Distribution of Wine in the United Regno Unito

In the last few years, the production and consumption of wine in the United Kingdom experienced an increase that marks the passage of the most consumed alcoholic beverage, from beer to wine.
The expansion of the areas dedicated to the cultivation of wine, has allowed the production to exceed 117,000 hectolitres per year, with an increase in 2018 equal to 50% compared to the production of the previous year.

Despite the rise in the consumption of wine produced locally, 55% of the wine consumed in the United Kingdom comes from Europe. French and Italian wines achieved the primacy of the most imported wines in 2019, especially white and red wine remain at the top of the ranking of wines preferred by the British. In the same year, the value of imports of the top five countries was around 2.17 billion British pounds, of which 754 million from France and almost 685 million from Italy.

The Food Standards Agency (FSA) is the British non-ministerial department responsible for the safety and hygiene of food in England, Wales and Northern Ireland. It works with local authorities to enforce food safety regulations and standards and has responsibility for labelling in Wales and Northern Ireland.

According to the legislation, all vineyards over 0.1 hectares, and smaller vineyards that operate commercially, must be registered. In addition, the wine regulations specify the data that must be collected, including the area of the vineyard and the areas for the different varieties of vines grown.

Finally, growers and producers must complete each year, respectively, the harvest and production declarations.

This data is intended to support wine quality schemes in the United Kingdom in terms of traceability and to provide the sector with valuable information, allowing the United Kingdom to present formal declarations to the European Union. Total production data are provided to the European Commission.

Production declarations must be sent by the January deadline of each year.

The labelling provisions for wine come largely from European regulation. This legislation was implemented in the UK by the "The Food Information Regulations 2014" (FIR), as well as the "The Wine Regulations" of 2011, updated in 2019.

The European Regulation No. 607/2009 provides detailed labelling rules and establishes annual verification requirements for specific categories of wines. The mandatory information for labelling, referred to in the European Union section, must be shown in a visual field and must be easily readable without having to turn or rotate the container.

Allergen information and batch number must be visible on the container but may be in a different field of vision.

In addition, there must be a declaration of at least 1.2 mm typeset on the bottle, regarding allergens, if the sulphur dioxide content exceeds 10 mg / litre and if the milk or egg residues exceed 0.25 mg / litre.

The label may contain additional information such as the colour of the wine and its style, however such contents may be affixed provided that they do not conflict with the mandatory information, that there is no misuse of protected expressions, and there is no risk of misleading information for the consumer.

For wines produced in the United Kingdom, the names "England" or "Wales" can be replaced with "United Kingdom”. For wines obtained by blending wines from different EU Member States, the label must contain the words "Blend of wines from different European Union countries” or "European Union wine". Finally, if the wine is produced in the UK from grapes harvested in other Member States, the expression must be "Wine made in the UK from grapes harvested in [Member State where it is harvested]".

Finally, it must be pointed out that, from 1 January 2021, the United Kingdom will establish its own Geographical Indication (GI) schemes. The GI systems will provide a set of rules to protect the geographic names of food, drinks and agricultural products including wines. The UK systems will fulfil its World Trade Organisation (WTO) obligations. UK food products will not be labelled as "EU" origin products.

In addition to the "Alcohol etc. (Scotland) Act 2010", which regulates prices and promotions on alcoholic sales in Scotland, the United Kingdom provides an advertising code (the “BCAP" code) containing specific sections on the promotional marketing methods of alcohol.

In particular, in rules 19.2 - 19.18, it is provided that advertisements must not:

• show or encourage behaviours that represent excessive alcohol consumption, or give suggestions on the repeated purchase of alcohol;
• show individuals with an excessive amount of alcohol, or encourage their behaviour;
• connect alcohol intake to the increase in popularity of those who consume it, or to show that alcohol can improve personal qualities, or even that drinking alcohol can lead to success or to social acceptance;
• have any reference that may associate alcohol with audacity or tenacity
• relate alcohol to sexual success or seduction and, on the contrary, the link between alcohol intake and romance is precluded;
• describe alcohol as an indispensable or priority element in life;
• exhibit alcohol as a useful tool in dealing with difficult times or that solitary non-sporadic drinking is acceptable;
• imply that alcohol has therapeutic qualities or that it is able to change mood, physical condition, behaviour or that it is a source of nourishment;
• show people who drink alcohol in the workplace.

