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Nicopure Labs, LLC v. Food and Drug Administration [United States] [July 21, 2017]
A manufacturer of e-cigarette devices and liquids challenged a federal regulation that deemed e-cigarettes to be “tobacco products.” This rule subjects e-cigarettes to the same federal laws as traditional cigarettes under the Tobacco Control Act (TCA). The manufacturer argued that the Food and Drug Administration (FDA), which issued the regulations, did not have the authority to regulate empty e-cigarettes or nicotine free e-liquids, because they were not made or derived from tobacco. The company also argued that the TCA’s ban on distributing free samples and pre-approval for modified risk statements was arbitrary and violated their First Amendment rights.
In this decision, the District Court upheld the FDA’s rule. The TCA gives the FDA the power to regulate “components” of tobacco products. The court found empty e-cigarettes and nicotine-free e-liquids are “components” of a tobacco product because together they make up an electronic nicotine delivery system. Further, the court found that the rule did not violate the manufacturers’ First Amendment rights because the ban on free samples was regulating conduct, not speech. The court also held that pre-approval for modified risk statements did not violate the First Amendment because it does not ban modified risk statements, it only requires the claims be substantiated. Finally, the court found because of the public health risks associated with nicotine and increasing rates of e-cigarette use in adolescents and adults, the decision to subject e-cigarettes to the TCA was not arbitrary.
British American Tobacco Ltd v. Ministry of Health [Kenya] [February 17, 2017]
British American Tobacco appealed a 2016 court decision, which upheld nearly all elements of Kenya’s Tobacco Control Regulations. The appeals court ruled that the tobacco company’s appeal had no merit and affirmed the decision of the lower court. The earlier ruling upheld nearly all elements of the Regulations, which are designed to implement the Tobacco Control Act, including:
- a 2% annual contribution by the tobacco industry to help fund tobacco control education, research, and cessation;
- graphic health warnings;
- ingredient disclosure;
- smoke-free environments in streets, walkways, and verandas adjacent to public places and in private vehicles where children are present;
- disclosure of annual tobacco sales and other industry disclosures; and
- regulations limiting interaction between the tobacco industry and public health officials.
The appeals court agreed with the lower court that the tobacco company had been given adequate opportunities for participation in the development of the regulations and that the regulations do not violate the tobacco company’s constitutional rights.
Japan Tobacco International and Others v. Ministry of Health (plain packaging laws) [France] [December 23, 2016]
Legal challenges to the plain packaging of tobacco products laws dismissed.
On December 23, 2016 the Conseil d’Etat (the Council of State, the highest administrative jurisdiction in France) dismissed six legal challenges that were brought against the tobacco products plain packaging laws. Previously, in January 2016, the Constitutional Council had also upheld the law as in accordance with the constitution, on a referral from members of parliament.
In brief, six cases were brought challenging the regulations - four by the tobacco companies, one from the confederation of tobacco retailers, and one from a tobacco paper manufacturer. The Conseil d'Etat dismissed all the claims and held that:
1. The ban on using figurative, semi-figurative signs, and logos on packaging of tobacco products was valid because the brand and variant name is still permitted allowing the identification of the product.
2. Plain packaging constitutes an infringement of property rights, but that this infringement is justified in the light of the objective pursued (public health) and because the measure regulates the use of trademarks but does not completely ban them.
3. There was no 'deprivation' of property rights.
4. For the same reasons, the Conseil d'État held that the national legislation is a quantitative restriction on the importation of goods but this is in conformity with European Union law because the introduction of such restrictions is permitted where they are justified by a public health objective and the protection of human life. The court held that in this case, the challenged provisions must be considered as unable to do anything other than, over time, reduce the consumption of tobacco. The evidence in the case file also showed that neutral packaging would reduce the attractiveness of tobacco products. The measures were therefore proportionate and justified.
A summary of the decisions from the two separate courts is attached in French and English in the section on "Related Documents".
