resources 2: case-summaries
Details and analysis on the three Australian cases is available from the McCabe Centre for Law & Cancer website.
The four major tobacco companies challenged the Tobacco Plain Packaging Act 2011 based on section 51(xxxi) of the Constitution, which deals with the acquisition of property by the state.
The two principle arguments were that plain-packaging laws were a breach of the constitution because they amounted to an acquisition of the tobacco companies’ intellectual property rights including trademarks‘and that the government’s use of or control over the packaging itself amounted to an acquisition of property.
The High Court ruled in the Government’s favor by 6 to 1.
One judge observed that the tobacco companies’ most strenuous objection was the taking “of the advertising or promotional functions of their registered trademarks.”
The High Court held that, to be an acquisition, the Government must obtain a benefit or interest of a “proprietary nature.” One judge stated that “on no view can it be said that the Commonwealth. . . has acquired any benefit of a proprietary character”; and another that the requirements of the Act “are no different in kind from any legislation that requires labels that warn against the use or misuse of a product.”Moreover,that “[m]any kinds of products have been subjected to regulation in order to prevent or reduce the likelihood of harm, including medicines, poisonous substances and foods.”
The transcripts of the hearings1 show that counsel for Japan Tobacco International (JTI) and Imperial Tobacco compare the cigarette packet to advertising billboards by saying that Australia “is acquiring our billboard, your Honour”; and “I own this packet and I will determine what message goes on it”. . . it is our “bonsai billboard.”
Philip Morris Asia Limited v. Commonwealth of Australia PCACase 2012–02
Philip Morris Asia brought a claim under a bilateral investment treaty between Australia and Hong Kong to obtain compensation for losses it claimed were due to the plain-packaging laws. The two main arguments of Philip Morris were: that plain packaging had the equivalent effect of “expropriating” the property rights in its trademarks that could no longer be used on packaging; and that the measure was “arbitrary” and “unreasonable” on the basis that there was no evidence it would work.
However, in order to bring the claim, Philip Morris International restructured, so that ownership of 100% of its shares in Philip Morris Australia were transferred from PMI (based in Switzerland) to Philip Morris Asia (based in Hong Kong) after the Australian government had announced its intention to adopt plain packaging of tobacco products. The arbitration tribunal found that this was done for the sole purpose of bringing a claim under the investment treaty between Hong Kong and Australia and the claim was therefore “an abuse of rights.” The tribunal therefore declined jurisdiction, and the merits of the claim were not considered.
The dispute arose out of complaints by Cuba, the Dominican Republic, Honduras, Indonesia, and Ukraine that the plain-packaging laws breach various articles of the WTO agreements, and a dispute settlement panel was composed in May 2014. The final oral hearing took place in October 2015, and final summary written submissions were made in December 2015. The On May 28, 2015, Ukraine suspended their dispute in order to negotiate a mutually agreed solution with Australia. The panel has stated that its ruling will be given not before May 2017. It is possible for parties to appeal to the WTO's Appellate Body.
The complaining countries argue that Australia’s law breaches:
The ruling is highly anticipated and has significant wider relevance that is clear from the fact that there are more third-party WTO member states that have made written and oral submissions to the panel than for any previous WTO dispute — some 34 countries plus the EU. It has been reported that Philip Morris and British American Tobacco are providing legal and financial support to the Dominican Republic and Honduras.
Australia has published an executive summary of its submissions to the panel.2
R (British American Tobacco & Ors) v. Secretary of State for Health EWHC 1169 (Admin);  EWCA Civ 1182 (Appeal)3
Claims were commenced by the four big international tobacco companies — British American Tobacco, Philip Morris, Imperial Tobacco, and Japan Tobacco International — together with a German manufacturer of cigarette tipping paper (TANN). The 17 grounds of claim were under domestic administrative law, European Union Law, and the European Convention of Human Rights.
