QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp i-iii DOI: 10.5204/qutlr.v17i2.697
PLAIN PACKAGING SPECIAL ISSUE – EDITORIAL
THE HON. NICOLA ROXON
It gives me great pleasure to write a forward on this topic at a time when there is such a groundswell of international support for plain packaging of tobacco products. World No Tobacco Day in 2016 had as its tag line ‘Get ready for plain packaging’ and the world’s health ministers are doing just that.
When Australia became the first country in the world to remove all colours and logos on tobacco packs in 2011 — recognising their allure to young new smokers — the tobacco industry tried every move in their book to stop us. Lobbying, donations, advertising campaigns, threats, dodgy research, front groups, overblown claims and legal action dominated our political debate for two years. When all these local manoeuvres failed, the industry switched its effort to trying to ensure we were the only country to take this step. Writing in November 2016, it is manifestly clear that those efforts, both local and international, have failed. Country after country — France, the UK, Ireland, Canada, Norway, New Zealand — is either implementing plain packaging, passing their laws, or consulting with the community before introduction; and many more countries will move this way in the coming months and years. Plain packaging of tobacco products is now truly an international movement. It is an epidemic of the best sort, as countries catch on to its value, purpose and ease of implementation. We will now see its introduction spread like wildfire around the world.
When we announced the introduction of plain packaging in Australia, it was a world first. The government I was part of has received much praise for our resolve and foresight to see this through, from smooth implementation to the great early results already showing significant impact in the reduction of smoking rates across the country. I am proud of our action, but plain packaging was not my idea originally — the idea initially came from a Canadian academic. In fact, both Canada and Australia flirted with the idea in the 1990s, but were bullied and lied to by a tobacco industry which convinced them that they would be in breach of their international intellectual property obligations if they took such a step. Thankfully, academics, tobacco control advocates and health professionals persisted and raised the idea again with us when we sought advice on preventative health measures the government could implement. We now know, through documents uncovered in other matters, that the industry always had clear advice that there was no breach of such obligations. Nevertheless they went ahead arguing what they knew to be false, and bought themselves a further decade or two free from this intervention. This bad, misleading, untruthful behaviour from the industry is constantly repeating itself. Most famously, of course, the industry misled the public and the US Congress about the known harms of tobacco for decades. With the same tactics today in Canada, the industry is running ads against the Trudeau government’s plans to introduce plain packs on the basis that ‘the Australian experiment has failed’. They assert this in national media and paid advertising, in flagrant disregard of all the credible research showing quite the opposite.
How does the tobacco industry keep getting away with it? Aren’t they embarrassed to lie? Surely they won’t keep litigating when they so often lose? Actually, my belief is they truly don’t care. Each tobacco control measure they can delay — long-term or short-term — works
This work is licensed under a Creative Commons Attribution 4.0 Licence. As an open access journal, articles are free to use with proper attribution in educational and other non-commercial settings.
QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products
for their business model selling an addictive product. Time means more people get hooked, they have lifelong customers, and they make more money. The long, loyal tail of consumers with such an addictive product is more profitable than most consumer items can ever boast at their peak. So each country that hesitates to introduce tobacco control measures is actually giving the tobacco industry time to find new customers. Each piece of litigation, even if lost, can buy the tobacco industry marketers a few more years of breathing space. And even the threat of litigation can have a chilling effect on governments — as we see with the WTO dispute brought against Australia by several countries and as yet unresolved five years later! If any country decided to ‘wait until the WTO dispute was complete’, the industry’s expenditure on lawyers will have been worth its weight in gold to their business.
We need to stop expecting the tobacco industry to play by the rules that the rest of us abide by. Unlike the tobacco industry, governments cannot and will not proceed by lying, and they won’t start legal action just to obtain a delay; peer-reviewed researchers cannot and will not produce dodgy research; charitable advocacy groups who raise money from the public for public good are not going to campaign for pointless interventions, or argue with poor evidence.
Plain packaging is a successful intervention with strong, early outcomes. But you wouldn’t know this if you only looked at the industry’s media, lobbying, advertisements, and their paid research. This persistent industry strategy of misleading and misusing information is what makes quality publications like this one so important. It can provide information, data, research and analysis in a non-biased format for all to read and consume. What all tobacco control advocates have learned, and this special edition contributes further to, is that those of us wanting to rid the world of such a harmful and highly addictive product, need to be part of a truly international movement. To successfully implement measures against powerful, multinational tobacco interests we must constantly share expertise, warnings and research. We need to know all the diversionary tactics and be ready for them. And we need to accept that the tobacco industry has not for decades, and likely will not in the future, play by any of the rules the rest of us adhere to — most obviously, telling the truth and acting on evidence.
This special issue allows advocates, governments and policy makers to learn from others, to explore in some detail different national experiences, and deepen their knowledge of relevant topics such as intellectual property, trade laws and the WTO, investor disputes and constitutional challenges. Importantly, it encourages us to step outside our professional areas of expertise to ensure we think about these measures holistically, encompassing health, economics, trade, property, labour rights and so much more. This edition also comes at an important time — at the start of a major trend. Just reflect on the fast expansion of graphic health warnings, which have gone from their introduction by Canada as the first mover in 2001, to now apply in 102 countries in just 15 years.1 Similarly, our example from Australia is spreading fast as other countries adopt plain and standardised packaging. I believe this intervention is now on an unstoppable trajectory and this edition will provide valuable insight at a crucial time.
I also welcome the coverage in this edition of matters relatively new on the tobacco control horizon, like the tobacco divestment movement. Tobacco free portfolios are new, but already making a huge impact. This movement brings all the past work together into a single argument
1 For data on this, see the Canadian Cancer Society’s reports of October 2014
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questioning why anyone would invest in an undeniably dangerous product. It is a product that has no use and no other utility or redeeming features. The industry manipulates and targets young people — exemplified in tactics such as giving away MP3 players with packs of cigarettes in East Timor, or creating pretty purple lipstick packs in Canada. As if this were not enough, in many developing countries tobacco farmers are held in virtual servitude and child labour is a regular feature. What is there to like about such an investment? Funds are increasingly voting with their feet (and their dollars). This will be an interesting space to watch and support as it, too, spreads its influence.
Because I am such a passionate advocate for tobacco control I am often asked if I ‘hate’ the tobacco industry. I’m not a hater — I generally consider hate to be a harsh and useless emotion — but I do find the industry relentlessly manipulative and untruthful, and irredeemably pointless. Just consider: They sell a hideously harmful product, that is highly addictive and with no other social utility; They have had clear evidence of harm caused by tobacco that they persistently denied and hid for decades; Despite being exposed in one country, they continue to pedal lies in other countries; They deny targeting young people, yet produce pink and purple lipstick packs; They use their money and influence to threaten politicians and governments against action, knowing full well those politicians and governments are entitled to act in the interests of their communities’ public health.
So, although I’m not a hater, what is there to like?
By the time this edition is published, the WTO may well have handed down its decision. It seems unimaginable that trade advocates would allow the tobacco industry to use international trade laws in this way. If the tobacco industry wins, trade laws will be thrown further into disrepute, right at the time that populist politics and anti-freetrade movements are on the rise. If the decision upholds Australia’s right to seek to protect its citizens, the industry may nevertheless feel satisfied that they delayed other countries from acting for five years or more, serving a purpose for their interests whatever the outcome. I hope this edition and other research will allow more people to wise up to these tactics, ignore the threats and misinformation and take principled action at the right time for their communities.
30 November 2016 The Honourable Nicola Roxon Former Health Minister and Former Attorney-General of Australia Chair, Cancer Council Australia
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 1-20 DOI: 10.5204/qutlr.v17i2.702 TOBACCO PLAIN PACKAGING IN AUSTRALIA: JT INTERNATIONAL SA V COMMONWEALTH AND BEYOND
CATHERINE BOND
For as long as plain packaging legislation had been floated as an option for tobacco products in Australia, tobacco companies had threatened legal action against such a regime. Those threats became action when two tobacco companies separately commenced litigation in the High Court of Australia claiming that the Tobacco Plain Packaging Act 2011 (Cth) breached section 51(xxxi) of the Australian Constitution. Yet, the Act survived that challenge and remains in force to this day. This article reviews the introduction of the Act and subsequent challenge, and closely analyses the judgments comprising the decision in JT International SA v Commonwealth. It then examines how plain packaging has operated in practice, including enforcement of the regime and unexpected legal issues arising from its application. This article concludes with a reflection on what the Commonwealth’s victory regarding plain packaging means for constitutional intellectual property issues more generally.
I INTRODUCTION
As soon as plain packaging legislation was floated as an option for tobacco products in Australia, tobacco companies threatened legal action should such a regime be passed into law. In response, both government and academic lawyers stated that any legal action taken against such a measure would likely be unsuccessful. When the Labor Government announced in 2010 that it had decided to introduce tobacco plain packaging, these legal threats turned into action. Before the legislation had even been passed by the federal Parliament, Philip Morris Asia had launched international legal action against the Commonwealth of Australia.1 Following the passing of the Tobacco Plain Packaging Act 2011 (Cth), two tobacco conglomerates, JT International SA and British American Tobacco Australasia (‘BAT’,2 which holds 47 per cent of the tobacco market in Australia),3 separately commenced litigation against the Commonwealth in the High Court of Australia. In both matters it was argued that, in restricting the use of their registered trade marks and mandating requirements for the appearance of the physical product, the Tobacco Plain Packaging Act breached section 51(xxxi) of the Australian Constitution by effecting an acquisition of their intellectual property (‘IP’). That provision grants power to the Commonwealth to acquire property from a person, company or state, but also guarantees that, where property is acquired, the Commonwealth must compensate the previous owner on ‘just terms’.4
Catherine Bond, Senior Lecturer, Faculty of Law, UNSW Sydney. With thanks to Michael Handler for our helpful discussions surrounding this topic and Chantel Cotterell for research and proof-reading assistance. 1 See Attorney-General’s Department (Aust), Tobacco Plain Packaging — Investor–State Arbitration
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When the matters were heard together before the High Court, Van Nelle Tabak Nederland BV, Philip Morris Ltd and Imperial Tobacco Australia Ltd had been given leave to intervene on behalf of the plaintiffs. In 2011, Philip Morris Australia comprised 36 per cent of the Australian tobacco market; and Imperial Tobacco Australia held 16 per cent of the Australian cigarette retail market.5 The governments of Queensland, the Australian Capital Territory and the Northern Territory were also granted leave to intervene on behalf of the defendants, while the Cancer Council of Australia sought to appear as amicus curiae but was ultimately denied. A full bench of the Court, led by Chief Justice Robert French, heard the case.
During its nearly nine-year span, the French High Court delivered a number of surprising judgments involving IP laws.6 The decision in JT International SA v Commonwealth7 (‘JTI’) was not one of those cases.8 A majority of six justices, in five judgments, confirmed what government and academic lawyers had been arguing all along: tobacco plain packaging was not in breach of section 51(xxxi) of the Australian Constitution. Heydon J dissented, finding for the tobacco companies in a judgment that was also highly critical of the Commonwealth’s alleged attitude to section 51(xxxi).
Having survived that challenge, the Commonwealth government was free to implement and develop its plain packaging regime. While the government itself changed hands from Labor to the Liberal and National Coalition in 2013, the plain packaging regime has continued. There has not always been strict compliance with the measures imposed, but, to this date, the Commonwealth has not had to prosecute for any breach or impose any civil penalties. At the same time, a number of unexpected legal issues have arisen, most recently in the Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd9 litigation in the Federal Court of Australia. At first instance and on appeal, the issue for determination was whether a company which transfers cigarettes from their original packaging into plain packaging is in breach of the Trade Marks Act 1995 (Cth).
This article examines the Tobacco Plain Packaging Act and the broader plain packaging regime from creation, to its constitutional challenge and beyond. It focuses on the Australian experience and does not deal with any international legal issues or developments.10 In Part II it reviews the Commonwealth government decision to introduce a plain packaging regime and summarises the relevant statutory provisions and their effects. This Part then moves to an
5 Department of Health, above n 3, 48 (citation omitted). 6 See eg, IceTV Pty Ltd v Nine Network Australia Pty Ltd (2009) 239 CLR 458; D’Arcy v Myriad Genetics Inc (2015) 258 CLR 334. 7 (2012) 250 CLR 1. 8 As Liberman notes, ‘[t]he High Court’s decision upholding Australia’s plain packaging regime came as no surprise’: Jonathan Liberman, ‘Plainly Constitutional: The Upholding of Plain Tobacco Packaging by the High Court of Australia’ (2013) 39 American Journal of Law & Medicine 361, 380. 9 See Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2015] FCA 1086; Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91. 10 See eg, Tania Voon, Andrew D Mitchell and Jonathan Liberman (eds), Public Health and Plain Packaging of Cigarettes: Legal Issues (Edward Elgar Publishing, 2012); Daniel Gervais, ‘Plain Packaging and the TRIPS Agreement: A Response to Professors Davison, Mitchell and Voon’ (2013) 23 Australian Intellectual Property Journal 96; Mark Davison, ‘Plain Packaging and the TRIPS Agreement: A Response to Professor Gervais’ (2013) 23 Australian Intellectual Property Journal 160; Enrico Bonadio, ‘Bans and Restrictions on the Use of Trademarks and Consumers’ Health’ [2014] 4 Intellectual Property Quarterly 326; Jonathan Griffiths, ‘“On the Back of a Cigarette Packet”: Standardised Packaging Legislation and the Tobacco Industry’s Fundamental Right to (Intellectual) Property’ [2015] 4 Intellectual Property Quarterly 343; Mark Davison, ‘The Various Legal Challenges to Tobacco Packaging Regulations’ (2016) 26 Australian Intellectual Property Journal 141; Sharon Givoni, ‘Plain Packaging Laws in Australia’ (2016) 29 Australian Intellectual Property Law Bulletin 167. QUT Law Review 17 (2), November 2017 | 2
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond examination of the constitutional issues raised during the drafting and enactment of the legislation and the arguments that the plaintiff tobacco companies and the Commonwealth as defendant made before the High Court. Part III explores each of the judgments made by the High Court — the separate findings of French CJ, Gummow, Hayne and Bell JJ, Crennan and Kiefel JJ and the dissenting opinion of Heydon J.
In Part IV, the article moves its analysis of plain packaging beyond JTI. It examines the operation of the regime over the past five years, including the recent post-implementation review evaluating its effectiveness in meeting the objects of plain packaging, and recent legal issues raised in the Federal Court of Australia over trade mark infringement for tobacco products repackaged in plain packaging. Part V concludes this article with a brief reflection on the relationship between the Constitution and IP in Australia and the potential for a broader plain packaging regime.
II THE TOBACCO PLAIN PACKAGING ACT 2011 (CTH) AND THE AUSTRALIAN CONSTITUTION
A The Introduction and Operation of the Act
In the early 21st century, brands and branding have a more substantial impact on the daily lives of the Australian community than many would care to admit. Every day decisions from what bottled water to buy to what type of car to drive are affected by branding. The same can be said of tobacco products, though this may be surprising to those who either do not smoke or do not engage in frequent smoking. As Freeman, Chapman and Rimmer commented in an oft-cited 2008 article, ‘[j]ust as designer clothing, accessories and cars serve as social cues to style, status and character so too can cigarette packs signify a range of user attributes.’11
The packaging of tobacco products and the appearance of the product themselves, whether cigarettes, cigars, rolling tobacco or another form, have gained increasing significance as, since the late 1980s, stricter rules have been placed on the prevalence and position of tobacco advertising.12 A 2016 review into the Tobacco Plain Packaging Act and regime noted that, as a result of these restrictions, ‘[t]he tobacco pack was therefore, one of the last remaining key sources of marketing that the tobacco industry could use to influence current and potential consumers.’13 The space available on that packaging was limited, however, when graphic health warnings, providing confronting photographs of the health effects of smoking, were mandated by the government.14
Many tobacco companies, long before such restrictions were introduced, had sought IP protection for their logos, in plain and stylised formats, primarily through trade mark registration. In Australia, for example, British American Tobacco Australia has held the trade mark registration for the word mark ‘LUCKY STRIKE’, in Class 34 for ‘Manufactured tobacco’, since 1958.15 It also has registered trade marks for a series of stylised trade marks, including registration for a mark featuring the words ‘LUCKY STRIKE “IT’S TOASTED”’
11 Becky Freeman, Simon Chapman and Matthew Rimmer, ‘The Case for the Plain Packaging of Tobacco Products’ (2008) 103 Addiction 580, 580. 12 Sam Ricketson, ‘Plain Packaging Legislation for Tobacco Products and Trade Marks in the High Court of Australia’ (2013) 3 Queen Mary Journal of Intellectual Property 224, 225. 13 Department of Health, above n 3, 10. 14 See eg, Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations 2004 (Cth). 15 Australian TM Number 151409. See IP Australia, Trade Marks
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products since 1944.16 While trade marks have traditionally been viewed as a ‘badge of origin’,17 it has also been recognised that users may derive ‘association’ benefits from aligning themselves with certain brands, a point noted above and recognised by tobacco companies.
In the late 1980s to early 1990s the idea of plain or generic packaging of tobacco products began to circulate within academic and government research,18 the idea being that standard or visually unpleasant packaging would dissuade members of the community from starting smoking, or motivate them to make the decision to quit. A number of parliamentary committees investigated but rejected the option, but the idea continued to gain traction.19 In 2007, when Kevin Rudd took office as the first Labor Prime Minister of Australia since 1996, a National Preventative Health Taskforce was created to, among other matters, establish a ‘National Preventative Health Strategy’ and to make recommendations for tackling the three biggest preventative health issues affecting the Australian community: obesity, tobacco consumption and alcohol consumption.20
Recommendations made by the National Preventative Health Taskforce were one of the motivating factors behind the government’s subsequent decision to introduce plain packaging.21 As noted in the 2016 report of the Post-implementation Review: Tobacco Plain Packaging, these factors also included ‘[n]ational and international evidence on the effectiveness of plain packaging’ and a series of recommendations made ‘by two separate parliamentary inquiries’.22
One of those parliamentary inquiries was into a Private Member’s Bill, the Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009 (Cth), introduced into the federal Parliament by then Family First Senator Steven Fielding. The Bill was referred to the Senate Community Affairs Legislation Committee23 and it was this consultation that generated the first significant, concentrated wave of discussion on the constitutional elements that might be raised by any legislation creating plain tobacco packaging, as will be considered below. However, before the Committee was even due to report, the government (with Kevin Rudd still in the position of Prime Minister and Nicola Roxon as Minister for Health and Ageing) announced its decision to introduce plain packaging and the inquiry was suspended following the dissolution of the federal Parliament, pending an election in mid-2010.24
The Labor government, now led by Julia Gillard, was returned to power and the push to introduce plain packaging legislation resumed. The Department of Health and Ageing released an exposure draft of the proposed legislation and sought submissions on its provisions.25 The
16 Australian TM Number 81899. 17 See eg, Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45, 65. 18 Matthew Thomas, Department of Parliamentary Services (Cth), ‘Tobacco Plain Packaging Bill’, Bills Digest, No 35 of 2011–12, 24 August 2011, 7–8. 19 Ibid 8. 20 National Preventative Health Taskforce (Aust), Australia: The Healthiest Country by 2020: National Health Strategy: Overview (2009) 7
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond formal legislation, comprising the Tobacco Plain Packaging Bill 2011 (Cth) and Trade Marks Amendment (Tobacco Plain Packaging Bill) 2011 (Cth) were introduced into the House of Representatives on 6 July 2011. Despite a protracted passage, both Bills were approved by Parliament and received Royal Assent on 1 December 2011. Section 3 provided:
(1) The objects of this Act are: (a) to improve public health by: (i) discouraging people from taking up smoking, or using tobacco products; and (ii) encouraging people to give up smoking, and to stop using tobacco products; and (iii) discouraging people who have given up smoking, or who have stopped using tobacco products, from relapsing; and (iv) reducing people’s exposure to smoke from tobacco products; and (b) to give effect to certain obligations that Australia has as a party to the Convention on Tobacco Control. (2) It is the intention of the Parliament to contribute to achieving the objects in subsection (1) by regulating the retail packaging and appearance of tobacco products in order to: (a) reduce the appeal of tobacco products to consumers; and (b) increase the effectiveness of health warnings on the retail packaging of tobacco products; and (c) reduce the ability of the retail packaging of tobacco products to mislead consumers about the harmful effects of smoking or using tobacco products.
These objects take on greater significance in the arguments of the Commonwealth in JTI, and the five year post-implementation review of the regime, discussed below.
The Tobacco Plain Packaging Act, already quite extensive at 103 pages as passed, was supplemented by the Tobacco Plain Packaging Regulations 2011 (Cth) and designed to work in conjunction with what became the Competition and Consumer (Tobacco) Information Standard 2011 (Cth) (the ‘Information Standard’).26 While only the Act and Regulations were the subject of the constitutional challenge in JTI, it is important to consider the effect of the Information Standard, as the requirements imposed therein were relevant to the challenge.
Table 1 summarises the effect of these different enactments on the physical features of tobacco products, providing a holistic picture of the regime itself. It focuses specifically on retail packaging for cigarettes;27 these account for ‘the largest segment of the tobacco product market in Australia’.28
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Table 1: Main requirements imposed by the Tobacco Plain Packaging Act, Tobacco Plain Packaging Regulations and the Information Standard for retail packaging for cigarettes.
Physical Requirement Enacting Measure Feature Shape Rectangle, with a flip top lid Tobacco Plain Packaging Act sub- Height — between 85mm and 125mm ss 18(2), (3) Width — between 55mm and 82mm Tobacco Plain Packaging Depth — between 20mm and 42mm Regulations reg 2.1.1 Colour and Matt finish; must be a ‘drab dark brown’, Tobacco Plain Packaging Act sub- finish of specifically Pantone 448C.29 Inner surface ss 18(2), 19(2) packaging must be white; lining of foil must be silver Tobacco Plain Packaging with white backing Regulations reg 2.2.1(2), (3), 4 Made only of cardboard Inner and No ‘decorative ridges, embossing, bulges or Tobacco Plain Packaging Act sub- outer surfaces other irregularities of shape or texture, or any s 18(1)(a) other embellishments’ Material not No trade mark or mark may appear Tobacco Plain Packaging Act sub- permitted to ss 20(1), (2) appear on retail packaging Material that The ‘brand, business or company name for Tobacco Plain Packaging Act may appear the tobacco products, and any variant name ss 20(3), 21 on retail for the tobacco products’, in Lucida Sans Tobacco Plain Packaging packaging font; ‘in [a] normal weighted regular font’; Regulations regs 2.3.1–2.3.4 and no larger than 10-point size Material Front of pack must feature a warning Information Standard s 2.2 Item 1; mandated to statement in Helvetica font, in upper case pts 3 and 4 (which contain appear on lettering and in bold; and a graphic. These combinations of the warning retail items ‘must cover at least 75% of the total statements, graphics, explanatory packaging area’ [emphasis added] messages and information messages to be applied to retail Back of pack must feature a warning packaging for cigarettes); pt 9 divs statement in Helvetica font, in upper case 3 and 4 lettering and in bold; a graphic ‘with an overlay of the Quitline logo’; an explanatory message in Helvetica font, lower and upper case in bold and normal. These items ‘must cover at least 90% of the total area’ [emphasis added]
Longest side must feature an information message, in Helvetica font, in black lettering over a yellow background, including the word ‘WARNING’. This ‘must cover at least 25% of the total area’ [emphasis added]
29 Pantone 448C was ‘found in market research to be optimal in terms of decreasing the appeal and attractiveness of tobacco packaging’: Explanatory Statement, Select Legislative Instrument 2011, No 263, Tobacco Plain Packaging Act 2011 and Tobacco Plain Packaging Regulations 2011, 8 (Attachment B).
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Chapter 3 of the Act created a range of criminal offences and civil penalties for failing to meet the requirements, for example, in the sale or supply of tobacco products where ‘the retail packaging does not comply’;30 or by packaging tobacco in material not complying with the requirements of the Act and Regulations;31 or by ‘[m]anufacturing non-compliant retail packaging’,32 among others. Special provision was made for failure to comply by a constitutional corporation.33 The Act also provided authorities with broad powers of investigation34 and, pursuant to section 108, mandated yearly reporting of the infringement notices and warning letters issued by virtue of the Act.
If tobacco companies had their way, however, the High Court would find the Tobacco Plain Packaging Act invalid before any of these elements came into effect.
B Constitutional Issues
The introduction of the Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009 into the federal Parliament sparked tobacco companies into action. As noted above, the Bill was referred to the Senate Community Affairs Legislation Committee, which called for submissions, and received 58 responses.35 Philip Morris Ltd and Imperial Tobacco Australia Ltd made submissions and, while this Bill was not as extensive as the eventual Tobacco Plain Packaging Act, in its submission Philip Morris argued that:
In Australia, Senator Fielding’s plain packaging proposal represents an unconstitutional property acquisition for which compensation would be due. PML is the owner and licensee of highly valuable intellectual property used in the course of its business, including registered trade marks, registered designs, brand goodwill and cigarette packaging. These are exactly the elements of the pack Senator Fielding’s Bill seeks to control. PML’s property rights, including the exclusive right to use its registered trade marks, registered designs, brand goodwill, cigarette packaging and cigarette packaging not yet in existence, are all species of property protected by section 51(xxxi) of the Commonwealth Constitution.36
This was one of the first of many appearances that section 51(xxxi) would make in the plain packaging debate.37 As noted briefly above, that section operates as both a power of the
30 Tobacco Plain Packaging Act s 31. 31 Ibid s 33. 32 Ibid s 34. 33 Ibid ch 3 pt 3. 34 Ibid ch 4. 35 A full list of submissions received by the Committee is at: Senate Standing Committee on Community Affairs, Parliament of Australia, Inquiry into Plain Tobacco Packaging (Removing Branding from Cigarette Packs) Bill 2009 (7 June 2010)
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Commonwealth Parliament and guarantees remuneration on ‘just terms’ where the Commonwealth exercises that power to acquire property. It reads:
The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: … (xxxi) the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws[.]
Thus, tobacco companies argued that in regulating what could appear on their cigarette packets, including restricting the use of trade marks on those packets, the Commonwealth had acquired their property (a proposition discussed in greater detail below). As a result, it was posited, the Commonwealth would be liable to compensate the tobacco companies for this acquisition with the requisite ‘just terms’ — with the unpopular idea of taxpayer funds directed towards tobacco companies cited often over the next two years.38 Indeed, Tim Wilson, then of the Institute of Public Affairs and now federal parliamentarian, contended that the ‘just terms’ the government may be required to pay would amount to a ‘gift from taxpayers to tobacco companies … [ranging] from $378m to $3,027m per year’.39 These arguments — and those figures — continued, as the Gillard government released an exposure draft of its planned plain packaging legislation and, later, when the Bill that would eventually become the Tobacco Plain Packaging Act was introduced into Parliament.40
What was questionable, however, was what ‘property’ the Commonwealth acquired and how it had done this under the Act. The Trade Marks Act 1995 (Cth) does provide that trade marks are personal property,41 and the High Court had previously confirmed IP could be acquired under section 51(xxxi) of the Constitution.42 Under the Trade Marks Act the owner of a trade mark, once registered, acquires the following rights pursuant to section 20:
(1) If a trade mark is registered, the registered owner of the trade mark has, subject to this Part, the exclusive rights: (a) to use the trade mark; and (b) to authorise other persons to use the trade mark; in relation to the goods and/or services in respect of which the trade mark is registered.
Section 20 has been interpreted as creating a negative rather than a positive right — that is, the exclusive right under Trade Marks Act does not give the trade mark owner the right to use the
38 See eg, Tim Wilson, ‘Plain Packaging Ploy Likely to Go Up in Smoke’, The Australian (online), 30 April 2010
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond registered mark, but to exclude others from doing so43 — a point that French CJ suggested caused difficulties for the arguments of the plaintiffs in JTI.44 Under the Tobacco Plain Packaging Act, the Commonwealth did not gain any right to use the trade marks themselves. Also, and significantly, the Act provided that affected marks could not be refused registration for being contrary to law or revoked on account of non-use.45 However, the plaintiffs argued that something less could amount to an acquisition of property. For example, Philip Morris posited that ‘[t]he extinguishment of these property rights would afford the Commonwealth the benefit of having full control of the cigarette packaging, freed from competing rights of PML to control the cigarette packaging’.46 Similarly, in an oft-cited 2011 article, Stern and Draudins commented that:
While the concept of ‘acquisition’ may require a corresponding or related benefit to be conferred on the Commonwealth or some other person, ‘there does not need to be correspondence either in appearance, value or characterisation between what has been lost and what may have been acquired’.
An example of a ‘corresponding benefit’ acquired by the federal government is, in the view of health advocates and indeed as set out in the Bill, the increased prominence of the health messages.47
Both IP and constitutional law scholars dismissed the constitutional claims.48 Nonetheless, these arguments were taken seriously enough by the government that the eventual Tobacco Plain Packaging Act included a special section dealing with acquisition of property ‘out of an abundance of caution’,49 seeking to ensure that even with an effective constitutional challenge, no ‘gift’ would ever be payable to a tobacco company. This provision, section 15, stated in part that the Act would ‘not apply … [where] its operation would result in an acquisition of property … otherwise than on just terms’50 and if the restrictions on ‘use of a trade mark’ constituted an acquisition of property, then that ‘trade mark … may be used on or in relation to the retail packaging of tobacco products’.51
43 See eg, JT International v Cth (2012) 250 CLR 1, 31 (French CJ); 125 (Kiefel J). But see Evans and Bosland, who consider that section 20 confers negative and positive rights: Simon Evans and Jason Bosland, ‘Plain Packaging of Cigarettes and Constitutional Property Rights’ in Tania Voon, Andrew D Mitchell and Jonathan Liberman (eds), Public Health and Plain Packaging of Cigarettes: Legal Issues (Edward Elgar Publishing, 2012) 48, 51–6. Heydon J in dissent took a similar view: see JT International v Cth (2012) 250 CLR 1, 79 (Heydon J). 44 JT International v Cth (2012) 250 CLR 1, 34 (French CJ). 45 Tobacco Plain Packaging Act s 28. 46 Philip Morris Limited, above n 36, 4. 47 Stephen Stern and Olivia Draudins, ‘Generic Packaging — A Bridge (Over the Bodies of IP Rights) Too Far?’ (2011) 23 Australian Intellectual Property Law Bulletin 146, 149, quoting Smith v ANL Ltd (2000) 204 CLR 493, 542 (Callinan J) (citations omitted). 48 See Mark Davison, ‘Plain Packaging Bill to Extinguish Some Tobacco Trade Marks’, ABC News (online), 15 April 2011
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C Before the High Court: Arguments of the Plaintiffs
As noted above, in early to mid-December 2011 two tobacco companies brought separate actions before the High Court challenging the validity of the Tobacco Plain Packaging Act. One company, JT International SA, was the owner of the trade mark for ‘Old Holborn’ rolling tobacco and the exclusive licensee of four registered trade marks relating to ‘Camel’ cigarettes.52 It was these trade marks, in addition to its product get-up, that JTI argued constituted property, and that the Commonwealth had subsequently acquired that property, under the Act.53 The other group of companies, collectively referred to here and in the judgments as BAT, was the producer and distributor of a range of cigarettes including Winfield and Dunhill.54 BAT contended that a far broader range of its IP had been acquired under the Tobacco Plain Packaging Act, including registered and unregistered trade marks; get-up; goodwill and reputation; design rights; patent rights; copyright protection for certain artistic and literary works; and packaging rights, among others.55
Gavan Griffith QC, a former Commonwealth Solicitor General, appeared for JTI. Griffith argued that JTI’s trade marks and get-up had been acquired by the Commonwealth; as a result of the Tobacco Plain Packaging Act these ‘rights … [were] reduced to a “bare husk”’.56 That ‘extinguishment … [gave] rise to a measurable and identifiable advantage to the Commonwealth’ — namely, the fact that the Commonwealth was able to use the space on cigarette packets freed up by the Act to impose the requirements of the Information Standard.57 In support of this argument, Griffith noted the High Court had previously found ‘[t]he property acquired does not have to correspond exactly with what is taken’.58 It was also argued that the Commonwealth’s ability to meet the objects of the statute, namely ‘improving public health and … the effectiveness of the health warnings’ was also ‘a measurable and identifiable advantage’.59 But for the existence of section 15, extracted above, the Act would be unconstitutional.60
Counsel for BAT made similar arguments, stating that:
The Act deprives the trade marks of any value and it places material in the place on the packaging where BAT would have used its trade marks. … The Commonwealth’s advantage is control of the use of, and of using, the space on the packaging which would be used by the mark. The Commonwealth is relieved of the cost of acquiring that space. The owner of the ‘Quitline’ mark obtains the benefit of increased prominence by reason of the prohibition of BAT’s intellectual property.61
This idea of ‘control’ was also put forward by counsel for Philip Morris, as an intervener; it was argued that the Tobacco Plain Packaging Act ‘confer[red] on the Commonwealth complete
52 JT International v Cth (2012) 250 CLR 1, 36–7 (Gummow J). 53 Ibid 6 (G Griffith QC) (during argument). 54 Ibid 37 (Gummow J), 90 (Crennan J). 55 Ibid 7 (AJ Myers QC) (during argument), 25 (French CJ). 56 Ibid 6 (G Griffith QC) (during argument). 57 Ibid. 58 Ibid (citation omitted). 59 Ibid. 60 Ibid 23–4 (French CJ). 61 Ibid 8 (AJ Myers QC) (during argument) (citation omitted). QUT Law Review 17 (2), November 2017 | 10
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond control over exploitation of the packaging and over how and where the intellectual property rights may be exploited’.62 This ‘change of control’ was the acquisition requiring just terms.63
Nonetheless, it was noted that the plaintiffs and interveners experienced ‘difficulties’ in presenting their arguments to the Court.64 Rimmer, who attended all three days of the hearings later commented that ‘as an expert in IP, the arguments of the tobacco companies about acquisition of property often seemed synthetic and unreal to me’.65
D Before the High Court: Arguments of the Defendant
Stephen Gageler SC, the Commonwealth Solicitor-General who would, later in 2012, be appointed a Justice of the High Court, represented the government. The primary arguments disputed the characterisation of the property (while it accepted that the trade marks were property, it was claimed that ‘get-up’ did not constitute property)66 and any alleged acquisition of property affected by the Act. In order to effect an acquisition, the Commonwealth contended, the government needed to ‘[acquire] an interest in property, however slight or insubstantial’.67 What had occurred here was simply ‘a diminution of use or value of a thing in which some right of the property exists’.68
The Commonwealth also made a number of arguments that were more difficult to establish. It was claimed that, even if an acquisition of property had occurred, no compensation was payable as this was ‘no more than a necessary consequence or incident of a restriction on a commercial trading activity where that restriction is reasonably necessary to prevent or reduce harm caused by that trading activity to members of the public or to public health’.69 As will now be explored, the members of the High Court placed different emphases on the arguments made by the plaintiffs and defendants in their judgments.
III THE FINDINGS OF THE HIGH COURT OF AUSTRALIA
In reaching an outcome, the Justices of the High Court essentially had to answer the following questions:
1. What constituted property in this case, for section 51(xxxi) to apply? 2. Was that property acquired by the Commonwealth, or another person, pursuant to the provisions of the Tobacco Plain Packaging Act? 3. If there was an acquisition, did the Tobacco Plain Packaging Act provide just terms in those circumstances; or Regardless, did the argument of the Commonwealth as to ‘reasonable necessity’ apply, thereby negating the payment of ‘just terms’; or
62 Ibid 9 (AC Archibald QC) (during argument). 63 Ibid 10. 64 Liberman, above n 8, 374. 65 Matthew Rimmer, ‘Cigarettes Will Kill You: The High Court of Australia and Plain Packaging of Tobacco Products’, WIPO Magazine (February 2013)
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Did section 15 apply, to sever the invalid provisions?70
The majority of the judgments focused on the first two questions, with some remarks as to the final question made in obiter, and in the dissenting opinion of Heydon J.
A French CJ
While, as Liberman has noted, JTI ‘did not involve consideration of the merits of plain packaging as a policy intervention’,71 in his judgment French CJ placed great emphasis on the ‘purposive elements reflecting public policy considerations’ that have always been present in ‘the statutory creation of [IP] rights’.72 This ‘statutory purpose’, his Honour considered, ‘may be relevant to the question whether and in what circumstances restriction or regulation of their enjoyment by a law of the Commonwealth amounts to acquisition of property for the purposes of s 51(xxxi)’.73 Although French CJ was not as precise in his reference to the different types of IP and property potentially affected by the Act, his Honour spent part of his judgment examining the nature of IP rights and how this affected the issues of the case. As with other members of the Court, it was considered that these were negative rights — that as BAT proposed, were ‘rights to exclude others’, which would have ‘no substance’ if use of the rights is restricted.74 In the present circumstances, this posed difficulties for the plaintiffs, given that ‘the negative character of the plaintiffs’ property rights leaves something of a logical gap between the restrictions on their enjoyment and the accrual of any benefit to the Commonwealth or any other person’.75 This factor was considered important as, while French CJ considered that ‘space’ (on packets) was created by the regime, the Commonwealth did not acquire any property.76
His Honour was also careful in making the distinction between a ‘taking’ of property as opposed to an acquisition, as required by section 51(xxix), stating that ‘[t]aking involves deprivation of property seen from the perspective of its owner. Acquisition involves receipt of something seen from the perspective of the acquirer’.77 In establishing what constitutes an acquisition under section 51(xxxi), the Chief Justice cited the findings of Mason J in Commonwealth v Tasmania (‘the Tasmanian Dam Case’) noting that ‘there must be an acquisition whereby the Commonwealth or another acquires an interest in property, however slight or insubstantial it may be’.78 The comments of Justice Deane in that case, in relation to the relevant ‘proprietary rights’ acquired, would play a significant role in the judgments of Gummow J and Hayne and Bell JJ, and the dissenting view of Heydon J.
In JTI, no proprietary right, ‘interest[,] or benefit’ in relation to the IP of the plaintiffs was acquired by the Commonwealth.79 French CJ similarly rejected the ‘space’ and ‘control’ arguments, finding ‘that the public purposes to be advanced and the public benefits to be derived from the regulatory scheme outweigh those public purposes and public benefits which
70 Fletcher provides a similar list: see Daniel Fletcher, ‘JT International SA v Commonwealth: Tobacco Plain Packaging’ (2013) 35 Sydney Law Review 827, 830. 71 Liberman, above n 8, 377. 72 JT International v Cth (2012) 250 CLR 1, 27 (French CJ). 73 Ibid 28. 74 Ibid 32; see also 31. 75 Ibid 34. 76 Ibid. 77 Ibid 33 (citation omitted). 78 Ibid 34, citing Commonwealth v Tasmania (1983) 158 CLR 1, 145 (Mason J). 79 Ibid. QUT Law Review 17 (2), November 2017 | 12
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond underpin the statutory intellectual property rights and the common law rights enjoyed by the plaintiffs. The scheme does that without effecting an acquisition.’80
B Gummow J
Gummow J was also sensitive to the specific issues posed by the nature of IP rights and the repercussions of these for the plaintiffs’ case,81 but was critical of the arguments of the plaintiffs regarding the ‘cardboard boxes’ as property as ‘both unreal and synthetic’.82 His Honour also focused on the distinction between a ‘taking’ as opposed to an acquisition, finding that the former had actually occurred in this case on account of the ‘sufficient impairment’ of the rights of the plaintiff.83 In reaching this conclusion, his Honour took time to compare section 51(xxxi) with the Fifth Amendment of the United States Constitution, which only requires the lesser action of ‘taking’, rather than acquisition, in order to be invoked successfully.84
The judgment of Gummow J was similarly precise in its unpacking of arguments regarding the nature of the benefit or interest that must accrue to the Commonwealth or another person under the alleged impugned legislation. As noted above, for section 51(xxxi) to apply, the Commonwealth does not need to receive the exact rights that it is said to have acquired (for example, here it did not need to receive ownership of the tobacco company trade marks for the constitutional provision to be infringed). In JTI the plaintiffs sought to rely on a comment made by Deane J in obiter in the Tasmanian Dam Case that, in some circumstances, section 51(xxxi) can be invoked in the absence of a ‘corresponding benefit of a proprietary nature’.85 Gummow J rejected this (although Heydon J, in dissent, explored the ‘proprietary’ aspect of this comment in greater detail, as outlined below).
Thus, although there was a ‘taking’, there was ‘no acquisition of any property’.86 Similarly, although Gummow J agreed that the rights were ‘denuded of their value’, that did not amount to an acquisition.87 His Honour was also particularly dismissive of the argument that fulfilment of a legislative goal or a treaty obligation could amount to an acquisition:
JTI submits (i) there can be an ‘acquisition’ within s 51(xxxi) which is not proprietary in nature and (ii) the pursuit of the legislative purposes in s 3 of the Packaging Act confers the requisite advantage upon the Commonwealth to satisfy the requirement of an ‘acquisition’. Proposition (i) should be rejected as inconsistent with the authorities discussed above. As to (ii), pursuit of the legislative objectives stated in s 3 of the Packaging Act does not yield a benefit or advantage to the Commonwealth which is proprietary in nature.
No doubt the implementation in municipal law of a treaty obligation of sufficient specificity may be a ‘purpose in respect of which the Parliament has power to make laws’ within the meaning of s 51(xxxi). However, the reasoning and outcome in the Tasmanian Dam Case indicates, as is apparent from the passage in the reasons of Mason J set out above, that the
80 Ibid (citation omitted). 81 Ibid 39. 82 Ibid 55 (citation omitted). 83 Ibid 47. 84 Ibid 51–2. 85 Ibid 57. 86 Ibid 47. 87 Ibid 59.
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mere discharge by the Commonwealth of a treaty obligation itself is insufficient to provide an ‘acquisition’ by the Commonwealth.88
His Honour further rejected the ‘control’ argument, agreeing with the finding of the joint judgment of Hayne and Bell JJ, discussed below, that ‘compliance with federal law’ does not amount to control or acquisition.89
C Hayne and Bell JJ
The decision of Hayne and Bell JJ is significant for several reasons, including their reiteration of the ‘bedrock principle’ to be applied in section 51(xxxi) cases90 and their Honours’ criticisms of the characterisation of the ‘Commonwealth’ for the present proceedings.91 In the first section of the joint judgment, Hayne and Bell JJ sought to dismiss a number of the different interpretations that had been accorded to section 51(xxxi) during argument. It was noted the Court had consistently found ‘that s 51(xxxi) does not give protection to “the general commercial and economic position occupied by traders”’,92 and that:
There can be no acquisition of property without ‘the Commonwealth or another acquir[ing] an interest in property, however slight or insubstantial it may be’. Giving a liberal construction to ‘acquisition’ and ‘property’ does not, and must not, erode the bedrock established by the text of s 51(xxxi): there must be an acquisition of property.
The arguments advanced by the tobacco companies sought to depart from this bedrock principle. … They said that there need be no acquisition of ‘property’, or of a benefit or advantage of a proprietary nature, to engage s 51(xxxi). But that submission must run aground on the bedrock that has been identified.93
As to what the Commonwealth was said to acquire in the case, Hayne and Bell JJ summarised this list as follows:
‘use’ or ‘control’ of the (surface of) tobacco packaging; free advertising space; ‘control’ over what appears on retail packaging and thus ‘control’ over the ‘exploitation’ of that packaging; the removal from packaging of what the Commonwealth wanted removed and its replacement by what the Commonwealth wanted put there.94
However, none of these circumstances could be said to create any acquisition of property: ‘[c]ompliance with the … [Tobacco Plain Packaging Act] creates no proprietary interest’.95
D Crennan J
The findings of Crennan J are noteworthy on account of her Honour’s recognition of how the plaintiffs were still able to use their trade marks under the Tobacco Plain Packaging Act. After
88 Ibid 62 (citations omitted). 89 Ibid 63. 90 Ibid 68. 91 Ibid 72. 92 Ibid 67, citing Federal Council of the British Medical Association in Australia v Commonwealth (1949) 79 CLR 201, 270 (Dixon J). 93 Ibid 68 (emphasis in original), citing the Tasmanian Dam Case (1983) 158 CLR 1, 145 (Mason J). 94 Ibid 70. 95 Ibid 71. QUT Law Review 17 (2), November 2017 | 14
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond reviewing the rights accruing to trade mark owners,96 her Honour summarised the issues for consideration simply in the following way:
Whether subsequent legislative prohibitions or restrictions on the use of incorporeal property created by statute will amount to an acquisition of property for the purposes of s 51(xxxi) must depend on the nature of the rights attaching to the incorporeal property, and whether, for the purposes of the Commonwealth, the prohibitions or restrictions: (a) give, or effectively give, the Commonwealth or another a right to use the incorporeal property wholly or partly to the exclusion of the owner; or (b) bestow some other identifiable benefit or advantage upon the Commonwealth or another which can be characterised as proprietary.97
Rather than examining the discussion purely from the perspective of what benefit accrued to the plaintiff, Crennan J considered what benefits in the trade marks remained with trade mark owners and licensees, both through registration and in the get-up and goodwill still associated with their brands.98 Her Honour found that while the Tobacco Plain Packaging Act ‘restricted’ how JTI, BAT and the other plaintiffs could use their trade marks, what was still permitted by the Act, namely the appearance of the company name and cigarette or tobacco brand on the package itself was ‘capable of discharging the core function of a trade mark — distinguishing the registered owner’s goods from those of another, thereby attracting and maintaining goodwill’.99 As in other majority judgments, her Honour was also critical of the ‘control’ argument100 and rejected the proposition that fulfilment of the objects of the Act plus the additional requirements imposed by the Information Standard created any benefit.101 Therefore, while recognising that the Act imposed significant restrictions on the plaintiff’s IP, Crennan J found that the requirements of section 51(xxxi) were not fulfilled.
E Kiefel J
The decision of Kiefel J provided the most extensive discussion of the historical regulation of cigarette and tobacco packaging and advertising in Australia.102 Her Honour agreed that under the Tobacco Plain Packaging Act ‘some or much of the value of … [the plaintiff’s] intellectual property has been lost’, but this was not enough to effect an acquisition of property.103 As with the other judgments, Kiefel J also recognised the failure of the plaintiffs to state precisely what ‘proprietary interest’ or benefit the Commonwealth had gained to create the acquisition, beyond the ‘control of … space’ issue advanced in the course of the proceedings.104 Responding to the argument of BAT that the Commonwealth had ‘saved the cost of acquiring the space for its own advertising’, her Honour considered that ‘the plaintiffs’ businesses may be harmed, but the Commonwealth does not thereby acquire something in the nature of property’.105
96 Ibid 97–9 (Crennan J). 97 Ibid 99. 98 Ibid 104–5. 99 Ibid 105 (citation omitted). 100 Ibid 106–7. 101 Ibid 108. 102 Ibid 114–18 (Kiefel J). 103 Ibid 128. 104 Ibid 129. 105 Ibid 132.
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Kiefel J also considered the argument of the Commonwealth that any acquisition created by the Act could avoid the application of the ‘just terms’ requirement where it was ‘no more than a consequence or incident of a restriction on a commercial trading activity, where that restriction is reasonably necessary to prevent or reduce the harm that activity causes to public health’.106 However, her Honour rejected this argument, noting that, as drafted and interpreted by the High Court, the constitutional provision in question ‘contains its own limits and conditions’ — as appeared in this case — and found that the proposed ‘test of proportionality’ was not appropriate.107
F Heydon J in Dissent
In contrast to his fellow Justices, Heydon J did find that the Commonwealth was in breach of section 51(xxxi). His Honour relied on comments made by Deane J in the Tasmanian Dam Case, invoked by the plaintiffs but dismissed by other members of the Court, quoting the following paragraph in his decision:
.... The range of the prohibited acts is such that the practical effect of the benefit obtained by the Commonwealth is that the Commonwealth can ensure, by proceedings for penalties and injunctive relief if necessary, that the land remains in the condition which the Commonwealth, for its own purposes, desires to have conserved. In these circumstances, the obtaining by the Commonwealth of the benefit acquired under the Regulations is properly to be seen as a purported acquisition of property for a purpose in respect of which the Parliament has power to make laws. .…108
In applying this reasoning to the current case, Heydon J found that while the rights granted by the Trade Marks Act remained with their owners, the Tobacco Plain Packaging Act ‘deprived them of control of their property, and of the benefits of control. The [Tobacco Plain Packaging Act] gave that control and the benefits of that control to the Commonwealth’.109 Thus, in opposition to the conclusions reached by other members of the Court, his Honour considered the effect on the plaintiffs’ rights and the ‘control’ gained by the Commonwealth was enough to trigger section 51(xxxi).
These findings were even extended to the space on the cigarette packets, filled by the Information Standard, arguments also rejected in the other judgments. Heydon J phrased how this constituted an acquisition in the following terms:
The legislation deprives the proprietors of their statutory and common law intellectual property rights and their rights to use the surfaces of their own chattels. It gives new, related rights to the Commonwealth. One is the right to command how what survived of the intellectual property (the brand, business or company name) should be used. Another is the right to command how the surfaces of the proprietors’ chattels should be employed. The proprietors called this conscripting, commandeering or dominating the space. To put it more neutrally, 110 these new rights are rights of control.
106 Ibid 122. 107 Ibid 123. 108 Tasmanian Dam Case (1983) 158 CLR 1, 287 (Deane J) quoted by Heydon J in JT International v Cth (2012) 250 CLR 1, 76 (emphasis in original). 109 JT International v Cth (2012) 250 CLR 1, 80. 110 Ibid 82–3. His Honour also rejected the argument of the Commonwealth that s 51(xxxi) did not apply where there was ‘[t]he existence of a regulatory goal’: see 85. QUT Law Review 17 (2), November 2017 | 16
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond
In concluding his judgment, Heydon J was particularly critical of the defendant, going so far as to describe the Commonwealth as having a ‘hatred’ for section 51(xxxi), considering it akin to a ‘flame’ and it being the duty of the High Court to ‘ensure that that flame does not start a destructive blaze’.111 The possibility of that ‘destructive blaze’ manifesting itself in other forms of plain packaging is considered in the conclusion to this article.
IV BEYOND JTI
With the constitutional proceedings concluded, the Commonwealth was free to focus on the daily implementation of the plain packaging regime, overseen by the Department of Health. For the most part, it appears that over the last five years the regime has been successful in two respects. First, tobacco manufacturers, suppliers and retailers appear to be taking their obligations under the Tobacco Plain Packaging Act seriously. Second, it also appears that the regime is meeting the objective detailed in section 3 of the Act. Still, plain packaging has led to some unanticipated legal consequences that resulted in Federal Court action. Each of these aspects is examined in greater detail below.
During the first five years of tobacco plain packaging in Australia, there have been no prosecutions or civil penalties for breach of the regime. While specific information on investigations and the circumstances leading to the issue of warning letters and infringement notices is not publicly available, the Annual Reports for the Department of Health do provide some basic data, as required by section 108 of the Act. As a result, it is possible to summarise the number of matters investigated; the number of warning letters issued; and the number of infringement notices (Table 2).
Table 2: Matters Investigated and Issuances Under the Tobacco Plain Packaging Act, 2012 to 2016112
Infringement Notices Period Investigations Warning Letters Issued Issued 2012–2013 59 8 3 2013–2014 59 19 2014–2015 226 2015–2016 210 60 1
If one measure of success is the level of compliance with a statute, then it appears from this data that the Act has been successful. There has been no need to reach the full level of investigatory powers provided by the statute, no prosecutions and no civil penalties. Having said that, these figures are quite different from those presented in other outlets, including media coverage. In early March 2017 the Sydney Morning Herald reported that ‘[t]he Department of Health has received 1054 individual complaints involving 746 cases’ following the
111 Ibid 89. 112 Data collated from Department of Health and Ageing and Department of Health Annual Reports: Department of Health and Ageing (Aust), Annual Report 2012–2013 Vol 2 (2013), 240; Department of Health (Aust), Annual Report 2013–2014 Vol 2 (2014), 191; Department of Health (Aust), Annual Report 2014–2015 (2015), 156; Department of Health (Aust), Annual Report 2015–2016 (2016), 241. For the 2015–16 figure, it is noted in the report that ‘[t]he majority of these matters were continuing investigations from the previous year’. Reports available at
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products introduction of the Tobacco Plain Packaging Act.113 While such figures could be reconciled with the table above — for example, a complaint does not automatically lead to an investigation — it was further stated that ‘[o]f those cases, 459 were cleared and 135 warning letters were issued’,114 the latter figure being considerably larger than the number of warning letters listed in Table 2. The report, based in part on evidence presented to a Senate Estimates Committee, also noted that one $2000 fine for breach of the Act had been issued to date, and that there was evidence that tobacco companies had been experimenting with alternative methods of packaging that could be in breach.115
More generally, the effectiveness of the regime in meeting its objects was also highlighted in the recent post-implementation review into the Act. In late 2014 the Department of Health commissioned Siggins Miller Consultants to undertake a broad review into the operation and effectiveness of the Act.116 The review consulted with and sought submissions from the community, including health organisations, industry representatives and retailers. Perhaps unsurprisingly, those who advocated the measures argued that tobacco plain packaging was succeeding in lowering smoking rates in Australia, and those who disagreed with the legislation believed there was no discernible drop in smoking uptake and rates.117 In its submission, for example, the Institute of Public Affairs argued that not only was there evidence to suggest national smoking rates had risen since 2012, plain packaging had caused an increase in the importation of illegal tobacco into Australia.118 Despite those submissions, however, the Post- implementation Review: Tobacco Plain Packaging report referred to multiple data sources indicating that the objectives of the regime were being met and smoking levels in Australia were decreasing. These included data as diverse as:
an increase in calls to Quitline (a staggering 78 per cent increase in New South Wales, for example);119 a decrease in ‘daily smoking prevalence’ in Australia, ‘from 15.1% in 2010 to 12.8% in 2013’ in data collected as part of the National Drug Strategy Household Survey;120 and, data released by the Australian Bureau of Statistics 2014–2015 National Health Survey that ‘daily smoking prevalence’ had, on their figures, dropped from 16.1 per cent in 2011–12 (the time of introduction of plain packaging) to 14.5 per cent in 2014–15.121
In its Executive Summary, the report states that:
While the full effect of the tobacco plain packaging measure is expected to be realised over time, the evidence examined in this PIR suggests that the measure is achieving its aims. This evidence shows that tobacco plain packaging is having a positive impact on its specific mechanisms as envisaged in the [Tobacco Plain Packaging Act]. All of the major datasets examined also showed on-going drops in the national smoking prevalence in Australia. These
113 Amy Remeikis, ‘Just One $2000 Fine Issued Since Tough New Plain Packaging Laws Introduced’, Sydney Morning Herald (online), 5 March 2017
Tobacco Plain Packaging in Australia: JT International v Commonwealth and Beyond
decreases cannot be entirely attributed to plain packaging given the range of tobacco control measures in place in Australia, including media campaigns and Australia’s tobacco excise regime. However, analysis of Roy Morgan Single Source Survey Data shows that the 2012 packaging changes (plain packaging combined with enhanced graphic health warnings) have contributed to declines in smoking prevalence, even at this early time after implementation.122
In litigation before the Federal Court in 2015 and 2016, however, some unanticipated legal consequences of the operation of the Tobacco Plain Packaging Act were revealed. In 2014, Scandinavian Tobacco Group Eersel BC (‘STG’), which produces Henri Wintermans, Café Crème and La Paz cigars in Holland and Belgium,123 along with its Australian subsidiary, commenced action against Trojan Trading Company Pty Ltd (‘Trojan’) for trade mark infringement. Trojan legally acquired and packaged STG cigars and, in order to sell these into Australia, would ‘[remove] the cigars from the original packaging and [transfer] them individually to compliant retail plain packaging’ that met the packaging requirements of the Act.124 Trojan would re-apply the relevant STG trade mark, also within the confines of what was permitted under the Act.125 The practicalities of the plain packaging regime, in Trojan’s circumstances, were summarised as follows:
… if the Australian Parliament had not passed the plain packaging legislation, Trojan could have sold the cigars in the boxes or packets with packaging placed on them by STG Eersel. But Trojan could not do so because of the plain packaging legislation. Thus, it replaced the packaging in order to conform with the law and in doing so placed the trade marks on the packets to disclose the connection between the goods and the registered owner (not it).126
That action, however, was argued to amount to trade mark infringement pursuant to section 120(1) of the Trade Marks Act, in addition to passing off and a breach of Australian consumer protection provisions.127 Before Allsop CJ, the matter came down to two issues: had Trojan used the trade marks of STG as trade marks and, if so, whether section 123 of the Trade Marks Act, which permits use of a registered trade mark that has previously been applied to ‘goods by, or with the consent of, the registered owner’ applied in the circumstances. His Honour answered in the affirmative to both questions. In reapplying the trade mark, Trojan has used it within the requirements of section 120(1);128 that reapplication was a consequence of the operation of the Tobacco Plain Packaging Act (though not a defence to what Trojan had done). However, it was found that section 123 applied in the circumstances: Allsop CJ commented that the provision itself was designed to ‘[protect] … non-infringing use … which does no more than draw a connection between the goods and the registered owner’.129
On appeal, the Full Federal Court examined the same issues but, in a joint judgment, agreed with the findings of Allsop CJ.130 Thus, while the Tobacco Plain Packaging Act has generated
122 Ibid 4. 123 Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2015] FCA 1086 (9 October 2015) [11]. 124 Ibid [18]. 125 Ibid [18], [43]. 126 Ibid [81]. 127 Ibid [2], [5]. 128 Ibid [72]. 129 Ibid [85]. The additional actions were similarly dismissed: see [97]–[99] and [101]–[102]. 130 Scandinavian Tobacco Group Eersel BV v Trojan Trading Company Pty Ltd [2016] FCAFC 91 (24 June 2016) [56], [67], [77]. The additional actions were similarly dismissed: see [85] and [88].
