A Smoking Volcano Dispute

We are going to address the case of investor-state dispute over Plain-Packaging Laws and International Investment Law. The debate is settled on the framework of tobacco plain-packaging laws such as those proposed by Australia and Uruguay who have violated countries’ obligations under their respective Bilateral Investment Treaties. Plain-packaging laws violate typical BIT obligations. These laws mandate that tobacco products be sold in generic, simple packaging without any branding BUT often with explicit health warnings.

All in all, the regulations regarding plain-packaging have been challenged as unfair by multinational tobacco manufacturers not only in domestic courts, but also in international arbitration tribunals. Many of the states attempting to implement plain-packaging laws are also parties to Bilateral Investment Treaties which obligate them to respect certain protections of foreign firms’ property rights – including respect for trademarks and other forms of intellectual property.

Firstly, the issue of expropriation not only of the rights of companies but also of intellectual property is violated. Secondly, we are going to explain why plain-packaging is a series of unreasonable measures. Thirdly, the use of “fair and equitable treatment ” standard is a must for companies newly introduced to market structures and competitiveness and that, on the other hand, plain-packaging is an unfair disadvantage for the growing business sector and investment confidence. This means that its use can work as a deterrent for foreign investment. Eventually, the Reconciling Investor Rights and Investment Law guarantees those rights

The example of Philip Morris International in case against Australia, we clearly see the following:

Keeping plain-packaging tobacco means amounts of unlawful expropriation of investor and intellectual property without compensation are illegal. It also signals that the company fails to provide “fair and equitable treatment” to investment in Australia and that it breaches Australia’s international obligations in relation to investment by violating TRIPS (The Agreement on Trade Related Intellectual Property Rights), the Paris Convention for Protection of Industrial Property Aspects and WTO Agreement on Technical Barrier to Trade.

Moreover, on the point of expropriation of intellectual property rights under Phillip Morris International-Australia Bilateral Treaty. Using this example, firstly we acknowledge that a government has sovereign right of host state to promote and protect public health of the population and of citizens. BUT this does not mean that governments can abuse and manipulate that right and then evoke it as pretext while they are disregarding companies legal rights. On the same side of spectrum, it is obvious that by not following process requirements and not accepting compensations, governments are violating the Bilateral Treaties. Another aspect associated with the argument is that pictographs on packages depict health effects of smoking in an exaggerated way and they do not serve their purpose. Because they present highly shocking images designed to invoke repulsion and horror and they are so offensive that operate to denigrate products, to affect and diminish companies goodwill and to cause trademarks to be deprived from commercial value. Statistically, 80% warnings prevent usage of trademark and this deprives companies from right to trademarks. Lastly, the requirement of states to make payment is violation NAFTA(North American Free Trade Agreement) clause 110 because the prices would go so high that would neutralize cost advantages and would prevent small companies from offering meaningful price competition.

Plain-packaging allow for the implementation of unreasonable measures and that is why it should not be utilized. On the contrary, Bilateral Treaties prohibit the adoption of unreasonable or discriminatory measures that impair the management, maintenance, use, enjoyment, or disposal of foreign investments. By “unreasonable” we mean: unfair and state regulatory measures violating companies rights and importance of trademarks. By “reasonable” we mean: logical, consequential, and well-founded measures reflecting good cooperation with governments and companies. Our expectations are not unqualified or illegitimate. This means that use of trademarks is legal and applicable. By prohibiting use of colors to identify and to lead to differentiation of brand packs, a breach of prohibition against unreasonable measures under the BIT is created. However, it also arbitrally reduces the number of available products varieties without any rational public justification.

Lastly, let us not forget that companies have also concern of public health and that is why messages of public health can be passed without the hyperbole of 80% warning. The public policy objective for the empowerment and the wellbeing of citizens can be achieved with narrower measures.


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