Australia Triumphs Definitively In Long-Running Battle With Big Tobacco Over Plain Packs For Cigarettes

from the no-sacred-right-to-use-trademarks dept

Techdirt has written a lot about corporate sovereignty -- also known as "investor-state dispute settlement" (ISDS) -- which allows companies to haul countries before special tribunals for alleged loss of profits caused by new laws or regulations. One industry's use of ISDS that Techdirt has been following particularly closely is tobacco. As a typically brilliant John Oliver segment explained back in 2015, Big Tobacco companies have used corporate sovereignty clauses in international trade and investment deals to sue countries for daring to try to regulate cigarettes, advertising or packaging. Thankfully, that didn't turn out so well. Philip Morris tried to use ISDS to roll back plain-pack laws, but cases against Australia and Uruguay were both thrown out. The tide against the use of corporate sovereignty by tobacco companies to undo health protection laws has turned so much that special carve-outs have been added to trade deals to prevent this kind of corporate bullying.

But the tobacco industry had one last trick up its sleeve. John Oliver noted five years ago that Big Tobacco persuaded three countries -- Honduras, Dominican Republic and Ukraine -- to file complaints with the World Trade Organization (WTO) against Australia, claiming the plain-packaging law violates trade agreements. As an article in the Financial Review explains, they were later joined by Indonesia and Cuba. A dispute panel backed Australia in June 2018, but Honduras and the Dominican Republic appealed against that decision. Now the WTO's Appellate Body has made its final ruling:

The Appellate Body confirmed the previous WTO ruling, which said that when Australia prevented tobacco producers from differentiating themselves from their rivals via brand marketing, this wasn't necessarily a restriction on trade.

It also rejected the argument that raising the purchasing age or increasing tobacco taxes were less trade-restrictive options that Canberra could have pursued instead of the plain packaging rules.

And it said that the international intellectual property regime didn't give tobacco companies a right to use a trademark; it merely stopped competitors from using it. So there was no obligation on Australia to allow a company to use its trademark, and the plain packaging regime hadn't "unjustifiably" encumbered companies' trademark usage.

That last point is particularly interesting. As far back as 2011 the tobacco companies tried to argue that "plain packaging has a smothering effect on companies' logos and trademarks." The WTO has just stamped on the idea that companies have some kind of sacred right to use their trademarks, which could have wider implications.

As for the main attempt to get rid of plain packs in Australia, that has now failed definitively -- there is no way to appeal against the WTO Appellate Body's ruling. That means that many more countries around the world are likely to bring in plain-pack laws -- a real victory for Australia's tenacious pursuit of this important health measure.

Follow me @glynmoody on Twitter, Diaspora, or Mastodon.

Filed Under: australia, health, plain packs, trade agreements, wto

Just Because Australia Won Its Plain Packaging Case Against Philip Morris Doesn't Mean Corporate Sovereignty Isn't A Threat

from the extrapolating-from-a-single-data-point dept

The challenge by Philip Morris to Australia's plain packaging law for tobacco products is perhaps the best-known example of how companies try to use corporate sovereignty provisions in trade agreements to force nations to change their policies -- in this case, one designed to save lives. That case was also notable for the way that it had been brought: since Philip Morris was very unlikely to win by invoking the trade agreement between Australia and the US, it used one between Australia and Hong Kong -- a classic case of treaty shopping. Last week, we heard that the case had been dismissed. An article by Kyla Tienhaara in The Sydney Morning Herald explains:

it appears that Australia was able to convince the tribunal that Philip Morris should not be permitted to plead the merits of its case because it engaged in "treaty shopping". In other words, it was an American investor when plain packaging was introduced and only adopted a "flag of convenience" in order to access arbitration.

It's great news that Australia won't be forced to pay huge punitive fines for proceeding with its health policy. But, predictably, people are already pointing to this result as "proof" that corporate sovereignty isn't really a problem, as in this column published by The Conversation:

A tobacco company sued a government for enacting laws designed to improve public health. They used a little understood mechanism -- ISDS -- to sue, despite having lost in Australian courts. International trade law disputes rarely have such a clear-cut villain. It is natural to distrust the mechanisms they relied on. However, this victory -- in the first ISDS claim brought against Australia -- should allay those concerns.

The author concludes:

Australia's victory over Philip Morris should take much heat out of this debate.

The bogeyman has been slain.

