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August, 2016:

Tobacco, alcohol and weaponry – here’s where some of the state’s investment has been flowing

Aug 27th, 2016
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The majority of the money is tied to Ireland’s sovereign-wealth fund.

http://www.thejournal.ie/isif-investment-alcohol-arms-tobacco-2-2950666-Aug2016/

ALMOST €35 MILLION in taxpayers’ funds is invested in the alcohol, tobacco, aerospace and defence industries through the state’s sovereign-wealth pools.

But new figures for the National Treasury Management Agency (NTMA), which oversees the nation’s investments, show the share of funds put into the sectors has been falling – declining from €45 million at the end of 2014.

The organisation, which manages the Irish Strategic Investment Fund (ISIF), had a total exposure to the industries of €34.5 million as of June this year, according to new figures provided to Fora.

The bulk of the NTMA’s equity investments in the alcohol, tobacco and defence industries relate to the ISIF, which was set up with the remainder of the National Pension Reserve Fund after its predecessor was raided to keep the banks afloat during the financial crisis.

The ISIF has a mandate to make investments on a commercial basis, with one of its stated aims to “support economic activity and employment in Ireland”.

Its total portfolio was worth €21.3 billion at the end of June, with €355 million committed to support SMEs and another €447 million going towards venture funds.

Tobacco and alcohol

According to the NTMA’s recently published annual report, the state held more than €7.2 million in both quoted equity and debt instruments for Philip Morris, British American Tobacco and other major tobacco firms.

The state also has small equity investments in international companies involved in the development of armaments, such as Canadian group Bombardier, French firms Thales and Boeing, and the US’s Airbus Group and United Technologies.

The NTMA’s investments in the companies are made through fund managers, rather than the organisation actively selecting the firms or industries.

The report said the organisation’s largest single investment last year was in Irish Water, with a €450 million loan facility provided to the semi-state company – €300 million of which was drawn down by the end of 2015.

Ethical investment

Earlier this year, NTMA chief executive Conor O’Kelly told the Dáil’s Public Accounts Committee that armaments is the organisation’s only restricted investment category.

The ISIF’s ethical investment policy for armaments is mainly influenced by its commitment to the UN Principles for Responsible Investment, but this policy does not stop its funds going into the sector altogether.

Under the UN guidelines, the ISIF is required to carry out investments on an ‘active-ownership basis’, which means it does not have to rule out any companies as long as it works to improve their environmental, social and governance policies.

In response to a parliamentary question last year, however, Finance Minister Michael Noonan revealed that the NTMA has excluded 14 companies from its list of possible investments – although he did not list the banned firms.

These exclusions were made to ensure the state complied with Irish legislation prohibiting the support of companies that developed cluster munitions and anti-personnel mines.

Meanwhile in April, the ISIF said it was committed to putting more money into medium-sized Irish companies over the next four years. The fund has made direct investments in mobile analytics firm Swrve and life sciences investment outfit Malin, among others.

ISIF director Eugene O’Callaghan revealed the sovereign wealth fund expected to pledge in excess of €750 million to Irish businesses and funds over the course of 2016.

This would bring increase its total commitments to almost €3 billion.

Written by Killian Woods and posted on Fora.ie

Cigarettes & Tobacco in Indonesia: A New Roadmap Needed

Aug 27th, 2016
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http://www.indonesia-investments.com/news/news-columns/cigarettes-tobacco-in-indonesia-a-new-roadmap-needed/item7130

The Indonesian government is advised to make a new roadmap for the cigarette (and tobacco-related products) industry that includes targets for the short, middle and long-term. Moreover, the roadmap should involve strategies that aim to find a middle way between reducing cigarette consumption (protecting citizens’ health) in Indonesia while at the same time optimizing lucrative state revenue from this industry (as well as safeguarding the jobs of the nearly six million of Indonesians who are working in the cigarette supply chain).

The government of Indonesia is still discussing whether to raise the excise tax for cigarettes. This hike would help the government to reduce its looming tax and budget shortfall in 2016, while discouraging people from consuming the notorious “death sticks”. Last week it was reported that the government might even raise the price of a package of cigarettes from around IDR 20,000 to IDR 50,000 per pack. However, this is most likely a false rumor as such a drastic hike would in fact jeopardize state revenue, jobs in the tobacco-related sectors and would also give rise to a blossoming illegal cigarette market. In 2015 cigarette prices had already risen by an average of 11 percent.

Balancing between the safeguarding of high state income (from the tobacco excise) and protecting people’s health is key for the government. This year the government targets to gain IDR 140 trillion (approx. USD $10.6 billion) from the cigarette excise. As such, cigarettes account for about 95 percent of total excise income for the Indonesian government in 2016. This illustrates the importance of the cigarette industry in terms of state revenue. In 2017 the government targets to raise IDR 150 trillion worth of cigarette excise.

