Defeat Of Philip Morris In Its Corporate Sovereignty Case Against Uruguay Likely To Open Floodgates For Tobacco Packaging Legislation

from the this-is-the-big-one dept

Last December, Techdirt wrote about Australia fending off an attempt by Philip Morris to use corporate sovereignty to overturn the country’s plain-packaging regulations. As we pointed out, this wasn’t proof that investor-state dispute settlement (ISDS) was no threat to national sovereignty, despite what some were claiming. Australia won on purely procedural grounds, not because the ISDS tribunal agreed that Australia had a fundamental right to regulate.

However, as the Techdirt article also mentioned, there is another tobacco case based on corporate sovereignty provisions in a trade deal — the one which Philip Morris brought against Uruguay. It’s fortunate that Uruguay decided not to roll over, but to contest the case — something it could only do because of funding from a foundation set up by former New York mayor Michael Bloomberg — because a tribunal has just found in its favor:

The award released on Friday brings to a close a six year dispute between the global tobacco giant and Uruguay, with an arbitral tribunal upholding Uruguay’s right to do two things: prohibit tobacco companies marketing cigarettes in ways that falsely present some cigarettes as less harmful than others and require tobacco companies to use 80% of the front and back of cigarette packs for graphic warnings of the health hazards of smoking.

Uruguay’s lawyers, the Boston-based firm Foley Hoag, praised the decision as having broad international consequences.

As that quotation from an article in The Mandarin suggests, this is a much more significant decision than the Australian one, because Philip Morris did not lose on procedural grounds this time. That establishes a crucial precedent for other countries that wish to introduce health measures affecting tobacco packaging. Several have been holding off from bringing in such laws until they knew what happened to Australia and Uruguay, and therefore what legal risks they would run. We can probably expect many more nations to move forward with new legislation now, not least because Philip Morris was also ordered to pay $7 million of Uruguay’s $10.3 million costs (pdf).

Uruguay’s regulations on cigarettes did not bring in plain packs of the kind adopted by Australia. Instead, the South American country currently limits how much of the cigarette packet can be used for branding, and also stops tobacco companies from making misleading claims that their products are “mild” or “ultra-light.” However, The Mandarin notes that Uruguay will:

soon move towards all tobacco products being sold in generic packages, with even larger warnings of the harms caused by smoking, in an effort to further reduce smoking levels.

The latest defeat for Philip Morris clears the way for Uruguay to do that. Even more importantly, it also represents a high-profile failure of the tobacco company’s strategy of using the threat of ISDS litigation to apply pressure to nations not to bring in legislation. It’s hard not to think that the tribunal’s refusal to sanction this approach is due to a massive growth in public awareness and public antipathy towards corporate sovereignty, an area that not so long ago was a sleepy corner of trade law familiar to only a few specialist lawyers.

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Comments on “Defeat Of Philip Morris In Its Corporate Sovereignty Case Against Uruguay Likely To Open Floodgates For Tobacco Packaging Legislation”

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That One Guy (profile) says:

Re: So remind us again...

In related news all that hubub about people starving and global warming are both demonstrably wrong because I’m not hungry and the temperature isn’t too bad at the moment.

The fact that two cases actually went in favor of the country rather than the company, one purely on procedural grounds and the other because someone with enough money was willing to bankroll the case does not suddenly make the fact that corporate sovereignty allows private companies to sue governments in hilariously biased ‘courts’ over laws or regulations just because they might affect their profits all roses and sunshine.

The lawsuits against Australia and Uraguay were enough to get New Zealand to put their own push towards similar laws on hold while they waited to see how the cases ended up, meaning just the implied threat was enough to convince a government to withhold changes or additions to the law for fear that those changes would upset a private company, and if you think that’s the only time something like that’s happened you’re only fooling yourself.

Anonymous Coward says:

Re: So remind us again...

In your eagerness to be first with a smartass comment, perhaps you missed this bit in the second paragraph:
“It’s fortunate that Uruguay decided not to roll over, but to contest the case — something it could only do because of funding from a foundation set up by former New York mayor Michael Bloomberg…”

Now what if it didn’t have that aid? What if it couldn’t afford the legal expenditure? How much money was spent defending this case?

Though I do concede you have a point that people will stop listening. Perhaps we need a good company victory over a government. Will you care then?

Anonymous Coward says:

It’s almost amusing to watch those lawyers argue on reddit in favor of ISDS. There’s one who trawls the /r/economics forum loudly proclaiming the benefits of ISDS and how we should all jump at the chance to have “our” interests protected there by his legal firm.
Certainly no kind of self-interest behind his posts…

MadAsASnake (profile) says:

That it is possible to bring a case claiming the corporate profit overrides national laws regarding false advertising should be a worry. That there was an expectation that Philip Morris would win should be truly frightening. Imagine the precedent set had Philip Morris won – that it is a corporate right to mislead consumers? ISDS needs to be removed from all treaties as the abomination it is.

