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Big tobacco bullies the global south. Trade deals are their biggest weapon

The industry has a long history of using trade to force their products into new markets. This has led to at least a 5% increase in cigarette deaths

Cigarette packets often carry the warning to “protect children: don’t make them breathe your smoke”. In 2014, the Kenyan government attempted to do just that – banning the sale of single cigarettes, banning smoking in vehicles with a child and keeping the tobacco industry out of initiatives aimed at children and young people.

But as the Guardian reported last week, British American Tobacco, in an effort to keep Kenyans breathing their smoke, fought the regulations on the grounds that they “constitute an unjustifiable barrier to international trade”.

In fact, big tobacco has a long history of using trade and investment rules to force their products on markets in the global south and attack laws and threaten lawmakers that attempt to control tobacco use.

Back in the 1980s, as cigarette consumption fell off in North America and western Europe, US trade officials worked aggressively to grant American companies access to markets in Asia, demanding not only the right to sell their products, but also the right to advertise, sponsor sports events and run free promotions. Smoking rates surged.

In the 1990s, World Trade Organisation agreements led to a liberalisation of the international tobacco trade, with countries reducing import tariffs on tobacco products. The impact, according to a joint study of the World Health Organisation and the World Bank, was a 5% increase in global cigarette consumption and accompanying mortality rates.

Big tobacco’s lawyers were quick to discover the value of “next generation” trade agreements. In the 1990s, Canada dropped a plain packaging initiative after US manufacturers threatened a suit using the first next-gen trade deal, the North American Free Trade Agreement (Nafta). A few years later, Philip Morris threatened Canada again after it prohibited terms such as “light” and “mild” cigarettes. Philip Morris argued it would be owed millions in compensation for damage to its brand identity.

Philip Morris was able to credibly wield this threat because of the extraordinary powers that Nafta grants international corporations: the right to sue governments in private tribunals over regulations that affect their profits.

A toxic combination of far-reaching and poorly defined “rights” for investors, eye-watering legal costs, and tribunals composed of corporate lawyers with the power to set limitless awards against governments makes investment arbitration and the modern “trade” agreement a formidable weapon to intimidate regulators.

And what big tobacco learned in the global north it has been replicating in the global south, where threats carry greater force against poorer countries that may lack the resources to see down a legal challenge.

In 2010, Philip Morris launched a $25m claim against Uruguay after it introduced graphic warnings on cigarette packs. Though Uruguay successfully defended the measure, it still faced millions in legal costs. And Philip Morris effectively won, as Costa Rica and Paraguay held off introducing similar measures.

Such are the fears around big tobacco’s aggressive use of trade and investment rules that the US-negotiated Trans-Pacific Partnership trade deal featured a carve-out excluding big tobacco from investment protections – an explicit admission of the problem.

But this does not go far enough. The important thing to realise is that the problem goes beyond big tobacco. Big oil, big pharma and big mining follow the same playbook, launching investment arbitration cases to defend their business models from governments that would regulate to protect public health, the local environment or the climate.

Rather than target individual companies or sectors, we must push our governments to reform trade and investment rules that grant such extraordinary powers to corporations. That means removing special investor rights and investment courts from trade agreements. It means removing limits on the freedom of governments to protect public health, labour and human rights and the environment.

Of course, this is easier said than done. Robert Lighthizer, US trade representative, served as deputy in a Reagan administration that pressured countries to open their tobacco markets to US exporters in the 1980s.

Vice-President Mike Pence’s record includes opposing smoking regulation, taking huge campaign donations from big tobacco, and denying the causal link between smoking and lung cancer. The EU commission, meanwhile, has been criticized for its meetings with big tobacco while it was negotiating EU-US trade talks.

The good news is that from Brazil to India to Ecuador, countries are stepping away from outdated trade and investment rules. In the UK, the Labour party manifesto opposes parallel courts for multinationals and proposes to review the UK’s investment treaties.

But until we scrap the powers that we grant big tobacco and others to frustrate and bypass our laws, efforts around the world to protect public health will continue to go up in smoke.

Big Tobacco is losing the fight to stop plain packaging of cigarettes

Dr Enrico Bonadio, a Senior Lecturer in the City Law School, says the tobacco industry’s bid to avoid plain packaging by relying on legal arguments around trade and intellectual property rights, is being systematically dismissed by courts around the world.

You may already have seen the tobacco packs currently sold in the UK: a dark, murky green colour with large graphic health-warning images and scary messages aimed at informing current and potential smokers about the devastating consequences of tobacco consumption. They have no colourful logos, with the brand name just displayed in small characters in a standard font.

These packs are now required by new regulations which entered into force in May 2016. There has been a one-year transitional period for the sell-through of old stock – and from May 20 2017 all tobacco products on sale in the UK must comply with the new rules.

The legislative move has been recommended to all countries by the World Health Organisation to reduce the attractiveness of smoking and eventually reduce consumption. Australia was the first country to introduce such strict packaging requirements in December 2012. France and, of course, the UK have since followed suit.

It follows significant research that shows these new standardised cigarette packs are much less appealing to consumers – and young people especially.
The industry’s legal defeats

No wonder tobacco companies have challenged the measure in the courts. They have argued that it is useless, too harsh – and is an infringement of their fundamental and intellectual property rights, especially trademarks. Yet, their claims are based on weak arguments and have been rejected by both the High Court of England and Wales and the Court of Appeal.