On the other hand, having a big population that is addicted to cigarettes also gives rise to economic costs for the government, particularly now it is serious to expand its universal healthcare program. Smoking-related physical illnesses (such as heart diseases) cause costs that need to be carried by the government and society. Meanwhile, having many ill people also implies that Indonesia does not make optimal use of its human resource potential.

To protect the millions and millions of passive smokers in Indonesia, authorities should undertake more efforts to encourage smoke-free areas in buildings and public facilities (both indoor and outdoor). On the other hand, the domestic tobacco industry should be able to boost production of cigarettes for export purposes. Falling domestic cigarette consumption but boosting cigarette exports (trying to become the cigarette production hub of the Asia Pacific) would be a win-win solution for Southeast Asia’s largest economy.

The tobacco industry is one of the largest industries in Indonesia, reflected by the fact that two cigarette manufacturing companies are positioned within the top ten of largest Indonesian companies (in terms of market capitalization) listed on the Indonesia Stock Exchange. The main reason is that there exists a huge market in Indonesia, while the government has not been eager to implement measures that aim at curtailing tobacco consumption in society. For example, Indonesia is one of the few Asian countries that is yet to ratify the World Health Organization (WHO)’s Framework Convention on Tobacco Control (FCTC).

All the above-mentioned matters need to be considered when creating a new roadmap for Indonesia’s tobacco industry.

Facts about Smoking in Indonesia

There are about 91 million (active) smokers in Indonesia (roughly 36 percent of the population)

About 70 percent of Indonesian smokers are part of the poorer segments of Indonesian society.

These poor families spend about 12 percent of their disposable income on cigarettes (making these death stick the second-most popular item for low-income families, after rice). A price hike would discourage the men in these families to purchase cigarettes

Every day an average of 1,172 people die because of smoking-related illnesses

Some IDR 7 trillion or approximately 30 percent of funds that are available to Indonesia’s National Health Insurance (Jaminan Kesehatan Nasional, or JKN) program are spent to combat tobacco-related diseases

In Indonesia the cigarette excise is still relatively low at a maximum of 57 percent; abroad this maximum is 80 percent. Therefore, Indonesian cigarettes remain among the cheapest worldwide and thus tempting for consumers

E-cigarettes vs tobacco health risks study launched

Aug 26th, 2016
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http://www.bbc.com/news/uk-scotland-tayside-central-37194495

A study comparing the effect of e-cigarettes and tobacco cigarettes on smokers’ health is being launched by Dundee University.

The project will test the effects of both types of cigarette on volunteers’ blood vessel function, a key health indicator.

It will recruit 135 adult volunteers who have smoked 15 cigarettes a day for a minimum of two years.

The study is funded by the British Heart Foundation.

Participants will be split into three groups, with one continuing to smoke tobacco cigarettes.

The others will switch to electronic cigarettes containing nicotine plus flavour, or switching to electronic cigarettes containing flavour alone.

‘Safer alternative’

Dr Jacob George, from the university’s school of medicine, said: “E-cigarettes are sold on the principle that they are a much safer alternative to traditional cigarettes because they don’t contain harmful substances like tobacco and tar.

“However, many e-cigarettes contain nicotine, which may be harmful to blood vessels itself.

“We want to see whether the e-cigarettes are better for blood vessel function compared to traditional cigarettes.

“Many people seem to think that this is the case but as yet there is no hard scientific evidence to prove this.”

People with a history of cardiovascular disease, women who are pregnant or breast feeding and anyone with a nut allergy cannot take part in the study.

Anyone who is interested in joining the study or finding out more should contact vesuvius@dundee.ac.uk

World ignores WHO’s treaty on illegal tobacco trade

Aug 26th, 2016
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http://www.washingtonexaminer.com/world-ignores-whos-treaty-on-illegal-tobacco-trade/article/2600245

The World Health Organization is still struggling to get countries to adopt a treaty committing countries to wipe out illegal trade in tobacco products, nearly four years after the international health body adopted it and asked countries to ratify it.

The treaty, adopted in November 2012, doesn’t require most countries to do what they already do to stop illicit trade in tobacco products, and generally requires that they put in place “effective” measures to meet that goal.

But it’s mostly been met with yawns from WHO members. As of this year, 54 countries have signed onto it, but almost four years after the signing ceremony, just 19 countries have taken steps to implement it.

Many of them are smaller countries, like Burkina Faso, Congo, Gabon, Latvia and Turkmenistan. The European Union has approved it, but most individual member countries still have to ratify it before that means anything.

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The U.S. is not a signatory.

The lack of interest forced the WHO to once more delay the implementation of the treaty this November in India. Under the treaty, 40 countries have to ratify it before it can be implemented.

