Managing Incongruence in Trade, Investment and Domestic Law The Tobacco Packaging Cases

Presented at the Annual Review of International Economic Law Mandela Institute, University of the Witwatersrand, Johannesburg, 3 November 2012

Session on Adapting to Change

Laurence Boulle[1]

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Draft only, not for citation or referencing – inquiries to Laurence.Boulle@wits.ac.za.

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Introduction

This contribution examines the incongruence prevailing among trade, investment and domestic legal systems, with specific reference to current issues relating to tobacco control. After considering the trade and investment dimensions of the topic it examines the status within them of domestic and international public health policies in regard to the consumption of tobacco. It identifies the beneficiaries of the incongruence among the legal systems referred to and reflects on its implications for smoking control policies in developing countries. The contribution is partly a review of specific developments in 2012 and partly a preview of anticipated future developments in the area.

The article considers the legal issues pertaining to tobacco control in the context of the concept of regime congruence, or incongruence, among different legal systems. Here the term congruence, or coherence, is used to refer to situations in which different legal rules, principles and processes are complementary with, or at least not in collision with, one another.[2] This is contrasted with the prevalence of incongruence among, or fragmentation of, legal norms within an overall ‘system’ of regulation, governance and dispute resolution. While the vertical allocation of authority between nation states and international law inevitably leads to the collision of legal norms, the main focus in this contribution is on horizontal incongruence among international institutions and laws and the implications of this for different state policy and corporate behaviour. This incongruence is partly a function of the immense growth in international law and tribunals in recent times, the relative specialisation within these institutions, and the absence of definitive methods for resolving inconsistencies among them. While the crowded nature of the international domain leads to fragmentation among policies and legal norms, it can also be a source of synergy among them.[3]

In the present context the fragmentation and incoherence themes are related specifically to public health issues, but similar considerations arise in relation to environmental policy and climate change in their relationships with mainstream manifestations of international economic law (IEL). In all cases there are overlaps of policy, rules and jurisdiction, for example between trade rules and multilateral environmental policies, or between international investment regimes and plurilateral public health standards. The issues are endemic, the responses to them are often pragmatic.

The subject-matter of the article is considered in the context of a mixed year in relation to the economic aspects of globalisation. UNCTAD’s World Investment Report in June 2012 indicated that in 2011 global FDI exceeded pre-GFC averages but was significantly below 2007 peaks.[4] Moreover, the report predicted slower FDI growth in late 2012, based on retreats in major areas of cross-border investment during the first five months of the year.[5] While developing economies accounted for 45% of global FDI during the year, Africa and LDCs suffered a third year of declining inward FDI, though sub-Saharan Africa fared considerably better than North Africa for predictable reasons. Regarding cross-border trade, the economic malaise in the EU and US resulted in global reductions in trade during 2012, although intra-regional trade grew.[6] Throughout the year predictions from the WTO warned of declines in global trade. Even in Asia, the engine room of the contemporary global economy, China’s slowdown reinforced the trend, albeit relative to its high growth figures in the recent past.[7] Nevertheless, both the investment and trade realities were over-shadowed by financial concerns arising from high levels of indebtedness in developed economies. In October 2012 the IMF went so far as to warn that the world could face another financial collapse in the year ahead.[8] However, anticipated protectionism in domestic economies has not been as significant as might have been expected for the year although symptoms of current economic turbulence are found in the dispute resolution arena – an extensive number of disputes was initiated in the WTO, many involving China, the US and the EU, and there was a continuing increase in ICSID investor-state case loads.

In the context of these trends in economic globalisation, regime coherence on anti-smoking law and policy seems relatively marginal to the mainstream issues in the global political economy. That said, public health is not an insignificant factor in contemporary globalisation - tobacco is notorious for being the one lawful product which will advance the death of at least 50% of those who use it as intended.[9]

The development of domestic state policy in this area is not straightforward, even where public health concerns are paramount. Apart from local constitutional and intellectual property questions, states have to balance their policy formulation with responsibilities under trade and investment treaties. Moreover there can be unintended consequences of enacted policy, for example in the expansion of cigarette smuggling and the black market, or in the diversion of consumers to more harmful products. There are also complex budgetary matrixes for state governments in developed countries: ever-more stringent measures, including high excise rates, bans on advertising, health warnings and public education campaigns, have resulted in limited growth, and some declines, in the cigarette market in these countries. Paradoxically, declines in tobacco consumption require increases in excise duties to maintain state revenues in the face of the success of government policies in reducing tobacco consumption.[10] Even on the public health issues there are questions over the efficacy of specific legislative measures. Tobacco companies contend that each deterrence step has, on its own, no impact on rates of smoking, while governments claim that each measure contributes in indeterminate ways to overall patterns.[11] The lack of congruence in international norms renders legal resolution of the contesting views problematic, creating advantages for some interests and disadvantages for others.

