Issue Number 12: 12th June 2015
- Ukraine takes steps to address poor nutrition and health in the country in light of WHO and EU initiatives
- The WTO Appellate Body issued its report on India’s import measures affecting agricultural products
- How ‘misleading’ can food labelling and packaging be?
- Recently Adopted EU Legislation
Ukraine takes steps to address poor nutrition and health in the country in light of WHO and EU initiatives
Earlier this year, the Government of Ukraine adopted the ‘Strategy for Sustainable Development: Ukraine 2020’ (President Decree No. 5/2015 of 12 January 2015), which, inter alia, seeks to foster citizens’ personal responsibility for their own health. Within this framework, Ukraine’s Ministry of Health developed a specific instrument (Resolution of the Parliament No. 26-VIII of 11 December 2014) to reform the health system in the country.
Reportedly, these developments align Ukraine’s legislation with the WHO’s ‘Health 2020’ policy framework (i.e., the WHO’s strategy to support governmental action improving public health). In particular, it appears that Ukraine’s reforms may be guided by the WHO’s ‘European Food and Nutrition Action Plan 2015-2020’ (hereinafter, European Action Plan), which lays down specific objectives and recommendations embedded in the ‘Health 2020’ policy for the European region (which, in the context of the WHO, comprises 53 Member States). The European Action Plan clarifies, inter alia, that excessive intake of energy, saturated fats and trans fats, sugar and salt, as well as inadequate consumption of vegetables, fruits and whole grains, are priority issues that need to be tackled.
In Ukraine, non-communicable diseases (such as overweight, obesity, diabetes and coronary heart disease, hereinafter, NCDs) affect 60 percent of adults and almost 20 percent of children and, in this light, nutrition-related issues appear to be a concern for the country. The country has highlighted that issues associated to nutrition labelling, consumption of trans fats and marketing of ‘unhealthy foods’ are of particular importance. In this context, the scope of ‘unhealthy foods’, covers, according to the WHO, food products that are high in energy, saturated fats, trans fats, sugar or salt, as contained in energy-dense, micronutrient-poor foods and non-alcoholic beverages (see Trade Perspectives, Issue No. 7 of 2 April 2015).
The European Action Plan acknowledges, in relevant part, that unhealthy diets lead to a high risk of NCDs, which have important social and economic costs for individuals and societies. In light of the statistics on NCDs prevalence, the European Action Plan recommends that governments foster healthier dietary choices and lifestyles through a range of instruments. In relevant part, these include economic tools (such as targeted subsidies and taxes to promote healthy eating), a ban on trans fats (to be implemented in the context of other improvements to the overall nutritional quality of food products) and nutrition labelling schemes (which should convey easy-to-understand food information and encourage healthier dietary choices). However, prior to enacting any specific measure, there are a number of important considerations that governments should be aware of.
Of the economic tools recommended in the Action Plan, so-called ‘fat taxes’ are possibly the most visible ones. ‘Fat taxes’ may be regarded as a type of ‘sin taxes’ (i.e., excise or ‘per unit’ taxes that are levied on certain goods and services that are generally subject to a high degree of regulation, such as tobacco and gambling). Measures of this type are equally defended and criticised, although it is undeniable that they often target specific food products that, when consumed in moderation, form part of a healthy diet. In the EU, by means of example, ‘fat taxes’ have been tabled, discussed or adopted in a number of EU Member States, including Denmark, France, Finland and Hungary. Some of these schemes have proved particularly controversial, leading the EU Commission to initiate, earlier this year, state aid proceedings against Denmark’s tax measure (see Trade Perspectives Issue No. 4 of 20 February 2015). A similar measure proposed in France in 2012 (the so-called ‘Nutella tax’, which envisaged an additional excise tax of EUR 300 per tonne of palm, copra and palm kernel oil for use in human food) rightly gathered considerable opposition from affected stakeholders and was ultimately deemed inappropriate by the French Government itself (see Trade Perspectives, Issue No. 21 of 16 November 2012).