A WHO official explained in mid-August that while a meeting to mark the implementation of the treaty “cannot be held in India” this November, he was hoping that other countries would soon ratify the deal. “Countdown to the Protocol entering into force is very much closer than the figures might at first indicate,” said Dr. Vera da Costa e Silva.

Skeptics of the treaty aren’t so sure. David Williams, president of the Taxpayers Protection Alliance, say the WHO has been fighting tobacco for the last several years, at a time when many think the WHO should stick to its more traditional missions.

“The WHO is struggling right now,” he told the Washington Examiner. “They’re not very popular. People want them to focus on Zika, focus on Ebola.”

Williams’ group was one of several who criticized the WHO back in June for pushing against tobacco so hard that it issued a direct warning people in Syria that smoking will kill them — right in the midst of its bloody, five-year civil war that has killed and displaced hundreds of thousands of people.

“Syrians are fleeing for their lives yet these appalling unelected puritans think now is the time to tell them not smoke,” said one critic of the WHO from the United Kingdom.

Williams added that the WHO’s efforts to crack down on tobacco use in general are likely leading to increased trade in black market tobacco products.

“When you have an organization that wants to tax this product, the black market wants to take advantage of that,” he said. “Guys, you created this problem.”

For now, the WHO is likely to continue pressuring smaller countries to ratify the deal, in the hopes that larger countries follow. But it’s not clear whether or when the group will reach the 40 countries needed to implement it.

Flavored Electronic Cigarette Use and Smoking Among Youth

Aug 26th, 2016
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Download (PDF, 919KB)

The day Pravin Gordhan took on big (illegal) tobacco

Aug 25th, 2016
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Gordhan and his colleagues’ investigations of the illicit tobacco trade – which appears to involve top politicians and businessmen – is possibly the reason they’re being targeted now.

http://www.citizen.co.za/1263756/the-day-pravin-took-on-big-illegal-tobacco/

Finance Minister Pravin Gordhan must be wondering whether one of his old plans while he was in charge of the SA Revenue Service (Sars) – combating the illegal tobacco trade in South Africa – was worth it.

Because that is apparently where the nightmare he finds himself in now began.

While Gordhan will not be reporting to the Hawks this afternoon, it appears as if former Sars deputy commissioner Ivan Pillay, together with former group executives Pete Richter and Johan van Loggerenberg, will be knocking on Brigadier Nyameka Xaba’s door, where they will be informed of their rights under the constitution and the charges against them.

Pillay, Richter and Van Loggerenberg will be kept in separate rooms as, one by one, they are informed of their rights under the constitution and the charges against them.
Van Loggerenberg has urged the public not to overreact to speculation.

“As early as 31 July 2014, Sars was on record that the initial attacks on Sars, me and investigative units that I managed, were driven by persons associated with the tobacco industry,” Van Loggerenberg told The Citizen.

“I have continuously offered my cooperation to the authorities since as early as 2014. I have nothing to hide and deny any wrongdoing. As stated before, I have no doubt that if the Hawks conduct their investigations without fear or favour, the truth shall ultimately triumph.”

Gordhan and the others have to decide if they are willing to answer questions or make a statement, or simply inform Xaba they wish to testify in court.

The “rogue unit” narrative at Sars has been well documented and discredited. However Van Loggerenberg’s claim the tobacco industry was behind the destabilisation of Sars is startling.

Sars wars: where there’s smoke

If the Hawks need more information, it needs to look at pending court action between independent cigarette manufacturer Carnilinx and British American Tobacco (BAT), Forensic Security Services (FSS) and eight other respondents.

Former police officer and FSS investigator Daniel van der Westhuizen states on behalf of Carnilinx in its founding affidavit he was the project manager of operation “Knysna”, which was dedicated to disrupting Carnilinx’s operations.

In the affidavit, he claims stakeholders in the project were the “South African Police, Department of Priority Crimes Investigation, Crime Intelligence Gathering, Asset Forfeiture Unit, Sars, Customs, and the Traffic Control Policing Unit.”

He further claims BAT agents were paid up to R5 000 for disturbing Carnilinx operations.

“BAT SA paid an amount in excess of R150 million to the spies, through FSS,” said Van der Westhuizen, referring to “spies” recruited by FSS.

Van der Westhuizen stated further that if BAT SA were investigated properly, authorities “may well recover tens of billions of rands which are due to the fiscus.”

Spy games

According to a letter from former Fair Trade Independent Tobacco Association (Fita) chairperson Belinda Walter’s attorney in May 2014, it was between December 2012 and January 2013 that Walter was introduced to BAT, and the Tobacco Institute of SA (Tisa) and their private security firm FSS, and then subsequently to BAT United Kingdom.

“As a direct result of Ms Walter’s relationship with representatives of the State Security Agency (SSA),” Walter then entered into an agreement with BAT.