The tobacco industry has faced numerous courtroom defeats of late. Last year Uruguay won a landmark case against the Swiss giant Philip Morris International. The company had sued the Latin American state after it introduced two measures affecting tobacco packaging and trademarks. These were mandatory graphic health warnings covering 80% of cigarette packets (a measure very close to plain packaging) and the obligation for tobacco companies to adopt a single presentation for their brands, dropping for example the “gold” and “blue” descriptors, that could lead smokers to believe one variant was safer than another.

The fact that the courts sided with Uruguay would have been encouraging to other countries aiming to introduce controls on tobacco packaging. And even greater encouragement came recently from a World Trade Organisation ruling which deemed that the plain packaging requirements introduced by Australia as compliant with international trade and intellectual property rules – and are therefore a legitimate public health measure.

The decision has not been officially announced, but a confidential draft of the interim ruling was leaked to the media and the final decision is expected later this year. The Australian measure had been challenged at the WTO tribunal by Cuba, Dominican Republic, Indonesia and Honduras, countries whose economies strongly rely on the tobacco industry.

A domino effect

This is a blow to the industry. The short-term consequences of the WTO ruling – Imperial Tobacco’s shares fell more than 2% after the decision was leaked – reflects the longer-term danger that this ruling poses. It will likely convince other states to introduce plain packaging legislation without fear of violating international trade and intellectual property laws. It basically gives them a green light by removing the regulatory chilling effect that such legal action has produced on countries that wanted to follow Australia’s example.

After all, more and more countries seem interested in adopting standardised packaging. As well as France and the UK, Ireland and Norway will introduce packaging restrictions later in 2017, and Hungary in 2018. Many other states are debating similar measures, including New Zealand, Canada, Belgium, Slovenia, Belgium, Singapore and Thailand.

So, a legislative trend has started which aims to restrict the ability of tobacco manufacturers to make their products appealing to consumers by using eye-catching words, logos or ornamental features on the pack. And attempts by Big Tobacco to stop it by relying on legal arguments around trade and intellectual property rights are being systematically dismissed by courts around the world.

Ultimately, the industry needs to accept the fact that its ability to use fancy brands, especially on packaging, may be reduced by governments for public health reasons. Also that a company’s property rights are not absolute or untouchable. Not only does it not have enough legal basis – as has now been confirmed by several courts and tribunals – but it also disregards legitimate policies adopted by democratically elected governments.

Uruguay: A giant leap to prevent tobacco-assisted suicide

Tobacco is arguably one of the most significant threats to public health we have ever faced. Since the publication of the landmark U.S. Surgeon General’s Report on Tobacco and Health in 1964, that provided evidence linking smoking to diseases of nearly all organs of the body (see graph below), the international community slowly began to realize that a century-long epidemic of cigarette smoking was causing an enormous, avoidable public health catastrophe across the world.

History is not linear. The road to progress tends to be circuitous and full of uncertainties, and even more than a few steps backwards. In spite of this reality, at certain points in time, we have to admire those individuals and countries who have stepped in to shine the light to allow us all to move forward.

Recently, Uruguay, a small country in South America, offered us a good example of how a government that is committed to protecting the health and wellbeing of its people was able to withstand for more than 6 years the pressure of litigation from a giant multinational tobacco company, whose annual revenues of more than US$80 billion exceed the country’s gross domestic product of close to US$50 billion. As discussed in detail below, Philip Morris started proceedings in February 2010 claiming that the comprehensive tobacco control measures adopted by the Government of Uruguay since 2003 violated obligations under international trade and investment arrangements.

We are heartened by the resolve of leaders in Uruguay, which reflects the “garra charrúa” or the “resourceful, daring, and never to give up attitude” of the Uruguayan people. Perhaps in this case is apt to paraphrase the words of Apollo 11 astronaut, Neil Armstrong, after he stepped onto the lunar surface for the first time in 1969, to describe Uruguay’s victory as “one small step for a country, one giant leap for global tobacco control.”

Although cigarettes are “legal” goods that are produced, traded, and sold across the world, it is an indisputable fact, as one of us can attest as a specialist in vascular disease, that tobacco acts in a number of direct and indirect ways to cause damage to our blood vessels, heart and brain. Over time, these injuries raise blood pressure, reduce ability to tolerate exercise, and increase risk for blood clots and cancer.


Indeed, the bleak truth is that tobacco is the only “legal” product that kills when used as advertised. Despite decades of accumulated epidemiologic and experimental evidence on the causal relationship between tobacco smoking and lung cancer and other diseases, as well as significant progress achieved in reducing tobacco use globally since the adoption in 2005 of the WHO’s Framework Convention on Tobacco Control (FCTC), smoking remains one of the largest causes of preventable disease and death, with nearly 80% of the world’s one billion smokers living in developing countries. Data from the 2015 Global Burden of Disease study show that tobacco-attributable deaths and disability-adjusted life years (DALYs) lost have continued to rise across the world because of increases in population and aging that overwhelm declines in both exposure and risk-delated rates of related disease burden. In 2015, more than 7.1 million people died due to all tobacco smoke-related cases, up from 6.8 million people in 2005.