The European Action Plan also advocates for a drastic reduction (or elimination) of trans fats. Trans fats, which are fats that have been artificially hardened through the process of partial hydrogenation, are largely found in industrial food products, although they are known to cause negative effects on health (see Trade Perspectives, Issue No. 10 of 15 May 2015). In 2010, the European Food Safety Authority (i.e., EFSA) indicated that trans fat intakes should be “as low as is possible”, which led governments in a number of European countries (including Austria, Denmark, Hungary, Iceland and Switzerland) to adopt measures to legally limit the content of trans fats in foodstuffs. In particular, governments set the limit at 2g of trans fat per every 100g of fat, a threshold that appears to be scientifically justified (see Trade Perspectives, Issue No. 15 of 26 July 2013).
Additional policy instruments endorsed by the WHO’s European Action Plan are food labelling schemes, particularly those that help consumers understand foods’ nutritional properties by providing front-of-pack interpretative explanations. In the EU, the Food Information Regulation (i.e., Regulation (EU) No. 1169/2011 of the European Parliament and of the Council of 25 October 2011 on the provision of food information to consumers, hereinafter FIR) lays down requirements on food labelling. However, the FIR also leaves room for voluntary labelling schemes as long as, inter alia, they are based on scientific evidence and are not misleading for consumers, non-discriminatory and do not create obstacles to the free movement of goods. In this sense, a number of food business operators in certain EU Member States have recently started to include so-called ‘traffic light’ nutrition labelling schemes in their products (which, essentially, attribute a colour coding to specific food components, such as sugar, fat, salt and energy). Although these schemes remain voluntary and circumscribed to the private sector, the UK Food Standards Agency recommended them in June 2013 (see Trade Perspectives, Issue No. 19 of 17 October 2014) and, reportedly, France will regulate their use in the near future.
Sources suggest that Ukraine intends to implement its nutrition plan between 2015 and 2017, and that it will address not only the issues indicated above, but also other matters, such as the regulation of the permitted content of saturated fats in foods. Although the WHO’s recommendations may be looked at as authoritative, despite lacking any binding force, any measure adopted pursuant to them will still be subject to the adopting country’s relevant international obligations, including those stemming from the WTO. Under the WTO legal framework, measures must not discriminate between products according to their origin. In addition, they need to be scientifically justified and must not be more trade-restrictive than necessary to achieve a legitimate objective. Arguably, an eventual measure capping the content of saturated fats in foodstuffs (a possibility that has been reported) may run the risk of being in conflict with these fundamental principles, de facto if not de jure.
It remains to be seen what impact the WHO’s recommendations will have on Ukraine’s legislative framework and domestic priorities. The developments in Ukraine will be interesting for other countries and regions, including for the EU, which appears to be in the process of finalising the report on the presence of trans fats in foods, as required by the FIR. Should the report be accompanied by a legislative proposal, it will be interesting to see which (if any) of the abovementioned options will be endorsed. In that context, any measure needs not only to comply with the EU’s WTO obligations, but also to be aligned with the rules governing the EU’s internal market, namely that schemes do not pose obstacles to the free movement of goods and, in the case of fiscal measures, that they do not amount to discriminatory taxation. Operators involved in the relevant sectors are advised to closely monitor all related developments and ensure that legislation seeking to address legitimate public health concerns does not result in instances of misinformation, misregulation and/or discrimination, which would defeat the well-intended purpose of the concerned measures.
The WTO Appellate Body issued its report on India’s import measures affecting agricultural products
On 4 June 2015, the WTO Appellate Body issued its report in India – Measures Concerning the Importation of Certain Agricultural Products (hereinafter, India – Agricultural Products). In large part, the Appellate Body upheld the findings and conclusions of the panel, which concluded that India’s measures prohibiting the importation of certain agricultural products from countries reporting notifiable Avian Influenza (hereinafter, AI) to the World Organisation for Animal Health (i.e., the Office International des Epizooties, hereinafter OIE) are inconsistent with the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (hereinafter, SPS Agreement).