“Walter would provide BAT with information of and concerning the business operations, illicit and/or criminal activity of independent cigarette manufacturers who were clients of Ms Walter and/or members of the Fita (of which Ms Walter was the chairperson from its formation until November 2013),” the letter to Ewan Duncan of BAT declares.

For her work, Walter was to be paid £3 000 per month by BAT “to provide and share such information” with BAT, which would “be used by BAT in conjunction with SSA and other South African law enforcement agencies in order to combat criminality in the tobacco and cigarette industries”.

In the subsequent letter to BAT, Walter threatens to sue BAT for nonpayment of £5 000, and was also going to sue the SSA for misrepresentation, “as BAT, SSA, and the other South African law enforcement agencies were not sharing the information for the purposes alleged …” and “BAT required the information for purposes of industrial espionage” the letter continued.

Shortly afterwards, Walter was allegedly approached by members of Sars’ Tobacco Task Team and offered immunity from prosecution in exchange for dropping the civil action against BAT and the SSA.

However, in June 2014, rumours of a “rogue unit” within Sars began hitting the media.

Walter, a lawyer by profession, was allegedly paid in “Travelex” cards, which meant no cash trail for Sars and therefore no tax.

Then in July 2014, Walter’s SSA alleged handler told Walter “he represented interests of people who sought to replace the leadership of Sars and minister of finance”. The claim was circulated to various people within Sars on email by Walter on July 20, 2014.

At the time, Nhlanhla Nene was finance minister and Ivan Pillay the acting Sars commissioner.

In September, Tom Moyane was parachuted in as Sars boss after the crescendo of “rogue unit” articles grew.

The denials

“The illicit tobacco trade in South Africa, which accounts for nearly a quarter of the overall market, is a growing problem for our consumers and our business. For several years, we have endeavoured to assist the law enforcement agencies in their efforts to combat this illicit trade,” BAT said in a statement to The Citizen.

“We are currently involved in litigation with certain manufacturers, who have made claims that some of our activities went beyond our legitimate interest in combating the illicit trade.

“We are conducting an investigation with the assistance of an external law firm and if we were to find that illegal activity had occurred, we would, of course, take appropriate action. However, given that our investigation is ongoing and that some of the allegations are the subject of legal proceedings, it would not be appropriate for us to comment any further on them,” BAT stated.

Numerous attempts to engage Walter on the allegations proved fruitless.

Rot starts at the top

In a report entitled “Project Broken Arrow”, by an unnamed SA Revenue Services (Sars) official, it is brought to the attention of its former group executive Johann van Loggerenberg (JVL) and former deputy commissioner Ivan Pillay (IP) that there were efforts by “certain individuals”, who wished to destabilise and disorganise the organisation.

These “individuals” wanted to damage the reputation and stability of the targeted functionaries and that of Sars as a state institution, according to the document as seen by The Citizen.

The official claims to have met on several occasions in 2009 with former Sars employee Mike Peega (MP).

“…He duly informed me of his intentions to merge with other individuals in order to ‘expose’ and possibly ‘take care’ of JVL and a host of other significant individuals in the NRG [National Research Group],” it states.

“This would ultimately include the then commissioner of Sars and now Finance Minister Pravin Gordhan.

“MP spoke of a number of interested individuals inside Sars who are more than willing to combine efforts to target IP and JVL.

“It must be borne in mind that, although the aforementioned names of people were identified, NO other way of corroboration was actually done.

“The aforementioned individuals have allegedly met on a number of times at different locations before I could be approached.”

President Jacob Zuma in the report is often referred to as ‘old man’.

In an alleged timeline of events it is states:
• August 2009, a call was received from MP to meet.
• “MP came to my house and he told me that there were highly influential people that would like to meet with me.”
• The official then alleges that MP was referring to the late Leonard Radebe (LR), Mabheleni Ntuli (MN) and Bizoski Manyike (BM).

He continues:
• The following day… he came back to my house… at around 8am and he was driving a greenish Volvo SUV.
• He told me we were to meet with LR and BM for a discussion.
• We met LR alone at the House of Coffees in Silver Lakes at exactly 10 in the morning…
• BM did not show up.

Pay Close Attention to What’s in Your Ethical Fund

Aug 25th, 2016
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ESG and environmental investing booms to $223 billion

Lack of standards for what counts as ethical starts G-20 probe

http://www.bloomberg.com/news/articles/2016-08-24/anything-goes-with-ethical-funds-holding-exxon-to-big-tobacco

Thinking of putting your money into a fund that describes itself as ethical? You’d better read the fine print if backing Exxon Mobil Corp. and British American Tobacco Plc isn’t your idea of doing good.