More pertinent to the theme of this contribution is a decision of the highest court in Australia which is having international reverberations as state systems and international corporations engage in protracted contestations over the packaging of cigarettes.

Domestic Law

Restrictions on tobacco marketing and consumption have been challenged in many jurisdictions, and sometimes in international forums. Requirements for plain packaging were first introduced in Australia in 2012. The Tobacco Plain Packaging Act 2001 (Cth) (TPP), the requires drab generic packaging for all tobacco products sold in Australia and prohibits all company logos, symbols and other advertising images on the packaging, requiring instead uniform presentation. Importantly, in terms of the intellectual property issues arising, the legislation curtails but does not eliminate brand names and products’ places of origin on the packaging, provided these labels are of specified colours, font styles and sizes, and they appear in only designated locations.[12] The restrictions on trademarks and logos are reinforced by continued mandatory requirements for health warnings and graphic pictorial images as previously required on all tobacco products. In July of this year the highest court delivered a watershed decision[13] which upheld the national legislation.[14]

While Australia itself manufactures cigarettes and other tobacco products, and exports products to the Pacific region, [15] there have never been suggestions that the plain packaging regulations are discriminatory in regard to imported products, are protectionist in nature or constitute disguised limitations on cross-border trade.[16] The measures apply to both domestic and imported tobaccos and are essentially motivated by concerns over the health of smokers and non-smokers and by pressures on the budgets of state health departments. In economic terms the packaging requirements, in conjunction with previous prescriptions relating to verbal and graphic warnings, are designed to impact on the demand side of the supply-demand equation. In other words, without directly affecting tobacco supply through quotas or bans, its regulatory effects are designed to guide consumer choices away from the products in question.[17] The legislation brought on the ire of the tobacco companies which responded with fire: they challenged its constitutionality on intellectual property and expropriation grounds.

The key domestic constitutional issue was whether the legislation in question amounted to an acquisition of property without provision of the constitutionally-prescribed compensation.[18] This, a 6-1 majority held, was not the case.[19] The TPP did not entail the state acquiring property, or something in the nature of property, even of a slight or insubstantial sort, notwithstanding that it involved some harm to the tobacco companies’ commercial interests. Much of the judgment revolved around the policy of intellectual property law, which was designated as not only about protecting the private interests of IP holders but also about serving public policy objectives, a theme also arising in relation to the WTO TRIPS Agreement referred to below. Thus it was held that trademarks legislation did not confer a statutory monopoly on the holder, nor bestow a right free from restraints imposed by other statutes. As the legislation did not violate trade mark rights the High Court held that legislation did not amount to an acquisition of property otherwise than on just terms. Moreover, various judges in the majority acknowledged the connection been cigarette smoking and fatal diseases, some holding that the tobacco companies’ arguments were ‘delusive’ and unreal’. It was acknowledged that it was common practice to require specific labelling on foods and other consumables to promote public health, and that the measure under consideration was part of a long line of tobacco control measures. In the case of one judgment specific reference was made to the legislation giving effect to Australia’s obligations as a party to the WHO Framework Convention on Tobacco Control (FCTC), referred to in more detail below,[20] an element of domestic-international congruence apparent in other jurisdictions addressing the topic. However, no references were made to the country’s trade and investment obligations in this forum. It was these obligations which were picked up by the tobacco companies, uninhibited by the domestic decision, [21] in two sets of parallel proceedings currently still on foot.