From 2003 to 2006, High Pathogenic Avian Influenza (hereinafter, HPAI) spread across the world. In February 2007, India responded by passing measures that prohibited the importation of, inter alia, live poultry, poultry meat, eggs and egg products from countries reporting both HPAI and Low Pathogenic Avian Influenza (hereinafter, LPAI). According to the OIE Terrestrial Animal Health Code, its members are to notify the organisation of any domestic HPAI cases in birds and of LPAI in poultry. Article 10.4.4 of the OIE’s Terrestrial Animal Health Code considers a country to be free from highly pathogenic AI when it has been shown that no HPAI in poultry has been present in the country for the past 12 months, even when its LPAI status is unknown. In India – Agricultural Products, the panel, based in part on consultations with the OIE and experts on AI surveillance regimes, found that the relevant provisions of the OIE Terrestrial Animal Health Code do not envisage the imposition of an import prohibition on poultry products and that they are not only intended for country-wide purposes, but could also be applied on the basis of zones and compartments.
Under WTO rules, Articles 2.2, 5.1 and 5.2 of SPS Agreement require WTO Members to ensure that SPS measures are based on scientific principles, including risk assessments. Article 2.3 of the SPS Agreement states that WTO Members must not arbitrarily or unjustifiably discriminate between Members where similar conditions prevail. SPS measures must also be based on international standards and, if they “conform to” international standards, they are presumed to be WTO-consistent. Under Article 3.4, the SPS Agreement explicitly recognises the relevance of standards and guidelines developed by the OIE. Articles 5.6 and 2.2 are also relevant, given that they require WTO Members to ensure that their SPS measures be “applied only to the extent necessary” and that they not be “more trade-restrictive than required to achieve their appropriate level of protection”. Lastly, Article 6 of the SPS Agreement requires WTO Members to implement regionalisation (i.e., to recognise the concepts of disease-free areas and areas of low disease prevalence).
Before the panel, relying on the above WTO rules, the US claimed that India’s measures prohibiting the importation of the relevant products from countries reporting HPAI and LPAI are neither based on or conform to the relevant OIE standards, and that India did not present sufficient scientific evidence to justify a deviation from the accepted international standard. In addition, even if India did have justification, either in law or science, the US argued that said import restrictions should be applied on the basis of regional conditions under Article 6 of the SPS Agreement.
India maintained that its measures conformed to Article 10.4 of the OIE Terrestrial Animal Health Code, and that compliance with the relevant provisions of the SPS Agreement and the General Agreement on Tariffs and Trade must, therefore, be presumed. India argued that it was not required to provide scientific evidence to the panel, including risk assessments and articulation of relevant scientific principles. India nonetheless did provide some scientific evidence to the panel, in large part based on AI cases in Australia, but the panel, agreeing with arguments brought by the US, was not of the opinion that the evidence presented was specific to India’s situation, nor that such evidence qualified as relevant risk assessments. Accordingly, the panel determined that India’s measures were not based on, and did not conform to, the relevant international standard (i.e., the OIE Terrestrial Animal Health Code). Moreover, the panel concluded that India’s measures were inconsistent with the other relevant articles of the SPS Agreement. In particular, it found India’s measures were not based on scientific principles, including risk assessments, and were thus in violation of Articles 2.2, 5.1 and 5.2 of SPS Agreement. The panel also found that India’s measures arbitrarily and unjustifiably discriminated against other WTO Members, contrary to its obligations in Article 2.3 of the SPS Agreement. Lastly, the panel rejected India’s argument that the regionalisation obligations contained in the first two paragraphs of Article 6 of the SPS Agreement are dependent on an exporting member requesting inspection under the article’s third paragraph.