The lawsuit by Philip Morris, the biggest tobacco company in the world, against Uruguay argued that the country’s rules on tobacco packaging negatively impacted its intellectual property rights and sales in violation of the terms of a bilateral investment treaty between Uruguay and Switzerland, where the tobacco company has its headquarters. At its core, the lawsuit opposed provisions in two tobacco control measures adopted by the Government of Uruguay for protecting public health from the adverse effects of tobacco promotion, including false marketing that certain brand variants are safer than others, even after misleading descriptors such as “light,” “mild,” “ultra-light” were banned, and to increase consumer awareness of the health risks of tobacco consumption and encourage people, particularly the youth, to quit or not to take up smoking. Ordinance 514 issued by the Ministry of Public Health in 2008 requires each cigarette brand to have a “single presentation” and prohibits different packaging or “variants” for cigarettes sold under a given brand. Presidential Decree 287 of 2009 mandates an increase in the size of prescribed health warnings of the surface of the front and back of the cigarette packages from 50% to 80%, leaving only 20% of the cigarette pack for trademarks, logos and other information. The application of these provisions forced Philip Morris to withdraw most of its brands (such as Marlboro Red, Marlboro Gold, or Marlboro Green) from retail stores in Uruguay.

On July 8, 2016, however, the International Center of Settlement of Investment Disputes (ICSID), an independent arm of the World Bank Group, dismissed the lawsuit in its entirety and ruled that Uruguay should be awarded compensation for all the expenses and costs associated with defending against these claims. In essence, the ruling accepted the claim made by the Government of Uruguay that its anti-tobacco measures were “about protection of public health, not interference with foreign investment.” We should be clear, as Uruguay’s President, Dr. Tabaré Vázquez, an oncologist, stated in a televised address to the country after the ruling, the ICSID award reinforces that “it is not acceptable to prioritize commercial considerations over the fundamental right to health and life.”

This landmark international ruling came at just the right time, as India prepares to host in early November 2016, the Conference of the Parties (COP7), bringing together 180 Parties, which includes almost every country in the world, as well as regional economic integration organizations like the European Union, for reviewing the implementation of the WHO’s FCTC and the Protocol to Eliminate Illicit Trade in Tobacco Products.

At COP7, the victory of Uruguay needs to be highlighted echoing the words of former New York City Mayor Michael Bloomberg, an international public health champion, who provided financial support to help Uruguay deal with the litigation: “No country should be ever be intimidated by the threat of a tobacco company lawsuit, and this case will help embolden more nations to take actions that will save lives.” Indeed, countries across the world have now an important precedent to follow for the benefit of their people.

Big Tobacco’s controversial, ailing crusade against plain packaging

THREE years ago, the government of Togo, which has a gross domestic product of $4 billion, received a letter from Philip Morris International, a tobacco giant which last year earned revenues of $74 billion. The country had been mulling bringing in plain packaging for cigarette boxes. It would risk “violating the Togolese constitution”, the firm’s subsidiary explained, “providing tobacco manufacturers the right to significant compensation.” It then outlined how plain packaging would violate binding global and regional agreements. Togo was in no position to anger its international partners, it suggested.

For health advocates, such tactics are the last refuge of firms they have long denounced. But tobacco companies will do what they can to protect their packaging. They detest warnings with repulsive images of decaying body parts. In 2010 Philip Morris sued Uruguay, claiming that big warnings on boxes violated a trade deal. Then two years later Australia became the first country to go further, banishing iconic trademarks from tobacco packs. Its law mandates that brand names—such as Marlboro, Winfield or Dunhill—appear in grey type against a background of Pantone 448C, a putrid green deemed the world’s ugliest colour by a market-research firm.


So tobacco firms sued—in Australian courts, before a UN tribunal and by supporting countries that challenged the rule before the World Trade Organisation (WTO) on the ground that banning trademarks represents an expropriation of intellectual property (IP). Less formally, they and allies have lobbied against warnings and plain packaging in places ranging from Namibia to New Zealand. It has all been surprisingly effective. Until very recently, Australia has been the only country to ban tobacco trademarks from cigarette packs.

Such avenues may be closing. Although the WTO’s decision is still pending, firms lost their other suits against Australia. Last month arbitrators at the World Bank threw out the lawsuit against Uruguay. In May the European Court of Justice upheld a rule on big warnings and Britain’s High Court confirmed one for plain packaging. It seems likely that more governments will in future prioritise public health over IP. Canada, France and Ireland are already moving towards plain packs.

If so, ugly packaging could become the most damaging rule tobacco firms have faced in years. To date many laws have hurt firms in some ways but also, strangely, helped them in others. Bans on advertising lower their costs. Small competitors, unable to advertise, struggle to grow. High excise taxes can be another boon: when taxes are fixed and large, a big increase in the underlying price of a pack amounts to a relatively small rise in the pack’s total price. High prices have sustained tobacco firms, even as smoking rates decline. “They probably have the best pricing power of any industry,” says James Bushnell of Exane BNP Paribas, a broker.

But plain packaging clamps down on one of their last bits of advertising. The design of the box is where they must convey not only the name of the brand but abstract qualities, such as masculinity or the idea that a product is “premium”, and worth an extra outlay. If such traits are stripped from packs, consumers may choose cheaper brands. That is particularly worrisome in emerging markets, says Mr Bushnell, where standard packs would threaten the aspirational appeal of smoking. Other “sin” industries are worried. The International Trademark Association frets that governments might strip trademarks from junk food and liquor.

