Summaries of the Legal Challenges

NOTE - All the legal challenges brought by the tobacco industry against plain packaging laws have been dismissed by the courts and tribunals across the globe.

JT International SA v. Commonwealth of Australia [2012] HCA 43 (5 October, 2012)

The four major tobacco companies challenged the Tobacco Plain Packaging Act 2011 based on section 51(xxxi) of the Constitution, which deals with the acquisition of property by the state.

The two principle arguments were that plain-packaging laws were a breach of the constitution because they amounted to an acquisition of the tobacco companies’ intellectual property rights including trademarks‘and that the government’s use of or control over the packaging itself amounted to an acquisition of property.

The High Court ruled in the Government’s favor by 6 to 1.

One judge observed that the tobacco companies’ most strenuous objection was the taking “of the advertising or promotional functions of their registered trademarks.” Removing the advertising features of packaging is the intended purpose of plain packaging.

The High Court held that, to be an acquisition, the Government must obtain a benefit or interest of a “proprietary nature.” One judge stated that “on no view can it be said that the Commonwealth … has acquired any benefit of a proprietary character”; and another that the requirements of the Act “are no different in kind from any legislation that requires labels that warn against the use or misuse of a product.” Moreover,that “[m]any kinds of products have been subjected to regulation in order to prevent or reduce the likelihood of harm, including medicines, poisonous substances and foods.”

The transcripts of the hearings¹ show that counsel for Japan Tobacco International (JTI) and Imperial Tobacco compare the cigarette packet to advertising billboards by saying that Australia “is acquiring our billboard, your Honour”; and “I own this packet and I will determine what message goes on it”… it is our “bonsai billboard.”

These quotes further demonstrate how even the tobacco companies accept that the packaging acts as advertising for their products.

A more detailed analysis of this case is provided by Jonathan Liberman of the McCabe Centre here.

1.2 International Investment Arbitration Claim — Dismissed in December 2015

Philip Morris Asia Limited v. Commonwealth of Australia PCA Case 2012–02

Philip Morris Asia brought a claim under a bilateral investment treaty between Australia and Hong Kong to obtain compensation for losses it claimed were due to the plain-packaging laws. The two main arguments of Philip Morris were: that plain packaging had the equivalent effect of “expropriating” the property rights in its trademarks that could no longer be used on packaging; and that the measure was “arbitrary” and “unreasonable” on the basis that there was no evidence it would work.

However, in order to bring the claim, Philip Morris International restructured, so that ownership of 100% of its shares in Philip Morris Australia were transferred from PMI (based in Switzerland) to Philip Morris Asia (based in Hong Kong) after the Australian government had announced its intention to adopt plain packaging of tobacco products. The arbitration tribunal found that this was done for the sole purpose of bringing a claim under the investment treaty between Hong Kong and Australia and the claim was therefore “an abuse of rights.” The tribunal therefore declined jurisdiction, and the merits of the claim were not considered.

More information is available from the WHO FCTC Knowledge Hub on Legal Challenges.

1.3 World Trade Organization Dispute — complaints dismissed by panel on June 28, 2018 and by the Appellate Body on June 9, 2020

Australia — Certain Measures Concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging. Dispute numbers  DS435, DS441, DS458, and  DS467

Download the Panel Report and the Appellate Body Report.

Download our SUMMARY of the panel ruling and a short BREIFING PAPER for talking points and responding to industry claims.

The panel and Appellate Body’s authoritative rulings should be powerful in persuading governments to move forward with tobacco plain packaging and can be used to resist many of the flawed arguments that the tobacco industry puts forward to oppose the policy.

The WTO panel considered extensive evidence, from Australia and the complaining countries, and found the evidence demonstrates tobacco plain packaging works to reduce tobacco use.

The panel re-affirmed that states have a right to regulate for public health under WTO law and Plain packaging does not interfere with international trademark rights.

States should now move forward to adopt laws and implement tobacco plain packaging and can ignore the tobacco industry’s false claims about international trade law.

 Background

The dispute arose out of complaints by Cuba, the Dominican Republic, Honduras, Indonesia, and Ukraine that the plain-packaging laws breach various articles of the WTO agreements, and a dispute settlement panel was composed in May 2014. The final oral hearing took place in October 2015, and final summary written submissions were made in December 2015. On May 28, 2015, Ukraine suspended their dispute in order to negotiate a mutually agreed solution with Australia. 