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In examining the findings and effect of JTI, Rimmer argued that ‘the ruling of the High Court … will spark an “Olive Revolution” — in which other countries will follow the lead of Australia and mandate the plain packaging of tobacco products’.131 While this may be overemphasising the significance of the High Court decision (Ricketson has commented that the case ‘may have limited relevance for other countries’),132 Rimmer was correct in his prediction that other countries would be inspired by the Australian experience.
Perhaps surprisingly, what has not come to pass in Australia is an ‘Olive Revolution’ for other products that may interfere with a healthy lifestyle — for example alcohol, soft drinks and junk food.133 During the passage of the Tobacco Plain Packaging Act, there was speculation that these types of products would be next to receive the plain packaging treatment and, since the enactment of the legislation, there have been increased calls to extend the regime to these products. Ricketson has argued that JTI ‘provides a clear basis for confidence at the national level that analogous restrictions … would be constitutional’.134 As illustrated in this article, the Commonwealth government arguably felt initially cautious about the legal consequences of plain packaging laws, particularly given the continued lobbying of tobacco companies over the two years it took to introduce the regime in Australia. However, its successful defence of the legislation in the High Court, in addition to the findings of the post-implementation review that the regime is meeting its objectives, may motivate the government to consider creating a broader plain packaging regime. This space may be very different when Australian reaches the 10th anniversary of tobacco plain packaging.
131 Matthew Rimmer, ‘The High Court of Australia and the Marlboro Man: The Battle over the Plain Packaging of Tobacco Products’ in Tania Voon, Andrew D Mitchell and Jonathan Liberman (eds), Regulating Tobacco, Alcohol and Unhealthy Foods: The Legal Issues (Routledge, 2014) 337, 339. 132 Ricketson, above n 12, 226. 133 Ibid 239. 134 Ibid. QUT Law Review 17 (2), November 2017 | 20
QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 21-45 DOI: 10.5204/qutlr.v17i2.701
REGULATORY CHILL: LEARNINGS FROM NEW ZEALAND’S PLAIN PACKAGING TOBACCO LAW
JANE KELSEY*
Australia’s precedent-setting Tobacco Plain Packaging Act 2011 (Cth) took two and a half years from its public announcement to come into force. The fact that New Zealand’s almost identical legislation was still not in force six years after it was first mooted suggests it was subject to regulatory chill through both specific threats and systemic influences within the policy making process. This article examines the hypothesis that three elements associated with New Zealand’s free trade and investment treaties combined to chill a National government that was already luke-warm on a plain packaging law: perceived risks from litigation; associated arguments pressed by politically influential industry lobbyists; and the bias in the regulatory management regime that favours minimal intervention and empowers the tobacco industry, consistent with contemporary trade agreements. It concludes that these mutually reinforcing factors delayed the passage of New Zealand’s legislation, but did not see it abandoned. This suggests that health policies supported by public opinion, international health obligations, and precedents from other countries can withstand regulatory chill. But the difference from Australia also highlights the need to pay more attention to ways of neutralising those factors if a Smokefree Aotearoa New Zealand, and similarly ground-breaking public health policies, are to be achieved.
I INTRODUCTION
The six-year unfinished saga of New Zealand’s plain packaging of tobacco legislation has all the hallmarks of regulatory chill. The legislation is almost identical to Australia’s precedent- setting Tobacco Plain Packaging Act 2011 (Cth). That took only two and a half years from its inception to come into force.1 The Australian government announced its proposed legislation in April 2010, released a consultation document and exposure draft in April 2011 and had introduced the legislation to both houses of Parliament by August 2011. This occurred despite Philip Morris Asia serving a notice of claim that it would challenge the law under the Australia Hong Kong bilateral investment treaty. The Commonwealth Parliament passed the Act in November 2011, with implementing regulations made the same month. The Act came into force a year later on 1 December 2012.
In stark contrast, the New Zealand process will have dragged on for seven years. The government announced a raft of policies in March 2011 that aimed to make Aotearoa New Zealand ‘effectively smoke-free’ by 2025.2 That included possible alignment with Australia’s
* LLBHons (VUW), BCL (Oxon), MPhil (Cantab), PhD (Akl), Professor of Law, Faculty of Law, The University of Auckland, New Zealand. 1 The history of the initiative is set out in: Cancer Council of Victoria, Plain Tobacco Packaging in Australia: A Time-line of Legislative Developments and Litigation (2014)
QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products plain packaging law. The consultation document was released in July 2012.3 The Smoke-free Environments (Tobacco Plain Packaging) Bill 2013 was introduced in December 2013. The Health Select Committee heard submissions and reported in August 2014.4 The second reading was not held until June 2016. The Bill was given the Royal assent on 14 September 2016 to come into force at an unspecified date, or in 18 months (March 2018) at the latest. A consultation and exposure draft of the implementing regulations was released in May 2016, with one month for submissions. The regulations were published a year later and the government announced the Act would finally enter into force on 14 March 2018.5
The divergence between Australia and New Zealand is all the more striking because the Trans- Tasman Mutual Recognition Arrangement (‘TTMRA’) 1998 permits any product that can be sold legally in one country to be sold in the other, including branded tobacco.6 The Australian government had to take a permanent exemption for its plain packaging legislation to avoid the conflict with New Zealand’s law.7
Why has the New Zealand government been so reticent to follow Australia’s lead? There is unlikely to be a definitive answer until enough time has elapsed for politicians and officials to speak frankly. This article explores the most likely factors. It starts by developing a typology of specific and systemic forms of regulatory chill, expanding on work done in the context of international trade and investment agreements. The working hypothesis is that three elements related to those agreements combined to chill a government that was already luke-warm on a plain packaging law: perceived risks associated with New Zealand’s free trade and investment treaties; the agency of politically influential industry lobbyists who articulated those risks; and the bias in the regulatory management regime that favours minimal intervention and empowers the tobacco industry, which is reinforced by international trade and investment rules. The article concludes that these factors are mutually reinforcing and delayed the passage of plain packaging legislation, but did not see it abandoned. That suggests health policies that are strongly supported by public opinion, international health obligations and precedents from other countries can withstand regulatory chill. But the difference between Australia and New Zealand also highlights the need for more attention to ways of neutralising those three factors if Smokefree Aotearoa New Zealand, and similarly ground-breaking public health policies, are to be achieved.
II REGULATORY CHILL
When governments are reluctant to explain, or even admit to delaying the implementation of the policies or laws to which they are publicly committed there are legitimate grounds to suspect they have been influenced by factors other than the merits. It is notoriously difficult to prove why something has not happened. It may be that governments were chilled from taking action by such considerations as threats of legal action or the potential for collateral damage to
Representatives in Accordance with Standing Order 248 (J 1), 14 March 2011) (‘Government response to Māori Affairs Committee Inquiry’). 3 Ministry of Health (NZ), Proposal to Introduce Plain Packaging of Tobacco Products in New Zealand. Consultation Document (2012) (‘Consultation on Plain Packaging Proposal’). 4 Health Select Committee (NZ), Smoke-free Environments (Plain Packaging Tobacco) Amendment Bill: Government Bill: As Reported from the Health Committee (2014) (‘Health Select Committee Report’) 5 Hon Nicky Wagner, ‘Standardised Packaging Regulations Released’ (Media Release, 8 June 2017). 6 Trans-Tasman Mutual Recognition Arrangement 1998, signed 14 June 1996 (entered into force 1 May 1998) art 3.1. 7 Schedule 1 of the Trans-Tasman Mutual Recognition Legislation Amendment (Tobacco Plain Packaging) Regulation 2013 (Cth) provides for a permanent exemption. QUT Law Review 17 (2), November 2017 | 22
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law important economic or social interests. Perhaps they made an assessment that the political costs of proceeding outweighed the gains, or they may have been reluctant starters seeking an excuse for their inaction. Decisions not to act will often be a combination of these and other factors.
Contemporary policy research has paid increasing attention to the phenomenon known as regulatory chill in influencing such decisions. The ‘chilling effect’ is a well known concept in the relation to free speech, where the legitimate exercise of rights is inhibited or discouraged by threats or attacks by opponents of an idea. Regulatory chill describes the reluctance of policy makers to adopt legislation or other regulation after factors external to the merits of the proposal are injected into the decision-making process with the intention of influencing the regulatory outcome. The most common examples are direct threats of, or actual, legal action or warnings that proceeding would cause undesirable economic or reputational harm. The grounds are usually speculative or rely on untested legal arguments. A more systemic form of chill occurs when similar considerations are internalised through the policy criteria, procedures and bureaucratic hierarchy of the government’s own processes.
Regulatory chill is not a new phenomenon. However, the influence on specific policies of extrinsic factors and players outside the relevant policy community has attracted more attention in recent years as new and far-reaching international trade and investment agreements have grown in number, scope and prominence.
A Direct Chill
The most obvious form of chilling is where a government capitulates to specific threats of litigation directed at a proposed policy or law. Australian political scientist Kyla Tienhaara used several in-depth case studies to distill the impacts of actual or threatened litigation on environmental policy, especially foreign investors’ use of international arbitration to enforce the obligations of states under bilateral investment treaties (‘BITs’) or investment chapters of free trade agreements (‘FTAs’).8 She found three concerns were most influential: financial consequences of a loss due to litigation; reputational impacts among investors if the government is sued; and negative experience of previous litigation. The existence of enforceable external constraints could also shift the locus of power over decisions from Parliament to the executive, as trade and other economic ministries increased their influence over specific decisions. Noting the difficulty of knowing when governments are using these risks as cover for controversial action or inaction, Tienhaara stressed the need for a political science perspective when assessing how policy processes actually work, rather than purely legal assessments.9
Threats from the tobacco industry to bring investment disputes around the world have now become a cause célèbre.10 An early study by Canadian constitutional scholar David Schneiderman linked Canada’s decision to drop its plain packaging proposal to threats by Philip Morris International and JR Reynolds in 1994 to bring an investment dispute under the
8 Kyla Tienhaara, The Expropriation of Environmental Governance: Protecting Foreign Investors at the Expense of Public Policy (Cambridge University Press, 2009) 262–4. 9 Kyla Tienhaara, ‘Regulatory Chill and the Threat of Arbitration: A View from Political Science’ in Chester Brown and Kate Miles (eds), Evolution in Investment Treaty Law and Arbitration (Cambridge University Press, 2011) 606, 606. 10 Vividly conveyed by comedian John Oliver in a satirical segment: ‘Tobacco’, Last Week Tonight with John Oliver (HBO) (15 February 2015)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products newly adopted North American Free Trade Agreement (‘NAFTA’).11 In later writings, Schneiderman contrasted that retreat with Australia’s determination to proceed with its law.12
B Systemic Chill
These examples of direct chill assume a degree of conscious deliberation by decision makers. Canadian legal scholar Gus Van Harten has stressed the institutional dimension of regulatory chill, as policy makers internalise these and related considerations.13 Van Harten and Dayna Scott carried out empirical research on how investor–state dispute settlement (‘ISDS’) under the investment chapter of NAFTA impacted on environmental policy making in Ontario.14 Interviews with policy makers about internal government processes confirmed that government ministries changed their approach to decision-making to account for concerns about ISDS. Trade ministries and trade lawyers also exerted a lot more influence over internal government decisions and pushed for a more centralised vetting process that gave them greater influence over other ministries’ decisions. Once there had been one ISDS dispute, the investment rules and potential for a dispute were likely to figure much more prominently in policy makers’ thinking. Several officials suspected that claims from trade officials that industry lobbies or affected businesses might bring a dispute were generated by the officials themselves, because the industries were known not to have raised them.
These scholarly analyses of regulatory chill informed legal arguments in New Zealand on whether the proposed Trans-Pacific Partnership Agreement15 (‘TPPA’) could have a chilling effect on government policies towards indigenous Māori. This argument was part of a claim brought in 2015 by a number of iwi (tribes), pan-Māori organisations, and eminent individuals to the Waitangi Tribunal.16 The claim alleged that the TPPA would breach the Crown’s obligations to Māori under the Treaty of Waitangi 1840. The impact of ISDS on New Zealand’s ability to achieve the smoke-free 2025 goal was one aspect of the claim. As discussed below, the smoke-free commitment had been triggered by a report in 2010 by the Māori Affairs Committee of the New Zealand Parliament on the disproportionate harm caused to Māori by tobacco use.17 The legal expert appointed to assist the tribunal, Amokura Kawharu, proposed a three-tiered typology of the potential impact of the TPPA on policy:18
(i) regulatory restraint, which is imposed by the rules of the Agreement;
11 David Schneiderman, Constitutionalizing Economic Globalization: Investment Rules and Democracy’s Promise (Cambridge University Press, 2008) 120–4. 12 David Schneiderman, ‘How to Govern Differently: Neo-liberalism, New Constitutionalism, and International Investment Law’ in Stephen Gill and Claire Cutler (eds), New Constitutionalism and World Order (Cambridge University Press, 2014) 165, 173–8. 13 Gus van Harten and Dayna Nadine Scott, ‘Investment Treaties and the Internal Vetting of Regulatory Proposals: A Case Study from Canada’ (2016) 7 Journal of International Dispute Settlement 92. 14 Ibid. 15 Trans-Pacific Partnership Agreement, concluded 5 October 2015 (not yet entered into force). 16 The broader Waitangi Tribunal claim and report are not directly relevant to this article, but the Report of the Waitangi Tribunal, Trans-Pacific Partnership Agreement WAI-2522 and pleadings can be accessed online: TPP Legal, Waitangi Tribunal (2016)
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law
(ii) regulatory chill, which occurs not only through direct threats of litigation, but includes shifts in emphasis within policy making generally as agreements become more wide-ranging; and (iii) the psychological effect of officials and judicial officers not wanting their decisions to be reviewed by an international tribunal.19
C Synthesis of Specific and Systemic Chill
This author, who was the legal expert assisting the claimants before the Waitangi Tribunal, developed an alternative typology that distinguishes between the specific and systemic mechanisms in Kawharu’s ‘regulatory chill’ category. A threat to litigate if a government proceeds with a measure, or the deterrent effect of disputes brought against other countries that have pursued similar measures, can cause a specific or direct form of chill along the lines identified by Tienhaara. The Crown’s expert in the Waitangi Tribunal hearing described this process as ‘prudent decisions based on risk assessment’, rather than chill.20 But the calculus is not simply actuarial or legal. Policy makers assess the legal, financial, economic and reputational risks of proceeding. Their decisions are heavily influenced by the disposition, competing priorities and relative power of different politicians, official agencies, policy advisers and government lawyers, and the access and effectiveness of the various lobbying interests and the broader public. Arguments can slow and stop a proposed government action, even if a state believes it has a compelling legal argument.
Chilling at the systemic level refers to mechanisms that are now built into the criteria, procedures and institutions for government decision-making through the cross-fertilisation of domestic processes and international agreements. Under the rubric of ‘best practice regulation’, both Australia and New Zealand have adopted neoliberal regulatory management regimes to evaluate the risks associated with different options to achieve a policy goal.21 The in-built criteria give preference to the least burdensome evidence-based option to achieve that goal.22 In recent years, this domestic regime has been complemented by similar criteria and processes in binding international trade agreements, which are subject to oversight and enforcement by other states.23 The details of these rules are discussed later in the article.
Risk assessments within the domestic process feature advice on the country’s international trade and investment obligations provided by trade ministries, which have assumed an elevated status in the bureaucratic hierarchy.24 Their incursions into policy decisions unrelated to trade and commerce reflect the direct and indirect impact of contemporary trade and investment
19 That concern was expressed by the dissenting arbitrator Professor McRae in William Ralph Clayton, William Richard Clayton, Douglas Clayton, Daniel Clayton and Bilcon of Delaware Inc v Government of Canada (2009) UNCITRAL, PCA Case No 2009–04, a NAFTA investment dispute that was discussed extensively during the claim. 20 Waitangi Tribunal, above n 18 (Penelope Ridings) 420. 21 Council of Australian Governments, Australian Government Guide to Regulation (2014); and Council of Australian Governments, Best Practice Regulation: A Guide for Ministerial Councils and Nation Standard Setting Bodies (2014); New Zealand Government, Government Expectations for Good Regulatory Practice (2017). 22 Jane Kelsey, The FIRE Economy. New Zealand’s Reckoning (Bridget Williams Books, 2015) 141–9. 23 For a discussion of the implications of the TPPA for tobacco control policy, see Jane Kelsey, ‘The Trans-Pacific Partnership Agreement: A Gold-Plated Gift to the Global Tobacco Industry?’ (2013) 39 American Journal of Law and Medicine 237, 246–50. 24 Specified risk factors in the New Zealand assessment process include whether any of the legislative options have the potential to be inconsistent with or have implications for New Zealand’s international obligations; and a second question relating to the TTMRA: New Zealand Treasury, Regulatory Impact Analysis Handbook (2013) [1.18].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products agreements on a broad range of policy areas.25 That input can be persuasive, overriding otherwise compelling arguments in favour of a policy; yet the arguments on which it is based are rarely contested or contestable, not least because their advice is commonly redacted from published documents.
The procedural element of the regulatory management regime requires that interested sectors of the public, including the affected industries within the country and offshore, are consulted at various stages of the policy process.26 As the tobacco case study in this article shows, this has provided numerous opportunities for the tobacco lobby to present self-serving interpretations of the country’s legal obligations and threaten litigation, which supplemented their input to the standard select committee processes. ‘Transparency’ chapters and rules have also become common in recent agreements, providing rights of input for other states and ‘interested persons’ into proposed laws and regulations and to have those views considered.27 Both mechanisms are highly valued by the tobacco industry as a means to circumvent the intention of Article 5.3 of the World Health Organization’s Framework Convention on Tobacco Control (‘FCTC’) to constrain the tobacco industry’s ability to influence policy decisions.28
III NEW ZEALAND’S PLAIN PACKAGING LAW
New Zealand’s most comprehensive tobacco control legislation, the Smoke-free Environments Act 1990 (NZ), was passed back in 1990.29 Table 1 sets out the more recent history of New Zealand’s path to implementing plain packaging reform.
Table 1: Timeline to Enactment of Tobacco Plain Packaging Legislation
Date Activity November 2010 Māori Affairs Committee Inquiry into the Tobacco Industry and the Consequences of Tobacco Use for Māori reports to Parliament 14 March 2011 Government Response to the Report of the Māori Affairs Committee of Inquiry into the Tobacco Industry and the Consequences of Tobacco Use 27 June 2011 Philip Morris Asia files a statement of claim against Australia’s Tobacco Plain Packaging Act 2011 under the Australia Hong Kong Bilateral Investment Treaty 1993 September 2011 Cabinet agrees to actively consider introduction of plain packaging in 2012 depending on advice on regulatory impacts and implications of trade and investment agreements December 2011 Confidence and Supply Agreement between National and Māori parties commits to work on plain packaging for cigarettes. Tariana Turia is made Associate Minister of Health
25 For example, the review of New Zealand’s patent law was influenced by assessments of potential conflicts with the TPPA then under negotiation, see: New Zealand Treasury, Best Practice Regulation: Principles and Assessments (2015) 23. 26 New Zealand Treasury, above n 24, Part 3. 27 Jane Kelsey, ‘The TPPA: Treaty-making, Parliamentary Democracy and the Rule of Law’ (TPPA Expert Paper Series, Paper No 1, 2015) 25–26
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13 March 2012 Ukraine lodges a request for consultations at the World Trade Organization challenging Australia’s Tobacco Plain Packaging Act 2011. 23 July 2012 Consultation document: Proposal to Introduce Plain Packaging of Tobacco Products in New Zealand and Regulatory Impact Statement is released 24 July 2012 New Zealand notifies the legislation to the WTO committee on Technical Barriers to Trade and invites intergovernmental submissions. 5 October 2012 Consultation is closed 21 November 2012 Analysis of submissions on the consultation document is released 18 February 2013 Cabinet agrees to legislation aligned to Australia’s. Associate Minister of Health announces the government’s decision to introduce the legislation. 19 February 2013 Prime Minister says the legislation may not proceed if Australia loses its legal challenges May 2013 Ministry of Health Statement of Intent 2013–2016 sets smoke-free goals for 2018 11 December 2013 Cabinet Legislation Committee approves introduction of the Smoke-free Environments (Tobacco Plain Packaging) Amendment Bill, subject to decisions on timing of entry into force 17 December 2013 The Bill is introduced to Parliament 11 February 2014 First reading of the Bill and referral to Select Committee 28 March 2014 Submissions close 5 August 2014 Select Committee reports on the Bill, renamed The Smoke-free (Standardisation of Tobacco Packaging and Tobacco Products) Bill 6 November 2015 The TPPA text is made public with an exclusion for tobacco control measures from ISDS 11 November 2015 Cabinet Social Policy Committee authorises preparation of an exposure draft of regulations and a consultation process for 2016 17 December 2015 Philip Morris Asia loses the investment dispute challenging Australia’s plain packaging laws 31 May 2016 Consultation document and exposure draft of the Standardised Tobacco Products and Packaging Draft Regulations is released 30 June 2016 Second reading of the Bill 29 July 2016 Submissions on the consultation document on the Regulations close 23 August 2016 Committee of Whole House debates the Bill 8 September 2016 Third reading of the Bill 14 September 2016 Royal assent and the Act becomes law, to come into force no later than 14 March 2018 December 2016 Cabinet decides to finalise the Regulations 4 May 2017 Informal reports that Australia has successfully defended the WTO challenge to its plain packaging law 6 June 2017 The Regulations are adopted 8 June 2017 Analysis of the submissions on the Regulations, dated May 2017, is released 14 March 2018 Date for the Act and Regulations to come into force
A The Māori Affairs Committee
Incremental steps over several decades have reduced overall tobacco use.30 But persistently high smoking rates among Māori prompted the Māori Affairs Committee of Parliament in 2009 to launch an inquiry into the industry and the effects of tobacco use on Māori. The initiative was driven by the Māori Party and led by Northern Māori Member of Parliament Hone Harawira and co-leader Tariana Turia. The committee’s hard-hitting report was published in November 2010 and stressed the urgency of effective action to stop smoking by Māori:31
30 Hon Tariana Turia, Minister of Health (NZ), Tobacco Control Achievements: Summary Report (Tabled in New Zealand Parliament, 2014). 31 Inquiry into the Tobacco Industry, above n 17, 10.
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With smoking rates amongst Māori double that of the general population, tobacco has a particularly devastating impact on Māori, and accounts for a significant portion of the life expectancy differential between Māori and non-Māori. More than 600 Māori die prematurely each year from smoking-related illnesses, and this loss, as well as the preceding addiction, erodes economic, social, and cultural wellbeing, and hinders Māori development aspirations and opportunities. Tobacco smoking delivers a major insult to whānau ora [health of the wider family].
The inquiry’s terms of reference called for public submissions on:
the historical actions of the tobacco industry to promote tobacco use amongst Māori; the impact of tobacco use on the health, economic, social and cultural wellbeing of Māori; the impact of tobacco use on Māori development aspirations and opportunities; what benefits may have accrued to Māori from tobacco use; what policy and legislative measures would be necessary to address the findings of the inquiry.32
The report’s 21 heads of recommendations included: ‘That the tobacco industry be required to provide tobacco products exclusively in plain packaging, harmonising with the proposed requirement in Australia from 2012’.33
B The National Government’s Policy
The government responded to the report in March 2011, committing New Zealand to ‘a longer term goal of reducing smoking prevalence and tobacco availability to minimal levels, thereby making New Zealand essentially a smoke-free nation by 2025’.34 ‘Minimal’ was never defined, but it has been treated as meaning around 5 per cent of adults.35 However, the government’s position on plain packaging was ambivalent; this was even before Philip Morris had lodged its statement of claim in the investment dispute against Australia:
The Government is monitoring Australia’s progress on its proposal to legislate for plain packaging of tobacco products in 2012, and will consider the possibility of New Zealand aligning with Australia. New Zealand Government officials have commenced discussions with respective Australian counterparts on the possible alignment. An initial report back to Cabinet is due by 30 June 2011.36
In September 2011, Cabinet recognised the desirability of aligning the two countries’ policies, consistent with the TTMRA, but said it would consider options ranging from full alignment with Australia to a separate regulatory regime.37
32 Ibid 13. 33 Ibid, Recommendation 7. 34 Government Response to Māori Affairs Committee Inquiry, above n 2, 4. 35 Framework Convention Alliance, ‘Smokefree 2025 Aotearoa/New Zealand’,
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law
Following the general election in 2011, the National government signed a confidence and supply agreement with the Māori Party in which they promised to work together towards plain packaging.38 In April 2012 the government announced a decision in principle to introduce a plain packaging regime aligned to Australia’s, but that was still subject to the outcome of a public consultation process.39 The consultation document and exposure draft were released in July 2012.40 A total of 292 submissions were received. Some 62 per cent of submitters supported the proposal, mostly because it was a logical next step to the smoke-free 2025 targets; 38 per cent were opposed.41 The vast bulk of domestic submitters were from the health sector, but over 60 submissions indicated links to the tobacco industry.42 Significantly, 48 of the 292 submissions were from overseas, of whom half were from business,43 and eighteen from government agencies and non-governmental organisations (‘NGOs’).
Cabinet decided in February 2013 that it would introduce the law.44 By that time Australia was facing an investment dispute from Philip Morris Asia and an industry-sponsored challenge by three countries at the World Trade Organization (‘WTO’).45 The Cabinet paper acknowledged there was a risk of legal proceedings, but expected greater certainty from Australia’s cases by the time New Zealand’s law was enacted; if not, the paper said its introduction could be delayed. Associate Health Minister Turia did not seek drafting instructions until August 2013.46 The legislation was given Priority Level 5, to be referred to the Health Select Committee before the end of the calendar year. The Cabinet Legislation Committee approved introduction of the legislation in December 2013, noting that ‘decisions on when to enact the legislation or when the regulations should come into force will need to take into account the progress of legal proceedings at the World Trade Organisation’.47
38 Relationship Accord and Confidence and Supply Agreement between the National Party and the Māori Party (December 2011). 39 Hon Tariana Turia, ‘Moving Towards Plain Packaging of Tobacco Products’ (Media Release, 19 April 2012)
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C The Legislative Process
The Smokefree Environments (Tobacco Plain Packaging) Amendment Bill 2013 (NZ) was introduced to the House just before it rose for 2013. No date was specified for entry into force of the Act, leaving the government’s options open pending the outcome of Australia’s disputes. The Bill was sent to the Health Select Committee in February 2014. Over 15 500 submissions were received, many in standard form, with 32 heard orally. The Committee reported back in August 2014.48 Aside from being renamed the Smokefree Environments (Tobacco Standardised Packaging) Amendment Bill 2015 (NZ), the most significant amendment expanded its purposes to recognise a cultural dimension. It was allocated Category 3 priority in the 2015 legislative programme: to be passed ‘if possible’ during the year.49
The Bill then languished. It was not until 11 November 2015 that the Cabinet Social Policy Committee considered the matter again. A Cabinet paper co-sponsored by the Office of Minister of Trade and the Office of Associate Minister of Health claimed that the Bill had ‘been progressing on standard parliamentary timeframes’ since its introduction in December 2013 and would shortly be given a second reading.50 However, they also acknowledged that waiting for Australia’s WTO dispute to be resolved before drafting regulations would attract complaints from the Bill’s supporters that ‘standardised packaging could not come into force before 2019, seven years after the decision was taken to proceed’.51
The Associate Minister was asked to prepare an exposure draft of regulations in the first half of 2016. The consultation would be undertaken through the Ministry of Health, working closely with the Ministry of Foreign Affairs and Trade (‘MFAT’). The consultation document was published in late May 2016 and submissions closed in late July 2016,52 although the analysis was not released for another ten months.53 Of the 61 submissions, 44 were from health or tobacco control NGOs, urging stronger regulations and inclusion of rules on compliance and enforcement.54 A majority of the five retail organisations’ submissions reprised concerns they had raised previously over new display laws: additional compliance costs, discrepancies with Australia’s regulations, and the precedent effect for other products.55 The six tobacco companies with a presence in New Zealand re-litigated the plain packaging law itself and urged government not to act until the WTO had resolved the dispute against Australia.56
The Cabinet decided to proceed with the regulations in December 2016,57 but chose not to announce that publicly. The regulations were adopted in late May 2017, after it became known
48 Health Select Committee Report, above n 4. 49 Cabinet Social Policy Committee (NZ), Standardised Tobacco Product Packaging: Update and Next Steps SOC-15-MIN-0041 [6]. 50 Office of the Minister of Trade, Office of the Associate Minister of Health, Cabinet Social Policy Committee (NZ), Standardised Tobacco Product Packaging: Update and Next Steps (November 2015) [3] (‘Standardised Tobacco Product Packaging’). 51 Ibid [61]. 52 Ministry of Health (NZ), Standardised Tobacco Products and Packaging Draft Regulations. Consultation Document (2016) (‘Consultation Document on Regulations’). 53 Ministry of Health (NZ), Standardised Tobacco Products Packaging Draft Regulations. Summary of Submissions (2017) (‘Summary of Submissions on Regulations’). 54 Ibid 3–5. 55 Ibid 5. 56 Ibid 6. 57 Cabinet Legislation Committee (NZ), Smoke-free Environment Regulations 2017 (2017) [2]. QUT Law Review 17 (2), November 2017 | 30
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law informally that Australia has won the panel stage of the WTO dispute.58 The government announced on 8 June that the Act and Regulations would come into force on 14 March 2018 (the final possible date under the Act).59 The remainder of this article considers the specific and systemic chilling effects that might explain this prolonged legislative process: New Zealand’s trade and investment agreements, the agency of industry lobbies, and the regulatory management regime. IV TRADE AND INVESTMENT AGREEMENTS
The recent prominence of trade and investment agreements in tobacco policy debates has taken many in the health community and health policy makers by surprise. Two factors have converged to create this effect. First, tobacco control policies have become more hard-line and effective, prompting the industry to use every available means to resist. Second, international trade agreements have expanded their reach quite dramatically. They now routinely include rules on non-trade topics, notably intellectual property rights and investment, that are designed to restrict governments’ policy options. As explained below, contemporary agreements also impose regulatory presumptions that favour business, and procedural obligations to ensure that foreign states and companies have prior warning and opportunities to comment on proposed regulation. Lawyers for investors have become quite audacious in exploiting investor-rights and investor-initiated enforcement of new investment chapters and old BITs.60
Tobacco companies have embraced these opportunities as they become increasingly marginalised from domestic policy-making, especially in the wake of the FCTC.61 They and their support groups have also widened their constituency of support with warnings of a slippery slope: that is, acceptance of plain packaging of tobacco as compliant with international trade and investment treaties will spread to labelling of other commercial products and exports.
Warnings that measures will breach the trade and investment rules are especially potent in New Zealand. Successive governments have prided themselves on the country’s reputation as an exemplary international trade citizen. New Zealand was a founding member of the General Agreement on Tariffs and Trade (‘GATT’) in 1947 and the WTO in 1995.62 It has only one active BIT, with Hong Kong, dating from 1995,63 but recent governments have enthusiastically negotiated new broad-ranging FTAs that increase the country’s exposure to complaints when regulating intellectual property rights, technical barriers to trade, and trade in services, as well
58 ‘Tobacco Logo Ban Said to Get WTO Backing in Landmark Case’, Bloomberg (online), 4 May 2017,
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products as to investor protections and investor enforcement.64 Development of New Zealand’s plain packaging legislation coincided with negotiations for the TPPA, where the risk of US corporations using ISDS to challenge New Zealand’s health policies featured prominently.65
A Specific Threats and Deterrents
The tobacco industry and its allies, local and foreign, played to the New Zealand government’s sensitivity at every opportunity. The analysis of submissions on the consultation document in 2012 shows 31 of the 292 submitters referred to the potential legal implications, many of whom were unlikely to support the proposal. They included 10 international manufacturers, seven international organisations, two manufacturer /exporter /importers, one professional association, and one international retailer.66 In particular, their submissions alleged breaches of the WTO’s Agreement on Trade-related Intellectual Property Rights (‘TRIPS’) and TBT, as well as the Paris Convention for the Protection of Industrial Property (1883).67 The intellectual property rights argument was also posed as a domestic legal issue of property rights and of freedom of expression under the Bill of Rights Act 1990 (NZ).68
These arguments were echoed in submissions to the Select Committee. The industry lobby focused on three issues: investment and WTO disputes; impacts on other exports of establishing a precedent for tobacco; and New Zealand’s reputation. Their threats to bring an investment dispute were aggressive but vague. British American Tobacco New Zealand (‘BATNZ’) told the Select Committee on the plain packaging Bill in 2014 that the legislation would breach investment treaties that protected companies within their group and would entitle them to ‘an arbitral award requiring New Zealand to repeal the legislation and/or pay substantial sums in compensation’.69 Their companies would take ‘all steps necessary to protect their investments from unlawful government interference’.70 Imperial Tobacco’s Global Director of Corporate Affairs Axel Gietz refused to rule out legal action when presenting its submission on the Bill.71
The tobacco industry was supported by umbrella lobby groups. The New Zealand Food and Grocery Council was the most important. Chief executive Katherine Rich focused on potential breaches of TRIPS and investment agreements, noting the latter allowed private companies to take action against governments.72 While disavowing expertise on the details and likelihood of
64 Penelope Ridings, ‘Investment Negotiations: Walking the Tightrope Between Offensive and Defensive Interests’, Insider (online), 5 October 2016
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law retaliation, she suggested it would be interesting to know whether MFAT officials had advised the Committee on the risk of litigation, in particular the views of Indonesia (which had brought a tobacco-related dispute against the US at the WTO73). Rich even described ISDS as a tool that is ‘modeled on basic tenets of democratic legal systems – promotes economic development by protecting investors from unequal and arbitrary action on the part of governments’.74 Threats were often accompanied by self-serving legal interpretations. An unnamed manufacturer baldly asserted that:
Public health justifications would not be a defence if the Government breaches an Investment Treaty through unfair, inequitable and discriminatory conduct. Even if in theory there could be a defence, given the absence of evidence that Plain Packaging would reduce tobacco consumption, the existence of suitable alternative tobacco control measures, and the fact that tobacco remains a legal product, it would be impossible for the Government to discharge its burden of proving that Plain Packaging is a proportionate, pressing and reasonable measure that is necessary for the protection of public health.75
The manufacturer hoped that ‘legal proceedings [would] not be required, but [it would] take all measures necessary to protect our valuable property rights from unlawful interference’.76
Some smoke-free advocates addressed the industry threats head-on, with 31 submissions on the 2012 consultation document arguing that health policy must take primacy over actions that might infringe a company’s rights, or as one said ‘public health overrules commercial profit or free trade for this industry’.77 A number acknowledged there were legal risks, but said that was no reason not to proceed. The Ministry of Health was urged not to be swayed or deterred by offshore business interests.78
There was a second limb of the industry arguments that sought directly to chill the policy process: the consequential risk to other products of setting a precedent on tobacco. This was almost certainly a more important consideration to the governing National Party, with its strong farming base and ideological commitment to free trade, than the smoke-free policy itself. Warnings of a slippery slope were especially potent coming from the Food and Grocery Council.79 Katherine Rich warned the Select Committee that compromising the right of companies to use their trademarks ‘will then become the beginning of standardised packaging for other products considered a health risk such as wine, confectionary and dairy products, particularly infant formula’.80 She predicted ‘the ensuing intellectual property scrap [on plain packaging of tobacco] could result in a pyrrhic victory for New Zealand’:81 if the WTO upheld the challenge to Australia’s law ‘then plain packaging for food and wine on which the New
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Zealand economy has a heavy reliance, may well be at risk’.82 Ironically, given the Council’s members are deeply integrated with Australian firms, Rich suggested that a ruling of compliance with the TTMRA might well jeopardise all trade except trans-Tasman trade.83
The industry also played the reputation card. The Food and Grocery Council stressed New Zealand’s reputation as a ‘very principled country in its trading, government, community and relationships, and a good global citizen’.84 Media reported a big US corporate lobby group had warned the plain packaging Bill both violated New Zealand’s trade obligations and damaged its leadership credentials.85
B The Government’s Response
Although heavily redacted, the official documents released on the government’s own initiative and under New Zealand’s Official Information Act 1982 show the officials and Cabinet evaluated the potential risks relating to the WTO, ISDS and the TTMRA at every stage of the policy process. Table 1 shows a strong correlation between the timing of New Zealand’s decisions and the status of Australia’s WTO dispute and the ISDS case under the Hong Kong– Australia BIT. Prime Minister John Key conceded in early 2013 that the litigation was behind the delays in progressing the law.86
It could be argued that the government was simply seeking to ensure compliance with its legal obligations — what Kawharu referred to as ‘regulatory restraint’ and the Crown’s expert called ‘prudent decision making’. However, New Zealand’s exposure to legal risk was no more, and arguably less than Australia’s, because New Zealand had fewer agreements, and an exception for non-discriminatory health measures in its only bilateral investment treaty (with Hong Kong),87 — an exception which was not in the Australian BIT. While Australia’s win in the investment dispute88 was crucial to Cabinet’s decision to pass the Bill, it noted that it could still delay the Act’s entry into force.89 Presumably, Cabinet was waiting for the WTO decision as well. There had been considerable criticism in the WTO’s TBT Committee when New Zealand notified the proposed law in July 2012.90 The government joined the WTO dispute against Australia as a third party, which gave it access to the arguments and an ability to assess the likely outcome. Cabinet’s decision in June 2017 to proceed was taken after the parties had received the confidential draft report, but without a formal decision.91
82 Food and Grocery Council Submission, above n 79, 7. 83 Ibid 4. 84 Ibid 6. 85 Radio New Zealand, ‘Minister Defends Plain Packaging’, Morning Report, 14 February 2014 (William Reinsch)
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law
The agreement that governments could block investor–state disputes over tobacco policies in the TPPA seems unlikely to have been a legal consideration,92 as that agreement could not have come into force before the legislation, and the exclusion would not prevent state–state enforcement of the investment chapter or other chapters in the agreement.93 There is no equivalent protection in the free trade agreement that New Zealand negotiated with South Korea during the same period and which came into force in December 2015.
The other legal obstacle, the TTMRA,94 had been removed in 2013. Australia initially took a temporary exemption for tobacco products to prevent the industry by-passing the plain packaging law by importing branded tobacco products from New Zealand.95 Temporary exemptions are meant to last for 12 months.96 Australia took a permanent exemption in 2013 as the New Zealand government continued to prevaricate.97
Overall, the pure ‘legal compliance’ argument is unconvincing. The publicly available policy documents show the government was concerned about the potential for litigation and its effects, not just the legality of its actions.98 For example, the paper for the Cabinet Committee in November 2015, entitled ‘Update and Next Steps’, focused on international developments.99 The headings show the officials provided assessments of the hearings in the WTO dispute against Australia. That was followed by a large redacted section on litigation risk, which officials said informed their advice on the timeline.
The same paper discussed the industry’s response to moves in other countries.100 It noted that the United Kingdom and Ireland had both passed detailed legislation for standardised packaging to come into force from 20 May 2016 and not faced WTO or ISDS disputes, although tobacco companies had commenced domestic legal proceedings which were now before the European Court of Justice. Canada, France, Norway and Singapore had notified their intentions to the WTO. The commentary accompanying these observations was also blacked
92 Trans-Pacific Partnership Agreement, art 29.5: ‘Tobacco Control Measures: A Party may elect to deny the benefits of Section B of Chapter 9 (Investment) with respect to claims challenging a tobacco control measure of the Party. Such a claim shall not be submitted to arbitration under Section B of Chapter 9 (Investment) if a Party has made such an election. If a Party has not elected to deny benefits with respect to such claims by the time of the submission of such a claim to arbitration under Section B of Chapter 9 (Investment), a Party may elect to deny benefits during the proceedings. For greater certainty, if a Party elects to deny benefits with respect to such claims, any such claim shall be dismissed.’ 93 Notably Chapter 8 Technical Barriers to Trade, Chapter 9 Intellectual Property, and Chapter 10 Cross-Border Trade in Services. The exclusion also does not affect the procedural chapters that entitle the tobacco industry to have input on proposed regulation. 94 New Zealand and Australia agreed to adopt a mutual recognition principle that goods produced in or imported into one country that can lawfully be sold in that country can also be sold lawfully in the other, without the need to comply with any of its legal requirements relating to sale. This obligation is implemented through each country’s domestic laws. See Trans-Tasman Mutual Recognition Act 1997 (NZ) s 10. See further Kelsey, above n 86, 40–1. 95 The legislative history in the Trans-Tasman Mutual Recognition Legislation Amendment (Tobacco Plain Packaging) Regulation 2013 (Cth) says: ‘The Tobacco Plain Packaging Act 2011 and these Regulations were temporarily exempted from the operation of the Trans-Tasman Mutual Recognition Act 1997 under s 46 of that Act and s 109 of the Tobacco Plain Packaging Act 2011. The temporary exemption operated from 1 October 2012 until the commencement of the Trans-Tasman Mutual Recognition Legislation Amendment (Tobacco Plain Packaging) Regulation 2013’, which provided for a permanent exemption. 96 Trans-Tasman Mutual Recognition Arrangement 1997, [4.2.1] and [4.2.2]. 97 Trans-Tasman Mutual Recognition Act 1997 (Cth) sch 2, pt 2. 98 Standardised Tobacco Product Packaging, above n 50 [6]. 99 Ibid. 100 Ibid [10]–[11].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products out. But it is clear that these considerations were determinative in the decision in November 2015 to release regulations for consultation: ‘This paper therefore proposes taking a next step towards developing the detailed regulations needed to implement’ the law.101
The discussion of trade law issues in the Cabinet paper regarding adoption of the regulations in June 2017 was also heavily redacted.102 While noting leaked information that Australia had prevailed in the WTO dispute, it said that could not be confirmed until the final report was released, which was not expected until late 2017 or early 2018. The paper then noted the default date for the Act to come into force was 14 March 2018. This clearly implied that March 2018 was as long as the government could legally delay the Act’s implementation, whatever the contervailing considerations.
There is no question that legal risks were a factor in delaying the New Zealand legislation. As noted, New Zealand had fewer concrete legal risks under investment agreements than Australia, and similar WTO exposure, but Australia chose to stare down those risks. There are certainly grounds to infer that the threats to pursue such litigation constituted a specific or direct chill on the government, and that associated risks to reputation and other exports were another factor in delaying the legislation.
V POLITICAL AGENCY
Regulatory chill requires agency. Not every intervention by pro-tobacco interests will contribute to a specific or direct chilling effect. But many will. They will also contribute to or reinforce the systemic or institutionalised bias that chills a government’s regulatory decisions. This section explores both dynamics in relation to New Zealand’s plain packaging law.
New Zealand can be described as an intimate society. In a small country with relatively few powerful corporations and individuals, the corporate–state nexus is particularly close. Political party officeholders and donors, well-connected bloggers, corporate funded think tanks and their executives, and industry lobbyists have ready access to the inner circle of law makers and senior bureaucrats. There is a small revolving door of lobbyists and consultants who have been, or subsequently become, politicians or trade negotiators. These interactions take place within a very thin political system of a unitary House of Parliament. Since the introduction of a Mixed- Member Proportional Representation electoral system in 1996, however, a requirement to govern through coalitions has generated a political market in which minor parties trade their allegiance for the government’s endorsement of favoured policies. As plain packaging showed, such commitments can prove fickle.
Small country syndrome also impacts on the community of public health advocates and academics. Access to funding for tobacco control research, programmes and advocacy is highly competitive, and allocations are susceptible to political sensitivities. The government buried a report by this author on the implications of New Zealand’s free trade and investment agreements for the Smoke-free 2025 goal,103 and the larger research grant of which it was part was threatened. Advocacy groups may seek to minimise such risks by not actively engaging on politically sensitive issues, such as demanding protection for tobacco control policies during trade and investment negotiations. But without their pressure, the pro-tobacco lobby can wield disproportionate influence.
101 Ibid [15] [emphasis added]. 102 Smoke-free Environments Legislation 2017, above n 91, [6]–[10]. 103 Report to the Tobacco Control Research Turanga, above n 86. QUT Law Review 17 (2), November 2017 | 36
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A Tobacco Industry Lobby
The tobacco industry deployed a familiar raft of campaign activities and strategies to oppose plain packaging, supplemented by personal links to politicians and the governing party. Imperial Tobacco New Zealand and BATNZ have the largest commercial presence in New Zealand. During the initial public consultation in 2012 the latter launched a mass media campaign under the slogan Agree-Disagree, using standard industry arguments to establish a constituency of support.104 The Ministry of Health rejected complaints that the campaign broke the law by promoting smoking, saying there were insufficient grounds for a prosecution.105 Canadian health academics noted similarities with the anti-plain packaging campaign there by JTI-MacDonald, with the equally unwarranted title of Both Sides of the Argument.106 Imperial Tobacco joined with Philip Morris and British American Tobacco in producing a multi-choice postcard targeted towards retailers and their workers and a template for retailers to fill in, and had a postcard of its own. Several generic letters were developed for retailers, one of which referred to the Australian litigation. Smokefree NZ, the Cancer Society, the Heart Foundation and Plainpacks.org also co-sponsored two postcards. The final count showed 8201 postcards in favour of the law and 11 814 opposed.
However, as in most countries, the tobacco industry had an image problem and personal appearances backfired. Imperial Tobacco’s submission on the Bill in 2015 was the most verbally aggressive among the industry. It described the legislation as ‘draconic’, ‘disproportionate and unlawful’, ‘premature’, in breach of New Zealand investment and trade agreements, lacking an evidence base, and more.107 At the same time, it depicted itself as a ‘truly Kiwi company’ committed to creating jobs, trading and sourcing with local suppliers and businesses, and collecting over $350 million in taxes and other duties. Imperial Tobacco’s Global Director of Corporate Affairs, Axel Gietz, who presented their 2015 submission, returned during consultations on the tobacco packaging Regulations in 2016. The visit was a public relations disaster. Veteran public broadcaster Kim Hill lost her patience over his obfuscations,108 and co-leader of the Māori Party called him a ‘corporate executioner’ and a ‘peddler of death’ on television.109
B Pro-tobacco Lobbyists
Big Tobacco relied on more credible lobby groups, notably the New Zealand Food and Grocery Council whose image and broader warnings about the slippery-slope effects of plain packaging were more likely to resonate with politicians, media and consumers. Their messaging, focused
104 Topics of the television advertisements were: theft of intellectual property, effects on wine exports of breaching trade rules, copying Australia’s untested laws, freedom of choice, and the slippery slope of plain labels for beer. Andrew Morehu Waa et al, ‘Analysis of the Logic and Framing of a Tobacco Industry Campaign Opposing Standardised Packaging Legislation in New Zealand’ (2016) Tobacco Control (Online First) doi:10.1136/tobaccocontrol-2016-053146. 105 Ibid 1. 106 Julia Smith, ‘Both Sides of the Argument? JTI-MacDonald’s Anti-Plain Packaging Spin in Canada’ BMJ Blog (online), 1 November 2016
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products entirely on factors designed to chill the government decision, largely set the terms of the debate in the media and consultation documents.
According to the Food and Grocery Council’s website, it ‘promotes the role the industry plays in the health and nutrition of New Zealanders in making better diet and lifestyle choices. … [and] at all times promotes the facts about safe food and good nutrition using an evidence- based approach’.110 Chief executive Katherine Rich was a senior National Party politician who left Parliament in 2008 after nine years in opposition. Rich presented the Council’s submission to the plain packaging Bill ‘on behalf of companies who sell products through supermarkets’, including tobacco.111 She said the Council supported all current laws and regulations relating to the production and sale of tobacco (although it had opposed legislation introducing new restrictions on displays in 2011).112 In 2012 the National Party, then in government, appointed Rich to its newly established Health Promotion Authority, whose job is to lead and support nation-wide health initiatives. Both she and the government denied any conflict of interest. However, Rich resigned in 2015, despite being cleared of conflict of interest allegations arising from leaked emails that suggested links to attacks by a right-wing blogger on academics who promoted tobacco and alcohol control policies.113
Other pro-tobacco lobbyists had strong political connections. Carrick Graham, son of a former National Party Cabinet minister, rose from selling tobacco to become spokesman for British American Tobacco from 1996 to 2006. His communications company acted for known tobacco front groups, such as the Association of Convenience Stores.114 Graham was quoted in an interview as bragging that: ‘Victory … is when the other side starts to use his language and gets forced onto an agenda he wrote’.115 In 2014 Graham was implicated in the covert coordinated campaign to smear public health researchers who were advocating evidence-based interventions to cut obesity, and smoking and alcohol-related diseases.116 Graham paid a right- wing blogger to post these stories without disclosing the author (himself) or his clients, who were thought to be members of the Food and Grocery Council.117
C Coalition Parties in Government
Agency is important to achieving regulatory chill. However, agents can also neutralise or counteract chill, especially within the government itself. New Zealand’s government was led throughout the plain packaging policy process by the National Party, traditionally the ‘party of business’ and a strong advocate of a neoliberal market economy. There is nothing to indicate that National had any real commitment to a smoke-free agenda. In addition to appointing Rich to the Health Promotion Authority, National defied criticism when it selected two former
110 New Zealand Food and Grocery Council, About (2017)
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law tobacco industry lobbyists as candidates for the 2014 election. One, the former Corporate Affairs Manager for Philip Morris, won a safe seat. The other, who previously held the same job, was elected on the party list.118
It could be argued that National took advantage of threats that were intended to chill, as a justification for delaying a policy that was unpopular with parts of its core constituency and which it had endorsed as the price of forming a coalition government. But that is too simplistic. In 2008, 2011 and 2014 National maintained an unlikely alliance with the Māori Party, which was formed in 2004 in opposition to Labour government legislation that denied Māori rights to claim ownership of the foreshore and seabed. The party’s co-leader Tariana Turia held the portfolio of Associate Minister of Health from 2008 to 2014. The Māori Party spearheaded the Select Committee inquiry that reported in November 2010 and led to the Smoke-free 2025 goals announced in March 2011. The confidence and supply arrangement in 2011 included a commitment to tobacco reform, including work on plain packaging. Turia drove the smoke- free policy with the same determination as Australia’s Health Minister at the time, Nicola Roxon, and deserves considerable credit for diminishing the ‘chilling effect’. But she lacked power within a reluctant government to advance the legislation. Turia retired in 2014 and the party only secured two seats in that year’s election. National no longer needed them to govern and their leverage over tobacco control and other policies fell accordingly.
Over the same period National had a coalition arrangement with the libertarian ACT Party, which champions regulatory minimalism, protection of private property rights and individual choice. ACT held the portfolio of Regulatory Responsibility and was responsible for the Cabinet statement, ‘Better Regulation, Less Regulation’, issued in 2010.119 Despite that position, ACT lacked the influence to stop the government from pursuing a contrary policy. Its only MP, David Seymour, ‘proudly opposed’ the plain packaging Bill at the second reading in 2016, declaring it a ‘major step in eroding our tradition of property rights and freedom to trade’.120
This contrast suggests that the political context of coalition politics impacted on the industry’s moves to chill the policies, but was not determinative of the government’s decision to bring the law into force in March 2018. That was both a legislative imperative, and necessary to avoid the reputational harm associated with inaction when Australia had been so proactive.
D Tobacco Control Advocates
The other potentially neutralising agents were the tobacco control community. As noted earlier, they mobilised to generate submissions and actively engaged throughout the prolonged policy process. Health advocates and academics were personally targeted by Carrick Graham and others on behalf of their un-named clients. University of Otago alcohol researcher Doug Sellman observed:
118 Editorial, ‘Tobacco Stain on Would-Be MP’, Dominion Post (online), 1 May 2014,
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I think it’s had a chilling effect on public health practitioners and scientists who speak out on issues that might upset big business, like Carrick Graham’s clients, and current government policy. ... I’m most concerned about the way [this] might put off bright, enthusiastic young health practitioners and scientists from getting involved in alcohol [reform] advocacy. …The most important thing is the public comes to understand that personal attacks on health professionals who speak out against vested interests are a deliberate tactic of these people to maintain their power and fortunes.121
The government was complicit in muzzling the health community. In 2014 the Ministry of Health launched a review of the effectiveness and value for money of tobacco control.122 The budget for the tobacco control programme in 2014–2015 was $61.7 million. The review saw $21 million in contracts re-tendered.123 Other projects were being re-evaluated. Those who lost their funding included the major advocacy groups: the Smokefree Coalition of 56 groups who had been catalysts for the Smokefree Aotearoa agenda over 20 years, the New Zealand arm of Action on Smoking and Health New Zealand, Smokefree Nurses, and various Māori and iwi (tribal) providers.124 The decision to refocus the available public funding for tobacco control away from advocacy towards treatment diluted the political risk of delays in the introduction of plain packaging and the capacity for those groups to campaign actively against the TPPA and similar negotiations.
VI REGULATORY CONSTRAINTS
The industry’s strategy achieved delay, but not abandonment of the plain packaging legislation. To achieve even that degree of specific chill requires access as well as influence. Contemporary regulatory management systems offer structured opportunities for influence; they are also an important element of systemic chill.
A The Regulatory Management Regime
The New Zealand and Australian governments are both strong proponents of a neoliberal notion of ‘best practice’ regulation that prescribes the presumptions, criteria and processes that policy makers must apply.125 A bias towards minimising intrusion on commercial interests has become institutionalised through a process of regulatory impact analysis and the publication of exposure drafts of legislation and regulations for consultation with stakeholders.
As with many approaches to governance since the 1980s, the regulatory management regime has a stronger ideological bent in New Zealand than Australia. Health policy makers have to
121 Newport, above n 115. 122 See SHORE and Whariki Research Centre, ‘Review of Tobacco Control Services Report’, (Report, 27, 2014)
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law comply with a ‘Better Regulation, Less Regulation’ directive, a Code of Good Regulatory Practice, a Best Practice Model from the Treasury, and other strictures that favour no, self- or co-regulation, and relegate directive forms of regulation (such as plain packaging) to the least desirable end of the spectrum.126 There is an inbuilt role for MFAT to assess a proposal in light of New Zealand’s trade and investment agreements. The more numerous and broad-ranging their scope, the greater MFAT’s influence over policies and regulations that are the core business of other ministries. Their advice came to dominate the later Cabinet papers on implementing the plain packaging law.
Specific and systemic forms of regulatory chill converged in this process. Consultations on draft legislation and regulations gave the tobacco industry new opportunities to challenge the rationale and evidence base for plain packaging laws, in addition to making parliamentary submissions. The industry targeted New Zealand’s processes from an early stage. In 2011, Philip Morris (New Zealand) told the Associate Minister of Health that ‘plain packaging breaches the government’s own regulatory principles’.127 Because New Zealand’s plain packaging legislation largely copied Australia’s, the industry also cited the internal disagreements between government agencies and criticisms of Australia’s regulatory impact analyses from IP Australia and the Office of Best Regulatory Practice (located in the Department of Finance and Deregulation) in their various interventions.128
The regulatory process had another less obvious, but arguably more significant, value to the industry. Australian tobacco companies built an extensive compendium of documents through these consultation processes, complemented by official information requests, which provided evidence to support the WTO and investment disputes.129 New Zealand’s Ministry of Health and MFAT were presumably aware of this, introducing a potential chilling factor into the engagement between ministries.
