Beware The Tobacco Bullies: Do Not Let Them abuse FTA's

(CNS): Tobacco giants, who always put profit ahead of lives and health, are invoking investor-state dispute mechanisms in bilateral investment agreements to challenge moves of governments which are aimed at controlling the widespread use of tobacco products. This scary development highlights the dangers of signing trade or investment treaties which could give corporations the right to sue governments over legitimate health or other public interest regulations.

Cigarette company Philip Morris is currently suing the Australian government for billions of dollars over its plan to be the first country to introduce plain, brand-free packaging for cigarettes.

From January 2012 the Australian government plans to stop manufacturers showing logos, branding, colours and promotional text on tobacco packaging. Cigarette packets will be a drab, unattractive olive-green colour and will also show graphic images depicting the health consequences of smoking on the front and back.

Hong Kong-based Philip Morris Asia, (which owns the Australian affiliate Philip Morris Limited), fearful that plain-packaging will damage its cigarette brands like Marlboro and Alpine, and reduce their ability to compete against other brands, has filed a notice of claim arguing that Canberra's proposed legislation violates a bilateral investment treaty between Australia and Hong Kong, which holds the government responsible to protect investments made by Asian companies in Australia against discriminatory treatment. The treaty, according to the tobacco company, protects companies' property, including intellectual property such as trademarks, and the plain packaging would severely diminish the value of the company's trademark. As Australia has signed a free trade agreement (FTA) with the US, which is the main base of Philip Morris, which does not include investor-state dispute mechanism, so the company is cleverly using the existence of a subsidiary company in Hong Kong to pursue this case by using the Australian-Hong Kong bilateral investment.

According to Philip Morris Asia spokeswoman, Anne Edwards, "Brands are valuable intellectual property and form the basis of consumer goods businesses like ours. If we are banned from using them, our business in Australia will become commoditized and its value will be significantly impacted. The Australian government does not have an unfettered right to confiscate [our] valuable intellectual
property.”

Meanwhile, British American Tobacco (BAT), one of the largest cigarette firms in Australia, whose brands include Winfield, Dunhill and Benson and Hedges, is also planning a legal challenge to the proposals, once they are formally released. It feels that the government's plans would infringe upon international trademark and intellectual property laws.

The Australian government, however, has pledged to fight any legal action that undermines its efforts to reduce smoking rates and the health costs associated with smoking. Australian Prime Minister, Julia Gillard, said: "We're not going to be intimidated by Big Tobacco's tactics, whether they're political tactics, whether they're public affairs kind of tactics out in the community, or whether they're legal tactics. We're not taking a backward step. We've made the right decision and we'll see it through."

This is not the first time that Philip Morris has resorted to such blatant pressure tactics.

In February, 2010, three Philip Morris International (PMI) companies, based in Lausanne, filed a request for arbitration against Uruguay at the World Bank's International Centre for Settlement of Investment Disputes ("ICSID"). They contended that certain Uruguayan regulations, on the packaging and labeling of tobacco products, have hurt their business substantially and thus violated Uruguay's trade agreements with Switzerland, where Philip Morris International is based. According to a 1991 bilateral investment treaty between Switzerland and Uruguay, each country guarantees certain minimum standards of treatment for the other country’s investors, and agrees to resort to international arbitration to resolve disputes with individual investors over alleged failures to live up to those commitments.

It must be remembered that Uruguay first introduced tough anti tobacco laws 4 years ago under the leadership of its then oncologist President Tabaré Vázquez, which, on being made stricter in 2009, were challenged by the tobacco giant.

In the words of Phillip Morris--- Our BIT (bilateral investment treaty) claim only challenges three regulations implemented in 2009 by the former administration that go far beyond public health objectives: a regulation that forces companies to sell only one pack variation per cigarette brand that required us to withdraw 7 of the 12 cigarette varieties we sold in Uruguay; an increase in health warnings on tobacco packaging to 80%; and a requirement to print images on tobacco packaging that include repulsive and shocking pictures, such as a grotesquely disfigured baby…..These measures 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.”

It is unfortunate that after putting up an initial fight, Uruguay has eventually bowed to pressure from Philip Morris. It has agreed to amend legislation which slaps large health warnings on cigarette packets and bans the sale of those branded as "light". It said it would tweak the legislation, or possibly draft a new law, to fend off the complaint and comply with international trade obligations. One mooted change was reducing the size of health warnings from the current 80% of a packet's size to 65%. Another was to permit the sale of "light" cigarettes. The government said such changes would be minor.

Tabaré Vázquez, has accused the tobacco giant of "blackmailing" pressure. "The only thing that Philip Morris is trying to do is show its power over a small country that has set an international example on this issue," he said.

Other activists have echoed similar sentiments.

Laurent Huber, then-director of the Framework Convention Alliance on tobacco control, said: “In countries like Uruguay, the tobacco industry uses its vast wealth to tie up public health measures in court battles. Win or lose, this has a chilling effect on other governments.”

The row between Philip Morris and Australia is being closely followed by politicians in Britain, Canada and New Zealand, where similar plans to curtail cigarette branding are being considered.

In the US itself, two tobacco companies (Lorillard Inc and Reynolds American Inc's R.J. Reynolds Tobacco Co unit) went to court in February 2011 against U.S. health regulators (Food and Drug Administration—FDA), seeking to block consideration of an imminent advisory panel report that could recommend a ban on menthol-flavored cigarettes, thereby reducing the lucrative market for menthol cigarettes, which make up roughly 27 percent of U.S. annual cigarette sales of more than $83 billion.

A 2009 law gave the FDA regulatory power over tobacco products and specifically banned chocolate, fruit and other flavorings that lawmakers said enticed children to start smoking. According to the latest reports, FDA’s Tobacco Products Scientific Advisory Committee has recommended in a draft report to the agency that “removal of menthol cigarettes from the marketplace would benefit public health in the United States.”

Courtroom bullying and pressure tactics by tobacco bigwigs are likely to have a broader intimidating effect on other governments, especially the developing ones, and those who still do not have good anti tobacco legislation in place. Moreover, other countries would do well to revisit existing trade and investment agreements they have already signed or under negotiation to reject such a provision and other provisions which can undermine a government's ability to take measures which it deems are in the public interest.

India is in the process of signing a Free Trade Agreement with the European Union, and would do well to read the fine print regarding such issues before signing on the dotted line. The risks of sloppy free trade agreements evidently are manifold and so it remains for the negotiating countries to ensure that these agreements do not end up in choosing between health and death. (CNS)

Shobha Shukla - CNS
(The author is the Editor of Citizen News Service (CNS). She is a J2J Fellow of National Press Foundation (NPF) USA. She is also the Director of CNS Gender Initiative and CNS Diabetes Media Initiative (CNS-DMI). She has worked earlier with State Planning Institute, UP. Email: shobha@citizen-news.org, website: http://www.citizen-news.org)

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