On appeal, the Appellate Body agreed with the finding of the panel that, because India’s measures were not based on a risk assessment, and were thus inconsistent with Articles 5.1 and 5.2 of the SPS Agreement, a presumption was raised that those measures were also inconsistent with Article 2.2 of the SPS Agreement. However, the Appellate Body found that the panel had erred in its application of Article 2.2 of the SPS Agreement by not adequately considering whether such presumption had been rebutted by the arguments and the evidence that India provided, and reversed the panel’s finding that India’s measures were inconsistent with Article 2.2 of the SPS Agreement, at least with respect to poultry meat and eggs. However, the Appellate Body was unable to complete the analysis. With respect to the other matters under review, the Appellate Body in large part upheld the findings and conclusions of the panel, and recommended that the WTO Dispute Settlement Body (hereinafter, DSB) request India to bring its measures into conformity with WTO rules. In particular, the Appellate Body upheld that panel’s findings and conclusions concerning regionalisation, reiterating that adherence to Article 6 of the SPS Agreement is a unilateral obligation for WTO Members.
The general outcome of this dispute was not surprising. India’s measures prohibiting certain agricultural products from being imported from countries that had reported HPAI and LPAI were found not to conform to international standards. Although India’s main argument focused on its conformity to the OIE Terrestrial Animal Health Code, the SPS Agreement actually allows WTO Members to implement SPS measures that are stricter than the relevant international standard if there is a scientific justification or if said measure is implemented as a consequence of the level of protection that a Member deems to be appropriate. Article 5 of the SPS Agreement expands on the appropriate level of protection concept, including the obligation to perform a risk assessment and to ensure that a measure is not “more trade-restrictive than required to achieve their appropriate level of protection”. In addition, it allows Members to exercise precaution and provisionally adopt SPS measures based on available pertinent information, where relevant scientific evidence is insufficient.
Accordingly, there are various approaches countries may implement to protect their legitimate human, animal and plant health interests while avoiding unnecessary and potentially discriminatory trade restrictions. As discussed above, the SPS Agreement itself provides an example in the proper application of the concept of regionalisation. In this context, India’s appropriate level of SPS protection could have arguably been reached through measures allowing imports from areas (i.e., compartments) recognised as HPAI and LPAI free, or in areas where proper eradication and control procedures took place pursuant to the OIE standards (e.g., destruction of infected animals, disinfection of relevant facilities, and the imposition appropriate waiting periods). Trading partners, such as India and the US here, may also agree to certain measures, especially when supported by the private sector. For example, officials may agree on improved surveillance procedures, heightened bordered testing requirements, either on arrival or during agreed-upon pre-shipment inspections (i.e., preclearance), additional quarantine requirements, or even the recognition of pre-approved, or established, production and distribution facilities. Governments and stakeholders should continually consider the options provided by the SPS Agreement. The agreement provides space within which parties may consult, so as to find a proper balance between the protection of legitimate SPS concerns and the need to ensure minimisation of trade-restrictive measures.
How ‘misleading’ can food labelling and packaging be?
On 4 June 2015, the Court of Justice of the European Union (hereinafter, CJEU) handed down a preliminary ruling in Case C-195/14 requested by the Bundesgerichtshof (the German Federal Court of Justice, BGH) in proceedings of a German consumer protection association (Verbraucherzentrale Bundesverband) and the tea manufacturer Teekanne. The CJEU held that the labelling of a foodstuff must not mislead the consumer by giving the impression that a particular ingredient is present, even when it is possible to determine from the list of ingredients that said ingredient is not present. With its decision, the CJEU deviates from its previous jurisprudence in relation to the average consumer who is reasonably well informed and reasonably observant and circumspect. This change of direction could have far-reaching consequences for the food industry and the design of their products. Teekanne’s chances in the main proceedings appear not to be good, as the BGH has reportedly already indicated that the presentation suggests that the tea contains raspberry and vanilla or flavours thereof. The CJEU was only asked to clarify whether the list of ingredients is sufficient to correct a wrong impression.
In the case at hand, Teekanne marketed a fruit tea called ‘Felix Himbeer-Vanille Abenteuer’ (‘Felix raspberry and vanilla adventure’). The packaging comprised, in particular, depictions of raspberries and vanilla flowers with the popular children’s book character ‘Hase Felix’ (‘Rabbit Felix’) and the indications ‘fruit tea with natural flavourings’ and ‘fruit tea with natural flavourings - raspberry - vanilla taste’. In fact, the fruit tea did not contain natural ingredients from vanilla or raspberry, nor flavouring obtained from them. The list of ingredients, which was on one side of the packaging, read: ‘Hibiscus, apple, sweet blackberry leaves, orange peel, rosehip, natural flavouring with a taste of vanilla, lemon peel, natural flavouring with a taste of raspberry, blackberries, strawberry, blueberry, elderberry’.
