PHM-Exch> Philip Morris files investment treaty claim against tobacco regulations

[Claudio Schuftan]

From: Ellen Shaffer ershaffer at cpath.org

*From:*editor at iareporter.com]

*Philip Morris files first-known investment treaty claim against tobacco
regulations
By Luke Eric Peterson*

*http://www.iareporter.com
March 3, 2010*

One of the world’s largest tobacco companies, Philip Morris International,
has filed an arbitration claim against the Republic of Uruguay challenging
tobacco industry restrictions introduced by Uruguayan health authorities.

The firm contends that a series of measures taken by Uruguay to dampen
tobacco use in that country have given rise to breaches of the
Switzerland-Uruguay bilateral investment treaty.

The move is certain to be closely watched by international lawyers and
policymakers alike, as it will serve as an early test-case of the
little-used intellectual property protections contained in BITs. What’s
more, the arbitration appears likely to grapple with the thorny relationship
between investment treaty protections and public health regulation by
governments.

Notably, the arbitral claim comes fast on the heels of concerns raised by
tobacco companies in relation to public health measures being debated in the
United Kingdom (and discussed in our previous edition* of *IAReporter*).

Philip Morris International turned to arbitration on February 19, lodging a
request with the World Bank-affiliated International Centre for Settlement
of Investment Disputes (ICSID).

A spokesperson for PMI tells *IAReporter* that the ICSID claim seeks to
challenge 3 separate measures which have come into force in recent months,
and which harm the company’s trademarks and market share in Uruguay.

Among the disputed measures are ones which seek to stamp out the use of
misleading marketing descriptors such as “light” and “mild”, as well as
further branding techniques used to convey such descriptions.

PMI complains that these measures are excessive and far-reaching. Company
spokesperson, Morgan Rees tells *IAReporter*:

“It is without precedent anywhere in the world and arbitrarily limits each
brand family to a single variant.  As a result, we had to withdraw from the
market 7 of 12 brand variants we sold there. In the case of Marlboro, this
means that we now only sell Marlboro Red in Uruguay and have had to withdraw
Marlboro Gold, Blue and Green.”

PMI also seeks to challenge pictorial health warnings on cigarette packaging
that go “well beyond” their intended purpose, as well as a recently-enacted
requirement that 80% of a cigarette package be devoted to public health
warnings.

Mr. Rees says:

“The large size of these warnings prevents us from effectively displaying
our trademarks and goes beyond what could reasonably be considered
appropriate to inform consumers of the well-established health risks of
smoking. Again, this is without precedent anywhere in the world.”

Of particular interest, the company seeks not just compensation for losses
to its investments in Uruguay, but also suspension of Uruguay’s recent
regulatory measures.

(The latter type of arbitral order remain largely untested in investment
treaty arbitration contexts. As earlier reported** in *IAReporter* at least
one tribunal has ruled that it has the power under an investment treaty to
order a state to perform specific actions, rather than simply pay
compensation for treaty breaches. However, this politically-sensitive power
has yet to be exercised in the case in question.)
*
Uruguay in vanguard of tobacco crack-down*

Uruguay is viewed within public health circles as having taken some of the
most aggressive measures to curb tobacco use.

Cynthia Callard, Executive Director of a Canadian organization which
campaigns for stricter tobacco regulation both at the national and
international level, tells *IAReporter* that Uruguay has “pushed the
envelope” by introducing strict measures,

Callard, of Physicians for a Smoke-Free Canada, says that the decision by
Philip Morris International to bring a claim against Uruguay may be viewed
as a shot across the bow of other Latin American countries contemplating
more rigorous regulation.

Indeed, she notes that Uruguay is to play host to the next Conference of the
Parties of the WHO Framework Convention on Tobacco Control, an international
treaty which encourages states to regulate tobacco products more
stringently. She anticipates that the Philip Morris claim will be
widely-discussed in the lead up to that meeting of the Convention Parties.

*Relationship of BITs and Tobacco Control pact could be probed in
arbitration*

As was noted in an earlier *IAReporter* article*, the relationship between
the obligations in bilateral investment treaties and the WHO Tobacco Control
Convention remain unclear. However, it appears that this issue could become
a live one in the recently-filed ICSID arbitration.

For its part, Philip Morris International has shown a particular interest in
recent years in the use of international trade and investment agreements to
combat tighter tobacco regulation globally.

In mid-2009, the firm commissioned a legal opinion from the Swiss law firm
Lalive on the international legality of proposals to require tobacco
products to be sold in plain-packaging.

*IAReporter* understands that the same law firm represents PMI in the
arbitration claim, although a member of that law firm was unable to comment
on the matter at press time.
*
Uruguay is not a complete stranger to BIT arbitration*

Although Uruguay is little-discussed in investment treaty arbitration
contexts, *IAReporter* is aware of the state having been warned of potential
treaty claims by a Finnish investor concerned to protect its investments in
a controversial pulp mills (which have been the subject of a major
diplomatic row with Argentina). Because Uruguay stood behind the investment
in question, no arbitration claim was filed by the investor.

Furthermore, *IAReporter* is also aware of an earlier claim lodged by a
French-Moroccan investor, Stephane Benhamou pursuant to the France-Uruguay
bilateral investment treaty. In that claim which arose out of the
politically sensitive privatization of an Uruguayan bank, arbitrators ruled
in favour of Uruguay in an unpublished 2002 award. Arbitrators in that
UNCITRAL rules proceeding were Dr. Andres Rigo Sureda (Chair), Françoise
Lasry (investor’s nominee), and Jorge Tálice (respondent’s nominee).


* See "Plain packaging of tobacco products decried as expropriation,
contrary to treaties; long-running debate rejoined", *IAReporter*, Feb 9,
2010

** See "ANALYSIS: Are stakes higher in Micula v. Romania case given
tribunal’s signal that it could order restitution of legal framework?", *
IAReporter*, May 11, 2009

*Investment Arbitration Reporter is a specialized news publication tracking
developments in the area of international investment law and policy.

The publication does not offer legal advice or recommendations of any kind.

For further information about the publication or for subscription
information contact: subscribe at iareporter.com

To offer news-tips or comments, email the Editor, Luke Eric Peterson, at:
editor at iareporter.com*
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