Philip Morris gets its ash kicked in Uruguay; where will it next blow smoke?
Philip Morris International just lost a six-year battle to block Uruguay’s strong cigarette warning labels, which cover 80 percent of the front and back of cigarette packs, including graphic photos of the damages of smoking.
The decision was made by the World Bank’s trade tribunal, the International Centre for Settlement of Investment Disputes (ICSID), the world’s the leading body to settle international investment disputes.
Philip Morris became the first tobacco company to take on a country in an international court, and it took on one of the smallest. The company argued that Uruguay had violated terms of an investment treaty with Switzerland by enforcing anti-smoking laws. The operational headquarters for Philip Morris International is in Lausanne.
Philip Morris, with gross revenues of US$64 billion in 2010, sued Uruguay, with a GDP of US$32 billion that year, under the investor-state dispute settlement (ISDS) provisions of international trade deals. The tobacco company claimed Uruguay’s health warnings reduced the value of its investment and trademark rights to sell cigarettes in Uruguay. The ICSID trade tribunal upheld Uruguay’s right to protect its people’s health.
Small country, easy prey
Uruguay, nestled between the southern tip of Brazil and the northern part of Argentina, has a small population – 3.4 million – but a big desire to cut tobacco usage. Its president, Tabaré Vázquez, is an oncologist.
Among other anti-smoking efforts, it bans tobacco advertising and smoking in public places.
Such efforts have paid off. A study published in 2012 in The Lancet praised Uruguay’s “substantial, unprecedented decrease” in adult cigarette smoking. The number of adults who smoke in Uruguay fell from 35 percent in 2005 to 22 percent in 2014.
At one level, Uruguay’s win seems to contradict opponents of trade deals like the proposed Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). These opponents say the pending trade agreements would give multinational corporations, such as Philip Morris, the ability to directly challenge public health, worker safety and environmental laws through ISDS provisions.
In this case, however, Uruguay was able to resist Philip Morris because of financial help from Michael Bloomberg in faraway New York. Indeed, before international health groups appeared, Uruguay was considering weakening the health warnings to avoid an even longer battle with Philip Morris.
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Neither Bloomberg nor Uruguay disclosed the amount of Bloomberg’s financial help. It is safe to say that Uruguay would have not prevailed without this financial and international political support.
A history of bullying
Philip Morris’ legal bullying of Uruguay is nothing new. It has bullied other countries, states and cities for years. It does this by filing lawsuits that exhaust the resources of governments that enact anti-smoking laws.
Tobacco companies routinely sued U.S. communities in the 1980s and 1990s to deter them from enacting smoke-free laws, despite the companies almost always losing in court. This strategy often succeeded by using the mere threat of litigation to deter localities from adopting similar laws.
Although tobacco companies almost always lost in court, most localities did not go to court for fear of being sued. Few have the money and ability to hire the expensive lawyers – some of whom are paid as much as $1,000 an hour – to stay in a legal battle with tobacco companies. The threat of legal action was powerful to stop localities. More importantly, the threat of incurring expensive legal fees was enough to deter other cities from enacting laws that ban smoking.
Laurent Huber, the executive director for Action on Smoking and Health, the oldest anti-smoking group in the U.S., hinted at the effectiveness of this strategy in his post-trial comments. Phillip Morris “will no doubt shed some public crocodile tears, but their main goal in launching the suit has been realized, six years and millions of dollars have been spent defending a nondiscriminatory law that was intended purely to protect public health,” Huber said.
Likewise, in the 1990s when Australia and Canada first started thinking about requiring cigarettes to be sold in plain generic packaging, tobacco companies threatened to sue them. Standardized plain packaging, as Simon Chapman notes, removes the emperor’s clothes. The companies claimed that these proposals violated their trademark rights, one of the same claims Philip Morris made against Uruguay.
This was despite their own lawyers privately telling them that international treaties permitted governments to require such packaging. The tactic worked; both countries dropped their efforts for two decades. Canada has resumed its efforts, and Australia implemented plain packaging in 2012.
In response, Philip Morris sued Australia in domestic and international trade courts. After a four-year battle, Australia prevailed. The country still faces an industry-inspired challenge in the World Trade Organization, however.
Uruguay’s and Australia’s victories provide some legal precedent about a country’s sovereign right to implement public health regulations for other countries. Indeed, it is just these kinds of precedents that Philip Morris was trying to block. As then Philip Morris Vice President Hugh Cullman observed in 1985, “a sneeze in one country today causes international pneumonia tomorrow.”
He was right to be worried. U.K., Ireland and France recently enacted plain packaging, and New Zealand, Canada, Norway, South Africa, Malaysia, Turkey, India and Chile are moving forward.
U.S. dragging behind other countries
Uruguay’s and Australia’s wins against Big Tobacco are important reminders of how much the United States is lagging. Despite being required by the 2009 Family Smoking Prevention and Tobacco Act, we still do not have pictorial health warnings, much less plain packaging, on tobacco products.
The FDA issued a rule requiring pictorial warnings (albeit smaller than Uruguay’s) in 2011. The tobacco industry blocked this rule in court. That was in no small part because the Obama administration grossly underestimated the benefits and overstated the cost of including the pictorial warnings, including the “pleasure” that smokers would lose if they broke their addictions to nicotine or never started.
The FDA still has not issued new graphic health warnings despite the fact that 91 countries have pictorial health warnings on cigarette packages.
The administration is still pushing the TPP and TTIP, both of which will provide new avenues for Big Tobacco and other corporate interests to sue governments over strong public health policies. It also opposed excluding tobacco, also known as a tobacco “carve-out” in the TPP, and was willing to support only mild limits on Big Tobacco’s ability to use ISDS provisions to directly sue governments over their tobacco control policies.
TPP members would still need to “elect to deny” the ability of tobacco companies to sue directly, creating a loophole for them to continue intimidating governments with potential ISDS challenges.
With both the Republican and Democratic presumptive nominees for president opposing the TPP, it is time for the next president to start removing provisions of trade agreements that empower big companies to sue governments over health and environmental protections.
And, in the meantime, the administration should follow Uruguay, Australia and the rest of the world and require 21st-century warning labels on tobacco products.