Back in Your Box: Big Tobacco s Legal Challenges to Plain Packaging in Australia

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1 Back in Your Box: Big Tobacco s Legal Challenges to Plain Packaging in Australia Associate Professor Andrew D Mitchell Melbourne Law School

2 Existing Health Warnings in Australia Front Back

3 Plain Packaging Timeline 29 April 2010 Australian Government announces that it will introduce legislation to ensure all cigarettes will be sold in plain packaging. 6 July Tobacco Plain Packaging Bill 2011 and associated Trade Marks Amendment (Tobacco Plain Packaging) Bill 2011 introduced into the House of Representatives. 24 August 2011 Legislation passed by the House of Representatives. 10 November Legislation passed by the Senate. (Government amendments in the Senate mean the Bill must return to the House expect to be passed November 2011). 1 December 2012 (1 July 2012) Full compliance required.

4 Plain Packaging Objectives to improve public health including by discouraging smoking initiation, encouraging smoking cessation, discouraging relapse, and reducing exposure to second-hand smoke to implement certain of Australia s obligations as a party to the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC). (Source: Tobacco Plain Packaging Bill 2011 (Cth), cl 3(1).)

5 Evidence to Support Objectives Over 24 published experimental studies have examined the likely impact of plain packaging on young people and current smokers. Key findings: The cigarette pack has become the key marketing tool employed by the tobacco industry to attract and retain customers. Cigarette packaging is used to communicate particular attributes about each brand and the smoker s social status. Current pack colours and imagery can dilute the impact of graphic health warnings. Unregulated package colouring and imagery contribute to consumers misperceptions that certain brands are safer than others. Cigarettes in plain packs are considered less appealing and affect young people s perceptions about those who smoke them. Source: Cancer Council Victoria, Plain Packaging of Tobacco Products: A Review of the Evidence (2011)

6 Plain Packaging

7 Big Tobacco s Legal Challenges International Trade Law International Investment Law Australian Constitutional Law Plain Packaging Freedom of Information Requests

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9 Australian Constitutional Law 51.The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: - (xxxi.) The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws:

10 Australian Constitutional Law s 51(xxxi) acquisition of property on just terms Property The rights of trademark owners are property under s 51(xxxi) Acquisition The government must obtain a benefit that is proprietary in nature; and There must be a corresponding relationship between the gain of that benefit and the loss of the property rights.

11 International Trade Law The World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) Agreement on Technical Barriers to Trade (TBT Agreement) Relevance of the World Health Organization Framework Convention on Tobacco Control (WHO FCTC) Australia s preferential trade agreements

12 Distinction between Negative & Positive Trademark Rights Trademark owners have the exclusive right to prevent all third parties not having the owner s consent from using identical or similar signs TRIPS Article 16.1 Trademark rights are negative rights: rights to exclude, rather than to use Carvalho.

13 Unjustifiable Encumbrance under TRIPS Article 20? Article 20: Other Requirements The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings. This will not preclude a requirement prescribing the use of the trademark identifying the undertaking producing the goods or services along with, but without linking it to, the trademark distinguishing the specific goods or services in question of that undertaking.

14 Unjustifiable Encumbrance under TRIPS Article 20? Article 20: Other Requirements The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings. This will not preclude a requirement prescribing the use of the trademark identifying the undertaking producing the goods or services along with, but without linking it to, the trademark distinguishing the specific goods or services in question of that undertaking.

15 Unjustifiable Encumbrance under TRIPS Article 20? Carvalho - to ban the use of trademarks would be the ultimate encumbrance, and where justified, it could not be challenged under the TRIPS Agreement, even though it would be seriously detrimental to the (legitimate) interests of the trademark owners. Watal fears exaggerated about introducing special requirements on cigarette labels or packaging because Article 20 allows for justifiable encumbrances and these can be considered as permitted by TRIPS language. Correa - conditions imposed with an aim to warn the public about the effects of the use of a product (eg tobacco) or restricting the use of trademarks would be justifiable for public health reasons under TRIPS Article 20.