The consumer-protection association complained that, through the various items on the packaging, Teekanne misled consumers with regard to the tea’s content. It argued that, on the basis of that label, consumers would expect the tea to contain vanilla and raspberry or, at least, natural vanilla flavouring and natural raspberry flavouring. The BGH, to which the case came at last instance in Germany, asked the CJEU whether the labelling of a foodstuff may mislead the consumer when it gives the impression that a particular ingredient is present, even though it is not in fact present, and the only way for the consumer to be aware of this information is by reading the list of ingredients. In its judgment, the CJEU reiterated that Article 2(1)(a)(i) of Directive 2000/13/EC on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs (hereinafter, Directive 2000/13) requires that consumers have correct, neutral and objective information that does not mislead them. Directive 2000/13/EC was repealed with effect from 13 December 2014 by Regulation (EU) No. 1169/2011 on the provision of food information to consumers (hereinafter, the FIR), but, having regard to the date of the facts of the dispute at hand, still applied.
While the CJEU held that consumers are assumed to read the list of ingredients before purchasing a product, the CJEU does not exclude the possibility that the labelling of the product may be such as to mislead the purchaser, when some of the items on the labelling are misleading, erroneous, ambiguous, contradictory or incomprehensible. The CJEU argued that, in such a case, the list of ingredients, even though correct and comprehensive, may not be capable of sufficiently correcting the erroneous or misleading impression that consumers gain from the overall labelling of the foodstuff. Therefore, where the labelling of a foodstuff gives the impression that a particular ingredient is present in that foodstuff, even though it is not in fact present (this being apparent solely from the list of ingredients), such labelling could mislead the purchaser as to the characteristics of the foodstuff in question. The CJEU added that, according to Article 16 of Regulation No 178/2002 on the general food law, the labelling, advertising and presentation of food or feed, including their shape, appearance or packaging, the packaging materials used, the manner in which they are arranged and the setting in which they are displayed, must not mislead consumers.
According to Teekanne, the stylised fruits on the tea’s packaging point out the flavour of the tea. Teekanne states that its tea achieves the well-known taste of raspberries and vanilla and, accordingly, the tea’s packaging informs the consumer on the use of natural flavourings in a repeated, clear and unequivocal manner. Teekane has also clarified that it would not be feasible to achieve the same taste by adding raspberry and vanilla in dried form, considering the amounts that can be used in tea bags.
In Germany, the consumer association won in the first instance, but lost on appeal before the Higher Regional Court of Düsseldorf (OLG Düsseldorf). The OLG Düsseldorf found that, in accordance with Directive 2000/13, the provisions on misleading advertising were to be interpreted by reference to the expectations of the average consumer. In the present case, it was clear from the fruit tea’s list of ingredients, printed on the packaging, that the natural flavourings used have the taste of raspberry or vanilla. That list thus expresses, in a manner free from doubt, the fact that the flavourings used are not ‘obtained from’ vanilla and raspberries, but only ‘taste’ like them. The next instance, the BGH, requested a preliminary ruling to the CJEU.
According to settled case-law, pursuant to the division of jurisdiction between EU Courts and national courts, it is not for the CJEU to rule on the question of whether the labelling of certain products is likely to mislead the purchaser or consumer. That task is for the national court. When giving a preliminary ruling on a reference, however, the CJEU may, in appropriate cases, give further clarification as guidance to the national court in its decision. In order to assess the capacity of labelling to mislead, the national court must, in essence, take into account the presumed expectations, in light of that labelling, that an average consumer who is reasonably well informed and reasonably observant and circumspect has as to the origin, provenance and quality associated with the foodstuff. In this context, the critical point is that the consumer must not be misled and must not be induced to believe, incorrectly, that the product has an origin, provenance or quality that are not genuine.