Although Australia was the first country to introduce plain packaging laws many other jurisdictions have had similar litigation in the face of restrictions on the sale and marketing of tobacco products. In South Africa the Supreme Court of Appeal considered similar issues in BAT v the Minister of Health.[22] Here amendments to the Tobacco Control Act 83 of 1993 were in issue as they allegedly curtailed s 16 of the constitutional right to freedom of expression by restricting one-to-one communications between the tobacco industry and its adult consumers. In examining the freedom of commercial speech, for both vendors and consumers, the court held the limitation did entail a limitation on freedom of speech but that it was justified in terms of s 16(1) of the Constitution. This conclusion was reached through balancing the proportionality of the health measure against the rights of consumers to receive information. The SCA was strongly influenced in the balancing exercise by South Africa’s obligations under the FCTC, to which it is a signatory, and the constitutional imperative to have regard to international law when interpreting the Bill of Rights.[23] In this regard it is worth noting that there are stronger constitutional imperatives for concordance between international law obligations and domestic law in South Africa than in many other jurisdictions.[24] The SCA also referred, with approval, to a similar approach to commercial expression in the context of anti-smoking legislation in Canadian jurisprudence, which also upheld the high importance of health policies.[25] Had the South African legislation been taken to an international tribunal, those proceedings would formed the focus of this presentation.

Trade and Investment Law Challenges

While the Australian court’s decision finalised the constitutional questions, a claim has been brought before the World Trade Organisation. Member states are alleging that the domestic measures are non-compliant with Australia’s obligations under various WTO agreements.[26] For example on 18 July 2012, shortly after the judgment,[27] the Dominican Republic requested consultations with Australia concerning the laws and regulations at issue in the High Court decision. The claimant contended that Australia's measures were inconsistent with the country’s obligations under the TRIPS Agreement,[28] the TBT Agreement[29] and the GATT 1994.[30] This, and related cases, are proceeding through the prescribed consultation and preparatory procedures which precede more formal parts of the dispute resolution process under the WTO’s Dispute Settlement Understanding.

In the WTO context the issue is whether the Australian measures are compliant with provisions of the respective covered agreements. While this is the first time plain packaging laws will be considered in this forum there have been other tobacco cases before the WTO. In all previous decisions, domestic measures promoting health objectives have been held to be non-compliant with the relevant state’s obligations with tobacco products being treated no differently to other products in relation to provisions of the GATT, the TBT or the Customs Valuation Agreement.[31] In these contexts, public health considerations have not overridden, or seriously challenged, predominant trade principles of liberalisation and non-discrimination and there has been no significant incoherence among the different WTO Agreements in question. This may be attributed in part to the fact that the covered agreements are designed to complement one another and mutually reinforce fundamental trade principles and they are all subject to the same dispute resolution procedures under the DSU.

Several defences will avail the respondent, many involving the exploitation of exceptions and interpretive spaces within the language of the respective provisions. The extent to which the FCTC might also the respondent is considered further below. In terms of remedies a panel or the Appellate Body is most likely to recommend that non-compliant domestic measures be brought into compliance with the state’s international obligations. In other words, the legislation upheld for its constitutional validity be amended in terms of international norms. Regardless, enforcement of WTO recommendations can involve protracted subsequent procedures.

The second set of proceedings is being brought in terms of the Hong Kong – Australia BIT[32] and under the 2010 UNCITRAL Arbitration Rules, with the Permanent Court of Arbitration as the appointing authority. Here Phillip Morris Asia (PMA),[33] a tobacco company incorporated in Hong Kong which acquired shares in the Australian corporation Philip Morris Ltd (PML), is alleging that Australia breached the BIT.[34] As is usual in situations of investor-state dispute settlement (ISDS), several breaches of the BIT are being alleged, including:

  • Regulatory expropriation of PML’s assets without requisite compensation;

  • Breach of the fair and equitable treatment required of host countries in international investment law;

  • Impairment of PML’s interests by unreasonable and discriminatory measures;

  • An absence of full protection and security, as required by the BIT; and

  • Breach of the umbrella clause, with particular reference to the multilateral treaties referred to below.[35]

In the investment arbitration, the issues revolve around the question of whether the host country has breached the BIT’s investor safeguards against the direct or indirect expropriation of its assets without appropriate compensation. In this case the remedy being sought is financial in nature, the tribunal having the capacity to award substantial compensatory damages. It goes without saying that the tribunal will be guided in resolving the ‘expropriation’ question, and if so the quantum of damages, by treaty language and investment jurisprudence, which respectively tend to be wider and more generous than equivalent measures in many domestic domains.

Two central defences would avail the host country. The first is that the domestic legislation does not constitute a direct or indirect expropriation of the investor’s assets> The second is that BITs do not remove the host state’s right to regulate for legitimate purposes, an inherent principle of international law and state sovereignty. Other normative influences, including the extent to which the FCTC may be a factor, are considered below.

