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June 8th, 2016:

Smoke and Mirrors? Structuring of Foreign Investments Following the Philip Morris Award

Jun 8th, 2016
by Editor.
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http://www.lexology.com/library/detail.aspx?g=a2cfda47-0e67-4a86-91c4-2eba3fa71966

Perhaps the most high-profile case in the debate over investor-state arbitration in recent years has been the investment treaty claim by Philip Morris against the Australian Government, concerning the introduction of tobacco plain packaging rules. Opponents have relied on the case to highlight the perceived risk of “regulatory chill” caused by the proliferation of “secret courts”, while many proponents had hoped that the case would result in an award that carefully balanced the State’s “right to regulate” with the investor’s rights to “fair and equitable treatment” and “legitimate expectations”. The recently published decision[1] of the tribunal not to exercise jurisdiction over the claim has therefore resulted in a degree of disappointment from all quarters. Nonetheless, the award on jurisdiction and admissibility of 17 December 2015 deals with some important issues that have direct relevance to any investors seeking to restructure their investments in a manner that maximises their chances of obtaining investment treaty protections.

Background

The claim was brought by Philip Morris Asia Limited (“PM Asia“), a Hong Kong based subsidiary of Philip Morris International Inc. (“PMI“), under the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments, dated 15 September 1993 (the “Treaty“). The substantive claim arose from the introduction of the Tobacco Plain Packaging Act 2011 and the Tobacco Plain Packaging Regulations 2011, which prohibited the use of brands, trademarks and logos on tobacco packaging. PM Asia argued that this amounted to an indirect expropriation of its intellectual property rights and transformed its Australian subsidiary (“PM Australia“) from a manufacturer of branded products to a manufacturer of commoditised products, thus substantially diminishing the value of its investments in Australia. PM Asia claimed damages of over US$ 4 billion.

The award sets out a detailed description of the chronology preceding the claim, but in summary, Australia had first considered plain packaging legislation in 1995. After various consultations and one abortive attempt to introduce legislation into the Senate, the Australian Prime Minister, Kevin Rudd, officially announced his intention to introduce plain packaging legislation in April 2010. Following Mr Rudd’s defenestration by Julia Gillard and the subsequent election in August 2010, the Tobacco Plain Packaging Bill was eventually introduced into parliament in April 2011 and received Royal Assent on 1 December 2011.

In parallel with these developments, PMI had expressed its opposition to plain packaging legislation in Australia from at least late 2009. It maintained its dialogue with the Government from that point onwards, describing the proposals as “restrictions tantamount to expropriation” and threatening “legal challenges” if the proposals were pursued. Staring in September 2010, PMI began restructuring several of its global affiliates, with the stated aim of streamlining its corporate structure. On 21 January 2011, PMI filed a foreign investment application regarding the proposed purchase of PM Australia by PM Asia. The Treasury subsequently issued a “non-objection letter” and the acquisition completed on 23 February 2011. PM Asia issued its initial notice of claim under the Treaty on 27 June 2011 and its formal notice of arbitration on 21 November 2011, the day that the Tobacco Plain Packaging Bill passed both Houses of Parliament.

Award on Jurisdiction and Admissibility

The award on jurisdiction and admissibility deals with two preliminary objections by Australia:

  • the “Non-Admission Objection” – Australia argued that PM Asia’s investment in PM Australia was not properly admitted in accordance with Australian law and therefore fell outside the subject-matter jurisdiction (ratione materiae) of the tribunal;
  • the “Temporal Objection” – Australia argued that there was a pre-existing dispute between PMI and the Australian Government concerning the plain packaging proposals, and PM Asia’s investment in PM Australia post-dated this dispute, so it did not fall within the temporal jurisdiction (ratione temporis) of the tribunal. Australia supplemented this jurisdictional objection with an admissibility objection: even if the tribunal had jurisdiction over the claim, it should not exercise its jurisdiction because PM Asia’s claim under the Treaty amounted to an abuse of process.
  • The “Non-Admission Objection” is specific to the facts of the case and is therefore of limited significance. However, the tribunal’s findings on the “Temporal Objection” may have wider application and are therefore worth further consideration.

PM Asia’s primary response to the Temporal Objection was that it had controlled PM Australia prior to the restructuring, through the exercise of management functions and strategic/budgetary decisions since 2001. The Treaty definition of an “investment” included assets “owned or controlled” by an investor and so PM Asia argued that it was eligible for the protections afforded by the Treaty long before its formal acquisition of PM Australia. The tribunal undertook a brief analysis of the case law on the distinction between ownership and control and found that PM Asia’s involvement in the approval of expenditures and dividends, its role in branding and marketing strategy and its supervision of PM Australia’s staff were insufficient to amount to “control” in circumstances where PM Asia’s actions were undertaken in accordance with PMI global policies and procedures and were ultimately subject to PMI approvals.

