Cabinet decision on a sugary drinks tax: the Federal Court of Justice’s criteria for justifying state restrictions on EU fundamental freedoms

By a Cabinet decision of 14 October 2026 (only available in German), the German federal government approved draft legislative wording for the governing parliamentary groups to introduce a bill in its lower house, the Bundestag, imposing a tax on sugar-sweetened drinks from 1 July 2027. Under the proposal, drinks with a specified minimum total sugar content would be taxed according to their sugar content, with the aim, as envisaged by the federal government, of reducing sugar consumption and the diseases it causes. Specifically, the draft provides for a two-tier tax: drinks containing at least five but less than eight grams of sugar per 100 ml would be taxed at €0.26 per litre, while those containing eight grams or more per 100 ml would be taxed at €0.32 per litre.

However, the proposed tax raises numerous legal concerns. First, there are serious concerns under constitutional law and, given the cross-border implications, under the EU’s fundamental freedoms. Second, the federal government’s underlying assumption that a tax on sugar-sweetened drinks can achieve the public health objective of reducing sugar intake among the German population currently lacks a sound evidence base. On the contrary, empirical studies from the UK indicate that introducing a tax confined to sugar-sweetened drinks has only a limited impact. Moreover, the tax thresholds under discussion merely follow the UK model, which likewise provides for a tiered tax that becomes payable or increases when specified thresholds for sugar content per 100 ml of drink are exceeded. They are not, however, based on a scientific analysis undertaken by the German legislature.

Despite the extensive criticism, the federal government has now paved the way for the proposed tax on sugar-sweetened drinks. This provides an opportunity to examine in greater depth the requirements concerning the standard of proof for justifying, in court proceedings, legislation that restricts the EU’s fundamental freedoms, as clarified by the Federal Court of Justice (Bundesgerichtshof) in its landmark judgment of 17 July 2025 – I ZR 74/24 (only available in German).

This article first sets out the standards established by the Federal Court of Justice’s judgment for justifying state restrictions on the EU’s fundamental freedoms (A). It then considers the resulting requirements for evaluating existing legislation (B). Finally, it examines the judgment’s implications for legal practice (C).

A. Standards for justifying state restrictions on the EU’s fundamental freedoms

In the above decision, the Federal Court of Justice draws on the relevant case law of the European Court of Justice to set out generally applicable standards for justifying state restrictions on the EU’s fundamental freedoms, with implications extending well beyond the particular case. The Court emphasizes that, in each individual case, the legislature must prove, on the basis of objectively reliable evidence, that a measure restricting a fundamental freedom is suitable and necessary to achieve its legislative objective. Specifically, the Federal Court of Justice requires proof through empirical studies, statistical data addressing particular issues, or other means of comparable probative value. The legislature, which bears the burden of proof, must already have based its predictive assessment on such empirical data (see Federal Court of Justice judgment, juris, paragraphs 42 and 51).

At the same time, the Federal Court of Justice makes clear that, when reviewing a regulatory measure, courts must not confine themselves to examining whether the legislature’s reasoning is sound; they must instead assess the soundness of the evidence presented. To this end, courts must examine objectively, that is, by reference to other available evidence, whether, on a reasonable assessment, the evidence presented supports the conclusion that the means chosen are suitable for achieving the objectives pursued, and whether those objectives could be achieved by measures that restrict the free movement of goods less severely (see Federal Court of Justice judgment, juris, paragraphs 42-43).

According to the Federal Court of Justice, these principles concerning the burden of proof and the means of establishing proof also apply without qualification in the context of the precautionary principle, under which the state must be able to take preventive public health measures to avert risks to the population’s health even where scientific uncertainty persists.

B. Legal requirements for evaluating existing legislation

Since judicial review of a regulatory measure is not confined to examining whether the legislature’s reasoning is sound, the legislature must continue to evaluate legislation after its enactment to determine whether it remains suitable and necessary (see Federal Court of Justice judgment, juris, paragraph 53). Correspondingly high-quality standards must be applied to the evidential value of such evaluations. Only then can the legislature, in the event of litigation, rely on an evaluation to produce robust empirical data or other material of comparable probative value as appropriate evidence.

That such quality standards are far from universal in legislative evaluations is illustrated by the report commissioned by the National Regulatory Control Council (Nationaler Normenkontrollrat) and published on 4 March 2026, entitled “Effective and practical government through evaluations and practical checks” (Wirksam und praxisnah regieren durch Evaluierungen und Praxischecks). For example, 11% of the evaluation reports on federal legislation examined for the study did not clearly identify the objectives of the legislation under review; around 30% described neither a model of how the legislation was expected to produce its effects nor the research design (report, p. 19). The report states that this substantially diminishes the evidential value of the evaluations concerned (see report, p. 20), consequently reducing the robustness of the empirical data derived from them.

C. Outlook: the Federal Court of Justice judgment’s significance for legal practice

In its landmark judgment, the Federal Court of Justice examines the ECJ’s established case law, analyses it systematically and sets out detailed standards for the proof required to justify legislation that restricts the EU’s fundamental freedoms in court proceedings.

The Federal Court of Justice’s judgment has the potential to open up further avenues for influencing legislation that restricts fundamental freedoms. Under the principles set out in the judgment, existing legislation is vulnerable to challenge if the legislature cannot demonstrate its suitability and necessity through statistical data or other means of comparable probative value. This may apply, for example, to legislation that has evolved over time without ever being evaluated. At the same time, the Federal Court of Justice’s decision gives stakeholders additional strategic options for shaping new legislation, enabling them to exert significant influence not only through legal and political arguments but also through evidence-based submissions.

As regards the proposed tax on sugar-sweetened drinks, the federal government will therefore need to address in detail whether it can prove that the tax is suitable and necessary to achieve its public health objectives, alongside the other constitutional concerns, if, indeed, it proceeds with the proposal at all.