B The Consultation Document and Regulatory Impact Statement 2012
The industry used the consultations on the Bill and the Regulations to reiterate its arguments and repeat its threats, and to orchestrate an apparent groundswell of opposition. The consultation paper on the Bill was released in 2012 with the Regulatory Impact Statement (RIS) and exposure draft of the legislation.130 It stated four purposes: alignment of New Zealand’s requirements with those applying in Australia; effectiveness, with a preference for the strongest form of standardisation unless there is good reason otherwise; to inform New Zealand’s trade partners and invite their comments; and practicality, with a preference for simplicity.131
While the process also provided a forum for health policy advocates, the consultation paper largely required them to respond to the industry’s arguments. The 20 questions it posed were informed by the industry’s standard complaints about plain packaging, and almost none were about health.132 Some were adaptations of the template for such documents, for example:
126 Kelsey, above n 27, 141–9. 127 Letter from Brett Taylor, General Manager, Philip Morris (NZ) Ltd to Hon Tariana Turia, Associate Minister of Health, 11 July 2011
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If you do not agree that plain packaging should be introduced, are there other options that you think should be adopted to address the issues above; … If adopted, do you think plain packaging of tobacco products might have any unintended or undesirable consequences, such as … What are the likely impacts that plain packaging would have for manufacturers, exporters, importers and retailers of tobacco products.
Other questions were very specific, addressing the black market for tobacco, increased costs to businesses, and time taken to serve customers. Despite setting the agenda, the industry complained that the questions were biased against it.
Their proposed alternatives foreshadowed the main argument that was likely to be used in WTO committees and litigation: that there were effective and less burdensome options for achieving the policy objectives, such as continuing the status quo, further education, additional excise tax, and increased personal responsibility.133 The strongest (identical) remark supporting the status quo came from two international manufacturers:
We urge the New Zealand Government to develop a rational and appropriate framework within which legitimate consumer demand for tobacco products is met and real public health goals achieved, rather than continuing to pursue an irrational approach that achieves no public health benefit.134
The consultation document invited comments on the RIS itself. The 15 submitters who expressed concerns were either individuals who did not support the policy or retailers and participants in the domestic or international tobacco industry.135 Their objections included: a flawed evidence base; insufficiently robust research methodologies; lack of New Zealand specific data; no impartial, independent and thorough assessment of evidence; under-statement of the problems; over-exaggeration of the benefits; and failure to give enough weight to other policy options. BATNZ complained that the RIS made no attempt to quantify New Zealand’s exposure to awards of compensation136 (although the paper conservatively assessed the government’s costs for an investment arbitration at NZ$3–6 million and under NZ$2 million for a WTO dispute).137 A combination of three manufacturer / exporter / importers, one international manufacturer, one retailer, and three individuals deemed the RIS not fit for purpose. The summary of government’s failure to ‘meet the key principles for good regulation’ reads like a (somewhat incoherent) complaint to an investment tribunal or WTO committee:
proportionality (the RIS does not take into account the costs and benefits of the proposed regulatory measures) certainty (the tobacco industry and retailers are in an unpredictable position as the details of plain packaging requirements will not be available until after the legislation has [been] enacted) flexibility (the Ministry has not provided adequate analysis on the impacts and costs) durability (once implemented it will be hard to respond to unforeseen consequences)
133 Ibid 56. 134 Ibid 57. 135 Ibid 64–5. 136 British American Tobacco (NZ) above n 69, 70. 137 Ministry of Health (NZ), Regulatory Impact Statement: Plain Packaging of Tobacco Products (2012), 12. QUT Law Review 17 (2), November 2017 | 42
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law
transparency and accountability (the Ministry will not engage in a transparent and accountable manner and the proposal contains no performance targets or mechanisms by which to assess the effectiveness of the proposal) capable regulators (the Ministry lacks institutional capacity to monitor the proposal) growth supporting (plain packaging is likely to have a severe impact on growth).138
C Parliamentary Submissions
Attacks on the process continued in the Select Committee hearing on the Bill. Imperial Tobacco’s submission claimed that the ‘flawed’ regulatory impact assessment ‘demonstrably failed to meet the government’s own standards’.139 Gietz told the Select Committee the company wanted to engage constructively with government to achieve ‘quality regulatory decisions’ based on ‘sound, evidence-based, reasonable and practicable regulation of tobacco products’.140 Katherine Rich’s talking points to the Select Committee on behalf of the Food and Grocery Council insisted that:
[g]ood regulatory practice must not be abandoned for a government’s position on what it believes to be the public good. All legislation must be reasonable, robust, and justified. Without such criteria being rigorously applied, there is no framework to manage the whims and fancies of any well-meaning enthusiast [and that] delays do not change the basis for regulation from bad practice to good practice.141
D Supra-national Regulatory Disciplines
The same ideological presumptions and practices are increasingly written into contemporary free trade and investment agreements that bind the government when making domestic regulatory decisions. The most familiar in the tobacco policy arena are the rules on Technical Barriers to Trade in the WTO and many FTAs.142 These rules apply to labelling and product standards, and require the government to adopt the least trade restrictive measures that could achieve its health policy objectives, using narrow criteria that must be supported by evidence. New regulations must be notified to and can be reviewed by the TBT committee, under the spectre of a formal dispute. The WTO’s TRIPS agreement and intellectual property chapters of FTAs have their own rules, criteria, review and dispute processes. More recently, the TPPA sought to mandate the use of regulatory impact assessments as ‘best practice’ and apply the presumption of light-touch regulation across the board, although the final text of its Regulatory Coherence chapter was diluted and unenforceable.143
A complementary trend in recent agreements requires governments to consult on measures that could affect their obligations under an agreement. For example, transparency obligations are no longer just requirements to make existing laws, regulations and procedures publicly available. Chapters on ‘transparency’ may require prior consultation with other states and ‘interested persons’, the consideration of their views, and sometimes explanations for why these were not accepted.144 These stand-alone chapters are often reinforced by parallel
138 Submissions Analysis, above n 41, 67. 139 Imperial Tobacco Submission 2014, above n 71. 140 Ibid 6. 141 NZFGC Introductory Statement, above n 72. 142 See WTO Agreement on Technical Barriers to Trade, opened for signature on 15 April 1994, 1868 UNTS 120 (entered into force 1 January 1995) art 2.2. 143 See Kelsey, above n 22, 246–50. 144 For example, TPPA, art 26.2.2.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products requirements in particular chapters, and compliance is overseen by sectoral sub-committees of the parties. Although the TPPA is defunct in its original form, similar proposals have been promoted in negotiations for other agreements.145
Many of these international obligations were not in play during New Zealand’s policy process for plain packaging. However, New Zealand’s trade officials have been their strongest proponents, reflecting the strong ideological synergy between the international agreements and the domestic regulatory regime into the future.
VII CONCLUDING THOUGHTS
This paper tested the working hypothesis that three inter-related elements combined to chill an already reluctant New Zealand government on the plain packaging law: perceived risks associated with trade and investment obligations; arguments of highly influential industry lobbyists; and a bias in the regulatory management regime that favours minimal intervention, consistent with the international trade and investment agreements.
Six years from the first tentative policy announcement, New Zealand’s plain packaging legislation had been passed but was not in force. There is no doubt that the threat of litigation under New Zealand’s trade and investment agreements played a significant role in this delay. The tobacco industry and its allies used every available opportunity to wield their considerable influence. Even with redactions, it is clear from official documents that threats of trade and investment litigation, reputational factors and flow-on effects to other export industries induced caution throughout the process. The centrality of these arguments meant the policy advice on plain packaging became more heavily influenced by MFAT than by the Ministry of Health.
It could be argued that the decision to proceed reflected an assessment of the legal risk in light of Australia’s success in the investment arbitration and initial WTO hearing, and the safety in numbers created by a growing number of countries adopting plain packaging laws. Equally, the government had reached the point when it could delay no longer: the Act stipulated 14 March 2018 as the default date for implementation. There was no guarantee that the tobacco industry would not bring an investment dispute or that Australia would not lose an appeal against the WTO panel’s decision. But the alternative was to amend or repeal the plain packaging legislation. Presumably, the political cost of doing so would have outweighed the factors that had chilled the adoption of the law for six years.
That assessment is consistent with the government’s lack of commitment to the broader Smoke-free 2025 goal. The interim smoke-free targets for 2015 and 2018 have been missed. Smoking is still strongly delineated by ethnicity and class. Tobacco use has not fallen significantly among those who smoke the most: Māori, Pacific, people on low incomes, and people with mental illness.146 Two years after the government promised an action plan to
145 For example, the Transparency provisions (Article III) in the General Agreement on Trade in Services; see Ellen Gould, Analysis of the TiSA Annex on Transparency’ (Greenpeace, 2016)
Regulatory Chill: Learnings from New Zealand’s Plain Packaging Tobacco Law achieve the Smoke-free 2025 goal there was not even a timetable for its development. Frustrated, tobacco-control researchers announced they would develop their own.147
This paper has argued that political leadership is crucial to achieving that goal in New Zealand, as it has been in Australia. At present, there are no effective political champions of tobacco- control in the governing coalition or the opposition parties. But that would still not be enough. Outside strategies are needed to neutralise the specific and systemic elements of regulatory chill, such as active campaigning to prevent new international agreements that constrain health policy, including tobacco control; rallying the health community to challenge the subordination of health policy to international trade and investment rules; strengthening the backbone of the Ministry of Health to contest the dominance of MFAT; and conducting alternative impact assessments of proposed agreements to expose the negative consequences.148 Given the government’s deliberate gutting of the tobacco-control advocacy groups, responsibility to develop and implement those strategies will fall largely to academics and the broader public health community. Unless that is done, the inertia that has been instilled into policy-making on Smokefree Aotearoa 2025 will continue to infect tobacco control strategies and comparable public health objectives for alcohol and high-sugar foods, as well as other socially progressive policies.
147 ‘Researchers to Propose New Smokefree 2025 Action Plan in Light of Government No Show’, Scoop (online), 30 May 2017
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 46-65 DOI: 10.5204/qutlr.v17i2.714
PROPERTY AND PROPORTIONALITY: EVALUATING IRELAND’S TOBACCO PACKAGING LEGISLATION
EOIN O’DELL*
This article evaluates the constitutionality of the restrictions upon tobacco packaging in Ireland in the Public Health (Standardised Packaging of Tobacco) Act 2015 and Part 5 of the Health (Miscellaneous Provisions) Act 2017. Australia is the only country to have commenced this legislative process earlier, so the Irish experience (and, in particular, an analysis of the constitutionality of the Irish legislation) could provide a roadmap for other jurisdictions aiming to implement similar restrictions. This article concludes that public health and the protection of children constitute pressing and substantial reasons sufficient to justify as proportionate these Acts’ restrictions upon tobacco companies’ property rights protected by the Irish Constitution.
I INTRODUCTION
On 10 March 2015, Ireland became the second country in the world — after Australia — to enact legislation requiring standardised tobacco packaging; and, after amendment, it came fully into force on 29 September 2017.1 The legislative regime prohibits all forms of branding (including trade marks) from appearing on tobacco packaging, except for brand names which will have to be presented in a standard typeface on packages, which must all be in the prescribed colour.
Although early Irish tobacco legislation mainly covered excise matters, 2 tobacco is now increasingly being regulated for public health reasons, and the current packaging legislation is simply the most recent example in a long line of tobacco control legislation. Hence, the regulation of tobacco advertising in Ireland began in 1978;3 the regulation of the sale of tobacco products began in earnest in 1988;4 and a comprehensive system to regulate the sale and consumption of tobacco products — including the world’s first outright ban on smoking in the workplace — was
* BCL (NUI), BCL (Oxon), MA (j o) (Dubl), LLM (a e Oxon) (Dubl), PhD (Cantab), Barrister (Kings Inns). Fellow and Associate Professor, School of Law, Trinity College Dublin. I would like to thank Mark Bell, David Kenny, Caoimhín Mac Maoláin, Deirdre Ní Fhloinn, Rachael Walsh, and Gerry Whyte for their help with this article. 1 On 10 March 2015, the President signed the Public Health (Standardised Packaging of Tobacco) Act 2015. On 16 February 2017, the President signed the Health (Miscellaneous Provisions) Act 2017, Part 5 of which amends the 2015 Act. Those parts of the 2015 Act which were not to be amended by the Bill which became the 2017 Act were brought into force on 20 May 2016 by the Public Health (Standardised Packaging of Tobacco) Act 2015 (Commencement) Order 2016 (SI No 270 of 2016); and the remaining parts of the 2015 Act, as amended by the 2017 Act, were brought into force on 29 September 2017 by the Public Health (Standardised Packaging of Tobacco) Act 2015 (Commencement) Order 2017 (SI No 115 of 2017). References hereafter simply to the Irish packaging legislation are to the primary and secondary legislation in this footnote. 2 Tobacco Act 1934; Finance (Excise Duty on Tobacco Products) Act 1977. 3 Tobacco Products (Control of Advertising, Sponsorship and Sales Promotion) Act 1978. 4 Tobacco (Health Promotion and Protection) Act 1988. This work is licensed under a Creative Commons Attribution 4.0 Licence. As an open access journal, articles are free to use with proper attribution in educational and other non-commercial settings.
Property and Proportionality: Evaluating Ireland’s Tobacco Packaging Legislation introduced by the Public Health (Tobacco) Act 2002.5 That Act is the foundation for the current system of tobacco control in Ireland.6 It was amended in 2004,7 to implement two European Directives,8 and to give effect to the World Health Organization’s Framework Convention on Tobacco Control 2003,9 and has recently been amended to prohibit smoking in cars in which children are present.10 The Public Health (Standardised Packaging of Tobacco) Act 2015 (‘2015 Act’) implemented another European Directive;11 and that Act, as amended by Part 5 of the Health (Miscellaneous Provisions) Act 2017 (‘2017 Act’), now requires standardised packaging of tobacco products.
The ink was barely dry on the President’s signature on the 2015 Act when the tobacco industry sought declarations that it was contrary to EU law. A reference to the Court of Justice of the European Union was refused,12 and the case subsequently settled.13 When the Bill that became the 2015 Act was being considered by parliamentary committee,14 the probability of a constitutional15 challenge was a theme of submissions, not only from the tobacco industry,16 but also from the Law
5 The workplace ban was introduced by s 47 of the 2002 Act, and the Tobacco Smoking (Prohibition) Regulations 2003 (SI No 481 of 2003). 6 As amended, inter alia, by the Public Health (Tobacco) (Amendment) Act 2009, the Public Health (Tobacco) (Amendment) Act 2010, the Public Health (Tobacco) (Amendment) Act 2011, and the Public Health (Tobacco) (Amendment) Act 2013. 7 By the Public Health (Tobacco) (Amendment) Act 2004. 8 Directive 2001/37/EC of the European Parliament and of the Council of 5 June 2001 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning the Manufacture, Presentation and Sale Of Tobacco Products [2001] OJ L 194/26; and Directive 2003/33/EC of the European Parliament and of the Council of 26 May 2003 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Relating to the Advertising and Sponsorship of Tobacco Products [2003] OJ L 152/16. 9 World Health Organization Framework Convention on Tobacco Control, signed 21 May 2003 (2302 UNTS 166, entered into force 27 February 2005). Ireland signed the Convention on 16 September 2003 and, by virtue of the 2004 Act, ratified it on 7 November 2005. 10 Protection of Children’s Health (Tobacco Smoke in Mechanically Propelled Vehicles) Act 2014. 11 Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning the Manufacture, Presentation and Sale of Tobacco and Related Products [2014] OJ L 127/1. It repealed and replaced Directive 2001/37/EC above n 8, and is in part directed to implementing the Framework Convention on Tobacco Control. It is given further effect in Irish law by the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 (SI No 271 of 2016). 12 In JTI Ireland Ltd v Minster for Health [2015] IEHC 481 (07 July 2015) Cregan J refused to make the reference, in part because the same questions had already been referred from the UK in R (Philip Morris Brands Sàrl) v Secretary of State for Health [2014] EWHC 3669 (Admin). The questions were answered in Case C-547/14 R (Philip Morris Brands Sàrl) v Secretary of State for Health (ECLI:EU:C: 2016:325, CJEU, 4 May 2016). These answers were applied in British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) affd [2016] EWCA Civ 1182. 13 The case settled after a Directions Hearing on 9 November 2016. 14 Joint Committee on Health and Children, Parliament of Ireland, Public Health (Standardised Packaging of Tobacco) Bill 2013, Seanad Debates (13 February 2014)
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Society of Ireland.17 In PJ Carrolls v Minister for Health and Children,18 constitutional property rights were central to the tobacco industry’s challenge to tobacco advertising prohibitions in the Public Health (Tobacco) Act 2002; they were central to the industry’s challenge to the Australian legislation;19 and they would doubtless be equally central to any challenge to the Irish packaging legislation. Such property rights challenges have failed in the High Court of Australia20 and the Court of Justice of the European Union;21 they are likely to fail in the European Court of Human Rights;22 and it is the conclusion of this article that they would also fail in Ireland.
Part II of this article therefore briefly describes the restrictions upon the use of trade marks and other branding that potentially engage constitutional property rights. Part III describes the integrated constitutional protection of property; and it considers the extent to which it is likely to be engaged by restrictions on the tobacco companies’ use of their trade marks. Part IV considers the pressing and substantial reasons which the state may proffer to seek to justify the restrictions in the packaging legislation upon constitutional property rights. The state’s interests in the promotion of public health in general, and the protection of children in particular, have been relied upon to sustain important legislation in the past; and this Part considers the extent to which they may be relied upon by the state in this context. Part V considers the extent to which the restrictions thereby justified satisfy the proportionality and rationality standards of review or scrutiny.
Part VI concludes that, if the restrictions on constitutional property rights in the 2015 Act and in Part 5 of the 2017 Act are challenged by the tobacco companies, the courts will almost certainly find that those Acts are constitutionally valid.
II RESTRICTIONS
The restrictions prescribed by the Irish packaging legislation are extensive and broadly of three kinds. In general, many elements of tobacco packaging are prohibited, others are regulated, and still others are required. These three strategies affect the tobacco companies’ intellectual property rights. For example, branding and trade marks on wrappers23 are prohibited; the appearance of
17 Submission of the Intellectual Property Law Committee of the Law Society of Ireland
QUT Law Review 17 (2), November 2017 | 48 Property and Proportionality: Evaluating Ireland’s Tobacco Packaging Legislation branding24 and the location of brand-names25 are regulated; and the shape of packets,26 and the colours of all parts of packaging27 not taken up by the health warnings and images that have long been mandatory 28 must be as required. Moreover, the Minister has power to make orders 29 prescribing the details of standardised packaging for every brand on the market. Furthermore, tobacco packaging shall ‘not bear a mark or trade mark’ except as permitted pursuant to the 2015 Act. The general powers relating to the regulation of packaging, and the specific rules relating to trade marks, will certainly control the use of trade marks upon — and potentially even effectively ban trade marks from — tobacco packaging.
In all of these ways, therefore, the tobacco companies’ intellectual property rights are plainly affected by the restrictions in the Irish packaging legislation. The question therefore arises whether their constitutionally protected property rights are thereby engaged.
III RIGHTS
The tobacco companies’ property30 rights are potentially engaged by these restrictions for two reasons. First, there are restrictions on what tobacco companies can do with the packets of their products. Second, their intellectual property rights are affected; in particular, their trade marks are banned on wrappers and restricted and potentially prohibited on packaging.
A Two Articles
In Ireland, two articles of the Constitution are concerned with the protection of property: article 40.3.2 and article 43. This bifurcated protection reflects an uneasy drafting compromise. 31 Although their interpretation and inter-relationship has not been free from difficulty in the past,32
24 Ibid ss 7(3)–(4), 7(10)–(11), 9(3)–(4), 9(10)–(11), 10(3)–(4), 10(9)–(10). 25 Ibid ss 7(3)–(4), 9(3)–(4), 10(3)–(4), as extended by 2017 Act ss 13–15. 26 Ibid ss 7(6), 9(6). 27 Ibid ss 7(1)(a)–(b), 9(1)(a)–(b), 10(1)(a)–(b). 28 Ibid ss 7(4), 9(4), 10(4). The first power to require health warnings was contained in Tobacco Products (Control of Advertising, Sponsorship and Sales Promotion) Act 1978 s 2(f), implemented by the Tobacco Products (Control of Advertising, Sponsorship and Sales Promotion) Regulations 1979 (SI No 350 of 1979). See now Part 3 of the European Union (Manufacture, Presentation and Sale of Tobacco and Related Products) Regulations 2016 (SI No 271 of 2016), implementing the 2015 Act and Directive 2014/40/EU, above n 11. To the extent that the Directive is valid, the statutory instrument implementing it is immune from constitutional challenge, as a measure ‘necessitated by the obligations of membership’ of the EU (Constitution, art 29.4.6; Quinn v Ireland (No 2) [2007] 3 IR 395). Consequently, the regulations relating to health warnings are not considered further in this article. 29 2015 Act ss 7(10)–(11), 9(10)–(11), 10(9)–(10). 30 The experience in the US and Canada suggests that speech rights are also potentially engaged, and the issue arose in PJ Carrolls v Minister for Health and Children [2005] IESC 26. However, they are left aside in this article, as the issue is comprehensively covered in Eoin O’Dell, ‘Is Standardised Tobacco Packaging a Proportionate Restriction on Constitutional Speech Rights?’ (paper delivered at the ICON-S British and Irish Chapter Inaugural Conference, Trinity College Dublin, Ireland, 5 September 2017). 31 Rachael Walsh, ‘Private Property Rights in the Drafting of the Irish Constitution: A Communitarian Compromise’ (2011) 33 Dublin University Law Journal 86. 32 See eg, Re Article 26 and the Planning and Development Bill, 1999 [2000] 2 IR 321, 347, [76] (Keane CJ, for the Court); Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 197, [113] (Hamilton CJ, for the Court); Reid v Industrial Development Agency [2015] IESC 82, [41]–[42] (McKechnie J; Denham CJ, O’Donnell, Laffoy and Charleton JJ concurring).
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products it is not in doubt that they ‘mutually inform each other’,33 and it is increasingly clear that they now work together as part of an integrated constitutional protection of property which pays appropriate attention to the literal text of the articles, but shows equal concern for their structure and interoperation.
On the one hand, Article 43 is directed to the state. The first half of the article is a muscular assertion of the institution of private property: by it, the state acknowledges ‘the right to the private ownership’ and guarantees ‘to pass no law attempting to abolish’ that right.34 However, the second half of the article provides the state with a relatively wide scope for manoeuvre in restricting the exercise of property rights: it authorises35 the state to regulate the exercise of property rights on the basis of ‘the principles of social justice’ and to delimit their exercise on the basis of ‘the exigencies of the common good’. On the other hand, Article 40.3.2 is directed to citizens. It provides that the state shall ‘by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the … property rights of every citizen’.
Hence, both articles 43.1 and 40.3 protect property 36 as part of an integrated constitutional protection of property; and there is, in particular, a close relationship between article 43.2 and article 40.3.2 on the question of when restrictions are justified. In such cases, three questions usually arise.37 First, the courts examine the nature of the property rights at issue to determine if the integrated constitutional protection of property in articles 43 and 40.3 are engaged by the restriction. Second, if they are, then, pursuant to article 43.2, the courts examine whether the restriction is prima facie justifiable on the basis of social justice or the common good,38 and they afford the state a wide latitude in regulating on those bases. Third, if such a prima facie justification is made out, then the courts ensure that the state has not carried the restriction too far, by reviewing or scrutinising, pursuant to article 40.3, whether the restriction constitutes an unjust (usually, a disproportionate) attack on the engaged property rights.39
B Integrated Constitutional Protection of Property
The first case in which the integrated constitutional protection of property in articles 43 and 40.3 was relied upon successfully was Buckley v Attorney General.40 Here, the Supreme Court struck
33 Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 197 [113] (Murray CJ, for the Court); J&J Haire v Minister for Health [2010] 2 IR 615, 644 [90] (McMahon J). 34 Blake and Madigan v Attorney General [1982] IR 117, 135 (O’Higgins CJ, for the Court) (art 43.1 ‘prohibits the abolition of private property as an institution’); Re Article 26 and the Employment Equality Bill 1996 [1997] 2 IR 321, 366 (Hamilton CJ, for the Court). 35 O’Callaghan v Commissioner of Public Works [1985] ILRM 364, 367 (O’Higgins CJ, for the Court). 36 Blake and Madigan v Attorney General [1982] IR 117, 135–6 (O’Higgins CJ, for the Court). 37 Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 201 [119] (Murray CJ, for the Court); National Asset Loan Management Ltd v McMahon [2014] IEHC 71, [40] (Charleton J); McGrath Limestone Works Ltd v An Bord Pleanála [2014] IEHC 382, [10.4] (Charleton J). 38 Reid v Industrial Development Agency [2015] IESC 82, [42], [44(ii)] (McKechnie J; Denham CJ, O’Donnell, Laffoy and Charleton JJ concurring). 39 Re Article 26 and Part 5 of the Planning and Development Bill 1999 [2000] 2 IR 321, 348–50 (Keane J, for the Court); compare CRH plc v Competition and Consumer Protection Commission [2017] IESC 34, [67] (MacMenamin J). 40 [1950] IR 67, striking down the Sinn Féin Funds Act 1947 because it infringed not only constitutional property rights but also the constitutional separation of powers: see Gerard Hogan, ‘The Sinn Féin Funds Judgment Fifty Years
QUT Law Review 17 (2), November 2017 | 50 Property and Proportionality: Evaluating Ireland’s Tobacco Packaging Legislation down an Act intended to prevent pending litigation about funds of a moribund political party, and to divert the funds to a charitable board. In Cox v Ireland,41 the Court struck down the automatic forfeiture of a public job and an employment-related contractually-due pension upon conviction of an offence.42 Moreover, in Re Article 26 and the Employment Equality Bill 1996,43 the Court struck down a provision that would have required employers to bear the costs of all special accommodations which employees with disabilities may have needed.
On the other hand, many pieces of legislation relating to the regulation of pensions, and of markets, trades, professions, businesses, and industries, have survived constitutional challenge. 44 For example, the regulation of taxis has been upheld on several occasions.45 In Maher v Minister for Agriculture, Food and Rural Development,46 the Supreme Court upheld the Irish implementation of an EU system of quotas of milk production and levies for over-production. Moreover, in PC v Minister for Social Protection,47 the Court held that a statutory pension that could be varied from time to time, could not constitute a ‘property right’ within the meaning of the Irish Constitution.
C Property and Tobacco Packaging
The restrictions in the Irish packaging legislation do indeed restrict tobacco companies’ use of their property. While they are being manufactured and until they are sold, the packets of tobacco products are the property of the tobacco companies, and so the various restrictions on the packaging of those products are restrictions on the companies’ use of their property. Moreover,
On’ (1997) 2 Bar Review 375; Ronan Keane, ‘The Sinn Féin Funds Case. Across the Cherokee Frontier of Irish Constitutional Law’ in Eoin O’Dell (ed), Leading Cases of the Twentieth Century (Round Hall, 2000) 185. In Buckley v Attorney General (No 2) (1950) 84 ILTR 9, Kingsmill Moore J held against Sinn Féin’s claim on the merits. 41 [1992] 2 IR 503, striking down section 34 of the Offences Against the State Act 1939; see Richard Humphreys, ‘Constitutional Law — Techniques of Analysis: Blacklists and Shortcuts’ (1991) 13 Dublin University Law Journal 118; see also Lovett v Minister for Education [1997] 1 ILRM 89 (HC, Kelly J) (contributory pension a constitutionally protected property right). 42 Contrast PC v Minister for Social Protection [2017] IESC 63 (MacMenamin J; Denham CJ, and McKechnie, Clarke and O’Malley JJ concurring) impugning regulations made pursuant to s 249(1) of the Social Welfare (Consolidation) Act 2005, which provided for the automatic cessation of a contributory state pension upon imprisonment resulting from conviction of an offence. The Court struck them down, not for property reasons, but because they constituted an additional punishment not imposed by a court, contrary to the right to trial in due course of law secured by art 34 of the Constitution: [2017] IESC 63 [59]. 43 [1997] 2 IR 321, striking down s 35 of the Employment Equality Bill 1996. 44 See Eoin O’Dell, ‘Property Rights, Proportionate Restrictions, and Media Pluralism’ (paper delivered at the Conference on the Irish Constitution at 80: 80 Years of Constitutional Change, University of Limerick, Ireland, 11 November 2017). 45 Hempenstall v Minister for the Environment [1994] 2 IR 20 (HC, Costello J), upholding the Road Traffic (Public Service Vehicles) (Amendment) (No 2) Regulations 1992 (SI No 172 of 1992); Gorman v Minister for the Environment and Local Government [2001] 2 IR 414 (HC, Carney J), upholding all but one of the provisions of the Road Traffic (Public Service Vehicles) (Amendment) (No 3) Regulations 2000 (SI No 367 of 2000) (the provision which was struck down infringed constitutional doctrines other than property); Muldoon v Minister for the Environment and Local Government [2015] IEHC 649 (Peart J) (same). 46 [2001] 2 IR 139, upholding the European Communities (Milk Quota) Regulations 2000 (SI No 94 of 2000). 47 [2017] IESC 63, [28] (MacMenamin J; Denham CJ, and McKechnie, Clarke and O’Malley JJ concurring). Instead, the court struck down regulations made pursuant to s 249(1) of the Social Welfare (Consolidation) Act 2005, which provided for the automatic cessation of a contributory state pension upon imprisonment resulting from conviction of an offence, because that constituted an additional punishment not imposed by a court, contrary to the right to trial in due course of law secured by art 34 of the Constitution (at [59]).
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products the provisions regulating packaging permit the Minister to make orders to require standardised packaging, which will not be allowed to bear a trade mark, except as permitted pursuant to the 2015 Act. 48 This will certainly control the use of trade marks upon tobacco packaging. Furthermore, it seems to be the government’s intention to rely on these powers to go further and ensure ‘that all forms of branding — trade marks, logos, colours and graphics — would be removed from tobacco packs’.49 Indeed, the matters prohibited on wrappers include trade marks.50 If a trade mark is a form of property, then a control or prohibition on the use of trade marks would be a restriction on the companies’ use of their property.
However, at least three hurdles must be jumped before it can be concluded safely that these restrictions engage the integrated constitutional protection of property.51 First, no relevant property right may be engaged, either because none arises on the facts,52 or because the particular interest relied upon by the plaintiff does not possess sufficient characteristics of ‘proprietorship and dominion’53 to count as property for the purposes of the constitutional protection of property. Since the scope of that protection is remarkably capacious,54 the interest relied upon would have to be uncommonly precarious for it not to count. Even so, there is a line between property rights that are constitutionally protected and other interests that are not. On the former side of the line lie real property,55 personal property,56 money,57 shares,58 the benefit of contractual rights,59 causes of
48 2015 Act, ss 7(1)(c), 9(1)(c), 10(1)(c), but see s 5(1). 49 Ireland, Seanad Debates, ‘Public Health (Standardised Packaging of Tobacco) Bill 2014: Second Stage’ Seanad, 17 June 2014 (Deputy James Reilly, Minister for Health) [emphasis added]
QUT Law Review 17 (2), November 2017 | 52 Property and Proportionality: Evaluating Ireland’s Tobacco Packaging Legislation action,60 and lawful market street trading rights.61 Sitting astride the line are various pensions62 and licences.63 And, since the Supreme Court has held that milk quotas cannot be equated to a right of property,64 they are clearly on the other side of the line.
As to the restrictions imposed by the packaging legislation, the general restrictions on packaging restrict the tobacco companies’ use of their chattels, which plainly engage the constitutional protection of property. As to the particular restrictions upon — and potential prohibitions on — the tobacco companies’ use of their trade marks, it is clear that trade marks possess sufficient characteristics of proprietorship and dominion to count as property to engage the constitutional protection of property rights. Intellectual property rights are similar to personal property, the benefit of contractual rights, causes of action, and street trading rights, which have all been held to count; and although they are probably close to the line straddled by pensions and licences, they are not on the other side of it with milk quotas. Hence, copyright has been held to constitute ‘a right of private property within the meaning of article 40.3.2 and article 43.1 of the Constitution’.65 Similarly, in the context of the tort of passing off, a trading reputation has also been held to constitute a property right.66 By parity of reasoning, trade marks would, in an appropriate case, likewise be held to constitute constitutionally protected property rights.67 Indeed, the point is potentially stronger in relation to trade marks than it is in the context of passing off. The state registers and regulates trade marks, affording them a high level of protection; whereas unregistered rights protected by actions like passing off may not attract as high a level of protection. Hence if the latter are constitutionally protected property rights, so also must the former be. Indeed, in Maher v Minister for Agriculture,68 Keane CJ came very close to holding that trade marks are constitutionally protected property rights. In rejecting the submission that a fishing quota
60 O’Brien v Keogh [1972] IR 144, 155 (Ó Dálaigh CJ, for the Court); Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 182 [86] (Murray CJ for the Court). 61 DPP (Long) v McDonald [1983] ILRM 223, 225 (Henchy J; Walsh and Griffing JJ concurring). 62 See above, nn 41 and 47. 63 On the one hand: Muldoon v The Minister for the Environment [2015] IEHC 649, [175] (Peart J) (right to property certainly engaged in relation to the holding of a taxi licence). On the other hand: State (Pheasantry Ltd) v Donnelly [1982] ILRM 512, 516 (Carroll J) (intoxicating liquor licence not property capable of existence separate from the premises); Nuerendale v Dublin City Council [2009] IEHC 588 (21 December 2009) [190]–[193] (McKechnie J) (interests generated by state regulation will not generally give rise to a property right; no property right vests in a party ‘merely by the possession of a licence’); Hand v Dublin Corporation [1991] 1 IR 409 (open question whether casual trading licences constitutionally protected). Contrast Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 (petroleum exploration licences outside scope of constitutional protection). 64 Maher v Minister for Agriculture [2001] 2 IR 139, 186 [107] (Keane CJ), 223 [217] (Denham J, Murphy J concurring), 234 [260] (Murray J), 265 [388] (Fennelly J, concurring with Murray J). 65 Phonographic Performance (Ireland) Ltd v Cody [1998] 4 IR 504, 511, affd without reference to this point [1998] IESC 64; EMI Records (Ireland) Ltd v Eircom Ltd [2010] 4 IR 349, 366, [28]–[29] (Charleton J); EMI Records (Ireland) Ltd v UPC [2010] IEHC 377, [85] (Charleton J); Sony v UPC (No 1) [2015] IEHC 317 [122] (Cregan J), affd [2016] IECA 231 [18] (Hogan J); Rónán Kennedy, ‘Was it Author’s Rights All the Time? Copyright as a Constitutional Right in Ireland’ (2011) 33 Dublin University Law Journal 253. 66 Falcon Travel Ltd v Owners Abroad Group plc [1991] 1 IR 175, 183 (Murphy J). 67 Compare Anheuser-Busch Inc v Portugal 73049/01 (2007) 45 EHRR 36 (trade marks constitute ‘possessions’ within the meaning of art 1 of Protocol 1 to the European Convention on Human Rights); British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) [716]–[717], [783] (Green J); affd [2016] EWCA Civ 1182, [115] (Lewison, Beatson and Richards LJJ) (same); SIA AKKA/LAA v Latvia 562/05 [2016] ECHR 631 (copyright; same); see also JT International v Cth of Australia (2012) 250 CLR 1, [105], [137] (Gummow J), [267] (Crennan J), [192], [202]–[205] (Heydon J, dissenting). 68 [2001] 2 IR 139.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products amounted to property, he did not ‘find that any assistance is to be derived from comparisons with patents, trade marks or copyright rights which under our legal system are nowadays generically described as “intellectual property rights”’.69 It is therefore clear that trade marks are property rights for the purposes of the constitutional protection of property.
The second hurdle to be jumped to reach the conclusion that constitutional protection of property is engaged by restrictions on the tobacco companies’ property and trade marks is that, whilst there may be a relevant property right, what looks like a restriction may turn out not to be so on the facts.70 For example, the restrictions imposed by the Irish packaging legislation upon the tobacco companies’ use of their trade marks are likely to have a negative impact on the value of their brands in general and of their trade marks in particular.71 However, this diminution in value may not necessarily amount to a restriction on the tobacco companies’ property rights: ‘a change in the law which has the effect of reducing property values cannot in itself amount to an infringement of constitutionally protected property rights’.72 On the other hand, there remains a wide range of restrictions on packaging and on the use of trade marks, and these restrictions will certainly engage the integrated constitutional protection of property.
Third, there may indeed, on the facts, be a restriction on a relevant property right, but it may turn out not to be one the plaintiffs can challenge. For example, article 40.3.2 refers to the ‘property rights of every citizen’, and article 43.1.1 provides that ‘man, in virtue of his rational being’ has the right to the ‘private ownership of external goods’. The emphasised words in these provisions might well have confined the enjoyment of the constitutional protection of property to natural persons who are citizens. Nevertheless, it is now well established that such protections may also be enjoyed by corporate entities 73 and non-citizens. 74 Therefore a challenge by the tobacco companies to the Irish packaging legislation would almost certainly not be excluded on this ground.
69 [2001] 2 IR 139, 186–7 [110]. 70 BUPA Ireland v Health Insurance Authority (No 2) [2013] IEHC 103, [91]–[92] (Cooke J) (no attack on property rights, as no compelled payments actually made); Dellway Investments v National Asset Management Agency (No 1) [2011] 4 IR 1, [2011] IESC 4 (3 February 2011) (no attack on property rights, as no valid decision made to acquire loans); Criminal Assets Bureau v Kelly [2012] IESC 64, [33] (MacMenamin J; Denham CJ and Hardiman J concurring) (forfeiture of proceeds of crime ‘cannot be said to impinge on a right to private property, as the property was acquired unlawfully’); McFeely v Official Assignee in Bankruptcy [2017] IECA 21, [29] (Peart J; Hogan and Hedigan JJ concurring) (landlord cannot complain about search of leased premises conducted pursuant to warrant, as any property rights engaged were those of tenant). 71 But this impact should not be overstated: see British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) [698]–[706] (Green J); affd [2016] EWCA Civ 1182. 72 Hempenstall v Minister of the Environment [1994] 2 IR 20, 28–9 (Costello P); Maher v Minister for Agriculture [2001] 2 IR 139, 220 [202] (Denham J, Murphy J concurring); BUPA Ireland v Health Insurance Authority [2006] IEHC 431, [242] (McKechnie J); Dellway Investments v National Asset Management Agency [2011] 4 IR 1, 64 [116], [2010] IEHC 364 [7.14] (1 November 2010) (Kearns P, Kelly and Clarke JJ, in a joint judgment), affd Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 325–6, [452]–[454], [2011] IESC 14, [91]– [93] (12 April 2011) (Fennelly J); Muldoon v The Minister for the Environment [2015] IEHC 649, [164], [181]–[183] (Peart J). 73 Iarnród Éireann v Ireland [1996] 3 IR 321, 345, [1995] 2 ILRM 161, 183 (Keane J), affd [1996] 3 IR 321; Shirley v O’Gorman [2012] 2 IR 170, 174 [6] (Fennelly J; Denham CJ, and Murray, Macken and Finnegan JJ concurring); see also CRH v Competition and Consumer Protection Commission [2017] IESC 34, [61]–[68] (MacMenamin J). See generally, Ailbhe O’Neill, The Constitutional Rights of Companies (Thomson Round Hall, 2007) Part III. 74 NVH v Minister for Justice and Equality [2017] IESC 35.
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IV REASONS
A Pressing and Substantial Reasons
In general, where there is a restriction upon a constitutional right, the state may advance ‘pressing and substantial’75 reasons to seek to justify the restriction. The textual limitations on the integrated constitutional protection of property are threefold: the state’s obligation in article 40.3.2 is to protect ‘as best it may’ citizens’ property rights, whilst article 43 permits restrictions on the basis of ‘the principles of social justice’76 (article 43.2.1) and ‘the exigencies of the common good’ (article 43.2.2).77 It would be unwise to overparse the similarities and differences between these concepts,78 or the public policy underlying impugned legislation or the legitmate aim pursued by it.79 Rather, they are simply different assertions of the same point that the state may advance ‘pressing and substantial’ reasons to seek to justify a restriction upon a right. The state can lead expert evidence on these issues.80 Indeed, it may be fatal not to. In Re Article 26 and the Housing (Private Rented Dwellings) Bill 1981,81 the Supreme Court struck down rent control provisions for which no justification was provided. And so, the question here is simply whether there are ‘pressing and substantial’ reasons upon which the state may rely in seeking to justify the restrictions upon property contained in the Irish packaging legislation. It may potentially be justified by many reasons, but two in particular stand out: public health, and the protection of children.
B Public Health
Public health is the main reason for the Irish packaging legislation.82 In the case of the 2015 Act, the clue is in the name: the Public Health (Standardised Packaging of Tobacco) Act 2015. And
75 Heaney v Ireland [1996] 1 IR 580, 607 (Costello J) affd [1996] 1 IR 580. 76 Rachael Walsh, ‘“The Principles of Social Justice” and the Compulsory Acquisition of Private Property for Redevelopment in the United States and Ireland’ (2010) 32 Dublin University Law Journal 1. 77 See in particular, Keane v An Bord Pleannála (No 3) [1998] 2 ILRM 241, 262 (Keane J; Hamilton CJ and Barrington J concurring), construing s 26(5)(c) of Local Government (Planning and Development) Act 1963 as inserted by s 3 of the Local Government (Planning and Development) Act 1992. 78 Contrast Donal Barrington, ‘Private Property under the Irish Constitution’ (1973) 8 Irish Jurist (ns) 1; Attorney General v Southern Industrial Trust (1960) 94 ILTR 161, 175–6 (Lavery J). 79 Criminal Assets Bureau v Kelly [2012] IESC 64, [32] (public policy) [34](b) (legitimate aim) (MacMenamin J; Denham CJ and Hardiman J concurring); Dellway Investments v National Asset Management Agency [2011] 4 IR 1, 118 [283], [2010] IEHC 364, [10.16] (1 November 2010) (primary policy decision for the Oireachtas) (Kearns P, Kelly and Clarke JJ, in a joint judgment). 80 PJ Carrolls v Minister for Health and Children [2005] IESC 26. 81 [1983] IR 181, 191 (O’Higgins CJ). Similarly, in Sister Mary Christian v Dublin City Council [2012] IEHC 163 and Sister Mary Christian v Dublin City Council (No 2) [2012] IEHC 309, Clarke J struck down elements of a city development plan for which no reasons were offered and which therefore could not be assessed for proportionality. See also Reid v Industrial Development Agency [2015] IESC 82 (invalid reason). 82 Compare British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) [60]–[76] (Green J); affd [2016] EWCA Civ 1182, [21]–[27] (Lewison, Beatson and Richards LJJ); JT International v Cth of Australia (2012) 250 CLR 1, [4] (French CJ), [145] (Gummow J); [253]–[254] (Crennan J), [308]–[309], [316]–[317] (Kiefel J), but see [193], [209], [227] (Heydon J, dissenting).
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products public health was one of the justifications offered for the Act by the responsible Minister, Dr James Reilly.83
In some of the Supreme Court’s most important constitutional rights cases, the state has sought to uphold impugned legislation on the basis of public health concerns. On the one hand, in Ryan v Attorney General,84 the Court dismissed a challenge to the fluoridation of public water supplies, which the state successfully justified on the grounds of public health.85 And in Norris v Attorney General,86 the Court dismissed a challenge to legislation criminalising male homosexual acts, which the state successfully justified on the grounds, inter alia, of public health.87 On the other hand, in McGee v Attorney General,88 the Court accepted that there ‘may be many reasons, grounded on considerations of public health …’ 89 for a prohibition on the import or sale of contraceptives, but struck it down as a disproportionate infringement of the plaintiff’s constitutional rights. Moreover, the state may also argue that such public health concerns implicate the state’s positive duty to vindicate the rights of its citizens. The constitution recognises an unenumerated right to bodily integrity implied in article 40.3.1. 90 That article might, in an appropriate case, also provide a home for a right to health.91 And the duty to vindicate these rights could re-enforce the state’s interest in public health.92
The state’s interest in the promotion of public health was central to PJ Carrolls v Minister for Health and Children, in which the Supreme Court held that the state could lead expert evidence of the harmful effects of smoking to meet a challenge to tobacco advertising prohibitions in the Public Health (Tobacco) Act 2002. For all of these reasons, therefore, the public health concerns underpinning the Irish packaging legislation would almost certainly constitute pressing and substantial reasons upon which the state may seek to justify standardised packaging restrictions.
83 See note 14 above; see further: Ireland, Seanad Debates ‘Public Health (Standardised Packaging of Tobacco) Bill 2014: [Seanad Bill amended by the Dàil] Report and Final Stages’, Seanad, 3 March 2015 (Deputy James Reilly, Minister for Children and Youth Affairs)
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C Protection of Children
The protection of children was another of the justifications offered for the Act by the Minister,93 and it has been accepted by the European Court of Human Rights as an aim which the state may legitimately pursue in limiting property rights.94 In Landers v Attorney General,95 Finlay J held that the protection of children must be part of the common good. Moreover, the state may also argue that such concerns implicate the state’s duty to vindicate children’s rights,96 which are expressly secured by article 42A.1 of the Constitution. For these reasons, the concerns to protect children underpinning the Irish packaging legislation would almost certainly constitute pressing and substantial reasons upon which the state may seek to justify standardised packaging restrictions. So too would the state’s interests in the promotion of public health. These conclusions hold, whether those concerns or interests are described as principles of social justice, exigencies of the common good, strong public policies, legitimate aims, or pressing and substantial reasons.
V REVIEW
It is clear that, where there is a restriction upon a right, the state may advance ‘pressing and substantial’ reasons to seek to justify the restriction. However, it is not enough for the state to advance such reasons; those reasons must support and justify the restrictions, and not go too far in doing so. On this question of review or scrutiny, following the lead of the European Court of Human Rights 97 and the Supreme Court of Canada, 98 the Irish Supreme Court has strongly committed to a proportionality test to review or scrutinise legislative restrictions upon constitutional rights; in particular, the impugned legislation must:
(a) be rationally connected to the objective and not be arbitrary, unfair or based on irrational considerations; (b) impair the right as little as possible; (c) be such that their effects on rights are proportional to the objective.99
93 See Ireland, Seanad Debates, 17 June 2014, above n 49, 39–40; also, Joint Committee on Health and Children, Parliament of Ireland, above n 14. 94 Vekony v Hungary 65681/13 [2015] ECHR 5. 95 Landers v Attorney General (1975) 108 ILTR 1, 5 (Finlay J) upholding s 2(b)–(c) of the Prevention of Cruelty to Children Act 1904. 96 It might also lighten the applicable standard of review; see below, Part V, E Lower and Variable Standards of Review. 97 Handyside v United Kingdom 5493/72 (1976) 1 EHRR 737, [49]. 98 R v Oakes [1986] 1 SCR 103, [70] (Dickson CJ; Chouinard, Lamer, Wilson and Le Dain JJ concurring). 99 Heaney v Ireland [1996] 1 IR 580, 607 (Costello J), affd [1996] 1 IR 580 (SC); Rock v Ireland [1997] 3 IR 484, 500 (Hamilton CJ, for the Court); Re National Irish Bank [1999] 1 ILRM 321, 352 [26]–[31] (Barrington J; O’Flaherty, Murphy, Lynch and Barron JJ concurring); DK v Crowley [2002] 2 IR 744, 757–8 (Keane CJ, for the Court); Blehein v Minister for Health and Children [2009] 1 IR 275, 281 [18] (Denham J; Hardiman, Geoghegan, Kearns and Macken JJ concurring); Leech v Independent Newspapers (Ireland) Ltd [2014] IESC 79, [21]–[22] (McKechnie J; Dunne and Murray JJ concurring); Meath County Council v Murray [2017] IESC 25, [21] (McKechnie J; Denham CJ, and O'Donnell, Laffoy and Dunne JJ concurring); CRH plc v Competition and Consumer Protection Commission [2017] IESC 34 [66]–[67] (MacMenamin J).
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The Court has applied this test in the context of the integrated constitutional protection of property.100 And it would almost101 certainly be applied in any challenge by tobacco companies to the packaging legislation.
A Rational Connection
The first of the three steps in the Irish proportionality test is a requirement of a rational connection: the impugned legislation must be rationally connected to the pressing and substantial reasons advanced by the state, and not be arbitrary, unfair or based on irrational considerations. Hence, a court ruling that restrictions were ‘impermissibly wide and indiscriminate’102 is now explained as the application of a proportionality test.103 Similarly, a ruling that restrictions were ‘shot through with unnecessary anomalies and inconsistencies’104 is well on course to being explained in similar terms.105 Moreover, restrictions that are ‘arbitrary’106 or ‘discriminatory’107 have also been held
100 Re Article 26 and the Employment Equality Bill 1996 [1997] 2 IR 321, 383 (Hamilton CJ, for the Court); Re Article 26 and the Planning and Development Bill 1999 [2000] 2 IR 321, 349 [83] (Keane CJ, for the Court); Criminal Assets Bureau v Kelly [2012] IESC 64 [34] (MacMenamin J, Denham CJ and Hardiman J concurring). See generally, Gerard Hogan, ‘The Constitution, Property Rights, and Proportionality’ (1997) 32 Irish Jurist (ns) 373; Rachael Walsh, ‘The Constitution, Property Rights and Proportionality: A Reappraisal’ (2009) 31 Dublin University Law Journal 1. This is not an enquiry which much detains the Australian courts in property cases at present; however, see JT International v Cth of Australia (2012) 250 CLR 1, [336]–[340] (Kiefel J). 101 Subject to discussion below, Part V — E Lower and Variable Standards of Review. 102 Cox v Ireland [1992] 2 IR 503, 524 (Finlay CJ, for the Court), striking down s 34 of the Offences Against the State Act 1939. 103 Heaney v Ireland [1996] 1 IR 580, 607 (Costello J); Rock v Ireland [1997] 3 IR 484, 500 (Hamilton CJ, for the Court); Re Article 26 and the Employment Equality Bill 1996 [1997] 2 IR 321, 342–3, 383 (Hamilton CJ, for the Court). 104 Brennan v Attorney General [1983] ILRM 449, 469 (Barrington J), see also 486 (‘eccentric and ludicrous’); affd [1984] ILRM 355, 365 (O’Higgins CJ, for the Court) (‘lack of uniformity, inconsistencies and anomalies’). See also John Grace Fried Chicken Ltd v Catering Joint Labour Committee [2011] 3 IR 211, 241 [39] (Feeney J) (striking down the Employment Regulation Order Catering Joint Labour Committee (for areas other than the areas known, until 1st January 1994, as the County Borough of Dublin and the Borough of Dun Laoghaire) 2008 (SI No 142 of 2008) which provided for inconsistent and arbitrary rates of remuneration and conditions of employment). 105 In Shirley v O’Gorman [2006] IEHC 27 (Peart J), affd on other grounds [2012] 2 IR 170; Peart J in the High Court treated Brennan v Attorney General [1983] ILRM 449 and proportionality as interchangeable standards, and concluded that restrictions were ‘arbitrary, unfair and irrational and [were] therefore disproportionate’ [emphasis added]. 106 Blake and Madigan v Attorney General [1982] IR 117, 138, 140 (O’Higgins CJ, for the Court) (‘unfair and unjust’; ‘unfair and arbitrary’; ‘arbitrary and unfair’) striking down Part II (restrictions on rent of controlled dwellings) and Part IV (restrictions on recovery of possession of controlled premises) of the Rent Restrictions Act 1960 (as amended by the Rent Restrictions (Amendment) Act 1967 and the Landlord and Tenant (Amendment) Act 1971). 107 Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 209, [2011] IESC 14, [53] (Murray CJ) semble equating ‘arbitrary or discriminatory’ with ‘disproportionate’. In that case, the Supreme Court upheld the National Asset Management Agency Act 2009 against a comprehensive challenge, but derived from the plaintiff’s property rights certain obligations of fair procedures: see Dellway Investments v National Asset Management Agency [2011] 4 IR 1, [2010] IEHC 364 (1 November 2010) (Kearns P, Kelly and Clarke JJ, in a joint judgment), affd on different grounds in three judgments in the Supreme Court: Dellway Investments v National Asset Management Agency (No 1) [2011] 4 IR 1, [2011] IESC 4 (3 February 2011) (no valid decision to acquire loans); Dellway Investments v National Asset Management Agency (No 2) [2011] 4 IR 1, [2011] IESC 23 (12 April 2011) (right to be heard when decision being taken); Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, [2011] IESC 14 (12 April 2011) (right to be informed of impending decision).
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The requirement of a rational connection assesses the strength or weakness of the state’s reasons for the restriction. The less pressing and substantial they are, the less likely is it that a restriction will be considered proportionate. For example, the state failed to provide adequate reasons to justify an anomalous and unfair system of agricultural rates based upon land values set in 1852.109 Conversely, where the reasons are more pressing and substantial, a restriction is more likely to be upheld as proportionate. For example, an ‘extreme financial crisis or fundamental disequilibrium in the public finances’,110 could justify very significant restrictions indeed.
The question here, then, is whether the Irish packaging legislation passes the requirement of a rational connection. Subject to the evidence on this point that might be run in any challenge, the answer would almost certainly be yes. The state’s interests in the promotion of public health and in the protection of children (discussed above) are pressing and substantial reasons; the packaging legislation is clearly rationally connected to them; and it does not seem to be arbitrary, unfair or based on irrational considerations.111
B Minimal Impairment
The second of the three steps in the Irish proportionality test is a requirement of minimal impairment: the impugned legislation must impair the engaged right as little as possible. That is, the interference must not exceed what is necessary to meet the pressing and substantial concerns in question, and must be the least possible interference with the right consistent with the advancement of those of those concerns.112 Hence, the imposition of ‘relatively minor’113 burdens or ‘limited’114 intrusions upon rights, or restrictions that are not material,115 have been held to be minimal and thus proportionate interferences with those rights.
The requirement of minimal impairment assesses the strength or weakness of a restriction upon a right. A control upon property is less intrusive than the expropriation of the property, so control is
108 Lawlor v Minister for Agriculture [1990] 1 IR 356, 377 (HC, Murphy J) (upholding the milk quota system in European Communities (Milk Levy) Regulations 1985 (SI No 416 of 1985); see now Maher v Minister for Agriculture [2001] 2 IR 139. 109 Brennan v Attorney General [1984] ILRM 355, striking down s 11 of the Local Government Act 1946 which had adopted rateable valuations determined in accordance with s 11 of the Valuation Act 1852. 110 Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 208 [132] (Murray CJ, for the Court); Dellway Investments v National Asset Management Agency [2011] 4 IR 1, 120 [287], [2010] IEHC 364 [10.20] (1 November 2010) (Kearns P, Kelly and Clarke JJ, in a joint judgment). 111 Compare British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) [587]–[649] (Green J), affd [2016] EWCA Civ 1182 (Lewison, Beatson and Richards LJJ). 112 Reid v Industrial Development Agency [2015] IESC 82, [44](iv) (McKechnie J; Denham CJ, O'Donnell, Laffoy and Charleton JJ concurring); Keane v An Bord Pleannála (No 3) [1998] 2 ILRM 241, 262 (Keane J; Hamilton CJ and Barrington J concurring). 113 Electricity Supply Board v Gormley [1985] IR 129, 152 (Finlay CJ, for the Court). 114 Chestvale Properties Ltd v Glackin [1993] 2 IR 35, 45 (Murphy J); Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 327, [2011] IESC 14, [456] (12 April 2011) (Fennelly J). 115 Dellway Investments v National Asset Management Agency [2011] 4 IR 1, 64 [117], [2010] IEHC 364, [7.15] (1 November 2010) (Kearns P, Kelly and Clarke JJ, in a joint judgment).
