Major brewery consortium granting lease of public house containing beer tie – Reversion subsequently assigned to small regional brewer – Current landlord contending tie enforceable in his hands although conceding tie initially invalidated by European competition laws – Tenant contending revival of clause precluded by terms of Treaty of Rome, article 85(2) – Tenant’s contention rejected
In February 1992 Inntrepreneur Estates (CPC) Ltd (Inntrepreneur), working in association with Grand Metropolitan plc and Courage Group Ltd, granted to the plaintiff a 20-year lease of the Rose and Crown public house, Aldershot. The lease, in common with a large number of similar leases granted by Inntrepreneur, contained a covenant which prohibited the plaintiff from purchasing specified beers from persons other than Inntrepreneur or its nominees. In July 1992 Inntrepreneur assigned its interest in a number of public houses, including the Rose and Crown, to the first defendant (Morland), a small regional brewer. In January 1998 the plaintiff brought an action against Morland and others claiming,inter alia, a declaration that he was free of the beer tie. The plaintiff contended that the tie was prohibited by article 85(1) of the Treaty of Rome, being an agreement having as its object or effect the prevention, restriction or distortion of competition within the common market, and as such rendered “absolutely void” by article 85(2). Morland applied to have the claim struck out as disclosing no reasonable cause of action. Solely for the purpose of that application, the parties accepted that the restriction: (a) had never been enforceable as between the plaintiff and Inntrepreneur; and (b) would have been enforceable if it had been contained in a new lease granted by Morland (whose relatively modest network of agreements was assumed not to contribute significantly to a foreclosure of the UK market). Resisting the application, the plaintiff argued that an agreement which was absolutely void from the outset could not be rendered valid by subsequent events.
Held The plaintiff’s claim should be struck out.
As interpreted by the European Court, article 85(1) was concerned with intended or actual economic effects of agreements and did not prohibit clauses of a particular form or language. In ascertaining whether trade between member states was affected, one of the factors was the cumulative effect of several similar agreements: see Brasserie De Haecht v Wilkin [1967] ECR 407. It followed that a contract in one trader’s hands might offend the article, but the same contract in another’s might not. Since the absolute nullity imposed by article 85(2) only applied in so far as the agreement was “prohibited” by the operation of article 85(1) (see Kerpen v Kerpen [1983] ECR 4173), the former provision did not cause a guillotine to come down and prevent the subsequent revival of the agreement. Merely to say that an agreement was an absolute nullity did not indicate for how long it remained in that state, nor as between which parties. On the assignment of the reversion to the public house, obligations which were once offensive had ceased to be so, and were consequently enforceable in the hands of Morland.
Mark Brealey (instructed by Maitland Walker, of Minehead) appeared for the plaintiff; Nicholas Green QC (instructed by Kimbell & Co, of Milton Keynes) appeared for the defendant.
