WTO Panel to Hear Dispute over Australia Tobacco Packaging Law

1 May 2014

The long-running dispute over Australia’s plain packaging law for tobacco products has advanced to the panel stage, over two years since the first complaint was filed. The case has brought front and centre questions on the extent to which flexibilities exist to advance public health objectives in WTO rules.

The policy at issue is Canberra’s Plain Packaging Act, which requires all tobacco products sold in Australia to be packaged with only one colour and shape, with a significant portion of the packaging covered in health warnings. The bill was approved in December 2011, though it allowed tobacco companies until December 2012 to make the required changes in their production. (See Bridges Weekly, 21 March 2012)

Australian officials have defended the controversial measure as necessary for stemming increases in cancer levels and other health problems caused by smoking, and have said that the policy is already beginning to show benefits in reducing public smoking levels.

Furthermore, Australia has noted, estimates from the World Health Organization place global deaths from tobacco use at 10 million in the year 2030 – up from the 3 million seen in 1990 and the 6 million annually today. Of these, the majority will be in developing economies.

In the months following the Australian bill’s approval, legal complaints – both at the WTO and elsewhere – came swiftly. The five WTO members that have challenged the policy – Cuba, the Dominican Republic, Honduras, Indonesia, and Ukraine – have claimed that the measure is unnecessarily trade-restrictive. By undermining protections provided to trademarks and geographical indications, they say, it is difficult for their premium products to stand out in the marketplace, making fair competition impossible.

Complainants have generally cited various provisions in the General Agreement on Tariffs and Trade (GATT), the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and the Technical Barriers to Trade (TBT) Agreement in their consultations and panel requests.

Many of these countries have also questioned whether the policy is actually leading to the public health benefits that Australia seeks, while saying that they do share the country’s public health concerns.

Elsewhere, the policy has already been subject to review by Australia’s highest court, which ultimately upheld the plain packaging law. Major tobacco companies, such as Philip Morris, have also filed challenges under some of the country’s bilateral investment treaties. (See Bridges Weekly, 12 September 2012)

Australia criticises delay

The first of the WTO complaints was lodged by Ukraine in March 2012, with Honduras following weeks after. The Dominican Republic filed its consultations request in July of that year, while both Cuba’s and Indonesia’s complaints were filed in 2013.

The unusually prolonged nature of this period led Australia to raise concerns in March over the potential precedent that this could set for other cases. For instance, the lag between the Dominican Republic submitting its first panel request – which was rejected in December 2012 – and its second this April was 16 months.  A ten-month delay was seen between Honduras’ first and second panel requests.

In an effort to speed up the proceedings, Canberra took the rare step in the cases of both Indonesia and Cuba in agreeing to their first requests for a dispute panel, in March and April, respectively. Under international trade rules, respondents to a WTO dispute can reject a complainant’s first panel request, which they do in the vast majority of instances. However, if a second request is filed a panel must automatically be established.

At last week’s meeting of the Dispute Settlement Body (DSB), sources say that Australia repeated the questions it had raised in March over the long delay in advancing the dispute process, particularly since some of the complainants involved had urged fellow WTO members to await the results of the dispute before issuing similar tobacco packaging policies of their own.

The UK, New Zealand, and Ireland have nonetheless been moving forward in drafting their own plain packaging rules in the interim. In the UK, for instance, government officials have said that such legislation could be tabled ahead of the country’s general election in May of next year.

Panel composition set for May

Under the terms agreed to by both Australia and the five complainants, one single panel is set to hear all of the disputes jointly. The WTO Director-General is set to confirm the panellists by 5 May. To date, 28 WTO members have requested third party rights in the dispute.

While global trade rules dictate that a panel, once formed, should issue a ruling within six months, in practice the process takes far longer, given the heavy workload that the WTO dispute settlement system currently faces.

ICTSD reporting; “U.K. Inches Toward Graphic Cigarette Packs,” WALL STREET JOURNAL, 3 April 2014.

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