benn mcgrady , phd

Campaign for Tobacco-Free Kids www.tobaccofreekids.org

The Real Deal on International Trade; Investment Agreements; and Packaging and Labeling Regulations


Benn McGrady, PhDInternational trade and investment lawyer based at Georgetown University’s O’Neill Institute for National and Global Health Law, USA


Topic 1: Government’s power to enact strong packaging and labeling measures.

The Measures• Bans on misleading descriptors / signs

– Required by Article 11 of the WHO Framework Convention on Tobacco Control (WHO FCTC)

– Address myth of ‘light’ products being less harmful• Warning labels

– Shall be no less than 30% of the principal display areas, but should be 50% or more under Article 11 of the WHO FCTC

– Guidelines to Article 11 recognize graphic and large warnings to be more effective

• Plain packaging– Not yet implemented (although Australia intends to

implement), but recognized in Guidelines to Articles 11 and 13 of the WHO FCTC


Topic 2: Tobacco Industry arguments and relevant agreements.

Overview of Industry Arguments• Large graphic health warnings, measures prohibiting

misleading descriptors / signs (including trademarks) and plain packaging:– unlawfully interfere with trademark rights under the

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Paris Convention for the Protection of Industrial Property; and

– are more trade restrictive than necessary to protect health, contrary to Article 2.2 of the Agreement on Technical Barriers to Trade (TBT Agreement).

• These arguments ignore widespread implementation of large graphic health warnings and bans on misleading descriptors / signs without a related WTO dispute having arisen.


Topic 3: Relevant WTO Articles: TRIPS

TRIPS and Trademark Registration

• TRIPS and the Paris Convention oblige Parties to register trademarks in certain circumstances.– No obligation to register misleading

marks (Art. 6 quinquies (B)(3) Paris Convention; TRIPS Art. 15.2)

– Warning labels, plain packaging and even bans on use of misleading marks can be implemented without interfering with trademark registration.

Trademark Rights: Not Rights of Use

• A trademark right under these agreements is a negative right to prevent others from using the mark in certain circumstances. (TRIPS Art. 16; EC - Geographical Indications)– WTO Members are not obliged to permit

trademark owners to use their marks.– TRIPS is not violated simply because a

tobacco control measure affects use of a trademark.

Unjustifiable Encumbrances on Trademarks

• TRIPS Article 20 prohibits WTO Members from unjustifiably encumbering the use of a trademark with special requirements.

• It is not clear what types of measures constitute special requirements under Article 20.

• Nonetheless, Article 20 concerns only ‘unjustifiable’ encumbrances.

• The principles in TRIPS Article 8 emphasize that WTO Members may adopt measures necessary to protect public health.

• These principles guide what is ‘unjustifiable’ i.e. necessary measures are justifiable.


Topic 4: The Necessity Requirement in WTO Law

Measures Necessary to Protect Human Life or Health

• Guidance may be sought in Article XX(b) of the General Agreement on Tariffs and Trade (GATT), which permits measures necessary to protect human life or health.

• To determine whether a measure is necessary, WTO panels weigh the trade restrictiveness of a measure against its contribution to health protection, in light of the importance of the goal.

• WTO panels then consider whether less trade restrictive alternatives are reasonably available.

Measures Necessary to Protect Human Life or Health

• In recent cases, a high degree of deference has been shown to the regulatory choices of WTO Members.

• Protecting human health is considered to be a goal of the highest importance. (Source: EC - Asbestos)

• The effectiveness of a measure need not be established (the measure need only make a material contribution to its goal). (Source: Brazil - Retreaded Tyres)

• WTO law is also interpreted in light of other international laws. (Source: US - Gasoline)


Topic 5: The TBT Agreement and The Necessity Requirement

The TBT Agreement

• Article 2.2 provides that technical regulations shall not be more trade restrictive than necessary to achieve a legitimate objective, such as protection of human health.

• A technical regulation to protect health, in accordance with relevant international standards shall be presumed necessary.

• Whether WHO FCTC guidelines would constitute relevant international standards is an open question.

Conclusion on WTO Law

• Bans on misleading descriptors / signs (including trademarks) and large graphic health warnings are implemented widely, without controversy at the WTO.

• Plain packaging is yet to be implemented, but should withstand any WTO challenge due to – the limited character of trademark rights under

TRIPS; and – the necessity of the measure to protect human

health, as reflected in guidelines to Articles 11 and 13 of the WHO FCTC.


Topic 6: Investment Agreements

International Investment Agreements

• Companies have standing to bring claims under these agreements as foreign investors.

• Tobacco companies argue that international investment agreements require payment of compensation from governments implementing packaging measures because those measures interfere with property rights.

• Philip Morris is bringing a claim against Uruguay concerning:– the size of pack warnings (80% of pack surface);– the content of the graphics; and– implementation of the Uruguayan prohibition on misleading

packaging.


Topic 7: Protection of Investors’ Property Rights

Expropriation of Investments

• Tobacco companies argue that packaging measures expropriate trademarks and other rights indirectly.

• In determining whether expropriation has occurred tribunals usually consider factors including:– the impact of a measure on property rights;– the objective and character of the measure i.e. whether

it is general regulation; and– whether there is a relationship of proportionality

between the measure, its objective and the impact on property rights.

• This type of analysis usually leaves considerable scope for health measures.


Topic 8: How governments can protect themselves.

Protecting Against Expropriation Claims

• To minimize uncertainty governments can:– carve tobacco products or tobacco control measures

out of an international investment agreement; and– clarify key concepts such as expropriation.

• Governments can also protect themselves by:– refusing to register misleading tobacco trademarks,

the act of which may create a domestic law property right for a tobacco company;

– not making specific representations to tobacco companies about their ability to avoid regulation.


Thank you for your participation

Engage With Us

• Website: www.tobaccocontrollaws.org

• Email: [email protected]

http://www.tobaccocontrollaws.org/

benn mcgrady , phd

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