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products more likely to be a proportionate restriction than expropriation. On the one hand, the imposition of a prospective charge for health services was held to be a limited and proportionate restriction on rights.116 On the other hand, the imposition of a retrospective charge for health services (to validate payments unlawfully exacted) was held to be an extensive and disproportionate expropriation.117 The question here, then, is whether the Irish packaging legislation passes the requirement of minimal impairment. Again, subject to the evidence on this point that might be run in any challenge, the answer would almost certainly be yes. There are pressing and substantial reasons; the packaging legislation, whilst extensive, seems to impair the engaged property rights as little as possible; in particular, there do not seem to be any plausible less restrictive means available to the state to the achieve the same ends.118
C Proportional Effects
The third of the three steps in the Irish proportionality test is a requirement of proportional effect: the effects of the impugned legislation on the engaged rights must be proportional to the pressing and substantial reasons advanced by the state. On the one hand, where even a minor transgression has an excessive consequence,119 the legislation will be disproportionate and unconstitutional. Again, where the effects of the legislation fall excessively upon one person or group,120 for the benefit of another group121 or even of society as a whole,122 the legislation will be disproportionate and unconstitutional. On the other hand, it
is entirely proper that the State should insist that those who profit from an industrial process should manage it as safely, and with as little danger to health, as possible. The cost of doing the job safely and in a healthy manner is properly regarded as part of the industrialist’s costs of production. Likewise it is proper that he should pay if he pollutes the air, the land or the rivers. It would be unjust if he were allowed to take the profits and let society carry the cost.123
This plainly covers the position of the tobacco industry. Even if the Irish packaging legislation could be called into question on the basis that its effects fall excessively upon the tobacco companies, it is entirely proper that the state should insist that those who profit from tobacco should market it with as little danger to health as possible. It would be unjust if the tobacco companies were to be allowed to take the profits and let society carry the cost of healthcare, a cost that would be reduced if the restrictions in the packaging legislation were effective.
The requirement of proportional effects assesses the strength or weakness of the right which the state has pressing and substantial reasons to restrict: the more central the restricted activity is to
116 Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105. 117 Ibid. 118 Compare British American Tobacco v Secretary of State for Health [2016] EWHC 1169 (Admin) [650]–[679] (Green J), affd [2016] EWCA Civ 1182 (Lewison, Beatson and Richards LJJ). 119 Cox v Ireland [1992] 2 IR 503, 524 (Finlay CJ, for the Court), as explained in Murphy v Irish Radio and Television Commission [1999] 1 IR 12, 26–7 (Barrington J; Hamilton CJ, O'Flaherty, Denham, and Keane JJ concurring). 120 Shirley v O’Gorman [2006] IEHC 27 (Peart J). 121 Blake v Attorney General [1982] IR 117, 139 (O’Higgins CJ, for the Court); Re Article 26 and the Housing (Private Rented Dwellings) Bill 1981 [1983] IR 181, 191 (O’Higgins CJ). 122 Re Article 26 and the Employment Equality Bill 1996 [1997] 2 IR 321, 367 (Hamilton CJ, for the Court). 123 Ibid; see also O’Callaghan v Commissioner of Public Works [1985] ILRM 364, 368 (O’Higgins CJ, for the Court); Re Article 26 and the Planning and Development Bill 1999 [2000] 2 IR 321, 354 [93]–[94] (Keane CJ, for the Court).
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The question here, then, is whether the Irish packaging legislation passes the requirement of proportionate effects. Again, subject to the evidence on this point that might be run in any challenge, the answer would almost certainly be yes. The effects do not fall excessively upon the tobacco companies, and their property rights are not central to the freedoms or protections engaged by the restrictions in the packaging legislation.
D Deference
The courts are particularly reluctant to second guess legislative judgments on controversial128 or sensitive 129 social, economic and medical matters and on major issues of national policy. Accordingly, in applying the three steps of the proportionality test, courts often afford a great deal of deference to the state.130 This may ‘be an application of the presumption of constitutionality’,131 by which legislation enacted by the Oireachtas after the Constitution came into force in 1937 is presumed to be constitutional, unless and until the contrary is clearly established.132 The Court has applied this presumption in the context of the integrated constitutional protection of property,133
124 State (Pheasantry Ltd) v Donnelly [1982] ILRM 512, 516 (Carroll J), approved in Maher v Minister for Agriculture [2001] 2 IR 139, 220 [202]–[203] (Denham J, Murphy J concurring); Muldoon v The Minister for the Environment [2015] IEHC 649 [167]–[175], [180]–[183] (Peart J). 125 Hempenstall v Minister of the Environment [1994] 2 IR 20, 28 (Costello P); Maher v Minister for Agriculture [2001] 2 IR 139; Muldoon v Minister for the Environment [2015] IEHC 649; see also O’Dwyer v Minister for the Environment [2001] 1 IR 255, 262, [12] (Geoghegan J) (no obligation not to change the conditions); Gorman v Minister for Environment and Local Government [2001] 2 IR 414, 429-30 (Carney J). However, see Wurridjal v The Commonwealth (2009) 237 CLR 309, 439–40 [363]–[364] (Crennan J) (contingency does not automatically remove a statutory right from scope of constitutional protection); JT International v Cth of Australia (2012) 250 CLR 1, [102]– [108] (Gummow J) (same). 126 PC v Minister for Social Protection [2017] IESC 63 [27]–[28], [45] (MacMenamin J; Denham CJ, and McKechnie, Clarke and O'Malley JJ concurring). 127 Phonographic Performance (Ireland) Ltd v Cody [1998] 4 IR 504, 511. 128 Ryan v Attorney General [1965] IR 294, 312 (Kenny J); Dellway Investments v National Asset Management Agency [2011] 4 IR 1, 119–20 [284]–[287], [2010] IEHC 364, [10.17]–[10.20] (1 November 2010) (Kearns P, Kelly and Clarke JJ, in a joint judgment) affd Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 225, [2011] IESC 14 [110] (12 April 2011) (Denham J). 129 MD v Ireland [2012] IESC 10, [50] (Denham CJ; Murray, Hardiman, Fennelly and Macken JJ concurring). 130 BUPA Ireland v Health Insurance Authority [2006] IEHC 431, [247] (McKechnie J); CRH plc v Competition and Consumer Protection Commission [2017] IESC 34, [67] (MacMenamin J) (‘substantial latitude’). 131 Colgan v Independent Radio and Television Commission [2000] 2 IR 490, 512 (O’Sullivan J). 132 The classic statements are Pigs Marketing Board v Donnelly (Dublin) Ltd [1939] IR 413, 417 (Hanna J); McDonald v Bord na gCon [1965] IR 217, 239 (Walsh J); East Donegal Co-operative Livestock Mart Ltd v Attorney General [1970] IR 317, 340–41 (Walsh J); see most recently Collins v Minister for Finance [2016] IESC 73 [70] (Denham CJ, and O’Donnell, McKechnie, Clarke, Dunne and Charleton JJ, in a joint judgment). 133 White v Dublin City Council [2004] 1 IR 545, 569 [81] (Denham J; Murray, McGuinness, Fennelly and McCracken JJ concurring); Clinton v An Bord Pleanána (No 2) [2007] 4 IR 701, 716 [26], 725 [53] (Geoghegan J; Denham,
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products and the packaging legislation would almost certainly benefit from it and from any attendant judicial deference to legislative judgment.
This presumption of constitutionality leads to two further presumptions. First, it is presumed that the Oireachtas intended a constitutional construction of legislation; so where constitutional and non-constitutional constructions are reasonably open, the Court must choose the constitutional one. 134 Again, the Courts have applied this presumption in the context of the integrated constitutional protection of property,135 and the Irish packaging legislation would almost certainly benefit from it. Second, the presumption of constitutionality leads to the further presumption that a statutory discretion will be exercised constitutionally 136 and that fair procedures will be followed.137 Again, the Courts have applied this presumption in the context of the integrated constitutional protection of property.138 The making of a statutory instrument by the Minister for Health, pursuant to the discretion conferred by the packaging legislation,139 would almost certainly benefit from this presumption too.
E Lower and Variable Standards of Review
The Supreme Court applies the proportionality test in a flexible or variable fashion, assessing the strengths and weaknesses of the restrictions, rights and reasons at issue in the cases.140 But it also seems to have developed an alternative, lower standard of review. In particular, where it considers that the Oireachtas is essentially engaged in a balancing of constitutional rights and duties, the Court effectively applies a rationality test rather than a proportionality test. In such cases, the role of the Court
is not to impose their view of the correct or desirable balance in substitution for the view of the legislature as displayed in their legislation but rather to determine from an objective stance whether the balance contained in the impugned legislation is so contrary to reason and fairness as to constitute an unjust attack on some individual’s constitutional rights.141
Fennelly, Kearns and Macken JJ concurring); Reid v Industrial Development Agency [2015] IESC 82 [44(v)] (McKechnie J; Denham CJ, O'Donnell, Laffoy and Charleton JJ concurring). 134 McDonald v Bord na gCon [1965] IR 217, 239 (Walsh J); East Donegal Co-operative Livestock Mart Ltd v Attorney General [1970] IR 317, 340–41 (Walsh J). 135 National Asset Loan Management Ltd v McMahon [2014] IEHC 71, [42] (Charleton J). 136 East Donegal Co-operative Livestock Mart Ltd v Attorney General [1970] IR 317, 340–41 (Walsh J). 137 Garvey v Ireland [1981] IR 75, 97 (O'Higgins CJ); Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 282, [2011] IESC 14, [311] (12 April 2011) (Hardiman J). 138 Dellway Investments v National Asset Management Agency (No 3) [2011] 4 IR 1, 202–4, [2011] IESC 14 [26]– [29] (Murray CJ); [2011] 4 IR 1, 225, 234, [2011] IESC 14 [111], [135] (Denham J), [2011] 4 IR 1, 282, [2011] IESC 14 [312] (Hardiman J), [2011] 4 IR 1, 321–2, [2011] IESC 14 [435]–[437] (Fennelly J). 139 2015 Act ss 7(10)–(11), 9(10)–(11), 10(9)–(10). 140 See discussion above: sub-headings B Minimal Impairment through D Deference. 141 Touhy v Courtney [1994] 3 IR 1, 47 (Finlay CJ, for the Court); Re Article 26 and the Regulation of Information (Services Outside the State for the Termination of Pregnancies) Bill, 1995 [1995] 1 IR 1, 45, (Hamilton CJ, for the Court); Iarnród Éireann v Ireland [1996] 3 IR 321, 376 (O’Flaherty J, for the Court); In re Article 26 and the Employment Equality Bill, 1996 [1997] 2 IR 321, 334 (Hamilton CJ, for the Court).
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This rationality test is a lower, less stringent, more tractable standard of review or scrutiny than the three-step proportionality test. Even so, legislation can fail this test 142 and be found unconstitutional. If the Irish packaging legislation is justifiable not only on the basis of the state’s interests in public health and the protection of children, but also on the basis of constitutional rights,143 then the state may seek to argue that its constitutionality should be assessed on the basis of this rationality standard rather than on the basis of the stricter three-step proportionality standard. And if the rationality test were to applied, then the packaging legislation would almost certainly survive review or scrutiny; it could not be said that the balance of rights contained in the packaging legislation is ‘so contrary to reason and fairness’ as to constitute an unjust attack on the tobacco companies’ property rights.
F Absence of Review
It was not always clear that legislation restricting rights will be subjected to a standard of review or scrutiny. In Attorney General v Southern Industrial Trust, it was enough for Lavery J that the legislation restricting the plaintiff’s property rights was directed to the constitutionally-sanctioned legitimate aims of the ‘exigencies of the common good’ and the ‘principles of social justice’.144 He did not go on to subject that aim to further review or scrutiny, to determine for example whether the restriction went too far in the pursuit of that aim. Moreover, there is an oft-repeated dictum of Walsh J in Dreher v Irish Land Commission that might mean that legislation authorised by the principles of social justice or the exigencies of the common good in article 43 cannot amount to an unjust attack for the purposes of article 40.3.145
These cases predate the development of the proportionality and rationality standards of review or scrutiny discussed above. To the extent that they could preclude further review or scrutiny once a pressing and substantial reason to justify the legislation has been established, then they can no longer be right. It is unthinkable that the Irish packaging legislation would not be subject to some standard of review or scrutiny. The only question is which one: a tractable rationality test, or a more stringent three-step proportionality test. However, it is clear that the packaging legislation would almost certainly satisfy any applicable test.
VI CONCLUSION
The tobacco companies’ litigation strategy 146 has seen them challenge legislation restricting tobacco packaging in many jurisdictions and before international tribunals. These cases can turn
142 Re Article 26 and the Health (Amendment) (No 2) Bill 2004 [2005] 1 IR 105, 198 [115] (Murray CJ, for the Court) (striking down retrospective health charges); White v Dublin City Council [2004] 1 IR 545, 568–9 [80] (Denham J; Murray, McGuinness, Fennelly and McCracken JJ concurring), striking down an absolute two-month limitation period in s 82(3B)(a)(i) of the Local Government (Planning and Development) Act 1963, as inserted by s 19(3) of the Local Government (Planning and Development) Act 1992. 143 See discussion above, Part IV Reasons. 144 (1960) 94 ILTR 161 (SC) 176 upholding s 5(1) of the Customs (Temporary Provisions) Act 1945 (forfeiture of car used in a crime). 145 [1984] ILRM 94, 96 (‘a piece of legislation which is authorised by Article 43 cannot fall foul of Article 40.3’); cited in O’Callaghan v Commissioner of Public Works [1985] ILRM 364, 368 (O’Higgins CJ, for the Court); Electricity Supply Board v Gormley [1985] IR 129, 150 (Finlay CJ, for the Court). 146 Ankita Ritwik, ‘Tobacco Packaging Arbitration and the State’s Ability to Legislate’ (2013) 54 Harvard International Law Journal 523.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products as much on general principles common to many constitutions and treaties as they can on the specifics of a particular constitutional text. The proportionality analysis of the Court of Appeal for England and Wales in British American Tobacco v Secretary of State for Health147 probably supplies an example of the former; 148 whereas the analysis of the concept of ‘acquisition of property’ in section 51(xxxi) of the Australian Constitution by the High Court of Australia in JT International v Commonwealth probably supplies an example of the latter.149 The one constant is that the tobacco companies invariably lose. Any challenge to the Irish packaging legislation would have a similar outcome.
Restrictions upon rights can be justified by reasons which survive review. The Public Health (Standardised Packaging of Tobacco) Act 2015 and Part 5 of the Health (Miscellaneous Provisions) Act 2017 together provide for comprehensive standardised packaging of tobacco products. In particular, there will be strict regulations upon, perhaps even prohibition of the use of trade marks and other branding. These restrictions potentially engage the integrated protection of property contained in the Irish constitution. This provides a largely stable and relatively coherent basis for analysis and development. The Irish packaging legislation does in fact restrict the tobacco companies’ use of their property, especially trade marks, and the integrated constitutional protection of property is engaged by these restrictions, albeit that statutorily contingent property is not at the core of that protection. In public health and the protection of children, the state has substantial and pressing reasons for the restrictions; and it may even be said that it is vindicating its citizens’ rights to health and bodily integrity in general, and children’s rights in particular.
In reviewing the impact of the restrictions in the packaging legislation on the tobacco companies’ property rights against that backdrop, the legislation must satisfy a three-step proportionality test of rational connection, minimal impairment, and proportional effects. Because statutorily contingent property is not at the core of the integrated constitutional protection of property, it is easier to restrict it proportionally. Moreover, it is unjust for the tobacco companies to continue to take the profits but let society carry the cost of healthcare, a cost that would be reduced if the restrictions in the packaging legislation were effective. However, if the Supreme Court considers that the Irish packaging legislation seeks to balance the tobacco companies’ speech and property rights against citizens’ right to health, and children’s rights, then the legislation would have to satisfy only a rationality test, which it would satisfy easily.
Ireland has been in the vanguard of tobacco control worldwide. With the Public Health (Standardised Packaging of Tobacco) Act 2015 and Part 5 of the Health (Miscellaneous Provisions) Act 2017, it continues to set a very important example. Any challenge from the tobacco industry on property grounds is likely to fail. And Ireland’s children and public health will be all the better for that.
147 [2016] EWCA Civ 1182. 148 See above, nn 111 and 118. 149 JT International v Cth of Australia (2012) 250 CLR 1. See also, above n 51.
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VII APPENDIX
Relevant provisions of the Irish Constitution
Article 40 3. 1 The State guarantees in its laws to respect, and, as far as practicable, by its laws to defend and vindicate the personal rights of the citizen. 2 The State shall, in particular, by its laws protect as best it may from unjust attack and, in the case of injustice done, vindicate the life, person, good name, and property rights of every citizen. …
Article 42A 1. The State recognises and affirms the natural and imprescriptible rights of all children and shall, as far as practicable, by its laws protect and vindicate those rights. …
Article 43 1. 1 The State acknowledges that man, in virtue of his rational being, has the natural right, antecedent to positive law, to the private ownership of external goods. 2 The State accordingly guarantees to pass no law attempting to abolish the right of private ownership or the general right to transfer, bequeath, and inherit property. 2. 1 The State recognises, however, that the exercise of the rights mentioned in the foregoing provisions of this Article ought, in civil society, to be regulated by the principles of social justice. 2 The State, accordingly, may as occasion requires delimit by law the exercise of the said rights with a view to reconciling their exercise with the exigencies of the common good.
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 66-82 DOI: 10.5204/qutlr.v17i2.717
THE TOBACCO INDUSTRY’S CHALLENGE TO THE UNITED KINGDOM’S STANDARDISED PACKAGING LEGISLATION – GLOBAL LESSONS FOR TOBACCO CONTROL POLICY?
JONATHAN GRIFFITHS*
In 2015, legislation imposing a standardised packaging regime for tobacco products was passed by the United Kingdom Parliament. The Standardised Packaging of Tobacco Products Regulations 2015 (UK) came into effect fully from 21 May 2017 and were contested vigorously by the tobacco industry, both through the legislative consultation process and in the courts. This article focuses on the claim for judicial review brought by the industry against the Regulations, R on the Application of British American Tobacco Limited v The Secretary of State for Health. In that case, the introduction of standardised packaging was challenged on a number of grounds, including proportionality, compatibility with the right of property and with international and European Union rules on the protection of intellectual property. All these arguments were rejected in forceful terms by Green J in the High Court, and again on appeal, by the Court of Appeal. This article sets out the industry’s claims in detail and explores the grounds on which the legislation was upheld. It also outlines the European Union legal context within which the legislation operates, including the important judgment of the Court of Justice of the European Union in Philip Morris Brands SARL and Others v Secretary of State for Health (C-547/14). It is suggested here that the reasoning in these judgments may prove instructive well beyond the borders of the United Kingdom.
I INTRODUCTION
In the United Kingdom, smoking kills over 100 000 people every year. Deaths from smoking are more numerous than the next six most common causes of preventable death combined.1 At the same time, large numbers of young people continue to take up the habit. It is estimated that over 200 000 children between 11 and 15 begin smoking each year.2 In response to this public health problem, a number of important tobacco control measures have been introduced. These include compulsory standardised packaging for tobacco products, required under the Standardised Packaging of Tobacco Products Regulations 2015 (UK) (‘the Regulations’).3 The Regulations came into force on 20 May 2016 and, with effect from 21 May 2017, require all cigarettes and hand-rolling tobacco to be sold in standardised packaging. The United Kingdom was the second country in the world (after Australia) to introduce such legislation. However, its progress onto the statute book was far from smooth. Tobacco companies fought the measure vigorously, both through the consultation process and in the courts. This article
* School of Law, Queen Mary, University of London. In its description of the legislative process leading up to the Standardised Packaging of Tobacco Products Regulations 2015 and of the content of those Regulations (see, Part II Standardised Packaging Legislation, below), this article re-uses some material published in Jonathan Griffiths, ‘On the Back of a Cigarette Packet — Standardised Packaging Legislation and the Tobacco Industry’s Right to (Intellectual) Property’ (2015) 4 Intellectual Property Quarterly 343. 1 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [61]–[67]. 2 Cyril Chantler, Standardised Packaging of Tobacco: Report of the Independent Review (2014) 4 (‘Chantler Report’). 3 SI 2015/829. This work is licensed under a Creative Commons Attribution 4.0 Licence. As an open access journal, articles are free to use with proper attribution in educational and other non-commercial settings.
The Tobacco Industry’s Challenge to the United Kingdom’s Standardised Packaging Legislation – Global Lessons for Tobacco Control Policy? focuses on the legal challenge brought against the Regulations, which had two prongs. In the first, which was ultimately referred to the Court of Justice of the European Union for a preliminary ruling in Philip Morris Brands SARL and Others v Secretary of State for Health (C-547/14) (‘Philip Morris’),4 the companies challenged the legality of a provision of the Tobacco Products Directive that permits individual member states to go beyond the packaging controls contained in the Directive by introducing more rigorous measures, including standardised packaging, at domestic level.5 The second challenge, R on the application of British American Tobacco Limited v The Secretary of State for Health (‘British American Tobacco’),6 more wide-ranging and direct, was brought by means of an application for judicial review of the legality of the Regulations in the High Court of England and Wales.
In this article, I aim to explain in detail the industry’s objections to the United Kingdom’s standardised packaging legislation in British American Tobacco and to outline the legal system’s response. At first sight, this may appear a relatively modest goal. However, the scale of the challenges brought to the Regulations makes it worthwhile. The range of arguments raised by the tobacco company claimants was exceptionally wide (involving, for example, the law of evidence, domestic and European constitutional law, human rights law, European and international intellectual property rules and the rules of the internal market) and it is hoped that this exploration of the industry’s attempt to derail standardised packaging legislation may prove valuable and instructive well beyond the borders of the United Kingdom.
II STANDARDISED PACKAGING LEGISLATION – THE EUROPEAN UNION AND THE UNITED KINGDOM FRAMEWORK
Before looking in more detail at British American Tobacco, it is necessary to outline the relevant legislative framework at European and domestic levels. As a member of the European Union, 7 the United Kingdom has enacted tobacco control measures within a framework deriving from Union law. The Tobacco Products Directive (‘TPD2’)8 is designed to implement the Union’s obligations under the WHO Framework Convention on Tobacco Control (‘FCTC’) 9 and to replace and update a previous Directive in the area (‘TPD1’). 10 TPD2 requires the implementation of extensive restrictions on the labelling and packaging of tobacco
4 [2016] 3 WLR 973. 5 Directive 2014/40 of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products [2014] OL J 124/1 (‘EU Directive 2014/10’), Art 24(2). Under Art 10, specified text and image health warnings must be carried on the outside packaging of tobacco products. Such warnings must cover 65 per cent of the main surfaces of the unit packet of a tobacco product. 6 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin); [2016] EWCA Civ 1182. 7 Following a referendum held on 23 June 2016, the UK Government has commenced the formal process of bringing membership of the EU to an end. At the time of writing, it is not possible to state precisely how this change in Treaty relations will affect the status of EU rules currently forming part of UK law. The Government’s current intention is to ‘domesticate’ secondary legislation implementing Directives wherever possible. If this intention is fulfilled, the vast majority of rules deriving from Directives in the area of copyright law will be retained in existing form at the time of formal departure from the Union. See Department for Exiting the European Union, Legislating for the United Kingdom’s Withdrawal from the European Union, Cm 9446, (2017). 8 EU Directive 2014/40 above n 5. 9 WHO Framework Convention on Tobacco Control, opened for signature 16 June 2003, 2302 UNTS 166 (entered into force 27 February 2005). 10 Directive 2001/37/EC of the European Parliament and of the Council of 5 June 2001 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco products [2001] OJ L 194/26.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products products.11 In particular, it increases the percentage of the space on the outer faces of a tobacco pack which must be taken up with health warnings, and imposes a series of further prohibitions on different aspects of product presentation and appearance. TPD2 does not oblige member states to introduce a fully standardised packaging regime.12 However, the option to do so at national level is explicitly left open13 by Art 24(2) of the TPD2, which states that:
This Directive shall not affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive. Such measures shall be proportionate and may not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States. ...
Some member states, including the United Kingdom, have already taken advantage of the option presented by this provision or have indicated that they will do so in future.14 In Philip Morris Brands SARL (C-547/14),15 tobacco companies challenged the legality of Art 24(2).16 The case originated in judicial review proceedings in the High Court of England and Wales, in which the companies objected to the TPD2 on a variety of grounds (the claim was described as a ‘kind of general onslaught’ by Advocate General Kokott).17 A number of issues were referred to the Court of Justice for a preliminary ruling. Amongst the claims, the tobacco companies argued that article 114 of the Treaty on the Functioning of the European Union (‘TFEU’)18 did not provide a suitable legislative basis for Art 24(2) because it envisaged the introduction of more stringent controls on tobacco packaging in some member states and could not, accordingly, be regarded as having an internal market objective. The Court held that Art 24(2) was not to be interpreted as permitting the introduction of further requirements in relation to any aspect of the packaging of tobacco products, including those harmonised under the TPD2. Rather, it was to be interpreted as permitting member states to implement the further standardisation of tobacco product packaging in respect of aspects of packaging which were not harmonised under TPD2. TPD2 was held only partially to harmonise the packaging of
11 It also places further regulatory controls on the marketing of tobacco products (including e-cigarettes) and introduces a prohibition on the marketing of tobacco products with ‘characterising flavours’ (including menthol cigarettes). 12 An amendment requiring the inclusion of a full, standardised packaging regime within the Directive was proposed, and rejected, during the legislative process, see Alberto Alemanno and Amandine Garde, Legal Opinion on the Compatibility of the UK Proposals to Introduce Standardised Packaging on Tobacco Products with the EU Tobacco Products Directive (Action on Smoking and Health and Cancer Research UK, 2014)
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The Tobacco Industry’s Challenge to the United Kingdom’s Standardised Packaging Legislation – Global Lessons for Tobacco Control Policy? tobacco products within the Union and, as a result, it did not preclude member states from introducing more stringent controls on the colour and presentation of packaging in areas that had not been harmonised. Interpreted in that way, Art 24(2) was held to be consistent with Art 114. While partial harmonisation measures do not eliminate all obstacles to trade, they eliminate some and, accordingly, assist in the establishment of the internal market.19
The Court’s confirmation of Art 24(2)’s legality effectively gave the green light to member states contemplating the introduction of standardised packaging legislation. These included the United Kingdom, where the Regulations had already been adopted when Philip Morris was handed down. The legislative process leading to the Regulations had been protracted. Following an initial consultation in 2012,20 a provision was inserted into the Children and Families Act 2014 (UK) authorising the Secretary of State for Health to make regulations concerning the retail packaging of tobacco products if he or she considers that such regulations might contribute at any time to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18.21 Following this provision coming into force, the government sought an independent review of the scientific evidence on the effectiveness of standardised packaging legislation from the paediatrician, Sir Cyril Chantler. His report concluded that, in conjunction with existing tobacco control measures, such legislation was ‘very likely to lead to a modest but important reduction over time on the uptake and prevalence of smoking and thus have a positive impact on public health’.22 Following further consultation in 2014,23 the Regulations were tabled and received Parliamentary approval through the affirmative resolution procedure on 19th March 2015.24
The aims of the Regulations, set out in an accompanying memorandum, are first, to discourage young people from starting to use tobacco products; second, to encourage people to give up using tobacco products; third, to reduce the appeal or attractiveness of tobacco products; fourth, to reduce the misleading elements of packaging and the potential for packaging to detract from the effectiveness of health warnings and, finally, to alter attitudes, beliefs, intentions and behaviour relating to the reduction in use of tobacco products.25 The Regulations pursue these goals through a series of stringent controls on the packaging of cigarettes and hand-rolling tobacco. External packaging surfaces must be presented in a specified dull brown colour and internal surfaces must either be white or the same dull brown.26 With the exception of health warnings and other statutorily prescribed information, the only distinguishing text permitted on the packaging of products covered by the legislation is a brand and variant name. The font and maximum size of this text is specified. 27 Restrictive conditions are imposed on the presentation of cigarettes themselves.28 Further constraints relating to the required materials,
19 Philip Morris [2016] 3 WLR 973 [85]–[95]. 20 Department of Health, Consultation on Standardised Packaging of Tobacco Products (2012)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products shape and type of packaging for tobacco products are designed to eradicate all other opportunities for product differentiation. 29 These packaging requirements apply to retail packaging only (that is, to packaging intended to be presented for sale to consumers).30 Breach of the Regulations is a criminal offence31 and no compensation is payable for those adversely affected by the legislation.
The Regulations do not restrict promotion of tobacco products at wholesale level and include provisions designed to preserve the existence of the intellectual property rights in the Industry’s brand signs, despite the serious controls placed on the use of those signs. Thus, for example, it is provided (i) that trade marks and designs relating to tobacco products may still be registered even though they cannot be applied to tobacco products;32 and (ii) a trade mark proprietor’s inability to use a registered trade mark relating to tobacco products as a result of the Regulations will not result in the revocation of that mark.33
III R ON THE APPLICATION OF BRITISH AMERICAN TOBACCO LIMITED V THE SECRETARY OF STATE FOR HEALTH
Unsurprisingly, tobacco companies brought a wide-ranging legal challenge to the Regulations. Indeed, Green J, who heard the judicial review of the Regulations in the Queen’s Bench Division of the High Court noted that ‘no even remotely or marginally arguable stone has been left unturned’ by the companies.34 Ultimately, he upheld the legality of the Regulations against all challenges, in a judgment that extended to precisely 1000 paragraphs.35 On appeal, the Court of Appeal occasionally differed from the judge’s approach to specific aspects of the challenge but, overall, confirmed his conclusions in the clearest of terms.
British American Tobacco was concerned with the legality of a specific measure in a single state. Nevertheless, it can justifiably be suggested to have broader significance. A number of the arguments advanced by the companies in this case seem likely to be rehearsed elsewhere in one form or another in future. This will be the case, for example, for the claims relating to (i) the treatment of the company’s evidence, (ii) the proportionality of standardised packaging legislation, (iii) the alleged interference with the companies’ fundamental right of property, (iv) the relationship between standardised packaging legislation and European Union trade mark law, and (v) the legislative competence of member states to introduce standardised packaging legislation, with particular reference to the TRIPS Agreement.36 The UK courts’ analysis of, and conclusions on these subjects will be of interest in other jurisdictions in which the industry has challenged tobacco control measures, or seems likely to do so in future. Each of these important categories of claim is examined further below. However, before considering each in turn, it is first necessary to pause briefly to note a number of further, less fundamental arguments that were also raised in British American Tobacco. The companies challenged the Regulations on the ground that Art 114 did not provide a suitable foundation for Art 24(2) of the TPD2 and, therefore, that the Regulations were unlawful.
29 Reg 4 (cigarettes); Reg 8 (hand-rolling tobacco); Regs 10–12; Sch 2. 30 See Explanatory Memorandum, 7.10. 31 Reg 15. 32 Regs 13(1)–(3) (trade marks); 14 (designs). 33 Reg 13(4)–(8). 34 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [50]. 35 The Court of Appeal was critical of the extreme length of Green J’s judgment, see R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [2]. 36 Agreement on Trade Related Aspects of Intellectual Property Rights, adopted 15 April 1994 at Marrakesh, TRT/WTO01/001, entry into force 1 January 1995.
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However, by the time Green J handed down his judgment in British American Tobacco, the Court of Justice had already decided Philip Morris and, as a result, it was clear that this challenge was unsustainable.37 The argument that the Secretary of State should have awaited the judgment in Philip Morris before proceeding with the Regulations, 38 and that the consultation exercise had been a sham, were also held to be without merit.39 In a further claim related to the legislative basis for the Regulations, the companies argued that the Secretary of State had failed to give adequate weight to the fact that a decision to introduce standardised packaging legislation at national level could only be justified where the ‘high level of protection of human health’ already achieved through the TPD2 was taken into account. The companies argued that such legislation could therefore only be introduced if there was clear evidence that it would achieve a higher level of health protection than that achieved by TPD2. In rejecting this reading of the provision, Green J held that the Secretary of State had taken adequate steps to assess the desirability of standardised packaging controls within a legislative exercise that was ‘precautionary, predictive and related to public health’. 40 The Court of Appeal upheld this conclusion, finding that Art 24(2) did not require a direct comparative exercise based on specific evidence addressing the relative health benefits of TPD2 packaging and standardised packaging.41
A parallel claim for judicial review was brought by producers of ‘tipping paper’, the paper which encases the filter tips of cigarettes, and was joined to the companies’ challenge to the Regulations. The producers argued that the Regulations’ restrictions on the presentation of the paper surrounding cigarettes42 were ultra vires, firstly because they were not permitted under Art 24(2) because they did not relate to ‘packaging’ and, secondly, because they were disproportionate. On the first of these arguments, Green J held (i) that, read purposively, and in the light of the FCTC, tipping paper fell within the definition of ‘packaging’; (ii) that, in any event, member states were free to introduce extra restrictions on the branding of tobacco products in order to secure the effet utile of the packaging restrictions in the Regulations; and (iii) even if those arguments were wrong, the TPD2 was a partial harmonisation measure which did not prevent member states from introducing further public health restrictions on the presentation of tobacco products.43 On proportionality, the producers argued that there was no evidence that the controls on the presentation of the paper surrounding cigarettes would serve a useful public health purpose. However, Green J considered that the Secretary of State had acted proportionately in determining that the altered appearance of the tipping paper would have a beneficial impact.44 In a relatively rare instance of substantive disagreement with the judge, the Court of Appeal did not accept that ‘packaging’ could be interpreted as encompassing tipping paper. Nevertheless, it upheld his judgment on the ground that the TPD2 was only a measure of partial harmonisation and that the EU legislature had not intended to prevent member states from standardising the presentation of the paper surrounding cigarettes more generally.45 On proportionality, the Court of Appeal agreed with the judge’s conclusion
37 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [266]. 38 Ibid [935]–[948]. 39 Ibid [919]–[932]. 40 Ibid [895]. 41 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [261]–[262]. 42 Regulations, Reg 5. 43 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [949]–[979]. 44 Ibid [980]–[1000]. 45 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [280].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products that there were reasonable grounds for believing that the controls on the presentation of tipping paper would be beneficial to public health.46
A The Challenge to the Secretary of State’s Treatment of the Tobacco Companies’ Evidence
In a claim that has wide potential relevance, the companies argued that the Secretary of State had acted unlawfully in according limited weight to the evidence they had presented against standardised packaging legislation during the consultation processes. Green J found that no such error had been made, stating that ‘…measured against internationally accepted research and evidence standards, [the companies’] evidence, as a generality, was materially below par’.47 Accordingly, to the extent that limited weight had been placed on the companies’ evidence, it had been entirely appropriate for the Secretary of State to do so. The judge also held that, even if insufficient weight had been placed on the industry’s evidence, there was no reason to believe that such failure had affected the decision-making process leading to Parliament’s approval of the Regulations.48 In concluding thus, the judge approved the best practice guidelines on scientific evidence applied by the Secretary of State at the pre-legislative stage. He took into account the FCTC and WHO guidelines on tobacco industry evidence, and critical academic studies of the companies’ submissions to the standardised packaging consultation. He also referred to the judgment in the District Court in the District of Columbia in Tobacco-Free Kids Action Fund v Philip Morris USA Inc, in which the industry’s systematic failure to provide honest evidence had been exposed.49
The judge’s conclusions on the industry’s practices on research and evidence were strongly worded. He noted, for example, that:
Uniquely in this case there is an international consensus from within the WHO and across the world that tobacco companies are set on subverting national health policies antithetical to their financial interests. This is, in part, due to experiences in the US courts and the sharp conflict between public utterances and private analysis. There is in such circumstances a real premium upon full observance with the principles laid down in the [Civil Procedure Rules] (in so far as there is day light) with best and transparent research and publication practices generally. It is in this way that the tobacco companies can persuade a systemically sceptical world that their research is valid and worthy of the great probative weight they claim for it.50
There were a number of significant ways in which the companies’ evidence was held to fall below best scientific practice. It was not peer-reviewed, or based on peer-reviewed material, and it was not transparent, in that it was not benchmarked against the companies’ own internal documents. The evidence, according to the judge, was ‘virtually devoid of any reference to the internal documents of the tobacco companies themselves’.51 The evidence presented was often unverifiable and ignored the broader literature on the subjects at issue. At an individual level, the judge was scathing in his criticism of the evidence of some of the witnesses who appeared on behalf of the companies.52
46 Ibid [288]. 47 Ibid [404]. 48 Ibid [376]. 49 Ibid [276]–[376], citing United States of America (and Tobacco-Free Kids Action Fund et Ors, Intervening) v Philip Morris USA Inc et al, US District Court for the District Court of Columbia 449 F.Supp.2d 1 (Civil Action No. 99-2496 (GK), 17 August 2006, Judge Gladys Kessler). 50 Ibid [318]. 51 Ibid [292]. 52 See eg, ibid [314]–[315]
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On appeal, the Court of Appeal held that Green J had been entitled to refer to the FCTC and its Guidelines and to the judgment in Tobacco-Free Kids Action Fund, even though the latter, in particular, had not been canvassed extensively by the parties at the hearing at first instance. The Court of Appeal also held that the judge had not applied different standards to the expert evidence relied on by the Secretary of State from those applied to the companies’ experts. Overall, the Court of Appeal held that the judge had not disregarded or marginalised the companies’ evidence by applying a ‘sui generis rule which singles out the tobacco companies for particular and adverse treatment’.53 It was clear that he had reviewed all the expert evidence in the case in the light of best scientific methodological practice. Any doubts about his approach could not undermine his overall conclusions on this issue.
B Proportionality
The tobacco companies argued that the Regulations violate the principle of proportionality because (i) they are not suitable and appropriate to meet the objective of improving public health, (ii) they are not ‘necessary’, in that other less onerous measures could have been adopted just as effectively, and (iii) they do not strike a fair balance between the public interest and the interests of the companies (‘proportionality stricto sensu’). Proportionality was relevant to a number of the arguments advanced by the companies, including those relating to an alleged violation of the right of property (discussed below), and incompatibility with the principle of free movement of goods. It was also raised as a free-standing challenge considered in its own right by both Green J and the Court of Appeal. Their findings on this issue lie close to the core of the dispute. Ultimately, it is absolutely clear that the judge and the Court of Appeal were convinced that the Regulations represented an entirely proportionate response to a serious health problem. Nevertheless, the framework within which a UK court is obliged to assess the proportionality of measures within the scope of EU law is complex and it was therefore necessary for both Green J and the Court of Appeal to consider the applicable principles in some detail. The judgment of the Supreme Court in R (Lumsdon) v Legal Studies Board (‘Lumsdon’)54 and that of the Court of Justice in Scotch Whisky Association v Lord Advocate (C-333/14) (‘Scotch Whisky’)55 were particularly significant in this respect. In Scotch Whisky, the Court had emphasised that a member state derogating from the freedom of movement of goods in order to protect human life and health was obliged to provide appropriate evidence of the proportionality of the measures adopted. However, member states were not required to prove that ‘no other conceivable measure could enable the legitimate objective pursued to be attained under the same conditions’. 56 Any court assessing the proportionality of such a derogation must ‘examine objectively whether it may reasonably be concluded from the evidence submitted by the member state concerned that the means chosen are appropriate for the attainment of the objectives pursued and whether it is possible to attain those objectives by measures that are less restrictive of the free movement of goods’.57 In doing so, the court was entitled to take account of scientific uncertainty.58
On these foundations, Green J set out a number of principles relevant to the proportionality analysis. He held that the concept of proportionality under the European Convention on Human
53 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [178]. 54 [2016] AC 697. 55 [2016] 1 WLR 2283. 56 Ibid [55]. 57 Ibid [56]. 58 Ibid [57].
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Rights59 (‘ECHR’) and the Human Rights Act 1998 (UK) was fundamentally the same as that applied in EU law. He also noted that certain factors, such as the ‘precautionary’ nature of a national intervention in an area of scientific uncertainty might provide a ‘margin of appreciation’ for a decision maker and that the intensity of the court’s review was fact and context sensitive. Drawing on Lumsdon, he pointed to a number of factors which could affect the intensity of judicial review for proportionality. These included:
(i) the nature and importance of the ‘private interest’ being derogated or departed from…; (ii) the importance of the public interest being prayed in aid to justify the departure from the competing private right; (iii) the need in an EU case to prevent unnecessary barriers to free movement and market integration…; (iv) the extent to which the alleged derogation itself furthered a recognised social policy of the EU…; (v) the extent to which the national measure derogated from free movement in an area where the EU had not legislated but where it was said that the derogating measure furthered an important consumer protection policy in the Member State….60
Having traced these important basic principles, he considered their application in British American Tobacco itself.
On appropriateness and suitability, the companies argued that the Regulations would not improve public health. They suggested that the evidence from Australia, following the introduction of standardised packaging legislation, supported this contention and claimed that the introduction of the Regulations would lead customers to ‘downtrade’ to lower-priced products and, as a result, to increase their use of tobacco. Green J did not accept this argument, holding that the Secretary of State’s evidence established a prima facie basis for demonstrating the suitability and appropriateness of the Regulations. In this respect, his assessment of the relative merits of the evidence presented by the parties (as discussed above) was significant. He noted that, while it was necessary to consider the factual foundation and reasoning underlying the proportionality of the impugned measure at an appropriate level of detail, a decision maker such as the Secretary of State benefited from a ‘relatively broad margin of appreciation’ in a case such as this. This margin arose as a result of:
(a) the fact that the Regulations are public health measures where both the precautionary principle applies and where the scientific evidence is predictive and not fully mature or robust; (b) the fact that there exist scheduled reviews at points in time when it can be expected that the evidence will have developed and matured; (c) the fact that the decision maker was Parliament and that the process of promulgation of the Regulations was supervised by the EU Commission; (d) the fact that the adoption of standardised packaging measures is endorsed at the highest level of international consensus; and (e) the fact that this is an area of shared competence between the EU and the Member States in which the Member States must take a high level of protection of health as their starting point.61
Great importance was to be attached to legislative activity in the spheres of health and consumer protection. Also militating in favour of a broad margin of appreciation were the facts that (i) this was an area where harmonisation is partial; (ii) the decision to introduce the legislation required a complex evaluation involving political, economic or social choices; (iii)
59 Convention for the Protection of Human Rights and Fundamental Freedoms, opened for signature 4 November 1950, Rome, entry into force 1953. 60 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [434]. 61 Ibid [629].
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The Tobacco Industry’s Challenge to the United Kingdom’s Standardised Packaging Legislation – Global Lessons for Tobacco Control Policy? the Regulations were passed by affirmative resolution; and (iv) the operation of the Regulations was to be reviewed after a period of five years.62
The judge’s conclusion that the Regulations were appropriate and suitable was challenged on appeal. In particular, the companies challenged the ‘margin of appreciation’ accorded to the Secretary of State. The Court of Appeal doubted the utility of this concept in domestic law but concluded nevertheless that any error in the judge’s approach had not been determinative because, regardless of any margin of appreciation applied, he had independently concluded, after careful examination, that the companies’ evidence was adequate to establish the suitability and appropriateness of the Regulations. He had not adopted an erroneous ‘manifest inappropriateness’ standard. The companies also disputed Green J’s reference to the precautionary principle, suggesting that it should only apply where there is uncertainty as to the existence of a risk. The Court of Appeal held (i) that an assessment of the proportionality of a measure made at first instance should not be reversed unless vitiated by error of law, and (ii) that the precautionary principle could extend to situations, such as that at issue in these proceedings, in which it is uncertain whether action against a known public health risk would be effective. In any event, even if the judge had erred in relying on the precautionary principle, this error had not vitiated his judgment because he had had other reasons for deciding that the Secretary of State benefited from a relatively broad margin of appreciation and had, quite independently, reached a prima facie conclusion that the Secretary of State’s evidence was sufficient to demonstrate the appropriateness of the Regulations without reference to any margin of appreciation.63
On necessity, the judge held that Parliament acted reasonably in concluding that there was no equally effective, less restrictive, measure that would have met the aims of the Regulations. Relying again on Scotch Whisky and Lumsdon, he stated that the Secretary of State was not required to prove ‘positively that no other conceivable measure could enable the legitimate objective pursued to be attained under the same conditions’ 64 and that, while all the circumstances bearing on the question of necessity were to be taken into account, a reviewing court would be ‘heavily reliant on the submissions of the parties for an explanation of the factual and policy context’.65 Because it was uncertain whether a margin of appreciation was available to a decision maker on this issue after Scotch Whisky, Green J applied a test of ‘objective reasonableness’. On this basis, he accepted that Parliament had acted reasonably in concluding that there was no less onerous, but equally effective, alternative to the Regulations.66 On appeal, the companies argued that this step of the proportionality review had been emptied of all substance by the judge. However, while the Court of Appeal accepted that some aspects of the judge’s reasoning on this issue might be open to criticism, his application of the ‘objective reasonableness’ test drawn from Scotch Whisky was correct and, on this basis, he had been entitled to reach the conclusion that the Regulations were necessary.67
As a matter of legal principle, prior to British American Tobacco, there had also been some uncertainty as to whether or not the proportionality test under EU law also encompasses a third
62 Ibid [438]–[472]. 63 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [223]–[230]. 64 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [660]. 65 Ibid [665]. 66 Ibid [676]. 67 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [236]–[241].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products component under which a court is obliged to balance the rights and interests of the parties (proportionality stricto sensu) in a case such as this. Green J held that it does and that this element of the test was the same as the ‘fair balance’ enquiry conducted by the European Court of Human Rights when it considers situations in which competing rights conflict.68 In applying this test, he noted that tobacco control was a public interest of the first order and that the competing interest of the companies was ‘profit’. These two interests were said to ‘collide in the most irreconcilable of ways’ and the balance between them overwhelmingly favoured the state.69 The companies’ appeal on this point was rejected.70
C The Fundamental Right of Property
The companies also challenged the legality of the Regulations on the ground that they violated their property rights, most notably their trade marks, under Art 1, Protocol 1 of the ECHR, Art 17 of the Charter of Fundamental Rights of the EU and at common law.71 In essence, they claimed that the restrictions imposed on the use of trade marks relating to tobacco products under the Regulations were tantamount to an expropriation of those marks and, more broadly, of their brands. They argued that such an interference with property rights could only be lawful on payment of compensation. Green J considered Art 1, Protocol 1 of the ECHR first, noting that the companies’ intellectual property rights were undoubtedly ‘possessions’ for the purpose of this provision.72 Having established that the marks were covered by the ECHR’s property guarantee, he went on to determine whether the Regulations could be classified as a ‘deprivation’ of the companies’ marks or as a less restrictive ‘control’ on their use. This distinction is significant because states have greater leeway in relation to the latter than the former. Indeed, generally, in the Strasbourg jurisprudence, there is an assumption that ‘deprivation’ of possessions is only lawful where compensation is paid. Having considered the relevant case law in detail, the judge concluded that the Regulations were a control on the use of the companies’ marks rather than an expropriation or deprivation. Trademark law establishes negative rights and, while the Regulations severely curtailed the companies’ ability to use their marks, those marks could still be used on communications at a wholesale level (subject to pre- existing controls on tobacco marketing) and enforced against third party infringers. Accordingly, they retained their core function, that of indicating the origin of goods. As a result, there was no deprivation of property.73
Having determined the nature of the interference with the companies’ possessions, Green J considered whether compensation was necessary. He noted that, under the case law of the Strasbourg Court, a ‘fair balance’ test was applied. This was the same as the balancing test previously considered in relation to proportionality and, therefore, clearly came out in the Secretary of State’s favour. According to the judge, it was important to appreciate the context of the dispute:
68 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [432]. 69 Ibid [683]. 70 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [244]–[245]. 71 The companies also sought to argue that there had been an infringement of their right to conduct a business under Art 16. However, it was held that this ‘heavily circumscribed’ right added nothing to the claim based upon the right of property: R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWHC 1169 (Admin) [858]–[864]. 72 Ibid [731]. 73 Ibid [732]–[784].
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The Tobacco Industry’s Challenge to the United Kingdom’s Standardised Packaging Legislation – Global Lessons for Tobacco Control Policy?
The Claimants seek compensation for the loss of the ability to promote a product that is internationally recognised as pernicious and which leads to a health ‘epidemic’. It is as such unlike any other case in which the Courts have granted compensation…. The Claimants could not identify a case where compensation had been paid for the suppression or control of a private activity that pursued an end or objective recognised as a public vice.74
Even if the Regulations had been defined as a deprivation of property, rather than as a control on use, compensation would not have been payable. Under the Strasbourg case law, compensation generally had to be paid for deprivations of property unless ‘exceptional circumstances’ prevailed. Green J believed that such circumstances existed here:
The reason why there is no breach of A1P1 if compensation is not paid is due to (a) the undeniable and all pervasive harm caused by the product; (b) the fact that the trade marks are used causally to further that harm by promoting the product to consumers; and (c) the fact that they thereby impose on the State clear up and remedial costs of a staggeringly large scale…. It is hard to avoid the conclusion that the suppression of rights which promote a health epidemic and impose huge costs on the taxpayer is precisely the sort of circumstance where exceptionality does apply.75
The Court of Appeal upheld his conclusion on this point.76
The rights under the EU’s Charter of Fundamental Rights77 are closely aligned with those under the ECHR. Nevertheless, the companies argued that, even if there was no violation of Art 1, Protocol 1, there could still be a breach of Art 17 of the Charter because Art 17 encompassed an absolute prohibition on interferences with the right of property which fail to respect the ‘essence’ of that right. On this basis, even if the Regulations were held to be proportionate, they would still fall foul of Art 17. The judge held that this interpretation of the requirements of the Charter would lead to absurd outcomes and could not be supported by the jurisprudence of the Court of Justice.78 Nevertheless, because the issue was not completely free from doubt, he considered the companies’ claim on the assumption that Art 17 did, in fact, encompass such an absolute prohibition on the impairment of the ‘essence’ of protected rights. On this basis, he held that the Regulations did not impair the ‘essence’ of the companies’ trade mark rights because those trade mark rights primarily provided a cause of action against infringing third parties.79 Green J’s strong overall conclusion on this issue is worth quoting at length:
At base this point boils down to the correctness of the [companies’] proposition that the essence or substance of their trade marks allows them to facilitate a health epidemic … and that since they are prevented from using their property rights to do this by the Regulations those measures are unlawful, even if they are otherwise proportionate. In my judgment this is an unsustainable proposition. Nothing in international or EU law could or would tolerate this proposition; it runs counter to almost every sensible notion of how and why fundamental rights are to be defined and it assumes that the tobacco companies’ shareholders have a greater hold on fundamental rights than do (say) the 600 children a day who start smoking in the UK and
74 Ibid [794]. 75 Ibid [802]. 76 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [91]–[115]. 77 Charter of Fundamental Rights of the European Union (Official Journal of the European Union, 2000/C 364/01). 78 British American Tobacco (UK) Limited v The Secretary of State for Health [2016] EWHC 1169 (Admin) [825]–[830]. 79 Ibid [831]–[843].
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whose long term health prospects and life expectancy are threatened by the [companies’] product and who can also assert a (fundamental) right to protection of their health. In short and even assuming that nothing can impair the essence of a fundamental right, the very concept of ‘the essence’ is flexible and it responds to and is governed by overriding public interest considerations. In the present case the fact that the Regulations intrude upon trade mark usage is simply a reflection of the fact that the essence of the rights yields to and is defined by superior health interests; the essence of the right is not impaired or disrespected as a result.80
The Court of Appeal upheld this conclusion on Art 17, holding that the essence of the companies’ rights was the ability to employ their trade marks as negative rights against third parties and that those rights were retained under the Regulations. Furthermore, the jurisprudence of the Court of Justice clearly demonstrated that the right of property under the Charter is not absolute but can be regulated so far as is necessary in the general interest and is to be viewed in relation to its social function. The various rights protected under the Charter sometimes come into conflict and the resolution of such conflicts inevitably involves an analysis of proportionality. However, this would be impossible if the companies’ claim that the essence of a right could not be interfered with in any circumstances were to be upheld. This consequence underlined the absurdity of the companies’ submission on this point.81
It was also argued that, at common law, the property in trade marks could not be interfered with without the clearly expressed will of Parliament and, even then, only if compensation were paid. Green J held that Parliament had not ousted the right of property at common law in adopting the Regulations because there was no clear wording to that effect in the legislation. However, he held that a common law right of property must inevitably contain similar limitations to those included in Art 1, Protocol 1 and Art 17. As a result, the common law right neither prohibited the Regulations nor required the payment of compensation.82 On appeal, the Court of Appeal upheld this conclusion but employed slightly different reasoning, holding that the right of property at common law applied to deprivations of property only and not to controls on the use of property such as that at issue in these proceedings.83
D Incompatibility with European Union Intellectual Property Rights
The companies also argued that the Regulations violated secondary Union legislation on intellectual property rights. In particular, they claimed that the Regulations were inconsistent with the unitary character of Community trade marks84 under the Community Trade Mark Regulation (‘CTMR’).85 Art 1(2) of the CTMR provides that:
80 Ibid [837]. 81 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [116]–[124]. 82 British American Tobacco (UK) Limited v The Secretary of State for Health [2016] EWHC 1169 (Admin) [844]–[857]. 83 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [125]–[129]. 84 The companies also advanced a parallel, and equally unsuccessful claim, based upon the unitary nature of Community registered designs: see British American Tobacco (UK) Limited v The Secretary of State for Health [2016] EWHC 1169 (Admin) [880]–[882]. 85 Regulation (EC) No. 207/2009 of the Council of 26 February 2009 on the Community trade mark [2009] OJ L 78/1 (‘CTMR’). The CTMR has subsequently been amended by Regulation (EU) No 2015/2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95 implementing Council Regulation (EC) No
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A Community trade mark shall have a unitary character. It shall have equal effect throughout the Community: it shall not be registered, transferred or surrendered or be the subject of a decision revoking the rights of the proprietor or declaring it invalid, nor shall its use be prohibited, save in respect of the whole Community. This principle shall apply unless otherwise provided in this Regulation.
On the basis of this provision, the companies argued that member states are not permitted to derogate from the rights granted under the CTMR. However, under the Regulations, the companies were prohibited from using certain marks on tobacco packaging in the United Kingdom and, as a result, they claimed, their Community Trade Marks (‘CTMs’) would not have ‘equal effect throughout the Community’. As a result, the use of the marks was not prohibited under the Regulations ‘in respect of the whole Community’, as required under Art 1(2) CTMR (set out above). According to the companies, the Regulations were not saved by Art 110(2), which provides that:
This Regulation shall, unless otherwise provided for, not affect the right to bring proceedings under the civil, administrative or criminal law of a Member State or under provisions of Community law for the purpose of prohibiting the use of a Community trade mark to the extent that the use of a national trade mark may be prohibited under the law of that Member State or under Community law.
The companies suggested that this provision did not justify the Regulations, which discriminated between national marks and CTMs.