It may become pointless for cigarette firms to start legal proceedings. The Trans-Pacific Partnership (TPP), a pending free-trade agreement among 12 countries, shields governments from lawsuits over tobacco rules. It may unravel, but future pacts could have similar terms. Only America, where the right to free speech makes standard packs highly unlikely, may remain an anomaly (though it is a signatory to the TPP). In the past investors often viewed a new wave of rules on tobacco as a chance to buy tobacco stocks inexpensively, before they resumed their steady rise. This time may be different.

Philip Morris Gets Its Ash Kicked in Uruguay; Where Will It Next Blow Smoke?

Philip Morris International just lost a six-year battle to block Uruguay’s strong cigarette warning labels, which cover 80 percent of the front and back of cigarette packs, including graphic photos of the damages of smoking.

The decision was made by the World Bank’s trade tribunal, the International Centre for Settlement of Investment Disputes (ICSID), the world’s the leading body to settle international investment disputes.

Philip Morris became the first tobacco company to take on a country in an international court, and it took on one of the smallest. The company argued that Uruguay had violated terms of an investment treaty with Switzerland by enforcing anti-smoking laws. The operational headquarters for Philip Morris International is in Lausanne.

Philip Morris, with gross revenues of US $64 billion in 2010, sued Uruguay, with a GDP of US $32 billion that year, under the investor-state dispute settlement (ISDS) provisions of international trade deals. The tobacco company claimed Uruguay’s health warnings reduced the value of its investment and trademark rights to sell cigarettes in Uruguay. The ICSID trade tribunal upheld Uruguay’s right to protect its people’s health.

Small Country, Easy Prey

Uruguay, nestled between the southern tip of Brazil and the northern part of Argentina, has a small population — 3.4 million — but a big desire to cut tobacco usage. Its president, Tabaré Vázquez, is an oncologist.

Among other anti-smoking efforts, it bans tobacco advertising and smoking in public places.

Such efforts have paid off. A study published in 2012 in The Lancet praised Uruguay’s “substantial, unprecedented decrease” in adult cigarette smoking. The number of adults who smoke in Uruguay fell from 35 percent in 2005 to 22 percent in 2014.

At one level, Uruguay’s win seems to contradict opponents of trade deals like the proposed Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). These opponents say the pending trade agreements would give multinational corporations, such as Philip Morris, the ability to directly challenge public health, worker safety and environmental laws through ISDS provisions.

In this case, however, Uruguay was able to resist Philip Morris because of financial help from Michael Bloomberg in faraway New York. Indeed, before international health groups appeared, Uruguay was considering weakening the health warnings to avoid an even longer battle with Philip Morris.

Neither Bloomberg nor Uruguay disclosed the amount of Bloomberg’s financial help. It is safe to say that Uruguay would have not prevailed without this financial and international political support.

A History of Bullying

Philip Morris’ legal bullying of Uruguay is nothing new. It has bullied other countries, states and cities for years. It does this by filing lawsuits that exhaust the resources of governments that enact anti-smoking laws.

Tobacco companies routinely sued US communities in the 1980s and 1990s to deter them from enacting smoke-free laws, despite the companies almost always losing in court. This strategy often succeeded by using the mere threat of litigation to deter localities from adopting similar laws.

Although tobacco companies almost always lost in court, most localities did not go to court for fear of being sued. Few have the money and ability to hire the expensive lawyers — some of whom are paid as much as $1,000 an hour — to stay in a legal battle with tobacco companies. The threat of legal action was powerful to stop localities. More importantly, the threat of incurring expensive legal fees was enough to deter other cities from enacting laws that ban smoking.

Laurent Huber, the executive director for Action on Smoking and Health, the oldest anti-smoking group in the US, hinted at the effectiveness of this strategy in his post-trial comments. Phillip Morris “will no doubt shed some public crocodile tears, but their main goal in launching the suit has been realized, six years and millions of dollars have been spent defending a nondiscriminatory law that was intended purely to protect public health,” Huber said.

Likewise, in the 1990s when Australia and Canada first started thinking about requiring cigarettes to be sold in plain generic packaging, tobacco companies threatened to sue them. Standardized plain packaging, as Simon Chapman notes, removes the emperor’s clothes. The companies claimed that these proposals violated their trademark rights, one of the same claims Philip Morris made against Uruguay.

This was despite their own lawyers privately telling them that international treaties permitted governments to require such packaging. The tactic worked; both countries dropped their efforts for two decades. Canada has resumed its efforts, and Australia implemented plain packaging in 2012.

In response, Philip Morris sued Australia in domestic and international trade courts. After a four-year battle, Australia prevailed. The country still faces an industry-inspired challenge in the World Trade Organization, however.

Uruguay’s and Australia’s victories provide some legal precedent about a country’s sovereign right to implement public health regulations for other countries. Indeed, it is just these kinds of precedents that Philip Morris was trying to block. As then Philip Morris Vice President Hugh Cullman observed in 1985, “a sneeze in one country today causes international pneumonia tomorrow.”

He was right to be worried. UK, Ireland and France recently enacted plain packaging, and New Zealand, Canada, Norway, South Africa, Malaysia, Turkey, India and Chile are moving forward.

