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Abstract
Objective Describe the process of enacting and defending strong tobacco packaging and labelling regulations in Uruguay amid Philip Morris International’s (PMI) legal threats and challenges.
Methods Triangulated government legislation, news sources and interviews with policy-makers and health advocates in Uruguay.
Results In 2008 and 2009, the Uruguayan government enacted at the time the world’s largest pictorial health warning labels (80% of front and back of package) and prohibited different packaging or presentations for cigarettes sold under a given brand. PMI threatened to sue Uruguay in international courts if these policies were implemented. The Vazquez administration maintained the regulations, but a week prior to President Vazquez’s successor, President Mujica, took office on 1 March 2010 PMI announced its intention to file an investment arbitration dispute against Uruguay in the International Centre for the Settlement of Investment Disputes. Initially, the Mujica administration announced it would weaken the regulations to avoid litigation. In response, local public health groups in Uruguay enlisted former President Vazquez and international health groups and served as brokers to develop a collaboration with the Mujica administration to defend the regulations. This united front between the Uruguayan government and the transnational tobacco control network paid off when Uruguay defeated PMI’s investment dispute in July 2016.
Conclusion To replicate Uruguay’s success, other countries need to recognise that strong political support, an actively engaged local civil society and financial and technical support are important factors in overcoming tobacco industry’s legal threats to defend strong public health regulations.
- Advocacy
- Litigation
- Low/Middle income country
- Packaging and Labelling
- Tobacco industry
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Introduction
Since the 1990s, the tension between trade and tobacco control has escalated1 as new legal rules concerning intellectual property and foreign investment have enabled investors (including tobacco companies) to challenge domestic public health policies in international trade and investment arbitration courts.2–4 Tobacco companies lobbied states in the General Agreement on Tariffs and Trade and World Trade Organization (WTO) to file trade disputes against other member states’ tobacco control policies.5 6 Subsequently, tobacco companies directly challenged public health policies using investor–state dispute settlement (ISDS) mechanisms in trade and investment agreements7 and used the threat of legal action8 to dissuade governments from implementing tobacco control policies.9
Partially in response to trade challenges, tobacco control advocates formed a transnational tobacco control network, consisting of health advocates, health organisations, academics, lawyers and donors to increase exchanges of information and services.10 This network combines characteristics of global civil society,11 epistemic communities12 13 and advocacy networks.14 This network supported the creation of the WHO Framework Convention on Tobacco Control (FCTC)15 and assisted governments in implementing it,16–19 which has accelerated the adoption of tobacco control regulations,20–23 including pictorial health warning labels (HWLs) on cigarette packages.24 The fact that the FCTC does not clearly prioritise health over trade1 25 forced this network to adapt and combat emerging pressures of trade on tobacco control.
In 2004, Dr Tabaré Vazquez, an oncologist, was elected president and made reducing tobacco consumption a high priority. Supported by strong local advocates, Uruguay became the first Latin American country to establish 100% smokefree environments in all workplaces and public places,26 prohibit misleading descriptors on cigarette packages and adopt pictorial HWLs covering 50% of the front and back of the package27 (table 1). As in other countries,28–30 Philip Morris International’s (PMI) Uruguayan subsidiary Abal Hermanos (Abal) responded to the prohibition by colour-coding cigarette packages (eg, replacing Marlboro Lights with yellow Marlboro packages). In 2008 and 2009, the Uruguayan government responded by implementing the world’s strongest (at the time) tobacco packaging and labelling regulations, requiring pictorial HWLs covering 80% of the front and back of the package31 (figure 1) and that cigarette brands be sold in a single pack presentation.32 (The single pack presentation permitted only one variant of each cigarette brand which prohibited the colour-coding of ‘light’ and ‘mild’28–30 33 or menthol33 variants). PMI then threatened and sued Uruguay in domestic and international courts. With strong political support, an actively engaged local civil society and the transnational tobacco control network that provided financial and technical support, Uruguay overcame these legal challenges and defended its regulations, serving as a model for future public health successes.