This is an important judgment that has wider international significance. The ruling dealt with the merits of most of the key legal issues set out above in section 2. The judge gave particular attention to issues of international relevance including —the importance of the WHO Framework Convention on Tobacco Control (FCTC); the public health justification for plain-packaging laws; the issue of whether or not there is a right to use trademarks; and a detailed analysis of the evidence that supported the policy and the tobacco companies’ evidence submitted to oppose the policy.
The judge’s analysis of the evidence from both sides of the dispute is particularly significant because the same evidence should be considered by any government taking forward plain packaging. This is the first judgment that provides a careful scrutiny of that evidence, confirming that it meets relevant legal tests.
On the tobacco industry’s evidence, the judge said that, “On the basis of my own review of the methodologies adopted by the Claimants’ experts . . . I conclude that that body of expert evidence does not accord with internationally recognised best practice.” And was heavily critical of “what has the appearance of being an industry wide practice not to adduce internal documents or to allow their experts to see and review and then rely upon internal documents.”
A more detailed summary of this useful judgment is available on the CTFK website here.4
The aim of the EU Tobacco Products Directive (TPD) is to provide a harmonized regulatory environment for tobacco products across the EU (including on emissions, health warnings, labeling, and reporting requirements) to assist the free movement of those goods. In doing so, the Directive takes a high standard of public health. Some provisions of the TPD introduce elements of a plain-packaging policy, such as the requirement for cuboid cigarette packs with flip top lids, and a minimum of 20 cigarettes per pack. The TPD also includes, inArticle 24(2), a provision that member states may adopt further measures in relation to the standardization of tobacco packaging.
The four major international tobacco companies commenced a legal claim in the UK courts, challenging the government’s intention to implement the TPD on the basis that the Directive was not validly made. The High Court referred questions of interpretation of EU law to the Court of Justice of the European Union (CJEU). The legal challenge sought to overturn the whole Directive on a number of different grounds and also challenged the validity of separate parts of the TPD, including Article 24(2).
All grounds of challenge were dismissed and the validity of the Directive upheld. The importance of the FCTC was highlighted by the CJEU, which emphasized that its guidelines could have “decisive influence” on the interpretation of EU laws on tobacco control. But the key aspect of the judgment relevant to plain packaging, is that the Court of Justice confirmed that the Tobacco Products Directive permits EU Member States to introduce measures to standardize the packaging of tobacco products.
The opinion of the Advocate General (adopted by the Court) confirmed that measures to standardize packs contribute to increasing the visibility of health warnings and that these measures are proportionate because purely economic interests in the functioning of the tobacco market are secondary to the protection of human health.
Legislation providing powers to introduce plain packaging was adopted by the Assemblée Nationale as part of Law n°2016–41 on the Modernization of the Health System and came into force on January 26, 2016. The constitutional appeal was filed by members of parliament and concerned the entirety of the law (of which plain-packaging provisions were just one part). The plain-packaging measures were challenged on the basis of the legislative process, the constitutional rights to property and free enterprise, and on the proportionality of the measures.
The Constitutional Council noted that the brand name can still be applied to packages allowing for clear identification of the product. It held that the rights of the trademark owner to exclude the use by others are still respected through this. It also held that there was no expropriation of property but a limitation on the property rights justified by the objective of protecting public health, because the plain-packaging measure made it possible to prevent the pack from becoming a piece of advertising. The Court noted the measure does not prohibit the production, distribution, or otherwise the sale of tobacco products. Accordingly, the measure was held to be a proportionate infringement of the rights of commerce and free enterprise.
The detailed Decree and Ministerial Order to implement plain packaging were published on March 22, 2016, and came into force May 20, 2016.
JTI launched an action on April 29, 2016, at the level of the Conseil d’État (the highest administrative court) alleging that the laws are in breach of the French constitution. Similar actions were launched by Imperial Tobacco, Philip Morris, and British American Tobacco; by the Confédération Nationale des Buralistes de France (the National Organization for Tobacco Retailers in France); and by République Technologie (a cigarette-paper manufacturer) in May 2016.
