Analysis: New EU spirits regulations

The EU is nearing completion of an updated set of regulations that will govern the spirits industry. While many of the new rules have been welcomed by producers, The Spirits Business finds some of them are causing concern.

*This feature was originally published in the January 2019 issue of The Spirits Business

Coming to an agreement is never easy in politics. But after years of discussions, the 28 EU member states have settled on an updated set of regulations for the definition, description, presentation and labelling of spirits. On 27 November 2018, the Austrian Presidency of the Council and European Parliament representatives agreed the finalised version of the Spirit Drinks Regulations.

“This is a very good day for the spirit drinks sector,” said Elisabeth Köstinger, Austrian federal minister for sustainability and tourism, and president of the council. “Thanks to these new rules the most prestigious EU products, such as whisky, brandy and vodka, will be better protected, and consumers will be better able to make informed choices, thanks to clearer and more uniform production and labelling rules across the EU.”

The current EU regulations were established in 2008. In December 2016, the European Commission suggested adapting the laws to create “simpler and clearer production rules” and improved protection of geographical indications (GI) for spirits.

The updated Spirit Drinks Regulations aim to bring the industry in line with the Lisbon Treaty, which came into force in 2009, and with the developments in managing GIs for food products and the rules for wine, as listed by the Common Market Organisation regulation.

Key measures agreed within the rules include a harmonisation across the EU regarding the use of sugar or sweetening substances in spirits, as well as providing information on the origin of ingredients – which is anticipated to clamp down on fake GI spirits in transit across the EU. Presentation and labelling rules have been clarified and designed to better align with the rules for food information, while also “maintaining the specificities of spirit drinks”.

GI statuses are set to benefit from an additional seven years of protection compared with the World Trade Organization (WTO) agreement on trade-­related aspects of intellectual property rights, while “more traditional production methods” will also benefit from greater protection.

TRANSITION PERIOD

However, the regulations are not yet set in stone. The agreement has to be submitted to WTO members to pass comments during a 60­day period. Following this, the rules will be delivered to the European Parliament for a vote at first reading, and will then be returned to the Council for adoption. They will then be published in the Official Journal of the European Union – which could be as early as this spring – and come into force seven days after publication. But there will be a two-­year transition period before the rules are applicable throughout the EU, with the exception of certain provisions that would come into effect two weeks after ratification.

On the whole, the EU spirits industry has responded positively to the regulations. “After so many years of discussions, it is a great relief to see the conclusion of the new regulation as it lays down the rules for the production and labelling of all spirits sold in the EU and for the protection of those EU spirits bearing a geographical indication,” said Ulrich Adam, director general of trade body Spirits Europe. “The law is a central piece of legislation for the spirits sector because it created an effective, harmonised framework, which protects consumers and producers alike.”

Glass half full: new rules welcomed

However, there has been one sticking point with the new rules that Spirits Europe has been less than thrilled about. The regulations outline the definitions for 47 spirit categories, all of which try to reflect distillation and production methods in all 28 member states. But as part of the changes, the EU has backtracked on a previous clause that allowed flexibility to update category definitions when required. Nick Soper, Spirits Europe internal marketing director, predicts the industry will face difficulties as a result of this amendment. “We are not happy,” said Soper, “the entire spirits sector is not happy with this. This legislation has many, many useful and constructive innovations; it will help in a lot of ways. But this is one where it is going to cause problems. The spirits sector does not stand still. As we’ve seen before, despite the best efforts of legislators some of the category requirements are not perfect, and everybody has allowed that until now, so the removal is very bad.”

Soper cites the definition for London Dry gin as an example. The style of London Dry gin is known globally, but the 2008 EU regulations have so far not defined a ‘London Dry’ style. There’s been a ‘London’ style and a ‘Dry” style, but no combination of the two. How, then, have brands been able to distil, bottle and sell ‘London Dry gin’ for so long?

“A lot of the time what happens on the market is reality, then it’s up to the legislator to catch up to reality,” explains Soper. “With London Dry gin, it’s a classic case of regulations not being able to keep pace with what’s happening on the market.”

Still, although Soper and the wider Spirits Europe team would like to see the regulations on adjusting definitions reintroduced into the rules, he is not hopeful that this will happen. It has been two years since the document was first scrutinised, and Soper believes picking it apart now would leave room for all 28 member states to start voicing any lingering concerns and delaying its publication indefinitely. He’s confident there will be no further changes to the document before it progresses to the final stages.

RESOLVING PROBLEMS

“It’s one of those ‘suck it and see’ moments,” says Soper. “We know there’ll be difficulties, parliament knows, but the council is quite stubborn on this point.” He also assures that: “On the positive side, there has always been a sort of willingness to find ways to resolve problems. Member states are flexible and they don’t want to cause difficulties for producers. The regulations aren’t perfect – they’re pretty damn good, but they’re not perfect, so we’ll live with the compromises.”

But these regulations are to protect EU spirits, and the UK’s scheduled departure from the EU is just around the corner. By the time the new rules come into force, Brexit could well have happened, leaving the UK outside of the EU. Could this have a detrimental effect on spirits in the UK, particularly the likes of Scotch whisky, which relies heavily on GI protection?

“Brexit is an element that does cause concern; it is so uncertain,” says Soper. “The way it works at the moment is UK spirits are defined by law and GI, and protected under EU law. If my understanding is right, the UK has said it would like to continue this protection, so part of the legislation will be rolled over and protected after Brexit, meaning it won’t have to introduce its own rules. Whatever happens, both sides need to work together to make sure UK GIs are protected in the EU, and EU GIs are protected in the UK. It’s just not entirely clear how that is going to happen.”