Parallel Proceedings, Centrifugal Forces

The Australian smoking episode highlights the possibility of identical fact situations giving rise to parallel proceedings with potentially inconsistent outcomes. This confirms the incongruence hypothesis. In the absence of a system of res judicata operating over the various jurisdictions in question, the possibility is that identical issues could effectively be relitigated in three forums with no system for reconciling different outcomes. As with the domestic case, the two international proceedings raise issues of public health, intellectual property, investment protection and trade policy, and unlike the domestic decision they will not be resolved solely in terms of domestic constitutional questions. The WTO considers disputes through a trade prism, and investment tribunals through an FDI prism. This creates the possibility of inconsistencies not only between international tribunals and the highest domestic court, but also between the international regimes themselves.

There are clearly some commonalities in the parallel proceedings in terms of high level IEL norms such as national treatment and the MFN principle. International customary law and the Vienna Convention on the Law of Treaties both provide some unifying effect in the interpretation of all international treaties. There is arguably greater integration between trade and investment laws now than in previous eras, and the complainants in the investment case even implied greater levels of cross-over in international norms in their contending that the plain packaging legislation breached Art 2(2) of the BIT by virtue of the fact, inter alia, that it breached Australia’s obligations under the TRIPS Agreement, the TBT Agreement and the Paris Convention for the Protection of Industrial Property. Needless to say the respondent resisted the relevance of these multilateral treaties in the evaluation of its international investment obligations as an attempt to establish a ‘roving jurisdiction’ within the competence of the arbitral tribunal.[36] Nonetheless, within the divergence of norms and process referred to further below, sight should not be lost of various centripetal forces within IEL.

In the Australian High Court, it was essentially a constitutional question decided, without significant consideration of the country’s international obligations, although it was noted that the legislation was congruent with the WHO Convention referred to above. The acquisition issue was essentially decided within the four corners of the domestic constitution where it was found that there was no expropriation of the corporation’s intellectual property in that the state had not acquired any assets but merely regulated the use of affected trademarks. This inward focus is not unprecedented in highest appellate courts in domestic jurisdictions.

What follows is a brief outline of the main elements of WTO- and BIT-based dispute resolution procedures. Where these are contrasting in nature they indicate the propensity for different, and possibly irreconcilable, outcomes in the circumstances of the pending tobacco control cases.[37]

Each of these factors is subject to the arguments and counter-arguments in the cut and thrust associated with adversarial disputation and adjudicative decision-making. For example, the sources of law permissible in each forum have always been an evolving and somewhat indeterminate factor, especially in the investment context. The central question is whether all sources of international law, including international customary law (which itself has an evolving content), treaty law in cognate areas, treaty law on unrelated topics (such as that on public health discussed below), decisions of other international tribunals and different sources of ‘soft’ law, are potentially applicable and influential normative sources. While guidance is provided by ‘legislative’ provisions, tribunals themselves develop different policies on these possibilities, some opting for the broadest array of sources and others for a more restrictive set. Thus different treaty language, itself often open-textured in nature, will be one guide in this respect, but may not be determinative. This variability has particular cogency in relation to the content of the fair and equitable treatment obligation imposed on host countries by BITs.[38]

Regarding the expropriation, or regulatory taking, question in the arbitral proceedings BITs do not preclude state interventions which occasion direct or indirect expropriation of investment assets. However, most treaties condition the expropriation on three factors: the expropriation needs to be related to the public interest according to the needs of the host state and be in accordance with the due process of law; it needs to be non-discriminatory in nature, in accordance with the national treatment principle; and it must be accompanied by prompt, adequate and effective compensation. In light of these factors respondent states inevitably contend that the domestic intervention does not amount to expropriation but constitutes a non-compensable regulatory intervention. In any event the expropriation claim will be difficult to establish in the light of existing relevant jurisprudence, and other bases for the claim should also be resistible.[39] This is also to assume that the foreign investor will surmount the jurisdictional hurdle.[40]

In the tobacco cases the domestic court has determined that plain packaging regulations do not directly affect the legal title or ownership of international investors. However, the same question over the acquisition or expropriation of an investor’s assets is likely to be answered more broadly under international investment law than under domestic law. Thus a direct acquisition of property is not necessary to trigger the requirement for compensation and if a state measure has a significant impact on an investment, such as on profitability or reasonable expectations, an arbitral tribunal may hold that there has been compensable expropriation. The dividing line between compensable expropriation and non-compensable regulation is a complex topic in this domain. It is further complicated when a trade or investment body, each situated within one specialised area of international law, is required to interpret and adjudicate on norms developed in another area of specialisation, such as public health.