The complaining countries argued that Australia’s law breaches:

• the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) by failing to provide required protections to trademarks rights and because it is an unjustifiable encumbrance on the use of tobacco trademarks;
  
  
• the Agreement on Technical Barriers to Trade (TBT Agreement) because it is more trade-restrictive than necessary to fulfill a legitimate objective; and
  
  
• the General Agreement on Tariffs and Trade (GATT) because it provides imported tobacco products less favorable treatment than like products of national origin.

Australia has published an executive summary of its submissions to the panel.²

The wider importance of the issues in dispute was clear from the fact that more third-party WTO member states made written and oral submissions to the panel than for any previous WTO dispute — some 34 countries plus the EU. The countries that brought complaints had either no trade or very minimal trade with Australia. It was reported that Philip Morris and British American Tobacco provided legal and financial support to the Dominican Republic and Honduras.

Following the panel ruling, Honduras and Dominican Republic filed appeals with the Appellate Body. 

Panel Ruling

On June 28, 2018, the panel rejected all grounds of complaint against Australia’s plain packaging laws in a 900-page report. The panel’s key findings include that tobacco plain packaging:

• Is “apt to, and does in fact, contribute to Australia’s objective of reducing the use of, and exposure to, tobacco products” [para. 7.1025].
• Is not more restrictive than necessary to fulfill Australia’s legitimate public health objective [para. 7.1732].
• Is a justified encumbrance on the use of trademarks and does not violate WTO trademark protections [para. 7.2593].  

The panel also held that: 

• The WTO Agreements recognize that Member States have the right to regulate for a legitimate public health objective, even where a measure is trade restrictive. 
• The WHO FCTC acts as important evidence in showing that a tobacco control measure is reasonable and justified under the WTO Agreements. 
• Governments have a wide degree of latitude to implement public health measures that interfere with or restrict the use of trademarks. 
• Trademark owners do not have a positive right to use their trademarks under WTO TRIPS agreement, but only the right to prevent third parties from using them.

Appellate Body Ruling

On June 9, 2020, the Appellate Body (AB) upheld the panel’s ruling, dismissing all grounds of appeal. 

In particular, the two appellant countries sought to challenge the way the panel dealt with the evidence and its finding that plain packaging was apt to and did in fact contribute to Australia’s public health objectives. The AB rejected the arguments and confirmed the panel’s conclusions.

Further case details and links to the case documents are available on the WHO FCTC Knowledge Hub for Legal Challenges.

R (British American Tobacco & Ors) v. Secretary of State for Health [2016] EWHC 1169 (Admin); and on appeal [2016] EWCA Civ 1182 (Appeal)³

Download a more detailed summary of this extremely useful judgment which extracts key quotes on the important legal issues and the Judge's analysis of the evidence from both sides.⁴

Claims were commenced by the four big international tobacco companies — British American Tobacco, Philip Morris, Imperial Tobacco, and Japan Tobacco International — together with a German manufacturer of cigarette tipping paper (TANN). The 17 grounds of claim were under domestic administrative law, European Union Law, and the European Convention of Human Rights.

This is an important judgment that has wider international significance. The ruling dealt with most of the key legal issues and the judge gave particular attention to issues of international relevance including —the importance of the WHO Framework Convention on Tobacco Control (FCTC); the public health justification for plain-packaging laws; the issue of whether or not there is a right to use trademarks; and a detailed analysis of the evidence that supported the policy and the tobacco companies’ evidence submitted to oppose the policy.

The judge’s analysis of the evidence from both sides of the dispute is particularly significant because the same evidence should be considered by any government taking forward plain packaging. This is the first judgment that provides a careful scrutiny of that evidence, confirming that it meets relevant legal tests.

On the tobacco industry’s evidence, the judge said that, “On the basis of my own review of the methodologies adopted by the Claimants’ experts … I conclude that that body of expert evidence does not accord with internationally recognised best practice.” And was heavily critical of “what has the appearance of being an industry wide practice not to adduce internal documents or to allow their experts to see and review and then rely upon internal documents.”

