JURIST Guest Columnist Craig Welch of LWC Policy Consulting, Inc. discusses legislation regulating tobacco packaging in the international context, and related health and safety issues…

A recent Investor State Dispute Settlement (ISDS) decision in Singapore represents a major setback for tobacco companies in their fight against plain packaging legislation. But are the implications of this case as important as some commentators have suggested?

In 2011, JURIST Guest Columnist Allyn Taylor [JURIST] from Georgetown University Law Center quite reasonably suggested that a successful ISDS case could prove to be a ‘chilling blow’ to governments’ attempts to enforce public health measures such as the plain packaging of tobacco products – which precludes brand differentiation and prevents the use of cigarette packets as an advertising medium. At that time the case in question was that of Philip Morris (PM) – Australia in the Permanent Court of Arbitration, a dispute that was launched the same day that the Tobacco Plain Packaging Act 2011 (Cth) came into effect.

Concurrently PM intervened in a High Court case in which two other major tobacco companies (JT International and British American Tobacco) were suing the Australian Government, claiming that the tobacco packaging legislation amounted to expropriation of their intellectual property rights (mainly trademarks). The High Court determined in 2012, by a six to one majority, that the actions of the Government did not constitute the acquisition of property, in that there was no property of the kind specified in § 51(xxxi) of the Australian Constitution.

The ISDS case, held in Singapore by arbitrators appointed by both parties, was neither a continuation of nor an appeal against the High Court Case, but was brought separately under the terms of a Bilateral Investment Treaty (BIT) between Hong Kong and Australia. It was arguably doomed to fail, as the corporate re-shuffling to enable an action to be brought under this particular BIT took place after the Australian Government had foreshadowed its plain packaging agenda.

The Singapore judgment has garnered headlines worldwide, but the perception of the outcome as a ‘win’ for public health and a ‘loss’ for the tobacco industry is illusory. The case was dismissed on jurisdictional grounds, after an application for bifurcation was allowed. It addressed neither the merits of the legislation nor the subsequent effect on tobacco use and importantly, offers no legal precedent. Nor can either of the two cases be appealed.

Together, what these two cases should do however is to prompt questions about the validity of the widely mooted concept of ‘regulatory chill’. Implicit in this concept is that governments are less likely to legislate or regulate in an area where ISDS or similar provisions might allow a challenge from ‘Big X’, where ‘X’ might be tobacco, pharma, food, fossil fuel and so on. Regulatory chill, it is claimed, hinders the ability of Governments to pursue sound public policy, including public health policy. The Australian Government itself complained about regulatory chill in a World Trade Organisation (WTO) meeting of the Dispute Settlement Body [PDF] in November 2014, referring to a plethora of disputes as ‘a well-known tactic of the tobacco industry to avoid countries implementing tobacco control measures’. Whether or not this ‘chill’ has had an effect, it has arguably been put in the freezer by the two cases discussed.

Australia is also being challenged by Cuba and others under the WTO dispute settlement mechanism, primarily based on allegations of breaches of the Technical Barriers to Trade (TBT) and Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreements. A Dispute Panel has been formed and is expected to hand down its decision in the first half of 2016.

Important considerations here are that the High Court of Australia found the Government’s actions legal; the ISDS action was a sham; and there are valid defenses to the WTO action in that there are exceptions to the relevant treaty obligations [PDF] including when ‘necessary to protect human, animal or plant life or health’.

There is another extant dispute similar to that which failed against Australia. Philip Morris has raised a dispute against Uruguay, under the Switzerland – Uruguay BIT [PDF]. One unfortunate aspect of ISDS cases is that they frequently take some years to conclude. Although there was a hearing two months ago on the merits, the matter is currently held up in procedural arguments. Importantly though, to date no ISDS case relating to tobacco plain packaging has been either won or lost on its merits. This particular BIT contains a pro-vision recognising ‘… each other’s right not to allow economic activities for reasons of public security and order, public health or morality, …’, as do most BITs. It hardly bears mentioning that tobacco use is a major public health issue.

All of the above cases, concluded or not, are part of the scene currently being set in the United Kingdom. In May 2016 the Standardised Packaging of Tobacco Products Regulations 2015 comes into effect – and predictably, on December 10 a challenge was mounted in the UK High Court to the validity of the regulations by almost the same group of players involved in the Australian domestic challenge.

Perhaps the ‘regulatory chill’ is turning into a ‘regulatory grill’ as the plain packaging movement gains momentum. May 2016 also marks the entry into force of Ireland’s Public Health (Standardised Packaging of Tobacco) Act 2015, which provides a one year ‘wash-out’ period for labelled stocks to be depleted. That same month also sees the advent of France’s corresponding Act, Projet de Loi de modernisation de notre système de santé [translation: Bill of Modernization on Our Health System]. 2016 becomes a watershed year with legislation along the same lines coming into force in in Burkina Faso [PDF, in French], and Hungary being the first of many other countries that are planning their own implementations.

And in the background is the EU Tobacco Directive [PDF] (2014), which contains provisions for standardized packaging, as well as other measures relating to e-cigarettes, menthol flavors, among others. France’s actions are a national implementation of the Directive. In a significant move, prior to an upcoming judgment in the Court of Justice of the European Union, the Advocate General Juliane Kokott recently gave her support to all components of the Directive, including packaging. Her opinion [opinion, PDF] is not binding, but the Court generally takes such opinions very seriously. Those bringing the challenge to the Directive include the usual tobacco parties (some as ‘interested’ parties) as well as Poland and Romania.

Whether it is the strength of the public health agenda or the weakness of the case being prosecuted by the tobacco industry, there is little evidence to date that ‘regulatory chill’ is undermining the resolve of governments around the world. However whether one can conclude that efforts to pit public health against the commercial interests of powerful industries other than tobacco will not be undermined by ISDS provisions, remains to be seen.

Craig Welch is an Australian LLM student in the final stages of his degree with the University of Liverpool. Previously, Welch was a senior business executive working in Southeast Asia and Australia, and managed Australia’s first listed software country (Sausage Software) through its pioneering days of developing some of the world’s first e-commerce software solutions.

Suggested citation: Craig Welch, Tobacco Plain Packaging Legislation, JURIST – Professional Commentary, Jan. 15, 2016, http://jurist.org/hotline/2016/01/craig-welch-tobacco-plain-packaging.php