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« GLOBAL LEGAL CENTER « TOBACCO AND INTERNATIONAL TRADE AND INVESTMENT LAW


ON THIS PAGE:
1. Types of international agreements that impact tobacco control

2. The sovereign right of states to regulate for public health under international law

3. Assessing the risk of a tobacco company investment treaty claim

4. Steps that governments can take to strengthen their legal position

5. The ‘carve out’ for tobacco control measures in the Comprehensive and Progressive Trans-Pacific Partnership Agreement (CPTPP)

6. Big Tobacco’s threats and allegations

7. Trade and the WHO Framework Convention on Tobacco Control (FCTC)

8. Related links and resources

1. Types of international agreements that impact tobacco control

INTERNATIONAL TRADE AGREEMENTS

Trade agreements, including the World Trade Organization (WTO) agreements and regional free trade agreements (FTAs), are intended to reduce trade barriers such as import quotas, tariffs or unnecessary technical regulations. They also provide for minimum standards of protection for intellectual property. Their purpose is to establish the rules for the trade of goods and services between states party to the agreement and to govern how those states may restrict trade or regulate traded goods, including tobacco products.

Where trade disputes arise, they are between the state parties to an agreement. There have been a number of trade disputes under the WTO mechanisms concerning tobacco products and tobacco control measures. These are summarized here.

More information on the WTO agreements and how they relate to tobacco control measures can be found on the WHO FCTC knowledge hub on legal challenges.

INTERNATIONAL INVESTMENT TREATIES (IIT)

IITs are often agreements between two countries to provide protections for foreign investors from the other country. They usually include investor-state dispute settlement (ISDS) mechanisms that allow foreign corporations to sue governments in international tribunals if they believe that a government measure has impacted their investment in a way that breaches the treaty. There are over 3000 investment treaties globally, most of which are bilateral.

Tobacco companies have started to bring legal claims under IITs to challenge tobacco control laws. Philip Morris has brought treaty challenges against Uruguay and Australia, both of which it lost.

More information about IITs and how they relate to tobacco control measures can be found on the WHO FCTC knowledge hub on legal challenges.

Many modern FTAs often include an investment chapter that provides the same sort of protections that are found in IITs. However, while there are some connections and interrelated issues between trade agreements and investment agreements, these two areas of international law are best considered separately.

2. The sovereign right of states to regulate for public health under international law

International trade and investment agreements, and international law generally, provide states the right and flexibility to regulate to protect health. This principle is reflected in the WTO Agreements, in modern trade and investment treaties, and in recent international tribunal rulings.

The award in the investment arbitration case of Philip Morris v. Uruguay, included strong language supporting the right of states to adopt public health measures. That ruling set a high legal bar for any future investment arbitration claims that challenge tobacco control regulations. Despite this, the big tobacco companies continue to allege that tobacco control measures breach these international agreements and seek to threaten and intimidate governments to delay or prevent the adoption of public health laws.

3. Assessing the risk of a tobacco company investment treaty legal claim

The threat of legal challenges by tobacco companies under investment treaties has received a lot of international attention and has resulted in delay by governments in adopting tobacco control laws.

The tobacco companies have been using their flawed arguments for decades as part of a coordinated and deliberate strategy. But the real risk of a tobacco industry legal action under an international investment treaty is far lower than these threats would suggest.

There have only ever been 2 investment treaty claims (one against Uruguay and one against Australia) both of which were lost by Philip Morris. Those claims also resulted in significant media attention and condemnation from politicians and the business community. While further claims cannot be ruled out, the risks are limited if appropriate steps are taken as described below.

DOWNLOAD THIS PAPER which sets out a basic introduction on how an assessment of risk can be undertaken.

4. Steps that governments can take to strengthen their legal position

There are steps that governments can take to strengthen their legal position in relation to tobacco control measures:

  • Ensure effective procedures and processes, in accordance with national administrative and constitutional arrangements, when developing and adopting tobacco control laws – these include:


    • ensure non-discriminatory application of the laws;
    • follow all national constitutional and administrative process and carefully review the evidence base; and
    • set clear objectives and identify that the measures implement the WHO FCTC;
  • Ensure no part of government enters into any agreement or makes representations to tobacco companies that encourage investment by indicating that no further or stricter tobacco control regulations will be introduced. Representations of that sort could provide a tobacco company with a ‘legitimate expectation’ that the regulatory environment for their investment would not get any more difficult, which could be enforced under an investment treaty.
  • Promote coordination between Ministries of Health and Ministries of Trade to ensure that tobacco control and the protection of public health are prioritized in setting trade and investment policy. This should lead to the exclusion of tobacco and tobacco control from trade and investment agreements entirely; or at a minimum ensuring that tobacco companies cannot use the agreements to bring international legal challenges to tobacco control laws. There are other important steps that can be taken in the design of investment treaties which will protect public health measures more broadly.

