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 March 2010, Philip Morris International (PMI) launched a multi-billion dollar lawsuit against the Government of Uruguay, over a decision to make health warnings cover 80% of cigarette packs. [1] [2] [3]

The Legal Claim

The company brought its claim under the Switzerland-Uruguay Bilateral Investment Treaty (BIT) at the World Bank’s International Center for Settlement of Investment Disputes. It claims that Uruguay’s regulatory measures violated the investment protection agreement signed in 1991 between Uruguay and Switzerland, where Philip Morris is headquartered. [3] [2]

Specifically, Philip Morris 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% [4]
  • the design of six messages that will fill the 80% space [5]
  • a regulation that forces companies to sell only one variation of cigarettes per brand (to get around a previous prohibition on labelling cigarettes as ‘light’ or ‘ultralight’, some manufacturers had taken to colour-labelling cigarette packs).[6]


The company claims that the case is 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.”

Philip Morris 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.” [7]

Uruguayan journalist Claudio Paolillo commented: “Uruguay offers a cautionary tale for other small countries willing to take on the tobacco industry. In 2009 Uruguay’s GDP was $32 billion, while Philip Morris’s revenues that year hit $62 billion. Uruguay’s leaders worried, for good reason, whether they could successfully wage a long fight against a sophisticated multinational corporation.”[3]

Uruguay - a Leader in Tobacco Control

In March 2006, President Tabaré Vázquez, an oncologist, began an “anti-tobacco crusade”. He banned smoking in all enclosed spaces except private homes. In 2008 he forced tobacco companies to place health warnings over 50% their cigarette packs, severely restricted tobacco advertising and event sponsorship, and prevented the use of words like ‘light’ and ‘mild’ in tobacco ads or on packs. In February 2010, a week before he left office, Vázquez raised tobacco taxes to 70 percent of the cost of a pack, nearly doubling the price of an average pack of cigarettes. [3]

"Cynical Attempt ... to Make an Example of a Small Country"

A legal opinion from Todd Weiler, an international lawyer whose practice focuses on investment treaty arbitration, commissioned by Physicians for a Smoke Free Canada, suggests that the claim is unjustified and unreasonable - and is part of a wider strategy to forestall plain packaging. [2]

Weiler's report stated:[2]

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.

External Resources

References

  1. 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 6 June 2011
  2. 2.0 2.1 2.2 2.3 Todd 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 6 June 2011
  3. 3.0 3.1 3.2 3.3 Claudio 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 6 June 2011
  4. Presidential Decree Nº 287/009, which was promulgated on 15 June 2009 and came into force on 12 December 2009
  5. Ordinance Nº 466, issued on 1 September 2009 and in force on 28 February 2010
  6. Ordinance Nº 514, issued on 18 August 2009 and in force on 14 February 2010
  7. Bilateral Investment Treaty claim, Uruguay, Philip Morris International, 5 October 2010, accessed 6 June 2011
  8. Philip Morris International claims against Uruguay without merit, Physicians for a Smoke-Free Canada, 12 August 2010, accessed 6 June 2011