In addition, advertisements by television must be aimed at people over 18 and must not associate alcohol with youth culture or have a person or character as testimonial whose example will probably be followed by those under the age of 18.

Anyone who wants to produce wine for sales purposes must have an excise license, known as a wine producer license, authorised by the tax authorities (HM Revenue & Customs, or HMRC).

When the wine is produced, and has an alcohol volume higher than 1.2%, or if it is imported, it becomes subject to the duty.

From 1 February 2019 the UK government has established new excise duties on alcoholic goods, increasing taxes on wine. They amount to about £92/hl (hectolitre) if the percentage of alcohol by volume of the wine is less than 4%, £126/hl, if not more than 5.5% and £297/hl, if less than 15%.

The value added tax (VAT) is applied to the consumption of all types of wine, with the ordinary rate of 20%.

As well as in Italy and France, in the United Kingdom there is no specific legislation that regulates distribution contracts concerning wine, especially because it is a common law system, in which the contract theory remains substantially based on the principle of negotiating autonomy of contractors and on the value of case law precedents.

It is important when considering marketing a product, to be aware of the difference, in legal terms, between an agency agreement ("agency agreement") and a distribution agreement ("supply agreement").

The distribution agreement is usually used when a supplier has no presence or representation in a specific market or territory. A distributor is a person who buys goods from a supplier (or a manufacturer) and then resells them to his customers, adding a margin to cover costs and to profit from them.
In the UK, there is no one-size-fits-all model for such agreements, however, typically supply agreements:

• cover aspects relating to the minimum purchase order by the distributor;
• establish the price of the product;
• set the duration of the contract;
• establish if the contractual relationship should be subject to an exclusive clause, for which the distributor is prohibited from selling or promoting products other than those purchased from the supplier; and finally
• indicate the applicable law and the competent court in case of legal disputes.
  
  

A distribution agreement has similarities to the agency contract, however, the main difference between the two kinds is that in the distribution agreement, the supplier purchases from the manufacturer and resells to the end user (the customer) on his own account, without involving the supplier/manufacturer, except as regards the guarantee of the same supplier or the warranty and the product liability.

However, in the agency, the contract is between the agent and the supplier (or manufacturer). An agent is therefore an intermediary, involved in entering into a contract between the supplier/producer and the customer of the supplier/producer. The agreement usually establishes what the agent will do, the modalities and how the latter will be paid (usually on a commission basis). The agency agreement establishes reciprocal rights and obligations between supplier and agent, for example regulates good faith and can establish the methods that the agent must respect in order to best market the supplier's goods.

In an agency contract, the agent procures customers for the supplier and when he sells goods, ownership of the goods passes directly from the supplier to the customer. In fact, unlike the distribution contract, the agent never owns the goods he sells, but acts only to facilitate the sale of the supplier to the customer.

From a commercial point of view, the agency contract is preferable where the supplier wishes to maintain a close relationship with the customer, since, on the contrary, the distribution contract inevitably moves the supplier away from the end customer. This contract remains preferable even if the supplier wants to maintain greater control of the sales conditions of its products, in particular as regards pricing. In fact, the imposition of a resale price on a distributor is illegal under the competition law of the United Kingdom and the EU, while through the agency contract the supplier can validly retain the freedom to set his own selling price.

Lastly, please note that the relationship between a supplier and its agent or distributor must emerge unequivocally from the contract. The initial definition of "Supply agreement" or "Agency agreement" does not constitute sufficient proof of the nature of the agreement. In case of disputes, the judge will examine the substance of the agreement between the parties.

The general rules on the "supply agreement" are found in section 12 of the "Sale of Goods Act 1979" and in section 2 of the "Supply of Goods and Services Act 1982" as regards the obligations of the parties, while in the "Consumer Protection Act 1987" is set for the guarantee from defective products.

In view of the changes that will occur with the exit of the United Kingdom from the EU, several bilateral agreements are being made aimed at increasing trade between countries.

