Defeat Of Philip Morris In Its Corporate Sovereignty Case Against Uruguay Likely To Open Floodgates For Tobacco Packaging Legislation

from the this-is-the-big-one dept

Last December, Techdirt wrote about Australia fending off an attempt by Philip Morris to use corporate sovereignty to overturn the country's plain-packaging regulations. As we pointed out, this wasn't proof that investor-state dispute settlement (ISDS) was no threat to national sovereignty, despite what some were claiming. Australia won on purely procedural grounds, not because the ISDS tribunal agreed that Australia had a fundamental right to regulate.

However, as the Techdirt article also mentioned, there is another tobacco case based on corporate sovereignty provisions in a trade deal -- the one which Philip Morris brought against Uruguay. It's fortunate that Uruguay decided not to roll over, but to contest the case -- something it could only do because of funding from a foundation set up by former New York mayor Michael Bloomberg -- because a tribunal has just found in its favor:

The award released on Friday brings to a close a six year dispute between the global tobacco giant and Uruguay, with an arbitral tribunal upholding Uruguay's right to do two things: prohibit tobacco companies marketing cigarettes in ways that falsely present some cigarettes as less harmful than others and require tobacco companies to use 80% of the front and back of cigarette packs for graphic warnings of the health hazards of smoking.

Uruguay's lawyers, the Boston-based firm Foley Hoag, praised the decision as having broad international consequences.

As that quotation from an article in The Mandarin suggests, this is a much more significant decision than the Australian one, because Philip Morris did not lose on procedural grounds this time. That establishes a crucial precedent for other countries that wish to introduce health measures affecting tobacco packaging. Several have been holding off from bringing in such laws until they knew what happened to Australia and Uruguay, and therefore what legal risks they would run. We can probably expect many more nations to move forward with new legislation now, not least because Philip Morris was also ordered to pay $7 million of Uruguay's $10.3 million costs (pdf).

Uruguay's regulations on cigarettes did not bring in plain packs of the kind adopted by Australia. Instead, the South American country currently limits how much of the cigarette packet can be used for branding, and also stops tobacco companies from making misleading claims that their products are "mild" or "ultra-light." However, The Mandarin notes that Uruguay will:

soon move towards all tobacco products being sold in generic packages, with even larger warnings of the harms caused by smoking, in an effort to further reduce smoking levels.

The latest defeat for Philip Morris clears the way for Uruguay to do that. Even more importantly, it also represents a high-profile failure of the tobacco company's strategy of using the threat of ISDS litigation to apply pressure to nations not to bring in legislation. It's hard not to think that the tribunal's refusal to sanction this approach is due to a massive growth in public awareness and public antipathy towards corporate sovereignty, an area that not so long ago was a sleepy corner of trade law familiar to only a few specialist lawyers.

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Filed Under: australia, corporate sovereignty, plain packaging, tobacco, uruguay
Companies: philip morris

USTR Hoping To Keep Corporate Sovereignty Provisions If It Excludes Big Tobacco From The Deal

from the horse-trading dept

We've been quite critical of so-called corporate sovereignty provisions in various trade agreements. These provisions -- which trade negotiators prefer to call "investor state dispute settlement" (ISDS) rules (in part because they're so boring when called that, no one pays attention to how pernicious they are) -- basically allow companies to take governments to special tribunals, if new laws and regulations somehow interfere with their attempts to profit. A key example of how this is used under existing (via NAFTA) corporate sovereignty provisions is Eli Lilly demanding $500 million from Canada for daring to reject two of its patents because the drug in question didn't actually prove to be useful. Eli Lilly claims that this undermined the company's "expected future profits" and thus filed this suit, undermining the sovereignty of the country of Canada to determine what is, and what is not, patentable.

Another popular use of corporate sovereignty claims is the tobacco industry, going after countries that pass "plain packaging" laws (which say that all cigarette packaging needs to be without logos and trademarks and such). Whether or not you agree with such laws, the idea that big tobacco companies can take entire countries to these tribunals, demanding many millions of dollars based on laws those countries decided to pass, seems troubling. It's especially been concerning to health officials who have long favored plain packaging regulations.

Apparently, the latest move to salvage corporate sovereignty provisions in the Trans Pacific Partnership (TPP) agreement has the USTR attempting to throw Big Tobacco under the bus by removing tobacco from the ISDS provisions. This is an incredibly cynical and political move, designed to try to quiet some of the health activists' talking points about the plain packaging fights -- while leaving the overall basis of these corporate sovereignty provisions wholly in place.

While I don't always (or often) agree with the AFL-CIO, its response to this cynical attempt to carve Big Tobacco out of the deal is dead on:

The proposed carve-out will not stop multinationals like Veolia from suing the government of Egypt for raising the minimum wage. It won’t stop the pharmaceutical giant Eli Lilly from suing Canada over patent requirements or stop extractive company Pacific Rim Mining (a Canadian company that has since been bought by the Australian multinational OceanaGold) from demanding compensation when El Salvador refuses to let it pollute the local water supply by operating a gold mine.

Any industry-specific carve-out will not address the serious structural problems inherent in the system itself. Issues of broad public interest should not be viewed through the narrow lens of trade and investment at all, let alone decided by unaccountable private panels. Systems of justice should be transparent and accessible on an equal basis. ISDS is anything but: Only foreign investors can use it and there are no requirements that affected communities be allowed to participate or even have their view considered. In many cases, there often are not even requirements that hearings or decisions be made available to the public at all! Even in the case of clear legal error, it is almost impossible to reverse a decision.

In fact, the cheap attempt by the USTR to toss Big Tobacco under the bus to get a deal done really does more to underline the problems of corporate sovereignty positions, rather than to help smooth things over. If ISDS isn't appropriate for Big Tobacco, why is it appropriate for Big Pharma? Or big mining companies?

The USTR has continued to push out-of-date regulatory concepts into modern trade agreements. These are clearly designed not with the public interest in mind, but with a focus on what's best for the representatives of a few giant companies who are close to the USTR. Helping a few giant multinationals undermine regulations around the globe may be good for future job prospects in the industry, but it's hardly the incentives we should want for public servants.

Filed Under: corporate sovereignty, isds, plain packaging, plain packs, tobacco, tpp, ustr