BackPhilip Morris vs Uruguay

11.08.16
Philip Morris vs Uruguay

Last July 8th, a Court ruling in favor of Uruguay put an end to the international arbitration proceedings that the Philip Morris tobacco group filed against the Republic of Uruguay.

It all started in February 2010 when the tobacco company sued Uruguay for 25 million dollars, at the World Bank’s International Center for Settlement of Investment Disputes, arguing that the South American country violated a bilateral investment treaty between Switzerland and Uruguay.

The demand was caused by a number of regulations that the Uruguayan Government implemented as part of its firm endeavors to battle smoking, to the detriment of the tobacco industry’s interests.

Among others, such regulations included the following:
i) The requirement of a single packaging for each brand name of tobacco products. This implied that, for each brand name, the market would have only one kind of package, in one single color and with no adjectives describing the product’s characteristics (i.e. “light”, “ultra light”, “mild”, “soft”, etc.)
ii) The obligation for all product packaging and containers to include health warnings and images or pictographs describing the adverse effects of tobacco consumption and other related messages, which should cover at least 80% of the package total surface.
iii) Higher taxes on the sales of tobacco products.
iv) The ban, for all media, to place advertising relative to cigarettes and tobacco products.

Though the multinational company admitted most of such measures, it strongly opposed the ban on trading with sub-brands of cigarettes and the obligation to cover 80% of the package surface with health warnings.

This was the motive for Philip Morris to resort to the ICSID, based on the grounds of the harm that those measures implied for the company’s commercial interests, forcing it to withdraw from that market seven of its twelve products. However, the main claim revolved around the undermining of the firm’s legitimate intellectual property rights, which were subject to expropriation with no requital.

In addition to other international entities related to science and medicine, in November 2014, the World Health Organization (WHO) ratified its position supportive of Uruguay through the Pan American Health Organization (PAHO), acknowledging the country’s perseverance in establishing norms aimed at protecting its population against the consumption of tobacco and from second-hand smoke.

Following a legal process of six years, the international arbitration proceedings were concluded last July 8th, with a judgment issued by the ICSID acknowledging the legitimacy of the measures implemented in Uruguay, based on the jurisdiction corresponding to the Ministry of Public Health. Stress was made on the sovereignty of all States for imposing regulations to defend the health interests of society as a whole. In that sense, the ruling indicates that Uruguay is duly entitled to adopt any measures deemed necessary, and that it is not acceptable to prioritize business interests over the defense of fundamental rights such as life, health and public safety.

The plaintiff was also ordered to bear the expenses and legal fees in which Uruguay incurred as defendant, as well as all costs relative to the arbitration court and the ICSID, all of which amount to approximately USD 8.5 million.

Undoubtedly, this has become a test case worldwide, with consequences that will surely arise, in the short term, in a number of countries that have taken or will take similar actions to Uruguay’s in their battle against tobacco.