The oil company accused of misleading investors by hiding evidence about climate change and Europe’s biggest cigarette maker are among the holdings of some of the 30 biggest funds that invest following environmental or social governance guidelines, according to data compiled by Bloomberg.

While some funds are strict about supporting only clean-energy producers, others buy securities from Big Oil to Big Tobacco along with consumer brands such as Unilever and Facebook Inc. The wide range of holdings is the result of each institution deciding on its own what meets the ethical threshold. Loosening that definition has helped ethical investing grow about 80 percent over the past five years to $223 billion, data compiled by Bloomberg show.

“The industry hasn’t done itself many favors in making sure people understand what’s what,” said Charlie Thomas, who manages 950 million euros ($1 billion) under Jupiter’s Ecology funds, which exclude oil and tobacco in favor of companies that have a solution for environmental issues. “The challenge that we have as a sector is to be very clear with the investor so they know what they’re actually buying. Not all ethical funds are the same.”

green-goes-mainstream

There’s no agreed definition on what an ethical fund should be. That has allowed to mushroom the number of funds saying they support companies guided by standards on environmental and social governance. There are no set criteria for how companies report performance on those metrics, and no regulator like the Securities and Exchange Commission has set out rules.

The looseness of the system is a concern to the Group of 20 nations, which asked a panel led by Bank of England Governor Mark Carney to draw up a proposal for voluntary reporting standards that companies could follow if they chose. That’s likely to offer best practices to companies and accounting firms that draw up sustainability reports and release data through organizations such as the non-profit CDP and Bloomberg.

ESG fund strategies range from excluding only companies they score the worst in their industries on specific metrics to including only the best of their class. Some seek to spur change by working as activist shareholders. A few will invest only in companies that benefit the environment. The only way to tell the difference is to look at what the fund is holding.

No Simple Label

“There’s not a simple label you can slap on it to solve the problem,” said Greg Elders, an analyst at Bloomberg Intelligence in London tracking ESG data. “Clients think it’s a shortcut for seeing how sustainable a fund is.”

The Bloomberg survey found the number of environmentally friendly or ESG funds has more than doubled in the past decade to about 730. Of the top 30, at least six hold oil companies.

At Impax Asset Management Group, which runs a $568 million Environmental Markets fund, the number of companies that meet its rules has jumped to 1,500 from 250 in 1999, with the pool of firms eligible to be included growing to $4.1 trillion, according to Jon Forster, a portfolio manager at the firm.

Investors have benefited from the diversification of green funds. The MSCI KLD 400 Social Index has risen more than 225 percent from the March 2009 low, about as much as the S&P 500 Index. The gauge includes 400 companies, with Microsoft Corp., Procter & Gamble Co. and Verizon Communications Inc. having the biggest weightings.

Growth in the sustainable-fund business, regardless of how “green” some of its investments are, is set to continue. A boom in renewable energy investment along with tighter environmental rules and increasing interest from younger people are the main drivers, said Sarbjit Nahal, head of thematic investing at Bank of America Corp. in London.

“The word I would stress is ‘mainstream,’” Nahal said. “There’s been a huge change towards taking longer-term issues into account. This is a space that you want to be in.”

Here are some of the top 30 ESG funds that hold oil and tobacco:

TIAA-CREF Social Choice Equity Fund, with $2.8 billion under management
Tracks the U.S. stock market, giving “special consideration to certain social criteria,” according to the firm’s website.
Holdings as of June included Occidental Petroleum Corp., Schlumberger Ltd., ConocoPhillips, Marathon Oil Corp.

The fund’s approach is to “include companies that are ESG leaders among their industry and sector peers,” said Manica Piputbundit, an associate at TIAA Global Asset Management, which manages $889 billion including more than $18 billion in ESG funds.

KLP AksjeGlobal Indeks I, a $3.7 billion fund

Invests in stocks listed in developed markets in accordance to KLP’s guidelines for responsible investment. All coal and tobacco companies are excluded.
Holdings include Exxon, BP Plc, Monsanto Co. Exxon was excluded from 2004 until 2009, when it was involved in a bribery case.
The fund aims to achieve “positive change through active ownership,” said Annie Bersagel, responsible investment adviser at KLP.

DNB Global Indeks, a $1.4 billion fund

Avoids companies responsible for “grave harm to the environment” and that don’t meet DNB’s “minimum ethical requirements,” according to its website.

Holdings include Exxon, Chevron Corp. and mining giant BHP Billiton Ltd. Weapons, tobacco and pornography companies are excluded, as well as those miners and power producers that get 30 percent or more of their income from coal.

ACTIAM NV’s $1.3 billion Responsible Index Fund

Tracks the MSCI North America Index, investing “exclusively in shares that meet the ESG criteria, as formulated by ACTIAM,” according to its website.
Holdings include British American Tobacco and Royal Dutch Shell Plc. Weapon producers are among the companies excluded.

