Australia Accepts Indonesia WTO Dispute On Tobacco Packaging; Calls For Five Disputes To Be Joined

Australia yesterday took the unusual move of agreeing to the first request by Indonesia to establish a World Trade Organization dispute panel against it. The ready acceptance of the panel request was an attempt by Australia to bring the some or all of the five separate cases against its tobacco plain packaging law together for resource reasons and to protect the integrity of the WTO dispute settlement mechanism, it said in a statement to the Dispute Settlement Body.

Indonesia requested the dispute panel after requesting consultations with Australia on the matter on 20 September, and holding the consultations on 29 October, to no resolution.

Indonesia joins Ukraine, Honduras, Dominican Republic and Cuba, in bringing cases against Australia’s 2011 public health measure, which took effect in 2012. The assertions in each case vary somewhat but typically involve the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and the Technical Barriers to Trade agreement.

In its 26 March request for a panel, Indonesia said Australia’s measure appears to be inconsistent with TRIPS Articles 2.1, 3.1, 15.4, 16.1, 16.3, 20, 22.2(b), and 24.3, as well as TBT Arts. 2.1 and 2.2, and Art. III:4 of the General Agreement on Tariffs in Trade (GATT) 1994. The TRIPS articles deal mainly with trademark rights and geographical indications. The TRIPS Agreement text is here.

In response to Indonesia, Australia said in a statement that “tobacco plain packaging is a sound, well-considered measure designed and based on a broad range of scientific studies and reports to achieve a legitimate objective – the protection of public health.”

Australia noted the World Health Organization (WHO) recognition of the tobacco “epidemic,” and said it believes other countries will follow it in implementing similar measures.

In addition, Australia remarked that Indonesia might look favourably upon such health measures, as a substantive majority of Indonesian males are smokers, and the country is estimated to have the second highest male smoking rate in the world. Of those, 41 percent are between 13 and 15 years old. And the number of women smokers is on the rise.

Ukraine offered a statement to say it shares Indonesia’s concerns and welcomes Australia’s acceptance of the panel request.

Disparate Disputes on Same Measure

Normally, WTO members avail themselves of the option of refusing the first panel request by another member, but Australia accepted Indonesia’s on the first request. That was in an effort to put the various disparate cases together so they can move forward and open the way for other nations to implement similar anti-smoking measures, it said.

Australia raised concerns about the broader implications for the WTO dispute settlement procedures of having so many separate cases.

With the addition of Indonesia, three separate panels have been established (Ukraine September 2012, Honduras September 2013). But two years after the first dispute was filed, no panel proceedings have yet started, it said.

In December 2012, Australia and Ukraine agreed to suspend the composition of a panel in order to allow Honduras and the Dominican Republic to catch up. But Honduras took 10 months between its first panel request in November 2012 and its second request in September 2013. And when the panel was established, Honduras sought to suspend the panel composition, but Australia refused this suspension request because Ukraine had just started its process again, and Australia wanted the two processes to proceed together under a single panel.

Ukraine issued a 24 March letter requesting the director general to compose the panel, according to sources. In its statement to the DSU, Ukraine said it recognises that to the “greatest extent possible,” disputes relating to the same matter should proceed “before the same panellists and on the basis of a harmonised timetable.”

For the Dominican Republic, its first panel request was December 2012, and it still hasn’t returned to make the second request 16 months later. But it did, on 3 March, request “full participation” in the joint panel discussions between Australia, Ukraine and Honduras. Australia rejected this too, as the Dominican Republic did not signal when it would pursue a panel in its own dispute.

And for Cuba, consultations took place in June 2013 but it has not yet requested a panel.

Support for Australia

New Zealand, Uruguay and Canada weighed in on the side of Australia, raising the same concerns about delays in forming a panel and broader implications for the dispute system. Uruguay raised the importance of governments being able to take actions on behalf of their population’s health, arguing that it could save thousands of lives.

New Zealand said in its statement that “These disputes are of direct trade interest to New Zealand” because it is currently working on draft legislation for similar measures to Australia (noting the comments are invited from other WTO members by 18 April).

Broader Implications for WTO Dispute System?

Australia raised three main points about implications for the system of this tie-up. These are: security and predictability of the system; resource implications; and procedural questions.

The WTO Dispute Settlement Understanding Article 3.2 states that the dispute system “is a central element in providing security and predictability to the multilateral trading system.” Art. 3.3 highlights the importance of prompt settlement of disputes to the effective functioning of the WTO and the maintenance of a proper balance between rights and obligations of members.

The uncertainty about the tobacco cases “has a cost for all Members which extends beyond the circumstances of this case,” Australia said. It noted that several countries bringing cases have said other countries considering anti-tobacco measures should wait for the outcome of the case against Australia, yet they have delayed progress of the cases.

The cost of continued uncertainty and failure to proceed to a prompt settlement “is a regulatory chilling effect on other WTO Members that may wish to take into account the outcome of the disputes against Australia before implementing their own tobacco control measures,” Australia said, adding that there is a human cost in delaying public health measures as well.

The resource implications are also high in asking a single country to manage five separate cases against a single measure. While a developed country like Australia should be able to find the resources, it should be considered what the implications would be if it were a developing country. Australia also noted the cost to the secretariat of the unpredictable workload on these cases.

And on procedural questions, Australia called on the WTO director general to compose the panel for Honduras’ dispute, and questioned the Dominican Republic’s long delay in making its second request for a panel, which would have led it to join the panel composition discussions.

Australia noted that delays may occur where parties are seeking bilateral settlement, but that is not the case here, as “not one of the parties has approached Australia to resolve the dispute through a mutually agreed solution,” it said. And it noted that the WTO rules are not designed to allow countries to bring cases and then “afterward consider whether it has a case that is capable of succeeding.”

Status of the Different Disputes (from official sources):

Australia – Certain Measures Concerning Trademarks, Geographical Indications and other Plain Packaging Requirements applicable to Tobacco Products and Packaging.

Five members initiated disputes. Three panels have been established and none composed yet. The first dispute started in March 2012

DS434 – Complaint by Ukraine.
Request for consultations submitted on 13 March 2012.
First panel request: 31 August 2012 (rejected by Australia)
Second panel request/panel established: 28 September 2012

A meeting was held to discuss the panellist criteria in November 2012 but Ukraine requested the suspension of a panel composition. In August 2013 Ukraine reactivated the panel composition and a new meeting was held earlier on March 2014 jointly with Honduras. The panel has not been composed yet.

DS435 – Complaint by Honduras.
Request for consultations submitted on 4 April 2012
First panel request: 16 November 2012 (rejected by Australia)
Second panel request/panel established: 25 September 2013

DS441 – Complaint by Dominican Republic.
Request for consultations submitted on 18 July 2012
First panel request: 17 December 2012 (rejected by Australia)

DS458 – Complaint by Cuba.
Request for consultations submitted on 3 May 2013

DS467 – Complaint by Indonesia
Request for consultations submitted on 20 September 2013.
First panel request submitted 26 March 2014 and established by the DSB

(Updated on 26/03/2014)