US Lagging Behind Other Countries

Uruguay’s and Australia’s wins against Big Tobacco are important reminders of how much the United States is lagging. Despite being required by the 2009 Family Smoking Prevention and Tobacco Act, we still do not have pictorial health warnings, much less plain packaging, on tobacco products.

The FDA issued a rule requiring pictorial warnings (albeit smaller than Uruguay’s) in 2011. The tobacco industry blocked this rule in court. That was in no small part because the Obama administration grossly underestimated the benefits and overstated the cost of including the pictorial warnings, including the “pleasure” that smokers would lose if they broke their addictions to nicotine or never started.

The FDA still has not issued new graphic health warnings despite the fact that 91 countries have pictorial health warnings on cigarette packages.

The administration is still pushing the TPP and TTIP, both of which will provide new avenues for Big Tobacco and other corporate interests to sue governments over strong public health policies. It also opposed excluding tobacco, also known as a tobacco “carve-out” in the TPP, and was willing to support only mild limits on Big Tobacco’s ability to use ISDS provisions to directly sue governments over their tobacco control policies.

TPP members would still need to “elect to deny” the ability of tobacco companies to sue directly, creating a loophole for them to continue intimidating governments with potential ISDS challenges.

With both the Republican and Democratic presumptive nominees for president opposing the TPP, it is time for the next president to start removing provisions of trade agreements that empower big companies to sue governments over health and environmental protections.

And, in the meantime, the administration should follow Uruguay, Australia and the rest of the world and require 21st-century warning labels on tobacco products.

Disclosure statement: Eric Crosbie receives funding from the National Institute of Health, and Stan Glantz receives funding from the National Institutes of Health and Truth Initiative. He is the president of the University of California Council of Faculty Associations.

Who really won the legal battle between Philip Morris and Uruguay?

The tobacco giant has to pay $7m to the small South American nation in a dispute over cigarette adverts. But the case could still set a worrying precedent

This month, campaigners celebrated the legal defeat of tobacco giant Philip Morris by Uruguay at the World Bank-hosted international centre for the settlement of investment disputes.

Philip Morris filed its controversial $25m (£19m) claim for damages at the World Bank arbitration court six years ago, saying it had “no choice but to litigate” due to Uruguay’s introduction of graphic warnings on cigarette packets. On 8 July, two of the three arbitrators ruled that Uruguay had the right to continue its anti-cigarette campaign, and that Philip Morris should reimburse $7m (£5.3m) in legal costs.

The David-Goliath battle between Uruguay and Philip Morris is an iconic case because it so clearly illustrates the way corporations can use international investment treaties to attack regulations made in the public interest.

So does Big Tobacco’s defeat by Uruguay mean that the growing public opposition to these investment treaties is mistaken? The corporate arbitration lawyers that take up many of the cases – and their supportive political allies – are keen to say that it proves the system can work fairly.

The question however is for whom is the system working? In investment arbitration cases, states never win. States can never file lawsuits against investors, so the best-case scenario for them is if the tribunal dismisses the investor’s accusations.

In this case, although Philip Morris was required to contribute $7m for legal costs, Uruguay will still have to pay a further $2.6m in financial costs and much more in terms of the non-material resources it has taken to fight this.

And this is a case that should never have been heard as it contradicted both the terms of the bilateral investment treaty between Switzerland and Uruguay (used as the basis for the claim) as well as the framework convention on tobacco control – the only binding multilateral convention on public health.

The arbitration panel’s decision to hear the case put a brake on the adoption of similar tobacco control measures in Costa Rica, Paraguay and New Zealand, among others.

Moreover, the lawsuit may have encouraged legal threats and actions by other corporations, hopeful that they could secure either revision of government policies or financial compensation.

In the past few years, Katoen Natie (logistics), Botnia (pulp/paper) and Farmashop (pharmacy) have threatened Uruguay with lawsuits. In March, a US-based telecommunications corporation, Italba, filed a lawsuit against the country.

The real winners in this proliferation of investor-state cases – which have surged globally from six in 1996 to 696 now – have been the corporate law firms that work on these long and complex cases. Typical arbitration lawyers, employed by either the state or a corporation, earn up to $1,000 an hour.

Philip Morris hired three international law firms (Sidley Austin, Lalive, and Shook, Hardy & Bacon), whereas Uruguay was represented by Foley Hoag. The three arbitrators that decided the case also received wages: nearly $1m between the three of them.

But more disturbing than the profits lawyers make is the power that they are given. Juan Fernández-Armesto, a Spanish lawyer and expert on investment arbitrators, said (paywall):

It never ceases to amaze me that sovereign states have agreed to investment arbitration at all […] Three private individuals are entrusted with the power to review, without any restriction or appeal procedure, all actions of the government, all decisions of the courts, and all laws and regulations emanating from parliament.

The German association of judges said in February (pdf) that these arbitration systems not only fail to meet international requirements for technical and financial independence, but are also unnecessary as disputes can be resolved through national courts.

So while Uruguay can celebrate this particular win over a corporate Goliath, perhaps the victory’s most useful contribution would be to raise awareness among states of the dangers of signing up to a privatised court system that leaves decisions on public policies in the hands of corporate lawyers. Failure to do so will mean the arrival of many more transnational Goliaths, armed not with spears but legal papers.