In relation to WTO proceedings there is scope within both the GATT and TBT Agreement to accommodate members’ policy space for implementing public health policies and in many cases under the DSU respondent states are defending the boundaries of this space.[41] Of particular relevance to proceedings in the tobacco control cases will be the extent to which the available evidence, including that of a scientific nature, supports the health objectives behind the measures.[42] Needless to say, respondent governments assert that their tobacco and smoking policies are based on studies, reports and the views of public health experts. Here a potential vulnerability in the Australian case is the fact that the plain packaging measure is part only of a comprehensive government strategy designed to reduce smoking rates. The influence of the health perspectives in DSU proceedings is considered further below.[43]

Despite the proliferation of BITs, and of investment provisions in trade treaties, the various agreements do not form a composite treaty system and lack a centralised dispute resolution system. This is despite their having many commonalities with one another, especially as regards ‘old order’ BITs.[44] The WTO system, by contrast, has numerous individual agreements, with potential inconsistencies within and between separate treaties, but they constitute an ‘internal system’ with a harmonising impact emanating from the centralised dispute resolution system. Thus, regardless of potential incongruence with external norms such as health policies, the investment regime has a degree of incoherence within its own parameters which is not as evident in the multilateral trade regime.

Framework Convention on Tobacco Control

While the factors of incongruence listed in the above table relate to the internal logic of the two international systems, the central question in the present context relates to the influential weight of public health policies in their decision-making processes. Within the vortex of constitutional, intellectual property, investment and trade issues the question arises as to the appropriate influence of domestic and international policies on smoking when they are apparently inconsistent with the IEL norms. This uneasy relationship, which also pertains in areas such as climate change and culture,[45] provides another source of incoherence in the cases under discussion. Incoherence is also a function of the unresolved fragmentation between IEL and the traditional fields of international law. As is the case with trade and investment, environmental and public health matters extend beyond national borders and beyond the jurisdictional limits of dedicated governance institutions.

While fragmentation among different elements of IEL, investment, trade and regional arrangements has been in evidence for some time, another source of fragmentation is found between IEL, on one hand, and international health law.[46] Here the World Health Organisation has produced two significant documents over the past decade.[47] The first is the International Health Regulations approved in 2004 and the second is the Framework Convention on Tobacco Control (FCTC) which was adopted in 2003 and entered into force in 2005 . The WHO subsequently adopted Guidelines for the implementation of specific provisions of the FCTC,[48] including recommendations on plain or generic packaging, and made the pronouncement, referred to above, that tobacco is the only legal consumer product that kills when used exactly as intended by the manufacturer.[49] The FCTC is depicted as an evidence-based treaty[50] and it promotes incremental restrictions on tobacco use in member states, encouraging them to adopt plain packaging and pictorial warnings as reflected in both the Australian and South African legislation. This raises questions over the congruence of these standards with established norms of trade and investment rules and principles.

The Australian legislation in question refers to the country’s obligations under the FCTC,[51] and the High Court judgment makes brief reference to the legislation having been enacted in terms of this obligation. As indicated above, the South African court also refers to this factor of congruence between domestic and international norms. However the more important issue concerns the degree of coherence between the FCTC standards and trade and investment rules.

Under WTO law there is no explicit reference to WHO instruments in the substantive norms of the trade body but the two organisations collaborate on different issues related to trade and health.[52] There is no formal agreement between the WHO and the WTO, but the latter has observer status in the SPS and TBT Committees, and it has ad hoc observer status in the TRIPS and GATS Councils. There is collaboration between the two Secretariats relating to health and sanitary and phytosanitary measures, and continuing joint efforts to bring attention to the need for policy coherence between trade and health matters at both the global and national level. For its part the WTO has observer status in the WHO and was part of the agency task force on the FCTC negotiations. The WTO and the WHO also communicate during pre-dispute processes. This suggests a relatively high degree of congruence at governance levels.