Philip Morris SÀRL v. Uruguay [Uruguay] [July 08, 2016]
In February 2010, three subsidiary companies of Philip Morris International (PMI) initiated an investment arbitration claim at the International Centre for the Settlement of Investment Disputes (ICSID), an arbitration panel of the World Bank. PMI alleged that two of Uruguay’s tobacco control laws violated a Bilateral Investment Treaty (BIT) with Switzerland. PMI brought the claim after legal challenges in Uruguay’s domestic courts by the Philip Morris subsidiaries had failed. The panel of three arbitrators published their ruling on July 8, 2016, dismissing all PMI’s claims and awarding Uruguay its legal costs ($7 million).
The two “Challenged Measures” required:
1. Large graphic health warnings covering 80% of the front and back of cigarette packets; and
2. The Single Presentation Requirement (SPR) that limited each cigarette brand to just a single variant or brand type (eliminating brand families to address evidence that some variants can mislead consumers and falsely imply some cigarettes are less harmful than others).
PMI alleged that the 80% health warnings left insufficient room on the packs for it to use its trademarks and branding as they were intended, and the SPR meant it could not market some of its brands such as Marlboro Gold. PMI therefore alleged that Uruguay had breached the terms of the BIT because the Challenged Measures: Expropriated the property rights in PMI’s trademarks without compensation; were arbitrary as they were not supported by evidence to show they would work and so did not accord PMI with Fair and Equitable Treatment; did not meet PMI’s Legitimate Expectations of a stable regulatory environment or to be able to use their brand assets to make a profit; and that the Uruguayan courts had not dealt properly or fairly with PMI’s domestic legal challenges such that there was a Denial of Justice.
Philip Morris sought an order for the repeal of the Challenged Measures and for compensation in the region of $25 million.
The tribunal’s findings
This highly anticipated award addressed a number of fundamental legal issues concerning the balance between investor rights and the space available for states’ to regulate for public health. While there is no doctrine of binding precedent in international arbitration law, the development of an investment treaty case law and jurisprudence means that the wider value of each award can be very significant. This ruling highlighted the importance of the WHO Framework Convention on Tobacco Control (FCTC) in setting tobacco control objectives and establishing the evidence base for measures, and confirmed that states therefore need not recreate local evidence. It addressed the wide ‘margin of appreciation’ and deference provided to sovereign states in adopting measures or decisions concerning public health. The tribunal also identified that a state need not prove a direct causal link between the measure and any observed public health outcomes – rather that it was sufficient that measures are an attempt to address a public health concern and taken in good faith.
The ruling sets an extremely high bar for any foreign investor seeking to bring an investment arbitration challenge against a non-discriminatory public health measure that has a legitimate objective and that has been taken in good faith.
BAT v. UK Department of Health [United Kingdom] [May 19, 2016]
The judgment dismissed all grounds of challenge against the UK's standardised (or "plain") packaging regulations. The judgment has significant wider implications because Mr Justice Green carefully considered all the evidence as part of the proportionality analysis, which will be similar to the justification analysis for plain packaging in most other jurisdictions. He was highly critical of the evidence put forward by the tobacco industry and provided a damning critique of individual studies and experts as well as making wider criticisms of the tobacco companies including that they failed to disclose any internal documents about their research or consideration of the impact of plain packaging on their business or smoking rates. He also linked his conclusions to the 2006 judgment of Judge Kessler in USA v Philip Morris Inc et al when she found, upon the basis of comprehensive evidence which included internal documents, that the tobacco companies were well aware of the strong causal nexus between advertising and consumer reaction.
The judge's conclusions on whether plain packaging amounts to an expropriation of the tobacco trade marks; on their claim for compensation; on the relevance of the FCTC and its guidelines; and on the compatibility with the WTO TRIPS agreement all have wider international relevance.
A summary of the key findings that have wider application is in the additional documents.
The McCabe Centre has produced an analysis of the key points for other jurisdictions which can be found here: http://www.mccabecentre.org/downloads/McCabe_Centre_-_Key_Points_on_UK_plain_packaging.pdf
British American Tobacco Kenya Ltd. v. Ministry of Health [Kenya] [March 24, 2016]
British American Tobacco's Kenyan subsidiary filed a lawsuit claiming that Kenya’s Tobacco Control Regulations are unconstitutional. The court ruled against the tobacco company, finding that the process of developing the regulations was lawful and conducted with sufficient participation by the tobacco industry. The court upheld nearly all elements of the Regulations, which are designed to implement the Tobacco Control Act, including:
a 2% annual contribution by the tobacco industry to help fund tobacco control education, research, and cessation;
graphic health warnings;
smoke-free environments in streets, walkways, verandas adjacent to public places;
disclosure of annual tobacco sales and other industry disclosures; and
regulations limiting interaction between the tobacco industry and public health officials.