Cecilia Olivet is a researcher at the Transnational Institute and Alberto Villareal coordinates the trade and investment programme of Redes-Friends of the Earth Uruguay

The Significance Of Uruguay’s Win Over Philip Morris International

The tobacco industry’s global efforts to use bilateral and multilateral agreements to challenge the spread of tobacco control measures such as trademark-minimising plain packages were dealt a significant blow last week when the World Bank dispute settlement body dismissed a case brought by Philip Morris against the government of Uruguay.

The decision is seen a landmark for those who view the company as using test cases to continually challenge and delay public health protection measures and discourage other countries, particularly those with fewer resources, from strengthening their health regulations. Additionally, the case reasserted that trademarks are subject to government regulations and also illustrated the role that international organisations and actors can play in support of national governments defending their health measures.

Facts & Arguments

Philip Morris initiated legal proceedings through its Swiss subsidiary against Uruguay at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) early in 2010. Among many firsts, this was the first time a tobacco group challenged a state in front of an international court and the first investment arbitration concerning tobacco control.

ICSID aims to support voluntary conciliation and arbitration of international investment disputes upon consent of both the investor and state. Once such consent is given, it cannot be withdrawn unilaterally and it becomes a binding undertaking. Independent arbitrators and conciliators appointed to each case hear the evidence and determine the outcome of the dispute.

Philip Morris claimed that the health measures imposed by the Uruguayan Public Health Ministry infringed on its intellectual property rights and breached Uruguay’s obligation under the bilateral investment treaty (BIT) between itself and Switzerland.

The case and related documents can be found here.

Two specific measures were contested. The first was the Single Presentation Requirement introduced by the Uruguayan Public Health Ministry in 2008, where tobacco manufacturers could no longer sell multiple varieties of a brand. In having to pull 7 out of its 12 products, Philip Morris alleged that only being able to market one variety substantially affected its company value.

The second measure concerned the so-called “80/80 Regulation.” Under a presidential decree issued in 2009, the graphic health warnings on cigarette packages should cover 80 percent instead of 50 percent, of the packaging, leaving only 20 percent to the tobacco companies’ trademarks and other information.

Uruguay was the first to go beyond the 50 percent surface requirement, but since the proceedings began, 58 other countries have also increased the requirement for the size of graphics. Nepal even calling for 90 percent of a cigarette package to be covered. The claimants contended that this further deprived them of their IP rights, causing further loss to their investments.

In its defence, Uruguay countered that “both regulations were applied in a non-discriminatory manner to all tobacco companies, and they amounted to a reasonable, good faith exercise of Uruguay’s sovereign prerogatives.”

The case moved to examine whether Uruguay had failed to observe its commitments on the use of trademarks under the BIT and the scope of such commitments.

Upon submitting a registration application and being granted trademarks, Philip Morris argued that an investor should be able to hold and exercise the full range of rights available to trademark holders and that Uruguay would be committed observe these rights. Within these rights was notably the right to use its trademarks.


The tribunal found that “under Uruguayan law or international conventions to which Uruguay is a party the trademark holder does not enjoy an absolute right of use, free of regulation, but only an exclusive right to exclude third parties from the market so that only the trademark holder has the possibility to use the trademark in commerce, subject to the State’s regulatory power.”

This reflects and falls in line with the general concept that trademarks confer their holders only the right to prevent others from using their marks and are still subject to state regulations.

Furthermore, with regard to the scope of commitments, it was held that “a trademark is not a unique commitment agreed in order to encourage or permit a specific investment” and that Uruguay had no commitment nor obligation in relation to an investment under the BIT.

Ultimately, “a trademark gives rise to rights, but their extent, being subject to the applicable law, is liable to changes” subject to a state’s decided health measures. With no commitment to enable Philip Morris to use its trademark and with trademarks being subject to national laws and regulations, the tribunal found that Uruguay had not violated the BIT and dismissed the case.

Implications of the Decision

The case is highly significant given the polarity between actors and the debate on the use and application of domestic and international intellectual property laws.

Many hail this case as a significant victory in a series of tobacco companies fighting control measures, and others such as former New York Mayor Michael Bloomberg applauded Uruguay for standing up to the tobacco industry and showing others they can win.

The decision reinforces that states have a sovereign right to decide on their laws and regulations to protect their population.

Philip Morris General Counsel Marc Firestone, meanwhile, said the company “never questioned Uruguay’s authority to protect public health,” but sought to clarify international law.

Some critics, such as Laurent Huber, executive director for Action on Smoking and Health, contend that this was a public relations case for Philip Morris, aimed at discouraging other countries from imposing stronger public health regulations with the threat of a lengthy lawsuit by an opponent with deep resources. The annual revenue of Philip Morris in 2013 was reported at $80.2 billion, in contrast to Uruguay’s GDP of $55.7 billion.

Already in 2010, international lawyer and practitioner in investment treaty arbitration Todd Weiler stated in a legal opinion that:

“PMI’s BIT claim against Uruguay is emblematic of its long standing strategy to vehemently oppose the adoption of measures that might some day lead to plain paper of their products, or other measures that substantially interfere with the use and enjoyment of its crucial investment in its tobacco brands.” He added that “the claim is nothing more than the cynical attempt by a wealthy multinational corporation to make an example of a small country with limited resources to defend against a well-funded international legal action….”

The Bloomberg Foundation lent substantial financial support to Uruguay’s legal expenses.