The petitioners contended that the measures constituted an infringement of fundamental rights relating to property; that they disregarded the principle of free enterprise; that they infringed the constitutional principle of clarity and intelligibility of the law; that they violated the provisions of trademark rights and intellectual property; that they constitute an assault on France’s international commitments under the European Convention of Human Rights, on the free circulation of products within the European Union, on the Convention of Paris, and the WTO agreement on issues of trade-related aspects of intellectual property rights (TRIPS).
JTI v. Minister for Health, Ireland, and the Attorney General 2015/2530P
Legislation for plain packaging on all tobacco products was adopted on March 10, 2015, and was due to come into force on May 20, 2016.However, some amendments were required to the law, and the likely coming into force date is now in 2017. JTI issued legal proceedings in 2015 challenging the Irish legislation. Following an initial hearing, JTI confirmed that its claim was based solely on the ground that the law is incompatible with the EU Tobacco Production Directive (TPD). The proceedings were stayed pending the outcome of the Court of Justice of the European Union ruling on the tobacco companies’ challenge to the TPD (see above 3.1). In addition, JTI explicitly stated that it reserves its position in relation to all other potential grounds pending the outcome of the UK High Court ruling (see above 2.1). Once the EU and UK cases were dismissed, JTI’s claim was then struck out. Ireland has a constitution that protects property rights with no limitation period; therefore, a constitutional challenge may be brought at some stage whatever the outcomes of the other cases, and it is understood that JTI formally reserved its position on this issue.
Morris Brand Sàrl (Switzerland) & Others v. Oriental Republic of Uruguay (ICSID Case No. ARB/10/7)
This case was not a challenge to plain packaging but rather two other packaging laws introduced in Uruguay in 2008 and 2009, stipulating:
However, the arguments put forward by Philip Morris in this investment arbitration claim are very similar to those used in the investment arbitration case against Australia’s plain packaging. Consequently, the ruling is highly relevant to the legality of plain packaging under international investment law. The Australian claim was dismissed on jurisdiction grounds, whereas the tribunal in this case determined the merits of the legal arguments and dismissed all grounds ofclaim.PMI alleged that the two measures violated a Bilateral Investment Treaty (BIT) with Switzerland5 and brought the claim after legal challenges in Uruguay’s domestic courts by the Philip Morris subsidiaries had failed. It sought an order for the repeal of the Challenged Measures and for compensation in the region of $25 million.
The landmark ruling highlighted the importance of the WHO Framework Convention on Tobacco Control (FCTC) in setting tobacco-control objectives and establishing the evidence base for measures. The ruling confirmed that states need not recreate local evidence to justify tobacco-control measures. It addressed the wide “margin of appreciation” and deference provided to sovereign states in adopting measures or decisions concerning public health.
The ruling sets an extremely high bar for any foreign investor seeking to bring an investment arbitration challenge against a non-discriminatory public health measure that has a legitimate objective and that has been taken in good faith.
The arbitrator appointed by PMI, Gary Born, agreed with the ruling on most aspects but gave a dissenting opinion on two issues. One of these was that the SPR had been adopted in an arbitrary manner and therefore breached the obligation of fair and equitable treatment. Part of his reasoning was that there was, in his view, no record of any proper consideration of the evidence and issues by Uruguay before adopting the measure (See GUIDE 1.2: Establish a document record).
A more detailed summary of the parts of this important case that have wider relevance, in particular to plain packaging is available from the CTFK website here.
2Available to download from the Australia DFAT website: http://dfat.gov.au/international-relations/international-organisations/wto/wto-dispute-settlement/Pages/wto-disputes-tobacco-plain-packaging.aspx.
3 High Court Ruling is available from: https://www.judiciary.gov.uk/wp-content/uploads/2016/05/bat-v-doh.judgment.pdf.
Court of Appeal Ruling is available from: http://www.bailii.org/ew/cases/EWCA/Civ/2016/1182.html.
5The 1991 Switzerland – Uruguay Bilateral Agreement on the Promotion and Protection of Foreign Investments. A copy is available here: http://investmentpolicyhub.unctad.org/Download/TreatyFile/3121.