For example, cigarette package sold in Uruguay with single brand presentation and pictorial health warning labels (HWLs) covering 80% front and back of the package. Package reads: ‘Smoking causes bad breath, stained teeth and unpleasant odour’ (translated by author).
Timeline of packaging and labelling regulations in Uruguay (2004–2016)
Methods
Between August 2014 and June 2016, we reviewed Uruguayan tobacco control legislation (available at https://parlamento.gub.uy/), government and health group reports (https://www.google.com.uy) and newspaper articles (www.elpais.com.uy) using standard snowball searches34 beginning with search terms ‘advertencias sanitarias’, ‘el comercio internacional’, ‘tratado bilateral de inversion’, ‘propiedad intellectual’, ‘marcas’, ‘Philip Morris’ and ‘Abal Hermanos,’ as well as key dates and specific actors. Between November 2014 and July 2015, we attempted to recruit 26 interviewees via email and telephone and 16 agreed to be interviewed (four denied our requests and six never responded after multiple requests). The 16 interviewees included seven Uruguayan tobacco control advocates, three congressmen, five Ministry of Health officials and one Ministry of Foreign Relations official. The interviewees agreed to waive their anonymity in accordance with a protocol approved by the University of California, Santa Cruz Committee on Human Research. Results were triangulated and thematically analysed through standard process tracing frameworks.35
Results
Abal (PMI) domestic and international legal threats
Between September 2008 and June 2009, Abal sent five letters to the Health Ministry (table 1) arguing the packaging and labelling regulations were unconstitutional, beyond the executive’s jurisdiction and violated Uruguay’s obligations under two treaties governing trademark and investment rights, the Paris Convention for the Protection of Industrial Property and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).36–38 Abal argued the regulations violated a 1991 Uruguay-Switzerland bilateral investment treaty (BIT) and threatened to file a complaint with the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) seeking compensation for damages.
Vazquez administration’s response to Abal’s first threats (2008–2010)
Despite Abal’s threats, the administration remained firm on the regulations. The Health Ministry recognised trade and investment agreements presented new complexities beyond their expertise and requiring discussions with the Ministries of Economy and Foreign Affairs.39 40 Their support41 for the Health Ministry’s approach to HWLs was necessary since each ministry had different priorities and stakeholders. President Vazquez’s support,41 as well as public support for tobacco control and Uruguay’s international commitments to the FCTC42 were vital to defending the regulations.
Health officials contacted local health groups, the Centro de Investigacion para la Epidemia del Tabaquismo (CIET, Tobacco Epidemic Research Centre) and the Sociedad Uruguaya de Tabacología (SUT, Uruguayan Tobacco Society) for information on the regulations’ international legal implications; these organisations asked the US-based Campaign for Tobacco Free Kids (TFK, supported by the Bloomberg Initiative to Reduce Tobacco Use43 and the Framework Convention Alliance (FCA) for help.44–48
Political support in the legislature
In addition to support by the executive branch, there was strong support for the regulations in the Uruguayan congress. Legislators confirmed local tobacco control organisations, CIET and SUT, and President Vazquez changed the culture of tobacco control in Uruguay and achieved strong political consensus for the regulations49–51 assisted by strong public support,45–48 52 53 and a reduction in hospital admissions following Uruguay’s smokefree law.54 This assistance proved critical because unlike other countries,55–57 congress did not attempt to weaken the regulations.49–51
Abal’s domestic legal challenge
After failing to force the Vazquez administration to withdraw the regulations, between 2009 and 2012 Abal unsuccessfully filed two lawsuits58–60 to block the single pack presentation on the grounds that the Health Ministry did not have jurisdiction to issue the ordinance and that only congress could restrict Abal’s constitutional rights. Then Abal unsuccessfully sued to block the requirement for the 80% pictorial HWLs, again arguing the Health Ministry did not have authority to issue the decree61 62 (table 1).