However while the above linkages suggest institutional synergies between the WTO and WHO, these are not necessarily reflected in dispute resolution systems. Here the focus is inevitably on the WTO as the WHO lacks any procedures for investigating and adjudicating on members’ alleged non-compliance with its norms. Initial resort can be had to general principles of WTO and international law where the tension is no longer between domestic measures and international trade norms but between two sets of international obligations. It would be invidious to evaluate each only in terms of its own objectives and logic and in isolation from other international law.[53] One approach would be to accept the non-obligatory nature of the WHO treaties, given they are part of a framework convention which motivates interventions by member states but is not binding on them in traditional treaty terms. This would be to relegate the FCTC to a subsidiary status vis-a-vis relevant trade and investment norms. Another approach would be to use the lex posterior principle, though this is more problematic in international law than in domestic situations.[54]

While the WTO’s primary focus will be on the TRIPS and TBT Agreements, and as the WHO legislation is not directly applicable in this forum, the FCTC could potentially serve as source of influence in the interpretation of value-based norms in the treaties. References have been made in the past to external environmental treaties and conventions in WTO jurisprudence, if only to assist in interpreting disputed terms in covered agreements.[55] The Vienna Convention on the Law of Treaties[56] requires interpreters to take account of any relevant rules of international law applicable to the relations between parties though this provision has been interpreted restrictively where not all WTO members are party to a non-WTO treaty.[57] Nonetheless, there is WTO jurisprudence supporting the interpretive use of non-WTO treaties.[58]

Regarding the FCTC specifically, reference was made to the convention in United States – Measures Affecting the Production and Sale of Clove Cigarettes.[59] The Panel acknowledged the important international efforts to curb smoking within the context of the FCTC and the WHO’s Partial Guidelines. It recalled the words of the Appellate Body when it acknowledged that the objective of preserving human life and health ‘is both vital and important in the highest degree’, and that ‘few interests are more 'vital' and 'important' than protecting human beings from health risks’. The Panel went on to consider the legitimacy of challenged restrictions on trade (to prevent minors from taking up smoking by restricting flavouring additives) but did not again mention the FCTC. The Appellate Body Report also failed to mention the FCTC; it contained two references to the WHO but neither appearing to have much impact on its decision.

Nonetheless parties participating in the DSU make extensive use of WHO materials, and this can mitigate against reliance on direct technical assistance from the body itself.[60] Moreover, while the ultimate finding was against the smoking restrictions, the Appellate Body commented on the general issues at stake:[61]

In reaching this conclusion, we wish to clarify the implications of our decision. We do not consider that ... any of the covered agreements is to be interpreted as preventing Members from devising and implementing public health policies generally, and tobacco control policies in particular, through the regulation of the content of tobacco products, including the prohibition or restriction on the use of ingredients that increase the attractiveness and palatability of cigarettes for young and potential smokers. Moreover, we recognize the importance of Members' efforts in the World Health Organization on tobacco control.

As regards specific agreements relevant to the packaging cases, under both the TBT and SPS Agreements, taking regulatory action to protect health is a legitimate policy objective[62] and reference has been made in the above table to the public health exception in the GATT. Art 8.1 of the TRIPS Agreement also recognises that member states may adopt measures necessary to protect public health, provided they are consistent with the overall agreement. All of the exceptions are arguable, and rebuttable. However on the specifics of the TRIPS Agreement Voon and Mitchell[63] observe that the agreement is aimed not at the use of trademarks but at their registration and the plain packaging legislation does not affect registration in any way. Moreover the treaty confers negative trademark rights which exclude usage without consent by other parties, rather than positively allowing their usage. As the authors assert,

...the TRIPS Agreement generally frames trade mark and other IP rights as negative rights precisely to allow Members to pursue legitimate non-IP-related policies such as promoting public health.

Art 20 of the TRIPS provides that the use of trademarks shall not be ‘unjustifiably encumbered by special requirements’ imposed by member states, and goes on to illustrate such encumbrances as including ‘use in a special form...or in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other[s]...’. Given the restrictive and mandatory requirements relating to generic packaging much will turn on whether these impositions are ‘unjustifiable’ or not.[64] In this context outcomes could turn on the scientific evidence presented by both parties and while both the FCTC and Australian policy is claimed to rest on provable opinions there might be difficulties in establishing that generic packaging on its own will reduce the incidence of tobacco–induced disease and death. If this proves to be the case the WTO could effectively negate both WHO and domestic policy on the health issues.