16 Relevance of TRIPS Articles 7 and 8 TRIPS Article 8 and the Doha Declaration 1. Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socioeconomic and technological development, provided that such measures are consistent with the provisions of this Agreement. Doha Declaration on TRIPS and Public Health We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members right to protect public health

17 Relevance of GATT Article XX, GATS Article XIV and WHO FCTC The interest or objective pursued by plain packaging, being the preservation of human life and health, has been described by the Appellate Body as both vital and important in the highest degree. Plain packaging contributes significantly to that objective - FCTC Plain packaging applies equally to all tobacco products from all sources (most originating in fact in Australia) and does not preclude importation of any products or otherwise restrict international trade. No reasonably available, less trade-restrictive alternative to plain packaging exists that would make an equal contribution to the public health objective of the measure.

18 Conclusions on WTO Law Australia s Plain Packaging measure: Does not breach TRIPS. TRIPS Articles 2.1 or 15.4 because those provisions concern trademark registration, whereas plain packaging affects trademark use; TRIPS Article 17 because that provision concerns exceptions to the rights conferred by trademarks as indicated in TRIPS Article 16 are negative rights to prevent use by others rather than positive rights to use trademarks TRIPS Article 20 because even if the scheme encumbers trademarks with special requirements, that encumbrance is justifiable and indeed justified by relevant evidence including the public health objectives of the government as borne out by the WHO FCTC and its implementing guidelines. Is not covered by the SPS Agreement. Is consistent with the TBT Agreement. because of its limited impact on trade and its contribution to the legitimate objective of promoting public health. Does not beach the GATT Because it is non-discriminatory, with a limited impact on international trade and a sound public health basis.

19 International Investment Law Australia is a party to 26 investment protection agreements: 5 preferential trade agreements that include investment chapters 21 bilateral investment treaties Claim by Philip Morris Asia Limited under the Australia-HK bilateral investment treaty

20 International Investment Law Arbitral tribunals have found a number of different factors relevant in distinguishing non-compensable regulation by the State from compensable expropriation. Relevant considerations: whether the government has acquired the investor s property rights; whether the interference with those rights is proportionate to a public interest objective; the degree and duration of the interference; whether the measure entails an exercise of the State s sovereign police powers; and the legitimate expectations of investors.

21 It s never too late to change? Unilateral termination not helpful. Modification, interpretation, or termination by agreement? 1. Remove investments and investors in the tobacco industry from the scope of the agreement or from the ISDS mechanism in Article Remove the ISDS mechanism altogether. 3. Clarify the scope of investment obligations contained in the agreement, particularly regarding expropriation and fair and equitable treatment. 4. Introduce one or more general exceptions to the substantive investment obligations imposed by the agreement, to protect non-discriminatory regulatory measures for the promotion of legitimate policy objectives such as public health. Retrospectivity of modification, interpretation, or termination by agreement Notice of claim creates a consent agreement independent of the underlying treaty prevailing modern understanding of ISDS. Different answer under VCLT Article 70(1)(b)? has Australia assumed obligations prior to termination? Do the parties otherwise agree?

22 Conclusion Public relations and litigation strategies are intertwined. Australia has good prospects of winning against legal challenges.

23 Questions? Papers available online: General Andrew Mitchell & David Studdert Plain Packaging of Cigarettes in Australia: A Novel Regulation Faces Legal Challenge (2011) Journal of the American Medical Association (forthcoming). Investment Law Tania Voon & Andrew Mitchell Time to Quit? Assessing International Investment Claims Against Plain Tobacco Packaging in Australia (2011) 14(3) Journal of International Economic Law Andrew Mitchell & Sebastian Wurzberger Boxed In? Australia s Plain Tobacco Packaging Initiative and International Investment Law (2011) 27(3) Arbitration International (forthcoming) WTO Law Tania Voon & Andrew Mitchell Face Off: Assessing WTO Challenges to Australia s Scheme for Plain Tobacco Packaging (2011) 22(3) Public Law Review Andrew Mitchell & Tania Voon Implications of WTO Law for Plain Packaging of Tobacco Products in Andrew Mitchell, Tania Voon and Jonathan Liberman (eds) Public Health and Plain Packaging of Cigarettes: Legal Issues (Edward Elgar: 2012) (forthcoming) -