“There are a some products or activities that directly lead to exclusion without prior engagement, but otherwise we see exclusion as a last resort,” Maxime Molenaar, an ESG analyst at ACTIAM, said in an e-mail response to questions. “We would first try to achieve improvements in the companies’ behavior.”

Pax World Management LLC, which manages ESG funds including the $1.9 billion Pax Balanced Fund

The Balanced Fund selects the best assets from a social and environmental perspective relative to their peers, according to Pax Chief Executive Officer Joseph Keefe, who said he doesn’t see the need for more definitive criteria in ESG investing.
Holdings include Occidental Petroleum because of its high ESG ranking, based on Pax’s analysis.

“There are a variety of strategies within sustainable investing funds because there are a variety of issues that investors care about,” Keefe said. “You want to design diversified portfolios to provide investors with the opportunity to achieve market or above-market return.”

Amundi Asset Management’s Atout Euroland $1.4 billion fund.

Its goal is to outperform the MSCI Euro Index by investing at least 75 percent of its assets in euro-zone stocks based on socially-responsible and ESG criteria, in addition to financial criteria, according to the fund’s prospectus. Amundi goes by “best-in-class strategies” rather than banning specific industries, and excludes the worst ESG-rated companies in each of them, the firm said in an e-mailed response to questions.

Holdings include Shell and Repsol SA.

“A policy of investing in the most efficient and least polluting issuers and avoiding the least efficient, for example, encourages companies and sectors to improve working practices and should reward investors through exposure to the best managed businesses,” a media representative for the firm said. “Blanket bans switch off dialogue and reduce incentives for managements to change.”

Tobacco repackaging appeal runs out of puff

Aug 25th, 2016
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http://www.lexology.com/library/detail.aspx?g=516d5294-b62d-4d4a-9d32-b0f55aba23ab

Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91

The appellants (STG) manufacture and sell cigars under various marks, including the marks in suit. Trojan imported and retailed genuine STG cigars in competition with STG’s authorised Australian distributor, but from a different source. STG cigars supplied to the authorised Australian distributor complied with Australia’s plain packaging laws for tobacco products; those supplied to Trojan did not. Accordingly, Trojan had to unpack STG’s cigars upon their arrival in Australia and repackage them in compliant packaging. Trojan’s packaging, among other things, included the marks in suit on an area and portion of the packaging which was not the same as the packaging of STG’s authorised distributor.

STG’s claim of trade mark infringement failed at first instance, because the defence in s 123 of the Trade Marks Act 1995 (Cth) was held to apply. In particular, the learned trial judge (Allsop CJ) found that the registered owner’s “consent” was to be assessed at the time of manufacture, rather than when Trojan repackaged and arguably “re-applied” the marks in suit to otherwise genuine goods. That interpretation was held to be consistent with the role of s 123 in “protecting as non-infringing use that which does no more than draw a connection between the goods and the registered owner”.

STG appealed against the decision, arguing unsuccessfully that the trial judge’s conclusion on the application of s 123 was erroneous (see below). Trojan filed a notice of contention that put into issue the correctness of the trial judge’s finding (which followed Full Court authority) that Trojan’s repackaging constituted use of the marks in suit “as a trade mark” within the meaning of s 120. At first instance, Trojan had argued that there had been trade mark use, but that the use had been by STG and not Trojan because Trojan applied the marks only to indicate a trade connection between the goods and STG. The Full Court (Besanko, Nicholas and Yates JJ) dealt with that issue first.

The Full Court first considered the state of authorities prior to the current Act, and observed that “by the time the 1995 Act was drafted, the question whether a person uses a registered mark already applied to goods by the registered proprietor which that person later imports and sells in Australia was by no means settled”. The Full Court also noted the conceptual difficulty in accepting (as Trojan would have it) that a reseller of goods to which a mark is applied by the trade mark owner does not itself “use” that mark, whereas on the authorities it is clear that a reseller of goods to which a mark is applied by a third party does use the mark. The Full Court concluded that “under the provisions of the 1995 Act, a person who, in the course of trade, imports and sells goods to which a registered mark was applied by its owner at the time of manufacture will have used the mark as a trade mark”. If that were not the case, the defence in s 123 would be little more than smoke and mirrors.

The Full Court accepted, as had the trial judge, Trojan’s submissions concerning the application of s 123. On Trojan’s approach, if a registered owner has applied its mark to the relevant goods, then it is open to another person to purchase the goods, remove the mark, and then re-apply it for the purposes of resale. In contrast, under STG’s approach, the re-application of a mark also would need to have occurred with the consent of the registered owner.