The FCTC is not the only agreement potentially challenging over-extensive interpretation of TRIPS protections. The WTO Ministerial Declaration on the TRIPS and Public Health,[65] which constitutes a ‘subsequent agreement’ among WTO members,[66] acknowledges that the TRIPS Agreement should not prevent members from taking measures to protect public health. Moreover even within the parameters of the WTO system the Appellate Body has upheld the ultimate value of the preservation of life and health, the very policy objective underlying the plain packaging legislation.[67]

The FCTC’s influence creates no institutional synergy between the WHO and investment tribunals as exists with the WTO. Further, in investment disputes, a major hurdle established by most BITs is that their dominant objective is the protection of foreign investors. While the normative tensions between the health and investment regimes is apparent, investment treaties do provide space for host countries to contend that their interventions do not involve direct or indirect expropriations, and as with the WTO the multilateral WHO’s FCTC could be invoked in support of this approach in relation to plain packaging. A longer term strategy would be to amend relevant BITs to prioritise the FCTC health norms over investment protections.[68]

The Impacts of Regime Incoherence

Remedying regime incongruence is not the subject of this contribution although some references have been made above to ways of lessening fragmentation in the international legal system. In the case of the WTO these involve multilateral declarations or treaty amendments such as the earlier TRIPS declaration, though multilateralism of any sort is currently problematic. Regional and plurilateral agreements are more feasible to achieve, but would have limited impacts. In the case of investment regimes these could involve introducing exceptions into BITs which would be relatively easier to achieve but more limited in their impacts. In the case of the WHO, its instruments on tobacco control could be made binding on member countries, thereby strengthening member states’ compliant legislation on tobacco controls against investor claims.[69] However, given the reality that regime incoherence is inevitable within the pluralistic legal and dispute resolution systems discussed above, the question arises as to the benefits and disadvantages this creates.

Incongruences inevitably benefit those most able to traverse them. This can be illustrated in relation to the arbitrage factors in the dispute resolution field favouring the globalised tobacco companies. While public health can be depicted as a public good under the responsibility of nation states, transnational corporations can attempt to subjugate it to competing norms through these strategic vantages. In the investment context the choices operate at three levels:

  1. Choice of proceeding - international investors have initial options in relation to the initiation of proceedings seeking compensation. These options do not generally avail host countries, though they may retain rights against investors under domestic statute law or the underlying investment contract. The investor has arbitrage options in terms of whether to bring proceedings in an international tribunal or within domestic courts to exploit domestic remedies before proceeding internationally, or whether to pursue other settlement strategies through diplomatic channels or the influence of international financial institutions. These choices can be made in serial fashion, as has occurred in the plain packaging situation.

  2. Choice of investment instrument - where there are procedural or substantive differences between different BITs a transnational corporation can have arbitrage options in relation to the most suitable treaty for bringing a claim. Where a tobacco company has operations in numerous countries it can select a BIT most attractive to the pursuit of its interests. Philip Morris, a US-based corporation, had these options in its selection of the Hong Kong-Australia BIT to found its claim against the host country. The host country had no counterpart choice.[70]

  3. Choice of forum - in relation to the decision to bring proceedings before an international tribunal, investors are often given, within a particular BIT, a choice of forum, usually involving UNCITRAL, ICSID, the ICC or the Permanent Court of Arbitration (PCA).[71] This election cannot be vetoed by the host country concerned. In the case under consideration this choice was exercised in favour of the UNCITRAL Arbitration Rules administered by the PCA; the ICSID, the currently preferred forum in ISDS was not available in the Hong Kong-Australia BIT.

In the WTO context there are more limited arbitrage options. While there is little formal difference in regard to which member states bring complaints to the WTO there might be economic and political advantages for a developing country to agree to bring proceedings at the behest of big tobacco. In the Australian case the WTO complaints were all initiated by developing countries. Choices also extend to the use of non-adjudicative processes available under the DSU, such as negotiation, conciliation or good offices, though the acquiescence of respondent states is required to proceed down these decision-making paths, rendering them less susceptible to unilateral manipulation.

Apart from the arbitrage factors it is well-established that BITs can confer on foreign investors more substantial rights than domestic firms are accorded under municipal law. Philip Morris’s plan to proceed with its investor-state dispute despite the domestic ruling by an independent court according it due process of law highlights the extent to which the investment arbitration system can be exploited by corporate interests. The FDI system was originally intended to provide protection for investors operating in countries where court systems were considered incompetent, corrupt or biased against foreigners. It has expanded into a system which has been described as ‘constitutionalising’ the rights of investors,[72] regardless of the Rule of Law attributes of domestic courts, and without reciprocal rights and remedies for host countries. For this reason there has been extensive attention to the potential amendment of BITs and in particular to the role of ISDS in FDI law. Paradoxically the Australian government announced in 2011 that it would no longer include ISDS in new international treaties, the very system to which it is subject in the Philip Morris case. [73] While the abandonment of ISDS alone would not advance the cause of domestic public health policies, much academic opinion has supported the right of host countries to maintain regulatory authority of public health issues in the face of BITs.[74]