In previous case-law, the CJEU has acknowledged that consumers, whose purchasing decisions depend on the composition of the products in question, will first read the list of ingredients. In those circumstances, an average consumer, who is reasonably well informed and reasonably observant and circumspect, could not be misled by the term ‘naturally pure’ used on the label simply because a jam contained pectin gelling agent whose presence was duly indicated on the list of its ingredients (Case C-465/98, Darbo). In the Mars case (C-470/93), the CJEU referred to the consumer’s ability to ‘make differentiated observations’ when it held that reasonably circumspect consumers may be deemed to know that there is not necessarily a link between the size of publicity markings relating to an increase in a product’s quantity and the size of that increase. Arguably, this reasoning can be applied to images of vanilla and raspberries on the packaging of tea, when the tea only ‘tastes’ like vanilla and raspberries, but it does not actually contain them, as is clear from the list of ingredients.
The question is now whether the consumer’s ability to ‘make differentiated observations’ should apply to tastes and flavours. Article 6 of Directive 2000/13 regulates how ingredients shall be listed. In particular, paragraph 6 thereof states that ingredients must be designated by their specific name (although flavourings must be designated either by the word ‘flavouring(s)’, or by a more specific name or description of the flavouring). In addition, the word ‘natural’ may be used only for flavourings in which the flavouring component contains exclusively flavouring substances as defined in Article 1(2)(b)(i) of Council Directive 88/388/EEC on the approximation of the laws of the Member States relating to flavourings for use in foodstuffs.
The flavours in the tea, in the case at hand, are described as ‘natural’, but not as ‘natural vanilla and raspberry flavours’. EU flavouring legislation (i.e., Regulation (EC) No. 1334/2008 on flavourings and certain food ingredients with flavouring properties for use in and on foods, the successor of Directive 88/388/EEC) provides that the term ‘natural’, for the description of a flavouring, may only be used if the flavouring component comprises only flavouring preparations and/or natural flavouring substances. The term ‘natural’ may only be used in combination with a reference to a food, food category or a vegetable or animal flavouring source if the flavouring component has been obtained exclusively (or by at least 95%) from the source material referred to. The term ‘natural flavouring’ may only be used if the flavouring component is derived from different source materials and where a reference to the source materials would not reflect their flavour or taste. Therefore, if the term ‘natural’ is used to describe a flavour, the flavouring components used must be entirely of natural origin. In addition, the source of the flavourings must be labelled, except when the source materials referred to would not be recognised in the flavour or taste of the food.
Teekanne’s tea was labelled as ‘fruit tea with natural flavourings’ and ‘fruit tea with natural flavourings - raspberry - vanilla taste’. Presumably, the flavourings used in Teekanne’s tea were denominated legally as ‘natural’ and the source material was correctly not indicated as raspberry or vanilla. It could be argued that an average consumer, who is reasonably well informed and reasonably observant and circumspect, as to the origin, provenance, and quality associated with the foodstuff, may know that said meaning of the term ‘natural’ is quite broad. When it comes to the flavour of food, such consumer may ‘make the differentiated observation’ that a flavour can be natural and ‘taste’ like vanilla, but not ‘contain’ vanilla at all.
The marketing and advertising of foods appears to become increasingly difficult for food business operators when they want to use images to indicate the taste of a product, even if the list of ingredients is correct. It is now for the BGH to determine, by examining the various items comprising the tea’s labelling, whether consumers may be misled as to the presence of raspberry and vanilla-flower or flavours obtained from those ingredients. In the context of that examination, the BGH must, in particular, take into account the words and depictions used as well as the location, size, colour, font, language, syntax and punctuation of the various elements on the fruit tea’s packaging. In conclusion, there are still arguments that Teekanne and other food business operators in similar situations can put forward in order to argue that reasonably well informed, observant and circumspect consumers are ‘able to make differentiated observations’ and are not misled by packagings such as in the case at hand, where the list of ingredients corrects eventual misunderstandings.
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