Green J held that the CTMR was to be construed in the light of superior legal obligations. The Court of Justice’s trade mark jurisprudence demonstrated that, when granted, trade marks were implicitly limited. This was apparent from the case law on competition and also from judgments in which the Court had distinguished between the ‘existence’ and ‘exercise’ of trade mark rights. Thus, insofar as the TFEU and the TPD2 permitted member states to introduce restrictions such as those in the Regulations, there was no breach of the CTMR.86 In any event, the CTMR itself contains a ‘carve-out’ from the unitary nature of CTMs under Art 110(2) and the Regulations fell within this provision.87
Green J did not accept the companies’ argument that the Regulations discriminated between national marks and CTMs and, as a consequence, were not covered by Art 110(2). The alleged discrimination was said to arise as a result of Reg 13(2)(b), which provides that nothing done in accordance with the Regulations ‘amounts to an enactment or rule of law which prohibits the use of a trade mark for the purposes of section 3(4) of that Act’. Under this provision, the Regulations do not preclude the registration, or maintenance, of tobacco marks despite the wide-ranging prohibitions on their use. The companies emphasised that Reg 13(2)(b) applied only to national trade marks and not to CTMs and, accordingly, discriminated between the two forms of trade mark. However, according to Green J, any difference in treatment between these two categories of mark could objectively be justified by the limits upon the United Kingdom legislature’s law-making powers. In any event, even if Reg 13(2)(b) were unlawful, the appropriate remedial response would be the severance of that provision from the legislation
40/94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) (Text with EEA relevance) [2015] OJ L 341/21 (‘EUTMR’). 86 British American Tobacco (UK) Limited v The Secretary of State for Health [2016] EWHC 1169 (Admin) [869]. 87 Ibid [870]–[879].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products rather than the quashing of the Regulations as a whole. He noted that it was rather strange that the companies were pressing this point because, from their perspective, Reg 13(2)(b) represented ‘the only silver lining to [the] otherwise dark cloud’ of the Regulations.88
The Court of Appeal upheld the judge’s conclusions on the CTMR, holding that the Regulations were exactly the type of provision for which Art 110(2) CTMR was devised. Reg 13(2)(b) of the Regulations did not detract from the prohibitory effect of the Regulations. It served only to make explicit what was implicit in any event (that is, the fact that compliance with the Regulations would constitute ‘proper reasons’ for non-use of the mark). The Court of Appeal also noted that, if Reg 13 of the Regulations were unlawful, it could be severed from the Regulations. In such circumstances, the remainder of the Regulations would remain intact and the companies’ position would be worsened, rather than improved.89
E Parliament’s Competence to Make the Regulations — the Common Commercial Policy and TRIPS
The final argument summarised here is the claim that the United Kingdom Parliament had no competence to make the Regulations because measures relating to the commercial aspects of trade marks are within the common commercial policy of the EU under Art 207(1) TFEU, and therefore fall within the exclusive competence of the EU. In advancing this claim, the companies relied on the judgment of the Court of Justice in Daiichi Sankyo Co. Ltd v DEMO Anonimos Viomikhaniki kai Emporiki Etairia Farmakon (C-414/11) (‘Daiichi’).90 This ground of challenge was rejected by Green J for a number of reasons. He held that the Regulations, in the framework of the TPD2, overwhelmingly relate to the protection of health. They affect international trade and trade marks only indirectly. This tangential impact was insufficient for them to become a matter of common commercial policy. As the power provided by Art 24(2) relates to the internal market and public health, it falls within the domain of shared competence between the EU and member states.91 According to the judge, this conclusion was in line with common sense because if ‘the trade mark tail were allowed to wag the health dog this would prevent the Member States from adopting any health measures which indirectly affected international trade’.92 He did not accept that the Judgment in Daiichi altered this position. Only rules relating to intellectual property with a specific link to international trade fall within the concept of ‘commercial aspects of intellectual property’ in Article 207(1) TFEU. The simple fact that legislation has an impact on the use of intellectual property rights does not bring it within the ambit of the common commercial property.93
Under Daiichi, as long as a national measure is consistent with TRIPS, there is no reason to doubt its legality. In this instance, the Regulations appeared to be compatible with TRIPS.94 There were a number of reasons for this conclusion. TRIPS was concerned with the registration
88 Ibid [879]. 89 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [130]–[139]. 90 [2014] Bus LR 1. 91 British American Tobacco (UK) Limited v The Secretary of State for Health [2016] EWHC 1169 (Admin) [908]–[911]. 92 Ibid [909]. 93 Ibid [911]–[914]. 94 The compatibility of Australia’s plain packaging legislation with the TRIPS Agreement has been raised before a WTO dispute resolution panel (see 2017 17(2) QUT Law Review (forthcoming)). A confidential leak of a draft of the panel’s report suggests that it will find the legislation to be compatible with TRIPS when it hands down its final report. See, for example, ‘Tobacco Industry Suffers Defeat as WTO Upholds Australia’s Plain Packaging Law’, The Guardian, (online), 5 May 2017.
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The Tobacco Industry’s Challenge to the United Kingdom’s Standardised Packaging Legislation – Global Lessons for Tobacco Control Policy? of marks and with the right to exclude others from the use of a mark rather than with a right- holder’s own use of a mark. Furthermore, under Art 7 TRIPS, registration and enforcement of trade marks were subject to a requirement to contribute to public welfare. Art 8 of the Agreement explicitly gave permission to contracting parties to adopt measures necessary to protect public health. The Regulations fell within the ambit of both of these provisions. The interpretation of TRIPS for which the companies argued would also be inconsistent with the principles of the Doha Declaration, which stated that the TRIPS Agreement should not prevent states from taking measures to protect public health.95 Furthermore, the TRIPS Agreement was to be interpreted consistently with the FCTC. It did not incorporate an ‘immutable and unyielding principle of non-discrimination as between different categories of goods and services’96 and was not to be construed as preventing the adoption of prohibitions on product- specific trade marks where those marks cause harm to health. Finally, it was to be noted that Art 17 TRIPS itself permitted limited exceptions to rights within the scope of the Agreement. While the companies argued that this provision permitted only limitations that were narrow in scope, the judge noted that the Regulations preserved the right to register a mark for tobacco products and the right to exercise such a mark to exclude others and, as a result, struck a proportionate balance between the interests of right holders and third parties and, accordingly, fell within Art 17.97
On appeal, the companies claimed that the judge had erred in concluding that the Regulations fell within an area of competence shared between the EU and its member states, but the Court of Appeal upheld the judge on this point. Art 24(2) TPD2 is a partially harmonising measure and the United Kingdom retains competence to legislate in the area covered by Art 24(2) or, more broadly, in areas falling outside the scope of the TPD2. 98 Daiichi did not help the companies. For the reasons given by the judge, the Regulations did not breach TRIPS. In this regard, the Court of Appeal noted, additionally, that (i) Art 19(2), TRIPS which specifically contemplates non-use of a trade mark as a result of ‘government requirements’ relating to goods, does not only apply where the goods concerned have been banned, and (ii) Art 20, TRIPS, which prohibits unjustified encumbrances upon the use of trade marks, encompassed a requirement of proportionality. As has been noted above, both the judge and the Court of Appeal had, in any event, held that the Regulations complied with this requirement.99
III CONCLUSION
British American Tobacco has clear doctrinal significance within the United Kingdom. For example, it has further confirmed the existence of significant flexibilities in the assessment of the proportionality of legislative measures aimed at the protection of health. However, its real impact may be more wide-ranging. The tobacco industry ‘threw the kitchen sink’ at the Regulations and failed spectacularly on all points. The judgments at first instance and on appeal make it absolutely clear that none of the challenges to the legislation advanced by the industry came anywhere near success. Standardised packaging legislation was understood by the courts as a proportionate attempt to protect the public against a grave health threat. Green J’s judgment was unusually outspoken in his condemnation of the companies’ case and in his tracing of the
95 World Trade Organization, Ministerial Declaration on the TRIPS Agreement and Public Health (Doha Round) adopted on 14 November 2001, WT/MIN(01)/DEC/1. 96 Ibid [916]. 97 Ibid [915]–[916]. 98 R (on the application of British American Tobacco (UK) Limited) v The Secretary of State for Health [2016] EWCA Civ 1182 [150]–[168]. 99 Ibid [140]–[149].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products absurd consequences that would have arisen if their challenges to the Regulations were to have been accepted. His exasperation with the litigation is palpable.
The outcome of British American Tobacco, and the reasoning leading to that outcome, are likely to embolden other states which are contemplating the introduction of standardised packaging legislation, but which have been hesitating in the face of threats that the introduction of such measures would violate the industry’s legal rights and would therefore result in massive compensation payments. Some of the conclusions outlined in this article are particularly significant in this respect. For example, the section of Green J’s judgment in which he analyses the weaknesses of the companies’ approach to evidence is likely to prove interesting reading for tobacco control advocates around the world. The conclusions of the academic research on which he drew to support his criticism of the evidence are also highly informative. Similarly, the long list of reasons advanced by Green J and the Court of Appeal for concluding that standardised packaging legislation is compatible with TRIPS suggests that a more direct challenge on this ground is likely to prove unavailing. Although, of course on this point, we are soon likely to have the benefit of a more definitive view from a dispute resolution panel.100
Perhaps, however, the most interesting aspect of British American Tobacco was the courts’ determination not to let the ‘trade mark tail wag the health dog’. In lobbying against the legislation, the industry had placed considerable emphasis upon the status of their brand symbols as ‘intellectual property’. It had been widely suggested that this categorisation of the trading interests at issue provided an enhanced level of protection for the industry against public interest regulation. Thus, for example, in a submission to the first consultation on the Regulations provided on behalf of the industry, the retired Law Lord, Lord Hoffmann, expressed the view that standardised packaging legislation constituted an expropriation of the companies’ intellectual property.101 In its broader lobbying, the industry often reiterated the claim that such an act of expropriation could only be rendered lawful through the payment of ‘billions’ of pounds in compensation. Both the High Court and the Court of Appeal were unmoved by these arguments, suggesting that (if necessary) the tobacco companies’ marks could be treated as one composite ‘brand’ rather than as discrete property entitlements and that intellectual property rights must always be subject to implicit normative limitations in the public interest. These conclusions are important, and will come as a surprise to many intellectual property lawyers. They demonstrate an understandable unwillingness on the part of the court to allow the legal protection of trading signs to produce entirely unreasonable outcomes in the sphere of public policy.
100 See discussion, above n 94. 101 Philip Morris Ltd, Standardised Tobacco Packaging Will Harm Public Health and Cost UK Taxpayers Billions: A Response to the Department of Health Consultation on Standardised Packaging of Tobacco Products (2012) App 5.
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 83-101 DOI: 10.5204/qutlr.v17i2.703
MAKING THE CASE FOR CANADA TO JOIN THE TOBACCO PLAIN PACKAGING REVOLUTION
BECKY FREEMAN
This article makes the case for introducing plain packaging reforms in Canada. Australia successfully introduced these measures in 2012, and other nations have adopted similar laws, in light of compelling evidence that plain packaging lessens the appeal of tobacco products, increases the effectiveness of health warnings and curbs the use of packaging to mislead consumers about the harmful effects of tobacco use. Tobacco industry arguments that plain packaging does not work, increases illicit trade, presents a slippery slope to over regulating other products, and hurts small business are unfounded. The proposed Canadian reforms open the door to improving on plain packaging legislation by increasing the restrictions on: acceptable brand names, the internal pack design and the appearance of the cigarette itself.
I INTRODUCTION
What is the primary purpose of tobacco packaging? Is it to simply hold products, maintain tobacco freshness, or is it perhaps designed to provide essential consumer information? While packaging may perform some of these basic functions, its most critical and exploited role is to convince consumers they are purchasing a desirable and quality product that reflects their tastes and personality.1 The tobacco industry and its business allies and partners are refreshingly candid about the importance of packaging in marketing cigarettes. For example, in a print industry trade article describing the ‘premiumisation’ of tobacco packaging in Indonesia, innovations in pack design were said to attract consumers and convey brand messaging:
Features such as velvet touch, soft touch, etching, rise and relief can be applied across the surface of the packaging to make the product more impactful and raise customer engagement. The look of the packaging such as intense metallics through the use of foil simulation inks can also give cigarette packaging the luxurious effect and adds on to the premium feel of the product. Using colours as a technique is effective, especially black. Black is often used to give the appearance of strength.2
There are countless examples of tobacco packaging that have been designed to appeal to young people,3 women,4 smokers concerned about their health,5 and to minimise the impact of health
BSc, MSc, PhD, Senior Lecturer and NHMRC Early Career Research Fellow, School of Public Health, Sydney Medical School, The University of Sydney. 1 Gerard Hastings, Karine Gallopel-Morvan and Juan Miguel Rey, ‘The Plain Truth about Tobacco Packaging’ (2008) 17 Tobacco Control 361. 2 Sha Jumaru, The Premiumisation of Cigarette Packaging in Indonesia (18 January 2017) Print Innovation Asia
QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products warnings. Tobacco packaging comes in bright colours, metallic tins, and limited edition designs.6 There are even examples of commemorative packages to mark international special events such as the football World Cup.7 The industry also varies the packaging shape, size and opening method to influence brand appeal and perceptions of risk, and to increase cigarette sales.8 The cigarette pack also serves as portable advertisement, carried and displayed by smokers.9
Of course, the tobacco industry is not alone in using packaging to attract consumers and sell more products. A quick glance in the beverage aisle of a large supermarket will reveal endless sizes, shapes, and design features for what appears to be a relatively straightforward product — bottled water. However, bottled water drinkers are not consuming a product that is likely to addict them, make them sick, and send them to an early death. In recognition of the six million deaths worldwide caused by tobacco products annually, the WHO Framework Convention on Tobacco Control10 (‘WHO FCTC’) requires that all ratifying nations adopt a comprehensive ban on tobacco advertising, promotion and sponsorship, and recommends that plain packaging be included as part of the ban.11
Since Australia first implemented plain packaging of tobacco products in 2012,12 there has been an international push to make this policy a global standard in the fight to reduce tobacco- related deaths. The United Kingdom13 and France implemented plain pack provisions in 2016; Ireland’s law commenced in September 2017,14 New Zealand passed legislation in September 2016,15 and Hungary’s implementation is expected to take effect from May 2019.16 While the European Union Tobacco Products Directive does not require that member states adopt plain packaging, it encourages and allows member states to do so.17 At least a dozen other countries — Norway, Slovenia, Uruguay, Thailand, Singapore, Belgium, Romania, Turkey, Finland, Chile, South Africa, and Canada — are in the process of requiring plain packaging or are formally considering doing so.18
6 Michelle Scollo, Becky Freeman and Elizabeth Greenhalgh, 11.10 Packaging as Promotion (November 2016) Tobacco in Australia: Facts and Issues
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution
A What is Plain Packaging?
Plain packaging is a somewhat misleading term in that it may conjure images of simple and clean white boxes with the word ‘cigarette’ printed on them. Indeed, some news article and editorials arguing against plain packaging will feature imagery of stark white cigarette boxes.19 Plain packaging has two primary properties: (1) removal of all brand imagery and logos; and (2) standardisation of the appearance of packs, including the same uniform colour across all brands, and requirements in regard to the shape and size of packs. All health warnings, including pictorial images, are retained or made larger.
In Australia, plain packaging requires that cigarette packs have a large pictorial health warning on both the front (75 per cent of the surface) and the back (90 per cent of the surface), that the remaining pack surface be a drab dark brown colour, that the product brand and variant name be written in a standard font, size and shade of grey, and that the package be made of stiff cardboard with no embellishments and have a flip top lid.20 (See Figure 1.) The box must also adhere to minimum pack dimensions. No company logos, trade marks, or brand colours are permitted. Similar requirements are applied to cigar and loose-leaf tobacco packages.
19 Alex Scholten, ‘Plain Packaging is Not the Answer to Canada’s Tobacco Problem’, Huffington Post (online), 6 June 2016
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Figure 1: Australian plain packaging design for a cigarette pack21
The goal of comprehensive tobacco control programs, as outlined in the WHO FCTC, is to reduce the enormous health toll of tobacco use, chiefly by discouraging people from taking up tobacco consumption, encouraging those who consume tobacco products to quit, preventing those who have quit from relapsing to use, and protecting people from second-hand smoke. Plain packaging contributes to effective tobacco control by lessening the appeal of tobacco products, increasing the effectiveness of health warnings and curbing the use of packaging to mislead consumers about the harmful effects of tobacco use.22
21 Department of Health and Ageing (Aust), Tobacco Plain Packaging: Your Guide (September 2014) Department of Health
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution
B Canada — Plain Packaging a Brief History
While plain packaging laws were first implemented in Australia in 2012, initial discussions of this policy reform can be traced back to Canada in the mid-1980s. In 1986, at the Annual General Meeting of the Canadian Medical Association (‘CMA’), Dr Gerry Karr proposed that cigarettes be sold ‘in the equivalent of plain brown wrappers’. This motion was adopted by the CMA, and in 1987, then CMA president, Jake Dyck, called on the Canadian federal government to require ‘tobacco products be sold in plain, standard-size packages that state: This product is injurious to your health’.23 In 1988, Canadian tobacco control organisations tried unsuccessfully to convince the federal government to amend Bill C-51, later enacted as the Tobacco Products Control Act24 to authorise plain packaging regulations. The Tobacco Products Control Act included provisions to restrict tobacco advertising and phase out sponsorship.25
Six years later, in 1994, the Canadian Prime Minister, Jean Chrétien, as part of a compensatory measure for significantly rolling back tobacco taxes, announced a review to examine the feasibility of tobacco plain packaging and tasked the House of Commons Standing Committee on Health (‘the Committee’) to make recommendations. In April 1994, with the expressed support of eight provincial governments for the measure, the Committee began hearings on plain packaging.26
The tobacco industry mounted a high-profile campaign suggesting there would be significant job losses among Canadian tobacco workers. Threats were made that the government would be expected to compensate for revenue lost to the tobacco firms. The tobacco industry, predictably, used legal threats as their core strategy and made unsubstantiated claims that plain packaging would be a violation of trade treaties and international intellectual property laws.
Philip Morris and RJ Reynolds retained a high-profile lawyer, Carla Hills, the US Trade Representative to Canada from 1989 to 1993. She submitted to the Committee a legal opinion stating that plain packaging would infringe a trade mark provision of the relatively recent North American Free Trade Agreement (‘NAFTA’) and lead to massive compensation payments to the tobacco industry. She claimed that plain packaging would also violate the international General Agreement on Tariffs and Trade (‘GATT’). When these arguments were presented to the Committee, the members were outraged at the notion that NAFTA could prevent the Canadian government from implementing an initiative that would save lives.27
Health groups retained their own legal counsel, Jean Castel, a respected professor of international law at Osgoode Hall Law School, and lawyer Michael Robinson of the Toronto firm Fasken Campbell Godfrey. They publicly released legal opinions that outlined the clear health exceptions in both GATT and NAFTA, which allow governments to act in the best interest of public health.28
23 Physicians for Smoke-Free Canada, The Plot Against Plain Packaging (version 2, 1 April 2008)
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Despite the intense tobacco industry pressure, the Committee endorsed the concept of plain packaging:
In the interest of the health of Canadians, as suggested by the evidence available to the Committee to date and in the absence of evidence to the contrary, the Committee affirms that plain or generic packaging could be a reasonable step in the overall strategy to reduce tobacco consumption.29
The Committee further recommended that the federal government establish a legislative framework to implement plain packaging but that regulations would only be introduced if the results of Health Canada (the Canadian federal government health agency) research, ‘support[ed] the available evidence that such packaging will reduce consumption’.30 In March 1995, Health Canada released its lengthy report (457 pages) on its studies of plain packaging.31 At that time, it was the most comprehensive examination of plain packaging ever conducted.32 The report concluded:
Plain and generic packaging of tobacco products (all other things being equal), through its impact on image formation and retention, recall and recognition, knowledge, and consumer attitudes and perceived utilities, would likely depress the incidence of smoking uptake by non- smoking teens, and increase the incidence of smoking cessation by teens and adult smokers.33
Canada was then the first country in the world with a parliamentary committee level endorsement of plain packaging as a government policy.34
An industry legal challenge to the federal Tobacco Act,35 and subsequent changes in health ministers amidst intense tobacco industry lobbying, meant the issue lost momentum on the Canadian policy agenda. However, in 2000, Canada paved the way for governments to acquire significant control of the appearance of tobacco packaging, by becoming the first country to implement pictorial health warnings on packs. Health warnings were required to cover 50 per cent of both the front and the back of cigarette packages. As of October 2016, 105 countries or jurisdictions have adopted graphic health warnings, with Nepal leading in terms of size by requiring 90 per cent of the front and back of the pack surface to be covered by a health warning. Canada refreshed and increased the graphic warnings in 2012, requiring that they cover 75 per cent of both sides of the pack.36
Then, in the October 2015 Canadian election, the Liberal party, led by Justin Trudeau, formed a majority government. The Liberal win followed on from ten years of a Conservative party led government under Stephen Harper, an era in which minimal tobacco control reforms and
29 Ibid. 30 Ibid. 31 Marvin E Goldberg et al, When Packages Can’t Speak: Possible Impact of Plain and Generic Packaging of Tobacco Products (Expert Panel Report Prepared at the Request of Health Canada, 1995). 32 Becky Freeman, Simon Chapman and Matthew Rimmer, ‘The Case for the Plain Packaging of Tobacco Products’ (2008) 103 Addiction 580. 33 Goldberg et al, above n 3131. 34 Ryan Hoskins, ‘How Canada Lost its Chance to Make Anti-Tobacco History’, TVO Current Affairs (online), 16 February 2016
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution programmes were implemented.37 The Liberal party had campaigned with a commitment to introduce plain packaging for tobacco products.38 On World NO Tobacco Day, 31 May 2016, plain packaging was officially put back on the Canadian tobacco control policy agenda with an official government consultation on proposed requirements. 39 Interested stakeholders and members of the public were invited to make a consultation submission until the closing date of 31 August 2016. The measures considered under the consultation were very similar to other tobacco plain packaging laws in that they proposed standardising the colour of all tobacco packages, prohibiting the use of brand elements on packs, standardising the shape and size of packages, and mandating how brand names are written on tobacco packages. Health warnings and other required markings (such as a tax stamp) would not be modified by these changes. The measures would apply to all tobacco products, including cigarettes, loose cigarette tobacco, cigars, pipe tobacco, tobacco sticks, smokeless tobacco, kreteks (clove cigarettes), bidis (a thin roll of tobacco wrapped in a leaf), shisha, tubes, blunt wraps, and rolling papers.
However, some innovative policy measures that go beyond Australian plain pack regulations and that are not in place in any other jurisdictions are also being considered. These novel approaches include:
Limits on the number of words in the product brand name; Package walls of prescribed thickness; No ‘space fillers’ inside of packages (to prevent modifications to the inner dimensions of packages); No distinctive colours or designs (such as grooves, hole or recess) in cigarette filters; Single length and minimum diameter for cigarettes; Single unattractive colour for cigarette and other products that are rolled in cigarette paper (for example tobacco sticks, kreteks (clove cigarettes), tubes, and rolling papers).40
In January 2017, the consultation summary report was released and a process for undertaking legislative changes commenced.41 In total, 58 000 responses to the consultation were received, with 92 per cent in support of the proposed measures. The majority of these comments were from the general public, but support also came from non-government agencies, public health organisations, government, and academic researchers. The 8 per cent of submissions not in support primarily came from industry, retailers and business associations.
Of those opposed to the measures, the arguments put forth included that plain packaging would not work to reduce smoking and had failed in Australia, be violation of trade agreements and international intellectual property rights, have prohibitively high implementation costs, lead to lost tax revenue for governments, result in job losses, and lead to an increase in illicit tobacco
37 Canada, Parliamentary Debates, House of Commons, 30 September 2016, 42nd Parl, 1st Sess, No 85, Statements by Members: Tobacco Control (Mark Holland)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products use. The tobacco industry also argued that the policy violated the right to freedom of expression under the Canadian Charter of Rights and Freedoms 42 by not allowing manufacturers to communicate product information and branding elements to adult consumers. Tobacco retailers suggested it would impact on their ability to serve customers efficiently and make stock management difficult. Cigar manufacturers claimed that consumers would turn to online purchasing for more attractive products and argued that only cigarettes should be included, not other tobacco products.
Bill S-5, for an Act to Amend the Tobacco Act and the Non-smokers’ Health Act and to Make Consequential Amendments to Other Acts, was passed during its third reading in the Canadian Senate on 1 June 2017.43 This parliamentary approval now allows Health Canada to develop draft regulations for plain packaging. These draft regulations will first be published in the Canada Gazette and then Canadians, and other stakeholders, will have another opportunity to give their opinions and feedback on the proposal. The measures to introduce plain packaging of tobacco products will be implemented by regulation.44
During the second reading of the Bill in December 2016, Senator Chantal Petitclerc (Independent) emphasised in her speech in support of the Bill that:
[B]ill S-5 ensures that compliance with the new packaging requirements does not result in the loss of registered trademarks. That’s a question that comes back often, so I would like to take this opportunity to clarify that there has been no finding of a breach on intellectual property rights in any of the other countries that have already implemented plain and standardized packaging. There have also been no findings to date that it is inconsistent with any international trade agreement.45
In her response speech, in March 2017, Senator Judith Seidman (Conservative), the opposition critic of the S5 Bill, outlined the industry arguments against plain packaging, but balanced this with overall support for tobacco control, in particular, measures that protect children. Her concluding remark on the plain packaging aspects of the Bill emphasised her focus on young people: ‘the question that must be asked is: will the introduction of standardised packaging in Canada achieve its stated objective to make tobacco cigarettes less appealing to youth and reduce their consumption?’46
Given that Canada is signalling a commitment to adopt plain packaging measures, it is timely to re-examine the case for plain packaging. 47 This case will be argued by systematically addressing the common questions and criticisms that the tobacco industry and its allies raise in order to convince governments that they must not pursue these measures.48
42 Canada Act 1982 (UK) c 11, sch B pt I (‘Canadian Charter of Rights and Freedoms’) s 7. 43 Bill S-5, An Act to Amend the Tobacco Act and the Non-smokers’ Health Act and to Make Consequential Amendments to Other Acts, 1st Sess, 42nd Parl, 2017. 44 The Bill also contained significant measures to change the regulation of electronic cigarettes. 45 Canada Parliamentary Debates, Senate, 13 December 2016, 1st Sess, 42nd Parl, Vol 150, Issue 87, 1910 (Sen Chantal Petitclerc)
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution
II WILL PLAIN PACKAGING WORK?
Critics of plain packaging suggest that there is insufficient evidence that plain packaging will ‘work’.49 For example, the Alliance of Australian Retailers (‘AAR’) adopted the theme, ‘it won’t work, so why do it’ in a mass media lobbying effort to block the adoption of plain pack laws.50 The AAR presented itself as a grassroots organisation that was representing small, local business. It was quickly revealed through a series of leaked documents, that the AAR was in fact a front group for the three major multi-national tobacco companies operating in Australia and had been formed and funded with the exclusive purpose of preventing plain pack laws from being enacted.51 The tobacco industry has a long history of being highly unsupportive of public health policy measures that it claims will not work to reduce tobacco.52 And, public health has an equally long history of providing volumes of evidence that show these policy approaches are exceedingly effective. The same is true for plain packaging.
As described above, plain packaging is designed to lessen the appeal of tobacco, increase health warning effectiveness and curb the use of packaging to mislead consumers about the harmful effects of tobacco use.53 To know whether or not plain packaging ‘works’ it must then be measured against these three clear objectives. Prior to Australia adopting plain packaging measures, much of the evidence in support of plain packaging came from experimental studies where smokers and potential smokers were shown mock-ups of tobacco packages that had larger health warnings and/or the removal of band elements. Research participants were then asked about their attitudes, beliefs, and likely behaviours in response to the packs.
A 2013 review of 25 quantitative studies that explored the likely effect of plain packaging on the three core policy objectives found that studies consistently showed that plain packaging reduced the appeal of cigarettes.54 And while the results were more mixed, plain packaging also tended to increase the salience and believability of health warnings and it improved smoker misconceptions about product strength and associated harms. Pack colour was also found to play a significant role in influencing consumer perceptions, with lighter coloured packs deemed to contain weaker and less harmful cigarettes than darker coloured packs. 55 Yet further reinforcing that plain packaging should not be misinterpreted to mean that tobacco products are sold in pristine, white boxes.
A 2015 narrative review builds on the above findings and included additional qualitative research and preliminary population-level data assessing the impact of the Australian plain packaging laws.56 The review authors emphasised that plain packaging laws are likely to be
49 Deloitte, Tobacco Packaging Regulation: An International Assessment of the Intended and Unintended Impacts: A Deloitte Report for British American Tobacco (May 2011) Deloitte Touche Tohmatsu Limited
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products most effective when accompanied by large graphic health warnings and implemented as part of a comprehensive smoking prevention strategy. The totality of the evidence reviewed was deemed to be reliable and supported a strong case that plain packaging can reduce positive perceptions of smoking and dissuade tobacco use.
A Australian Adult Smoker Responses to Plain Packaging
As evaluation and research of Australia’s plain packaging laws is now available to supplement earlier experimental work it provides the ‘real world’ evidence that sceptics demanded. A cross-sectional study that examined Australian adult smokers’ responses to plain packaging before and one year after implementation found that more smokers disliked their pack, perceived lower pack appeal, lower cigarette quality, lower satisfaction and lower value.57 More smokers also no longer believed that brands differ in terms of prestige. In terms of the new and larger graphic health warnings, more smokers noticed them, attributed motivation to quit to the warnings, avoided specific warnings when purchasing a pack and covered up their packs. The warnings remained believable, as there was no change to the perceived exaggeration of harms presented in the warnings. The proportion of smokers who believed that brands do not differ in harmfulness also increased, but no there was change in the belief that some brand variants do not differ in strength or to overall the perceived harmfulness of cigarettes. The study authors concluded that the first two objectives of the legislation relating to reducing appeal and increasing graphic warning effectiveness had been achieved. However, the third objective of reducing the extent to which smokers are misled about the harms of smoking was only partially met, which may be attributed to the fact that misleading brand variant names that imply reduced harm or product strength, are still permitted under the plain packaging laws.
An earlier population-level, cross sectional study that investigated the impact of Australia's plain tobacco packaging policy amongst adult smokers in the state of New South Wales two to three months following implementation found similar results. 58 There was a significant increase in the absolute proportion of smokers having strong cognitive, emotional, and avoidant responses to the new and larger graphic health warnings. Similarly, there was a significant increase in the proportion of smokers strongly disagreeing that the look of their cigarette pack is attractive, says something good about them, influences the brand they buy, makes their pack stand out, is fashionable and matches their style. Together these two studies59 confirm that the policy objectives were met in both the short (two to three months) and long (one year) term following policy implementation.
While not a direct objective of plain packaging, there is also evidence that the revised health warnings and plain packaging reforms have an impact on quitting behaviour among adults.60 As happened when Australia first introduced graphic health warnings in 2006, there was a 78 per cent increase in the number of calls to the Quitline (a toll free smoking cessation
57 Melanie Wakefield et al, ‘Australian Adult Smokers’ Responses to Plain Packaging with Larger Graphic Health Warnings 1 Year After Implementation: Results from a National Cross-sectional Tracking Survey’ (2015) 24 (Suppl 2) Tobacco Control ii17. 58 Sally M Dunlop et al, ‘Impact of Australia's Introduction of Tobacco Plain Packs on Adult Smokers’ Pack- Related Perceptions and Responses: Results from a Continuous Tracking Survey’ (2014) 4(12) BMJ Open e005836
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution counselling service) with the introduction of plain packaging, peaking four weeks after plain packs initial appearance on the market.61 However, this increased call rate was sustained for much longer, 43 weeks versus 20 weeks, than when graphic health warnings were introduced. In a study comparing a series of smoker cohorts that were surveyed about quitting behaviours before, during the transition period of plain packs being on the market, and one year after implementation, there was significantly greater increases in quit attempt rates in the transition and one year following periods, as compared to the period before plain packs.62
B Australian Adolescent Responses to Plain Packaging
The impact these laws had on adolescent perceptions about cigarette brands and packs,63 and their knowledge of smoking harms has also been investigated.64 A school based cross-sectional survey conducted prior to and 7–12 months following the implementation of plain pack laws was the first ‘real world’ study to assess adolescent perceptions of tobacco brands and packs.65 This study found that following plain pack implementation, among the 65 per cent of adolescents who had seen a cigarette pack in the previous six months, the appeal of cigarette packs and brands had decreased and there was a large increase in the proportion disagreeing that some brands have better looking packs than others. The researchers also found a decrease in positive pack image ratings. These findings were consistent across both smokers and non- smokers. The same survey examined how cognitive processing of warnings and awareness of different health consequences of smoking changed following the adoption of the new health warnings and plain pack laws.66 While students did have an increased awareness of bladder cancer, which was newly highlighted in the refreshed warnings, students’ cognitive processes, including reading, attending to, thinking or talking about the health warnings on cigarette packs, did not change. This is in stark contrast to the adult reactions to the new and larger health warnings, and may simply reflect the fact that daily smoking amongst Australian adolescents is exceptionally low, so they do not access and handle cigarette packs as frequently as adult smokers.67
Another Australian cross-sectional telephone survey, that included adolescents and young adults (age 12–24 years) from the states of New South Wales and Queensland, assessed attitudes towards, and responses to, tobacco plain packs pre- (2011) and post- (2012) implementation.68 Encouragingly, youth responses to plain packaging were greater than they had anticipated prior to the introduction of plain packaging. This suggests that the experimental studies conducted prior to the adoption of plain pack reforms may in fact be underestimating the real-world effects of plain packaging, not overestimating, as some critiques have suggested.69 For example, in 2011, only 8 per cent of ‘never smokers’ anticipated that plain packaging would make them less likely to try smoking, whereas in 2012, following policy
61 Young et al, above n 59. 62 Durkin et al, above n 59. 63 Victoria White, Tahlia Williams and Melanie Wakefield, ‘Has the Introduction of Plain Packaging with Larger Graphic Health Warnings Changed Adolescents’ Perceptions of Cigarette Packs and Brands?’ (2015) 24 (Suppl 2) Tobacco Control ii42. 64 Victoria White et al, ‘Do Larger Graphic Health Warnings on Standardised Cigarette Packs Increase Adolescents’ Cognitive Processing of Consumer Health Information and Beliefs About Smoking-Related Harms?’ (2015) 24 (Suppl 2) Tobacco Control ii50. 65 White, Williams and Wakefield, above n 62. 66 White et al, above n 63. 67 Dunlop et al, above n 57; Wakefield et al, above n 56. 68 Sally Dunlop et al, ‘Australia’s Plain Tobacco Packs: Anticipated and Actual Responses Among Adolescents and Young Adults 2010–2013’ (2016) Tobacco Control (online first, 15 November 2016). 69 Hatchard et al, above n 47.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products implementation, 16 per cent reported that the measure made them less likely to try smoking. Smoker responses were also greater, with significantly more smokers reporting quitting and social de-normalisation related responses (hiding packs, feeling embarrassed about smoking) to the plain packaging than predicted.
C Does Plain Packaging Contribute to Lowering the Prevalence of Smoking?
In a similar vein as the ‘it won’t work’ argument was the suggestion that even if plain packaging did succeed in increasing the effectiveness of health warnings and reducing tobacco brand appeal, it would have no real effect on actual smoking rates. There are two important points to consider when analysing the validity of this argument:
(1) Plain packaging was primarily conceived as a prevention measure, to protect young people from taking up smoking. This means any impact on smoking rates will not be measurable until sometime in the future, especially in countries like Canada where youth smoking rates are very low.70 (2) There is no magic policy approach that has seen smoking rates plummet overnight, reductions are incremental and occur slowly over time as a result of prolonged investment in public health measures and increased regulation of tobacco products. Additionally, others have reasoned that requiring ironclad proof of a policy’s effect, prior to implementing such a policy, means that innovative approaches could never be adopted.71
Nonetheless, three years after the adoption of plain packaging, the Australian Department of Health and Ageing commissioned a study to determine if plain packaging had had a discernible effect on the prevalence of smoking. As Australia had also implemented a series of significant tobacco tax increases at the same time as adopting plain packaging laws, these were adjusted for in the final analysis. Tobacco plain packaging in combination with graphic health warnings was associated with one quarter of the total drop (0.55 percentage points) in smoking prevalence between December 2012 and September 2015.72 This translates to 108 228 fewer smokers as a direct result of the policy. Again, it must be emphasised that this was not an explicit objective of the plain packaging legislation, but nonetheless, a goal of any comprehensive tobacco control program, of which plain packaging should be a part, is to reduce smoking rates. Other nations that follow Australia’s lead, can now readily point to robust and ample evidence of the impact of plain packaging laws on smoking-related opinions, attitudes, and behaviours.
70 Jessica L Reid et al, Tobacco Use in Canada: Patterns and Trends, 2015 Edition (Propel Centre for Population Health Impact, University of Waterloo, 2015)
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III ARGUMENTS PRESENTED AGAINST PLAIN PACKAGING REFORMS
A Slippery Slope Objections: Tobacco Today, But What Will Be Sold in a Plain Package Next?
In countries like Australia and Canada,73 where smoking rates are amongst the lowest in the world, and most smokers wish they could quit, 74 the tobacco industry finds itself in the awkward position of having very few community supporters. It is necessary then for it to try to appeal beyond its addicted customer base, and convince non-smokers and other industries that the products they hold dear will be affected next, in hopes they will assist in lobbying efforts to derail reforms. Slippery slope arguments position tobacco as the first victim of an unfair policy that will see other industries fall foul of government over-regulation.
JTI-Macdonald Corp, in Canada, and British American Tobacco, in Australia, and Imperial Tobacco UK, all developed print materials, online content, and advertisements warning that other products such as beer, wine, confectionary, and French fries would be next, should the government pass plain packaging laws.75 These tobacco industry-funded ads featured mock- ups of these other products in plain packages, some in the same green/brown colour as plain tobacco packages and some in plain white packaging. In Australia, this attempt to make allies of other industries backfired when the Winemakers Federation of Australia moved quickly to publicly dissociate itself from any tobacco industry campaign, stating that its members would reject any links made between the two industries.76
It is true that some public health stakeholders have encouraged the obesity and alcohol control fields to adopt some of the same measures that have worked so well to reduce smoking rates, such as advertising restrictions, tax increases, health warnings, and mass media campaigns.77 However, the pace of success in adopting these approaches has been glacially slow and some of these policies, particularly taxes and advertising controls on alcohol have already been in place for decades. The WHO FCTC remains the only global health treaty, food is still advertised on television around the world, graphic health warnings do not appear on fast food containers and alcohol is still sold in branded bottles. While there has been some success in adopting novel obesity prevention taxes, particularly on sugar sweetened beverages, the amount of tax per product is a small fraction of the high rates of tobacco taxes in the nations
73 E M Greenhalgh, M Bayly and M H Winstanley, ‘1.13 International Comparisons of Prevalence of Smoking’ in M M Scollo and M H Winstanley (eds) Tobacco in Australia: Facts and Issues (Cancer Council Victoria, 2015)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products that are also adopting tobacco plain packaging.78 Slippery slope arguments are decidedly flat in the face of real world progress on other chronic disease prevention policy changes.
B Plain Packaging Will Ruin Small Businesses
The tobacco industry has to cultivate this argument very carefully. If it were to suggest that plain packaging would have a detrimental financial effect on all tobacco retailers, it is essentially admitting that the law will negatively impact tobacco sales or profits. This is tantamount to agreeing that the regulation actually does work to reduce tobacco sales and use. Instead, the industry suggests that plain packaging laws will shift tobacco sales away from small, local business owners and retailers and have it end up concentrated in the hands of a few, large retail outlets. Given that just six corporations control the majority of the global tobacco industry, 79 the sincerity of this concern for small, local business is somewhat unconvincing.
The industry argues that smokers will swap to larger retailers because the service they will receive at small retailers will be too inconvenient. Plain packaging is said to slow down sales clerks and increase the number of pack selection errors so dramatically that smokers will no longer be willing to stand in line waiting to buy their purchases. In a simulation study, where participants were randomly assigned to a display of 50 plain or coloured cigarette packets and then read a list of cigarette brands, the time it took to locate each packet was significantly quicker for plain compared to coloured packs.80 A follow-up study that timed real-world tobacco transactions in 100 convenience stores, newsagents, petrol stations, and supermarkets immediately before and after plain packaging found that retailers actually slightly decreased the pack selection times after the legislation was implemented. 81 Neither study found an increase in pack error selection. It appears that small retailer employees are readily able to adapt to plain packaging and to read and remember the tobacco brand names that remain on the packs and continue or even improve on their level of service.
In terms of actual smoker purchasing behaviour, in a large national Australian telephone survey, the odds of reporting a current tobacco purchase from major retail channels such as supermarkets, tobacconists, small mixed businesses and petrol stations did not change after the implementation of plain packaging.82
This ‘financial impact, but no public health impact’ argument is furthered by suggestions that plain packaging leads to smokers down-trading brands, instead of affecting initiation or cessation of smoking. It is suggested then that plain packaging reduces prices that can be charged for premium cigarettes, thereby reducing revenue and profits for retailers. One year following plain packaging law implementation in Australia saw an increase in the
78 BBC, ‘UK Pushes Ahead with Sugar Tax’ BBC News (Health) (online), 5 December 2016
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution recommended retail price of tobacco products, and the advertised price of products at retail outlets did not decrease. 83
C Plain Packaging Will Increase the Illicit Tobacco Market
The argument that the market for illicit tobacco products will increase is not unique to plain packaging; it is used by the tobacco industry, and the third parties it funds, in the face of nearly every tobacco policy reform that is proposed or enacted.84 The key to controlling the illicit tobacco market is not to handcuff effective tobacco control measures, but to control the supply chain of tobacco, and resource and prioritise enforcement efforts appropriately.85 In Canada, contraband tobacco use has declined considerably since 2009 due to increased, and improved coordination of, enforcement activities.86 Plain packaging reforms will also retain the traceable tax paid stamps currently required on all Canadian tobacco packages and should be placed on packs to avoid obscuring graphic health warnings.87
The Australian market for illicit tobacco did not increase following plain packaging. A large, national survey showed no increase in use, before versus after the introduction of plain packaging, of two key subsets of cigarettes likely to be contraband: (1) brands that are produced specifically for the illicit market, and (2) international brands purchased by survey respondents for a suspiciously low price.88 The same study also found no increase in use of cigarettes purchased from informal sources (non-retail purchases). The purchasing of any unbranded tobacco declined following plain packaging, and the level of use of any completely unbranded tobacco did not change and remained very low at between 3 per cent and 4 per cent.89
D Governments That Enact Plain Packaging Will Face Legal Action
Threatening legal action, regardless of how unlikely it is that the tobacco industry will be successful, is de rigueur when governments want to enact innovative legislation to curb tobacco use.90 The Australian government expected and was prepared when the tobacco industry issued legal challenges to the plain packaging laws. The industry used nearly identical legal arguments to those they put forth during the Canadian debate in the 1990s (as described in Part IB above). The industry launched three separate legal processes, firstly to the Australian domestic courts,91
83 Michelle Scollo, Megan Bayly and Melanie Wakefield, ‘Did the Recommended Retail Price of Tobacco Products Fall in Australia Following the Implementation of Plain Packaging?’ (2015) 24 Tobacco Control ii90; Michelle Scollo, Megan Bayly and Melanie Wakefield, ‘The Advertised Price of Cigarette Packs in Retail Outlets Across Australia Before and After the Implementation of Plain Packaging: a Repeated Measures Observational Study’ (2015) 24 Tobacco Control ii82. 84 Katherine E Smith, Emily Savell and Anna B Gilmore, ‘What is Known About Tobacco Industry Efforts to Influence Tobacco Tax? A Systematic Review of Empirical Studies’ (2013) 22 Tobacco Control 144. 85 Hana Ross et al, ‘Approaches for Controlling Illicit Tobacco Trade — Nine Countries and the European Union’ (2015) 64(20) Morbidity and Mortality Weekly Report 547. 86 G Emmanuel Guindon, Robin Burkhalter and K Stephen Brown, ‘Levels and Trends in Cigarette Contraband in Canada’ (2016) Tobacco Control (Online First, 6 September 2016). 87 Michael Iacobelli et al, ‘When the Tax Stamp Covers the Health Warning Label: Conflicting ‘Best Practices’ for Tobacco Control Policy’ (2016) Tobacco Control (Online First, 20 December 2016) doi: 10.1136/tobaccocontrol. 88 Michelle Scollo et al, ‘Use of Illicit Tobacco Following Introduction of Standardised Packaging of Tobacco Products in Australia: Results From a National Cross-Sectional Survey’ (2015) 24 (Suppl 2) Tobacco Control ii76. 89 Ibid. 90 Andrew D Mitchell and Tania Voon (eds), The Global Tobacco Epidemic and the Law (Edward Elgar Publishing, 2014). 91 JT International SA v Commonwealth of Australia (2012) 250 CLR 1.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products next through an investment treaty with Hong Kong, and finally by supporting four countries92 (Cuba, Honduras, Indonesia, and the Dominic Republic) in filing disputes through the World Trade Organization (‘WTO’) as a violation of the GATT, 93 the Agreement on Technical Barriers to Trade,94 and the Agreement on Trade-Related Aspects of Intellectual Property Rights.95 Canada is a third party in the WTO dispute, as it ‘has a substantial trade interest in these proceedings as an importer of tobacco products and the interpretation of WTO obligations in this dispute could materially affect Canadian domestic measures’.96
Two of these three Australian legal disputes have been resolved, in the government’s favour. In May 2017, leaked documents suggested that the WTO would also rule in the government’s favour.97 In October 2012, the High Court of Australia rejected the constitutional challenge to plain packaging legislation brought by British American Tobacco, Imperial Tobacco, Japan Tobacco and Philip Morris.98 The primary argument put forth by the tobacco industry was that plain packaging constituted an unfair acquisition of its property by the Australian government, for which just terms had not been provided. The High Court ruling in favour of the Commonwealth emphasised that the Australian government had acquired no benefit or advantage of a proprietary nature by enacting plain packaging.99 The tobacco industry was also ordered to pay the Australian government’s associated legal costs.
In December 2015, Philip Morris Asia’s (‘PMA’) challenge to Australia’s plain packaging laws under a 1993 bilateral investment treaty between Australia and Hong Kong was dismissed. The tribunal that dismissed the claim stated that the PMA challenge was ‘an abuse of rights’ and that PMA’s sole rationale for restructuring its company, after plain packaging adoption, was so that the Australian arm of its business would be based in Hong Kong, and it could then pursue a complaint under the investment treaty.100
Similarly, in the UK in May 2016, the UK High Court rejected a claim made by British American, Imperial, Japan International, and Philip Morris, that plain packaging laws infringed
92 A fifth country, Ukraine, withdrew its complaint in 2015: World Trade Organization, DS434: Australia — Certain Measures Concerning Trade marks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution on their human and intellectual property rights.101 Some of the tobacco companies then took the case to the Court of Appeal. In November 2016, a panel of three judges dismissed the appeal.102 The final domestic legal decision was made in April 2017, when the UK supreme court refused permission to the tobacco industry to appeal against the laws.103
Plain packaging has then been defended successfully in two domestic High Courts. Nations need to be prepared for and not daunted by tobacco industry legal threats and action. In recognition of tobacco industry efforts to use the courts to intimidate governments and to thwart tobacco control reforms, Bloomberg Philanthropies has established an international legal fund to provide technical support of legal experts to draw up legislation and defend court actions brought by the tobacco industry.104
Canada has a strong track record of successfully defending its tobacco control reforms when challenged by the tobacco industry. Recent Supreme Court of Canada rulings suggest there are legal precedents for restricting the tobacco industry from advertising and promoting its products and brands,105 and that provisions of the Tobacco Act and the Tobacco Products Information Regulations106 that impose limitations on freedom of expression are justified as reasonable, and are constitutional under the Canadian Charter of Rights and Freedoms.107
IV BUILDING ON THE SUCCESS OF PLAIN PACKAGING LEGISLATION
Evidence that Australia’s plain packaging laws are sound and should be replicated and adopted by other nations is convincing. But there is room to improve on the Australian laws and adopt measures that may counter industry adaptations and exploitation of loopholes. As marketing restrictions tighten, the tobacco industry must look to any remaining windows, no matter how small, to promote its products. The proposed Canadian reforms open the door to significantly improving on plain packaging legislation, by increasing the restrictions on acceptable brand names, the internal pack design, and the appearance of the cigarette itself.
The tobacco industry quickly trade-marked new brand names under plain pack laws in Australia.108 Imperial Tobacco, for example, introduced the brand Peter Stuyvesant + Loosie, the pack included a bonus cigarette (21 instead of the usual 20), and the name served to promote this premium offer. 109 The inclusion of the extra cigarette also meant the internal pack dimensions were modified to accommodate it. The proposed Canadian regulations limiting brand names and pack fillers may have prevented this promotional activity from occurring.
101 British American Tobacco Limited and others v The Queen [2016] EWHC 1169 (Admin). 102 British American Tobacco UK Ltd & Ors v The Secretary of State for Health [2016] EWCA Civ 1182 (30 November 2016). 103 Chris Johnston, ‘UK supreme court denies tobacco firms permission for plain packaging appeal’, The Guardian (online), 12 April 2017
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products
The perceived sensory differences between cigarettes can be heavily influenced by the image of the brand, rather than any real differences between premium and value cigarettes. The importance of tobacco brand names in influencing consumer perceptions of their smoking experience continues to be evident, even in a plain packaging environment. An Australian experimental study that took place two years after plain packaging laws were implemented, found that smokers rated cigarettes given a premium brand name as having a better taste, as less harsh and less dry than identical cigarettes given a value brand name.110 This result was irrespective of whether the packs actually contained premium or value cigarettes. Limiting brand names may be able to reduce the impact that brand names have on convincing smokers that they are using a quality product.
The appearance of the cigarette itself also has an impact on how smokers perceive quality, taste, and safety, and the tobacco industry has manufactured and marketed cigarettes of varying lengths and diameters. Long, exceptionally slim cigarettes have been shown to increase product appeal to young women,111 and Philip Morris International developed a variant of its flagship brand, Marlboro, known as Marlboro Intense, that was 1.5 cm shorter, and designed to deliver the same amount of nicotine but requiring less time to smoke.112 But while the Australian plain packaging legislation does not allow cigarettes to be printed with logos and marketing messages, it does not prescribe the length or diameter of cigarettes, or that they be wrapped in a dissuasive colour. This means that while the cigarette packs are the unattractive drab dark brown colour, the cigarettes themselves can be a bright, clean white. Research from New Zealand suggests requiring individual cigarettes to be wrapped in an unattractive colour,113 or to feature a health warning, could increase the impact of plain packaging. The proposed Canadian regulations could prevent tobacco manufacturers from using cigarette shape and length as yet another way of targeting vulnerable smokers.
The Canadian government is planning to refresh the graphic health warnings on tobacco packages. Canadian tobacco warnings also include personal testimonials from smokers that have suffered from the devastating impacts of smoking. In December 2016, Health Canada issued a call for new individuals to submit their stories as part of the graphic warning refresh.114 While personal testimonials are common in tobacco control mass media campaigns,115 they are not universally part of graphic health warning messages. It is not enough for countries to adopt graphic health warnings and plain packaging measures. It is essential to renew the images regularly, and include a variety of messages and message types. Stale messaging lessens the impact of graphic health warnings over time.116
110 Gemma Skaczkowski et al, ‘Influence of Premium Versus Value Brand Names on the Smoking Experience in a Plain Packaging Environment: An Experimental Study’ (2017) 7(1) BMJ Open e014099. 111 David Hammond et al, ‘Impact of Female-Oriented Cigarette Packaging in the United States’ (2011) 13 Nicotine and Tobacco Research 579. 112 Daily Mail, ‘Tobacco Firm Launches “Mini-Cigarette” for Shorter Smoking Breaks’, Daily Mail (online), 3 February 2008
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Making the Case for Canada to Join the Tobacco Plain Packaging Revolution
V THE FUTURE
It is naive to assume that plain packaging will see an end to tobacco marketing. Tobacco companies will still rely heavily on their relationships with retailers to ensure their brands are readily available to consumers, are positioned as market leaders, and sold alongside other everyday items. Tobacco trade marketing is largely unregulated and allows the tobacco industry to offer retailers incentives and discounts to push its brands to consumers.117 However, one potential benefit of plain packaging is that it may also curb social media and consumer generated marketing of tobacco brands. In an age where consumers regularly post photos and videos of their favourite brands to social media, with little or no incentive from brand owners, a tobacco pack that is mostly covered in gruesome disease imagery offers little incentive to ‘selfie’ takers.118 The next generation of children will grow up with no knowledge or memory of tobacco brand imagery — the first to do so in more than 100 years.
Since the Australian adoption of tobacco plain packaging in 2012, there has been increasing international momentum to spread this successful reform. Canada appears poised to become the next nation to adopt and implement this essential component of a comprehensive ban on tobacco advertising. Just as on-pack graphic health warnings once seemed a radical and subversive measure, plain packaging is predicted to become commonplace amongst nations committed to improving public health. Branded tobacco packs are set to be novelty items destined for museum collections.
117 Suzan Burton et al, ‘Marketing Cigarettes When All Else is Unavailable: Evidence of Discounting in Price- sensitive Neighbourhoods’ (2014) 23 Tobacco Control e24. 118 Becky Freeman et al, ‘Digital Junk: Food and Beverage Marketing on Facebook’ (2014) 104(12) American Journal of Public Health e56. The Oxford English Dictionary defines ‘selfie’ as: ‘A photograph that one has taken of oneself, typically one taken with a smartphone or webcam and shared via social media’: Oxford English Dictionary (online ed, 7 July 2017)
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 102-130 DOI: 10.5204/qutlr.v17i2.709
INVESTOR–STATE DISPUTE SETTLEMENT AND TOBACCO CONTROL: IMPLICATIONS FOR NON-COMMUNICABLE DISEASES PREVENTION AND CONSUMPTION-CONTROL MEASURES
HOPE JOHNSON*
Public health advocates and policy makers have long considered how to translate the successes of tobacco control measures to address alcohol abuse and the excessive consumption of ultra- processed and nutrient-poor foods. Correspondingly, the strategies adopted by tobacco companies to prevent or delay regulation often parallel those adopted by the alcohol and food industries. Philip Morris, a leading tobacco company, has recently used investor–state dispute settlement (ISDS) mechanisms as a new strategy to hinder or prevent tobacco control measures in the form of plain packaging requirements. The cases that followed may have implications for the development of novel consumption-control measures, like plain packaging laws, aimed at preventing non-communicable diseases such as cancer and cardiovascular disease. This paper considers how the challenges to tobacco control measures through ISDS mechanisms could affect the development of consumption-control measures aimed at reducing alcohol abuse and unhealthy food consumption for non-communicable disease prevention. Using the recent ISDS challenges by Philip Morris as case studies, this paper draws out lessons and issues for the future development of consumption-control measures.
I INTRODUCTION
Investor–state dispute settlement (‘ISDS’) provisions in investment treaties allow foreign investors to use international investment dispute settlement processes against a host government in particular circumstances. Criticisms of ISDS mechanisms centre on whether these processes hinder the introduction of new, or the amendment of pre-existing, regulations necessary to promote public health, environmental protections and related human rights.1 In fact, opposition to the Trans-Pacific Partnership and Trans-Atlantic Trade and Investment Partnership largely focused on the inclusion of ISDS clauses.2
These concerns about the potential impacts of ISDS on public measures have come to a head in recent years,3 particularly when tobacco company Philip Morris brought claims against
* PhD (QUT), Post-doctoral research fellow, Intellectual Property and Innovation Law research program at the School of Law, Faculty of Law, QUT. 1 For the purposes of this article, ‘regulation’ refers to a broad range of regulatory mechanisms, and adopts the definition provided by Julia Black: ‘the intentional activity of attempting to control, order or influence the behaviour of others’: Julia Black, ‘Critical Reflections on Regulation’ (2002) 27 Australian Journal of Legal Philosophy 1, 1. 2 Leon Trakman and Luke Nottage, ‘As Asia Embraces the Trans-Pacific Partnership, ISDS Opposition Fluctuates’, The Conversation, 20 November 2015
Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures
Australia and Uruguay respectively. In both cases, the claims related to each country’s introduction of standardised tobacco packaging requirements. These cases reveal both strengths and weaknesses in the ISDS process, and may have implications for the negotiation of future trade deals encompassing ISDS provisions. The purpose of this article, however, is to reflect upon the implications of Philip Morris’s ISDS challenges to tobacco control for the adoption and development of consumption-control measures more broadly.
Tobacco use, unhealthy diets and alcohol abuse are three of the four main modifiable behaviours that increase the risk of non-communicable diseases (‘NCDs’), such as cancer, diabetes and cardiovascular diseases.4 Collectively, NCDs have become the main cause of human deaths worldwide.5 The adverse impacts of NCDs on human life, as well as related flow-on costs, disproportionately affect low- and middle-income countries.6 The increased prevalence of NCDs is an outcome of shifts in epidemiological, demographical and nutritional trends. Specifically, trade and investment flows between countries since the 1980s, underpinned by trade and investment agreements and policies, have significantly influenced the social and physical environments that drive NCDs.7 International trade and investment have enabled and improved the access to, and availability and promotion of alcohol, tobacco and ultra-processed,8 nutrient poor foods (‘risk commodities’). For instance, a significant body of work has examined how liberal trade policies, and aspects of globalisation more generally, have led to a shift within middle and low-income countries towards ‘Western’ diets that increase the risk of NCDs.9
The consumption of these risk commodities is the main behaviour that regulatory interventions can influence to reduce the impact of NCDs.10 To date, the most successful consumption- control regulations have concerned tobacco-related products. In fact, worldwide obesity has more than doubled, while the percentage of the population that smokes has globally declined.11 Regulatory interventions to influence tobacco use have primarily taken the form of fiscal action against Canada under the North American Free Trade Agreement, for the invalidation of patents for two pharmaceutical products. 4 Note, the fourth modifiable behaviour is physical inactivity, which is often addressed by measures to influence diets, such as informational campaigns. 5 World Health Organization, Global Status Report on Noncommunicable Diseases 2014 (2014) 8
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products measures, prevention and education initiatives, and legislative measures.12 These responses are facilitated and required by the World Health Organization’s (‘WHO’) International Framework Convention for Tobacco Control (‘FCTC’), the first, and at present the only international treaty supporting consumption-control measures for a risk commodity.
This is not to suggest that tobacco control has been a success. With over five million people dying each year from tobacco-related illnesses,13 tobacco control still has a long way to go. The number of smokers worldwide has increased due to population growth, and most people who smoke live in low- and middle-income countries where capacity to prevent and treat tobacco- related diseases is lower.14 However, the challenges and successes of tobacco control hold lessons for other consumption-control regulatory interventions, which for various reasons tend to be far less developed.
