Philip Morris vs the Government of Uruguay

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Uruguay has some of the most progressive tobacco control policies in the world.

In October 2017, Uruguayan President Tabare Vázquez announced that his government would introduce plain packaging legislation, becoming the 7th country to do so, following Australia, United Kingdom (UK), Ireland, France, Norway, and Hungary.[1][2]

An earlier Uruguayan tobacco policy affecting tobacco packaging and trademarks was unsuccessfully legally challenged by Philip Morris International (PMI), a multinational tobacco company with an 2009 annual revenue almost twice the size of Uruguay’s Gross Domestic Product (GDP).[1][2][3]Despite initial concerns that this case might act as “a cautionary tale for other small countries willing to take on the tobacco industry”[3], the case was dismissed in 2016 and demonstrated that small countries can win legal challenges brought by well-resourced multinational corporations.

Background

Uruquay’s President Vasquez, who served from 2005 to 2010 and a second term from 2015, was at the forefront of Uruguay’s progressive tobacco control policy.[3] An oncologist by profession, Vázquez began implementing tobacco control policies in 2006 when he prohibited smoking in all enclosed spaces except private homes, followed in 2008 by mandatory health warnings covering 50% of cigarette packs, severely restricted tobacco advertising and event sponsorship, and a ban of the use of misleading words like ‘light’ and ‘mild’.[3] In February 2010, shortly before leaving office for the first time, Vázquez raised tobacco taxes to 70% of the cost of a pack (nearly doubling the price of an average pack of cigarettes), and made health warnings cover 80% of tobacco packs.[3] Tobacco companies were also mandated to sell only one version of a brand, which ended tobacco companies’ ability to differentiate their brand variants using colours which have been found to have misleading health connotations to consumers.

Tobacco Company’s Legal Bid To Stop Tobacco Packaging Restrictions Failed

In February 2010, PMI (represented by law firm LALIVE) challenged Uruguay using the World Bank’s International Center for Settlement of Investment Disputes, seeking damages under the Switzerland-Uruguay Bilateral Investment Treaty (BIT) for tobacco control regulations introduced by Vázquez.[4][5]

The company claimed that Uruguay’s regulatory measures violated the investment protection agreement signed in 1991 between Uruguay and Switzerland, where PMI is headquartered.[3][5] Specifically, PMI complained about three measures imposed by Uruguay:

  • an increase in the size of health warnings on cigarette packets from 50% of the total pack size to 80% (Presidential Decree Nº 287/009, which was made law on 15 June 2009 and came into force on 12 December 2009)
  • the design of six health messages that filled the 80% space (Ordinance Nº 466, issued on 1 September 2009 and in force on 28 February 2010)
  • a regulation that forced tobacco companies to sell only one variation of cigarettes per brand (Ordinance Nº 514, issued on 18 August 2009 and in force on 14 February 2010).

PMI claimed that the case was about trademark protection. It said: “Although we support regulations requiring prominent health warnings, the requirement of 80% leaves virtually no space on the pack for display of legally protected trademarks.” It added: “We have supported and will continue to support effective and sensible tobacco regulations. The three measures challenged, however, are neither. They are extreme, have not been proven to be effective, have seriously harmed the company’s investments in Uruguay and have deprived the company of its ability to use its legally-protected trademarks and brands.”

PMI also called the design of some of the six health warning messages “repulsive and shocking”. It said: “We do not oppose the use of graphic health warnings but believe that images should accurately depict the health effects of smoking… We have a powerful case, and in the absence of any change to these excessive regulations we will continue with our claim.” [6]

In July 2016 The World Bank’s Court dismissed all claims that Uruguay had breached the 1991 BIT, stating that Uruguay had “the right to continue its anti-cigarette campaign”, and ordered the company to reimburse the state’s legal expenses.[7]

Uruquay is not the only country that has been taken to court by the tobacco industry over tobacco control measures. For an overview of some of the tobacco industry’s legal challenges across the world, go to, Legal Strategy and Legal Claims.