In preferring Trojan’s approach, the Full Court noted that “a registered trade mark may be used in many different ways which do not involve physically applying the mark to goods”, such as in advertising material (which a reseller may well create itself), invoices and other documents, and even in conversations. There does not need to be any direct physical relationship between the owner’s use of the mark and that of the reseller. It also is important to note that s 123 does not require that the registered owner consent to the acts of the reseller (whether they be selling a genuine product outside of the owner’s official channels, the creation of advertising material to promote those products, or some other activity in which a mark is “applied to, or in relation to,” the goods within the definition in s 9(1)). Section 123 must be construed so as to allow it to cover a wide variety of circumstances of use.

Further, the “operation of the section is not expressly or impliedly confined to a situation in which the goods still bear the mark as applied by the owner. The temporal requirement of the section will be satisfied if at some time in the past, which may be after the time of manufacture, the mark has been applied to or in relation to goods by or with the consent of the owner.” The defence therefore will be available, for example, in cases where original packaging has been removed due to damage or a need to comply with local regulation.

Insofar as that result might give rise to concerns about potential impacts on a registered owner’s goodwill or reputation, the Full Court emphasised that issues of deception were not relevant to the operation of the defence (although they might arise under, for example, passing off or the prohibition of misleading or deceptive conduct). Further, a registered owner is afforded some protection by the “notice of prohibition” mechanism under s 121 of the Act, to which s 123 does not apply.

The Full Court upheld the dismissal at first instance of STG’s claims for passing off and breach of the Australian Consumer Law.

The Commercial Bar Association of Victoria – The Honourable Peter C Heerey AM QC, Tom D Cordiner and Alan Nash

Tata, tobacco! Denmark aims for 1st smoke-free generation by 2030

Aug 25th, 2016
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https://www.rt.com/news/357209-denmark-smoke-free-generation/

Smoking bans in restaurants and bars have become commonplace in many countries, but Denmark isn’t stopping there. The Danish government has announced plans to create the “first smoke-free generation” by 2030, as part of a $333 million initiative.

The ambitious plan detailed in a presentation by health minister Sophie Løhde at Rigshospitalet hospital on Wednesday includes putting new restrictions on smoking at educational institutions and “partnerships with the business community” aimed at getting stores to stop selling tobacco to minors.

“Far too many children and youth take up smoking. We need to do something about that. And if we can reach our goal of having none of the children who are born today smoking in 2030, we will have gone very far in terms of preventing new cancer cases,” Løhde said, as quoted by The Local.

She added that the plan would “send a clear signal that children and smoking don’t go together.”

The plan is part of the Danish government’s Cancer Pack IV (Kræftplan IV) plan aimed at combating cancer throughout the country – at a cost of 2.2 billion kroner ($333.6 million).

“The government puts a high priority on the fight against cancer and therefore we want to inject a historically large amount of money into the area. With Cancer Pack IV we will ensure that more people survive cancer and that they can live a good life when they complete treatment,” Løhde said.

Denmark’s 50.9 percent survival rate for cancer patients is near the bottom amongst Western European nations, and far below the level of its neighbors Sweden (64.7%), Finland (61.4%), Iceland (61.2%), and Norway (58.6%).

According to Løhde An, the goal of Cancer Pack IV is to bring Denmark’s cancer survival rates up to “match the other Nordic countries.”

The plan also includes a “patient-first” strategy that emphasizes individual decisions about treatment options.

“Cancer treatment should be based on the individual patient’s needs and life situation. Patient involvement is already an integral part of the health care system, but we should turn to the patients themselves even more for advice, listen more to them and be better and considering their experiences,” Løhde said.

Cancer Pack IV has been praised by the Danish Cancer Society (Kræftens Bekæmpelse), which said the initiative will “hit the nail on the head.”

“There are a lot of good things to say about Cancer Pack IV, but the thing I am most pleased with is the ambition to make future generations smoke-free,” the society’s chairwoman, Dorthe Crüger, said in a press release. “No other initiative could save us from more instances of cancer than if we succeed with that.”

However, the Danish Health Authority has reportedly recommended going even further and proposed additional measures including increasing tobacco levies, mandating plain-label packaging for cigarettes, and forcing stores to place tobacco products out of plain view, the Politiken newspaper reported in June.

The Danish government isn’t alone in aiming to stop smoking in Denmark, no matter what the cost. TrygFonden, an anti-smoking foundation, has suggested offering financial rewards to those who kick the habit, and the Danish Cancer Society has voiced support for the idea.

The ‘ethical’ investment funds pumping millions into oil firms and big tobacco

Aug 25th, 2016
by Editor.
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Companies backed by the multi-billion dollar funds include Exxon Mobil which has been accused of hiding climate change science and British American Tobacco, Europes largest cigarette maker

http://www.independent.co.uk/news/business/news/exxon-mobil-british-american-tobacco-ethical-investment-funds-millions-oil-tobacco-a7208691.html

Funds are putting investors cash into companies such as BP and Exxon which have questionable ethics records Reuters

Thinking of putting your money into a fund that describes itself as ethical? You’d better read the fine print if backing Exxon Mobil and British American Tobacco isn’t your idea of doing good.

