Navigating Fragmented Laws And Systems Around Tobacco Packaging Lawsuits

Sitting between different rights, powers and principles at the intersection of differing legal regimes is the case of Philip Morris v Uruguay. The case, which concerns Uruguayan regulations that impose enlarged graphic health warning requirements on tobacco packaging and reduce the varieties of a tobacco brand that can be sold, has since its decision in July this year by an investor-state arbitration tribunal, has caused much discussion among legal practitioners and academia and attracted broader public attention.

As part of the Talking Disputes series, the International Centre for Trade and Sustainable Development (ICTSD) and the World Trade Institute Advisors organised a panel discussion on 27 October on the case, the decision and its wider implications.

Details of the panel and a recording of the webcast can be found here.

In his introduction, Pedro Roffe, senior associate at ICTSD, outlined that:

“The case deals with the intersection of different legal regimes, trade, investment, intellectual property, health and not least, human rights. At the heart of the case is the interface and coherence between distinctive international legal instruments and domestic law. At play at the same time are important fundamental principles around property rights, state regulatory power and the authority of investor-state disputes.”

Roffe added that “there is a lot misinformation and lack of evidence-based debates on this question” and that the panel would be a “modest contribution to more informed discussions on these issues.”

The Case

Krista Nadakavukaren Shefer, acting director of the Center for Human Rights Studies and professor at the University of Zurich, provided background information to the case and an overview of the key findings of the arbitral tribunal decision.

Nadakavukaren Shefer highlighted that the investor-state dispute settlement mechanism pits private actors against a state directly at the international level. She concluded with the question on whether the decision leaves open a lot of space for the next kind of packaging regulation.

Earlier coverage by Intellectual Property Watch of the case, which also outlines the facts and the decision by the tribunal can be found here (IPW, WTO/TRIPS, 21 July 2016).

Two of the claims by Philip Morris against Uruguay’s tobacco control measures were discussed by the panel. These claims were pursuant to Article 5 of the Uruguay-Switzerland bilateral investment treaty (BIT) as to whether Uruguay’s regulations constituted an indirect expropriation of Philip Morris’ assets, including its trademark rights, and whether fair and equitable treatment under Article 3(2) of the BIT had been violated. Both claims were dismissed by the tribunal.

Role and Power of the State (Re)asserted; IPRs Not Absolute

In the last 10 to 25 years, investors have been suing states for regulatory action, arguing exactly what Philip Morris argued in the respective case, noted Sabina Sacco, partner at Lévy Kaufmann-Kohler in Switzerland. Sacco proceeded to focus on a deeper of analysis of both claims based on expropriation and fair and equitable treatment.

Sacco explained that expropriation is permitted, but only under certain conditions. Ultimately, the right to use one’s trademark only extends to exclude others and is not absolute. A trademark is subject to a state’s regulatory power and as an asset can be expropriated, she said.

Benn McGrady later added that trademark rights therefore cannot prevent the state from regulating in the public interest and are subject to the state’s regulatory “broad authority”. Moreover, McGrady highlighted that Uruguayan law does not provide a positive nor absolute right, neither do any of the conventions to which it is party confer such a right.

International Legal Fragmentation and Legal Methodologies

Ernst-Ulrich Petersmann, emeritus professor for international and European law and former head of the Law Department of the European University Institute, outlined what in his opinion was a “strange situation” where there are dozens of disputes over tobacco regulation at national and regional levels, in addition to the United Nations Commission on International Trade Law (UNCITRAL) and in the World Trade Organization.

This allows “the tobacco companies to deliberately exploit forum shopping and rules shopping in order to either prevent or delay health regulations limiting the sale of toxic tobacco products,” Petersmann said.

Subsequently national, regional and worldwide courts are confronted with legal methodologies questions on how to define the applicable law and interpretation method, he said.

Petersmann described the legal fragmentation of international economic law as the cause for “forum and rule shopping” Therein, there are five competing conceptions in international economic law and adjudication: that between states such as the International Court of Justice; the arbitration on commercial law at for example the International Centre for Settlement of Investment Disputes; multilevel economic regulation as seen at the WTO; global administrative law at administrative tribunals; and lastly multilevel constitutional law at for example the European Court of Human Rights.

Petersmann also noted that the main problem is that rules are indeterminate and many treaties’ rules are incomplete.

There exists a lack of guidance on legal application, particularly by legal scholars and ultimately on what the relationship between judicial and political power is, he said. Petersmann additionally asked the question of how to justify judicial power vis à vis the claims of diplomats as being “the masters of the treaties” based on member driven governance.

Furthermore, in later discussions Petersmann warned that the “enormous danger of legal fragmentation in international law is that you do not only prioritise unilateral interest groups, trade interests in the WTO, investment interests in bilateral investment treaties, but diplomats do not assume their responsibilities vis à vis civil societies.” This overall limits their democratic and judicial accountability, particularly in domestic courts, whilst public health protection is not coherently regulated, he said.

With regards to the WTO panel, which is presently deciding on claims brought by WTO members against each others’ tobacco control measures under the WTO dispute settlement mechanism, Petersmann emphasised that Articles 7 and 8 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) explicitly recognise the need for balance and for protecting public health.

Petersmann called on WTO judges to use these articles as a confirmation of their judicial power to balance intellectual property rights and health rights. Moreover, even in these very diverse jurisdictions, “judges should take customary rules of treaty interpretation more seriously… and respect the explicit requirement of interpreting treaty settlement disputes in conformity with principles of justice” and “aim for coherent interpretations which avoid these kinds of “forum and rule shopping,” he concluded.

By focusing on the public health aspects of the case, Benn McGrady, technical officer in the Prevention of Noncommunicable Diseases Department at the World Health Organization, added that “tribunal members or arbitrators do not stand in the shoes of a domestic regulator or legislator” on how health risks should be addressed.

This relates to greater public policy issues on “the capacity of courts as fact finders on complex questions of science and evidence and specifically, whether international courts should function as a court of final appeal about the merits of domestic regulatory policies designed to address well established risks or focus more narrowly on implementation of their mandates,” said McGrady.

McGrady highlighted that in the present case, what was important from a public health perspective was that the tribunal had relied on Framework Convention on Tobacco Control and the guidelines that were developed and adopted by parties to the convention.

Alexandra Nightingale is a researcher at Intellectual Property Watch. She completed her Bachelors in Law at the University of Sussex and holds an LLM degree in International Law from the School of Oriental and African Studies in London. During her Masters, she developed a strong interest in Intellectual Property, particularly patents and the aspects relating to global health. Her research interests now also include geographical indications and trademarks.

 

Image Credits: ICTSD, Alexandra Nightingale