PMI ratchets up threats against new Mujica administration (2010–2015)
On 1 March 2010, while the domestic legal challenges were pending and a week before new President Mujica took office, PMI filed a request for arbitration with ICSID under the Uruguay-Switzerland BIT.63 PMI argued the regulations expropriated PMI’s trademark property rights without compensation, the company was not provided fair and equitable treatment under a stable regulatory environment, and was not dealt with properly by Uruguayan courts (table 2). PMI sought damages which it later quantified as US$25.7 million, and requested the tribunal order Uruguay to suspend the regulations, an unusual request that was later dropped as investor-state disputes usually only award monetary damages.64 PMI’s statements concerning intellectual property and investment in trade agreements were magnified by front page stories in major Uruguayan newspapers.65 66 The ICSID’s Secretary General registered PMI’s challenge as within the jurisdiction of the Centre on 26 March 2010.67
Summary of Philip Morris International’s (PMI) investment dispute and International Centre for Settlement of Investment Disputes’s (ICSID) ruling85
Mujica administration’s response to PMI’s second set of threats (2010–2015)
Mujica’s administration told the media that they were ‘reviewing’ the issue.65 Between April and June 2010, reports surfaced that PMI was privately negotiating an amendment to the regulations with the Ministers of Economy, Foreign Affairs and Health.44 49 While it is unclear what occurred during these private meetings, on 23 July 2010 Health Minister Daniel Olesker (2010–2015) announced the regulations would be amended by eliminating the single pack presentation rule and reducing the size of HWLs from 80% to 65%.68
Early mobilisation by local health groups in Uruguay
In February and March 2010, CIET and SUT published opinion-editorials in newspapers denouncing PMI’s attempt to intimidate the government.69 70 In March 2010, during a WHO meeting, CIET convened a meeting with TFK and FCA, Uruguayan government officials, and WHO lawyers to request support defending the regulations.44 49
After learning about the government’s private negotiations with PMI, CIET alerted the media and met with government officials to argue for maintaining the regulations.44 47 In June and July 2010, CIET continued publishing opinion-editorials and participated in media interviews highlighting the industry’s interference.53 In June, CIET wrote former President Vazquez stating changes to the regulations would reverse progress in Uruguay and set a bad precedent for the region.44 In July, CIET met with Senator Lucia Topolanski, President Mujica’s wife, to explain the risks of weakening the regulations. She told CIET to speak directly with the president. CIET requested a meeting and was eventually invited (together with a delegation of international lawyers) to discuss the regulations in August44 47–49 53 (table 1).
Response from former President Vazquez
On 24 July 2010, a day after Health Minister Olesker announced the government intended to weaken the regulations, the press and CIET contacted former President Vazquez who appeared on television to express disappointment in the Mujica administration and oppose weakening the regulations.71 Luis Almagro, Minister of Foreign Affairs, responded, telling reporters the government remained committed to fighting tobacco but was uncertain of the regulations’ legality under international trade law.72
A few days later, Mujica said in a radio interview that the government’s approach to the regulations had been ‘no simple thing’ and that his government faced ‘a clever and powerful enemy’ and was seeking other options to avoid contracting ‘lawyers at $1500 an hour for several years’.73
A week later, Mujica visited Vazquez to privately discuss PMI’s legal threats and the regulations, when Vazquez reportedly urged Mujica to defend the regulations and seek international support.73 Mujica reportedly acknowledged that Vazquez made some convincing arguments but that he was still concerned about the legal costs of fighting PMI, and was continuing to evaluate the situation.