Overall, given the definitive outcome of the present case in addition to cases where domestic, regional and international courts upheld measures to impose plain packaging and new tobacco regulations (see United Kingdom, European Union and Australia), other countries will perhaps no longer feel pressured and act on their own accord with regards to strengthening their public health measures.

International Organisation Support

Another significant aspect of the case is that the World Health Organization and the WHO Framework Convention on Tobacco Control (WHO FCTC) secretariat submitted an amicus brief during the proceedings which provided “public health on Uruguay’s tobacco packaging and labelling laws and detailed state practice in implementing similar measures.” Further details can be found in the WHO’s press release.

According to the FCTC, “The Tribunal accepted submission of the amicus brief on the basis that it provided an independent perspective on the matters in the dispute and contributed expertise from ‘qualified agencies’.”

This is not only affirmative that the FCTC provides legal backing to states who seek to provide protective health measures, but illustrates the success of international organisations in supporting national governments in their health efforts.

Lastly, in view of the place of arbitration some might question the existence of investor-state dispute settlement bodies such as the ICSID.

In Karen Hansen-Kuhn’s view as international program director at the US-based Institute for Agriculture and Trade Policy, these bodies empower companies to sue governments in private tribunals over measures that undermine their expected profits. In doing so, companies gain a chance for a “second bite at the apple,” which also “undoubtedly sends strong political signals to other local or national governments considering new programs.”

Hansen-Kuhn argued that rather than allowing investor-state dispute settlement bodies to decide, global governance rules should be given priority to lead the way on public health discussions.

International tribunal upholds states’ rights to protect health through tobacco control

GENEVA, 12 JULY 2016 – An international tribunal has upheld the sovereign authority of states to protect health through tobacco control. The World Bank’s International Centre for Settlement of Investment Disputes (ICSID) has confirmed that tobacco control measures applied by the Government of Uruguay did not violate the terms of an investment agreement between Uruguay and Switzerland, under which the dispute was initiated.

The decision was informed by a joint submission or amicus brief, from the World Health Organization (WHO) and the WHO Framework Convention on Tobacco Control (WHO FCTC) Secretariat. The brief provided an overview of global tobacco control, including the role of the WHO FCTC. It set out the public health evidence underlying Uruguay’s tobacco packaging and labelling laws and detailed state practice in implementing similar measures.

The Tribunal accepted submission of the amicus brief on the basis that it provided an independent perspective on the matters in the dispute and contributed expertise from “qualified agencies”.1 The Tribunal subsequently relied on the brief at several points of the factual and legal analysis in their decision. 2

In accepting submission of the amicus brief the Tribunal noted that given the “public interest involved in this case” the amicus brief would “support the transparency of the proceeding”.3. Now that the decision of the Tribunal has been released, the WHO and WHO FCTC Secretariat make available below their submissions to the Tribunal.

The tribunal’s award affirms that Parties to the WHO FCTC can confidently implement the Convention and its Guidelines to protect present and future generations from the devastating consequences of tobacco consumption.


1. Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay (ICSID Case No. ARB/10/7), Procedural Order No. 3 (February 17, 2015) at paras. 25 and 28.

2. Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay (ICSID Case No. ARB/10/7), Decision on the Merits (July 8, 2016)

3. Abal Hermanos S.A. (Uruguay) v. Oriental Republic of Uruguay (ICSID Case No. ARB/10/7), Procedural Order No. 3 (February 17, 2015) at para. 28

Uruguay Defeats Philip Morris In Major Win For Anti- Smoking Advocates

Uruguay has defeated Philip Morris, the global tobacco giant, in a major international lawsuit over the country’s tough anti-smoking regulations. The Swiss-based company sued Uruguay at the World Bank’s International Center for Settlement of Investment Disputes under the terms of a 1991 bilateral investment treaty between Uruguay and Switzerland.

Philip Morris, which was founded in London in 1847, is now the world’s largest cigarette manufacturer with annual revenues of over $80 billion. It has been waging an aggressive battle around the world against national laws requiring tobacco companies to print graphic warnings about the health impacts of smoking. So far it has lost  lawsuits in courts in Australia, Norway, Thailand and the UK.

On March 26, 2010, Philip Morris filed a complaint against Uruguay at the World Bank arbitration tribunal. The action was intended to escalate the fight to an international level and to take advantage of trade agreements that typically favor major corporations by allowing them to claim damages from laws that deny them profits from their investments.

“This is like David and Goliath,” Silvina Echarte Acevedo, the legal adviser in charge of the Uruguayan ministry of public health’s case, told the Independent newspaper.

“They are bullying us because we are small.”

In suing the small South American country, Philip Morris also hoped to strike down some of the toughest anti-smoking laws in the world. Uruguay requires tobacco companies to print health warnings and graphic images such as diseased lungs and rotting teeth that cover 80 per cent of both sides of cigarette packets. It also requires companies to use the same image for all its products making it hard for the company to promote sub-brands like lights or mild cigarettes. Taxes have been hiked and smoking in public places have been banned.

On October 13, 2014, Paul Reichler, a lawyer with Foley Hoag, in Washington DC, responded on behalf of the Uruguayan government, citing the country’s obligations under the World Health Organisation’s 2005 Framework Convention on Tobacco Control.