This article begins by exploring the approaches to and development of consumption-control measures. This discussion sets the context for exploring the tensions that exist between international investment law and these consumption-control measures. The two disputes regarding tobacco control measures brought by Philip Morris through ISDS mechanisms are then considered. Based on these case studies, this article draws out potential implications of ISDS mechanisms for the future of consumption-control policies.
II REGULATORY STRATEGIES FOR REDUCING MODIFIABLE RISK FACTORS FOR NCDS
A Approaches to Regulatory Strategies
It is well-established that regulation has a role in reducing the common modifiable risk behaviours for NCDs. Along with several UN General Assembly Resolutions supporting regulatory interventions to prevent NCDs,15 the WHO’s Global Action Plan for Prevention and Control of NCDs encourages member states to:
Strengthen programmes for the prevention and control of noncommunicable diseases with suitable expertise, resources and responsibility for needs assessment, strategic planning, policy development, legislative action, multisectoral coordination, implementation, monitoring and evaluation.16
12 See eg, World Health Organization, WHO Report on the Global Tobacco Epidemic 2015: Raising Taxes on Tobacco (2015)
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures
From an examination of legal and public health literature, this article identifies three broad models for regulating the common modifiable risk factors for NCDs.17 The first approach is largely influenced by libertarian political philosophy, with its emphasis on individual autonomy and low levels of state intervention, coupled with rational choice theory from neoclassical economics.18 From this perspective, the consumer is a rational actor optimally placed to make decisions in their own interest.19 Regulations in line with this approach centre on information disclosure such as education campaigns and mandated warnings on product labels. The reasoning behind this approach is that consumers, as rational actors, only require information, to make decisions that are in their self-interest. It is open to an individual to consider that the benefits of consuming a risk commodity — for example personal enjoyment — outweigh the health and financial costs. In addition to the provision of information, a neoclassical approach to addressing the risk factors for NCDs may support taxes on risk commodities, provided that the taxes are equivalent to the societal benefits of declines in the consumption of risk commodities such as unhealthy food choices or tobacco.20
The second approach to regulatory design for reducing NCD modifiable risk factors is referred to as a ‘libertarian paternalist’ approach.21 Based on insights from behavioural economics and psychology, the libertarian paternalism focuses on how choices are presented to consumers, and the environmental factors that influence consumer decisions. The aim of such regulatory interventions is to gently persuade or ‘nudge’ individuals towards desired behaviours.22 The libertarian paternalist approach marks a shift away from the consumer as rational decision- maker to a new model of consumption-control policies that, in minor or significant ways, alter the environments in which consumers make choices about what to consume. Using packaging standardisation regulations for tobacco as an example, Alessandro explained, ‘The focus of the
17 While regulatory responses certainly differ across jurisdictions, regulatory strategies for tobacco control have tended to converge, as facilitated by the WHO Framework Convention on Tobacco Control. See eg, Donley T Studlar, ‘Tobacco Control Policy Instruments in a Shrinking World: How Much Policy Learning?’ (2006) 29 International Journal of Public Administration 367. 18 The influence of libertarianism and neoclassical economics has generally been discussed in public health literature. See eg, Peter D Jacobson, ‘Changing the Culture of Health: One Public Health Misstep at a Time’ (2014) 51 Society 221; R S Magnusson, ‘Case Studies in Nanny State Name-calling: What Can We Learn?’ (2015) 129 Public Health 1074; Bryan Thomas and Lawrence O Gostin, ‘Tackling the Global NCD Crisis: Innovations in Law and Governance’ (2013) 41 The Journal of Law, Medicine & Ethics 16. See also, Ha-Joon Chang, ‘An Institutionalist Perspective on the Role of the State: Towards an Institutionalist Political Economy’ in Leonardo Burlamaqui, Ana Célia Castro and Ha-Joon Chang (eds), Institutions and the Role of the State (Edward Elgar Publishing, 2000) 3, 5, where the author discusses the linkages between neoclassical economics and Austrian- libertarian philosophy. 19 For a useful overview, see Raymond Boudon, ‘Rational Choice Theory’ in Bryan S Turner (ed), The New Blackwell Companion to Social Theory (John Wiley & Sons, 2009) 179; Herbert A Simon, ‘Theories of Decision- making in Economics and Behavioural Science’ in Surveys of Economic Theory (Palgrave Macmillan UK, 1966) 1
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products policy intervention is no longer on providing a set of information to enable choice, but on changing the context of choice’.23 The libertarian paternalist does not support outright bans on particular products. However, this approach does support subtly paternalistic consumption- control measures to influence decision-making.
A third way to regulate the behavioural risk factors of NCDs is to adopt a human rights-based approach. Various human rights treaties recognise a right to a health,24 which implies a duty on states to ‘provide an environment which facilitates the discharge’ of responsibilities associated with the right to health.25 However, a rights-based approach to NCDs is less developed or evident in the literature, in international policy guidance or in regulatory interventions. For instance, NCD policy instruments developed by international institutions tend to contain broad references to human rights without constructive advice about what such an approach entails and how it could be implemented.26 This is illustrated in the international Framework Convention on Tobacco Control,27 which reaffirms the human right to health and the overarching duty of governments to protect public health in the foreword and preamble, but does not weave this statement into its suggested framework for tobacco control.
Despite being an emerging area, it is possible to make some preliminary observations about the form of a rights-based approach to regulating risk behaviours. To begin, a rights-based model is more holistic than the previous two regulatory strategies. A rights-based approach focuses on the root causes of the risk behaviours, that is, the underlying determinants to health, which tend to centre on inequalities within and between societies on social, economic and political levels.28 Such an approach is compatible with NCD prevention, as NCDs tend to be more prevalent in low socio-economic groups.29 Thus, a rights-based approach to regulating
23 Alberto Alemanno, ‘Unpacking Plain Packaging and Other Standardization Requirements in Light of Behavioural Sciences’ in Alberto Alemanno and Enrico Bonadio (eds), The New Intellectual Property of Health: Beyond Plain Packaging (Edward Elgar Publishing, 2016) 15, 40. 24 See eg, International Covenant on Economic, Social and Cultural Rights, opened for signature 16 December 1966, 993 UNTS 3 (entered into force 3 January 1976) art 12; Convention on the Rights of the Child, opened for signature 20 November 1989, 1577 UNTS 3 (entered into force 2 September 1990) art 24. 25 Committee on Economic, Social and Cultural Rights, ‘The Right to the Highest Attainable Standard of Health (Art. 12)’, General Comment No 14, UN Doc E/C.12/2000/4, 11 August 2000, 5 [42]. 26 Laura Ferguson et al, ‘Non-Communicable Diseases and Human Rights: Global Synergies, Gaps and Opportunities’ (2016) Global Public Health 1. 27 World Health Organization Framework Convention on Tobacco Control, signed 21 May 2003 (entered into force 27 February 2005). 28 ‘Addressing the Social Determinants of Noncommunicable Diseases’ (Discussion Paper, United Nations Development Program, 16 October 2013)
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures risk behaviours for NCDs would be based on regulatory and other governance responses to facilitate the realisation of other, health-related, human rights such as the rights to education, shelter and fair wages.30
A rights-based approach also emphasises the state’s responsibility to protect citizens against human rights abuses by third parties, including corporate actors.31 In this context, an example of a human rights abuse committed by private actors may include the promotion of risk commodities known to be detrimental to health, especially for vulnerable groups.32 The United Nations Guiding Principles on Business and Human Rights33 observed that states should consider ‘the full range of permissible preventative and remedial measures, including policies, legislation, regulations and adjudication’ in order to protect their citizens against human rights abuse by private actors. Arguably then, a rights-based approach is more likely to support comparatively more onerous consumption-control measures for risk commodities and the corporate actors that profit from them. These include, inter alia, restrictions on the availability of sugar-sweetened beverages, taxation measures, gradually implemented bans on particular products, significant or total reduction in marketing of risk commodities, especially those that target vulnerable groups such as children, and reformulation requirements.34 To be consistent with a rights-based approach, these more onerous restrictions must be employed in conjunction with broader socio-economic interventions addressing inequities. Moreover, the right to health, and other rights protected or facilitated by consumption-control measures would need to be balanced against other human rights such as the right to liberty of the person.35
B Development of Consumption-control Measures
The relative successes of tobacco control have led to some tobacco control measures being translated into schemes to address other NCD risk factors, namely unhealthy diets and alcohol abuse.36 In reference to unhealthy dietary choices and tobacco use, Mercer et al observed: ‘[s]imilar psychological, social, and environmental factors as well as advertising pressures influence the usage patterns of all. These similarities suggest that there may be commonalities between factors involved in controlling obesity and tobacco’.37 This section will briefly outline
de salud publica) 217. 30 International Covenant on Economic, Social and Cultural Rights, opened for signature 16 December 1966, 993 UNTS 3 (entered into force 3 January 1976) arts 13, 11, 7. 31 Committee on Economic, Social and Cultural Rights, above n 25, 5 [42]; Olivier De Schutter, ‘The Right to an Adequate Diet: The Agriculture–Food–Health Nexus’, Report of the Special Rapporteur on the Right to Food, UN Doc A/HRC/16/49, (20 December 2010). 32 De Schutter, above n 31, 21 [42]. 33 United Nations Human Rights Council, Human Rights and Transnational Corporations and Other Business Enterprises, UNHRC Res 17/4, 17th sess, Agenda Item 3, UN DOC A/HRC/RES/17/4 (16 July 2011) 6–7. 34 Allyn Taylor, Emily Parento and Laura Schmidt, ‘The Increasing Weight of Regulation: Countries Combat the Global Obesity Epidemic’ (2015) 90 Indiana Law Journal 257
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products the overarching trends in tobacco control, alcohol control and dietary-related regulations to show how the regulation of these risk commodities has evolved in both different and similar ways.
Tobacco use became widespread in the 20th century, as advances in technologies made the mass production of cigarettes possible and as attitudes towards women smoking became more accepting.38 In response to increasing scientific certainty about the adverse effects of tobacco use, control measures began to be adopted from approximately the 1960s to the 1980s, and centred on mandated disclosure and fiscal measures.39
Over time, tobacco control has expanded to encompass the context in which consumers access and use tobacco. This is illustrated by the development of standardised packaging for tobacco and the increasing number of places where smoking is banned.40 The trend towards more interventionist control measures without prohibiting a product is aligned with a ‘libertarian paternalist’ approach. More broadly, it reflects a willingness of states to increase and expand regulatory measures relating to tobacco control.
Against the backdrop of a strong political willingness to regulate tobacco, consumption-control measures for tobacco have been subject to comparatively more global coordination and harmonisation than other risk commodities.41 This is evidenced by the FCTC, which, as already noted, remains the only international legal instrument for action to prevent a lifestyle factor that increases the risk of NCDs.42 This treaty provides a national and multilateral framework for tobacco control measures with the aim of substantially reducing the prevalence of tobacco use. To achieve these ends, the FCTC obligates states to strengthen or implement a range of measures to reduce the consumption of tobacco products including, for instance, a restriction or complete ban on the marketing of tobacco products.43
Alcohol and tobacco are behavioural risk factors for NCDs with common elements. Both are addictive drugs that have significant commercial interests, disproportionate effects on vulnerable groups and strong scientific evidence for the link between their consumption and the risk of NCDs.44 Yet, some significant differences exist between the two, which has led to less interventionist approaches to alcohol than tobacco. Unlike tobacco, alcohol has been produced and consumed for thousands of years longer, it is embedded within religious rituals and cultures, the adverse health impacts tend to be diverse and more long-term, and moderate drinking appears to be relatively unharmful (or, according to some studies, even reduces the
The American Journal of Clinical Nutrition 1073S. 38 Allan Brandt, The Cigarette Century: The Rise, Fall, and Deadly Persistence of the Product that Defined America (Basic Books, 2009) 57. 39 See eg, Heikki Hiilamo, Eric Crosbie and Stanton A Glantz, ‘The Evolution of Health Warning Labels on Cigarette Packs: The Role of Precedents, and Tobacco Industry Strategies to Block Diffusion’ (2014) 23 Tobacco Control e2. 40 Crawford Moodie et al, ‘Plain Tobacco Packaging: A Systematic Review’ (Report, Public Health Research Consortium, 2012)
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures risk of some NCDs, although this is debated).45 Perhaps as a result of these factors, prohibitions on alcohol from Russia, Norway, Iceland, Finland and the United States have generally been considered as unsuccessful at preventing alcohol use.46 Moreover, tobacco has been subject to decades of scientific investigation and activism, which has built strong public consensus that tobacco use is harmful, whereas with alcohol use, there is less activism and significant research gaps remain.47
Common measures of alcohol control include: minimum drinking ages; taxation and price control; restrictions on marketing, and on locations, quality and types of alcohol that can be consumed; and limitations on where, when and how many alcohol businesses can operate.48 Plain-packaging of alcohol products and complete bans on marketing are rare, unlike tobacco. Casswell and Thamarangsi observed: ‘Packaging and labelling restrictions have not been addressed for alcohol in the same way that they have for tobacco, but changes to labelling — at least for alcohol strength and ingredients — will probably be introduced’.49 Consequently, alcohol control has generally become more interventionist, but the measures adopted have retained a higher freedom of choice than tobacco control measures. Alcohol control measures often seem to sit somewhere between a completely libertarian approach and more paternalist interventions.
Meanwhile, regulatory interventions aimed at influencing food and dietary choices, for instance, have traditionally adopted a libertarian approach to regulatory design.50 National dietary guidelines tend to act as the key regulatory tool for influencing diets with almost 90 states having national dietary guidelines aimed at educating consumers.51 Social marketing campaigns are commonly used to communicate the advice contained in dietary guidelines, with the objective of influencing dietary choices by disseminating information and evidence. The
45 David J Hanson, ‘Historical Evolution of Alcohol Consumption in Society’ in Peter Boyle et al (eds), Alcohol: Science, Policy and Public Health (Oxford University Press, 2013) 31; Eric B Rimm et al, ‘Review of Moderate Alcohol Consumption and Reduced Risk of Coronary Heart Disease: Is the Effect due to Beer, Wine, or Spirits?’ (1996) 312 British Medical Journal 731. There is debate regarding whether moderate alcohol consumption has health benefits: see Kaye Middleton Fillmore et al, ‘Moderate Alcohol Use and Reduced Mortality Risk: Systematic Error in Prospective Studies and New Hypotheses’ (2007) 17(5 Suppl) Annals of Epidemiology S16. 46 See eg, Jeffrey A Miron and Jeffrey Zwiebel, ‘Alcohol Consumption During Prohibition’ (Working Paper 3675, National Bureau of Economic Research, April 1991)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products requirement that nutritional information be displayed on packaged foods is another, common way to inform consumers.52 States have increasingly considered and introduced a range of regulatory measures that seek to influence dietary choices more significantly. In part, this trend is a response to growing evidence that the libertarian approach of only providing consumers with information to make choices in their interest has been relatively ineffective.53 The measures adopted include marketing bans on ultra-processed food, taxes on particular foods (eg soft drinks) or attributes (eg sugar content), front-of-pack nutrition labelling schemes, regulating food manufacturing and product reformulation (eg prohibition on the addition of salt to particular foods) and restrictions on the availability of particular food (eg zoning limits on the number of fast food places in particular areas).54 In addition, some states have responded to calls for sustainable dietary interventions, that is, measures that exploit the synergies between foods that have a low environmental impact and human health and nutritional requirements.55
Unlike tobacco and alcohol, regulatory interventions that tax or that require the reformulation of a food product have only been adopted, sometimes unsuccessfully, by a small handful of states.56 Regardless, the larger range of regulatory interventions to influence diets that have been considered or implemented over the last decade reflect a general shift towards increased regulation to influence dietary change. The overarching trend in recent years has been towards using regulatory interventions to influence consumer choices, which is mirrored and supported by the concept of libertarian paternalism. The next section considers whether international investment law poses a threat to this (admittedly gradual and general) progress on regulating for the prevention of NCDs.
II FRICTION BETWEEN INTERNATIONAL INVESTMENT LAW AND THE ADOPTION OF CONSUMPTION-CONTROL MEASURES
A Overview of International Investment Law
International investment law emerged from, and remains centred on, protections for foreign investors against state interference. From the post-colonial era onwards, states have increasingly developed norms to assure protections for foreign investors against arbitrary state interference. These norms have been referred to as the international minimum standard of
52 M Cecchini and L Warin, ‘Impact of Food Labelling Systems on Food Choices and Eating Behaviours: A Systematic Review and Meta-analysis of Randomized Studies’ (2016) 17 Obesity Reviews 201. 53 See, eg, Walter Wymer, ‘Rethinking the Boundaries of Social Marketing: Activism or Advertising?’ (2010) 63 Journal of Business Research 99; VEPP Lemmens et al, ‘A Systematic Review of the Evidence Regarding Efficacy of Obesity Prevention Interventions among Adults’ (2008) 9 Obesity Reviews 446; M Stead, G Hastings and L McDermott, ‘The Meaning, Effectiveness and Future of Social Marketing’ (2007) 8 Obesity Reviews 189; Lawrence M Wallack, ‘Mass Media Campaigns: The Odds Against Finding Behavior Change’ (1981) 8 Health Education & Behavior 209. 54 See eg, David M Studdert, Jordan Flanders and Michelle M Mello, ‘Searching for Public Health Law’s Sweet Spot: The Regulation of Sugar-sweetened Beverages’ (2015) 12 PLOS Medicine e1001848; Paolo R Vergano and Blanca Salas Ferrer, ‘Taxing and Marketing Restrictions of “Foods High in Fat, Salt or Sugar” in the EU’ (2016) 7 European Journal of Risk Regulation 597. Note however, the critique from Gyorgy Scrinis and Christine Parker, ‘Front-of-Pack Food Labeling and the Politics of Nutritional Nudges’ (2016) 38 Law & Policy 234, regarding the accuracy and effectiveness of current approaches to food labelling. 55 See eg, Barbara Burlingame and Sandro Dernini (eds), Sustainable Diets and Biodiversity: Directions and Solutions for Policy, Research and Action (Food and Agriculture Organization, 2010). 56 Sisnowski, Handsley and Street, above n 50; Malene Bødker et al, ‘The Rise and Fall of the World’s First Fat Tax’ (2015) 119 Health Policy 737.
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures treatment for aliens.57 Yet it was not until the later part of the 20th century that international investment law started to develop rapidly.58 As liberal economic policies became predominant in the 1980s, states began rapidly entering into increasingly detailed bilateral and multilateral investment agreements.59 Indeed, the number of international investment agreements has grown from approximately 500 in 1988 to over 3000 in 2014.60 Now, the primary sources of international investment law are the substantive rules of international investment agreements (bilateral investment treaties and investment provisions in free trade agreements) and the decisions, interpretations and applications of these substantive rules by investment treaty tribunals. These sources of international investment law, along with customary international investment law, create standards for the treatment of foreign investors as well as specific norms regarding expropriation and dispute resolution.
In relation to standards of treatment, an investor’s right to fair and equitable treatment by the host state is one of the most common standards imposed via investment treaties.61 Yet, a shared formulation of ‘fair and equitable treatment’ does not exist.62 There is some suggestion from tribunals, other international institutions, and scholars that, depending on the context and the relevant provision, the following conduct can formulate a breach of the standard: clearly unequal treatment such as treatment that is significantly counter to rule of law principles; discriminatory treatment; or treatment that is grossly inconsistent with due process.63 Regardless, the fragmented way in which international investment law develops and is implemented has led to a significant amount of ambiguity and inconsistency surrounding the interpretation of the right to fair and equitable treatment.
Specific norms relating to expropriation apply in situations where a state wishes to directly expropriate an investor’s property rights. Expropriation norms were generally created to deal with situations where a state directly takes the title or possession of an investor’s property.
57 Rudolf Dolzer and Christoph Schreuer, Principles of International Investment Law (Oxford University Press, 2nd ed, 2012) ch 1. Note there is debate about the extent to which principles considered to be customary international investment law principles are in fact customary. As Professor Sornarajah observed ‘General principles of law are a weak source of international law. Their weakness is accentuated by the common tendency to select a proposition from a few national systems and argue that they constitute a general principle, which should be treated as international law. Thereafter, like-minded scholars seek to achieve this conversion through constant repetition. This is a phenomenon which frequently occurs in international investment law’: M Sornarajah, The International Law on Foreign Investment (Cambridge University Press, 2010) 418. 58 See eg, Barcelona Traction, Light and Power Company Limited (Belgium v Spain) (Preliminary Objections) [1970] ICJ Rep 3, 48 [89] where the ICJ observed that, in relation to international investment law ‘it may at first sight appear surprising that the evolution of law has not gone further and that no generally accepted rules in the matter have crystallized on the international plane.’ 59 World Trade Organization, World Trade Report 2013: Factors Shaping the Future of World Trade (2013) 76– 8
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Since the 1960s onwards, norms regarding expropriation have generally applied to indirect forms of expropriation where a state regulates in a way that affects the investor’s property to the extent that it is the equivalent of a physical taking.64 This shift was due to a general expansion of the concept of property, and the increased precision of rights and obligations that international investment treaties provide in comparison to customary international law.65 Regardless of whether the expropriation is direct or indirect, an expropriation must be non- discriminatory and for a public purpose.66 In addition, the host state must provide appropriate compensation to the investor.67
In relation to dispute resolution norms, bilateral investment treaties (‘BITs’) and multilateral free trade agreements have increasingly granted foreign investors the right to directly challenge a host state’s policy or other regulatory intervention. Such actions involve a foreign investor claiming in an international arbitration forum that a host state directly or indirectly expropriated their property.
These aspects of international investment law, that is, the establishment of the fair and equitable treatment obligation, the expanded understandings of expropriation and the development of ISDS clauses, are not simply a restatement of customary norms relating to investor protections.68 Rather, they represent an evolution in international investment law in a direction that has substantially increased the scope of protections for investors. These developments have fueled significant concerns that international investment law is curtailing the regulatory space required by states to adopt, inter alia, measures to protect public health.
A host state’s regulatory interventions to influence consumption choices could substantially impact on the value of an investment to the extent that enacting the regulation is considered an indirect expropriation of the foreign investor’s property. Alternatively, a host state may enact particularly onerous laws targeting risk commodities, in line with a libertarian-paternalist or a rights-based approach. Strict consumption-control measures could form the basis of an ISDS challenge where the investor argues that the host state breached its obligation to provide the investor with fair and equitable treatment by enacting the consumption-control measures. Even if a regulatory intervention was legitimately for and proportionate to decreasing risk behaviours linked to NCDs, it could still form the basis of an investor claim against a host state.
Moreover, a host state’s perceived threat of such an action eventuating is suspected of having a chilling effect on the introduction of new measures for the prevention of NCDs.69 Referred to
64 Libyan American Oil Company (LIAMCO) v The Government of the Libyan Arab Republic (1977) Ad Hoc Tribunal, Draft Convention on Arbitral Procedure, 103–4, where the tribunal broadened the emphasis in customary law on tangible property to discuss intangible property as ‘those rights that had a pecuniary or monetary value’. 65 See eg, Rudolf Dolzer, ‘Indirect Expropriations: New Developments?’ (2002) 11 New York University Environmental Law Journal 64. 66 These requirements are based in customary law, but have been reaffirmed in United Nations Declaration on Permanent Sovereignty over Natural Resources, GA Res 1803 (XVII)/17 UN GAOR Supp (No 17), UN Doc A/5217, 17th sess, 1194th plen mtg (14 December 1962). Note also, OECD’s overview ‘Policy Framework for Investment’ (Ministerial Council Meeting, OECD, 6 April 2015) 25
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures as the regulatory chill hypothesis, the suggestion is that ISDS mechanisms cause governments to stall, amend or abandon regulatory interventions in the public interest to avoid disputes with private actors.70 In fact, the Special Rapporteur on the Right to Health suggested that international investment law has allowed ‘[t]ransnational corporations to reduce States’ policy space and have been instrumental in increasing the influence of transnational corporations on States’ ability to institute public health policies...’.71 Similarly, Dr Margaret Chan, the Director- General of the WHO, described tobacco companies bringing of investment disputes in relation to tobacco control measures as ‘deliberately designed to instill fear in countries wishing to introduce similarly tough tobacco control measures’.72 Chan’s comment suggests that a single case concerning tobacco control measures could have broad impacts on the development of more onerous consumption-control measures worldwide. Despite these claims, it remains notoriously hard to prove or disprove whether ISDS has affected state decision-making on whether to introduce a particular measure to prevent NCDs.73
More broadly, ISDS raises questions about whether international investment arbitration tribunals are the appropriate forum to deal with complex matters of public interest. The applicable rules for ISDS depend on the investment agreements between the host and home states. Generally, an agreement will adopt the body of rules developed by the UN Commission on International Trade Law (‘UNCITRAL’) or the International Centre for the Settlement of Investment Disputes (‘ICSID’). Following the consent of parties, these rules are implemented by tribunals formed under these institutions. Thus, ISDS involve tribunals of differing compositions, potentially under different bodies of rules.
The potential for these characteristics to give rise to inconsistent decisions is aggravated by the fact that settled, uniform rules on the persuasiveness of previous cases have not been created, and ISDS mechanisms lacks appeal processes to correct legal or significant factual errors.74 Inconsistent decisions under ISDS occur in cases with similar facts but a different application of the law, across cases concerning the same investment treaty provisions.75 The cases of CME v Czech Republic and Lauder v Czech Republic arbitrations are a classic example of this practice and the issues that arise from it.76 The cases concerned the same Czech Republic government interference with media licences, and were both subject to UNCITRAL rules. Despite the similarities, in 2001 the Czech Republic was successful in opposing Lauder’s claims of expropriation, but in 2003 was ordered to pay a substantial compensation to CME
(2013) 3 Western Journal of Legal Studies [i]. See also, Arthur W Rovine, Contemporary Issues in International Arbitration and Mediation: The Fordham Papers 2014 (BRILL, 2015). 70 Ronald Labonte and Matthew Sanger, ‘Glossary on the World Trade Organization and Public Health: Part 2’ (2006) 60 Journal of Epidemiology & Community Health 738; Chester Brown and Kate Miles, Evolution in Investment Treaty Law and Arbitration (Cambridge University Press, 2011) 608–9. 71 Anand Grover, ‘Right of Everyone to the Enjoyment of the Highest Attainable Standard of Physical and Mental Health’, UN Doc A/69/299 (11 August 2014) 15 [48]. 72 Margaret Chan, ‘The Changed Face of the Tobacco Industry’ (Keynote address at the 15th World Conference on Tobacco or Health, Singapore, 22 March 2012)
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Regardless of the rules that apply, international investment arbitration procedures are based on domestic commercial arbitration models that are confidential and customisable to parties’ needs. As a result, disputes heard under UNCITRAL or ICSID have varying degrees of confidentiality and the granting of public access to decisions requires the consent of all parties.78 This lack of public oversight, and specifically the limited access to award decisions, would be unacceptable in domestic courts that are complying with the rule of law.
Two other examples of procedural issues with ISDS raise doubts about the appropriateness of referring matters of public interest to ISDS. Firstly, arbitrators are appointed by the parties to the dispute, and commentators have generally considered the conflict of interest standards to be inadequate and minimal.79 Secondly, substantial costs are often incurred in resolving investor-state disputes. The United Nations Conference on Trade and Development (‘UNCTAD’) found that the average legal fees and tribunal expenses in 2013 exceeded US$8 million for each party per case.80 For host countries, the overall costs include the potential of having to pay compensation and the costs involved in carrying out the arbitration (eg legal expenses and arbitration costs).81 Salacuse identifies a third cost, which is that ‘a substantial award to the investor may require the host country to repeal or modify measures that were implemented for the public good’.82
Non-party states may also incur opportunity costs as a result of another host state’s consumption-control measures being challenged under ISDS. Where a state does not adopt a particular regulatory intervention to avoid being subject to ISDS claims, they risk incurring significantly more economic costs from NCDs (eg due to a macro-economic loss of productivity).83 In other words, the opportunity to prevent NCDs by adopting more restrictive consumption-control measures may not be taken, which in turn may increase the incidence of and costs associated with NCDs.
77 See eg, Brian Tamanaha, ‘A Concise Guide to the Rule of Law’ in Gianluggi Palombella and Neil Walker (eds), Relocating the Rule of Law (Hart Publishing Limited, 2008). 78 See eg, Alexis C Brown, ‘Presumption Meets Reality: An Exploration of the Confidentiality Obligation in International Commercial Arbitration’ (2000) 16 American University International Law Review 969. 79 Allen S Weiner, ‘Indirect Expropriations: The Need for a Taxonomy of Legitimate Regulatory Purposes’ (2003) 5 International Law FORUM Du Droit International 166; Omar Chehade, ‘The Evolution of the Law of Indirect Expropriation and Its Application to Oil and Gas Investments’ (2016) 9 Journal of World Energy, Law & Business 64; James D Fry and Juan Ignacio Stampalija, ‘Forged Independence and Impartiality: Conflicts of Interest of International Arbitrators in Investment Disputes’ (2014) 30 Arbitration International 189. 80 United Nations Conference on Trade and Development, World Investment Report 2013: Global Value Chains: Investment and Trade for Development (2013) 112
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Due to their existing resource constraints, low and middle income countries are likely to be disproportionately affected and threatened by the financial costs of arbitration to the extent that they may wish to avoid contesting an arbitral claim and instead concede to investor demands.84 However, it is hard (if not impossible) to predict and prove that ISDS could have such a great chilling effect that it would prevent the development of effective measures to reduce NCDs and thus increase the economic burden of NCDs for particular countries.
B Limitations of Drawing Lessons for Other Risk Commodities from ISDS Cases Concerning Tobacco
Tobacco is arguably easier to regulate than the other key risk commodities: unhealthy food products and alcohol. The consumption of ultra-processed, nutritionally-poor foods, as well as alcohol, forms part of social events, epicureanism and culture in a far more heavily entrenched way than tobacco. Because of these factors, stronger measures to influence diets or lessen alcohol abuse may have to meet a higher threshold to be considered legitimate and proportionate public health measures. The food industry, in particular, is far more diverse and multifaceted than the tobacco or alcohol industries. Brownell and Warner observed:
The food industry is more complex than tobacco, with scores more players and thousands more products. Some companies, such as fruit and vegetable sellers, promote inherently good products, while some like the candy companies do the opposite. Most companies, especially the major players such as Nestlé, Unilever, and Kraft (the world’s three largest food companies), do a great deal of both.85
The difference between food as an essential human need and drugs like alcohol and tobacco, as well as the complexity of the food industry and diversity of products, suggests that consumption-control measures related to diets will be more difficult to introduce. Furthermore, the concentration within the food sector suggests that some companies are especially well- placed to frustrate efforts to influence diets, including by referring a matter to ISDS.86
A final point relates to ‘tobacco exceptionalism’, which is the notion that tobacco is uniquely toxic in nature and requires exceptional policy responses. The carveouts for tobacco in negotiated agreements beginning with the Trans-Pacific Partnership Agreement are reflective of tobacco exceptionalism. These carveouts partially or completely prevent investors from bringing claims in respect of tobacco control measures under the investment agreement’s ISDS clause.87 However, tobacco carveouts do not necessarily prevent a state challenging another state under an investment treaty in relation to tobacco control measures.
Similar carveouts for alcohol and particular food products have not been developed, which means that diet- and alcohol-control related measures can be subject to ISDS mechanisms
84 See eg, Alfred-Maurice de Zayas (Independent Expert), ‘Promotion of a Democratic and Equitable International Order’ (Human Rights Council, UN Doc A/70/285, 5 August 2015)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products under any applicable investment treaty. It seems narrow and inconsistent to apply this exceptionalism for tobacco, and not the two other key risk commodities. In regard to alcohol, Hawkins and Holden argued:
[a]lcohol is extremely harmful causing an estimated 3.3 million deaths per year (5.9% of global mortality), versus 5.4 million deaths per year (8% of global mortality) for tobacco, and is associated with a range of wider social harms. Whilst tobacco may be uniquely harmful, the differences in harm do not appear to provide sufficient rationale for such radically different policy approaches.
Meanwhile, around 16 million disability-adjusted life years,88 and 1.7 million deaths worldwide are attributable to diets low in fruit and vegetable consumption,89 and an estimated minimum of 2.6 million people die each year from being overweight or obese.90 While tobacco is exceptional in that it kills up to one half of its regular users, it is clearly not the only risk commodity significantly contributing to NCDs. Additionally, studies indicate at a population level that the use of tobacco corresponds with the uptake of unhealthy diets and alcohol abuse.91 This suggests that a more systemic, and coherent approach to consumption-control is required, including general carveouts to preserve public policy space for consumption-control measures.92
III PHILIP MORRIS ASIA LTD V AUSTRALIA: POTENTIAL IMPLICATIONS FOR TREATY SHOPPING TO CHALLENGE NCD PREVENTION MEASURES
A Australia’s Tobacco Plain Packaging Laws
The dispute between Philip Morris Asia Ltd and Australia began when the federal government in Australia passed the Tobacco Plain Packaging Act 2011 (Cth). The stated objectives of the Act include to ‘improve public health’ by discouraging tobacco use.93 It seeks to achieve this goal by regulating the retail packaging and appearance of tobacco products with the aim of reducing the appeal of tobacco products to consumers, increasing the effectiveness of health warnings and reducing the ability of such marketing to mislead consumers about the harmful effects of smoking.94
The Tobacco Plain Packaging Act sets out a number of requirements for how tobacco products must be packaged, including that the boxes must have a matte finish, only employ a ‘drab dark brown’ colour, not have any decorative ridges or other embellishments, only provide the company name once across one line, and must not display any trade mark.95 With this legislation, Australia seemingly removed the final avenue open to tobacco companies to advertise their products to consumers.
88 This refers to the overall productive years lost due to premature ill-health, disability or death. 89 World Health Organization, above n 5, 20. 90 ‘Obesity and Overweight’ (World Health Organization, Fact Sheet No 311, May 2014)
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Certainly, Australia’s plain packaging laws represent more of a libertarian paternalist approach as the context in which consumers are buying and making choices about tobacco has been altered more so than, for instance, an informational campaign.96 At the same time, the introduction of plain packaging laws is consistent with a rights-based approach; Australia is facilitating healthy environments and protecting citizens from actions of third parties that interfere with the right to health, that is, the use of marketing on packaging to promote the purchase and consumption of tobacco. Empirical evidence supports the notion that plain packaging laws contribute to the realisation of the right to health. An earlier empirical study found that those Australians smoking from plain packs perceive their cigarettes to be less satisfying; they were also more likely to have considered quitting at least once in the previous week and placed quitting as a higher priority.97 Furthermore, the smoking cessation helpline, Quitline, has experienced a prolonged 78 per cent increase in calls following the introduction of plain packaging.98
B Parties’ Arguments
As the Australian government was working towards the Tobacco Plain Packaging Act in 2011, Philip Morris’s Hong Kong affiliate, Philip Morris Asia Ltd (‘PM Asia’), acquired the Australian Philip Morris subsidiary. On the same day as the plain packaging laws were passed, PM Asia brought an action against Australia under the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments (‘1993 Hong Kong–Australia BIT’),99 and commenced arbitration proceedings in the Permanent Court of Arbitration.100 In addition to bringing an action under ISDS mechanisms, which is the focus of this article, Philip Morris unsuccessfully challenged the constitutionality of the plain packaging laws.101 Further challenges to the laws were brought by several countries under the WTO’s dispute resolution mechanisms. At the time of writing, the outcome of the WTO dispute has not officially been released.
The company’s ISDS claim was that the new plain packaging laws expropriated their intellectual property rights and transformed their tobacco products from a branded product to a commoditised product. The company argued that these actions amounted to an indirect
96 Alemanno, above n 23, 40. 97 Melanie A Wakefield et al, ‘Introduction Effects of the Australian Plain Packaging Policy on Adult Smokers: A Cross-Sectional Study’ (2013) 3 BMJ Open e003175. 98 Jane M Young et al, ‘Association between Tobacco Plain Packaging and Quitline Calls: A Population-based, Interrupted Time-Series Analysis’ (2014) 200 Medical Journal of Australia
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products expropriation by significantly devaluing PM Asia’s investments in Australia. The company sought an award of damages ‘of the order of billions of Australian dollars’ with compound interest, or withdrawal of the plain packaging laws.102
The Australian government defended its introduction of plain packaging laws.103 In its response to the Notice of Arbitration in 2011, Australia stated:
The plain packaging legislation forms part of a comprehensive government strategy to reduce smoking rates in Australia. This strategy is designed to address one of the leading causes of preventable death and disease in Australia…. The implementation of these measures is a legitimate exercise of the Australian Government’s regulatory powers to protect the health of its citizens.104
Australia raised several jurisdictional objections, and the following will focus on the two most relevant for the scope of this article. In the first instance, Australia asserted that the dispute arose before PM Asia had a controlling interest in the Australian company, as Australia announced its intentions to introduce plain packaging legislation before PM Asia acquired the Australian firm.105 Alternatively, Australia argued that PM Asia’s investment in the Australian firm of Philip Morris amounted to an abuse of process because PM Asia restructured its investment with the purpose of bringing a claim against Australia.106
PM Asia defended its corporate restructuring by arguing that restructuring investments to benefit from BIT protection was a common business practice, and that, as the investor, it enjoyed a presumption of good faith.107 In the context of ISDS, ‘treaty-shopping’ generally occurs where two states, country A and country B, have a BIT that has an ISDS clause.108 An investor from a third country wants to challenge a measure brought in by country B. To do this, the investor can incorporate in country A and challenge measures under the rights and guarantees provided for by the BIT between country A and country B. Thus, PM Asia is right in suggesting that their restructuring to take advantage of the BIT between Hong Kong and Australia is common practice. Treaty-shopping tends to increase the legal uncertainties present in ISDS; it may enhance a state’s perceived threat of a measure being subject to a ISDS challenge; and it allows for abuse of the investment law system if committed in bad faith.109 Arbitral tribunals have generally held that re-structuring to benefit from an investment agreement can be legitimate or, if the context supports it, may be an abuse of process.110
There was a long-running procedural dispute between Australia and Philip Morris that led to a large number of procedural decisions. In Procedural Order No 8, the Tribunal decided to divide
102 Ibid 2 [8]. 103 Philip Morris Asia Limited Claimant and The Commonwealth of Australia Respondent, Australia’s Response to the Notice of Arbitration under the 2010 Arbitration Rules of the United Nations Commission on International Trade Law (21 December 2011)
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C Findings and Potential Implications for Other NCD-prevention Measures
The Tribunal rejected Australia’s argument that the dispute arose when Australia announced its plans to introduce plain packaging, and therefore before PM Asia restructured to take advantage of the BIT between Hong Kong and Australia. Instead, the Tribunal agreed with PM Asia that the dispute arose on the date that the plain packaging laws were passed. Since PM Asia’s investment had occurred a few months before the laws were passed, no jurisdictional issues were present when the dispute arose.111 In other words, the Tribunal focused on the timing of the particular actions that breached the BIT (the passing of the laws), and not the broader context of the dispute, which began with Australia’s announcement of an intention to introduce standardised packaging laws.
Nonetheless, the Tribunal agreed with Australia that PM Asia’s claim was an abuse of process. On the basis of the evidence presented, the Tribunal was convinced PM Asia acquired the Australian subsidiary, Philip Morris (Australia) Limited, for the purpose of initiating arbitration under the Hong Kong Agreement to challenge Australia’s tobacco plain packaging laws. The Tribunal agreed with previous arbitral decisions by drawing a distinction between legitimate re-structuring and re-structuring for abuse of process. This distinction is based on whether the dispute was reasonably foreseeable at the time when the investor re-structured their companies. While the Tribunal considered various tests for foreseeability used by other arbitral bodies, it interpreted a dispute as foreseeable where there is a ‘reasonable prospect…that a measure which may give rise to a treaty claim will materialise’.112
In application to the dispute at hand, the Tribunal noted that the Australian government began indicating that it would consider introducing plain packaging measures in 2008. Subsequently, in 2009 Philip Morris had sought legal advice about the plain packaging, and wrote a letter to the Health Minister protesting plain packaging laws. In 2010, various public officials, including the then Prime Minister Kevin Rudd, announced Australia’s intention of introducing plain packaging legislation for tobacco products. The Australian government began consultations with stakeholders in late 2010, as Philip Morris began to re-structure its companies. Although changes in government leadership occurred in the years that followed, there was no evidence that the Australian government had changed its intention to introduce plain packaging laws.113 On the basis of these facts, the Tribunal commented that the introduction of plain packaging laws was:
[f]oreseeable well before the Claimant’s decision to restructure was taken (let alone implemented). On 29 April 2010, Australia’s Prime Minister Kevin Rudd and Health Minister Roxon unequivocally announced the Government’s intention to introduce Plain Packaging Measures.... Accordingly, from that date, there was at least a reasonable prospect that legislation equivalent to the Plain Packaging Measures would eventually be enacted and a dispute would arise.114
111 PMA v Australia (Permanent Court of Arbitration, No 2012–12, 17 December 2015) 98–113. 112 Ibid 185 [585]. 113 Ibid 184 [586]. 114 Ibid 184 [586].
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On the basis of these facts, the Tribunal held that Australia’s adoption of plain packaging laws for tobacco products was foreseeable to PM Asia at the time they re-structured.115 However, if the re-structuring were justified on other grounds, then it would be less likely to be considered an abuse of process, as the re-structuring would not be solely for the benefit of triggering an ISDS clause.116 In other words, a re-structuring will not be considered an abuse of process if it can be justified separately from the possibility of being eligible for ISDS.
PM Asia justified their re-structuring on the grounds that it was ‘part of a broader, group-wide process’, and submitted internal memoranda as evidence that the re-structuring of PM Australia was part of its re-structuring initiatives.117 Specifically, PM Asia claimed the re-structure was to centralise ownership to reduce costs and to minimise tax liabilities.118 The Australian government cast doubt on the veracity of these internal communications. It reported that any tax advantage would be negligible, and emphasised that one of the memoranda questions the commercial advantage that could be gained by re-structuring the Asian affiliates.119
Ultimately, the Tribunal found that PM Asia was unable to establish sufficient business reasons for re-structuring, and thus ‘the main and determinative, if not sole, reason for restructuring was the intention to bring a claim under the Treaty’.120 Therefore, the Tribunal was satisfied that the arbitration constituted an abuse of process, as PM Asia re-structured when it was reasonably foreseeable that the dispute would arise, and the re-structuring was for the main, perhaps only, purpose of gaining the rights offered under the Hong Kong–Australia BIT.
Some interpreted the outcome of the case as evidence that ISDS tribunals do not allow abuses of process by investors, and that the impact of ISDS provisions on the introduction of public health measures have been over-exaggerated by opponents.121 Others were more cautiously positive about the Tribunal’s decision, and spoke of the potential for future actions against NCD prevention measures under ISDS mechanisms.122 As Voon and Mitchell observed: ‘Australia’s win on jurisdiction offered a political boost to countries implementing or considering standardized tobacco packaging, but the circumstances of Philip Morris’ investment in Australia may not be mirrored elsewhere.’123 In other words, the case will make it more politically viable for other states to introduce similarly stringent public health measures, because it reduces the potential for ‘regulatory chill’ induced by the perceived threat of a measure being subject to ISDS. But this win for NCD prevention should be tempered because tribunals do not need to follow previous decisions, and facts differ between cases. Thus, a completely different decision could be reached in another case concerning the same or other risk commodities and similar regulatory measures.
115 Ibid 185 [588]. 116 Ibid 176 [570]. 117 Ibid 177 [572]. 118 Ibid 179 [573], [574]. 119 Ibid 177–8 [573]. 120 Ibid 184 [584]. 121 Tomas Fitzgerald, ‘Australia’s Plain Packaging Win Over Philip Morris Should Take the Heat off ISDS’, The Conversation, 18 December 2015
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For countries wishing to introduce other measures to reduce NCD risk behaviours, this decision shows the importance of pre-empting treaty-shopping by making public announcements earlier rather than later about their intentions to introduce a particular measure to reduce NCDs. Further, it shows that governments must either be in a position to act, consistent with their announcements, or at least should internally emphasise the importance of staying consistent with their announced intention. Otherwise, it will be difficult to prove that a corporate re- structuring occurred at a time when a dispute was reasonably foreseeable.
Companies producing unhealthy food or alcohol will be able to re-structure to take advantage of a treaty’s protection if they can justify the re-structuring on grounds other than that it allowed them to bring a dispute under a specific BIT. Given that food, alcohol and tobacco industries adopt similar strategies to avoid the introduction of NCD prevention and control measures,124 it seems likely that they would be better prepared to justify a re-structure following the outcome in this case. For instance, foreign investors will be more aware of the need to create valid internal communication evidence to support its justifications for re-structuring. Provided they reflect on the Tribunal’s decision in this case, those industries that produce risk commodities will be in a better position to refute abuse of process or rights claims.
From the perspective of preventing NCDs, it would have been beneficial if the Tribunal in this case found that re-structuring to take advantage of a treaty’s protections would be an abuse of process regardless of whether it was only one of the reasons for re-structuring. Currently though, corporate actors are in a position where they can re-structure to challenge NCD prevention measures, which may increase the potential for ISDS to have a regulatory chilling effect on measures to reduce NCD risk factors. Indeed, it may limit moves towards more stringent NCD prevention measures based on a rights-based approach. Nevertheless, tribunals do not follow precedent, and so any decision seeking to limit or prevent the ability of corporations to treaty-shop could only be persuasive (in non-legal terms) on another tribunal.
IV PHILIP MORRIS V URUGUAY
A Challenges to Uruguay’s Plain Packaging Laws
Since 1968, Uruguay has increasingly adopted measures to reduce tobacco use in order to prevent NCDs.125 In 2009, Uruguay introduced three new measures that became the subject of the dispute with Philip Morris. The first measure required that graphic health warnings cover 80 per cent of packages.126 The second identified the especially graphic images that would be used as health warnings.127 The third prohibited the use of logos, colours or other such markers that would imply the tobacco product was somehow safer than or otherwise different from another.128 The latter restriction effectively required a single presentation per brand family, as
124 See eg, Rob Moodie et al, ‘Profits and Pandemics: Prevention of Harmful Effects of Tobacco, Alcohol, and Ultra-processed Food and Drink Industries’ (2013) 381 The Lancet 670. 125 Presidential Decree 287/009. 126 Ministry of Health of Uruguay, Ordinance No 466 (issued 1 September 2008, entered into force 28 February 2010). 127 Ministry of Health of Uruguay, Ordinance No 514 (issued on 18 August 2008, entered into force 14 February 2010). 128 Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S A (Switzerland) and Abal Hermanos S A (Uruguay) v Oriental Republic of Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) (‘Philip Morris v Uruguay’); Ministry of Public Health Decree No. 287/009 on Health Warnings (2009); Minister
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products opposed to multiple variations of a brand. These measures, along with others such as restrictions on places where smoking is permitted, led to significant and unprecedented decreases in tobacco use in Uruguay.129
Similar to Australia, these standardised packaging laws represent a ‘nudging’ to tobacco, as the measures have altered and restricted how brands and packaging influence consumer choice, but they do not remove the risk commodity from sale.130 Arguably, Uruguay’s more restrictive approach to tobacco marketing is also more aligned with human rights law; but, as discussed, a rights-based approach employs a more holistic understanding of health, so no one measure will ensure that a country is meeting its human rights obligations to protect against third party interferences with health and to pro-actively facilitate health.
Using the ISDS provisions under a BIT between Switzerland and Uruguay,131 the Swiss subsidiary of the US-based Philip Morris, and other connected firms, sought either the withdrawal of the laws or damages of at least US$22.2 million with compound interest, as well as the fees and expenses incurred as a result of the arbitration. Among other breaches, the basis for their claim was that the packaging laws breached the company’s right to fair and equitable treatment,132 and Uruguay’s obligation to refrain from acts of expropriation unless for public purposes and with compensation.133 This case followed two domestic court cases brought by Philip Morris against Uruguay in the Supreme Court of Justice of Uruguay and the Tribunal de lo Contencioso Administrativo.
B Expropriation of Trade Marks
Whether trade marks and the goodwill that attaches to them are investments under the relevant BIT was undisputed in this case. The BIT had defined investments broadly to include ‘every kind of assets’ including tangible and intangible, and expressly ‘rights in the field of intellectual property’.134 States considering NCD prevention measures that may affect IP rights should, therefore, be carefully considering the definition of ‘investment’ when negotiating a BIT including whether IP rights for particular products or purposes can be removed from the definition of investment. Philip Morris argued that Uruguay’s standardised packaging laws had expropriated their trade marks for each brand variant contrary to article 5(1) of the BIT.135 To support this claim, Philip Morris argued that Uruguay’s tobacco control measures resulted in a considerable loss of sales combined with the loss of value of the company’s trade marks.136 In response, Uruguay argued that trade mark law does not recognise a right to use the trade mark in commerce and that the economic impact of its plain packaging measures was not substantial enough to be considered an expropriation.137
of Health of Uruguay, Ministerial Ordinance No 514 (2008). 129 Winston Abascal et al, ‘Tobacco Control Campaign in Uruguay: A Population-based Trend Analysis’ (2012) 380 The Lancet 1575. 130 Note though, under the introduced laws, one brand could generally not have multiple variations. In other words, the same product could not be branded in different ways to attract different consumers. 131 Switzerland-Uruguay BIT, signed 7 October 1998 (entered into force 22 April 1991). 132 Ibid art 3. 133 Ibid art 5. 134 Ibid art 1(2)(d). 135 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 53 [193]–[195]. 136 Ibid 49 [184]. 137 Ibid 45 [168].
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The majority first considered whether the trade mark conferred a positive right to use, or only a negative right to protect against use by another. In answering this question, the majority concluded that the legal title to the trade marks had not been affected by Uruguay’s tobacco control measures as a different proprietary relationship exists between a trade mark holder and third parties from that between a trade mark holder and the state who issued the trade mark. In support of this finding, the majority observed: ‘Nothing in any of the legal sources cited by the Claimants supports the conclusion that a trade mark amounts to an absolute, inalienable right to use that is somehow protected or guaranteed against any regulation that might limit or restrict its use’.138 In a similar vein, the majority noted the unreasonable outcomes that would occur if registering a trade mark guaranteed the holder the right to sell the trade-marked product. In this way, intellectual property is more subject to the power of the state than physical property. Here, the majority drew out broader lessons for consumption-control policies by stating:
Particularly in an industry like tobacco, but also more generally, there must be a reasonable expectation of regulation such that no absolute right to use the trade marks can exist. Otherwise ‘the mere fact of registering a trade mark would guarantee the sale of any trade-marked product, without regard to other considerations’. If a food additive is, subsequent to the grant of a trade mark, shown to cause cancer, it must be possible for the government to legislate so as to prevent or control its sale notwithstanding the trade mark.139
This is an important finding for measures to reduce alcohol or unhealthy food consumption that alter how the products are presented to the consumers, which tend to be more aligned with nudging and rights-based approaches to influencing the risk behaviours for NCDs. It suggests that tribunals will be less likely to require compensation for an investor where a trade mark is altered for a public health purpose.
When considering whether an expropriation had occurred, the majority considered the entirety of the business in Uruguay on the grounds that the standardised packaging laws impacted upon the business activities as a whole. Nonetheless, the majority held that the effects of the standardised packaging laws were far from being the equivalent to an expropriation, as the laws had not completely or even substantially deprived Philip Morris of the value of its investment. In fact, Philip Morris admitted that its Uruguay branch ‘had grown more profitable since 2011’ but added that it ‘would have been even more profitable’ if Uruguay had not adopted the consumption-control measures.140 The majority concluded:
[i]n respect of a claim based on indirect expropriation, as long as sufficient value remains after the Challenged Measures are implemented, there is no expropriation. As confirmed by investment treaty decisions, a partial loss of the profits that the investment would have yielded absent the measure does not confer an expropriatory character on the measure.141
This enforces a high standard for establishing indirect expropriation, which is consistent with previous arbitral decisions.142 A mere loss of profits in an investment will not equal indirect expropriation. Additionally, that the profits may have increased but for the measures being introduced was not given weight by the majority in this case. Such a finding also suggests that
138 Ibid 75 [268]. 139 Ibid 75 [269]. 140 Ibid 80 [284]. 141 Ibid 81 [286]. 142 See eg, Marvin Roy Feldman Karpa v United Mexican States (Award) (ICSID Arbitral tribunal, Case No ARB(AF)/99/1, 16 December 2002); Pope & Talbot Inc v The Government of Canada (Decision and Order by the Arbitral Tribunal) (UNCITRAL, 11 March 2002).
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products similar measures brought in for food or alcohol will be difficult to challenge unless the profits the investment would yield are substantially decreased. Thus, measures to reduce the risk factors for NCDs would have to result in the investor no longer having sufficient value in their investment after the measures are enforced. This allows for some lee-way in implementing consumption-control measures. At the same time, measures that ban a particular product, which may be aligned with a rights-based approach to regulating risk commodities, are likely to lead to a substantial decrease in the value of an investment and could be subject to indirect expropriation challenges.
B Defence Against Expropriation Claims: Police Powers Doctrine
Uruguay submitted in response to Philip Morris’s claims that it could adopt measures to protect public health on the basis of the police powers doctrine, and more broadly, state sovereignty.143 The police powers doctrine is a general and potentially customary international law principle that is closely connected, conceptually and practically, to state sovereignty.144 Essentially, the police powers doctrine recognises that states have, on the basis of their sovereignty, an inherent legal power to regulate even where doing so will interfere with private economic interests.145
Philip Morris viewed the defence as inapplicable because a state’s regulatory power has limitations imposed by private property and, in their view, the measures were disproportionate and unreasonable ‘even if enacted in pursuit of public health’.146 It seems then that Philip Morris views libertarian approaches to public health as reasonable and proportionate, but measures which tend to be more consistent with a libertarian-paternalist approach are unreasonable. Certainty, this position is consistent with their commercial interests.
Uruguay argued that the doctrine was implied by the BIT. Specifically, article 2(1) of the BIT acknowledges that a host state can refuse an investment ‘for reasons of public security and order, public health or morality’. Article 5(1), the expropriation clause, contains the commonly used restrictions on expropriation, which is that it must be ‘for the public benefit, as established by law, on a non-discriminatory basis, and under due process of law...’.147
The Arbitral Tribunal in Tecmed v Mexico first acknowledged that the police powers doctrine,148 and subsequent cases have further developed a test to determine whether the doctrine is applicable. For instance, in LG&E Energy Corp v Argentine Republic the test was described as follows:
It can generally be said that the State has the right to adopt measures having a social or general welfare purpose. In such a case, the measure must be accepted without any imposition of liability, except in cases where the State’s action is obviously disproportionate to the need being addressed.149
143 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 48 [181]. 144 See eg, Walter Wheeler Cook, ‘What Is the Police Power?’ (1907) 7 Columbia Law Review 322. 145 For a useful overview of police power doctrine in international investment law, see Ben Mostafa, ‘The Sole Effects Doctrine, Police Powers and Indirect Expropriation under International Law’ (2008) 15 Australian International Law Journal 267, 272–8. 146 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 53 [198]. 147 Switzerland–Uruguay BIT, signed 07 October 1998 (entered into force 22 April 1991). 148 Técnicas Medioambientales Tecmed S A v United Mexican States (ICSID Case No. ARB(AF)/00/2, 29 May 2003) 45–6 [119]. 149 LG&E Energy Corporation, LG&E Capital Corporation, and LG&E International, Inc v Argentine Republic (ICSID Case No. ARB/02/1, 3 October 2006) 59 [195].
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Further detail has been provided in Methanex v United States, where the Tribunal explained the doctrine as follows:
[a]s a matter of general international law, a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alios, a foreign investor or investment is not deemed expropriatory and compensable…150
These considerations were applied in Philip Morris v Uruguay. The majority agreed with Uruguay that the police powers doctrine was implied by the BIT.151 The important aspect of this finding is the basis on which this implication was established. Article 31(3)(c) of the Vienna Convention requires that a treaty provision be interpreted pursuant to the rules of international law applicable between the parties including customary international law.152 From this provision, the majority found that the expropriation clause in the BIT must be interpreted pursuant to the police powers doctrine, as it is a relevant rule of (customary) law that applies between the parties. Accordingly, Uruguay had not expropriated Philip Morris’s property because not only did the laws not impact upon the value of the investment, but also the laws were a ‘valid exercise by Uruguay of its police powers for the protection of public health’.153 This finding, which is consistent the decision in Saluka v Czech Republic,154 adds support to the view that the police powers doctrine can apply to indirect expropriation claims even where a BIT provision does not expressly refer to the doctrine.
