Debate on Australian Cigarette Packaging Law Reignites at TRIPS Council

7 March 2012

An Australian law intended to make the packaging of cigarettes less appealing to consumers again came under fire at the WTO last week, with developing country tobacco producers arguing that the measure could curtail competitiveness in the tobacco market and is inconsistent with multilateral trade rules.

The 28-29 February meeting of the WTO's Council on Trade-Related Aspects of Intellectual Property Rights (TRIPS) also saw a handful of developed country members reaffirm their commitment to using the existing flexibilities within the TRIPS Agreement to protect public health, in the face of mounting opposition from the tobacco industry.

The Australian law will require that all cigarettes sold in Australia be packaged with only one colour and shape, and that a significant portion of the whole packaging be used for health warnings.

The Plain Packaging Bill was approved last December, but due to delays in the Australian Senate's vote, tobacco companies have until 1 December 2012 to make the necessary changes in their production. (See Bridges Weekly 2 November 2011) Australian Trade Minister Craig Emerson has publicly defended the bill, saying it is "not anti-trade, it's anti-cancer."

Law could harm developing country producers, some members argue

At the TRIPS Council meeting, some developing country members - in particular tobacco producers such as the Dominican Republic, Cuba, El Salvador, and Ukraine -  reiterated arguments made in October's Council meeting  that such a measure violates provisions in the TRIPS agreement and could have large negative implications on local industries. (See Bridges Weekly, 2 November 2011)

The Dominican Republic - which said at the meeting that 100,000 families in that country make a living on tobacco products, generating important public income in taxes - had previously indicated that the new law 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."

At last week's meeting, the Dominican Republic also argued that the Australian measure could be in violation of TRIPS Article 24 on the protection of geographical indications (GIs). A GI is a marker used to designate a product that possesses certain qualities due specifically to its geographical origin.

The country highlighted the successful development of the first local GI for cigars, which in their view would lose value considerably as a result of the plain packaging bill. Canberra has said that it will seek to garner approval for similar regulations on other tobacco products, such as cigars, within the coming weeks.

Tobacco industry fights back

While many developing countries seemed opposed to the Australian legislation, exceptions to this pattern were Brazil and Uruguay, who voiced clear support for the Australian measures.

Tobacco giant Philip Morris has sued Uruguay over a similar cigarette packaging law at the World Bank's International Center for Settlement of Investment Disputes (ICSID), launching a case in February 2010. The company was forced to shut down its operations in Uruguay last October, saying it was no longer viable under new "fiscal and regulatory measures" (See Bridges Weekly 2 November 2011).

Uruguay has recently argued that ICSID does not have jurisdiction over these types of claims; both parties are awaiting a final ruling on the issue.

Meanwhile, the Australian law is also facing legal challenges by major tobacco companies, including Philip Morris International, Japan Tobacco, British American Tobacco, and Imperial Tobacco. These companies claim that the plain packaging legislation is unconstitutional; Australia's high court is set to hear the cases in April.

Phillip Morris is also challenging the law under the 1993 Bilateral Investment Treaty (BIT) between Australia and Hong Kong.

However, former Australian health minister and current Attorney-General Nicola Roxon has recently alleged that Philip Morris deliberately moved ownership of its parent company to Hong Kong in order to be able to launch proceedings under the BIT; the company has argued that the transfer was due to legitimate business reasons.

WTO dispute rumours

Recent reports indicate that the Australian measure might soon face another legal challenge, this time at the WTO dispute level. Bloomberg, citing unnamed sources familiar with the case, reported on Monday that at least three governments may lodge a complaint at the global trade arbiter. No dispute had been announced, however, by the time Bridges went to press on Wednesday evening.

ICTSD reporting; "Big Tobacco prepares for packaging switch," FINANCIAL TIMES, 14 February 2012; "Plain cigarette packaging labelled unlawful," FINANCIAL TIMES, 14 February 2012; "Australia Said to Face WTO Complaint Over Tobacco Packaging, Ban on Logos," BLOOMBERG, 5 March 2012 ; "Gobierno confía en su defensa y aguarda definición de primera parte del arbitraje," PRESS RELEASE PRESIDENCY OF URUGUAY, 2 March 2012.

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