Plain Packaging and Investor-State Disputes: Uruguay wins monumental victory against Philip Morris: Part I

On the 8th of July, Uruguay won (links to: the award, and a summary of the case) a hard-fought battle in the Investor-State Dispute Settlement (ISDS) proceeding brought by Philip Morris before the ICSID Tribunal. This is a decision of immense importance not only for Uruguay, but also for other countries that are currently considering plain packaging policies for tobacco products. The ICSID Tribunal upheld Uruguay’s regulations on public health and plain packaging, and even directed Philip Morris to pay Uruguay’s legal fees and other costs – an award in excess of seven million dollars.

The Tribunal upheld the legality of two of Uruguay’s regulations: one that prohibits tobacco companies from marketing cigarettes in ways that falsely present them to be less harmful than others (by using words such as “mild” and “light”), and one on plain packaging, that requires tobacco companies to use 80% of the front and the back of cigarette packs for graphic health warnings. In this regard, Philip Morris made three major arguments: that these regulations had expropriated their property, denied them fair and equitable treatment, and had unreasonably and discriminatorily denied them the right of enjoy their trademark rights.

This Award is especially significant as it will act as a precedent for other states, as well as affirm their sovereign right to adopt laws and regulations to protect the health of their citizens. The outcome of this proceeding follows a trend of positive decisions delivered for plain packaging. In December 2015, Australia’s right to enforce its plain packaging laws was upheld in an UNCITRAL Award against Philip Morris. In May, the United Kingdom’s plain packaging laws were affirmed by its High Court, and the European Union too, saw a similar directive on tobacco products upheld.

g“Because Australia was successful, the UK was successful, and because the UK was successful the EU can be successful, and because of this whole cascading impact, you see a lot of countries going above and beyond.” – Professor Timothy Mackey

The case was said to be a risky one for Uruguay, and some had even suggested that Philip Morris might bankrupt the country if they refused to settle out of court. However, this didn’t turn out to be much of a problem, as the support that the small Latin American country has gotten from public health activists is unparalleled. Campaign for Tobacco-Free Kids had even established a fund in 2015 to help smaller countries fight for their anti-tobacco laws in court, and Michael Bloomberg, New York City Mayor and the founder of Bloomberg Philanthropies went so far as to offer the country financial support for their court fees.

We have widely covered developments in plain packaging on the blog, as recently as last month when Vasundhara discussed a PIL filed in the Supreme Court for the implementation of plain packaging in India. Kiran and Thomas have also written excellent articles which more than do justice to the plain packaging dispute in light of WTO commitments (read here and here). An angle to this issue that we have not covered as of yet, and as Philip Morris argued, is the possible expropriation of their trademark rights. In my next post, I focus on plain packaging in light of investor-state disputes, and go into more detail of the award.

(Image taken from here)

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