The majority’s acceptance of the police powers doctrine holds lessons for implementing other measures to reduce the risk factors for NCDs. In particular, states should consider mentioning the police powers doctrine expressly when negotiating the expropriation clause in an investment treaty, and civil society could advocate for such an approach. This would reduce the persuasiveness of arguments that a state cannot avoid liability under an expropriation clause by invoking the police powers doctrine under customary international law. A more politically palatable option may simply be to ensure that the investment treaty refers to the sovereignty of the contracting parties and their ability to regulate in the public interest.
To reduce the risk behaviours for NCDs, states need to be able to take measures that influence consumers’ environments, and which address the underlying determinants of such risk behaviours. The protection offered by the police powers doctrine to states’ regulatory space is, therefore, important. Moreover, the on-going development of the police powers doctrine as a defence in expropriation cases is a significant advance for international investment law, which has largely focused on the rights and interests of investors. The majority’s decision in this case reflects a concerted attempt to elevate the importance of states exercising regulatory powers for public health purposes, even though the BIT focuses on investor rights. On the basis of the majority’s findings, future tribunals could imply the police powers doctrine using article 31(3)(c) of the Vienna Convention in order to protect the exercise of state powers legitimately for the benefit of public health.
150 Methanex v United States (Final Award) (North American Free Trade Agreement Chapter 11, Part IV, 3 August 2005) 4 [7]. 151 Switzerland–Uruguay BIT, art 5(1). 152 Vienna Convention on the Law of Treaties, opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27 January 1980). 153 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 88 [307]. 154 Saluka Investments BV (The Netherlands) v The Czech Republic (Partial Award) (UNCITRAL, 2006) 53–4 [263]–[264].
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C Fair and Equitable Treatment
Philip Morris argued that the plain packaging laws were unfair and inequitable. Their grounds for this argument were twofold: firstly, that the plain-packaging requirements were arbitrary as they were adopted without scientific evidence, and secondly the requirements did not adequately serve a public purpose. Secondly, Philip Morris claimed that the plain packaging laws undermined the company’s legitimate expectations to use and enjoy its investments including its brand assets. Finally, Philip Morris submitted that the plain packaging laws destroyed ‘the legal stability that Uruguay pledged in the BIT’.155 Uruguay contradicted these arguments on the basis that the laws were adopted in good faith, in a non-discriminatory manner and were logically connected with Uruguay’s public health objectives. In siding with Uruguay, the majority did not consider the laws to be arbitrary because there was nothing in their implementation that indicated ‘a willful disregard of due process’ and the plain packaging laws were adequately connected with the objective of protecting public health.156 In reaching this decision, the Tribunal consulted a number of sources.
Firstly, the Tribunal accepted written submissions filed by the Pan American Health Organization and the WHO, which supported the importance of tobacco control measures and the international empirical evidence illustrating that particular consumers were misled by different brands of cigarettes into thinking that one cigarette was safer than another.157 Accordingly, the submissions effectively supported Uruguay’s claims regarding the legitimacy of the laws for public health purposes. Notably, the Tribunal rejected the Inter-American Association of Intellectual Property’s request to file a written submission due to the ‘close relationship’ between Philip Morris and the association, including the participation of lawyers for Philip Morris on the association’s management board and thematic committees.158 The approach of the Tribunal in this case illustrates a willingness to allow independent non-parties to participate in complex, investment disputes relating to public health, and reveals the important contributions such bodies can make, particularly where the host state is less technically capable. Arguably, the inclusion of such briefs can help improve the legitimacy of a particular decision by an arbitral body by increasing non-party participation. Secondly, the majority’s decision shows how public health objectives can profoundly inform the interpretation of an investment treaty including whether a state interference was fair and equitable. Due to the evidence regarding tobacco and NCDs, the Tribunal did not consider it relevant to debate whether a measure was reasonable, and considered it sufficient that the plain packaging laws were ‘an attempt to address a real public health concern’.159 To a certain extent, this finding may allay concerns from some commentators that ‘the investor-friendly structure of investor–state dispute mechanisms can facilitate attacks on the presumption that public health regulation is necessarily for a public purpose’.160
Finally, the Tribunal noted that Uruguay’s plain packaging laws were in accordance with the FCTC, that Uruguay was an active participant in the implementation of the FCTC, and that this
155 Ibid 88 [309] 156 Ibid 112 [390]. 157 Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S A (Switzerland) and Abal Hermanos S A (Uruguay) v Oriental Republic of Uruguay (Procedural Order No 3) (ICSID Case No ARB/10/7, 17 February 2015); Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S A (Switzerland) and Abal Hermanos S A (Uruguay) v Oriental Republic of Uruguay (Procedural Order No 4) (ICSID Case No ARB/10/7, 24 March 2015). 158 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 10 [55]. 159 Ibid 119 [409]. 160 Samrat Ganguly, ‘The Investor–State Dispute Mechanism (ISDM) and a Sovereign’s Power to Protect Public Health’ (1999) 38 Columbia Journal of Transnational Law 113, 162.
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures treaty was evidence-based, so measures consistent with FCTC provisions could also be considered evidence-based.161 Consequently, the Tribunal did not consider it necessary for Uruguay to perform additional studies on plain packaging or to present further evidence to support its measures in order for the laws to be considered fair and equitable.
Those countries that are highly engaged at an international level in the sharing of knowledge and cooperation around measures to reduce the consumption of risk commodities may, therefore, be in a better position to implement control measures regardless of whether they have the resources to undertake the necessary scientific research. This decision illustrates the persuasiveness of a treaty based on scientific evidence, regarding control measures that reduce the consumption of particular risk behaviours. If Uruguay had not been a member of the FCTC, or had not been FCTC-compliant with its plain packaging laws, the link may not have been established between the plain packaging laws and the public health purpose. This would perhaps have led to the laws being considered as arbitrary and a breach of the fair and equitable guarantee. Given that unhealthy foods and alcohol do not have similar treaties regarding control measures, the arguments put forward by Philip Morris may be far more persuasive in cases concerning consumption-control measures for other products.
In relation to Philip Morris’s legitimate expectations and the stability of Uruguay’s laws, the Tribunal noted that specific undertakings by host states to investors form legitimate expectations, but a company cannot have a legitimate expectation that legislative schemes applying across a jurisdiction will remain unchanged.162 Additionally, the Tribunal did not consider that Uruguay’s legal system had been made unstable or substantially modified as a result of the introduction of plain packaging laws. Notably, the Tribunal stated:
Manufacturers and distributors of harmful products such as cigarettes can have no expectation that new and more onerous regulations will not be imposed, and certainly no commitments of any kind were given by Uruguay to the Claimants or (as far as the record shows) to anyone else.163
This is a positive statement from the perspective of regulating risk commodities to prevent NCDs. Products such as alcohol and highly processed and unhealthy food products are also considered harmful by WHO and other credible bodies on the basis of scientific evidence. Arguably then, investors cannot have a legitimate expectation that regulations in relation to these products will not become more onerous over time. This finding is consistent with the trends in consumption-control measures outlined above in Part II A Approaches to Regulatory Strategies. In particular, it allows for a libertarian-paternalist approach to consumption-control measures. Whether it allows for interventions as potentially onerous as a rights-based approach to NCD prevention is debatable.
D Denial of Justice
Philip Morris claimed another breach of the fair and equitable treatment obligation based on the argument that they were denied justice. Their argument was that the two cases it brought domestically against the measures within Uruguay reached contradictory interpretations of the same statutory provision but both decisions still overturned the laws. The cases were brought
161 Philip Morris v Uruguay (Award) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016) 113 [393]. 162 Ibid 124 [426]. 163 Ibid 125 [429].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products to the Supreme Court of Justice of Uruguay and the Tribunal de lo Contencioso Administrativo, which are largely equal under Uruguay’s constitutional system. It is unusual that one court’s decision does not override another where there is contradictory reasoning.
The parties and the majority accepted that a denial of justice is found ‘[i]f and when the judiciary breached the standard by fundamentally unfair proceedings and outrageously wrong final and binding decisions’.164 The majority’s decision, therefore, maintains this high standard for a denial of justice, which addresses concerns that the ISDS will significantly curb sovereign powers to the disadvantage of public interests and goals. In line with this, the majority noted that ISDS tribunals ‘should not act as courts of appeal to find a denial of justice, still less as bodies charged with improving the judicial architecture of the state’.165 Ultimately, the majority was not convinced that there had been an outrageously wrong decision or fundamentally unfair proceedings, as Philip Morris were able to present their case in court, to judicial authorities acting within their jurisdiction, and received a properly reasoned decision.166 This decision reflects a careful consideration of the role of ISDS and the variations between legal systems.
E Concurring and Dissenting Opinion
Arbitrator Gary Born, who was appointed by Philip Morris, dissented from the majority in two ways. Firstly, he considered the single presentation requirements did not accord with fair and equitable treatment.167 He emphasised that the FCTC contains a comprehensive range of detailed regulatory measures that should be adopted by signatories, but the FCTC does not oblige states or even recommend that states adopt laws that remove brand variants.168 Because international evidence was not considered as sufficient by Born, he focused on Uruguay’s domestic evidence and process for implementing the laws. Born commented ‘the requirement was formulated, drafted and approved in the space of a few days’.169 Born considered it arbitrary and disproportionate to remove brand variant trade marks because a blanket single presentation requirement is not proportionate to protecting consumers from being misled into thinking some variants of tobacco products were healthier than others. This is a compelling point, as surely other measures could have been used to prevent consumers from being misled. Thus, Born stated: ‘[n]otwithstanding the deference that is due sovereign regulatory measures and judgments, I am convinced that the requirement does not bear a rational relationship to its stated legislative objective, yet disproportionately injures important investor rights’. Born’s judgement shows that states should ensure their objectives for a particular measure expressly include protecting public health, or otherwise draw a link between the measure and achieving public health objectives. Merely implying such a purpose will be less convincing for some arbitrators.
Secondly, Born considered that Philip Morris was denied access to justice, and therefore Uruguay had breached its obligation to provide fair and equitable treatment. Born commented that the two court decisions were ‘rendered in closely-related proceedings, involving the same parties and interpreted the same provision of Uruguayan law to mean diametrically opposed
164 Ibid 143 [498]. 165 Ibid 151 [528]. 166 Ibid 151 [527]. 167 Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S A (Switzerland) and Abal Hermanos S A (Uruguay) v Oriental Republic of Uruguay (Concurring and Dissenting Opinion) (ICSID Arbitral Tribunal, Case No ARB/10/7, 8 July 2016). 168 Ibid 24 [99]. 169 Ibid 29 [116].
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Investor-State Dispute Settlement and Tobacco Control: Implications for Non-Communicable Diseases Prevention and Consumption-Control Measures and contradictory things’.170 This finding leaves consumption-control measures vulnerable to ISDS challenges where the host state’s court system does not have a mechanism for the claimant to resolve conflicts between equal courts with finality. Thus, Born applied a lower standard than the majority in relation to denial of justice. In contrast, and as discussed, the majority did not find the decisions were at a level serious enough to constitute a denial of justice. An especially weighty factor in this regard was that both courts’ decisions were constitutional.
V CONCLUSION
International investment law was designed to protect foreign investors from unfair interferences by host states. It remains an area of law focused on protecting the rights of foreign investors in order to promote economic growth. Due to this focus, as well as the deficiencies in ISDS processes, including a lack of transparency, there is a risk that an arbitral tribunal will award compensation to an investor, or require the state to overturn the challenged measure, in cases where a legitimate measure was adopted to reduce the consumption of risk commodities. This risk has heightened in recent decades as consumption-control measures have become more onerous in line with a more libertarian-paternalist approach.
Fortunately, the Philip Morris v Uruguay case indicates a willingness by international investment tribunals to prioritise a state’s power to enact legitimate public health protections, over investors’ interests. The decision further reflects how states may be able to use international evidence and the support of independent, international bodies to establish the proportionality and purpose of a particular measure to reduce alcohol or unhealthy food consumption. This is especially important for low income countries that lack the capacity to develop such evidence. Meanwhile, the Philip Morris v Australia case indicates how countries can try to prevent treaty-shopping, and, one hopes, provides an influential case for other tribunals when dealing with similar instances.
The outcomes of the ISDS cases concerning tobacco products should be understood as a positive development for other consumption-control measures, but it is a limited one. As the facts and provisions of each case differ, the risk of regulatory chill remains, as states can still be subject to ISDS for measures relating to tobacco products, and no case concerning other consumption-control measures need consider the Philip Morris cases. In addition, the risk of ISDS challenges to regulatory measures for reducing alcohol or unhealthy food consumption is arguably far greater than tobacco, due to the broader range of private actors and potentially relevant BITs involved. Likewise, the situation is likely to differ greatly where a case concerns alcohol products or unhealthy food products, which lack the support of an international treaty as a basis for consumption-control measures. There is also a far broader range of alcohol and food products with differing compositions, and low consumption of these products does not necessarily have harmful health impacts. For these reasons, it will generally be more difficult for host states to prove that regulatory measures to reduce alcohol abuse or unhealthy diets are proportionate and for legitimate public health purposes.
In the case of food, a state may be more likely to avoid liability under ISDS if it introduces consumption-control measures for particular substances with well-established negative health impacts (eg trans fats) and specific products (eg sugar-sweetened beverages), rather than applying control measures like restriction on marketing across a range of products, such as
170 Ibid 2 [9].
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products unhealthy food. In relation to alcohol, the strategy may be somewhat different because, if some alcohol products are restricted and others are not, this may suggest the consumption-control measure is discriminatory and not for legitimate public health purposes. However, a rights- based approach to NCD prevention would arguably support more drastic regulatory interventions that would perhaps not meet the proportionality considerations that tribunals undertake when considering whether an expropriation was in the public interest or whether an investor was treated fairly and equitably. To support consumption-control measures, states should ensure they are consistent with WHO guidelines, and they may bolster claims that a measure is proportionate and legitimate by demonstrating a history of being pro-active in relation to reducing alcohol and unhealthy food consumption. The potential for ISDS to weaken, delay or prevent consumption-control measures should remain a key concern of public health advocates, and states should be considering ways of protecting their regulatory space to adopt consumption-control measures when negotiating investment treaties.
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 131-160 DOI: 10.5204/qutlr.v17i2.695
THE GLOBAL TOBACCO EPIDEMIC, THE PLAIN PACKAGING OF TOBACCO PRODUCTS, AND THE WORLD TRADE ORGANIZATION
MATTHEW RIMMER*
In response to complaints by Ukraine, Honduras, the Dominican Republic, Cuba, and Indonesia, the government of Australia has defended the introduction of plain packaging of tobacco products in the World Trade Organization. This article focuses upon the legal defence of Australia before the WTO Panel. A key part of its defence has been the strong empirical evidence for the efficacy of plain packaging of tobacco products as a legitimate health measure designed to combat the global tobacco epidemic. Australia has provided a convincing case that plain packaging of tobacco products is compatible with the TRIPS Agreement 1994, particularly the clauses relating to the aims and objectives of the agreement; the requirements in respect of trade mark law; and the parallel measures in relation to access to essential medicines. Australia has also defended the consistency of plain packaging of tobacco products with the TBT Agreement 1994. Moreover, Australia has provided clear reasons for why the plain packaging of tobacco products is compatible with GATT. The position of Australia has been reinforced by a number of third parties — such as New Zealand, the United Kingdom, Ireland, Norway, Canada, and others — which have also been pioneers in tobacco control and public health. Australia’s leadership in respect of tobacco control and plain packaging of tobacco products is further supported by larger considerations in respect of international public health law, human rights, and sustainable development.
I INTRODUCTION
The World Health Organization (‘WHO’) has highlighted the serious, devastating impact of the global tobacco epidemic in a series of reports.1 The agency has stressed that tobacco is a leading cause of death, illness and impoverishment: ‘The tobacco epidemic is one of the biggest public health threats the world has ever faced, killing around 6 million people a year’.2 Moreover, the WHO observes that ‘children from poor households are frequently employed in
* Dr Matthew Rimmer, BA/LLB (ANU), PhD (UNSW), is a Professor in Intellectual Property and Innovation Law at the Faculty of Law in the Queensland University of Technology (QUT). He is a leader of the QUT Intellectual Property and Innovation Law research program, and a member of the QUT Digital Media Research Centre, the QUT Australian Centre for Health Law Research, and the QUT International Law and Global Governance Research Program. 1 World Health Organization, WHO Report on the Global Tobacco Epidemic, 2008: The MPOWER Package (WHO, 2008) http://www.who.int/tobacco/mpower/2008/en/>; World Health Organization, WHO Report on the Global Tobacco Epidemic, 2009: Implementing Smoke-free Environments (WHO, 2009)
QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products tobacco farming to provide family income’.3 The agency stresses that there is an important children’s rights dimension to the issue: ‘These children are especially vulnerable to “green tobacco sickness”, which is caused by the nicotine that is absorbed through the skin from the handling of wet tobacco leaves’.4
In the face of the threat of the global tobacco epidemic, the WHO has established the WHO Framework Convention on Tobacco Control (‘FCTC’).5 Article 3 of the Convention highlights the collective goal ‘to protect present and future generations from the devastating health, social, environmental and economic consequences of tobacco consumption and exposure to tobacco smoke’. Dr Margaret Chan, former Director-General of the WHO, has highlighted the important role of the agreement,6 noting that ‘following the adoption of the agreement, governments around the world have taken decisive steps not only to reduce tobacco use, but also to stand up to the multinational tobacco companies standing in the way of global progress’.7 The WHO has been supportive of its members introducing plain packaging of tobacco products as part of the FCTC. There has been concern, though, at the conference of parties about the use of trade and investment agreements to challenge public health measures, such as tobacco control.8
A pioneer in public health, Australia has undertaken an ‘Olive Revolution’ and introduced plain packaging for tobacco products.9 Melanie Wakefield and colleagues commented upon the regime established in Australia: ‘From 1 September 2012, all tobacco manufactured for sale in Australia was required to be contained in plain dark brown packs, with 75% front-of-pack graphic health warnings and the brand name and variant limited to a standardised font size and type’.10 After a constitutional challenge by ‘big tobacco’ companies, Australia successfully defended the plain packaging of tobacco products scheme in the High Court of Australia.11 Furthermore, Australia also defeated an Investor–State Dispute Settlement action by Philip Morris brought under a Hong Kong–Australia investment agreement.12 Australia’s plain
3 Ibid. 4 Ibid. 5 WHO Framework Convention on Tobacco Control (‘FCTC’), opened for signature 16 June 2003, 2302 UNTS 166 (entered into force 27 February 2005)
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization packaging of tobacco products has also been the subject of a challenge in the World Trade Organization (‘WTO’). That challenge will be the focus of this article.
The topic of intellectual property and public health has also been the subject of much disputation in international trade law in respect of tobacco control and plain packaging in the 2010s. The tobacco industry has sought to challenge the validity and the legitimacy of the plain packaging of tobacco products, through political lobbying, public relations campaigns, litigation, Investor–State Dispute Settlement clauses,13 and trade agreements. The tobacco industry has also engaged in various tactics to disrupt the impact of plain packaging of tobacco products.14 In terms of international trade, five countries — Ukraine, Honduras, the Dominican Republic, Cuba, and Indonesia — have challenged Australia’s regime of plain packaging of tobacco products in the WTO.15 The five complaints have progressed slowly.16 In May 2014, WTO Director General Roberto Azevêdo appointed three panellists to examine the dispute against Australia’s public health measure requiring tobacco products to be sold in plain packaging in this country.17 The panellists include Alexander Erwin, a former trade minister from South Africa, François Dessemontet from Switzerland, and Billie Miller, a former politician from Barbados. In 2015, the WTO Panel heard oral proceedings in the case.18 Four complainants presented oral argument: Honduras, Indonesia, Cuba and Dominican Republic. Ukraine withdrew its legal claim in the middle of the dispute.19 There were 36 third parties participating in the WTO proceeding. 20
PCA Case No 2012-12, 17 December 2015)
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This article — being written in late 2017, before the decision of the WTO Panel has been handed down publicly — is an analysis of the arguments in the dispute. In May 2017, there were reports in the media that Australia has prevailed in the matter.21 In fact, the decision has been communicated in private to the parties, however, it will not be made public until the middle of 2018, due to the need for the work to be translated. It is a somewhat unsatisfactory state of affairs to have a leaked draft outcome, without the accompanying reasoning. Nonetheless, public health advocates were delighted by the decision. Nicola Roxon observed: ‘I'm absolutely thrilled with the news today because it's a big win for Australia, both for our previous government [and] also for the current government that continued to fight so hard’.22 No doubt, Australia’s opponents will contemplate a further appeal against the decision. Of necessity, this article has been written in the interval between the argument of the case and the publication of the final decision. Given the stage of the proceedings, and that the official WTO decision and reasons are as yet unavailable, it will consider the broad arguments of the parties in the dispute, and will not engage in a detailed black letter analysis of the dispute, as that would be premature (especially given the decision is expected to be lengthy). The focus of the article is upon the competing arguments of the parties to the dispute, and the third parties.
As such, the piece is written from the perspective of evaluating the arguments of the countries involved in the trade dispute (which have been supported by the tobacco industry).23 The article highlights the importance of public health and human rights in the context of international trade,24 and supports the position of Australia that plain packaging of tobacco products is defensible under international trade law. Part II considers the relationship between international trade law, and the FCTC,25 and considers the public health arguments of Australia in respect of the regime. Part III examines the conflict over the Agreement on Trade-related Intellectual Property Rights (‘TRIPS’), and the plain packaging of tobacco products.26 Part IV explores the operation of the Agreement on Technical Barriers to Trade (‘TBT’).27 Part V briefly considers the arguments about plain packaging of tobacco products, and the General Agreement on
21 Tom Miles and Martinne Geller, ‘Australia Wins Landmark WTO Tobacco Packaging Case — Bloomberg’, Reuters, 5 May 2017,
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Tariffs and Trade (‘GATT’).28 Part VI considers the arguments of third parties to the dispute. In particular, it highlights the positions of key countries in respect of intellectual property and public health. The article concludes in Part VII that Australia’s plain packaging of tobacco products regime is consistent and compatible with international law on trade, and technical barriers to trade, intellectual property, and public health. Moreover, the parallel field of access to medicines supports the need for intellectual property flexibilities in respect of public health.
II INTERNATIONAL HEALTH LAW
International public health law provides an important context for Australia’s trade dispute in respect of the plain packaging of tobacco products. The question of the efficacy of plain packaging of products is an important consideration in respect of intellectual property, technical barriers to trade, and other general considerations in respect of trade. The overarching argument of this article is that international trade law does need to pay due deference to international public health law, human rights, and sustainable development.
A The World Health Organization
Internationally, the WHO welcomed the landmark ruling of the High Court of Australia, and called upon the ‘rest of the world to follow Australia’s tough stance on tobacco marketing’.29 The then Director-General of WHO, Dr Margaret Chan, emphasised that the ruling would encourage other countries to implement tobacco control measures, such as the plain packaging of tobacco products: ‘With so many countries lined up to ride on Australia’s coat-tails, what we hope to see is a domino effect for the good of public health’.30 She also stressed that the Australian experience would be of benefit to other nations:
The evidence on the positive health impact of plain packaging compiled by Australia’s High Court will benefit other countries in their efforts to develop and implement strong tobacco control measures to protect the health of their people and to stand resolute against the advances of the tobacco industry.31
Nicola Roxon — a key figure in the implementation of Australia’s plain packaging regime as Minister for Health and as Attorney-General — received a special award from the WHO for ‘her unwavering leadership’ in the field of health.32
For World No Tobacco Day in 2012, the WHO disseminated videos, lauding Australia’s regime for the plain packaging of tobacco products.33 This was followed in 2016 by the World No
28 General Agreement on Tariffs and Trade (‘GATT’), LT/UR/A-1A/1/GATT/2 (signed 30 October 1947) (as incorporated in annex 1A of Marrakesh Agreement Establishing the World Trade Organization, 1867 UNTS 3). 29 Margaret Chan, ‘WHO Welcomes Landmark Decision from Australia’s High Court on Plain Packaging’, (Statement by WHO Director-General, 15 August 2012)
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Tobacco Day ‘Get Ready for Plain Packaging’ campaign.34 In 2017, WHO has highlighted how the tobacco epidemic compromises a number of the global goals of sustainable development.35
At the TRIPS Council, the representatives of the WHO provided vocal support for Australia’s position. 36 They emphasised ‘that tobacco use was one of the greatest threats to public health the world had ever faced, and the single most preventable cause of death in the world today’.37 The representatives observed: ‘Globally, tobacco consumption killed nearly six million people a year through both direct use and the deadly effects of second-hand smoke, more than 70 per cent of whom reside in low- and middle-income countries’.38 The WHO was worried that ‘as necessary tobacco control measures continued to be implemented in developed countries, the tobacco industry, through aggressive marketing and interference practices, had shifted its focus to new markets in the developing world some time ago’.39 The WHO stressed that ‘it was a critical moment in the global effort to curb the tobacco epidemic for the introduction of necessary public health interventions under the WHO Framework Convention on Tobacco Control’,40 and emphasised that:
Because [non-communicable diseases] would result in long-term macroeconomic impacts on labour supply, capital accumulation and GDP worldwide, with the consequences most severe in developing countries, strong public health interventions, like the plain packaging measure, were relevant in addressing both health and economic concerns.41
The WHO was
of the view that the implementation of plain tobacco product packaging, representing a legitimate tobacco control measure, would have a substantial impact on tobacco consumption, was fully in line with the spirit and intent of the outcome of the UN High-Level Meeting, and was in accordance with international legal obligations under the WHO Framework Convention on Tobacco Control.42
On 29 October 2014, the Head of the Convention Secretariat made a joint statement with the WHO at the WTO TRIPS Council Meeting.43 In response to concerns related to plain
34 World Health Organization, World No Tobacco Day 2016: Get Ready for Plain Packaging (2016),
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization packaging of tobacco products and their compatibility with the TRIPS Agreement, the WHO stated that ‘the implementation of standardized tobacco product packaging represents a legitimate and effective tobacco control measure, and is fully in line with the spirit and intent of the outcome of the UN High-level Meeting, and is in accordance with international legal obligations under the WHO FCTC.’44 A similar statement was made to the WTO TBT Committee Meeting.45 The WHO recommended that Parties should consider adopting plain packaging in the guidelines for implementation of both Articles 11 and 13.
Dr Margaret Chan observed at the World Conference on Tobacco and Health that there was strong empirical evidence supporting plain packaging of tobacco products: ‘The evidence base is strong, empirical, and comes from well-qualified, respected, and credible sources’.46
Jonathan Liberman has emphasised the significance of the FCTC to understanding the conflicts over the plain packaging of tobacco products, observing that both domestic challenges and ongoing international challenges to Australia’s legislation will have to consider ‘the relationship between the FCTC, as both international law and international norm, and trade and investment obligations’.47 He has suggested:
The accumulation of litigation experience and development of jurisprudence build an invaluable collective resource of ideas, themes and narratives that can be drawn upon in different ways in different places to strengthen ongoing efforts to reduce the global burden caused by tobacco and the tobacco industry.48
For its part, the tobacco industry has sought to undermine the FCTC and the global dissemination of plain packaging of tobacco products.49
The WTO disputes raise a larger meta-question about the relationship between international health law and trade law, between the FCTC and trade agreements, such as the TRIPS Agreement, the TBT Agreement, and GATT.
B Post-implementation Empirical Evidence in Respect of Plain Packaging in Australia
There has been an important debate in the WTO about the empirical evidence for the impact of plain packaging of tobacco products. The introduction of plain packaging was supported by a strong body of empirical research,50 as set out by Australia’s National Preventative Health
World Health Organization in Relation to the Issue of Standardized Tobacco Product Packaging to WTO TRIPS Council Meeting; Geneva 28─29 October 2014; and Statement of the World Health Organization in Relation to the Issue of Standardized Tobacco Product Packaging to WTO TBT Committee Meeting; Geneva 5 November 2014. 44 Ibid. 45 Ibid. 46 Dr Margaret Chan, Director-General of the World Health Organization, ‘Keynote address’ (delivered at the World Conference on Tobacco and Health, Abu Dhabi, United Arab Emirates, 18 March 2015)
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Taskforce in 2009. There were market research reports, and there were further consultations on the draft legislation to enact the scheme in Australia. Plain packaging of tobacco products was considered to be a logical progression for tobacco control in Australia, given there was already a range of other tobacco control measures leading up to it.51 And as noted by public health researchers Simon Chapman and Becky Freeman, the Australian government has been systematically evaluating the impact of plain packaging, since its introduction.52
There was an important early study by Wakefield and colleagues into the introduction effects of the Australian plain packaging policy on adult smokers.53 The objective of the study was ‘to determine whether smokers smoking from packs required under Australia’s plain packaging law had different smoking beliefs and quitting thoughts, compared with those still smoking from branded packs’.54 They undertook a cross-sectional telephone survey during the roll-out phase of the law. The study involved 536 cigarette smokers with their usual brand, of whom 72.3 per cent were smoking from plain packaging, and 27.7 per cent were smoking from branded packaging. The researchers found: ‘Compared with branded pack smokers, smokers who were smoking from plain packs rated their cigarettes as being lower in quality and as tending to be less satisfying than 1 year ago’.55 They argued that:
Given that Australia is the first nation to implement plain packaging, our study provides an early investigation of its actual effects on smokers in a market where plain packs are available to all, compared with past studies that have experimentally exposed smokers to a single viewing of a plain or branded pack which may or may not have been their own brand, and naturalistic studies that have mocked-up plain packs for smokers to carry around with them in a trial situation.56
In 2015, the British Medical Journal published a special supplement of Tobacco Control, containing the results of fifteen peer-reviewed articles on Australia’s tobacco plain packaging legislation.57 This work showed that the specific objectives of plain packaging were achieved and generally sustained among adult smokers.58 The Australian government’s Post- Implementation Review of Tobacco Plain Packaging released in February 201659 concluded that the tobacco plain packaging measure had begun to achieve its public health objectives of reducing smoking in Australia. The review concluded:
[A]nalysis of Roy Morgan Single Source Survey Data shows that the 2012 packaging changes (plain packaging combined with enhanced graphic health warnings) have contributed to declines in smoking prevalence, even at this early time after implementation. The analysis estimated that the 2012 packaging changes resulted in a ‘statistically significant decline in
51 Michelle Scollo, Megan Bayly, and Melanie Wakefield, ‘Plain Packaging: A Logical Progression for Tobacco Control in One of the World’s “darkest markets”’ (2015) 24(Suppl 2) Tobacco Control ii3, doi:10.1136/tobaccocontrol-2014-052048. 52 Simon Chapman and Becky Freeman, Removing the Emperor’s Clothes: Australia and Tobacco Plain Packaging (Sydney University Press, 2014), 157–80. 53 Wakefield et al, above n 10. 54 Ibid. 55 Ibid. 56 Ibid. 57 Implementation and Evaluation of the Australian Plain Packaging Policy (2015) 24(Suppl 2) British Medical Journal – Tobacco Control
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smoking prevalence [among Australians aged 14 years and over] of 0.55 percentage points over the post-implementation period, relative to what the prevalence would have been without the packaging changes’. This decline accounts for approximately one quarter of the total decline in average prevalence rates observed between the 34 months prior to implementation of the measure and the 34 months following the implementation of the measure (the total decline between the two periods was estimated as being 2.2 percentage points, with average prevalence falling from 19.4% to 17.2%). …. [T]obacco plain packaging is achieving its aim of improving public health in Australia and is expected to have substantial public health outcomes into the future.60
Further work is still being done in this area. A study in October 2016 considered the impact of Australia’s plain packaging of tobacco products among adolescents and young adults.61 The tobacco industry’s claims about plain packaging of tobacco products impacting upon counterfeiting and smuggling have not been supported by evidence from customs in Australia.62 Indeed, in the United Kingdom, the courts have been highly critical of the poor evidence presented by the tobacco industry in their efforts to question the efficacy of plain packaging of tobacco products.63 The strong empirical evidence of efficacy was an important factor in terms of the defensibility of the plain packaging measure in the WTO.
C Evidence of the Efficacy of Plain Packaging in the WTO
In the executive summary of its argument, Australia emphasised the powerful evidence supporting the efficacy of plain packaging of tobacco products.64 It noted:
Under the two principal provisions at issue in this dispute — Article 20 of the TRIPS Agreement and Article 2.2 of the TBT Agreement — the complainants have assumed the burden of proving that the tobacco plain packaging measure will make no contribution to its public health objectives. …. The qualitative and quantitative evidence before the Panel, and the complainants’ own contradictory arguments regarding the effects of the measure, demonstrate that the complainants have failed to discharge this burden.65
Australia highlighted the important public health context of the dispute, noting that ‘this dispute concerns a Member’s right to regulate the advertising and promotion of tobacco — a unique, highly addictive product that kills half of its long-term users’.66 It also stressed the larger international context of the global tobacco epidemic:
60 Ibid 4. 61 Sally Dunlop et al, ‘Australia’s Plain Tobacco Packs: Anticipated and Actual Responses among Adolescents and Young Adults 2010–2013’ (2016) Tobacco Control
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To combat the global epidemic of tobacco use, the FCTC requires comprehensive tobacco control strategies in recognition that they are the most effective means of reducing the incidence and prevalence of smoking. …. To be effective, such comprehensive strategies must cover all aspects of supply and demand; apply to all tobacco products; optimize synergies between complementary measures; and be continually refreshed and revised.67
Australia’s evidence considered a wide range of empirical research into the efficacy of plain packaging of tobacco products, drawing upon economics, behavioural science, and marketing. Indeed, the work of Cass Sunstein and Alberto Alemanno have highlighted how graphical health warnings and plain packaging of tobacco products are a form of nudge economics, which can help produce behavioural change.68 In fact plain packaging relies upon graphic design in order to promote behavioural change in respect of smoking.69 In its conclusion to the executive summary, Australia highlighted the larger ramifications of the dispute: ‘The complainants’ claims and arguments in this case threaten the essential right of a WTO Member… to decide the level of protection it seeks to achieve when it comes to protecting the lives and wellbeing of its citizens’.70 Australia insisted that ‘tobacco plain packaging is a legitimate public health measure, based upon an extensive body of scientific evidence and the explicit recommendations of the Parties to the FCTC’.71 In its view, ‘The evidence demonstrates that the measure is already contributing to achieving Australia’s public health objectives and its effects are likely to grow over the long term.’72 Australia’s strong health justifications seem to be a key part of its victory in the WTO Panel Decision. 73
III THE TRIPS AGREEMENT 1994
The TRIPS Agreement lays down minimum standards for the protection of intellectual property rights, including trademarks, patent law and copyright law. Article 8(1) clearly acknowledges that ‘members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement’. The UNCTAD-ICTSD Resource Book on TRIPS and Development provides a useful account of the origins and nature of Article 8:
Since language of a treaty is presumed not to be surplus, it would appear that Article 8.1 is to be read as a statement of TRIPS interpretative principle: it advises that Members were expected to have the discretion to adopt internal measures they consider necessary to protect public
67 Ibid 2. 68 Cass Sunstein, The Ethics of Influence: Government in the Age of Behavioural Science (Cambridge University Press, 2016); Alberto Alemanno, ‘Unpacking Plain Packaging and Other Standardization Requirements in Light of Behavioural Sciences’, in Alberto Alemanno and Enrico Bonadio (eds), The New Intellectual Property of Health: Beyond Plain Packaging (Edward Elgar, 2016), 15–42. 69 Sarah Schrauwen, Lucienne Roberts, and Rebecca Wright, Can Graphic Design Save Your Life? (GraphicDesign&, 2017); Oliver Wainwright, ‘Can Graphic Design Save Your Life? Review – Thrills, Pills and Big Pharma’, The Guardian (online), 8 September 2017,
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health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development.74
Article 8 can and should inform the interpretation of the TRIPS Agreement, both as a whole, and in its individual articles. Its operation is certainly not limited to pharmaceutical drugs or patents. Indeed, Article 8 is not even limited to health-care. It refers to food security (‘nutrition’), technology transfer and development (‘the public interest in sectors of vital importance to their socio-economic and technological development’) and competition policy. Philosophically, intellectual property is designed to promote the public interest, particularly in respect of the promotion of public health. Nobel Laureate Joseph Stiglitz has emphasised the need to provide proper recognition of public health and equality under intellectual property rules in international trade agreements.75 Stiglitz and colleagues have also stressed the need to ensure that intellectual property promotes the UN’s Sustainable Development Goals.76
The dispute over the plain packaging of tobacco products has raised larger issues in respect of the relationship between intellectual property, public health, and trade.
A The Complainants
Confident that the regime was compatible with international trade law, Australia passed legislation for the plain packaging of tobacco products in 2011.
In March 2012, Ukraine asked for consultations over Australia’s plain packaging regime.77 Ukraine argued that Australia’s measures, especially in the context of its comprehensive tobacco regulatory regime, were inconsistent with Articles 1, 1.1, 2.1, 3.1, 15, 16, 20 and 27 of the TRIPS Agreement. At the TRIPS Council, Ukraine complained that the plain packaging requirements set forth in the legislation would violate a number of Australia’s WTO obligations,78 and reiterated its strong concern that the Tobacco Plain Packaging Act 2011 (Cth) and its implementing regulations violated several provisions of the TRIPS Agreement, as well as provisions of the Paris Convention as incorporated into TRIPS. Ukraine maintained that Australia’s tobacco measures appeared to be neither necessary to protect health, nor consistent with the provisions of the TRIPS Agreement.
At a meeting on 28 September 2012, the Dispute Settlement Bodies established a panel. Initially, Argentina, Brazil, Canada, the Dominican Republic, Ecuador, the European Union, Guatemala, Honduras, India, Indonesia, Japan, Korea, New Zealand, Nicaragua, Norway, Oman, the Philippines, Singapore, Chinese Taipei, Turkey, the United States, Uruguay, Zambia and Zimbabwe reserved their third party rights. Furthermore, Chile, China, Cuba, Egypt, Nigeria, Malaysia, Malawi, Mexico, Moldova, Peru, and Thailand also reserved their third party rights in the dispute.
74 United Nations Conference on Trade and Development and International Centre for Trade and Sustainable Development, Resource Book on TRIPS and Development (Cambridge University Press, 2005). 75 Joseph Stiglitz, Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump (WW Norton & Company, 2017), 40–43. 76 Dean Baker, Arjun Jayadev and Joseph Stiglitz, Innovation, Intellectual Property, and Development: A Better Set of Approaches for the 21st Century (AccessIBSA, 2017)
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Four other complainants subsequently joined the dispute, requesting consultations with Australia concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging,79 beginning with Honduras on 4 April 2012. Honduras claimed that Australia’s measures appeared to be inconsistent with its obligations under Articles 2.1, 3.1, 15.4, 16.1, 20, 22.2(b) and 24.3 of the TRIPS Agreement. At the TRIPS Council, Honduras expressed fears that producers and importers of affected tobacco products would be obliged to adopt standardized packaging and would at the same time be prevented from using their legitimate intellectual property rights on the packaging.80 In its view, Honduras believed that this requirement would violate Article 20 of the TRIPS Agreement. That Article establishes that the use of a trademark could not be unjustifiably encumbered in trade operations by specific requirements such as the use with another trademark, the use in a special form, or use in a manner which could undermine the ability for the brand to distinguish the goods or services of one company from those of other companies.81 Honduras argued that plain packaging measures created a serious risk of confusion between competing tobacco products.
On the 18 July 2012, the Dominican Republic joined the dispute,82 claiming that Australia’s measures were inconsistent with Australia’s obligations under Articles 2.1, 3.1, 15.4, 16.1, 20, 22.2(b) and 24.3 of the TRIPS Agreement. At the TRIPS Council, the Dominican Republic maintained that Australia’s plain packaging measures were a threat to intellectual property rights which were vital for international trade and should be a matter of concern to each and every Member.83 It argued that Australia’s plain packaging measures would eliminate the distinctive features of tobacco sector products by banning designs and trademarks, as well as by prescribing standardised packaging, and the measures would negate intellectual property rights.
In May 2013, Cuba joined the dispute.84 The Republic of Cuba is a major producer of cigars,85 as reported by The New York Times: ‘Cigar sales are handled by Habanos, a 50-50 joint venture between the Cuban state tobacco company and Altidis, a unit of Imperial Tobacco’.86 It is a curious irony that Communist Cuba should support the capitalist tobacco industry in the challenge to Australia’s plain packaging regime. Cuba also claimed that Australia’s measures were inconsistent with its obligations under Articles 2.1, 3.1, 15.4, 16.1, 20, 22.2(b) and 24.3 of the TRIPS Agreement.87 It argued that Australia breaches Article 20 because ‘Australia unjustifiably encumbers the use of trademarks for tobacco products in the course of trade
79 Honduras v Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WTO, Dispute No DS435)
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization through special requirements’,88 because it mandates: (i) that trademarks relating to tobacco products be used in a special form, and (ii) that trademarks relating to tobacco products be used in a manner which is detrimental to their capability to distinguish tobacco products of one undertaking from tobacco products of other undertakings. Cuba complained that the Australian Bill had created tension between the right of governments to protect human health, and the commercial interests associated with tobacco consumption.89 Cuba was concerned that the requirement of standard packaging would have an impact on advertising and consumption of tobacco. The delegate lamented that Cuban cigars had been the target of counterfeiting for many years and in many markets,90 and Cuba was concerned that plain packaging would defeat its anti-counterfeiting measures; and that it would no longer be possible to use the ‘Habano’ designation of origin seal or the national guarantee of origin seal used by the Republic of Cuba on its cigars; and that it would be prevented from applying the brand name and the place of origin, La Habana, Cuba, to the rings on cigars.
Indonesia then joined the fray in September 2013.91 Indonesia alleged breaches of the TRIPS Agreement, the TBT Agreement, and GATT. There was much debate about this action – especially given that Indonesia is a close neighbour of Australia, and a previous disputant over trade and tobacco control in the WTO.92
A number of countries have expressed support for these complainants. El Salvador raised concerns about Australia’s Tobacco Plain Packaging Bill and its compatibility with the TRIPS Agreement.93 Zimbabwe’s delegation shared the concerns expressed by the Dominican Republic and other delegations as regards the likely consequences for consumers and producers of tobacco products of the plain packaging measures being put in place by Australia.94 Chile had serious doubts that imposing plain packaging for cigarettes was the least trade restrictive measure available and that it was consistent with certain provisions of the TRIPS Agreement, in particular Article 20.95 Mexico’s delegation was sensitive to the legitimate objectives sought by Australia, which served as a basis for its Plain Packaging Bill, but shared some of the concerns of Chile. Ecuador was concerned about the impact of the plain packaging upon commercial sales of tobacco, and local farming communities.96
B Australia
In June 2011, the Australian government notified the TRIPS Council of its intention to
88 Ibid. 89 WTO, Council for TRIPS Meeting, above n 36, [181]. 90 Ibid [186]. 91 Indonesia v Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging (WTO, Dispute No DS467)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products introduce plain packaging of tobacco products.97 The Australian statement emphasised that ‘Australia’s Plain Packaging legislation was a legitimate and appropriate measure which would make a significant contribution to protecting the health of Australians’.98 Australia pointed out that ‘Tobacco packaging was one of the last remaining forms of tobacco advertising in Australia and the plain packaging legislation was therefore the next logical step in Australia’s tobacco control efforts’.99 The statement highlighted:
The plain packaging of tobacco products was designed to reduce the attractiveness and appeal of tobacco products to consumers, particularly young people; to increase the noticeability and effectiveness of mandated health warnings; to reduce the ability of the tobacco product and its packaging to mislead consumers about the harms of smoking; and, through the achievement of these aims in the long term, as part of a comprehensive suite of tobacco control measures, contribute to efforts to reduce smoking rates.100
It stressed that the ‘Guidelines agreed by the Conference of the Parties to the WHO Framework Convention on Tobacco Control (FCTC) in 2008 for the implementation of Articles 11 and 13 of the FCTC recommended that Parties consider the introduction of plain packaging’.101 Further,
The proposed legislation was consistent with recommendations made to the Government by Australia’s National Preventative Health Taskforce which had been based on extensive research evidence that explored the impacts of tobacco packaging and tested the reactions of respondents exposed to different packaging options under experimental conditions. The weight of the evidence indicated that a plain packaging requirement, as part of a comprehensive suite of tobacco control measures, would help to reduce smoking rates.102
Australia emphasised that the plain packaging regime was compatible with its international obligations to protect intellectual property rights under the TRIPS Agreement: ‘In framing its policy on plain packaging, Australia had paid full regard to its obligations under the TRIPS Agreement 1994 and would ensure that the new policy was implemented in a manner consistent with that Agreement’.103 The Australian delegate stressed ‘that amendments to the Tobacco Plain Packaging Bill had been proposed to ensure trademark owners’ ability to protect their trademarks from use by other persons, and the ability to register and maintain the registration of a trademark had been preserved’.104
In its executive summary, Australia maintained that the complainants had failed to demonstrate that the tobacco plain packaging measure was inconsistent with the TRIPS Agreement.105 Indeed, Australia argued that its opponents’ ‘claims are based on theories of “interests” that supposedly “pervade” the TRIPS Agreement 1994, and on attempts to rewrite various provisions of the TRIPS Agreement 1994 to create rights and obligations that do not exist in the text itself’.106 First, Australia contended that the complainants failed to demonstrate that
97 WTO, Council for TRIPS Meeting (Minutes of the Meeting of June 2011), IP/C/M/67. 98 WTO, Council for TRIPS Meeting, above n 36, [178]. 99 Ibid [180] 32, quoting Minutes of TRIPS Council Meeting, June 2011 (IP/C/M/66) recording Australian Statement. 100 Ibid [180] 33. 101 Ibid [179] 31. 102 Ibid. 103 Ibid [179] 32. 104 Ibid [176]. 105 Australia, Certain Measures, above n 64. 106 Ibid 16.
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization the measure was inconsistent with Article 20 of the TRIPS Agreement, and that ‘the complainants have failed to establish a prima facie case that the tobacco plain packaging measure imposes “special requirements” that “encumber” the “use of a trademark in the course of trade”’.107 Australia noted: ‘The relevant “use” of a trademark under Article 20 … is the use of a trademark to distinguish the goods or services of one undertaking from those of other undertakings’,108 and insisted that ‘the use of trademarks to advertise and promote the trademarked product is not a relevant “use” of trademarks under Article 20’.109 Australia also observed that ‘The complainants have not even attempted to demonstrate that the tobacco plain packaging measure encumbers the relevant use of trademarks in the course of trade.’110
Second, Australia maintained that ‘Article 20 of the TRIPS Agreement does not encompass the aspects of the tobacco plain packaging measure which prohibit the use of trademarks on tobacco packaging and products’.111 Third, Australia said that the ‘complainants’ interpretation of the term “unjustifiably” is unfounded’.112 In conclusion, Australia observed that the complainants failed to show that the tobacco plain packaging measure is inconsistent with Article 20 of the TRIPS Agreement:
The complainants have failed to show that the measure encumbers by special requirements the relevant ‘use’ of a trademark to distinguish the goods of one undertaking from those of other undertakings in the course of trade, and have therefore failed to establish the threshold applicability of Article 20. The use of trademarks to advertise and promote tobacco products is not a relevant ‘use’ of trademarks under Article 20. Any encumbrance upon this use is therefore irrelevant to establishing the applicability of Article 20.113
Moreover, ‘The complainants have failed to provide a coherent interpretative or factual basis for their assertion that the prohibitive elements of the tobacco plain packaging measure are “special requirements” that fall within the scope of Article 20, while other widely-adopted measures that affect the use of a trademark do not’.114 Furthermore, Australia maintained: ‘Assuming arguendo that these prohibitive elements do fall within the scope of Article 20, the complainants have failed to demonstrate that the measure as a whole encumbers the relevant use of a trademark’.115 The case of Australia in relation to the interpretation of the TRIPS Agreement is a plausible and persuasive argument.
C Academic Debate
There has also been a significant scholarly debate over plain packaging of tobacco products and the TRIPS Agreement. Back in 2008, I made the case — along with my public health colleagues — that the plain packaging of tobacco products was indeed compatible with the strictures of TRIPS.116 Our research into the internal documents of the tobacco industry revealed that the industry had been preparing for international trade, investment, and
107 Ibid 17. 108 Ibid. 109 Ibid 18. 110 Ibid. 111 Ibid 20. 112 Ibid. 113 Ibid 28. 114 Ibid. 115 Ibid. 116 Becky Freeman, Simon Chapman and Matthew Rimmer, ‘The Case for the Plain Packaging of Tobacco Products’ (2008) 103 Addiction 580.
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products intellectual property challenges in the 1990s. The internal documents also highlighted that the tobacco industry had private doubts about whether such challenges would be successful. Further insights into the tactics of the tobacco industry can be gained by more recent revelations. In 2017, the Reuters press agency published internal documents of Philip Morris, which detail its strategies to use intellectual property and international trade to delay the introduction of plain packaging of products.117
A number of other academics have been confident that the plain packaging of tobacco products is compatible with the TRIPS Agreement. University of Melbourne trade scholars, Tania Voon and Andrew Mitchell, comment: ‘Interpreting TRIPS Article 20 in the light of Articles 7 and 8 and the Doha Declaration, it seems incontrovertible that a public health objective could justify an encumbrance under TRIPS Article 20’.118 Treatise writer, Nuno Pires de Carvalho, observes that Article 20 of the TRIPS Agreement presents no such obstacle to special requirements in respect of the designation of tobacco, because such measures are justifiable.119 Jayashree Watal has maintained that ‘Article 20 allows for justifiable encumbrances and these can be considered as permitted by TRIPS language’ and that fears about special requirements on tobacco labels and packaging have been excessive.120 Professor Ben McGrady from Georgetown University maintains that plain packaging, as implemented by Australia, is consistent with WTO law.121 Professor Mark Davison from Monash University, clearly the pre- eminent scholar on trademark law in Australia, has maintained that Australia’s plain packaging regime is compatible with the TRIPS Agreement.122 He has noted that ‘the WTO tends to be cautious in its approach to interpretation of provisions in the relevant agreements as taking interpretative licence may tend to undermine the political consensus underpinning the WTO’.123 He concludes that ‘the claims made by tobacco trademark owners are dependent on an expansive approach to their intellectual property rights unsupported by the wording or the objectives of TRIPS.’124 Enrico Bonadio has maintained that ‘under the TRIPS Agreement and the Paris Convention trademark registrations do not offer a positive right to use the sign, but
117 The Philip Morris Files: The Secrets of the World’s Biggest Tobacco Company, Reuters Investigates (2017)
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization just a negative right to prevent third parties from exploiting the brand’.125 Such a position is buttressed by a previous WTO Panel ruling in a complaint by the United States against the European Communities, in respect of trademark law and geographical indications.126
Civil society has also voiced its views about the claims of the tobacco industry. Deborah Arnott, Chief Executive of health charity ASH said: ‘The claim that Australia’s tobacco plain packaging infringes WTO agreements is ill founded and has little or no chance of success’127 Alberto Alemanno comments that standardization measures are also used in other contexts in addition to tobacco, including in respect of alcohol, unhealthy foods, baby formulas, and pharmaceuticals.128 He suggests that ‘this emerging category of packaging requirements can, despite their intrusive nature (notably on trademarks), somehow be accommodated within IP regimes.’129
The reported WTO Panel Decision supports the view of such academic commentary that plain packaging of tobacco products is compatible with the TRIPS Agreement.
IV THE TBT AGREEMENT 1994
In the dispute over Australia’s plain packaging of tobacco products before the WTO, a number of the complainants raised the question of technical barriers to trade, alleging among other things that Australia’s regime of plain packaging was inconsistent with Articles 2.1 and 2.2 of the TBT Agreement.130 Article 2.2 of the TBT Agreement provides:
Members shall ensure that technical regulations are not prepared, adopted or applied with a view to or with the effect of creating unnecessary obstacles to international trade. For this purpose, technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create. Such legitimate objectives are, inter alia: ...protection of human health or safety.131
Moreover, it states: ‘In assessing such risks, relevant elements of consideration are, inter alia: available scientific and technical information, related processing technology or intended end- uses of products.’132
The WTO’s World Trade Report for 2012 places particular emphasis upon technical barriers to trade in.133 In his foreword, Pascal Lamy emphasised that there were a number of reasons why we should take matters of non-tariff measures (‘NTMs’) seriously:
125 Enrico Bonadio, ‘On the Nature of Trademark Rights: Does Trademark Registration Confer Positive or Negative Rights?’ in Alberto Alemanno and Enrico Bonadio (ed) The New Intellectual Property of Health: Beyond Plain Packaging (Edward Elgar, 2016), 43–68, 68. 126 European Communities — Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs, (WTO, Dispute No DS174),
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A clear trend has emerged over the years in which NTMs are less about shielding producers from import competition and more about the attainment of a broad range of public policy objectives. You could say we are moving from protection to precaution. This tendency is discernible in practically every economy, as concerns over health, safety, environmental quality and other social imperatives gain prominence.134
The topic of technical barriers to trade has become increasingly important, with significant battles in the WTO over matters such as tobacco control and the plain packaging of tobacco products; measures dealing with harmful products like asbestos; and environmental and consumer measures like eco-labelling.
