Uruguay Presents Defense Against Philip Morris Tobacco Lawsuit

Uruguay has presented a 500 page document to defend itself against an international lawsuit challenging the country's tough tobacco packaging regulations. The claim was brought by Philip Morris, the global tobacco giant, at the World Bank's International Centre for Settlement of Investment Disputes (ICSID) in Washington DC.

Philip Morris filed the original complaint on February 19, 2010, claiming that Uruguay's laws were a violation of a 1991 bilateral investment treaty between Uruguay and Switzerland. The company says that legal requirements that graphic warnings about the health hazards of smoking must cover most of the surface area of cigarette packets have harmed the company's trademarks and profits.

"The large size of these warnings prevents us from effectively displaying our trademarks and goes beyond what could reasonably be considered appropriate to inform consumers of the well-established health risks of smoking," Morgan Rees, a spokesperson for Philip Morris, told Investment Arbirtation Reporter. "This is without precedent anywhere in the world."

On October 13, 2014, Paul Reichler, a lawyer with Foley Hoag, in Washington DC, responded on behalf of the Uruguayan government, citing the country's obligations under the World Health Organisation's 2005 Framework Convention on Tobacco Control.

"We will fight because it is our right and duty as a government to protect our citizens' health," Silvina Echarte Acevedo, the legal adviser leading the Uruguayan ministry of public health's case, told the Independent newspaper. "They are bullying us because we are small. This is like David and Goliath." (Uruguay's annual gross domestic product is $53 billion, less than that of Philip Morris which took in $80 billion last year)

Governments around the world are watching the outcome as they begin to consider similar tobacco packaging laws to curb the $756 billion global industry. "They wanted to make an example of Uruguay," says Matt Myers, the executive.director of Tobacco Free Kids, a U.S. NGO. "It was a message designed to be global."

There is no doubt that Uruguay's strict tobacco packaging laws, which were first introduced in 2005, have had already had a major impact on local cigarette sales. After companies were required to print photos of premature babies, decaying teeth, and hospital operations on cigarette packages, smoking rates dropped from 33 percent to 12 percent among Uruguayan teenagers and from 40 percent to 23 percent among adults.

Since the 2010 complaint to the ICSID, Philip Morris has expanded its war on national tobacco packaging regulations. In 2011, the company sued Australia in local courts over the Tobacco Plain Packaging Act, but lost. The company has now appealed the decision to the United Nations Commission on International Trade Law, claiming that 2011 law violates a 1993 bilateral treaty between Australia and Hong Kong.

Philip Morris was initially more successful with a 2013 lawsuit in Thailand where courts ordered the temporary suspension of a new tobacco packaging law. Nor was it not alone in this fight - Japan Tobacco, another major tobacco giant, also sued Thailand. However the Thai government ultimately defeated the tobacco companies in court, forcing them to place warnings that covered 85 percent of both front and back of cigarette packets.

"They are in this to convince governments it's not worth the cost to enact laws to reduce tobacco's appeal," Chris Bostic, deputy director for policy at Action on Smoking and Health, a Washington-based NGO told Bloomberg. "It's about chilling countries from moving forward." And it is having an effect - both New Zealand and the United Kingdom said to have slowed their plain packaging laws while they watch the outcome of the Uruguay-Philip Morris dispute.

But international health organizations have come out firmly on the side of Uruguay. "PAHO/WHO supports Uruguay's defense of these measures, which are aimed at saving lives, and recognizes it as a role model for the region and the world," Carissa Etienne, the director of the Pan American Health Organization, the regional office of the World Health Organization, said in a press release last week. "Uruguay's continuing efforts to protect its population against tobacco consumption and exposure to secondhand smoke, despite challenges by the tobacco industry, demonstrate that the country will not be intimidated by the industry."

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