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Benn McGrady , PhD

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The Real Deal on International Trade; Investment Agreements; and Packaging and Labeling Regulations. Benn McGrady , PhD International trade and investment lawyer based at Georgetown University’s O’Neill Institute for National and Global Health Law, USA.

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Benn McGrady, PhD

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

the 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
overview of industry arguments
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.
trips and trademark registration
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
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
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.

measures necessary to protect human life or health
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 health1
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)

the tbt agreement
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
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.
international 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.
expropriation of investments
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.
protecting against expropriation claims
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.
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