5. The ‘carve-out’ for tobacco control measures in the Comprehensive and Progressive Agreement on Trans-Pacific Partnership Agreement (CPTPP)

In February 2016, the final text of what was then called the Trans-Pacific Partnership (TPP) was agreed and signed by 12 countries including the United States. In January 2017, the United States withdrew from the Agreement, but the remaining 11 countries have subsequently agreed to proceed with substantially the same agreement, now called the CPTPP.

The CPTPP text includes a historic provision that allows the party states to prevent any ISDS claim being made against a tobacco control measure (Article 29.5). Tobacco Free Kids and other civil society partners in the U.S. and other TPP countries campaigned for this provision to be included to prevent the tobacco industry from abusing the agreement to launch lengthy and expensive legal attacks against government regulations. The momentum for a tobacco ‘carve out’ in future trade agreements has begun and a similar clause has been included in the revised Australia/Singapore FTA (at Article 22 of Chapter 8). This type of ‘carve out’ for tobacco control measures should be encouraged in all new or renegotiated investment treaties.

The Tobacco Free Kids press release on the TPP ‘carve-out’ is available here.

As this article explains, the use of a ‘carve-out’ for tobacco control measures from ISDS should be followed by governments as they negotiate new (and renegotiate old) trade and investment agreements. Tobacco is a uniquely harmful product and the industry has shown itself to be exceptionally litigious. States have every reason to single out tobacco control for special protection as part of a broader move to balance these treaties in favour of sustainable development goals.

6. Big Tobacco’s threats and allegations

Even the threat of an international trade or investment challenge discourages countries from passing or implementing strong laws to protect the health of their citizens.

According to the Director-General of the WHO, Dr. Margaret Chan, “[t]he high-profile legal actions targeting Uruguay, Norway [and] Australia . . . are deliberately designed to instil fear in countries wishing to introduce similarly tough tobacco control measures.”

The tobacco industry - and the proxy organizations that promote its interests - has threatened governments throughout the world with allegations that proposed tobacco control measures breach trade and investment agreements. Just some of these allegations are detailed here.

Any delay in implementing lifesaving tobacco control measures is itself a victory for the tobacco industry, giving it years to establish a market for its products and addict a new generation of smokers, especially in emerging markets in developing countries.

7. Trade and the WHO Framework Convention on Tobacco Control (FCTC)

The way in which the tobacco industry has used international trade to accelerate the scale and spread of its products is recognised in international treaties and by international organisations. The Members of the World Trade Organisation recognised the importance of prioritising public health in the Doha Declaration in 2001. The forward to the WHO Framework Convention on Tobacco Control (WHO FCTC) refers to the issue and a number of Decisions from the Conference of the Parties (COP) seek to address the concerns.

  • Doha Declaration on the TRIPS Agreement and Public Health states that:
    “the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) does not and should not prevent members from taking measures to protect public health.”
  • The Foreword to the WHO FCTC states:
    “The WHO Framework Convention on Tobacco Control was developed in response to the globalization of the tobacco epidemic. The spread of the tobacco epidemic is facilitated through a variety of complex factors with cross-border effects, including trade liberalization and direct foreign investment.”
  • Implementation Guidelines to Article 5.3 at paragraph 29 state that:
    “Parties should not grant incentives, privileges or benefits to the tobacco industry to establish or run their businesses.”
  • Decision COP 4(5) Punta Del Este Declaration on the implementation of the WHO FCTC, confirmed
    “That in the light of the provisions contained in Articles 7 and 8 of the [WTO] TRIPS Agreement and in the Doha Declaration, Parties may adopt measures to protect public health, including regulating the exercise of intellectual property rights…”
  • Decision COP 6(19) on Trade and Investment Issues encourages Parties to cooperate in exploring possible legal options -
    “to minimize the risk of the tobacco industry making undue use of international trade and investment instruments to target tobacco control measures;”
  • Decision COP7(21) on Trade and Investment Issues considered
    “the importance of safeguarding regulatory space for public health objectives, including tobacco control policies, when entering into trade and investment agreements.” And called on Parties - “to increase, as appropriate, coordination and cooperation between health and trade/investment departments, including in the context of negotiations of trade and investment agreements”

8. Related links and resources


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