Unfortunately, there are many examples both past and present of whisky cask investment schemes that have proven to be scams, or collapsed due to negligence.
As a result the Scotch Whisky Association (SWA), the trade body representing the Scotch whisky industry, released updated consumer guidance on private cask investment, available here. In this excellent guide, the SWA strongly advises all potential cask owners to do the following:
“Before completing the purchase you should check with the warehousekeeper what documents they require and ensure that the seller can deliver them to you.”
If there’s one thing we want you to remember from your visit to this site, it’s this. Without confirmation from the warehouse that a cask is held in your name, or that the warehouse is aware that the cask is held on your behalf, you are at risk.
If you’re not sure of the ownership status of your cask ask yourself this: if you call the warehouse holding your cask are they be able to confirm that it is held in your name? If not then you have no autonomy and it is very possible the original seller still owns the cask as far as the warehouse is concerned.
The law requires both the warehousekeeper housing the purchased cask and the purchaser to be in direct contact and to have a clear written record between them of the transfer of ownership. Within the industry this is usually, but not exclusively, done through a document called a “Delivery Order”.
If no confirmation is received or there is no communication with the warehouse, it could suggest that the sale of that cask might not be in compliance with Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) as well as Excise notices 196 and 197. These notices explicitly state the necessity for a warehouse to maintain communication with both the buyer and the seller during the sale of goods stored in its facility.
Furthermore, this specific part of the SWA guidance is particularly useful for a number of reasons:
Clarity and Transparency
By advising buyers to check with the warehousekeeper, the SWA’s clear, concise advice promotes transparency and direct verification of information necessary for a purchase of a cask. It reduces the risk of misinformation or misrepresentation from sellers while ensuring they meet current legal standards, helping avoid potential disputes and complications.
Consumer Empowerment
Prospective buyers are empowered by placing the emphasis on them to verify necessary documents, fostering a sense of responsibility and encouraging due diligence. This is crucial in an industry where misinformation and lack of knowledge of this unregulated market could lead to substantial financial losses for buyers.
Industry Protection
The SWA’s advice also protects the industry’s reputation. It helps maintain trust and integrity within the Scotch whisky cask market by ensuring that transactions are conducted ethically and transparently, which is beneficial for the long-term sustainability of the industry.
What else does the SWA guidance say?
The SWA guidance also provides useful best practices so the prospective owner of a cask is aware of what exactly has been purchased and how the whisky can be labelled and used for either private or commercial purposes. Its advice includes:
Ensuring a buyer is able to receive clear information about the cask being purchased
The type of Scotch whisky should be clearly identified (ie Single Malt, Blended Grain, or any other of the five official Scotch whisky categories), the name of the distillery that produced it if it’s a single malt or grain, the year of distillation and a cask reference number.
Checking for what the SWA calls ‘contractual limitations’ on naming rights if a cask is bottled or sold
For example, when bottling a cask it may not be allowed to use the producing distillery’s name on the bottle. As distillery names are trademarked, it’s important to know this information especially if buying from a third party seller like a broker.
Knowing what insurance you’ll receive on your cask upon purchase and what exactly it covers
For example, leaks aren’t always covered by cask insurance plans.
Being aware of any limitations on how a cask can be used
For example, a seller may require that the whisky bottled from a particular cask can only be used for personal consumption.
Check the alcohol strength of a cask
If the ABV falls below 40%, it can no longer be legally called Scotch whisky. In general, it’s important to know the figures for the Original Litres of Alcohol (OLA) and the Regauged Litres of Alcohol (RLA). The former measures how full the cask was when first filled, while the latter gives the most current figure. RLAs are ideally taken every year or two, they help determine the rate of alcohol evaporation of that particular whisky or whether the cask might even be leaking.
Confirming whether the price of a cask is actually fair or realistic
This can sometimes be tricky as cask prices can change quickly in a rapidly changing market. The SWA recommends “contacting the distillery or company whose whisky it is, or speak to an established broker or specialist auction house.”
Please note that ProtectYourCask.com only presents guidance on cask purchase and ownership and does not provide investment advice to individuals when deciding how to invest in a Scotch whisky cask in an unregulated market.
Learn More:
Risky Whisky Business – Examples of Scotch Whisky Cask Investment Fraud
Advice For Overseas Buyers
3 Red Flags To Watch For With Scotch Whisky Cask Investment
A Primer On WOWGR and Revenue Traders
Delivery Orders Explained: Do You Need One To Buy A Cask?
Casks and Fraud
The Laws Governing Cask Ownership
Webinar: Whisky Cask Investment, The Law, The Scammers and You
Disclaimer
The information provided on Protect Your Cask is intended solely for educational and informational purposes and does not constitute legal, financial, or investment advice. We strongly encourage readers to conduct their own research and, where necessary, consult with professional advisors or legal counsel before making any investment decisions in the Scotch whisky cask market. The views and opinions expressed herein are not intended to serve as a guarantee or prediction of future events and should not be relied upon as such. Protect Your Cask disclaims any liability for decisions made based on the information provided on this website.