Making an Example of a Small Country to Stop Plain Packaging Precedent

A legal opinion from Todd Weiler, an international lawyer whose practice focuses on investment treaty arbitration, commissioned by Physicians for a Smoke Free Canada, suggested that the PMI lawsuit was unjustified and unreasonable - and part of a wider strategy to forestall plain packaging. [5]

Weiler's report stated:[5]

"PMI’s BIT claim against Uruguay is emblematic of its long standing strategy to vehemently oppose the adoption of measures that might some day lead to plain paper packaging of their products, or other measures that substantially interfere with the use and enjoyment of its crucial investment in its tobacco brands. In my opinion, the claim is nothing more than the cynical attempt by a wealthy multinational corporation to make an example of a small country with limited resources to defend against a well-funded international legal action, but with a well-deserved reputation as a worldwide leader in tobacco control."
"In effect, PMI can be seen as drawing a line in the sand on plain packaging, which appears to lie somewhere between the 56% now mandated by its putative home country, Switzerland; the 65% mandated by countries such as Mexico and Mauritius and the 80% now mandated by Uruguay. PMI undoubtedly recognized that it might be more advantageous to launch its first BIT claim against a country with relatively less resources, but a market large enough to make its damages claim plausibly worthwhile. The market of tiny Mauritius likely did not suit PMI’s purposes, and while the market in Mexico is substantially larger, that country has had significant experience with investment arbitration and has an established institutional capacity to fully respond to new claims. In other words, it would appear that PMI is trying to make an example of Uruguay, because it likely believes that it may not have the resources or expertise available to put on the best possible defence, and because Uruguay is an acknowledged world leader in tobacco control."

Neil Collishaw of Physicians for a Smoke-Free Canada said:[8]

"Uruguay has taken a state-of-the art approach to implementing the World Health Organization’s global tobacco treaty, the Framework Convention on Tobacco Control. Uruguay’s new regulations raise the bar for measures to reduce smoking, but are entirely consistent with the World Health Organization treaty’s obligations for health warnings and controls on deceptive packaging.... Any country that has a bilateral investment treaty with either Switzerland or the USA could face a similar challenge from Philip Morris."

TobaccoTactics Resources

TCRG Research

The paper below by Fooks et al examines how tobacco companies have used trade and investment agreements to challenge tobacco control measures. The paper explores this issue by exploring the Trans-Pacific Partnership (TPP) as a case-study.

Relevant Link

References

  1. 1.0 1.1 K. Parks, J. Kaplan, S. Chambers, Victory against Big Tobacco, Uruguay’s Vazquez takes aim at alcohol, Businesslive.co.za, 20 October 2017, access October 2017
  2. 2.0 2.1 E. Bonadio, How Big Tobacco is losing the fight to stop plain packaging of cigarettes, The Conversation, 19 May 2017, accessed October 2017
  3. 3.0 3.1 3.2 3.3 3.4 3.5 C. Paolillo, Part Three: Uruguay vs. Philip Morris - Tobacco Giant Wages Legal Fight over South America’s Toughest Smoking Control, Centre for Public integrity, 16 November 2010, accessed October 2017
  4. FTR Holding S.A. (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay), Request for arbitration under the rules of the International Centre for Settlement of Investment Disputes, from Physicians for a Smoke Free Canada website, 19 February 2010, accessed October 2017
  5. 5.0 5.1 5.2 5.3 T.J. Weiler, Legal Opinion: Philip Morris vs. Uruguay An Analysis of Tobacco Control Measures in the Context of International Investment Law, Physicians for a Smoke Free Canada website, 28 July 2010, accessed October 2017
  6. Philip Morris International, Bilateral Investment Treaty claim, Uruguay, Company statement, 5 October 2010, accessed October 2017
  7. C. Olivet, A. Villareal, Who really won the legal battle between Philip Morris and Uruguay?, The Guardian, 28 July 2016, accessed October 2017
  8. Philip Morris International claims against Uruguay without merit, Physicians for a Smoke-Free Canada, 12 August 2010, accessed 6 June 2011