Hands tied

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Has Bernie Crehan's victory cleared the way for other licensees to break free? Tom Sandham investigates.The tie is dead, long live the tie. After a...

Has Bernie Crehan's victory cleared the way for other licensees to break free? Tom Sandham investigates.

The tie is dead, long live the tie. After a few weeks of hectic activity this should be the message licensees hold on to. A lot has happened since May 6 - with Bernie Crehan's victory in his legal battle with Inntrepreneur, and the launch of a full-blown Parliamentary investigation into the pubco-tenant relationship.

As a result licensees might be forgiven for thinking the tie is dead and buried, but this is not the case.

Mr Crehan's win in the Court of Appeal, which found his beer tie had been in breach of European competition law, sent shockwaves across the trade and encouraged other licensees to consider their own ties. But Bernie Crehan was one man fighting one case and all judgements were based on his circumstances - no one should be using it as a yardstick.

If a tie is genuinely unfair and cripples a business, there is a chance of legal redress, but such reward comes at a cost. The fight is never easy and is likely to be financially and emotionally draining.

What is particularly important to remember in the Inntrepreneur case is that it was about a business relationship that no longer exists. Most licensees who were working in the trade at the time will acknowledge that the situation has improved since then.

That is not to say everything is rosy with the tie, there is still a lot of work to be done as the current Trade and Industry Committee investigation proves.

But there are very few companies that take the Inntrepreneur approach these days and, regardless of the problems some in the trade face, a tied lease or tenancy remains arguably the most economically sound method of getting a pub of your own.

"People need to look at the general beer market conditions in the early 1990s," said Rupert Croft, the Maitland Walker lawyer who represented Mr Crehan during his legal battle. "For our case we also relied on European Commission law - we needed a Court of Appeal hearing to even consider that.

"Whether we could do this now is questionable. It doesn't follow that every tenant can bring a similar claim, not even every Inntrepreneur tenant because there was a six-year time limit in which licensees had to bring their claim forward.

"Mr Crehan's case is more a warning to everyone about what can happen if the relationship between landlord and tenant deteriorates to such an extent that someone has to make catastrophic claims."

Bill Sharp, licensee at the Kings Arms in Southwark, London, operated Inntrepreneur pubs and appreciates the challenges that other licensees faced during the early 1990s.

Over the last 10 years he has worked with the trade and government to try and iron out the problems between pubcos and tenants and believes we have come a long way in that time.

"Everyone in the trade is delighted for Bernie Crehan," said Mr Sharp. "But we need to remember that the victory is quite hollow. He was only compensated £250,000, and considering what he went through, that isn't a great deal.

"The early 1990s were a terrible time for the trade. A lot of people suffered, and there are still people out there who should be compensated.

"But a lot has changed since then, there are things to be addressed, but the beer tie still has a place and relationships can improve if there is regular talk between landlords and licensees."

This is something the pubcos are quick to acknowledge, as you would expect.

Ted Tuppen, chief executive at the 9,000-pub Enterprise Inns, is confident the pubcos are working to develop a partnership.

"The evidence we have submitted supports our view that the relationship is fair and mutually profitable," he said. "We understand it is a partnership and are working towards a code of practice which makes things clearer to people when they sign up with us."

Despite this it remains obvious to a number of licensees that there is still work to be done.

The reality is that where a pubco is in a position of power it can use it fairly or abuse it. In this situation communication alone is not enough and the system needs to be transparent. It is, after all, a partnership and if it is to remain that way then both sides need to benefit from the arrangement.

It is hoped that the Trade and Industry Committee inquiry will at least help keep the pubco-tenant business relationship clear and public so that in future if tenants are struggling there are mechanisms in place to address these problems properly.

According to the clerk at the Trade and Industry Committee offices, the number of submissions fill a "very large mailbag", which should encourage a thorough investigation at least.

Last week The Publican reported how the Federation of Small Businesses (FSB) accused pub companies of "creaming off huge profits" from licensees.

The FSB pushed for the committee investigation and claims licensees are being left to survive on earnings less than the minimum wage while pubco profits soar.

"The Crehan case was good timing for everyone but the tie is alive and well," said FSB spokesman Stephen Alambritis. "This is why we've pushed the investigation. "But this case won't set a precedent, and people are wrong to think it will. However, MPs will have it in mind as they consider the submissions on the tenant-pubco relationship. It is important that through this investigation we can do away with the hidden nature of the tie."

The facts:

  • Bernie Crehan started his campaign against Inntrepreneur 10 years ago
  • Inntrepreneur is now a defunct pub company and was bought by Japanese bank Nomura in 1997
  • Mr Crehan claimed he had been ripped off by the company's restrictive tie agreement, which allowed Inntrepreneur to maximise rent prices while supplier Courage capitalised on beer prices
  • In March 2003 a high court judge found that the beer tie was making supplies more expensive and was responsible for Mr Crehan's business going bust, but it did not break European Competition law
  • Mr Crehan took his case to the Court of Appeal, which found the beer tie did in fact break European Competition law
  • He was awarded £131,336 - with interest this is expected to reach £250,000
  • Around 600 other former Inntrepreneur tenants have claims on hold - if they are successful payouts of up to £100m could be due
  • Nomura said it would be applying for permission to appeal to the House of Lords over the court's findings.

Related articles:

MPs' probe swamped with evidence (7 June 2004)

FSB attacks pubco profits (3 June 2004)

Inntrepreneur could face £100m legal bill (23 May 2004)

Crehan wins beer tie case (21 May 2004)

Parliamentary probe into pubco-tenant relationship (7 May 2004)

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