Having determined that PM Asia’s only eligible investment was its acquisition of PM Australia in February 2011, the tribunal therefore needed to ascertain whether it had jurisdiction and, if so, whether there was any reason for it to refuse to exercise that jurisdiction. Applying Gremcitel,[2] the tribunal held that whenever a cause of action is based on a treaty breach, the test for ratione temporis is whether the claimant made the protected investment before the moment when the alleged breach occurred. In that case, the tribunal had found that the critical date on which the breach crystallised was when the relevant legislative measures were adopted, notwithstanding the fact that this may have been “the culmination of a process or sequence of events which may have started years earlier“. In PM Asia’s case, it was the enactment of the Tobacco Plain Packaging Act in December 2011 that allegedly breached the Treaty and so PM Asia’s investment in February 2011 pre-dated the breach. Accordingly, the tribunal found that it did have jurisdiction over PM Asia’s claim.

Moving on to the question of admissibility, the tribunal undertook an analysis of the arbitral case law on abuse of process. Drawing on several prominent cases,[3] the tribunal emphasised that the mere fact of restructuring an investment to obtain the protection of an investment treaty is not per se illegitimate and that the threshold for finding an “abusive manipulation of the system of international investment protection” is high.[4] Applying Tidewater andMobil,[5] the tribunal determined that the key question was whether there was a “pre-existing” dispute at the time the restructuring was carried out. The tribunal grappled with the various formulations adopted in Gremcitel, Lao Holdingsand Pac Rim[6] and held that the initiation of a treaty claim constitutes an abuse of process when an investor “has changed its corporate structure to gain the protection of an investment treaty at a point when a specific dispute was foreseeable“.[7] Rather than adopting the test of foreseeability articulated in Pac Rim as “a very high probability and not merely a possibility“, the tribunal held instead that a dispute is foreseeable when there is a “reasonable prospect… that a measure which may give rise to a treaty claim will materialise“.[8]

Applying this test to the facts, the tribunal noted PMI’s objection to the Government’s proposals as early as 2009, including specific references to the deprivation of property rights and possible legal challenges. The tribunal also emphasised the fact that, while it took a considerable time for the legislation to pass and there was a degree of uncertainty as to whether the Government could obtain the parliamentary majority needed to pass the legislation, the intention of the Government remained relatively clear since April 2010 and so there was at least a “reasonable prospect” of the legislation being passed from that point onwards.

Notwithstanding these findings, the tribunal acknowledged that the commencement of a claim shortly after a corporate restructuring might not necessarily amount to an abuse of process where the restructuring was justified “independently of the possibility of bringing a claim“.[9] On the facts, the tribunal was unconvinced by PM Asia’s insistence that the restructuring (i) was part of a broader group-wide process, (ii) was needed to align ownership with pre-existing management control, (iii) helped minimise PM Asia’s tax liabilities, and (iv) helped to optimise cash flow. In particular, the tribunal noted the failure of PM Asia to present any witnesses who were directly familiar with the rationale for the restructuring and the lack of “contemporaneous corporate memoranda or other internal correspondence sufficiently explaining the business case for the restructuring in detail“.[10]

The tribunal also placed significant emphasis on the volume and timing of legal advice from PMI’s advisors concerning potential investment treaty claims. As part of the production phase of the arbitration, the parties agreed to exchange privilege logs listing any documents that they wished to withhold on grounds of privilege or political sensitivity. Following objections from both parties, the tribunal ordered the production of many of those documents.[11] While the award itself contains heavy redactions in relation to privileged and commercially sensitive documents, it is evident that the subject headings of emails passing between PMI and its legal advisors (for example, “Australia-HK BIT“, “Arbitration under the HK BIT“) gave a clear indication that PMI was being advised on potential investment treaty claims from as early as July 2010. Critical email exchanges also coincided precisely with the internal approval of the restructuring and the finalisation of the notice of claim.

In such circumstances, the tribunal was satisfied that the passage of the offending legislation was not only foreseeable, but actually foreseen. The tribunal concluded that “the main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the Treaty, using an entity from Hong Kong“.[12] Since this was carried out “at a time when there was a reasonable prospect that the dispute would materialise” it was deemed to be an abuse of process. Accordingly, the tribunal declared the claim inadmissible, precluding it from exercising jurisdiction over the dispute.

Key Lessons

There are several key lessons to take away from the Philip Morris award for any investor seeking to restructure its foreign investments in an effort to maximise treaty protections:

  • Preparing for the “worst case scenario” by seeking legal advice on investment treaty protections is entirely normal and prudent business behaviour.
  • Similarly, restructuring investments to benefit from treaty protections is unlikely to be abusive where this is in response to a general risk of future disputes.
  • The threshold for abusive conduct lies where a restructuring takes place at a point in time when a specific dispute is foreseeable; in other words, there is a reasonable prospect that a measure giving rise to a treaty claim will materialise.
  • Factual evidence is likely to be fundamental to the outcome of any objection based on abuse of process. It is therefore critical to ensure that any other reasons for the restructuring (such as tax benefits, costs reductions, management rationalisation) are well-documented and are presented in a manner that can be adduced in evidence without jeopardising any subsequent claims for legal privilege.
  • Legal advice on potential investment treaty protections should be sought as early as possible, and certainly prior to the crystallisation of a specific dispute. Wherever possible, any communications seeking legal advice should be clearly marked as privileged and should be drafted carefully to avoid any inadvertent suggestions that a specific dispute is either inevitable or foreseeable.