International support to the Uruguayan government
CIET requested TFK’s assistance to help the government defend the regulations.44 49 In response, TFK wrote President Mujica on 16 July 2010, (a week before the public announcement of the weakened regulations) offering legal support and requesting that his administration not settle with PMI.74 On 28 July 2010, (four days after the public announcement of the weakened regulations), TFK coordinated a letter signed by several international health groups urging Mujica to defend the regulations.75 This support and Vazquez’s encouragement helped Mujica reconsider defending both regulations in August 2010.75
Bloomberg financial support
On 10 August 2010, the international delegation of lawyers met high level government officials and congressmen to argue against settling. They told the government that it had a strong legal case76 because international law, including the Uruguay-Switzerland BIT, recognised governments’ authority to protect public health. Uruguay’s legal position was strengthened by being a party to the FCTC, which recommends the implementation of strong regulations.77 With authorisation from the Bloomberg Foundation, TFK offered financial assistance to the Uruguayan government to help support Uruguay’s legal defence.
Generating international political support for Uruguay
In late August, TFK reiterated to the Uruguayan government the widespread global support to Uruguay’s case.78 In September 2010, the Pan American Health Organization (PAHO), the WHO regional office for the Americas, became the first inter-governmental health organisation to formally support Uruguay.79 PAHO’s Executive Committee passed a resolution which specifically expressed support for Uruguay implementing FCTC recommended policies and urged member states to oppose tobacco industry interference.79 PAHO also offered technical support to the Health Ministry, focusing on the Conference of the Parties (COP), the FCTC’s governing body, scheduled to be held in Uruguay in November 2010.
In late September and early October, TFK reiterated its offer of financial and technical support to defend the regulations and develop a communications strategy80 (table 1). On 4 October 2010, the Foreign Minister held a press conference to announce the government would fight PMI and accept the financial support provided by Bloomberg though TFK.81 From this point on, the Mujica administration took a strong stance against PMI and the investment challenge to ensure the regulations would be protected.
The fourth COP meeting in Uruguay
The FCTC COP, which had been scheduled 2 years earlier, was held in Punta del Este, Uruguay in November 2010, providing further international support to Uruguay. During the COP, international health groups informed governments and generated international media coverage of PMI’s attempts to intimidate Uruguay82 (table 1). Uruguay produced and tabled the Punta del Este Declaration, supported by the FCTC Parties attending the COP (except the EU, China and Japan), declaring the rights of sovereign countries to prioritise public health regulations over trade agreements.25 The declaration specifically recognised the Parties’ concern regarding industry attempts to undermine government tobacco control regulations and Parties’ right and commitment to implement the FCTC.25 The EU successfully proposed adding the clause, ‘provided that such measures are consistent with the TRIPS agreement.’25
This international support sent a clear signal that Uruguay was not alone in defending its regulations against PMI. Former President Vazquez and President Mujica addressed the COP, acknowledging the assistance from the transnational tobacco control network and the courage required to defend the regulations.25 83 The WHO held a press conference and announced it would provide scientific evidence supporting the regulations and coordinate briefings related to trade and tobacco control to assist other governments in defending their regulations against legal challenges.44
On 15 November 2010, New York City Mayor Michael Bloomberg announced he had offered $500 000 to help defend Uruguay’s regulations against the investment challenge and personally called President Mujica to offer his support.84 This ongoing assistance included legal collaboration with the law firm retained by the Uruguayan government to represent it throughout the ICSID proceedings.
PMI investment challenge
After the ICSID Secretary General registered PMI’s investment dispute on 26 March 2010, the Uruguayan government and PMI spent a year selecting arbitrators for the tribunal, which was constituted in March 2011.85 In September 2011, Uruguay filed a memorandum arguing the tribunal did not have jurisdiction to hear the claim as PMI was required under the treaty to litigate in domestic courts before seeking arbitration,85 which the arbitrators denied in 2013.85 The next 2 years each party presented their arguments to the tribunal, which reviewed the case. In January and March 2015, the WHO and FCTC Secretariat86 and PAHO87 presented separate amicus briefs expanding on the scientific evidence and public health justification for the regulations. President Tabaré Vazquez, re-elected in 2014 and resuming office in March 2015, appointed a new team to coordinate the legal defence for the oral hearings on the merits of the case held in Washington, DC in October 2015.
