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Beer tie risk to Club Premises Certificates

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We have recently come across an issue where the existence of a beer tie is being cited as a reason for withdrawing a Club Premises Certificate.

This may be relevant to you if you have agreements where the supply of alcohol is subject to a tie and your club has the benefit of a Club Premises Certificate.

The Local Authorities’ rational in this particular case was that the club has to be shown to be established and conducted in good faith as a club.

When determining whether this is the case, the Local Authority is allowed to take into account a number of factors. One of those factors is the “arrangements restricting a club’s freedom of purchase of alcohol”.

Deciding the nature of such restrictive arrangements is very difficult as this issue has never been tested in court. However, on the face of it, a Brewery tie certainly appears to be an arrangement whereby the club is restricting the freedom of purchase of alcohol.

Whether such an arrangement is conducted in good faith may depend on the degree of the restriction and the extent to which the club remains an independent entity during the course of the tie.

For example, if a loan is granted for a fixed-period as part of a tie arrangement, such as for an extension of club premises then the club is more likely to be regarded as being conducted in good faith.  Conversely, if a tie arrangement consists of a general open-ended payment, then the ‘good faith’ argument might not apply.

Looking at Hansard to see what was said at the time of the introduction of the Act, a number of members of Parliament appear to have been concerned about this provision, presumably because they have clubs within their constituencies.

The Minister at the time appeared to suggest an example of when a club’s arrangements would not be considered to be carried out in good faith. This was where alcohol could be purchased only through a specified individual and where he or she may have used inappropriate influence to gain that position, perhaps over a number of years, and might, therefore, be abusing their position for financial advantage.

For example, a club member, who is also a beer wholesaler, may use their position to ensure the club’s alcohol purchasing arrangements are in some way restricted to him/her.

Given the prevalence of Brewery ties within clubs, our view is that the legislation was not intended to prevent the majority of these arrangements if any at all.

For further information, please contact Andrew Cochrane.

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