Smoke and Mirrors? Structuring of Foreign Investments Following the Philip Morris Award

Jun 8th, 2016
by Editor.
No comments yet

http://globalarbitrationnews.com/smoke-mirrors-structuring-foreign-investments-following-philip-morris-award-20160608/#page=1

Perhaps the most high-profile case in the debate over investor-state arbitration in recent years has been the investment treaty claim by Philip Morris against the Australian Government, concerning the introduction of tobacco plain packaging rules. Opponents have relied on the case to highlight the perceived risk of “regulatory chill” caused by the proliferation of “secret courts”, while many proponents had hoped that the case would result in an award that carefully balanced the State’s “right to regulate” with the investor’s rights to “fair and equitable treatment” and “legitimate expectations”. The recently published decision[1] of the tribunal not to exercise jurisdiction over the claim has therefore resulted in a degree of disappointment from all quarters. Nonetheless, the award on jurisdiction and admissibility of 17 December 2015 deals with some important issues that have direct relevance to any investors seeking to restructure their investments in a manner that maximises their chances of obtaining investment treaty protections.

Background

The claim was brought by Philip Morris Asia Limited (“PM Asia“), a Hong Kong based subsidiary of Philip Morris International Inc. (“PMI“), under the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments, dated 15 September 1993 (the “Treaty“). The substantive claim arose from the introduction of the Tobacco Plain Packaging Act 2011 and the Tobacco Plain Packaging Regulations 2011, which prohibited the use of brands, trademarks and logos on tobacco packaging. PM Asia argued that this amounted to an indirect expropriation of its intellectual property rights and transformed its Australian subsidiary (“PM Australia“) from a manufacturer of branded products to a manufacturer of commoditised products, thus substantially diminishing the value of its investments in Australia. PM Asia claimed damages of over US$ 4 billion.

The award sets out a detailed description of the chronology preceding the claim, but in summary, Australia had first considered plain packaging legislation in 1995. After various consultations and one abortive attempt to introduce legislation into the Senate, the Australian Prime Minister, Kevin Rudd, officially announced his intention to introduce plain packaging legislation in April 2010. Following Mr Rudd’s defenestration by Julia Gillard and the subsequent election in August 2010, the Tobacco Plain Packaging Bill was eventually introduced into parliament in April 2011 and received Royal Assent on 1 December 2011.

In parallel with these developments, PMI had expressed its opposition to plain packaging legislation in Australia from at least late 2009. It maintained its dialogue with the Government from that point onwards, describing the proposals as “restrictions tantamount to expropriation” and threatening “legal challenges” if the proposals were pursued. Staring in September 2010, PMI began restructuring several of its global affiliates, with the stated aim of streamlining its corporate structure. On 21 January 2011, PMI filed a foreign investment application regarding the proposed purchase of PM Australia by PM Asia. The Treasury subsequently issued a “non-objection letter” and the acquisition completed on 23 February 2011. PM Asia issued its initial notice of claim under the Treaty on 27 June 2011 and its formal notice of arbitration on 21 November 2011, the day that the Tobacco Plain Packaging Bill passed both Houses of Parliament.

Award on Jurisdiction and Admissibility

The award on jurisdiction and admissibility deals with two preliminary objections by Australia:

the “Non-Admission Objection” – Australia argued that PM Asia’s investment in PM Australia was not properly admitted in accordance with Australian law and therefore fell outside the subject-matter jurisdiction (ratione materiae) of the tribunal;
the “Temporal Objection” – Australia argued that there was a pre-existing dispute between PMI and the Australian Government concerning the plain packaging proposals, and PM Asia’s investment in PM Australia post-dated this dispute, so it did not fall within the temporal jurisdiction (ratione temporis) of the tribunal. Australia supplemented this jurisdictional objection with an admissibility objection: even if the tribunal had jurisdiction over the claim, it should not exercise its jurisdiction because PM Asia’s claim under the Treaty amounted to an abuse of process.
The “Non-Admission Objection” is specific to the facts of the case and is therefore of limited significance. However, the tribunal’s findings on the “Temporal Objection” may have wider application and are therefore worth further consideration.

PM Asia’s primary response to the Temporal Objection was that it had controlled PM Australia prior to the restructuring, through the exercise of management functions and strategic/budgetary decisions since 2001. The Treaty definition of an “investment” included assets “owned or controlled” by an investor and so PM Asia argued that it was eligible for the protections afforded by the Treaty long before its formal acquisition of PM Australia. The tribunal undertook a brief analysis of the case law on the distinction between ownership and control and found that PM Asia’s involvement in the approval of expenditures and dividends, its role in branding and marketing strategy and its supervision of PM Australia’s staff were insufficient to amount to “control” in circumstances where PM Asia’s actions were undertaken in accordance with PMI global policies and procedures and were ultimately subject to PMI approvals.