Pending the agreement with Japan, an agreement between the United Kingdom and the United States on the "Trade in Wine" was concluded in 2019, which aims to facilitate the exchange of wine between the parties and establishes that each party, on request, must cooperate to help the other to make available to producers the information relating to the specific limits of contaminants and foreign residues in force in their territory.

The negotiations for an agreement between the United Kingdom and Europe, which began last March and which will end in October 2020, will be decisive for outlining the import-export aspects of the wine trade.

Although an agreement aimed at facilitating trade in animal products, agri-food products, poultry, meat, and wines is very likely, what is currently certain is that there will be a 9-month transition period towards a new system for import of wine from a third country (EU).

The British government confirmed that controls for importing goods from the EU will be stepped up and that businesses will have to prepare for new border controls, ensuring that they have an (Economic Operator Registration and Identification) EORI number.

During the transition period, wine can be imported into the United Kingdom through the use of a "VI-1" document which fully describes the imported wine. After the 9-month transition period, the VI-1 may no longer be valid.

However, there are exemptions from the submission of the VI-1 document, which will continue to be valid even after the transition period. In fact, it will be possible to import wines into the United Kingdom or export them from the United Kingdom to the EU, without completing the aforementioned model if:

• the wine is in containers labelled up to a maximum of 10 litres, with a disposable stopper, and for a maximum of 100 litres per shipment;
• the owner is moving to the UK;
• the wine shipped does not exceed 30 litres per bag per traveller;
• the wine is sent from one person to another, up to a maximum of 30 litres;
• the wine is imported for the purpose of scientific and technical experiments up to a maximum of 100 litres;
• the wine is preserved in shops on board ships and planes operating in international transport;
• the wine is produced and bottled in the United Kingdom, exported and then returned to the United Kingdom for sale;
• the wine is produced and bottled in the EU, exported and then returned to the EU for sale;
• the wine is exchanged for diplomatic purposes in accordance with the Vienna Convention or the New York Convention.

The competent authorities in the sector will be the DEFRA (Department for Environment, Food & Rural Affairs) responsible for issuing form VI-1, also required to certify that the wine complies with EU regulations, and that it has been produced using winemaking practices; and the FSA and Food Standards Scotland (FSS) are responsible for the inspection and registration of wine exporters.

After registering with the FSA or FSS, importers will receive a WSB number to be provided to DEFRA in the application for the VI-1 model.

Entering into the contract in writing guarantees several advantages, first of all that of safeguarding and regulating all aspects that the parties consider relevant, and therefore mitigating the risk of incurring any breach.

The contract has an own economic value within the company, which is why relying on legal professionals for its drafting is an investment in the prevention of commercial problems rather than their resolution.

The contract usually defines the parties, the object and the duration, it regulates the methods of performance, it sets the price, it establishes the presence of clauses that limit competition, and finally it outlines the applicable law and jurisdiction. This is essential to establish the rules applicable to the contract and the identification of the person called to apply them in the event of a dispute.

In English law, the principle of freedom of choice of the law applicable to the contract was recognised by the "Contracts Act" of 1990, which ratified the Rome Convention on the law applicable to contractual obligations, and replaced the rules for determining the law applicable to contracts developed under common law.

The peculiarity of English law is that it recognises the autonomy of the parties in choosing the law applicable to the contract, even if the identified law has no connection with the latter, provided that "the intention expressed constitutes a manifestation of good faith and there are no reasons based on grounds of public policy that prevent such a choice".

In the absence of the governing law in the contractual document, the Rome Convention establishes as a subsidiary criterion the application of the law of the country with which the contract has the "closest connection". In particular, it is assumed that the closest connection is with the country in which, at the time of the conclusion of the agreement, the party who must give the "performance" has his/her habitual residence. This means that, in the absence of an agreement between the parties, English law applies both in the agency contract with an agent operating in the UK, and in the distribution/sales concession contract with importer in England.

The choice of the jurisdiction has several relevant aspects: increasingly, multinational companies choose the fastest and most efficient jurisdiction venue, such as London, Geneva and Vienna.

That said, the choice of the competent court in a contract with an agent or distributor/importer in England must be examined on a case by case basis with the help of an expert lawyer: if it is true that the English jurisdiction is more efficient and allows to obtain a judgment rapidly, the costs for a litigation in the UK are significantly higher than the average in the European Union.