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Philip Morris Brands Sàrl, Philip Morris Products S.A INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES WASHINGTON, D.C. PHILIP MORRIS BRANDS SÀRL, PHILIP MORRIS PRODUCTS S.A. and ABAL HERMANOS S.A. (THE CLAIMANTS) and ORIENTAL REPUBLIC OF URUGUAY (THE RESPONDENT) (ICSID Case No. ARB/10/7) AWARD Members of the Tribunal Prof. Piero Bernardini, President Mr. Gary Born, Arbitrator Judge James Crawford, Arbitrator Secretary of the Tribunal: Mrs. Mairee Uran-Bidegain Date of dispatch to the parties: July 8, 2016 Representing the Claimants: Representing the Respondent: Mr. Stanimir Alexandrov Mr. Rodolfo Nin Novoa Ms. Marinn Carlson Minister of Foreign Affairs Ms. Jennifer Haworth McCandless Colonia 1206, 6to. Piso Mr. James Mendenhall Montevideo Sidley Austin LLP Uruguay 1501 K Street, N.W. and Washington, D.C. 20005 Dr. Jorge Basso Garrido United States of America Minister of Public Health and 18 de julio 1892, Piso 2 Dr. Veijo Heiskanen Montevideo Ms. Noradèle Radjai and Uruguay Mr. Samuel Moss and LALIVE Dr. Miguel Ángel Toma Rue de la Mairie 35 Secretario de la Presidencia / Secretary of the 1207 Geneva Presidency Switzerland Plaza Independencia 710 and C.P. 11000 Mr. Ken Reilly Montevideo Shook, Hardy & Bacon LLP Uruguay Miami Center and 201 S. Biscayne Blvd., Suite 3200 Dr. Carlos Gianelli Miami, FL 33131 Embassy of Uruguay United States of America 1913 I (Eye) Street, N.W. and Washington, D.C. 20006 Ms. Madeleine McDonough United States of America Shook, Hardy & Bacon LLP and 1155 F Street NW, Suite 200 Mr. Paul Reichler Washington, D.C. 20004 Mr. Lawrence Martin United States of America Ms. Clara Brillembourg and Mr. Andrew B. Loewenstein Mr. Bill Crampton Foley Hoag LLP Shook, Hardy & Bacon LLP 1717 K Street N.W. 2555 Grand Blvd. Washington, D.C. 20006-5350 Kansas City, MO 64108 United States of America United States of America and Prof. Harold Hongju Koh 87 Ogden Street New Haven, CT 06511 United States of America ii TABLE OF CONTENTS INTRODUCTION AND PARTIES ................................................................................... 1 OVERVIEW OF THE DISPUTE AND THE PARTIES’ REQUEST FOR RELIEF .. 2 PROCEDURAL HISTORY ................................................................................................ 4 FACTUAL BACKGROUND ............................................................................................ 13 The Claimants’ Operations and Investments in Uruguay ...................................... 13 Uruguay’s Tobacco Control Policy and the Applicable Regulatory Framework 16 The International Regulatory Framework ................................................................. 19 The Domestic Regulatory Framework ...................................................................... 23 1. The Regulatory Framework up to the Enactment of the Challenged Measures ....................................................................................................................... 24 2. The Challenged Measures ............................................................................. 28 The alleged effects of the Challenged Measures ...................................................... 35 Tobacco Use in Uruguay Before and After the Challenged Measures ..................... 35 Claimants’ Investments and Market Competition Before and After the Challenged Measures .................................................................................................................... 39 The Challenges to the Regulations before the Uruguayan Courts ........................ 41 Proceedings Before the Tribunal de lo Contencioso Administrativo (TCA) Relating to the SPR .................................................................................................................. 42 The Proceedings Before the TCA and the Supreme Court of Justice Relating to the 80/80 Regulation ....................................................................................................... 44 The Regulatory Framework of Trademarks in Uruguay ....................................... 45 LIABILITY ........................................................................................................................ 47 Applicable Law ........................................................................................................... 47 Expropriation under Article 5 of the Treaty ........................................................... 48 The Legal Standard ................................................................................................... 49 1. The Claimants’ Position ................................................................................ 49 2. The Respondent’s Position ............................................................................ 50 3. The Tribunal’s Analysis ................................................................................. 51 The Claim .................................................................................................................. 53 1. The Claimants’ Position ................................................................................ 53 2. The Respondent’s Position ............................................................................ 57 3. The Tribunal’s Analysis ................................................................................. 65 (a) Whether the Claimants Owned the Banned Trademarks .............................. 65 iii (b) Whether a Trademark Confers a Right to Use or only a Right to Protect Against Use by Others ......................................................................................... 71 (c) Whether the Challenged Measures Have Expropriated the Claimants’ Investment ............................................................................................................ 76 Denial of Fair and Equitable Treatment under Article 3(2) of the Treaty ........... 88 The Legal Standard ................................................................................................... 89 1. The Claimants’ Position ................................................................................ 89 2. The Respondent’s position ............................................................................. 90 3. The Tribunal’s Analysis ................................................................................. 91 The Claim .................................................................................................................. 93 1. The Claimants’ Position ................................................................................ 93 (a) The Challenged Measures are Arbitrary ....................................................... 93 (b) The Claimants’ Legitimate Expectations ...................................................... 97 (c) Uruguay’s Legal Stability ............................................................................. 99 (d) The Doctrine of Unclean Hands, Raised by Respondent, is Inapplicable. ... 99 2. The Respondent’s Position .......................................................................... 100 (a) The Challenged Measures are Not Arbitrary .............................................. 100 (b) The Claimants’ Legitimate Expectations .................................................... 108 (c) Uruguay’s Legal Stability ........................................................................... 109 (d) The Claimants’ Fraudulent Behavior Prevents them from Bringing an FET Claim ................................................................................................................. 110 3. The Tribunal’s Analysis ............................................................................... 111 (a) Are the Challenged Measures Arbitrary? ................................................... 111 (b) Claimants’ Legitimate Expectations & Uruguay’s Legal Stability ............. 123 Impairment of Use and Enjoyment of the Claimants’ Investments under Article 3(1) of the Treaty ...................................................................................................... 127 1. The Claimants’ Position .............................................................................. 127 2. The Respondent’s Position .......................................................................... 128 3. The Tribunal’s Analysis ............................................................................... 128 Failure to Observe Commitments as to the Use of Trademarks under Article 11 ... ....................................................................................................................... 129 The Claimants’ Trademark Rights .......................................................................... 129 1. The Claimants’ Position .............................................................................. 129 2. The Respondent’s Position .......................................................................... 130 3. The Tribunal’s Analysis ............................................................................... 131 iv Article 11 as an Umbrella Clause and the Scope of the State’s “Commitments” ... 132 1. The Claimants’ Position .............................................................................. 132 2. The Respondent’s Position .......................................................................... 133 3. The Tribunal’s Analysis ............................................................................... 134 Denial of Justice ........................................................................................................ 139 The Legal Standard
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