Having determined that PM Asia’s only eligible investment was its acquisition of PM Australia in February 2011, the tribunal therefore needed to ascertain whether it had jurisdiction and, if so, whether there was any reason for it to refuse to exercise that jurisdiction. Applying Gremcitel,[2] the tribunal held that whenever a cause of action is based on a treaty breach, the test for ratione temporis is whether the claimant made the protected investment before the moment when the alleged breach occurred. In that case, the tribunal had found that the critical date on which the breach crystallised was when the relevant legislative measures were adopted, notwithstanding the fact that this may have been “the culmination of a process or sequence of events which may have started years earlier“. In PM Asia’s case, it was the enactment of the Tobacco Plain Packaging Act in December 2011 that allegedly breached the Treaty and so PM Asia’s investment in February 2011 pre-dated the breach. Accordingly, the tribunal found that it did have jurisdiction over PM Asia’s claim.

Moving on to the question of admissibility, the tribunal undertook an analysis of the arbitral case law on abuse of process. Drawing on several prominent cases,[3] the tribunal emphasised that the mere fact of restructuring an investment to obtain the protection of an investment treaty is not per se illegitimate and that the threshold for finding an “abusive manipulation of the system of international investment protection” is high.[4] Applying Tidewater and Mobil,[5] the tribunal determined that the key question was whether there was a “pre-existing” dispute at the time the restructuring was carried out. The tribunal grappled with the various formulations adopted in Gremcitel, Lao Holdings and Pac Rim[6] and held that the initiation of a treaty claim constitutes an abuse of process when an investor “has changed its corporate structure to gain the protection of an investment treaty at a point when a specific dispute was foreseeable“.[7] Rather than adopting the test of foreseeability articulated in Pac Rim as “a very high probability and not merely a possibility“, the tribunal held instead that a dispute is foreseeable when there is a “reasonable prospect… that a measure which may give rise to a treaty claim will materialise“.[8]

Applying this test to the facts, the tribunal noted PMI’s objection to the Government’s proposals as early as 2009, including specific references to the deprivation of property rights and possible legal challenges. The tribunal also emphasised the fact that, while it took a considerable time for the legislation to pass and there was a degree of uncertainty as to whether the Government could obtain the parliamentary majority needed to pass the legislation, the intention of the Government remained relatively clear since April 2010 and so there was at least a “reasonable prospect” of the legislation being passed from that point onwards.

Notwithstanding these findings, the tribunal acknowledged that the commencement of a claim shortly after a corporate restructuring might not necessarily amount to an abuse of process where the restructuring was justified “independently of the possibility of bringing a claim“.[9] On the facts, the tribunal was unconvinced by PM Asia’s insistence that the restructuring (i) was part of a broader group-wide process, (ii) was needed to align ownership with pre-existing management control, (iii) helped minimise PM Asia’s tax liabilities, and (iv) helped to optimise cash flow. In particular, the tribunal noted the failure of PM Asia to present any witnesses who were directly familiar with the rationale for the restructuring and the lack of “contemporaneous corporate memoranda or other internal correspondence sufficiently explaining the business case for the restructuring in detail“.[10]

The tribunal also placed significant emphasis on the volume and timing of legal advice from PMI’s advisors concerning potential investment treaty claims. As part of the production phase of the arbitration, the parties agreed to exchange privilege logs listing any documents that they wished to withhold on grounds of privilege or political sensitivity. Following objections from both parties, the tribunal ordered the production of many of those documents.[11] While the award itself contains heavy redactions in relation to privileged and commercially sensitive documents, it is evident that the subject headings of emails passing between PMI and its legal advisors (for example, “Australia-HK BIT“, “Arbitration under the HK BIT“) gave a clear indication that PMI was being advised on potential investment treaty claims from as early as July 2010. Critical email exchanges also coincided precisely with the internal approval of the restructuring and the finalisation of the notice of claim.

In such circumstances, the tribunal was satisfied that the passage of the offending legislation was not only foreseeable, but actually foreseen. The tribunal concluded that “the main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the Treaty, using an entity from Hong Kong“.[12] Since this was carried out “at a time when there was a reasonable prospect that the dispute would materialise” it was deemed to be an abuse of process. Accordingly, the tribunal declared the claim inadmissible, precluding it from exercising jurisdiction over the dispute.

Key Lessons

There are several key lessons to take away from the Philip Morris award for any investor seeking to restructure its foreign investments in an effort to maximise treaty protections:

Preparing for the “worst case scenario” by seeking legal advice on investment treaty protections is entirely normal and prudent business behaviour.
Similarly, restructuring investments to benefit from treaty protections is unlikely to be abusive where this is in response to a general risk of future disputes.
The threshold for abusive conduct lies where a restructuring takes place at a point in time when a specific dispute is foreseeable; in other words, there is a reasonable prospect that a measure giving rise to a treaty claim will materialise.
Factual evidence is likely to be fundamental to the outcome of any objection based on abuse of process. It is therefore critical to ensure that any other reasons for the restructuring (such as tax benefits, costs reductions, management rationalisation) are well-documented and are presented in a manner that can be adduced in evidence without jeopardising any subsequent claims for legal privilege.
Legal advice on potential investment treaty protections should be sought as early as possible, and certainly prior to the crystallisation of a specific dispute. Wherever possible, any communications seeking legal advice should be clearly marked as privileged and should be drafted carefully to avoid any inadvertent suggestions that a specific dispute is either inevitable or foreseeable.

