The Tobacco dispute
Significance of the dispute
This is probably one of the most important cases ever dealt with by the WTO Dispute Settlement Mechanism. While there have been other tobacco-related disputes in the past, only in this case the challenged legislation, on the face of it, could be said to have been adopted to address public health.
The panel was faced with a request to find out that the Plain Packaging legislation adopted in Australia was in breach of WTO rules. The decision, published at the end of June 2018, cannot be clearer: all the claims raised by the complainants have been rejected. This is therefore one of the rare cases where the defendant has successfully defended a measure in toto.
This decision confirms that Members have the full right to take strong measures for the purposes of protecting public health, even if the effect of the measures is trade-restrictive. In other words, this decision sends a clear message that public health prevails over trade.
In the wake of this decision, similar legislation adopted by other countries to diminish the consumption of tobacco should be equally allowed. While the subject-matter of this case is protection of public health from tobacco consumption, equivalent legislation to address public health concerns derived from consumption of alcohol beverages or junk food, among others, could also be permitted.
More generally, the Tobacco decision sends a clear message that measures may be adopted consistently with WTO rules to protect other important societal values and interests such as protection of the environment and natural resources, labour rights etc. Protection of such values and interests is already taken into consideration in the (limited) context of unilateral trade preferences and in preferential trade agreements. With the Tobacco decision, countries will find a powerful justification for developing and applying protective rules to the rest of trade.
In sum, the Tobacco decision clearly demonstrates that legislation can be adopted to protect important societal values and interests and that the WTO will not interfere with the state’s right to regulate those values and interests (provided that WTO rules are adhered to). This decision therefore dispels the unfounded argument that the WTO sides with corporations' commercial interests.
It is worth noting that Australia's plain packaging requirements were also challenged by multinational tobacco corporations twice prior to the WTO, once before the Constitutional Court of Australia and once in an Investment Dispute Settlement forum. In both cases, the challenges were fruitless.
The World Health Organisation ("WHO") welcomed the WTO's decision.
In 2010, as part of its national health strategy, Australia announced certain measures to address major health problems in the country. These included a tobacco excise tax increase of 25%, restrictions on internet advertising of tobacco products and increased expenditure on anti-smoking campaigns. The measures also covered legislation requiring that all cigarettes be sold or supplied in plain packaging by 1 December 2012. The main regulatory acts adopted to regulate this subject were:
- Tobacco Plain Packaging Act 2011
- Tobacco Plain Packaging Regulations 2011
- Trade Marks Amendment (Tobacco Plain Packaging) Act 2011
The objectives of this legislation were:
- To improve public health by discouraging people from using tobacco products and starting/restarting to smoke
- To give effect to Australia’s obligations in the World Health Organization Framework Convention on Tobacco Control
The first objective was to be achieved by increasing the effectiveness of health warnings on tobacco packages, preventing the packaging of tobacco products to mislead consumers about harmful effects of tobacco products and by these decreasing the appeal of tobacco products to consumers. The Act and Regulations established the following requirements:
- The retail packaging of tobacco products must not have any decorative ridges, embossing, bulges or other irregularities of shape or texture
- The cigarette pack or carton must be rigid and made of only cardboard
- All edges of the cigarette pack must be rigid, straight and not rounded, bevelled or otherwise shaped or embellished
- Cigarette pack must have a matt colour or otherwise must be drab dark brown
- No trade mark or mark may appear anywhere on the retail packaging of tobacco products
- Brand, business and product name must be printed in a standard colour, position, font size and style
- Graphic health warnings have to cover 75% of the front and 90% of the back of tobacco packaging
The WTO challenge and the decision
5 countries complained (Honduras, Dominican Republic, Cuba, Ukraine and Indonesia). They argued that Australia’s plain packaging legislation breached the WTO’s Agreement on Technical Barriers to Trade ("TBT Agreement") and Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") by:
- Being ‘more trade restrictive than necessary’ to protect public health
- Violating intellectual property protections, mostly related trademarks
The panel dismissed all arguments by the complainants and decided in favour of the compliance of Australia's plain packaging measures with WTO rules:
Regarding the claims on inconsistency with the TBT Agreement
The panel recognized that the aim of reducing tobacco use and exposure to tobacco smoke fell within the legitimate objective of protecting public health and plain packaging made a significant contribution to achieve this objective. The panel also recognized the trade-restrictiveness of the measures; however, the measures were suitable taking into account the graveness of the health risks they were called to fight. The panel found that there was no less-trade-restrictive alternative to provide an equivalent level of protection for public health on this matter. To support its findings the Panel referred to the WHO's Framework Convention on Tobacco Control several times.
Regarding the claims on intellectual property violations
The panel rejected the complainants' claims of violations of multiple provisions of the TRIPS Agreement. While tackling the intellectual property related questions, the panel noted that the interpretation of the TRIPS Agreement must give due weight to public health and other societal interests considering the Doha Declaration.
More information about this dispute, including the full panel decision, can be found in the WTO website.