The oil company accused of misleading investors by hiding evidence about climate change and Europe’s biggest cigarette maker are among the holdings of some of the 30 biggest funds that invest following environmental or social governance guidelines, according to data compiled by Bloomberg.

While some funds are strict about supporting only clean-energy producers, others buy securities from Big Oil to Big Tobacco along with consumer brands such as Unilever and Facebook. The wide range of holdings is the result of each institution deciding on its own what meets the ethical threshold.

Loosening that definition has helped ethical investing grow about 80 per cent over the past five years to $223 billion, data compiled by Bloomberg show.

“The industry hasn’t done itself many favors in making sure people understand what’s what,” said Charlie Thomas, who manages €950 million under Jupiter’s Ecology funds, which exclude oil and tobacco in favour of companies that have a solution for environmental issues.

“The challenge that we have as a sector is to be very clear with the investor so they know what they’re actually buying. Not all ethical funds are the same.”

There’s no agreed definition on what an ethical fund should be. That has allowed to mushroom the number of funds saying they support companies guided by standards on environmental and social governance. There are no set criteria for how companies report performance on those metrics, and no regulator lhas set out rules.

The looseness of the system is a concern to the G20 nations, which asked a panel led by Mark Carney, governor of the Bank of England to draw up a proposal for voluntary reporting standards that companies could follow if they chose.

Ethical investing has grown into a $223 billion dollar business (Bloomberg)

Ethical investing has grown into a $223 billion dollar business (Bloomberg)

That’s likely to offer best practices to companies and accounting firms that draw up sustainability reports and release data through organizations such as the non-profit CDP and Bloomberg.

Ethical, Social and Governance (ESG) fund strategies range from excluding only companies they score the worst in their industries on specific metrics to including only the best of their class. Some seek to spur change by working as activist shareholders. A few will invest only in companies that benefit the environment. The only way to tell the difference is to look at what the fund is holding.

No Simple Label

“There’s not a simple label you can slap on it to solve the problem,” said Greg Elders, an analyst at Bloomberg Intelligence in London tracking ESG data. “Clients think it’s a shortcut for seeing how sustainable a fund is.”

The Bloomberg survey found the number of environmentally friendly or ESG funds has more than doubled in the past decade to about 730. Of the top 30, at least six hold oil companies.

At Impax Asset Management Group, which runs a $568 million Environmental Markets fund, the number of companies that meet its rules has jumped to 1,500 from 250 in 1999, with the pool of firms eligible to be included growing to $4.1 trillion, according to Jon Forster, a portfolio manager at the firm.

Investors have benefited from the diversification of green funds. The main ethical investing index, the MSCI KLD 400 Social Index, has risen more than 225 per cent from the March 2009 low, about as much as the S&P 500. The gauge includes 400 companies, with Microsoft, Procter & Gamble and Verizon having the biggest weightings.

Growth in the sustainable-fund business, regardless of how “green” some of its investments are, is set to continue. A boom in renewable energy investment along with tighter environmental rules and increasing interest from younger people are the main drivers, said Sarbjit Nahal, head of thematic investing at Bank of America in London.

“The word I would stress is ‘mainstream,’” Nahal said. “There’s been a huge change towards taking longer-term issues into account. This is a space that you want to be in.”

Here are some of the top 30 ESG funds that hold oil and tobacco:

TIAA-CREF Social Choice Equity Fund, with $2.8 billion under management
Occidental Petroleum
Schlumberger
ConocoPhillips
Marathon Oil
KLP AksjeGlobal Indeks I, a $3.7 billion fund
Exxon
BP
Monsanto

The fund aims to achieve “positive change through active ownership,” said Annie Bersagel, responsible investment adviser at KLP.
DNB Global Indeks, a $1.4 billion fund

Avoids companies responsible for “grave harm to the environment” and that don’t meet DNB’s “minimum ethical requirements,” according to its website.

Exxon
Chevron
Mining giant BHP Billiton
ACTIAM NV’s $1.3 billion Responsible Index Fund

Invests “exclusively in shares that meet the ESG criteria, as formulated” by itself according to its website.

British American Tobacco
Royal Dutch Shell
Pax World Management LLC, which manages ESG funds including the $1.9 billion Pax Balanced Fund
Occidental Petroleum

The Balanced Fund selects the best assets from a social and environmental perspective relative to their peers, according to Joseph Keefe, Pax Chief Executive Officer, who said he doesn’t see the need for more definitive criteria in ESG investing.

Amundi Asset Management’s Atout Euroland $1.4 billion fund
Shell
Repsol

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