[1] Award on Jurisdiction and Admissibility, Philip Morris Asia Limited v The Commonwealth of Australia (PCA Case Nº 2012-12); available at https://www.pcacases.com/web/sendAttach/1711

[2] Gremcitel v Peru [ICSID Case No. ARB/11/17]

[3] Tidewater v Venezuela [ICSID Case No. ARB/10/5]; Mobil v Venezuela [ICSID Case No. ARB/07/27]; Gremcitel v Peru [ICSID Case No. ARB/11/17]; and Aguas del Tunari v Bolivia [ICSID Case No. ARB/02/3]

[4] Phoenix Action v Czech Republic [ICSID Case No. ARB/06/5]; Chevron v Ecuador [PCA Case No. 34877]

[5] Tidewater v Venezuela [ICSID Case No. ARB/10/5]; Mobil v Venezuela [ICSID Case No. ARB/07/27]

[6] Gremcitel v Peru [ICSID Case No. ARB/11/17]; Lao Holdings v Laos [ICSID Case No. ARB(AF)/12/6; Pac Rim v El Salvador [ICSID Case No. ARB/09/12]

[7] Paragraph 554

[8] Paragraph 554

[9] Paragraph 570

[10] Paragraph 582

[11] Procedural Order No. 12 (14 November 2014); available at https://www.pcacases.com/web/sendAttach/1483

[12] Paragraph 585

China is weak at the knees when it comes to anti-smoking measures

Jun 8th, 2016
by Editor.
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Watering down of draft law to restrict smoking nationwide ignores the massive health costs of a habit that kills millions every year

Public bans are the most effective way to protect society against the harmful effects of smoking. Studies show marked health benefits when cigarettes are stubbed out.

Mainland officials cannot be blind to such research or the cost to society of its nicotine habit while also being sympathetic to the demands of the powerful tobacco industry.

Until forceful measures are in place, Chinese will pay a terrible human and economic price.

The mainland has about 320 million smokers and 1.4 million people die each year from smoking-related illnesses. Should authorities do no more than they have already to curb the habit, the number would reach three million by 2050. The medical costs and toll to families and the workforce is already high, which is why Beijing, Shanghai and a handful of other cities have put in place curbs. A watering down of draft rules to be implemented nationwide therefore makes no sense.

China signed the World Health Organisation’s Framework Convention on Tobacco Control more than a decade ago, but at least 700 million non-smokers continue to be exposed to second-hand smoke. The draft nationwide law put up for general consultation in 2014 went a long way towards attaining that goal by banning smoking in all indoor public places and some outdoor ones. But the latest version has rolled back provisions to allow restaurants, bars, hotels and airports to set aside smoking areas and would permit the habit in individual offices. It fits a weakened approach that has failed to introduce tried-and-tested anti-smoking strategies like hiking cigarette prices through hefty taxes and mandating prominent health warnings on packaging.

The reason for not being tough is obvious: tobacco companies are state-run and generate huge profits through 50 per cent of men and 2.7 per cent of women smoking. The sector, which employs more than 30 million people, contributed 1.1 trillion yuan (HK$1.3 trillion) to public finances last year. But as compelling as those figures may be to justify limited anti-smoking measures, they ignore the mounting mortality rates and health costs. China’s health has to take priority.
________________________________________
Source URL: http://www.scmp.com/comment/insight-opinion/article/1969937/china-weak-knees-when-it-comes-anti-smoking-measures

California Is Raising Its Tobacco-Buying Age to 21. That’s Not Actually So High

Jun 8th, 2016
by Editor.
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http://time.com/4353967/tobacco-cigarette-age-law-california-21/

Starting Thursday, you’ll need to be 21 to buy cigarettes in California. That age may sound high, but it matches up with laws of the past

On Thursday, the age at which tobacco products may be purchased in California will increase, to 21. The state’s governor, Jerry Brown, signed the bill in May, bringing California into line with Hawaii as the states with the most restrictive statewide tobacco-buying ages.

But, looking back at the history of tobacco sales in the United States, it’s clear that the idea that 18 is an appropriate age for a person to be able to buy cigarettes—or that 21 is a particularly high barrier—is a relatively new one.

In a comprehensive paper published recently in the American Journal of Public Health, Dorie E. Apollonio and Stanton A. Glantz take a look back at age restrictions on American tobacco sales, going all the way to 1863. As they discovered, age restrictions on buying cigarettes and other tobacco products are older than the average person might think, especially considering that the landmark Surgeon General’s warning on the dangers of smoking only dates to 1964. And within that early history of minimum ages, there are plenty of examples of 21-and-over laws.

