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Issue #1748      September 14, 2016

Corporate dictatorship

Blow against big tobacco

Uruguay has won a significant decision in the International Centre for Settlement of Investment Disputes, against tobacco transnational Philip Morris to put a leash on corporation’s previously unbridled promotion of its deadly products. The decision strikes a blow in the growing struggle against the imposition of all-encompassing global trade deals formulated by the transnational corporations.

Under the Trans Pacific Partnership (TPP), to which Australia is a signatory, even limited democratic rights have been denied during its negotiations. This so-called “architecture for a 21st century trade agreement” is designed to serve US corporate and strategic interests and to act as a model for future agreements.

Shrouded in secrecy

The big corporations are at the table, consulted on every move but the public are being kept in the dark. If it were not for WikiLeaks we would still have little idea of how the Australian government is in the process of signing away our democratic and sovereign rights.

The Senate has called on the government to release details but it was flatly refused, treating this democratically elected, representative body with total contempt.

No one is opposed to trade. What people want is fair trade. The Australian Fair Trade and Investment Network (AFTINET), one of the main forces representing the interests of Australian people and the Australian economy, is promoting fair trade.

It is also dishonest to keep referring to the TPP, as the government does, as if it were just about trade. It is much more than a trade agreement. It is these other aspects that the government is particularly concerned to hide.

Not just a trade agreement

While the TPP might be referred to as a trade agreement, only about five of the 26 chapters that have been leaked are about trade. The remainder go to the heart of the powers and role of government; in particular, they seek to override the government’s sovereign powers and responsibility to legislate in the interests of its people, its economy and environment.

The government’s capacity to act or likelihood of not acting because of fear of being sued for hundreds of millions or even billions of dollars covers almost every aspect of life. Government authority can be challenged over such things as:

  • price of prescriptions
  • environmental protection
  • workers’ rights
  • local content on TV
  • foreign investment rules
  • food and tobacco labelling
  • coal seam gas mining
  • financial regulation
  • internet privacy
  • environmental protection
  • government procurement, and much more.

The government claims it is committed to protecting the Pharmaceutical Benefits Scheme and Australia’s interests. Its promises mean nothing, especially when it so fears the response to its actions that it treats them as top secret.

One of the most dangerous, amongst many, policies on the table is the investor-state disputes settlement (ISDS) provision, which the Turnbull government is supporting.

ISDS gives foreign corporations the power to sue the Australian government for potential (what they might miss out on), not actual, losses in profits resulting from government legislation or policy relating to health, environmental and other policies. Already under trade agreements with these clauses there are around 650 such cases involving 98 countries. Three quarters of the cases are against developing and transition countries with Latin America and the Caribbean copping the largest share.

Cases under the ISDS will not be heard by an Australian court but by international tribunals whose decisions override Australian courts.

Uruguay’s victory over Philip Morris

The South Centre’s Germán Velásquez reports on the Uruguay outcome.

In a landmark decision that has been hailed as a victory of public health measures against narrow commercial interests, an international tribunal has dismissed a claim by tobacco giant company Philip Morris that the Uruguay government violated its rights by instituting tobacco control measures.

The ruling had been much anticipated as it was the first international case brought against a government for taking measures to curb the marketing of tobacco products.

Philip Morris had started proceedings in February 2010 against Uruguay at the International Centre for Settlement of Investment Disputes (ICSID) under a bilateral investment treaty (BIT) between Uruguay and Switzerland. The decision was given on July 8, 2016.

Under the BIT, foreign companies can take cases against the host state on various grounds, including if its policies constitute an expropriation of the companies’ expectation of profits, or a violation of “fair and equitable treatment”. These investment treaties and arbitration tribunals like ICSID have been heavily criticised in recent years for decisions favouring companies and that critics argue violate the right of states to regulate in the public interest.

In this particular case, the tribunal gave a ruling that dismissed the tobacco giant’s claims and upheld that the Uruguayan pro-health measures were allowed.

President Tabaré Vázquez of Uruguay, responding to the ruling, stated: “We have succeeded to prove at the International Centre for Settlement of Investment Disputes that our country, without violating any treaty, has met its unwavering commitment to defend the health of its people … From now on, when tobacco companies try to undermine the regulations adopted in the context of the framework tobacco convention with the threat of litigation, they (countries) will find our precedent.”