That One Guy (profile) says:

Good, but not as helpful as you might think

That establishes a crucial precedent for other countries that wish to introduce health measures affecting tobacco packaging.

And were we talking about actual courts that precedent might actually be of value, but we’re not. Instead we’re talking about corporate sovereignty tribunals, which aren’t beholden to any country’s laws, and don’t have to keep in mind the precedent set by any previous cases, which means just because the company lost this time there’s absolutely no guarantee that the same will happen next time.

It’s hard not to think that the tribunal’s refusal to sanction this approach is due to a massive growth in public awareness and public antipathy towards corporate sovereignty, an area that not so long ago was a sleepy corner of trade law familiar to only a few specialist lawyers.

I’d go a step further and say that it’s quite likely that Uraguay’s win here has less to do with the tribunal really buying their arguments and more to do with the fact that there’s currently several ‘trade’ agreements infected with corporate sovereignty provisions on the line, and they didn’t want a blatant example of just how those previsions allow private companies to overrule governments when it comes to passing and enforcing laws, especially on an un-sympathetic subject as smoking and public health.

As such I can’t help but think that the ruling might have been just a little bit different if the public attention weren’t on the subject to the degree it is, and the potential for those ‘trade’ agreements, corporate sovereignty provisions and all were at possible risk due to backlash.

Craig Welch (profile) says:

Re: Re: Good, but not as helpful as you might think

This try only cost them $7 million

It cost them a little more than that. $7 million was their contribution to Uruguay’s costs. They also had to pay the costs of the tribunal itself, as well as their own costs, which would likely be in the same order as those of Uruguay.

That One Guy (profile) says:

Re: Re: Re: Good, but not as helpful as you might think

Even added together we’re talking about a massive company here, to the point that the amount they spent on the case might as well be a rounding error when it comes to writing up the yearly expenses/profits.

Given that, and the fact that the laws they’re trying to kill stand to cause them even larger losses odds are good that they will try again as soon as they figure out how.

Eldakka (profile) says:

Re: Good, but not as helpful as you might think

I was thinking this.

Is there anything in the treaties ISDS provisions that establishes the role of precedents?

Even if Philip Morris has lost this arbitration, could another tobacco company launch the same case against Uruguay under the same treaty and have that tribunal ignore this precedent and give a different ruling?

Even if the treaty does specify precedents as binding, what effect does this have on ISDS provisions of OTHER treaties? For example, would this precedent be binding on TPP ISDS tribunals? If Uruguay signs up to TPP, could Philip Morris launch the same action again against Uruaguay under TPP and have that tribunal ignore the precedent set under this treaty and rule differently?

Anonymous Coward says:

Get these murderers off of our streets. Putting pictures of dead people on the packaging would be more than fair. I should realize, I smoked for almost 40 years, took my first smoke around the ripe old age 10 years. And to think our evil government makes money via high taxes on big tobacco by assisting big tobacco in shortening peoples lives, sounds like the purge to me. Get cancer, emphysema, arterial sclerosis and die you worthless pieces of shit, and take your lawyers with you.

Wendy Cockcroft (user link) says:

Re: Re: Re:

Be fair, I.T. guy, due to ubiquitous product placement and the portrayal of smoking as glamorous and heroic for generations β€” in the Fifties and Sixties over here in the UK smoking was promoted by doctors as a stress-reliever β€” there has always been a considerable amount of peer pressure on people to take up smoking. When a) it’s everywhere and b) the cool people do it, not smoking takes an effort of will.

Heck, I remember kids smoking in the toilets at school; the in-crowd smoked, so if you wanted to belong, you had to take it up. I didn’t so was never particularly popular. When smoking == social life, what can you do? Saying no makes you the odd one out. I was willing to be the odd one out but not everyone is.

RE: sugar and red meat, we actually need those, just not in the amounts we often consume them in. Smoking has no benefits at all; people who cite stress relief won’t admit that cravings exacerbate stress.

TDR says:

Re: Re: Re: Re:

No, I never said prohibition was the answer. It just feels like people who advocate for full legalization of this sort of thing don’t seem to think of the possible side effects of doing so. If it’s less addictive than alcohol, fine, but show how that’s true, don’t just say it. A random statement without evidence provided to support it convinces no one. And I don’t know that in cases like these there are no victims as some claim because when you’re not in control of yourself, there’s no telling what you’ll do to yourself or others. Plus there’s the emotional and psychological effects it has on those watching the user(s) destroy their lives with this stuff. Physicality is only one kind of damage. There are other kinds as well.