Apollonio and Glantz start their survey in the 1880s, when New Jersey banned tobacco from being sold to anyone under 16, with New York, Connecticut, Michigan and Oregon all following suit that decade. During the rise of the anti-alcohol temperance movement, cigarettes were a natural target for reform. And it wasn’t just a matter of teetotalism. Around the turn of the century, children were picking up the habit at shockingly young ages, even to people back then. Though pipes or other tobacco products were an enduring part of American culture, as Cassandra Tate explains in her book Cigarette Wars, cigarettes—sold individually, cheaply enough to be purchased with pocket money—were seen as a danger to young children, prompting the New York Times to editorialize in 1905 that they had “an appalling hold on American youth beyond anything which the public at large had dreamed of.” (Tate notes that, not coincidentally, the turn of the century was also the era that saw the growth of the modern idea of childhood, that there’s a period during which an innocent young person must be protected.)

In fact, around the turn of the century more than a dozen states flat-out banned cigarettes. “By the end of 1920, all but 2 states had enacted some kind of age limit on cigarette sales, and at least 14 had set an age limit of 21 years,” Apollonio and Glantz write.

It was only around World War I that cigarette manufacturers were successful in fighting back, conveying the idea—something still heard today in arguments over California’s new law—that a man who could fight should be able to smoke too, and moreover that cigarettes were essential to the American soldier’s morale. In the years that between that war and the end of World War II, many states dropped their age limits. Cigarettes were actively marketed to younger people, they were largely socially acceptable and, as Apollonio and Glantz report, by the 1960s the tobacco industry had decided that 18 was a reasonable limit to fight to maintain.

States that tried to get them back up around 21 (like Massachusetts and Oregon in 1963) were unsuccessful. In 1985, when the American Medical Association proposed a national 21-and-over rule, that didn’t go anywhere either.

The 18-for-tobacco idea was, by then, stuck—or at least it seemed that way. Today, things might be changing.

Plain packaging protects human right to health — National Cancer Society

Jun 8th, 2016
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http://www.themalaymailonline.com/what-you-think/article/plain-packaging-protects-human-right-to-health-national-cancer-society

Representing various Malaysian groups and associations, the National Cancer Society is responding to the statement “Plain cigarette packaging an infringement against trademarks” that was published in the Malay Mail on 2 June 2016.

About 20,000 people die from tobacco related diseases every year in Malaysia. These deaths are preventable, many occurring among people who are still in their productive years.

In stretching the right to own intellectual property (trademark) as a fundamental human right, IDEAS should not stub out a very basic human right — the right to health.

The fundamental human right to health is violated when tobacco is sold in attractive packaging and when its users are ignorant of the real consequences of smoking.

According to World Health Organisation, tobacco-related illness is one of the biggest public health threats the world has ever faced. There is one death every six seconds in the world, and one death every 30 minutes in Malaysia.

There were about 4.5 million smokers in 2005 when Malaysia ratified the tobacco treaty, the WHO FCTC. Now, ten years later the Ministry of Health reports there are about 5 million smokers. This poses a big disease burden to the country.

As Health Minister Datuk Seri Dr S. Subramaniam has recently stated that anti-smoking campaigns are not effective in helping smokers curb their addiction, it is crucial that the country focuses on policy and regulation, including a tobacco act, to reduce smoking as well as the possible premature deaths of smokers.

Good health is wealth to the nation. Losing potentially millions of people still in their productive years is a tremendous economic loss to the country. The business sector has ignored that an increase in the number of sick people results in loss of productivity.

There are 16 types of cancers associated with smoking. The number of new cancer cases is projected to increase from 37,000 cases in 2012 to about 56,000 in 2025.

According to the Ministry of Health tobacco use accounted for 35 per cent of in-hospital deaths in Malaysia, mainly from cancer, heart disease and stroke.

Plain packaging is a decision from the WHO FCTC and not applicable to other products. Hence it is misleading for IDEAS to say there has been an international trend towards plain packaging for different items such as alcohol, sugary foods and toys. There is no such trend.

Plain packaging was recommended in the WHO FCTC Guidelines as part of a comprehensive approach to tobacco control that includes large graphic health warnings and comprehensive bans on tobacco advertising, promotion and sponsorship. The Malaysian government along with other countries (now 180) adopted these guidelines in 2008.

IDEAS claims that plain packaging prohibits the use of trademarks. According to the WHO Director-General, Dr Margaret Chan, “Plain packaging reduces the attractiveness of tobacco products. It kills the glamour, which is appropriate for a product that kills people.”

Besides Australia, the UK, France and Ireland are now implementing plain packaging. The tobacco industry challenged plain packaging in these countries with the intellectual property argument and lost. The intellectual property laws of these countries remain robust. Australia has among the lowest smoking prevalence in the world.

It is heartening to see many other countries moving forward with their plain packing legislation.

It is time to stop the senseless deaths. We fully support the government to implement plain packaging of tobacco.

