[Ip-health] IP-Watch: The Significance Of Uruguay’s Win Over Philip Morris International

Thiru Balasubramaniam thiru at keionline.org
Thu Jul 21 08:17:11 PDT 2016


The Significance Of Uruguay’s Win Over Philip Morris International


The tobacco industry’s global efforts to use bilateral and multilateral
agreements to challenge the spread of tobacco control measures such as
trademark-minimising plain packages were dealt a significant blow last week
when the World Bank dispute settlement body dismissed a case brought by
Philip Morris against the government of Uruguay.

The decision is seen a landmark for those who view the company as using
test cases to continually challenge and delay public health protection
measures and discourage other countries, particularly those with fewer
resources, from strengthening their health regulations. Additionally, the
case reasserted that trademarks are subject to government regulations and
also illustrated the role that international organisations and actors can
play in support of national governments defending their health measures.

Facts & Arguments

Philip Morris initiated legal proceedings through its Swiss subsidiary
against Uruguay at the World Bank’s International Centre for Settlement of
Investment Disputes (ICSID) early in 2010. Among many firsts, this was the
first time a tobacco group challenged a state in front of an international
court and the first investment arbitration concerning tobacco control.

ICSID aims to support voluntary conciliation and arbitration of
international investment disputes upon consent of both the investor and
state. Once such consent is given, it cannot be withdrawn unilaterally and
it becomes a binding undertaking. Independent arbitrators and conciliators
appointed to each case hear the evidence and determine the outcome of the

Philip Morris claimed that the health measures imposed by the Uruguayan
Public Health Ministry infringed on its intellectual property rights and
breached Uruguay’s obligation under the bilateral investment treaty (BIT)
between itself and Switzerland.

The case and related documents can be found here.

Two specific measures were contested. The first was the Single Presentation
Requirement introduced by the Uruguayan Public Health Ministry in 2008,
where tobacco manufacturers could no longer sell multiple varieties of a
brand. In having to pull 7 out of its 12 products, Philip Morris alleged
that only being able to market one variety substantially affected its
company value.

The second measure concerned the so-called “80/80 Regulation.” Under a
presidential decree issued in 2009, the graphic health warnings on
cigarette packages should cover 80 percent instead of 50 percent, of the
packaging, leaving only 20 percent to the tobacco companies’ trademarks and
other information.

Uruguay was the first to go beyond the 50 percent surface requirement, but
since the proceedings began, 58 other countries have also increased the
requirement for the size of graphics. Nepal even calling for 90 percent of
a cigarette package to be covered. The claimants contended that this
further deprived them of their IP rights, causing further loss to their

In its defence, Uruguay countered that “both regulations were applied in a
non-discriminatory manner to all tobacco companies, and they amounted to a
reasonable, good faith exercise of Uruguay’s sovereign prerogatives.”

The case moved to examine whether Uruguay had failed to observe its
commitments on the use of trademarks under the BIT and the scope of such

Upon submitting a registration application and being granted trademarks,
Philip Morris argued that an investor should be able to hold and exercise
the full range of rights available to trademark holders and that Uruguay
would be committed observe these rights. Within these rights was notably
the right to use its trademarks.


The tribunal found that “under Uruguayan law or international conventions
to which Uruguay is a party the trademark holder does not enjoy an absolute
right of use, free of regulation, but only an exclusive right to exclude
third parties from the market so that only the trademark holder has the
possibility to use the trademark in commerce, subject to the State’s
regulatory power.”

This reflects and falls in line with the general concept that trademarks
confer their holders only the right to prevent others from using their
marks and are still subject to state regulations.

Furthermore, with regard to the scope of commitments, it was held that “a
trademark is not a unique commitment agreed in order to encourage or permit
a specific investment” and that Uruguay had no commitment nor obligation in
relation to an investment under the BIT.

Ultimately, “a trademark gives rise to rights, but their extent, being
subject to the applicable law, is liable to changes” subject to a state’s
decided health measures. With no commitment to enable Philip Morris to use
its trademark and with trademarks being subject to national laws and
regulations, the tribunal found that Uruguay had not violated the BIT and
dismissed the case.

Implications of the Decision

The case is highly significant given the polarity between actors and the
debate on the use and application of domestic and international
intellectual property laws.

Many hail this case as a significant victory in a series of tobacco
companies fighting control measures, and others such as former New York
Mayor Michael Bloomberg applauded Uruguay for standing up to the tobacco
industry and showing others they can win.

The decision reinforces that states have a sovereign right to decide on
their laws and regulations to protect their population.

Philip Morris General Counsel Marc Firestone, meanwhile, said the company
“never questioned Uruguay’s authority to protect public health,” but sought
to clarify international law.

Some critics, such as Laurent Huber, executive director for Action on
Smoking and Health, contend that this was a public relations case for
Philip Morris, aimed at discouraging other countries from imposing stronger
public health regulations with the threat of a lengthy lawsuit by an
opponent with deep resources. The annual revenue of Philip Morris in 2013
was reported at $80.2 billion, in contrast to Uruguay’s GDP of $55.7

Already in 2010, international lawyer and practitioner in investment treaty
arbitration Todd Weiler stated in a legal opinion that:

“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 of their products, or other measures that substantially
interfere with the use and enjoyment of its crucial investment in its
tobacco brands.” He added that “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….”

The Bloomberg Foundation lent substantial financial support to Uruguay’s
legal expenses.

Overall, given the definitive outcome of the present case in addition to
cases where domestic, regional and international courts upheld measures to
impose plain packaging and new tobacco regulations (see United Kingdom,
European Union and Australia), other countries will perhaps no longer feel
pressured and act on their own accord with regards to strengthening their
public health measures.

International Organisation Support

Another significant aspect of the case is that the World Health
Organization and the WHO Framework Convention on Tobacco Control (WHO FCTC)
secretariat submitted an amicus briefduring the proceedings which provided
“public health on Uruguay’s tobacco packaging and labelling laws and
detailed state practice in implementing similar measures.” Further details
can be found in the WHO’s press release.

According to the FCTC, “The Tribunal accepted submission of the amicus
brief on the basis that it provided an independent perspective on the
matters in the dispute and contributed expertise from ‘qualified agencies’.”

This is not only affirmative that the FCTC provides legal backing to states
who seek to provide protective health measures, but illustrates the success
of international organisations in supporting national governments in their
health efforts.

Lastly, in view of the place of arbitration some might question the
existence of investor-state dispute settlement bodies such as the ICSID.

In Karen Hansen-Kuhn’s view as international program director at the
US-based Institute for Agriculture and Trade Policy, these bodies empower
companies to sue governments in private tribunals over measures that
undermine their expected profits. In doing so, companies gain a chance for
a “second bite at the apple,” which also “undoubtedly sends strong
political signals to other local or national governments considering new

Hansen-Kuhn argued that rather than allowing investor-state dispute
settlement bodies to decide, global governance rules should be given
priority to lead the way on public health discussions.

Alexandra Nightingale is an intern at Intellectual Property Watch. She
completed her Bachelors in Law at the University of Sussex and holds an LLM
degree in International Law from the School of Oriental and African Studies
in London. During her Masters, she developed a strong interest in
Intellectual Property, particularly patents and the aspects relating to
global health. Her research interests now also include geographical
indications and trademarks.

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