Ninja (profile) says:

Re: Re: Re:2 Re:

I have yet to see any problems with adults put aside people who are genetically prone to addiction. On the other hand there is evidence that tobacco is addicting regardless of genetics. And I have yet to see any marijuana use die from cancer. Granted the oldest use I know has been ‘stoned’ for 30 years now and the average is about 10 years of use but so far none of them suffered any breath capacity loss or stuff like that.

Anonymous Coward says:

Re: Re: Re:2 Re:

I always think people who advocate for banning stuff never stop to think of the side effects of doing so.

The purpose of making a substance illegal is to get people to stop using it, well that obviously does not work because there are still plenty of people smoking Marajuana, Crack, Meth or whatever else they want.

Because some things are illegal if you want them, and plenty of people do, black markets pop up to fill the void. Now we have a law intended to eliminate drug use actually causing MORE crime while still failing to meet its original goal.

If heroin was legal people could visit their local pharmacy, get some, pay some tax and know they got Heroin. But no, no no, thats bad so its illegal. Addicts are now forced to turn to the black market where they get heroin laced with who knows what and they end up dead.

Ever wondered why we have this heroin epidemic going on in 2016? You only have the war on drugs to thank. The prescription pain killers that have effects similar to heroin have been made so hard to get that the only choice remaining is heroin. If your mom was an addict would you prefer she have black market heroin or some prescription pills?

Lastly, people are going to watch other users destroy their lives no matter if the user’s drug of choice is legal or not. Making drugs illegal solves no problems but sure is good at creating many more problems.

I.T. Guy says:

Re: Re: Re:

“So being stoned and not in control of yourself”(Reefer madness!!!)
So… you’ve never smoked pot before.
I personally have smoked some of the best pot Amsterdam has to offer and never in my 32 years as a smoker have I come across weed so potent it made me “lose control of myself.” Nor does it affect motor function like alcohol. In fact, while others of my age at the time were drinking like fish every weekend at keg parties, most of which became habitual alcohol abusers by their 20’s, my group of friends were quite happy smoking weed then getting on our motorcycles riding through the woods. Countless hours, in the woods, at night, 30+ mph on 2 ft wide trails, never had an accident while high.

To this day I don’t drink alcohol.

JoeCool (profile) says:

Re: Re:

Burning marijuana is just as bad as burning tobacco. It’s not the drug that causes the problems, it’s the toxins that come from burning material. Marijuana would be less of a hazard, but only if ingested instead of inhaled. The classic brownie, for example. You don’t see tobacco users consuming it that way. πŸ˜€

Anonymous Coward says:

Re: Re: Re:

Actually in high altitude climates you chew on the tobacco leaf and it will help you breath better. The rest of the crap in the cigarette and the burning of all of it is what is bad for you.

Also, if you have a sick cow you force feed it tobacco and by morning the cow will be better. Again no cigarettes or other processing is involved. So cigaret companies need to go away but tobacco crops can stay.

Anonymous Coward says:

So it cost them at least 3 million to bring the case to show they have the right to protect the public ,
its clear corporate courts are truly against the rights of the public .They should be removed from any upcoming agreements .
IF a company does not want to do business in any country they can withdraw their products .
Europe has very advanced courts ,theres no need for isds
except to reduce governments ability to make laws
to protect their own citizens .

Anonymous Coward says:

i don’t see why corporations should stop at trying to require nations to let them lie to the people of the nations.

why not also require the people to smoke? start ’em out at a pack a day and then ramp it up. also put ’em to work on corporate projects within the nations at no recompense. make corporations great again.

britain’s empire would be plain meh next to that of philip morris or volkswagen.

Anonymous Coward (profile) says:

Three things:

(1) This could well have been a tactical loss by the corporations staffing the Tribunal, to soften up opposition to the massive victory that passage of TPP, TTIP, and TISA would represent. As someone mentioned, ISDS tribunals aren’t bound by precedent, and even some putatively august judicial courts find ways around precedent when the political leanings and financial affiliations of their current occupants make it profitable to do so.

(2) How much did this litigation cost the defense? (Let’s go ahead and assume that billionaire white knights are not going to come riding to the rescue of every relatively poor country every time they get hit with an ISDS suit.)

(3) Does the defense get to recover its litigation costs in full?

Wendy Cockcroft (user link) says:

Re: Three answers to three things

A rose (or legal action) by any other name is still a rose. The fact is, Uruguay was taken to a tribunal for arbitration for its efforts to counter tobacco smoking. That should not have happened. Every time I argue with an ISDS apologist their answer always boils down to “Them’s the rules.” We need to change the rules.

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