* This is the personal opinion of the writer and does not necessarily represent the views of Malay Mail Online.

Helena-West Helena City Council Votes to Raise Tobacco Sale Age

Jun 8th, 2016
by Editor.
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http://www.arkansasmatters.com/news/local-news/helena-west-helena-city-council-votes-to-raise-tobacco-sale-age

HELENA-WEST HELENA, Ark. – The Helena-West Helena City Council voted to raise the minimum age to buy tobacco in city limits from 18 to 21 on Tuesday evening.

The ordinance also includes e-cigarettes, officials said.

The council approved raising the minimum age to purchase tobacco unanimously, and the new law takes effect on September 1.

A 2015 report from the Institute of Medicine predicted that raising the tobacco sale age to 21 nationally would eventually reduce the smoking rate by 12 percent and reduce smoking-related deaths by 10 percent.

Helena-West Helena now joins 135 localities in nine states to raise the minimum age for tobacco sales, along with Hawaii and California.

McCoy signs law, raising tobacco purchase age to 21

Jun 8th, 2016
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http://cbs6albany.com/news/local/mccoy-signs-law-you-have-to-be-21-to-buy-tobacco-in-albany-county

ALBANY – ALBANY — Albany County Executive Dan McCoy approved a tobacco products ban for anyone under 21.

That’s not all.

The county law also restricts purchases of liquid nicotine, e-cigarettes, non-tobacco shisha, rolling papers and pipes.

McCoy says his approval of the law didn’t come lightly.

“You can serve your country. You can drive at 16. You can vote for President of the United States at 18, but you can’t drink and smoke, it was a tough call,” he explained.

Still, McCoy points to the need to curb early smoking.

“I’m hoping the revenue that we’re losing is going to make up for the revenue we’re spending on health care. Because there’s a lot of illnesses and cancer related to people smoking, so really, at the end of the day, it should balance itself out,” he continued.

Critics are skeptical, to say the least.

“I don’t know what they think they’re achieving. If they think they’re fooling the public, they’re not,” said Richard Metzger, owner of Coulson’s News and Deli in Downtown Albany.

“It’s just for show. A grand show. (Leaders are saying,) ‘Look what we’ve done in Albany County.’ While the rest of the counties are all selling (tobacco products) hand over fist.”

New York’s Secretary of State still has to sign off on the law. As soon as she does, it’ll take effect countywide.

53 billion illegal cigarettes consumed in the European Union last year

Jun 8th, 2016
by Editor.
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http://www.businesswire.com/news/home/20160608005602/en/53-billion-illegal-cigarettes-consumed-European-Union

53 billion illegal cigarettes were consumed in the European Union (EU) in 2015, which exceeds the legal market volume of Spain1, according to a new report published today by KPMG. Accounting for 1 in every 10 cigarettes consumed, this criminal activity costs EU governments up to EUR 11.3 billion in lost tax revenues.

This annual study investigates the levels and drivers of counterfeit, contraband and Illicit Whites2 in the 28 EU countries, as well as Switzerland and Norway.

While the illegal cigarette market in the EU accounts for around 10% of total consumption, this volume has declined marginally compared to 2014 as a result of several factors including increased activities to fight illegal trade and improved economic conditions.

The industry believes their strict supply chain controls and shared intelligence, combined with authorities’ law enforcement, has resulted in a decline of around 20% in the illegal flow originating from within the EU. This means that 88% of illegal cigarettes now come from non-EU countries.

A key trend identified in the KPMG report is the growing proportion of counterfeit and Illicit White brand flows compared to previous years. Illicit Whites accounted for over one third of all illegal cigarettes, whilst counterfeit grew to 4.7 billion cigarettes. The largest portion of Illicit Whites – 5.3 billion cigarettes – were in packs with Belarusian labelling.

The industry believes the changing mix of source countries and the increasing number of Illicit White brands demonstrates the adaptability of criminals who profit from the illegal tobacco market.

Key insights of the report:

  • Total illegal cigarette volumes accounted for 9.8% of all cigarettes consumed in the EU in 2015, representing 53 billion cigarettes;
  • Poland and France recorded the highest volumes of illegal cigarettes;
  • 88% of illegal cigarettes were coming from non-EU contraband and counterfeit;
  • Illicit Whites represent over one third of the illegal cigarettes consumed in the EU, 28% of which were cigarettes in packs with Belarusian labelling;
  • 1.3 billion Illicit White cigarettes are thought to originate from the Jebel Ali Free Trade Zone in the United Arab Emirates;
  • Belarus is the largest source country for Illicit Whites;
  • Counterfeit increased by 28% to 4.7 billion cigarettes;
  • Seizures of illegal cigarettes with the support of the EU Anti-Fraud Office (OLAF) doubled in 2015. In excess of 0.6 billion cigarettes were seized, compared with 0.3 billion in 2014;
  • If the illegal volume in the EU had been consumed legally, an additional tax revenue of EUR 11.3 billion would have been raised.