R (Philip Morris Brands Sarl & Others) v. Secretary of State for Health C–547

The aim of the EU Tobacco Products Directive (TPD) is to provide a harmonized regulatory environment for tobacco products across the EU (including on emissions, health warnings, labeling, and reporting requirements) to assist the free movement of those goods. In doing so, the Directive takes a high standard of public health. Some provisions of the TPD introduce elements of a plain-packaging policy, such as the requirement for cuboid cigarette packs with flip top lids, and a minimum of 20 cigarettes per pack. The TPD also includes, inArticle 24(2), a provision that member states may adopt further measures in relation to the standardization of tobacco packaging.

The four major international tobacco companies commenced a legal claim in the UK courts, challenging the government’s intention to implement the TPD on the basis that the Directive was not validly made. The High Court referred questions of interpretation of EU law to the Court of Justice of the European Union (CJEU). The legal challenge sought to overturn the whole Directive on a number of different grounds and also challenged the validity of separate parts of the TPD, including Article 24(2).

All grounds of challenge were dismissed and the validity of the Directive upheld. The importance of the FCTC was highlighted by the CJEU, which emphasized that its guidelines could have “decisive influence” on the interpretation of EU laws on tobacco control. But the key aspect of the judgment relevant to plain packaging, is that the Court of Justice confirmed that the Tobacco Products Directive permits EU Member States to introduce measures to standardize the packaging of tobacco products.

The opinion of the Advocate General (adopted by the Court) confirmed that measures to standardize packs contribute to increasing the visibility of health warnings and that these measures are proportionate because purely economic interests in the functioning of the tobacco market are secondary to the protection of human health.

Décision n° 2015–727 DC du 21 Janvier 2016

Legislation providing powers to introduce plain packaging was adopted by the Assemblée Nationale as part of Law n°2016–41 on the Modernization of the Health System and came into force on January 26, 2016. The constitutional appeal was filed by members of parliament and concerned the entirety of the law (of which plain-packaging provisions were just one part). The plain-packaging measures were challenged on the basis of the legislative process, the constitutional rights to property and free enterprise, and on the proportionality of the measures.

The Constitutional Council noted that the brand name can still be applied to packages allowing for clear identification of the product. It held that the rights of the trademark owner to exclude the use by others are still respected through this. It also held that there was no expropriation of property but a limitation on the property rights justified by the objective of protecting public health, because the plain-packaging measure made it possible to prevent the pack from becoming a piece of advertising. The Court noted the measure does not prohibit the production, distribution, or otherwise the sale of tobacco products. Accordingly, the measure was held to be a proportionate infringement of the rights of commerce and free enterprise.

4.2 Challenge in the Conseil d’État — dismissed December 23, 2016

CE, 23 décembre 2016, société JT International SA, Société d'exploitation industrielle des tabacs et des allumettes, société Philip Morris France SA et autres

The detailed Decree and Ministerial Order to implement plain packaging were published on March 22, 2016, and came into force May 20, 2016.

JTI launched an action on April 29, 2016, at the level of the Conseil d’État (the highest administrative court) alleging that the laws are in breach of the French constitution. Similar actions were launched by Imperial Tobacco, Philip Morris, and British American Tobacco; by the Confédération Nationale des Buralistes de France (the National Organization for Tobacco Retailers in France); and by République Technologie (a cigarette-paper manufacturer) in May 2016.

The petitioners contended that the measures constituted an infringement of fundamental rights relating to property; that they disregarded the principle of free enterprise; that they infringed the constitutional principle of clarity and intelligibility of the law; that they violated the provisions of trademark rights and intellectual property; that they constitute an assault on France’s international commitments under the European Convention of Human Rights, on the free circulation of products within the European Union, on the Convention of Paris, and the WTO agreement on issues of trade-related aspects of intellectual property rights (TRIPS).

