The Final Say on Australia’s Plain Packaging Law at the WTO
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This post was written by Nicholas J. Diamond, JD, LLM, MBe, an Adjunct Professor of Law at Georgetown Law. His academic work focuses on the intersection of economic issues, human rights, and the law.
On June 9, the World Trade Organization (WTO) disputes concerning Australia’s plain packaging law for tobacco products, which began in 2012, were finally brought to a close. The Appellate Body ruled against Honduras and the Dominican Republic, finding that Australia’s plain packaging law was not more restrictive of trade than necessary to protect public health and that it did not unjustifiably interfere with tobacco company trademarks.
This post considers the history of challenges to the Tobacco Plain Packaging Act of 2011 (TPP) in domestic and international forums, the significance of the recent Appellate Body ruling, and the potential implications for global public health regulation of tobacco products vis-à-vis international trade.
Australia’s Tobacco Plain Packaging Act of 2011
Since at least the mid-1990s, when initial discussions of what would become the Framework Convention on Tobacco Control (FCTC) began, tobacco control efforts have been a focal point in global public health. Australia, in particular, has long been a forerunner in domestic tobacco control, with a history of measures that began with restrictions on tobacco advertisements in the mid-1970s.
Partly in response to its obligations under the FCTC, Australia enacted the controversial Tobacco Plain Packaging Act of 2011 (TPP) and associated regulations, which broadly sought to decrease smoking rates by reducing the appeal of tobacco products, making health warnings more effective, and removing misleading information from packaging.
In brief, the TPP regulates the color, display of brand names, and display of required text and graphic health warnings, while prohibiting the display of logos, brand images, or promotional text, on tobacco products. Most noticeably, packaging is required to display startling images of the negative health effects of tobacco use. In effect, tobacco packaging is stripped of its colors, logos, textures, and branding, apart from a prescribed display of the brand name of the product, in favor of a prominent public health message.
Domestic and Investment Treaty Challenges
Unsurprisingly, the TPP was swiftly challenged by tobacco companies in several forums. Domestically, in 2012, four major tobacco manufacturers challenged the plain packaging laws in the High Court of Australia. Although the justices acknowledged that the TPP rendered the trademarks essentially valueless, they upheld the measures because, in pertinent part, the government had merely regulated, as opposed to acquired an interest in, the trademarks.
Separately, on the global stage, in 2011, Philip Morris challenged the TPP under the dispute settlement clause in the Hong Kong-Australia Bilateral Investment Treaty, arguing that Australia had breached obligations concerning expropriation, fair and equitable treatment, unreasonable impairment, and full protection and security. The tribunal, sitting in the Permanent Court of Arbitration, did not reach the merits of the issues. Instead, its decision in 2015 found that Philip Morris had abused its rights by restructuring ownership of its subsidiaries in Asia primarily as a strategic move to gain investment treaty protection when a dispute was already foreseeable.
At the WTO
The history of the WTO disputes concerning the TPP dates to 2012, when several members requested consultations on the effects of the TPP on Australia’s obligations under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), the Technical Barriers to Trade Agreement (TBT Agreement), and the General Agreement on Tariffs and Trade. The Dispute Settlement Body subsequently announced the establishment of a panel to investigate the claims. In 2018, the panel released its report, finding that the TPP was consistent with WTO law. Both Honduras and the Dominican Republic appealed the decision.
The Appellate Body, in its June 9 ruling, affirmed the findings of the panel report. Regarding Article 2.2 of the TBT Agreement, it held that the TPP measures are “apt to, and do in fact, contribute to Australia’s objective of reducing the use of, and exposure to, tobacco products”. It further held that the measures are not “more trade-restrictive than necessary to fulfill a legitimate objective”, namely, Australia’s public health goals relating to tobacco control. In particular, it agreed that the TPP did not have a limiting effect on trade by reducing producers’ ability to distinguish between tobacco products based on brand.
Finally, the Appellate Body held that Australia had not breached its obligations under TRIPS. Under Article 16.1 of TRIPS, a trademark owner does not have a positive right to use its trademark or a right to protect its distinctiveness through use; rather, the trademark owner only has an exclusive right to preclude unauthorized use. Moreover, under Article 20 of TRIPS, the special requirements on the use of a trademark under the TPP had not “unjustifiably” encumbered use of the trademarks, given the nature and extent of the encumbrance weighed against the public health goals of the measures. Notably, this marks the first time that the Appellate Body has considered “justifiability” under Article 20. Its arguably permissive view on the meaning of the term, which affords members some latitude in the design of their domestic measures vis-à-vis Article 20, is likely to have longer term implications for WTO law.
The recent Appellate Body ruling represents a major milestone for both Australia and global tobacco control efforts. For Australia, this ruling finally puts to an end challenges to the TPP in several forums, enabling a continued focus on its tobacco control and preventive health efforts.
On the global stage, the recent ruling is especially significant in at least two regards. First, it confirms that plain packaging laws can, where sensibly designed and supported by robust research, withstand legal challenges on several fronts. Indeed, other states that have enacted plain packaging laws, such as Uruguay, have also been challenged by tobacco companies and have likewise successfully defended their measures. For states with similar measures soon to go into effect, such as Singapore, the recent ruling likely reduces litigation risks, at least vis-à-vis trade obligations.
Second, and more broadly, the ruling reaffirms that international trade and public health goals are not necessarily mutually exclusive. Trade and public health have not always harmoniously interacted, especially where viewed within the broader normative and legal framework provided by international human rights law. Indeed, trade has often been viewed as a barrier to promoting public health on the global stage, not least regarding the potential for regulatory chill in global tobacco control efforts. However, the recent ruling further underscores that states can enact strong, yet evidence-based, tobacco control measures that do not, in principle, undercut their obligations on the international plane.