Jeff Weiss from the Office of the US Trade Representative (‘USTR’) has discussed the evolution of WTO jurisprudence on technical barriers to trade.135 He observed that there had been two main developments since the adoption of the TBT Agreement. First was ‘the agreement by the WTO Committee on Technical Barriers to Trade in 2000 on a set of principles for the development of international standards, namely: (1) openness, (2) transparency, (3) impartiality and consensus, (4) relevance and effectiveness, (5) coherence and (6) the development dimension’.136 Second, ‘members now recognize that, with tariff levels generally falling around the world, the biggest obstacles faced by industries are often “behind the border” barriers, including problematic standards-related measures’.137 Weiss observed that the USTR had published an annual report to ‘document the steps taken by the Obama administration to address standards-related barriers to U.S. exports’.138
There has also been a complex dispute between Indonesia and the United States over the regulation of clove cigarettes in the WTO.139 In 2010, Indonesia requested consultations with the United States regarding a provision of the Family Smoking Prevention Tobacco Control Act of 2009 (US), which banned clove cigarettes, but excluded menthol-flavoured cigarettes from the ban. Indonesia claimed that the provision was inconsistent with GATT, Article 2 of the TBT Agreement, and the Agreement on the Application of Sanitary and Phytosanitary Measures.140 A Panel report was released in September 2011 and an Appellate report in April 2012. Professor Tania Voon has summarised the WTO Appellate Report,141 observing that ‘this decision makes clear that WTO Members implementing tobacco-control measures and other labelling and packaging requirements must refrain from discriminating in law or fact against imports, except to the extent that such discrimination arises “exclusively from a legitimate regulatory distinction”’.142 Professor Lawrence Gostin lamented: ‘What is most worrying about the clove cigarettes case was that the WTO trampled on a historic public health law fashioned after years of political compromise — as all democratic institutions must
134 Ibid. 135 ‘International Trade and Standards: An Interview with Jeff Weiss, Office of the US Trade Representative’, ASTM Standardization News, May/June 2011
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The Global Tobacco Epidemic, the Plain Packaging of Tobacco Products, and the World Trade Organization compromise’.143 Professor Jane Kelsey has also explored the significance of the dispute in US- Clove Cigarettes for other tobacco control measures, such as the plain packaging of tobacco products.144
In its complaint to the WTO about Australia’s plain packaging regime, Ukraine alleged the measures were inconsistent with Articles 2.1 and 2.2 of the TBT Agreement.145 Honduras made a similar complaint,146 and the Dominican Republic also aired objections about technical barriers to trade.147 Cuba complained that Australia violated Article 2.1 of the TBT Agreement because it imposed technical regulations that applied less favourable treatment to imported tobacco products treatment than that applied to like products of national origin.148 Cuba also contended that the plain packaging regime was inconsistent with Article 2.2 because Australia imposed technical regulations that created unnecessary obstacles to trade and are more trade- restrictive than necessary to fulfil a legitimate objective, taking into account the risks that non- fulfilment would create. Indonesia has made similar complaints.149
In response to Indonesia’s complaint, Australia said in a statement that ‘tobacco plain packaging is a sound, well-considered measure designed and based on a broad range of scientific studies and reports to achieve a legitimate objective — the protection of public health’.150 Australia also cited the view of the WHO about the need for global action in respect of the ‘tobacco epidemic’. Furthermore, Australia highlighted the terrible health burden placed upon Indonesia because of tobacco. The Australian representatives ‘remarked that Indonesia might look favourably upon such health measures, as a substantive majority of Indonesian males are smokers, and the country is estimated to have the second highest male smoking rate in the world’.151
Australia robustly defended the consistency of plain packaging of tobacco products with the TBT Agreement, arguing in its executive summary that the complainants failed to establish a prima facie case that the tobacco plain packaging measure is inconsistent with Article 2.2 of the TBT Agreement:152
143 Gostin, above n 24, 238. 144 Jane Kelsey, International Trade Law and Tobacco Control: Trade and Investment Law Issues relating to Proposed Tobacco Control Policies to Achieve an Essentially Smoke Free Aotearoa New Zealand by 2025: A report to the New Zealand Tobacco Control Research Tūranga (2012) 27. See also Jane Kelsey, Hidden Agendas: What We Need to Know About the Trans-Pacific Partnership Agreement (BWB Books, 2013); and WTO, World Trade Report 2012, above n 133. 145 Ukraine v Australia (WTO Dispute No 434)
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The tobacco plain packaging measure is entitled to the presumption in Article 2.5 that it does not constitute an unnecessary obstacle to international trade, and the complainants have failed to rebut that presumption with the type of evidence required. Even if the complainants’ claims were found to overcome that fundamental hurdle, the complainants have also failed to establish a prima facie case that the tobacco plain packaging measure is trade-restrictive at all, let alone that it is more trade-restrictive than necessary having regard to the contribution it makes to its public health objectives and the risks that non-fulfilment of those objectives would create.153
Australia stated that it had ‘enacted its tobacco plain packaging measure in accordance with the FCTC Guidelines, which set out the relevant international standard for the plain packaging of tobacco products’,154 and argued that the complainants failed to make a prima facie case that the measure was trade restrictive under Article 2.2 of the TBT Agreement,155 but instead had tried to artificially expand the definition of trade-restrictiveness.156 Australia stated: ‘None of the complainants has substantiated its claims that the tobacco plain packaging measure entails compliance costs, or increases barriers to market entry, such as to constitute a limiting effect on international trade in tobacco products’,157 contending that ‘the complainants have failed in their attempt to establish that the tobacco plain packaging measure is not capable of contributing to its objectives of reducing the use of and exposure to tobacco products in Australia.’158 Australia commented:
[T]he overwhelming weight of the qualitative evidence unequivocally establishes that, by prohibiting tobacco packaging from being used to advertise and promote tobacco products — and thereby reducing the appeal of tobacco products, increasing the effectiveness of graphic health warnings, and reducing the ability of tobacco packaging to mislead consumers — the tobacco plain packaging measure is capable of discouraging smoking initiation and relapse, encouraging cessation, and reducing people’s exposure to tobacco products. The quantitative evidence corroborates this conclusion, and is consistent with the tobacco plain packaging measure operating synergistically with other elements of Australia’s comprehensive tobacco control policy to reduce further the use of tobacco products and exposure to tobacco smoke in Australia. …. The complainants have thus failed entirely to discharge their burden of establishing that the tobacco plain packaging measure is incapable of contributing to its public health objectives.159
Furthermore, Australia observed that the complainants had failed to established that the risks arising from non-fulfilment of the measure’s objectives are not grave: ‘Properly interpreted, the risks that would arise from the non-fulfilment of the public health objectives of the tobacco plain packaging measure are significant and grave, and the consequences would include increased tobacco-related deaths and disease in Australia.’160
Australia also noted that
three of the complainants’ four purported ‘alternatives’ — an increase in excise tax, an increase in the minimum legal purchase age for tobacco products, and improved social marketing
153 Ibid 32. 154 Ibid. 155 Ibid 34. 156 Ibid 35. 157 Ibid. 158 Ibid 36. 159 Ibid. 160 Ibid 37.
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campaigns — are not alternatives at all, as they constitute variations on existing elements of Australia’s comprehensive tobacco control policy.161
It noted further that, regarding ‘the only actual alternative measure the complainants propose — a pre-vetting scheme — the complainants have failed to provide any credible evidence or argument to support their implausible assertion that the scheme would make “an equivalent or greater contribution” to that of the tobacco plain packaging measure’.162
The WHO has also defended the position of Australia in a statement at the WTO Committee on Technical Barriers to Trade.163 The position of Australia seems to have been validated by the WTO Panel Decision.
V GATT
There have also been a number of complaints that Australia’s plain packaging regime does not meet the requirements of GATT.164 Honduras, the Dominican Republic, Cuba, and Indonesia (and Ukraine to begin with) contended that Australia’s tobacco regulatory regime appears to be inconsistent with Article III:4 of GATT, which provides that:
The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.
Moreover, it states that: ‘The provisions of this paragraph shall not prevent the application of differential internal transportation charges which are based exclusively on the economic operation of the means of transport and not on the nationality of the product.’ Tania Voon and Andrew Mitchell comment that the ‘Australian plain packaging requirements and associated offences themselves are expressed in non-discriminatory terms and would apply equally to domestic (that is, locally manufactured) and imported tobacco products’.165 They observe that ‘no de facto discrimination is likely to arise in their application because the requirements do not make any other distinctions that might affect local and imported products differently’,166 and conclude that Australia’s plain packaging regime does not ‘breach the GATT 1994 because it is non-discriminatory, with a limited impact on international trade and a sound public health basis’.167
In its complaint, Cuba also argued that Australia’s plain packaging measures appear to be inconsistent with its obligations under GATT, in particular, that the measures violated Article IX:4, because ‘Australia imposes requirements relating to the marking of imported cigar products which materially reduce their value and/or unreasonably increase their cost of production’.168 In its executive summary, Australia also addressed the GATT arguments,169 in
161 Ibid 38. 162 Ibid. 163 World Health Organization, ‘WHO and FCTC Joint Statement’, above n 43. 164 General Agreement on Tariffs and Trade, above n 28. 165 Voon and Mitchell, above n 118, 135. 166 Ibid. 167 Ibid 136 168 Cuba v Australia (WTO Dispute No DS 458)
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The position of Australia appears to have been upheld by the WTO Panel decision, although final publication of the decision will obviously shed further light on the Panel’s reasoning.
VI THIRD PARTIES
An important feature of the WTO Panel dispute has been the participation of a large number of third parties. Australia’s position in respect of plain packaging of tobacco products under the TRIPS Agreement, the TBT Agreement, and GATT has been reinforced by a number of other countries pioneering public health. Other countries, including the United Kingdom,174 Ireland,175 France,176 and New Zealand,177 have passed legislative measures in respect of the plain packaging of tobacco products. The ‘next generation’ of countries showing an interest in the introduction of standardized tobacco control measures include Norway, Sweden, Finland, Hungary, Slovenia, Canada, Singapore, Turkey, and South Africa.178
A New Zealand
Professor Jane Kelsey of the University of Auckland has provided a lengthy analysis of New Zealand’s position in respect of plain packaging, public health, and international trade: ‘Possible interpretations of the TRIPS provisions and exceptions provide some comfort for New Zealand’s proposed policies, but they are yet to be tested’.179 She has also highlighted ways that New Zealand could promote tobacco control policies, through notification of measures to the WTO; discussion at the WTO’s TBT Committee, and TRIPS Council; the WTO Trade Policy Review mechanism; and the WTO dispute mechanism. The government of
170 Ibid 38. 171 Ibid. 172 Ibid. 173 Ibid 38–9. 174 Tobacco and Related Products Regulations 2016 (UK); and British American Tobacco Limited and others v The Queen [2016] EWHC 1169 (Admin); and British American Tobacco UK Ltd & Ors v The Secretary of State for Health [2016] EWCA Civ 1182. 175 Public Health (Standardised Packaging of Tobacco) Act 2015 (Irel). 176 Decret No 2016-334 du 21 Mars 2016 Relatif au Paquet Neuter des Cigarettes et de Certains Produits du Tabac (France)
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New Zealand has welcomed the Australian government’s decision to legislate for the plain packaging of tobacco products, the TRIPS Council minutes recording:
The negative effects of smoking, which was the leading preventable cause of early death in New Zealand, could not be overstated. It was within a Member’s right to implement necessary measures in order to protect public health. [New Zealand’s] delegation noted the clear assurances by Australia that it had paid close attention to and respected its WTO obligations in developing its plain packaging proposal. [New Zealand] noted the numerous scientific studies which demonstrated that plain packaging of tobacco products could lead to positive public health outcomes by reducing the attractiveness and desirability of smoking and by increasing the prominence of public health warnings. It was [New Zealand’s] view that plain packaging, as part of a comprehensive suite of tobacco control measures, could contribute to efforts to reduce smoking rates.180
New Zealand’s Parliament conducted hearings on the scheme for the plain packaging of tobacco products in 2014,181 and passed the implementing legislation in 2016.182 Then Prime Minister, John Key, initially would have preferred to put the regime into operation, after the conclusion of the WTO dispute. The Associate Minister for Health, the Hon Peseta Sam Lotu- liga commented:
We too will have standardised packages starting to appear in New Zealand next year, by passing this bill into law today. They will be stripped of bright colours, and there will be no glamour. The bill will undoubtedly improve the health of New Zealanders and save lives. Along with tobacco excise increases and restrictions already in place, this move towards standardised packaging will help people to quit and prevent others from smoking.183
There was much discussion in the New Zealand Parliament about whether it should have passed the plain packaging regime in a more timely fashion.184 In response to the media reports about the WTO Panel decision, New Zealand’s then Trade Minister Todd McClay and Associate Health Minister Nicky Wagner put out a press release, indicating that the New Zealand government was confident that Australia would win the WTO case,185 the Health Minister adding: ‘Smoking is our leading cause of preventable disease and the Government is committed to the goal of making New Zealand smokefree by 2025’. McClay stressed:
This case is about a country’s right to determine its own measures to protect public health. We have always said that the link between domestic public health rights and trade is important to our government and we are fighting hard to ensure this view is shared in the WTO. …. The WTO has a robust set of trade rules in place to preserve our rights and I remain confident that the WTO will find in Australia’s favour on tobacco plain packaging.186
180 WTO, Council for TRIPS Meeting, above n 36 [202]. 181 Matthew Rimmer, ‘New Zealand, Plain Packaging, and the Trans-Pacific Partnership’, InfoJustice, 28 March 2014
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New Zealand has had a keen interest in proceedings because its regime for plain packaging of tobacco products would come into force on the 14th March 2018. Under new Prime Minister Jacinda Ardern, the government promises to be even more progressive in terms of its commitment to public health and tobacco control.
B The United Kingdom
After initially supporting plain packaging, former Prime Minister of the United Kingdom, David Cameron, postponed the measure, under the pressure of lobbying by the tobacco industry.187 The government of Scotland threatened to press ahead with its plans to introduce the plain packaging of tobacco products, if the UK did not.188 Wales was also supportive of the introduction of plain packaging measures.189 The UK government commissioned Sir Cyril Chantler to investigate the health impacts of plain packaging. The Public Health Minister Jane Ellison promised to introduce plain packaging, after receiving the Chantler report. Chantler advised: ‘Tobacco packages appear to be especially important as a means of communicating brand imagery in countries like Australia and the UK which have comprehensive bans on advertising and promotion’.190 After various false starts, the UK Parliament passed the legislative regime,191 and the introduction of plain packaging of tobacco products has led to a slump in cigarette sales.192 But the government has had to defend plain packaging in the High Court of Justice,193 in a case brought by British American Tobacco and others. In the case, Justice Green also considered the larger international context of the debate over the plain packaging of tobacco products, and emphasised that the TRIPS Agreement and the FCTC should be seen as mutually compatible:
It is plain from the above that intellectual property rights are not absolute and must be balanced against other competing public interests. In particular the right to use a trade mark can, under national law, yield to limitations imposed in the pursuit of superior public policy considerations. There is no canonical list of the public interests that may or may not be resorted to on the part of contracting states to limit intellectual property rights and a good deal of discretion is accorded to the signatories. What is however clear is that intellectual property rights can be derogated from in the name of public health since this is one of the few public interests which is explicitly identified. It is a point I return to later but it is worth emphasising
187 Sarah Boseley and Andrew Sparrow, ‘Delay on Plain Cigarette Pack Decision “Sad Day for Child Health”’, The Guardian (online), 13 July 2013
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here: For all the above reasons TRIPS and the FCTC can be read together without any risk of them colliding or being mutually inconsistent.194
The judge comments:
TRIPS makes it abundantly clear that the scope and effect, including usage, of intellectual property rights may be subject to limitations on grounds of public health; and [Directive 2014/40/EU of the European Parliament and Council, the ‘TPD’] which is an internal market (shared competence) measure expressly aspires to be compliant with relevant international law obligations (such as TRIPS). 195
The judge concluded that the regulations are consistent with the TRIPS Agreement. This decision was upheld on appeal.196 There are certainly global lessons for tobacco control policy that can be learnt from the tobacco industry’s challenge to the UK’s standardised packaging legislation.197
C The European Union and Neighbouring Countries
Ireland has adopted the plain packaging of tobacco products.198 The Public Health (Standardised Packaging of Tobacco) Act 2015 was passed by both Houses of the Oireachtas, and signed into law by the Irish President on 10th March 2015. Ireland became the first country in Europe and the second country in the world to pass such legislation.199 Hungary is due to introduce plain packaging of tobacco products in 2018, and Slovenia will do so in 2020. Belgium and Finland have taken steps towards the introduction of plain packaging.
A number of neighbouring countries to the European Union have also endorsed Australia’s position. At the TRIPS Council, Australia received strong support from Norway, whose government ‘expressed its support for the Australian measures at previous meetings of the Council and wished to reiterate its view that the TRIPS Agreement 1994 provided Members the flexibility to adopt measures necessary to protect public health’.200 Norway was confident that Australia’s plain packaging regime was consistent with international trade law: ‘Following the information provided by the Australian delegation in this matter, Norway remained confident that the measures described would be implemented in a manner consistent with Australia’s WTO obligations’.201 In 2016, Norway introduced a Bill for plain packaging of tobacco products,202 and in 2017 Norway successfully defended the standardised packaging of these
194 British American Tobacco v The Queen [2016] EWHC 1169 (Admin) [186] 88. 195 Ibid [913] 362. 196 British American Tobacco UK Ltd v Secretary of State for Health [2016] EWCA Civ 1182; Haroon Siddique, ‘Tobacco Firms Fail to Stop UK Introduction of Plain Packaging’, The Guardian (online), 30 November 2016,
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In WTO Discussions, Canada ‘was confident that Australia, in the elaboration of its Bill, had taken into account the importance of respecting international obligations’.205 Under the new government of Justin Trudeau, Canada has pushed forward with its own process into launching plain packaging of tobacco products.206 Jane Philpott, the Canadian Minister of Health, commented: ‘I don’t believe tobacco companies should be allowed to build brand loyalty with children, for a product that could kill them’.207 She emphasised: ‘Research shows that plain packaging of tobacco products is an effective way to deter people from starting to smoke and will bolster our efforts to reduce tobacco use in Canada.’208 Rob Cunningham of the Canadian Cancer Society stated that ‘Plain packaging is a key tobacco control measure to protect youth and to advance public health …. We strongly support implementation of plain packaging in Canada, just as so many other countries have done or are in the process of doing.’209 As Dr Becky Freeman has commented, there is a strong case for Canada to join the tobacco plain packaging revolution.210
Uruguay has been sympathetic to the position of Australia, especially after its graphic health warnings were disputed by tobacco companies under investment treaties.211 Providing vocal support for Australia in the WTO dispute settlement, Uruguay emphasised that it could not remain silent in this fight against ‘the most serious pandemic confronting humanity’.212 Uruguay also said that ‘the norms of the Multilateral Trading System cannot and should not force its members to allow that a product that kills its citizens in unacceptable and alarming proportions continues to be sold wrapped as candy to attract new victims’.213 In the wake of its defence of graphic health warnings in an Investor–State Dispute Settlement matter,214 Uruguay
tobacco packaging), introduced in Norwegian Parliament, 10 June 2016. 203 Government of Norway, ‘Full Victory to Norway Over Snus Producer Swedish Match’ (Press Release, No 47/2017, 6 November 2017)
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In the United States, the position of the Obama Administration was complicated on the question of tobacco control. After introducing graphic health warnings for tobacco products, the Administration was embroiled in legal action; and eventually dropped the tobacco control measure for further consideration.216 There has been criticism that the Obama Administration favoured the tobacco industry in trade negotiations,217 and a lawsuit was launched against the Food and Drug Administration over the delays in reintroducing graphic health warnings.218 There has been concern that the new Trump administration has strong links to the tobacco industry, particularly Vice President, Michael Pence, who has received significant funding from the tobacco industry. 219
E BRICS/BASIC Group
The members of the BRICS and BASIC groupings also offered their perspectives on the debate over the plain packaging of tobacco products in the TRIPS Council. The representative of China stressed that members of WTO needed to be cautious and strike a balance between the protection of IP right holders and the public interest in general.220 China believed that plain packaging measures should not contravene international obligations under the TRIPS Agreement.
The representative of Brazil emphasised that the existing international rules on IP should be supportive of public policy measures designed to protect public health within Members.221 Brazil stressed that Article 8 of the TRIPS Agreement and the Doha Declaration on TRIPS and Public Health222 should guide the interpretation of the applicable TRIPS provisions on trademarks. It is worth recalling the actual, broad language of the Doha Declaration. Article 4 affirms that
the Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all. [And] reaffirm[s] the right of WTO members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.
215 Tobacco Free Union, ‘Uruguay to Move on Plain Packaging’, 25 May 2017,
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South Africa reserved its position initially,223 noting that the question of plain packaging of tobacco products involved a tension between public health and a legitimate right to trademark protection. South Africa has since made further steps itself, towards the adoption of plain packaging of tobacco products.224 India has shown an interest in the policy option of plain packaging,225 having already introduced graphic health warnings on tobacco products.226 However, the tobacco industry has been seeking to undermine India’s tobacco control measures.227 To encourage further legislative and regulatory action, the WHO has promulgated information for policy-makers on evidence, design, and implementation of plain packaging of tobacco products.228
VII CONCLUSION
The overarching argument of this article has been that plain packaging of tobacco products is defensible under the TRIPS Agreement, the TBT Agreement, and GATT, and in light of larger concerns in respect of international public health law, human rights, and sustainable development. The article provides a critical examination of the arguments in the WTO dispute over plain packaging of tobacco products, before the publication of the first ruling in the dispute. As Alain Pottage has noted,
Plain packaging legislation raises a number of engaging theoretical and practical questions: about the legal qualities of the intellectual property rights that articulate branding strategies, about the relationship between the regimes of international trade law and world health policy, and about the history of regulatory initiatives to address the public health implications of smoking.229
According to media reports, Australia has prevailed in the WTO dispute.230 The confidential interim report is said to emphasize that Australia’s laws are a legitimate public health measure.231 Australia’s plain packaging regime was well designed to withstand legal challenges under the dispute settlement process of the WTO from Honduras, the Dominican Republic, Cuba, and Indonesia (and previously, Ukraine). There is a strong body of empirical evidence supporting the efficacy of plain packaging of tobacco products in Australia. As such, Australia was in a strong position to win the WTO dispute. The High Court of Australia’s decision on the plain packaging regime, the decisions on standardised packaging in the UK, and the case of Société JT International on plain packaging of tobacco products in the State Council of
223 WTO, ‘Council for TRIPS Meeting’, above n 36, [226]. 224 Valene Govender, ‘South Africa Set to Join Global Plain Cigarette Packaging Trend’, News 24, 26 May 2016,
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France, have provided support for Australia’s stance in the WTO.232 Australia’s adoption of plain packaging promotes the public interest purposes of the TRIPS Agreement, particularly in respect of the promotion of public health, human rights, and sustainable development. The measures are also consistent, in my view, with the TBT Agreement and GATT. Australia’s plain packaging regime also supports the regime established under the WHO FCTC.
There is no doubt the potential for further appeal by Australia’s opponents. A spokeswoman for British American Tobacco was of the belief that Australia’s complainants would keep fighting: ‘As there is a high likelihood of an appeal by some or all of the parties, it’s important to note that this panel report is not the final word on whether plain packaging is consistent with international law’.233 However, given the strength of Australia’s position, it is doubtful that the panel report will be overturned. Nicola Roxon has recommended that the tobacco industry and its allies should discontinue their opposition to plain packaging of tobacco products:
We had a fight in the High Court, which we won. We had a fight in Hong Kong with Philip Morris that we won. We’ve had a fight in the WTO. It’s time for them to call it quits. They can’t keep fighting unless they think that simply by fighting they’ll scare people off.234
Australia’s initiative has already been followed by a number of early adopters around the world. One can hope the WTO panel decision will encourage other wavering nations to join the plain packaging revolution. There have also been significant parallel debates in the field of access to essential medicines, public health, and the intellectual property implications, particularly in respect of HIV/AIDS, tuberculosis, malaria, cancer, and neglected diseases,235 with a longstanding debate at the United Nations in forums such as the WHO, the WTO, and the World Intellectual Property Organization.236 Antony Taubman, diplomat at the WTO, has commented regarding the ongoing discussions over intellectual property and public health: ‘The debate concerns balancing “access” (getting medicines to those who need them) with “innovation” (ensuring a sound foundation and the necessary resources for the development of needed new medicines’.237 The Doha Declaration on Public Health and the TRIPS Agreement 2001 and the WTO General Council Decision 2003 recognises that member states could make use of flexibilities in the TRIPS Agreement to address public health concerns.238 The United
232 JT International SA v Commonwealth of Australia [2012] HCA 43; British American Tobacco Limited and others v The Queen [2016] EWHC 1169 (Admin); British American Tobacco UK Ltd & Ors v The Secretary of State for Health [2016] EWCA Civ 1182; and Société JT International SA, Société d’Exploitation Industrielle des Tabacs et des Allumettes, Société Philip Morris France SA and Others (State Council of France, CE, 23 December 2016). 233 ‘Tobacco Industry Suffers Defeat’, Reuters, above n 73. 234 Grimm, above n 22. 235 Thomas Pogge, Matthew Rimmer and Kim Rubenstein (eds) Incentives for Global Public Health: Patent Law and Access to Medicines (Cambridge University Press, 2010); Frederick Abbott, Thomas Cottier, and Francis Gurry, International Intellectual Property in an Integrated World Economy (Wolters Kluwer Law & Business, 2015); Burcu Kilic, Boosting Pharmaceutical Innovation in the Post-TRIPS Era: Real-Life Lessons for the Developing World (Edward Elgar, 2014); Joo-Young Lee, A Human Rights Framework for Intellectual Property, Innovation and Access to Medicines (Ashgate, 2015); and Ellen t’Hoen, Private Patents and Public Health: Changing Intellectual Property Rules for Access to Medicines (AMB, 2016). 236 Benn McGrady, Trade and Public Health: The WTO, Tobacco, Alcohol, and Diet (Cambridge University Press, 2011); Graeme Dinwoodie and Rochelle Dreyfuss, A Neofederalist Vision of TRIPS: The Resilience of the International Intellectual Property Regime (Oxford University Press, 2012); Abbott et al, above n 235; and Obijiofor Aginam, John Harrington, and Peter Yu (ed), The Global Governance of HIV/AIDS: Intellectual Property and Access to Essential Medicines (Edward Elgar, 2013). 237 Antony Taubman, A Practical Guide to Working with TRIPS (Oxford University Press, 2011), 179. 238 WTO, Declaration on the TRIPS Agreement and Public Health. Adopted at Doha on 14 November 2001, WT/MIN(01)/DEC/2 ; and Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
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Nations Secretary-General’s High Level Panel on Access to Medicines sought to address the longstanding tensions between intellectual property, trade, and public health in 2016.239 There are common concerns in respect of human rights, public health, and sustainable development. As Nobel Laureate Joseph Stiglitz has observed, there is a need to recognise and respect the importance of public healthcare, human rights, and sustainable development under intellectual property, international trade, and investment law.240
It is hoped the epic international trade dispute over plain packaging of tobacco products will provide future guidance for the proper, harmonious relationship between intellectual property, public health, and international trade. There does need to be decisive collective international action to address the global tobacco epidemic.
Public Health, WTO Doc WT/L/540 (2003) (WTO General Council Decision of 30 August 2003). 239 United Nations Secretary-General’s High Level Panel on Access to Medicines, Report of the High Level Panel: Promoting Innovation and Access to Health Technologies (2016)
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QUT Law Review ISSN: Online- 2201-7275 Volume 17, Issue 2, pp 161-174 DOI: 10.5204/qutlr.v17i2.699
TOBACCO-FREE INVESTMENT: HARNESSING THE POWER OF THE FINANCE INDUSTRY IN COMPREHENSIVE TOBACCO CONTROL
BRONWYN KING, CLARE PAYNE AND EMILY STONE*
Leveraging the power of the global financial sector is emerging as a powerful, targeted strategy in tobacco control. The tobacco epidemic has been in decline in many high income nations since the 1960s but shows few signs of abating in low and middle income nations, with the tobacco industry offsetting regulatory restrictions and shrinking markets in industrialised countries by actively promoting tobacco use in poorer countries with weaker tobacco control. Lung cancer rates and tobacco-related mortality statistics reflect these changes with levels declining in high income countries but yet to peak in low and middle income countries. This contrast calls for new approaches that can cross borders, transcend the barriers between legislative domains and offer a truly international approach. Tobacco Free Portfolios works collaboratively with the global finance sector to inform, advance and prioritise tobacco-free investment. This initiative aims to encourage finance leaders to reflect on and reconsider commercial relationships with the tobacco industry, urging them to be part of the solution when it comes to addressing one of greatest global challenges of our time.
I INTRODUCTION
The concept of harnessing the power and support of the finance industry is a relatively new approach to tobacco control and is the focal activity of Tobacco Free Portfolios. Tobacco Free Portfolios is a young organisation that identified that the global finance sector had largely been absent from global tobacco control efforts. In 2010, oncologists at the Peter MacCallum Cancer Centre in Melbourne discovered that some of their superannuation funds were being invested in tobacco companies. Further investigation revealed that nearly all Australian superannuation funds invested money in the tobacco industry, primarily via acquisition of international equities. This remains a common investment strategy of which many superannuation contributors are likely to be unaware.
Tobacco Free Portfolios engages professionally and discreetly with the finance sector. As the initiative progressed, the Australian finance industry gradually moved to consider and then implement tobacco-free investment policies. As at December 2017, there are 41 Australian superannuation funds with tobacco-free policies that cover all investment options. Those 41 funds have a total of approximately AU$900 billion funds under management, which accounts for approximately 60 per cent of all Australian Prudential Regulation Authority approved superannuation funds. In 2015, Tobacco Free Portfolios extended its reach globally and has now been active in more than a dozen leading economies. To date, a total of approximately
* Bronwyn King: CEO Tobacco Free Portfolios; Honorary Radiation Oncologist, Peter MacCallum Cancer Centre; Distinguished Fellow University of Melbourne and Kings College London. Clare Payne: Chief of Global Strategy, Tobacco Free Portfolios; Fellow, The Ethics Centre. Emily Stone: Department of Thoracic Medicine St Vincent’s Hospital, Kinghorn Cancer Centre, University of NSW. This work is licensed under a Creative Commons Attribution 4.0 Licence. As an open access journal, articles are free to use with proper attribution in educational and other non-commercial settings.
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AU$12 billion of tobacco industry assets has been divested by financial institutions in ten countries.
Whilst tobacco-free investment is not a new phenomenon, it has not received mainstream interest until recently. Organisations such as those related to health, with religious affiliations, and those with ethical screening have long excluded tobacco from portfolio selection as it does not align with espoused values, and customers and clients have selected such organisations and financial products based on this investment philosophy. Demonstrating the early inter- connection of health and finance, MD Financial Management, a financial management company owned by the Canadian Medical Association, has excluded tobacco since inception, stating, ‘The decision for the fund to avoid tobacco products, from its inception, showed leadership on an important social issue that was not yet in the mainstream’.1
Each time a financial institution implements and publicises a tobacco-free investment policy, the tobacco industry is stigmatised and de-normalisation of the industry increases. Momentum escalates and new voices — in this case, from the finance sector — contribute to comprehensive tobacco control. Sceptics of applying financial exclusion policies may cite the argument that ‘others just buy the stock’. However, the status quo — whereby money is routinely invested in tobacco companies on behalf of Australian and global workers — needs to be challenged, even if a direct financial impact on tobacco companies may not be seen until the movement achieves substantial global scale.
It should be noted that, as tobacco-free investment gains momentum and publicity there are also other tobacco control initiatives working concurrently to stigmatise the sector and educate the community. The combined force of such initiatives is already having an impact, seen in the reduction of tobacco consumption in developed nations where tobacco control is advanced and the public is educated better than previous generations. Education of the broader community is an important aspect of tobacco control initiatives. The work of Tobacco Free Portfolios serves not just to create a narrative of tobacco control, but also to highlight the deceptive and harmful tactics of the tobacco sector. Financial institutions then repeat this narrative as they discuss tobacco-free investment internally and make public announcements, thus strengthening tobacco control messaging and weakening the tobacco sector in the eyes of the broader public.
An understanding of the scale and impact of the tobacco epidemic is crucial for effective discussions with finance leaders and several key questions routinely arise when financial organisations are considering the issue. This paper will provide an overview of the tobacco epidemic and will examine the international treaties and global health data that help provide answers to these key questions. The complex and entrenched links between the tobacco industry and the finance sector demand our collective scrutiny. Focusing on informed decision- making can bridge health and finance and bring together two major but previously independent forces in tobacco control.
II THE TOBACCO EPIDEMIC
Tobacco use is a global public health issue of profound scale, increasingly seen in economic and geopolitical terms as well as in the more traditional context where it is considered a purely
1 MD Financial Management
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Tobacco-Free Investment: Harnessing the Power of the Finance Industry in Comprehensive Tobacco Control health matter.2 The link between tobacco smoking and lung cancer emerged in the first decades of the twentieth century.3 However, it was not until the publication of pivotal studies in the mid-20th century that the association achieved widespread recognition.4 Tobacco has a delayed effect on health, with peak smoking mortality observed three to four decades after peak smoking prevalence.5 Lung cancer is now the most common cause of cancer deaths worldwide, with almost 1.6 million fatalities in 2012,6 predicted to rise to nearly 3 million worldwide by 2035.7 In most regions of the world, lung cancer cases are predicted to increase for the next few decades, in particular in the Western Pacific region, largely driven by China.8 Globally, tobacco smoking is currently causing an estimated 7 million deaths per year. 9 The major ailments responsible include cardiovascular disease, chronic obstructive pulmonary disease and lung cancer.10 In addition to the dire consequences for smokers themselves, World Health Organization (‘WHO’) data indicate that over 800 000 deaths across the globe result from second hand smoke exposure.11
Clearly, the tobacco epidemic is having an extraordinary impact on worldwide public health, first experienced in the industrialised world and now inflicted upon emerging nations. Rigorous restrictions placed both on the availability of tobacco and on the activity of the tobacco industry, coupled with education and better smoking cessation services have the potential to temper the catastrophe. However, this will require vigilance, intensified efforts and new collaborations.
III TOBACCO AND PENSION FUNDS
Compulsory superannuation has been in place in Australia since 1992. 12 Employers supplement an employee’s baseline salary by paying an additional 9.5 per cent13 into his or her
2 National Cancer Institute (US) and World Health Organization, ‘The Economics of Tobacco and Tobacco Control’ (Tobacco Control Monograph 21, National Cancer Institute; NIH Publication No 16-CA-8029A, National Institutes of Health, 2016). 3 Isaac Adler, Primary Malignant Growths of the Lungs and Bronchi: A Pathological and Clinical Study (Longmans, Green, 1912)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products superannuation fund. The money is invested, with a long-term vision of providing financial security during retirement years. Most Australian pension funds — and indeed the majority of pension funds around the world — allocate a portion of funds to equities. Many acquire equities by investing in an index. Indices consist of listed companies in a specific region: for example, the Standard & Poor 500 (‘S&P 500’) is an index consisting of 500 of the largest listed companies traded on American stock exchanges;14 the Morgan Stanley Capital International (‘MSCI’) World Index is a global list.15 When investing in an index, shares of all companies in the index are purchased. Tobacco companies are usually included in major world indices. For example, at the time of writing, the Financial Times Stock Exchange 100 (‘FTSE 100’)16 includes two tobacco companies: British American Tobacco, and Imperial Brands. If index investing is the method used for acquiring shares, tobacco will most likely be included in the portfolio, even though tobacco shares have not been specifically selected for purchase.
In addition to this incidental exposure to tobacco, active investment occurs when tobacco company shares are intentionally sought and purchased. Pension funds might be responsible for active investment decisions or, more commonly, they may outsource such decisions to fund managers. The extent to which fund managers actively purchase and hold tobacco stocks varies greatly, with exposure generally ranging from 0–25 per cent of total assets under management. There may also be some exposure to tobacco companies via corporate bonds, fixed interest and derivatives. The diversity of financial instruments that can lead to the holding of tobacco stock demonstrates that tobacco companies tend to be regarded by the finance sector in the same way that any other product or industry is viewed.
The work undertaken by Tobacco Free Portfolios with dozens of Australian pension funds has revealed tobacco exposure ranging from 0.108 per cent to 1.28 per cent of total assets. While this exposure may appear low in percentage terms, the large size of the Australian superannuation industry — approximately AU$2.3 trillion 17 — means that at least AU$2.484 billion (and possibly 10 times that amount) of Australians’ money is being invested in tobacco. This investment in tobacco companies on behalf of Australian workers stands in sharp contrast to Australia’s global leadership on tobacco control and the dramatic declines in the number of smokers in Australia in recent decades.
IV THE AUSTRALIAN FINANCE INDUSTRY
Early discussions with finance leaders highlighted a gap between the health and finance sectors in attitudes to the tobacco industry. Finance leaders were not necessarily thinking about tobacco companies with the same disdain as the health community. Nevertheless, the presentation of public health data on smoking, combined with the framing of discussions through a finance lens, drew attention to the issue. As finance leaders have become more informed about tobacco, many have examined the role they can play in global tobacco control. In 2012, First State Super became the first mainstream Australian pension fund to publicly declare that it would implement a tobacco-free investment policy. By the end of 2017, a total of 41 Australian pension funds had tobacco exclusions, representing 60 per cent of Australian institutional investors, divesting a combined total of approximately AU$3.5 billion in tobacco industry
14 S&P Bond Index, S&P Global (2018)
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Tobacco-Free Investment: Harnessing the Power of the Finance Industry in Comprehensive Tobacco Control assets. The momentum continues and has spread beyond the pension sector. In 2016, Australia’s largest health insurer, Medibank, went tobacco-free. 18 Some banks are re- examining their lending policies and fund managers are increasingly coming to market with tobacco-free products to meet the accelerating demand for tobacco-free investment. In 2017, AMP Capital, one of the largest fund managers in Australia, announced that it was moving to exclude tobacco across all of its products.19
One of the first international milestones for Tobacco Free Portfolios came from collaboration with the Paris-based global insurance giant AXA, which adopted a tobacco-free investment policy in May 2016, resulting in the divestment of €1.8 billion of tobacco industry assets.20 In 2017, BNP Paribas, the world’s seventh largest bank, announced a tobacco-free policy spanning lending, investment and insurance.21 When OP Trust, a large Canadian pension fund, announced a move to tobacco-free, it marked the 10th country where the initiative had made an impact. Tobacco Free Portfolios is currently working with more than 100 financial organisations in more than a dozen countries, spanning all aspects of the finance system including pension funds, Sovereign Wealth Funds, fund managers, insurers, banks and rating agencies. The conversation has become more comprehensive, expanding beyond investment into commercial relationships more broadly. AXA, for example, has not only ceased investing in the tobacco industry, but will also run off and not renew corporate insurance covering tobacco manufacturers’ products, assets and liabilities. Furthermore, no new corporate business covering tobacco manufacturers will be undertaken.22 Finance leaders frequently lend their support to the initiative, volunteering strategic advice and opening networks to facilitate greater engagement and tobacco-free decisions.
One of the most influential aspects of conversations pertaining to tobacco-free investment lies in alerting finance leaders to the provisions of the World Health Organization Framework Convention on Tobacco Control (‘FCTC’).23 This is the world’s first legally binding health treaty. It was crafted in 2004 in response to the tobacco epidemic and has 181 parties.24 WHO data project 1 billion tobacco-related deaths this century.25 Unfortunately, despite the elevated standing of the FCTC in the public health sector and its celebration by the health ministries of most governments, very few in the finance sector are aware of its existence and many do not know if their own governments are parties to the Treaty. While the focus for implementation of the FCTC has, justifiably, been placed on prohibiting the sale of cigarettes to minors, banning tobacco product advertisements and increasing taxes on cigarettes, elements of the
18 ‘Medibank Moves to Tobacco Free Investment Fund’, Media Release, 24 October 2016
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Treaty as it relates to the finance sector have largely remained unaddressed. In the Guidelines for implementation, Article 5.3, Provision 4.7 states: ‘Government Institutions and their bodies should not have any financial interest in the tobacco industry…’. Similarly, Provision 7.2 asserts: ‘Parties that do not have a State-owned tobacco industry should not invest in the tobacco industry…’. 26 Several European government-controlled financial institutions have recently adopted tobacco-free investment policies after reviewing the FCTC and considering the position of their respective organisations in the context of society more broadly. There are hundreds more finance organisations in which the same discussions — discourse that serves to shine a spotlight on the FCTC — would likely be equally influential.
In addition to the FCTC, the United Nations Sustainable Development Goals (‘SDGs’)27 have provided a valuable, constructive platform on which to base dialogue regarding tobacco-free investment. The SDGs are a set of 17 global goals with targets. Formally adopted by the UN General Assembly in September 2015, they officially came into force on 1 January 2016. While it is easy to appreciate the importance of tobacco control in pursuit of SDG 3, ‘Good Health and Well-Being’, some may not be aware that dramatic improvements in comprehensive tobacco control are in fact vital for achievement of 13 of the 17 SDGs.28 For example, SDG 1 calls for ‘No Poverty’. However, money spent on tobacco often accounts for an alarming percentage of household income. In Thailand, 13.6 per cent of the household income of low income families is spent on tobacco, displacing money that could be used to pay for food, clothing and education.29 SDG 2 focuses on ‘Zero Hunger’, but for example in Kenya and Bangladesh, tobacco cultivation has replaced food crops and has led to local food insecurity.30 SDG 17 calls for ‘Partnerships for the Goals’, which most clearly articulates the importance of cross-sector collaboration when addressing major global issues and is the underlying philosophy of the work of Tobacco Free Portfolios.
There are several other United Nations instruments and agencies that provide impetus and rationale to consider the issue of tobacco, including the United Nations Guiding Principles for Business and Human Rights, the United Nations Global Compact (which expelled tobacco companies from their membership in 2017),31 the United Nations Environment Programme Finance Initiative, the UN-backed Principles for Responsible Investment (‘PRI’) and Principles for Sustainable Insurance. In association with the PRI, the world’s first ‘Investor Statement on Tobacco’ was launched in May 2017, and in just three weeks, received 54 signatories with combined assets under management of US$4 trillion.32
26 WHO Framework Convention on Tobacco Control, Guidelines for Implementation of the WHO FCTC (2013)
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V FIVE KEY CONCERNS OF THE FINANCE INDUSTRY WHEN DISCUSSING TOBACCO-FREE INVESTMENT
Introducing the topic of tobacco-free investment to finance leaders generally gives rise to common concerns and beliefs that may initially be seen as potential barriers to action. Five such concerns are addressed here.
1. Shouldn’t adults be able to use and enjoy a legal product?
For adults the consumption of tobacco remains legal. The issue, however, is that informed adults rarely choose to start smoking. Most smokers commence the habit as children, with the average age of onset between 11 and 15 in the United States. Over 80 000 children begin smoking every day, and half of them live in Asia.33 To argue that these children — essentially the world’s poorest and most vulnerable — are fully informed about the serious long-term health consequences is simply implausible. There are many examples of tobacco companies intentionally targeting children in their advertising. In 2012, Phillip Morris was forced to remove billboards in Germany as the courts determined that the marketing campaign aimed to lure teenagers.34 There are further examples of cigarette sale points being deliberately placed close to schools.35 Cultural themes such as sport, movies and fashion have been exploited by the tobacco industry to successfully target the young and impressionable in Asian countries.36 It is important to note that cigarettes have been modified over time to become more addictive through higher nicotine yield.37 In countries with advanced tobacco control policies, many adult smokers are indeed reluctant smokers. A survey of smokers in Canada, the United States, the United Kingdom and Australia revealed that approximately 90 per cent agreed when presented with the statement, ‘If you had to do it over again, you would not have started smoking’.38 Smoking cessation might be seen as the simple answer, but quitting is difficult, usually requiring multiple attempts and a number of approaches incorporating pharmacotherapy and cognitive behavioural therapy.39 Moreover, vulnerable groups such as the homeless, mentally ill, incarcerated, indigenous people, or at-risk youth face particular
Tobacco Control’ (Press Release, 31 May 2017),
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products barriers to smoking cessation, including stress, competing needs, poor motivation and ready access to tobacco.40
2. Shouldn’t we engage with the tobacco industry to change their behaviour?
Engagement with companies by their shareholders is now a common strategy within the finance sector, to try to create change, especially when the company’s activities are questionable or have known negative impacts. There are many examples of effective engagement of this nature, across a broad range of industries, however, tobacco companies present an exception to useful engagement. In July 2017, Dr Vera da Costa e Silva, the Head of the WHO’s FCTC Secretariat stated ‘Engagement with the tobacco industry is contrary to the United Nations system’s objectives, fundamental principles and values’.41 In recognition of both the futility of collaborating with the tobacco industry and the inherent conflict of interest, the WHO issued a directive stating, ‘The tobacco industry cannot be an effective partner in tobacco control’.42 These views on the futility of engagement with the tobacco industry are not well appreciated outside the health sector.
3. If we go tobacco-free, won’t we just open ourselves to never-ending requests to exclude other products and industries sending us down a ‘slippery slope’.
There are many industries and products that might be regarded as controversial, sensitive, unethical, immoral or undesirable. A concern of finance leaders is that taking a strong position on tobacco will, over time, lead to an endless expectation that other companies or industries should be excluded from investment portfolios. It is important to acknowledge that applying exclusions to investment policies is something that should only be considered in the most exceptional circumstances. Tobacco is often viewed as the quintessential example. A framework of three questions provides the rationale:
(1) Can the product that the company makes be used safely?
With respect to tobacco companies, the answer is an unequivocal ‘no’. The only safe number of cigarettes for human consumption is zero. Even smoking an average of less than one cigarette per day increases the risk of death from lung cancer nine-fold compared to non-smokers.43 When used precisely as intended, tobacco will result in the early death of two out of three smokers.44 The evidence demonstrating the categorical and unconditional danger of smoking tobacco is irrefutable.
(2) Is there a UN Treaty regarding the issue?
40 Laura Twyman et al, ‘Perceived Barriers to Smoking Cessation in Selected Vulnerable Groups: A Systematic Review of the Qualitative and Quantitative Literature’ (2014) 4(12) BMJ Open
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For tobacco, the answer is ‘yes’. There is indeed a UN tobacco treaty, the WHO FCTC. As previously noted, the WHO has estimated that there will likely be 1 billion tobacco- related deaths this century.45
(3) Can investors use engagement with the company as an effective tool to create change? As it pertains to tobacco companies, the answer is ‘no’.
When these questions and answers are considered collectively, a clear framework emerges. As such, applying an exclusion to investment in tobacco companies can be viewed as both rational and pragmatic.
4. We can only examine financial issues. We cannot take moral or ethical considerations into account.
Some executives and trustees remain exclusively focused on framing investment decision- making around financial metrics. This positioning tends to be justified on the basis of fiduciary duties. Trustees of superannuation funds and other financial service providers are subject to statutory obligations to act in the best interests of their clients. The term ‘best interests’ is one of continuing inquiry within the sector, with a growing belief that it implies the pursuit of more than a purely financial benefit. According to lawyer Michelle Levy, a Partner at Allens, ‘What really does matter is that the best interests duty is not interpreted as a duty to obtain the best outcome’.46 In 2014, the UK Law Commission Report offered further clarification on fiduciary duties when it concluded, ‘the law is sufficiently flexible to allow other, subordinate concerns to be taken into account…provided that: they have good reason to think that scheme members share the concern; and there is no risk of significant financial detriment to the fund’.47 In 2016, a report on fiduciary duties was released by the PRI48 in conjunction with the United Nations Environment Programme Inquiry into the Design of a Sustainable Financial System. Fiona Reynolds , the Managing Director of PRI stated:
Recent studies have broadened the interpretation of fiduciary duty away from the narrow confines of past definitions, and have emphasised that there is no conflict between fiduciary duty and ESG [Environmental, Social, Governance] considerations — there is a growing recognition that ESG issues are in fact financially material to a portfolio. Using the status quo as a reason for not integrating ESG is no longer acceptable.49
The growing tobacco-free investment movement has seen hundreds of trustees and directors exercise their decision-making to exclude tobacco investment explicitly while abiding by their fiduciary obligations. The decision of such finance leaders to embrace tobacco-free investment has yet to be formally challenged in terms of fiduciary duty. However, it is evident that some trustees and directors remain cautious in their decision-making, conducting predictive financial modelling in addition to investigating and verifying ethical considerations and risks. However, taking a long-term view, analysis of the prospective risks faced by the tobacco industry
45 WHO Tobacco Free Initiative, above n 25. 46 Michelle Levy, Allens Linklaters, ‘The Best Interests Duties — Process or Outcome’, Unravelled (5 February 2015)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products suggests that avoiding tobacco stocks may be considered a prudent financial decision. There are four main risks to the long-term future of the tobacco industry:
(1) The risk of a changing regulatory environment that will reduce tobacco consumption: 181 parties to the WHO FCTC have committed to the implementation of comprehensive and robust regulatory changes. In May 2016 alone, over 30 countries adopted significant additional tobacco control measures. These include the entire European Union, the United States and Australia.50
(2) Litigation risk: legal action has long overshadowed the tobacco industry. Although it might seem that the industry can survive ad hoc and even occasionally large settlements, class actions continue. In June 2015, a Canadian court ordered three tobacco companies to pay C$15.5 billion (£8 billion), the largest award for damages in the country’s history. The plaintiffs were Quebec smokers who argued that the companies did not warn their customers properly of the inherent dangers of cigarettes and thereby failed in their general duty to not cause injury to another person.51 The case is currently on appeal. However, if upheld, a precedent will have been set for other Canadian jurisdictions, for other Commonwealth countries and for the world in general. The business model of the tobacco industry, one that externalises an estimated $1 trillion in costs each year52 — costs borne by governments across the world — yet internalises profits, is being challenged.
(3) Supply chain risk: scrutiny of supply chains is a major threat for the tobacco industry. Analysis of supply chains has revealed a disturbing reality, with the International Labour Office issuing a report in March 2017 stating that ‘in tobacco growing communities, child labor is rampant’.53 The US Department of Labor currently lists 15 countries that use child labour in tobacco farming.54 Reports from 2014, 2015 and 2016 detail child labour practices on tobacco farms in the United States itself.55 In many cases, children work without the required protective equipment, putting them at risk of
50 Matthew Thomas, ‘Tobacco Excise Increase: Budget Review 2016–17 Index’ (Research Paper Series 2015–16, Parliamentary Library, 4 May 2016)
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Green Tobacco Sickness, an illness caused by absorbing nicotine through the skin.56 Such abuse of human rights appears unlikely to continue unchecked in a world that increasingly demands improved transparency, responsibility and sustainability. The employment only of adults, under fair and safe work conditions would require dramatic systemic change in the industry and escalate costs immeasurably.
(4) Reputation risk: increased potential for damage to reputation by association also threatens the long-term future of the tobacco industry. Two aspects must be considered. The first is the risk of an association with the tobacco industry. The Reputation Institute compiled a report in 2010, based on 80 000 consumer interviews in 32 countries in which tobacco was listed as the world’s least reputable industry. Professor Mike Daube, then President of the Australian Council on Smoking and Health, said in relation to that report: ‘The public around the world rate this lethal industry exactly where it belongs — at rock bottom. The tobacco industry richly deserves its place as the world’s most disreputable industry.’57 Dr Margaret Chan, Director General of the WHO, declared during her opening speech at the Conference of the Parties of the FCTC in 2010: ‘The tobacco industry has vast financial resources, lawyers, lobbyists, and no values whatsoever beyond the profit motive’.58 The second aspect for consideration is the risk of failing to take part in the global shift away from tobacco companies, demonstrated by notable financial institutions in 10 countries, in the past two years alone, including: AXA; AP4, one of Sweden’s most influential pension funds; Fonds de Reserve pour les Retraites, the largest French pension fund; CalPERS, the largest pension fund in the United States; the Irish Sovereign Wealth Fund; multiple Dutch pension funds; Bank of New Zealand; OP Trust, a large Canadian pension fund; BNP Paribas, a leading global bank; and the majority of the Australian pension fund industry.
5. The tobacco industry performs well in ‘sustainability’ ratings so why would we address this issue?
The recognition of Environmental, Social, and Governance (‘ESG’) considerations has continued to gain support and acceptance within the finance sector. Many funds have staff dedicated to ESG analysis. Increasing recognition of the broad community impacts of the deployment of capital has encouraged financial organisations to look beyond traditional metrics when analysing companies in which they may or may not choose to invest. However, there is a paradox. On many occasions, despite the sense of advancement resulting from the incorporation of ESG considerations into investment decision-making, the pure application of ESG principles to the issue of investment in tobacco companies has proven to be a hindrance. To determine which companies perform best according to ESG criteria, rating systems have evolved and rankings and awards are regularly issued and distributed. In the most incongruous circumstances, some methodologies currently employed by mainstream rating agencies perversely propel tobacco companies to the top ranks of classification systems that were designed to showcase good corporate behaviour. How does this happen? The following examples illustrate this irony.
56 ASH: Action on Smoking & Health, above n 55. 57 Quoted in: Australian Health News Research Collaboration University of Sydney School of Public Health, ‘Tobacco Industry is the World’s Least Reputable Industry’ (Media Release, 17 June 2010)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products
The Dow Jones Sustainability Index (‘DJSI’) is designed to highlight companies with superior sustainability metrics. Like many rating systems, it employs a ‘best of sector’ strategy. This sees tobacco companies exclusively compared to other tobacco companies. While the overall or absolute ESG scores for all tobacco companies may be poor, the one with the least deficient grade is included in the DJSI. In September 2016, Reynolds American Inc issued a press release stating, …the company has been recognised again as a leader in corporate sustainability by being awarded membership in the 2016–2017 Dow Jones Sustainability North America Index, effective Sept. 8, 2016. This is the third consecutive year, and eighth out of the last nine years, that RAI has been recognised as a leader in corporate sustainability efforts. In addition, this is the first year that RAI has attained the DJSI World designation for the top-performing tobacco company worldwide.59
The website for British American Tobacco states: ‘We were the first company to be included in the Dow Jones Sustainability Index and we’ve been included every year since’.60 With tobacco companies now severely restricted in relation to advertising and product promotion, their inclusion in globally recognised indices provides a positive promotional opportunity. Global ratings agencies, considered experts in research and evaluation of listed companies, regularly award tobacco companies such as British American Tobacco (Malaysia) the maximum ratings (either green dots, stars, or As) for categories measuring social impact, such as ‘Supply Chain Labor Standards’ and ‘Product Safety and Quality’. Under this system, overall ESG Ratings for tobacco companies can be ‘AA’ — that such outcomes can be explained by ‘best of sector’ ratings, regardless of absolute scores, demands urgent revision. In another example, the Good Governance Report published by the Institute of Directors in the UK in September 2016 61 focused on five key attributes: board effectiveness, audit accountability, remuneration, relations with shareholders, and relations with other stakeholders. The number one ranking was awarded to British American Tobacco.62 This begs the question: why are the governance metrics of a company lauded when the company manufactures a product that kills two thirds of its customers?63 That both mortality rate and societal impact of the product are not captured by such ranking methodologies must be challenged. It is evident that in their current form, ratings systems can obscure the truth, misleading investors and diverting attention from the most crucial detail, one which demands our urgent and collective examination, namely, the impact of the company’s primary business. To sideline 7 million annual deaths in any system of corporate analysis is an extraordinary oversight, which, understandably, is having adverse consequences.
Rankings exert considerable influence on the finance sector and investment community. When investors and potential investors are presented regularly with such outstanding score sheets, finance leaders might very reasonably hesitate to even consider the issue of the real cost of
59 Reynolds American Inc, ‘RAI Selected to Dow Jones Sustainability North America Index for 8th Time’, (Press Release No RAI 2016–24, 8 September 2016)
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Tobacco-Free Investment: Harnessing the Power of the Finance Industry in Comprehensive Tobacco Control tobacco. The problem lies in rating system methodologies. ‘Best of sector’ is not an appropriate way to measure tobacco companies. All tobacco companies make products that cause death. A blanket exclusion of the industry from rating systems may be required. In 2017, Vigeo Eiris, a ratings agency based in France and the UK, downgraded the scores of all tobacco companies and as a consequence, tobacco companies are no longer eligible for inclusion in Vigeo Eiris’s ‘best of class’ listings.64 This change is a very welcome development and may prompt other ratings agencies to revise their methodologies.
VI SUMMARY AND CONCLUSIONS
The deep and complex links between the global finance sector and the tobacco industry were established long before the true impact of tobacco on human health was understood. These links have gone largely unnoticed, unexamined and unchallenged. If the finance system were to be created from scratch today, it is hard to imagine that tobacco companies would escape our scrutiny, would be deemed to be worthy of the same treatment as other companies, and slip their way into our investment portfolios by matter of routine. We need only consider the changed attitudes to slavery to understand how far society can move. Social attitudes and cultural acceptances can shift, as can legislation and regulation. Tobacco should be considered in a new light that of our new technological age where the impact of tobacco across health, government, the environment and human rights can be both tracked and measured. What would we do if tobacco companies asked to be listed on the newly formed stock exchanges of the world, to be included in global indices, to be part of standard benchmarks against which financial returns are measured? What would we say if banks were to lend tobacco companies money, if pension funds were to invest in them and insurers were to insure their deadly cargo lest it be spoiled or damaged on route to intended customers? Current thinking would not tolerate an industry whose products are responsible for 7 million deaths per year, an industry in which growing and manufacturing are interlaced with unacceptable working conditions including child labour, an industry that was built on a business model where costs are externalised but profits internalised. Indeed, we need to acknowledge this shift in thinking and standards and act on it.
Forging strong networks in the finance sector is vital to comprehensive tobacco control and has, until now, been a missing piece to the puzzle. The world’s health community is committed to tobacco control, as are 181 state parties to the FCTC. The sobering reality, though, is that such efforts are not enough, with an estimated eight million deaths projected for the year 2030.65 If the global finance sector continues to invest in, and seeks to profit from the tobacco industry, major sectors of society will continue to work against each other, forgoing a crucial opportunity to address the tobacco epidemic collaboratively. Clinicians can play a major role in bridging the gap between the health and finance sectors. Recounting real life examples of the extraordinary suffering inflicted by tobacco may seem like a simple task to doctors, yet the power of these shared stories is enormous, especially when delivered in the boardrooms of the world’s largest financial institutions.
64 Vigeo Eiris, ‘Vigeo Eiris Downgrades the Scores of Tobacco Sector Companies’ (Press Release, 23 May 2017)
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QUT Law Review Volume 17 (2) – Special Issue: Plain Packaging of Tobacco Products
In 1964, the US Surgeon General made the first public announcement acknowledging the unequivocal relationship between smoking and serious disease and death. 66 As a global community, we have known for more than 50 years that tobacco is not merely another product and that tobacco companies are not just ordinary companies. A different approach is now required to address every facet of their existence. The health sector treats the tobacco industry differently. Governments, too, treat the tobacco industry differently. It is heartening to see another sector of the global community — the finance sector — join collective efforts to confront one of the most extraordinary problems of our era. Disentangling the finance sector from tobacco will take some time, but the unravelling has already begun. A tobacco-free future depends on it.
66 United States Surgeon General’s Advisory Committee on Smoking and Health, Smoking and Health (Public Health Service Publication No 1103, US Public Health Service, Office of the Surgeon General, 1964)
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