Many people advocate the use of coffee grounds to deter slugs (or cats) - but apparently this is illegal, why?

Apparently 'any material used for pest control or as an animal repellent' within the European Union has to be approved for that purpose. The research required to gain approval for use as a pesticide is extremely costly and this has not been done for caffeine.  
Having said that, the caffeine content of coffee grounds is negligible (it end sup in your drink). Grounds can be used for other purposes, such as a mulch, if the intention is to improve plant growth, but not if the aim is to repel slugs and cats.  
This may seem silly but regulations on pesticide use are intended to stop dangerous chemicals being used to deal with pests, diseases and weeds.'

(from Andrew Halstead. Principle Scientist Plant Health)41004200420 

and http://www.permaculture.co.uk/articles/20-ways-control-slugs-permaculture-garden-or-allotment and http://www.getridofslugs.com/