The case was heard by a three person panel under arbitration rules that allow each party to appoint a judge each and mutually agree on a third. Not surprisingly when the verdict was delivered on July 8, 2016, Piero Bernadini, appointed by Uruguay, sided with the country, while Gary Born, apppointed by Philip Morris, sided with the company. The deadlock was broken by James Crawford, an Australian judge appointed by the World Bank, who sided with Uruguay.

“It is not acceptable to prioritize commercial considerations over the fundamental right to health and life,” Uruguay’s President Tabaré Vázquez announced in a victory speech to his citizens. “The health measures that we have imposed to control tobacco and protect the health of our people have been recognized as legitimate and adopted as a sovereign function of our republic.”

Other politicians and anti-smoking advocates applauded the verdict, notably Michael Bloomberg, the billionaire former mayor of New York city who helped fund Uruguay’s

“This is a major victory for the people of Uruguay — and it shows countries everywhere that they can stand up to tobacco companies and win,” Bloomberg said. “No country
should ever be intimidated by the threat of a tobacco company lawsuit, and this case will help embolden more nations to take actions that will save lives.”

The company attempted to put its best face forward. “We’ve never questioned Uruguay’s authority to protect public health,” Marc Firestone, general counsel at Philip Morris. “The arbitration concerned an important, but unusual, set of facts that called for clarification under international law, which the parties have now received. For the last seven years, we have already been complying with the regulations at issue in the case, so today’s outcome doesn’t change the status quo.”

However the company’s previous statements make it clear that this is a significant defeat.

“The large size of these warnings prevents us from effectively displaying our trademarks and goes beyond what could reasonably be considered appropriate to inform consumers of the well-established health risks of smoking,” Morgan Rees, a spokesperson for Philip Morris, told Investment Arbirtation Reporter. “This is without precedent anywhere in the world.”

PAHO/WHO congratulates Uruguay for successfully defending tobacco control policies, “a model for the region”

The Pan American Health Organization/ World Health Organization (PAHO/WHO) congratulated n Friday the Government of Uruguay for winning an international legal case brought by the Philip Morris tobacco company. Philip Morris challenged tobacco control regulations implemented by Uruguay in compliance with its obligations under the Framework Convention on Tobacco Control (FCTC), the world’s first international public health treaty negotiated under the auspices of WHO.

The World Bank’s International Centre for Settlement of Investment Disputes (ICSID) confirmed today that the measures applied by the Government of Uruguay to reduce tobacco consumption did not violate Philip Morris’ trade rights as established in investment agreements between Uruguay and Switzerland, where the company is headquartered.

“This decision serves not only as recognition of Uruguay’s continuing efforts to protect its population against tobacco consumption and exposure to secondhand smoke but also as a precedent and a call to all countries in the Americas and indeed worldwide to implement these measures without fear of violating any treaty, despite challenges by the tobacco industry,” said PAHO Director Carissa F. Etienne.

She added that, “PAHO/WHO supported Uruguay’s defense of these measures, which were aimed at saving lives. This is a very important day for all, as this case becomes a model for the Region of the Americas and the world in fighting the tobacco epidemic irrespective of threats from the tobacco industry.”

In a letter to Tabaré Vázquez, President of Uruguay, Dr. Etienne offered her congratulations and said that the decision “reaffirms the sovereign right of States to protect the lives and health of their populations over commercial interests.”

In his address to the nation, President Vasquez stated, “We reaffirm our commitment to continue a direct and frontal fight against tobacco consumption to reduce more and more the heavy burden this epidemic places on our people and to continue to promote the full implementation of the Framework Convention on Tobacco Control, inviting all countries to join us in fighting this plague, without fear of reprisals from the powerful tobacco industry, just as Uruguay has done”.

PAHO/WHO views Uruguay’s laws and regulations aimed at reducing tobacco consumption as being fully aligned with the provisions of the FCTC. In force since 2005, the FCTC obliges its States Parties to apply a series of policies and measures to reduce tobacco consumption and protect their populations against secondhand smoke.

Philip Morris first presented its claim in February 2010, after Uruguay implemented regulations requiring health warnings to cover 80% of the main surface of tobacco packages, and limiting tobacco manufacturers to one unique package per cigarette brand. Uruguay presented written arguments defending its tobacco control efforts at ICSID, and PAHO/WHO supported the country’s defense with an amicus brief.

Despite the industry’s legal challenge, in 2014 Uruguay accomplished a full ban on tobacco advertising, promotion and sponsorship by including a new prohibition on product promotion and display at the point of sale. In addition, Uruguay became the second country in the Americas (after Nicaragua) to ratify the Protocol to Eliminate Illicit Trade in Tobacco Products, a new international treaty and the first FCTC protocol.

A 2012 study published in The Lancet showed an average 23% decline in tobacco consumption in Uruguay between 2005 and 2011. The decline was more pronounced among young people. A separate 2011 study showed an association between the implementation of regulations mandating smoke-free public places in Uruguay and a
22% decline in hospitalizations due to acute myocardial infarction.

Currently 30 of 35 countries in the Americas have ratified the FCTC, which calls for tobacco control measures including the use of graphic warnings on tobacco packaging; monitoring of tobacco consumption; measures to protect the population from secondhand smoke; support for smoking cessation; enforcement of bans on tobacco advertising, promotion and sponsorship and increased taxes on tobacco.

Tobacco kills some 6 million people worldwide each year, both through direct consumption and exposure to secondhand smoke. At least 1 million of these deaths occur in the Americas.