JTI v. Minister for Health, Ireland, and the Attorney General 2015/2530P

Legislation for plain packaging on all tobacco products was adopted on March 10, 2015, and was due to come into force on May 20, 2016.However, some amendments were required to the law, and the likely coming into force date is now in 2017. JTI issued legal proceedings in 2015 challenging the Irish legislation. Following an initial hearing, JTI confirmed that its claim was based solely on the ground that the law is incompatible with the EU Tobacco Production Directive (TPD). The proceedings were stayed pending the outcome of the Court of Justice of the European Union ruling on the tobacco companies’ challenge to the TPD (see above 3.1). In addition, JTI explicitly stated that it reserves its position in relation to all other potential grounds pending the outcome of the UK High Court ruling (see above 2.1). Once the EU and UK cases were dismissed, JTI’s claim was then struck out. Ireland has a constitution that protects property rights with no limitation period; therefore, a constitutional challenge may be brought at some stage whatever the outcomes of the other cases, and it is understood that JTI formally reserved its position on this issue.

Swedish Match v The Ministry of Health and Care Services. 

(Commercial Court Case No 17-110415TV-OBYF and English translation; and Court of Appeal Case No 18-004746ASK-BORG/04)

Swedish Match sought an injunction in the Oslo County Court to suspend Norway's plain packaging laws for 'snus' (oral tobacco) while it brought a full challenge to the law. The Norwegian law requires plain packaging for cigarettes, hand rolled tobacco and snus. Swedish Match is the main producer of snus in Europe and Scandinavia. The key legal basis for the claim is that the law violates the EEA Agreement (the trade agreement with the European Union) because it is an unjustified restriction on the trade in goods. Swedish Match argued that snus is the least harmful smoke-free tobacco product on the market and that the government had not considered how important snus is as a harm-reduction product. They claimed it was wrong to treat cigarettes and snus equally in their packaging requirements and that there was no evidence that plain packaging would work to reduce tobacco use.

The Oslo County Court dismissed the application ruling that plain packaging is both suitable, appropriate and necessary and that it does not involve any arbitrary discrimination or hidden trade restriction. Swedish Match was ordered to pay all the governments legal costs.

Swedish Match issued an appeal on December 8, 2017. The appeal was dismissed by the Oslo Court of Appeal on February 19, 2018.

Morris Brand Sàrl (Switzerland) & Others v. Oriental Republic of Uruguay (ICSID Case No. ARB/10/7)

Read a more detailed summary of the parts of this important case that have wider international significance, in particular to plain packaging.

This case was not a challenge to plain packaging but rather two other packaging laws introduced in Uruguay in 2008 and 2009, stipulating:

1. that large graphic health warnings should cover 80% of the front and back of cigarette packets; and
2. that each cigarette brand be limited to just a single variant or brand type (eliminating brand families to address evidence that some variants can mislead consumers and falsely imply some cigarettes are less harmful than others) — known as the Single Presentation Requirement (SPR).

However, the arguments put forward by Philip Morris in this investment arbitration claim are very similar to those used in the investment arbitration case against Australia’s plain packaging (set out above). Consequently, the ruling is highly relevant to the legality of plain packaging under international investment law. The Australian claim was dismissed on jurisdiction grounds so the merits were not considered, whereas the tribunal in this case determined the merits of the legal arguments and dismissed all grounds of claim. PMI alleged that the two measures violated a Bilateral Investment Treaty (BIT) with Switzerland⁵ and brought the claim after legal challenges in Uruguay’s domestic courts by the Philip Morris subsidiaries had all failed. It sought an order for the repeal of the Challenged Measures and for compensation in the region of $25 million USD.

The landmark ruling highlighted the importance of the WHO Framework Convention on Tobacco Control (FCTC) in setting tobacco-control objectives and establishing the evidence base for measures. The ruling confirmed that states need not recreate local evidence to justify tobacco-control measures. It addressed the wide “margin of appreciation” and deference provided to sovereign states in adopting measures or decisions concerning public health.

The ruling sets an extremely high bar for any foreign investor seeking to bring an investment arbitration challenge against a non-discriminatory public health measure that has a legitimate objective and that has been taken in good faith.

The arbitrator appointed by PMI, Gary Born, agreed with the ruling on most aspects but gave a dissenting opinion on two issues. One of these was that the SPR had been adopted in an arbitrary manner and therefore breached the obligation of fair and equitable treatment. Part of his reasoning was that there was, in his view, no record of any proper consideration of the evidence and issues by Uruguay before adopting the measure (See Guide 1.2: Establish a Document Record which emphasizes the importance of keeping a careful record of the evidence considered and the decisions taken by government).