In July 2016, ICSID rejected PMI’s claims and ruled Uruguay had the sovereign right to protect public health.88 ICSID ruled the regulations did not substantially deprive PMI’s value of investment, were not arbitrary, reasonable and expected regulations, and handled properly in Uruguayan domestic courts85 (table 2). The tribunal noted PMI’s total costs were US$16.9 million while Uruguay’s total costs were US$10.3 million and ruled PMI had to pay US$7 million of Uruguay’s cost and an additional US$1.5 million for ‘all of the fees and expenses of the Tribunal and ICSID’s administrative fees and expenses’,85 leaving the government to pay $3.3 million. Bloomberg through TFK funded $1.5 million of the $3.3 million legal defence.
Discussion
The Uruguayan case illustrates how strong political support, an actively engaged local civil society, and international financial and technical support are important factors in overcoming tobacco industry legal threats to defend public health policies.89 90
Strong political support
The Vazquez and Mujica administrations demonstrated strong political commitments to tobacco control and ensuring the regulations were protected. President Vazquez’s leadership and prioritising tobacco control helped alter the culture of tobacco control in Uruguay, demonstrating the importance of political champions in advancing tobacco control measures. Uruguay’s Health Ministry established supportive communication with the Ministry of Foreign Affairs, illustrating the importance of developing interagency alliances and a whole-of-government approach91 to implement the FCTC and resolve differences at the intersection of health and trade.
Active engagement by local civil society
Similar to successful tobacco control advocacy efforts in other countries,17 57 92 93 local civil society groups developed close relationships with government officials, provided evidence-based information to policy-makers, and closely monitored swift government actions and industry activity to advance tobacco control in Uruguay. When the Mujica administration considered weakening the regulations to avoid an expensive legal battle with PMI (whose 2010 annual net revenues exceeded $64 billion versus Uruguay’s $32 billion GDP73 local health groups mobilised support from former President Vazquez and international health groups to produce a strong united response to support defending the regulations.
Support by the transnational tobacco control network
The united front between local and international health organisations demonstrates the value of the transnational tobacco control network in combating tobacco industry interference and supporting FCTC implementation,13 94 95 especially in low-income and middle-income countries.19 20 57 Even though international health organisations could have responded sooner to the government’s legal concerns, organisations such as TFK, WHO, and PAHO have become more knowledgeable about trade and investment issues. Advocacy networks and epistemic communities have continuously improved the links between science and advocacy to advance tobacco control policy13 14 94 96; the Uruguay case highlights how this network strengthened the links between trade and tobacco control to combat emerging pressures of trade on health. The network recognised the importance of legal precedents in tobacco control,97 contributing to their decision to support Uruguay’s regulations as a global tobacco control issue.
International financial and technical support
Bloomberg’s financial contributions highlight that trade and investment disputes create substantial burdens for small and financially vulnerable countries, which can be strong incentives for governments to settle these lawsuits. As a result, international organisations have focused more attention and resources towards this growing concern, especially in low and middle-income countries. In particular, in March 2015 Bloomberg and Bill Gates launched a $4 million ‘anti-tobacco trade litigation fund’ to assist countries in drafting legislation ‘to avoid legal challenges and potential trade disputes’, and if challenges arise to provide funds for actual litigation defence expenses.98
Domestic and international legal implications
PMI’s losses to Uruguay in domestic and international courts are the latest in a string of losses at the national and international level. Constitutional courts upheld strong tobacco control policies in fourteen countries.17 19 93 99 In particular, the Australian,100 UK101 and Indian102 High Courts upheld strong packaging and labelling policies, concluding similarly to the 2016 ICSID Uruguay ruling, that the registration of tobacco company trademarks did not prevent governments from restricting their use and imposing such restrictions was not expropriating their intellectual property rights. The EU Court of Justice also upheld the EU Tobacco Products Directive103 that grants the authority for each EU member to implement plain packaging104 and an arbitration tribunal dismissed as an ‘abuse of rights’ a BIT investment challenge filed by PMI against Australia’s plain packaging law on jurisdictional grounds.105