Charlie Simpson, lead partner of the study at KPMG, commented: “Overall, levels of illicit cigarette consumption in the EU declined slightly during 2015. Despite this, illicit tobacco continues to represent a sizeable proportion of overall cigarette consumption. It’s clear that the ever-evolving illegal tobacco market continues to affect countries throughout the EU. This year our research found that counterfeit and Illicit White brand flows made up a larger proportion of illicit consumption compared to previous years, which seems to demonstrate the flexibility of illicit cigarette flows.”

The industry believes the 2015 report results indicate that the increased joint efforts of governments, law enforcement agencies, manufacturers, and retailers contribute to efficiently addressing the illegal cigarette flows in EU. As criminals increasingly concentrate on illegal products such as Illicit Whites and shift to new source countries outside the EU, it is clear that efforts to fight illegal trade must be maintained in order to disrupt criminal networks.

British American Tobacco (BAT), Imperial Tobacco (Imperial), Japan Tobacco International (JTI) and Philip Morris International (PMI) remain committed to working together with authorities across the world and continue to invest in combating this problem.

The 2015 KPMG study on the illicit cigarette market in the EU, Switzerland and Norway is available on KPMG’s website: www.kpmg.com/uk/projectsun

NOTES TO EDITORS

KPMG Study on the illicit cigarette consumption in the EU:

KPMG has conducted this study every year since 2006. Since 2013, the study has been commissioned by all four major tobacco manufacturers –BAT, Imperial, JTI and PMI.

The study is the only comprehensive annual measurement of the black market for cigarettes in the EU. Access to a wider set of data sources, as well as methodology improvements in line with feedback received from external stakeholders, have allowed KPMG to further refine the completeness of the analysis over the years. The study’s methodology is presented in detail in the report.

The OECD considers the methodology of KPMG LLP the “most authoritative assessment of the level of counterfeit and contraband cigarettes” in the EU. KPMG LLP recognises the wider public policy context within which governments decide regulatory and fiscal changes for the tobacco industry, and that the analysis in this report only considers one aspect. KPMG LLP expresses herein no view, nor makes any recommendation, in relation to future policy for the industry in this regard.

About British American Tobacco plc:

British American Tobacco is a global tobacco Group with brands sold in more than 200 markets.

It employs more than 57,000 people worldwide and has over 200 brands in its portfolio, with its cigarettes chosen by one in eight of the world’s one billion smokers. Alongside offering tobacco products, British American Tobacco is committed to offering safer nicotine alternatives to adult smokers. As such, it was the first tobacco company to launch an e-cigarette in the UK. www.bat.com

About Imperial Tobacco:

Imperial Tobacco is part of Imperial Brands PLC, the UK FTSE100 parent company of a dynamic international business with around 34,000 employees. Brands sold in markets worldwide by Imperial Tobacco include Davidoff, Gauloises Blondes, West, JPS and Rizla. For more information see www.imperialbrandsplc.com

About JTI:

JTI, a member of the Japan Tobacco Group of Companies, is a leading international tobacco manufacturer. It markets global brands such as Winston, Camel, Mevius and LD. JTI is a global player in the e-cigarette market with E-Lites and Logic, and has been present in the heated tobacco sector with Ploom since 2011. Headquartered in Geneva, Switzerland, and with operations in more than 120 countries, JTI employs around 26,000 employees worldwide. Its core revenue in the fiscal year ended December 31, 2015, was USD 10.3 billion. For more information, visit www.jti.com.

About Philip Morris International Inc. (“PMI”):

PMI is the world’s leading international tobacco company, with six of the world’s top 15 international brands and products sold in more than 180 markets. In addition to the manufacture and sale of cigarettes, including Marlboro, the number one global cigarette brand, and other tobacco products, PMI is engaged in the development and commercialization of Reduced-Risk Products (“RRPs”). RRPs is the term PMI uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Through multidisciplinary capabilities in product development, state-of-the-art facilities, and industry-leading scientific substantiation, PMI aims to provide an RRP portfolio that meets a broad spectrum of adult smoker preferences and rigorous regulatory requirements. For more information, see www.pmi.com and www.pmiscience.com.

1 Legal domestic sales volume in Spain is 47 billion cigarettes according to the Tobacco Commissioner.

2 ‘Illicit Whites’ – Cigarettes that are usually manufactured legally in one country/market but which the evidence suggests have been smuggled across borders during their transit to the destination market under review where they have limited or no legal distribution and are sold without payment of tax.

Cigarette tax suit against UPS to go forward

Jun 8th, 2016
by Editor.
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http://www.tobaccojournal.com/Cigarette_tax_suit_against_UPS_to_go_forward.53640.0.html

A federal court declined to dismiss a lawsuit by New York authorities against UPS that contends the logistics company knowingly shipped untaxed cigarettes from Native American reservations to customers, the Associated Press said.

US District Court Judge Katherine Forrest denied a motion by UPS to dismiss the suit, reportedly saying there were issues that should be decided at trial. New York filed the suit in 2014, and is alleging the shipper handled about 700,000 cartons of between 2010 and 2014 in violation of an agreement with the state to stop, the AP said.