Leaving aside the rather important fact that it is not possible to extrapolate from a single data point -- and that there are dozens of other ISDS cases where governments have lost and been hit with massive fines -- there are couple of aspects to note here. First, as Tienhaara writes in her article:

the dismissal of the case on procedural grounds means that we will never get a ruling on the substance of Philip Morris' claims. As such, the award contributes nothing to the bigger debate about the conflict between investment protection and public policy.

That's the key issue -- whether companies can use corporate sovereignty provisions to trump laws enacted democratically. The defeat on a procedural issue leaves open the possibility that other ISDS cases will succeed where Philip Morris failed, and cause governments to repeal laws rather than pay massive fines. In particular, both TPP and TAFTA/TTIP are likely to give far stronger rights to tens of thousands of companies to sue governments directly, without needing to invoke obscure treaties with third parties. Tienhaara points out a further reason why the defeat of Philip Morris does not signal that corporate sovereignty is no longer a threat:

poor countries are in the worst position because they can't afford even a preliminary defence in an ISDS case. It has been reported that Australia has spent [AU]$50 million [about US$35 million] defending plain packaging in arbitration. Uruguay has been mired in its own dispute with Philip Morris for even longer than Australia and has to rely on funding from a foundation set up by former New York mayor Michael Bloomberg because it can't afford to pay its legal fees.

The high cost of ISDS makes the threat of arbitration a potent tool for the tobacco companies.

In other words, it is not necessary for companies to win all or even most corporate sovereignty cases: the mere threat of them winning is likely to be enough to dissuade many governments from proceeding with policies that could result in them paying huge awards. The ISDS bogeyman may have taken a hit with Australia's win, but it is most certainly not slain.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: australia, corporate sovereignty, isds, plain packs, trade agreeements
Companies: philip morris

Australia's Legal Bill For Fighting Philip Morris Corporate Sovereignty Case: $35 million -- So Far

from the heads-you-win,-tails-I-lose dept

Back in 2012, we wrote about Philip Morris using corporate sovereignty provisions in trade agreements to sue Australia and Uruguay over their attempts to reduce the number of deaths from smoking through plain packaging and other health measures. Since then, the case has become a textbook example of all that is wrong with investor-state dispute settlement (ISDS).

For example, even though Philip Morris lost its battle in the Australian High Court to stop the introduction of plain packaging, it did not simply accept the ruling, but sought to use ISDS to nullify the court's decision. The natural instrument would be the trade agreement between the US and Australia, but the Australian government had wisely refused to accept a corporate sovereignty chapter there. So Philip Morris used an obscure 1993 trade agreement between Australia and Hong Kong, which did have ISDS, claiming that its business activities in the latter territory gave it the right to invoke the treaty -- a classic example of "treaty shopping".

Since those events from a few years back, we've heard nothing about how the Philip Morris ISDS case is proceeding -- until now, since The West Australian newspaper has discovered the following fact:

More than [AU]$50 million [about US$35 million] of taxpayer money is expected to go up in smoke defending cigarette plain packaging in a secretive international tribunal in Singapore.

But costs will pile much higher if Australia loses on its first defence that Philip Morris indulged in cynical "venue shopping" by shifting its headquarters to Hong Kong to sue Australia.

That's because the hearing will move on to the main issues, summarized here on the official Australian government Web page for the case:

Philip Morris Asia is arguing that Australia's tobacco plain packaging measure constitutes an expropriation of its Australian investments in breach of Article 6 of the Hong Kong Agreement. Philip Morris Asia further argues that Australia's tobacco plain packaging measure is in breach of its commitment under Article 2(2) of the Hong Kong Agreement to accord fair and equitable treatment to Philip Morris Asia's investments. Philip Morris Asia further asserts that tobacco plain packaging constitutes an unreasonable and discriminatory measure and that Philip Morris Asia's investments have been deprived of full protection and security in breach of Article 2(2) of the Hong Kong Agreement.

The information obtained by The West Australian is significant, because it reveals the scale of the costs that a government must contemplate when defending itself against a corporate sovereignty claim. Given that background, it's easy to see why governments in these cases may choose to settle quickly, and to give the companies what they want, rather than risk mounting costs and a huge fine.

It's that fact that gives the lie to the claim that ISDS cannot force a government to change its laws. While that's true in theory, in practice governments are very likely to choose capitulation as the cheaper and easier option, recognizing that the whole process is biased against them. After all, unlike companies, a government can never win an ISDS case: the best it can hope for is not to lose.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: australia, corporate sovereignty, hong kong, isds, plain packs, trade agreements
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