The court specifically noted that the Tobacco Control Act and Regulations are intended to comply with the Framework Convention on Tobacco Control. Additionally, the court acknowledged the harm caused by tobacco products and stated it would make its decision within the context of a public health system balanced against the commercial rights of the tobacco company.
The court struck down a few minor elements of the regulations, ruling that (1) the tobacco industry is not required to provide evidence of its market share to the government; and (2) that penalties for violation cannot exceed the maximums authorized by law.
The court ruled that the regulations should take effect six months after the date of the decision.
Philip Morris Asia v Australia [Australia] [December 17, 2015]
Philip Morris Asia challenged Australia's tobacco plain packaging legislation under a 1993 Bilateral Investment Treaty between Australia and Hong Kong. This was the first investor-state dispute brought against Australia.
Philip Morris Asia initiated the arbitration in November 2011, immediately after the legislation was adopted. Australia responded with jurisdictional objections and sought a preliminary ruling on these issues. The tribunal bifurcated the proceedings and on 18 December 2015 issued a unanimous decision agreeing with Australia's position that the tribunal had no jurisdiction to hear the claim.
The main objection to jurisdiction was that at the time the dispute arose, Philip Morris Asia was not a foreign investor in Australia. The government announced its decision to proceed with plain packaging legislation in April 2010. At that time, 100% of the shares in Philip Morris Asia were owned by the parent company located in Switzerland (which had no investment treaty with Australia). Philip Morris International then undertook a restructure in 2011 which meant that Philip Morris Asia, located in Hong Kong, became the sole owner of the shares in the Australian subsidiaries.
The Tribunal found that Claimant’s restructure was for the principal, if not the sole, purpose of gaining protection under the Treaty so as to bring a claim against the plain packaging legislation. As such Philip Morris Asia's claim was an 'abuse of rights'. This concluded the arbitration in Australia's favour, subject to finalisation of the costs claim.
Imperial Tobacco Canada v. Attorney General of Quebec [Canada] [September 28, 2015]
Tobacco companies challenged the constitutionality of the Tobacco-Related Damages and Health Care Costs Recovery Act, which allows the government to sue tobacco manufacturers to recover the health care costs for individuals with tobacco-related illnesses. The Appeals Court of Quebec upheld the constitutionality of the law and dismissed the tobacco company’s appeal. The court relied, in part, on a decision from British Columbia upholding a similar law. The court found that the Quebec law did not violate the independence of the judiciary nor did it violate the tobacco companies' right to a fair trial.
Smith v. Philip Morris Companies [United States] [July 18, 2014]
A class action lawsuit against major tobacco companies argued that the companies fixed prices following “Marlboro Friday,” a day in 1993 in which a Philip Morris retail promotion lowered the price of Marlboros by approximately 20 percent. The class action represented Kansas purchasers of cigarettes who alleged that the tobacco companies conspired to fix the wholesale price of cigarettes in violation of state law. The court ruled that the class had failed to provide evidence proving price fixing and affirmed an earlier judgment in favor of the tobacco companies. In particular, the court found that the class failed to provide evidence that the tobacco companies were actively colluding with each other and not acting independently in changing prices.
Goodpaster et al. v. City of Indianapolis [United States] [November 25, 2013]
In 2012 the City of Indianapolis and Marion County expanded a local smoking ordinance to include bars and taverns. A number of bar owners sued, seeking a preliminary and a permanent injunction to prohibit the ordinance from taking effect. The bar owners claimed that the ordinance violated their rights to due process, freedom of association, and equal protection and constituted a taking under the federal and state Constitutions. The appeals court affirmed an earlier ruling upholding the local smoking ordinance. The court found that all of the bar owners claims failed. In particular, the court found that the government could have had a rational reason for adopting the law and for continuing to exclude cigar and hookah bars from the ordinance.