[Ip-health] Bridges Weekley: Australian Cigarette Labelling Legislation Faces Renewed Controversy at WTO

thiru at keionline.org thiru at keionline.org
Thu Nov 3 01:23:06 PDT 2011


Bridges Weekly Trade News Digest • Volume 15 • Number 37 • 2nd November 2011

Australian Cigarette Labelling Legislation Faces Renewed Controversy at WTO

A proposed Australian bill intended to make cigarette packaging less
appealing to consumers and decrease tobacco consumption has once more met
opposition at the WTO with a number of tobacco-producing developing
countries, citing competitiveness concerns. The Australian government
announced today that cigarette companies will be given additional time to
comply with the public health measure, due to repeated delays in moving
the legislation through Parliament.

The Australian legislation would require that all cigarettes sold in
Australia be packaged with one colour and shape only, and that a
significant portion of the front and back packaging be used for health

Some developing country tobacco producers - such as Nigeria, the Dominican
Republic, Honduras, and Cuba - say such a law would curtail
competitiveness in the cigarette market and may not effectively address
intended public health objectives.

They echo a sentiment also expressed by big tobacco companies,
particularly Philip Morris International, which is currently pursuing
litigation to stop these efforts claiming that they violate international
trade and investment obligations.

These issues were raised at the WTO’s Council on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) on 24-25 October, having also
prompted discussion at the previous TRIPS Council meeting in June (see
Bridges Weekly 15 June 2011).

The bill was passed by the Australian House of Representatives on 24
August; the Senate vote, however, has been delayed. Nevertheless, despite
threats of litigation and procedural delays, the bill is expected to move
forward in Australia.

“Big tobacco companies do have big tentacles that reach far and wide
across the world. I’ve made very clear to my international colleagues that
they need to look at this not only from a health perspective, but from a
trade perspective,” Australian Health Minister Nicola Roxon told Reuters
on 6 October.

Some developing countries express apprehension

During the TRIPS Council discussions, the developing countries likely to
be affected by such legislation argued that the proposed bill might reduce
prices and could even backfire by inciting illicit consumption.

According to the Dominican Republic, competing products would not be able
to be differentiated from one another should such legislation enter into
force. They also argued that the plain packaging requirement would likely
reduce cigarette prices, since competition by use of trademark would be
restricted. Cigarette quality would drop, they added, potentially paving
the way for an illicit market.

The Dominican Republic - which noted that tobacco represents 10 percent of
its agricultural production - also suggested that the plain packaging
requirement could be inconsistent with Australia’s obligations under TRIPS
Article 20 on special requirements and Article 10bis of the Paris
Convention for the Protection of Intellectual Property.

Article 20 of the TRIPS Agreement forbids trademark usage from being
“unjustifiably” held back by special requirements, which pertain to “use
in a manner detrimental to its capability to distinguish the goods or
services of one undertaking from those of other undertakings.”

Uruguay, WHO back Australia

Uruguay - another key player in the cigarette packing debate - supported
the proposed measures in the Australian bill at the meeting, stressing
that the legislation is indeed consistent with TRIPS and the flexibility
that the agreement provides for WTO members.

Phillip Morris sued Uruguay over a similar cigarette packaging law at the
World Bank’s International Center for Settlement of Investment Disputes
(ICSID) in February 2010. The company opposed Uruguay’s decision to
include large warnings and graphic imaging in cigarette packages and
contended that Uruguay failed to treat their investment fairly and

On 21 October, Philip Morris announced it would shut down its plant in
Uruguay, saying that its operations are no longer viable, according to a
statement from its local unit. This is partly because of “fiscal and
regulatory measures that limit our capacity to commercialize our products
profitably,” it claimed.

Abal Hermanos - the subsidiary Philip Morris company - will continue to
sell its products in Uruguay, but will now manufacture them in Argentina.

The World Health Organization (WHO) also spoke in favour of the Australian
bill at the TRIPS Council discussions, recalling that plain packaging is
one of the measures recommended under the WHO’s Framework Convention on
Tobacco Control Punta del Este Declaration.

Earlier this month, WHO Director-General Margaret Chan called out “big
tobacco” companies for using lawsuits to try to subvert national efforts
to curb tobacco consumption.

“It is horrific to think that an industry known for its dirty tricks and
dirty laundry could be allowed to trump what is clearly in the public’s
best interests,” Chan said at a WHO meeting in Manila on 10 October.

“The high-profile commercial and investment arbitrations targeting Uruguay
and Australia are deliberately designed to instil fear in other countries
wishing to introduce similarly tough tobacco control measures,” she added.

“Big tobacco” warns of legal action in Australia

Yet in Australia - a much bigger market for cigarettes than Uruguay -
Philip Morris has vowed to continue fighting back. Estimates place
Australian cigarette sales at 22 billion cigarettes each year.

“The Australian government seems intent on ignoring [the] adverse
consequences on [public health from] introducing such a regulation,”
Hermann Waldeme, chief financial officer of Philip Morris, recently told

“We are therefore vigorously pursuing several legal avenues to challenge
this unreasonable proposal and protect our valuable brands.”

However, procedural delays on the implementation of the bill have won
tobacco companies time, since the Australian government acknowledged that
tobacco companies will need substantial investments to recalibrate and
retool their machinery to comply with these changes.

“I don’t agree with the tobacco industry about very much,” Health Minister
Roxon said. “However, they are a legal business and like any business they
are entitled to some proper lead time to implement new measures.”

The bill was originally expected to take effect on 1 July 2012; due to the
delays in the Senate vote, tobacco companies will now have until 1
December 2012 to make the necessary changes, the Australian government
announced today.

ICTSD reporting; “Philip Morris to close Uruguay plant,” AFP, 21 October
2011; “Plain-packet cigarettes delayed in Australia,” AFP, 2 November
2011; “WHO chief accuses ‘big tobacco’ of dirty tricks,” AFP, 10 October
2011; “Roxon says procedural delay may hold up plain packaging,” THE
AUSTRALIAN, 31 October 2011; “Philip Morris fumes at ‘plain’ Australian
plan,” FINANCIAL TIMES, 20 October 2011; “Australia seeks world backing on
tobacco legal fight,” REUTERS, 6 October 2011.

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