PMI’s loss to Uruguay in ICSID, along with other defeats, provides greater legal clarity surrounding a country’s sovereign right to implement public health regulations. While there is no binding precedent in international arbitration law, the broader value of each award can contribute to the development and understanding of investment treaty law vis-a-vis tobacco control.106 By highlighting the importance of the FCTC in justifying evidence-based tobacco control measures, ICSID’s ruling should assist other countries, including New Zealand, Canada, Norway, South Africa, Malaysia, Turkey, India, Panama, Brazil, Ecuador and Chile, which, as of February 2017, were implementing or had announced plans to introduce similar tobacco packaging and labelling regulations.107 108
A more direct way to minimise the tobacco industry’s ability to threaten governments would be eliminating the application of ISDS mechanisms in relation to tobacco (and public health more broadly)4 in trade and investment agreements. Without the ISDS mechanism in the Uruguay-Switzerland BIT, PMI would have had to convince a WTO member to challenge Uruguay’s regulations. Forced to lobby WTO member states to file trade disputes can also backfire; after tobacco companies paid the fees for the Ukraine government to challenge Australia’s plain packaging policy, health advocates convinced the new government to withdraw the claim because Ukraine had no tobacco trade with Australia.109 Ten months after Australia announced the plain packaging proposal, PMI moved ownership of its Australian operations from Switzerland to Hong Kong to challenge Australia’s plain packaging policy under a 1993 Australia-Hong Kong BIT.110 This treaty shopping also failed when the investment dispute was rejected on jurisdictional grounds.111
Limitations
Top government officials in the president’s office and the Ministry of Foreign Affairs declined requests to be interviewed for this study, limiting the complete understanding of how the Mujica administration responded to tobacco industry legal threats. To protect attorney-client privileges policy-makers in the Health Ministry and Foreign Affairs Ministry could not discuss legal advice given to the President surrounding the PMI investment challenge against Uruguay.
Conclusion
To replicate Uruguay’s success, other countries need to recognise that strong political support, an actively engaged local civil society, and financial and technical support are important factors in overcoming tobacco industry legal threats to defend strong public health regulations. Uruguay’s historic legal victory should provide legal clarity for other countries interested in implementing similar tobacco packaging and labelling regulations.
What this paper adds
What is already known on this subject?
Tobacco companies have threatened governments over their packaging and labelling laws with international investment lawsuits since the 1980s.
What important gaps in knowledge exist on this topic?
Historically, some countries have dropped or delayed strong packaging and labelling rules in the face of legal threats from the industry but Uruguay, a small middle-income country, successfully resisted these threats with strong political leadership and support from the transnational tobacco control network.
What does this study add?
This is the first case study of how a tobacco company tried using investor protection provisions in an international trade and investment treaty in order to intimidate a government into withdrawing, weakening or delaying progressive tobacco packaging and labelling regulations. Uruguay illustrates how strong political will at the national level with support from the transnational tobacco control network helped a small and financially vulnerable country confront the tobacco industry in an international investment dispute to defend its public health regulations.
Acknowledgments
We thank Robert Eckford, Eduardo Bianco and the interviewees for the information provided for this study.
References
Supplementary materials
Spanish translation
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Footnotes
Contributor EC collected the raw data and prepared the first draft and subsequent drafts of the manuscript. PS and SAG helped revise the paper.
Funding This work was supported by the Tobacco Related-Disease Research Program Dissertation Research Award 24DT-0003, the Horowitz Foundation for Social Policy Dissertation Research Grant, the National Cancer Institute Training Grant 2T32 CA113710-11 and research grant R01 CA-087472. The funding agencies played no role in the conduct of the research or the preparation of this article.
Competing interests PS is employed by the Campaign for Tobacco Free Kids. EC and SAG have nothing to declare.
Ethics approval This study was conducted with the approval of the UCSC Committee on Human Research.
Provenance and peer review Not commissioned; externally peer reviewed.