Background

Philip Morris International (PMI) started legal proceedings against Uruguay’s government at the International Centre for Settlement of Investment Disputes (ICSID), based at the World Bank, in February 2010. This was the first time the tobacco industry challenged a state in front of an international tribunal.

Philip Morris claimed that the health measures imposed by the Ministry of Health of Uruguay violated its intellectual property rights and failed to comply with Uruguay’s obligation under its bilateral investment treaty (BIT) with Switzerland.

Two specific measures were contested by PMI: The first measure was the Single Presentation Requirement introduced by the Uruguayan Public Health Ministry in 2008, where tobacco manufacturers could no longer sell multiple varieties of one brand. PMI had to withdraw 7 of its 12 products. Philip Morris alleged that the restriction to market only one variety substantially affected its company’s value.

The second measure contested by PMI was the so-called “80/80 Regulation”. Under a presidential decree, graphic health warnings on cigarette packages should cover 80 percent instead of 50 percent, of the packaging, leaving only 20 percent for the tobacco companies’ trademarks and advertisement.

Uruguay adopted strict tobacco control policies to comply with the World Health Organisation’s Framework Convention on Tobacco Control (WHO FCTC), in light of evidence that tobacco consumption leads to addiction, illness, and death.

According to the Ministry of Health, since Uruguay introduced its tobacco control program in 2003, its comprehensive tobacco control campaign has resulted in a substantial and unprecedented decrease in tobacco use.

From 2005 to 2011 per person consumption of cigarettes dropped by 25.8 percent. Tobacco consumption among school-going youth aged 12–17 decreased from over 30 percent to 9.2 percent from 2003 to 2011. Ministry of Health data also indicate that since smoke-free laws were introduced, hospitalisation for acute myocardial infarction has reduced by 22 percent.

Since this was the first international litigation, the case is highly important for similar debates taking place in other forums, like the World Trade Organisation, where some states are being challenged by other states for their tobacco control measures. It is a significant victory for a state facing commercial threats by tobacco companies fighting control measures.

The decision is supportive of states that choose to exercise their sovereign right to introduce laws and strategies to control tobacco sales in order to protect the health of their population.

This is a David against Goliath victory. The annual revenue of Philip Morris in 2013 was reported at US$80.2 billion, in contrast to Uruguay’s GDP of $55.7 billion. The international lawyer and practitioner in investment treaty arbitration Todd Weiler stated in a legal 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 …”

An important aspect of the case was that the secretariats of the World Health Organisation and the WHO Framework Convention on Tobacco Control (WHO FCTC) submitted an amicus brief during the proceedings.

The brief provided an overview of global tobacco control, including the role of the WHO FCTC. It set out the public health evidence underlying Uruguay’s tobacco packaging and labelling laws and detailed state practice in implementing similar measures.

The Tribunal accepted the submission of the amicus brief on the basis that it provided an independent perspective on the matters in the dispute and contributed expertise from “qualified agencies”. The Tribunal subsequently relied on the brief at several points of the factual and legal analysis in their decision.

In accepting submission of the amicus brief the Tribunal noted that given the “public interest involved in this case” the amicus brief would “support the transparency of the proceeding”.

The Tribunal’s ruling upheld that Uruguay could maintain the following specific regulations:

  • Prohibiting tobacco companies from marketing cigarettes in ways that falsely present some cigarettes as less harmful than others.
  • Requiring tobacco companies to use 80 percent of the front and back of cigarette packs for graphic/pictures of warnings of the health danger of smoking.

Conclusion

This is a landmark ruling because it supports the case that it is the sovereign right not only of Uruguay but of states in general to adopt laws and regulations to protect public health by regulating the marketing and distribution of tobacco products.

It is hoped that many other countries, which have been awaiting this decision before adopting similar regulations, will follow Uruguay’s example. As President Tabaré said, it is time for other nations to join Uruguay in this struggle, “without any fear of retaliation from powerful tobacco corporations, as Uruguay has done.”

Nevertheless, there is still a lot of public concern worldwide about the role that bilateral investment treaties has played in curbing the policy space of countries, including for health policies. There have also been serious concerns about the rulings made by other tribunals of ICSID and other arbitration centres, which have favoured the claims of companies and imposed high monetary awards against states.

In the case of Philip Morris versus Uruguay, the tribunal’s ruling was correct in supporting the state’s right to regulate in the interest of public health. But the concerns in general are still valid. Other tribunals in other cases may or may not be so sympathetic to the public interest.

Next article – Editorial – On social democratic governments

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