Implications for Developing Countries

Many countries are following the parallel proceedings referred to above before deciding whether to join the ‘olive revolution’ in requiring plain packaging regulations of their own.[75] According to news reports the South African government is considering similar legislation to that enacted in Australia, and developed economies such as Canada, New Zealand and France are also said to be watching the outcome of the international tribunals. Moreover in October 2012 attention focused on New Zealand, a small developed economy, in relation to a proposal that the country should be smoke-free by 2025. This was motivated by public health concerns and the differential impacts of smoking on the indigenous population. While South Africa and other African countries have yet to decide whether to build on existing anti-tobacco legislation by banning brands and trade marks on packaging South Africa was one of several developing countries, but the only one from Africa, which requested to join the WTO consultations between the Dominican Republic and Australia.[76]

The domestic decision favouring plain packaging policies in Australia has virtually no precedent effect for developing countries considering comparable legislation. A favourable outcome for Big Tobacco in the WTO and PCA would inevitably inhibit developing countries, imposing a regulatory chill on public health policy in relation to smoking. For South Africa there was a brush with international obligations in the recent Walmart case where competition authorities were required to examine the proposed merger in light of the public interest test found in relevant legislation. The Competition Appeal Court acknowledged the potential relevance of South Africa’s international obligations in relation to its treatment of the merger but did not find it necessary to make a determination on this issue. Likewise in the Foresti case South Africa’s transformation in the mining industry was subject to scrutiny by an ICSID tribunal but the settlement of the proceedings avoided the prospective invalidation of the relevant mining legislation.

In the past developing and emerging economies have had difficulty resisting pressure from globalised tobacco corporations, with even developed countries such as Canada withdrawing packaging requirements in the face of proposed proceedings by a corporation under the NAFTA.[77] Moreover, developing countries such as Malawi and Zimbabwe are particularly dependent on tobacco exports for foreign currency and many developing countries, including Zimbabwe, expressed concerns over the Australian legislation’s possible violation of the TRIPS Agreement at a meeting of the TRIPS Council.[78] This suggests that quite apart from the legal indeterminacy prevailing in this area, many countries will have difficulties balancing preferred health policies with trade and investment obligations, as well as export and tax revenues.

Conclusions

Incoherence among different legal regimes is not new, and domestic law is susceptible to challenge on every occasion a complaint is brought to the WTO or an investment tribunal. South Africa is currently facing that prospect with Brazil pursuing its frozen chicken complaint against South Africa before the WTO, threatening the validity of anti-dumping duties imposed on frozen poultry in terms of the International Trade Administration Commission’s Report No 389.[79] Similarly constitutionally-based transformation in the mining sector came within a whisker of invalidation in the Foresti case[80] and in the protracted Walmart decision-making process the Competition Appeal Court referred in passing to whether the local vetting of the merger was compatible with the country’s IEL obligations, but did not have to decide the point. In many respects congruence cannot be expected when different forums adjudicate over the same factual situations in terms of different rules and principles. However, in the smoking cases it is impossible not to see the advantages accruing to Big Tobacco in having, after their ‘day in court’ in domestic courts, access to a ‘supranational court of appeal’ under the WTO and PCA. This benefit does not avail host countries – had the Australian litigation gone against the state there would have been no right of ‘appeal’ to an international tribunal.

The legal contests in the smoking cases are about the rights of states to regulate in pursuit of public health interests. They are also about the appropriate role of international courts and tribunals in constraining the behaviour of sovereign states and their courts. Here public health finds itself in the vortex of trade and investment forces as countries attempt to intervene in demand and supply dynamics in the tobacco market and the policies are resisted by transnational corporations. The paradox of these circumstances is that the measures are predominantly introduced by developed countries whose corporations the developing states are defending.[81]

Regime coherence has always been a challenge in international economic law. While incoherence can exist within treaty systems, such as ‘internal’ conflict among the various covered agreements of the WTO,[82] the external coherence problems, such as those between FDI law and trade law, are more problematic. Even here there are similar doctrines, such as national treatment and the MFN principle, which have common, though not identical, objectives within the two systems. Greater degrees of external coherence occur between IEL and instruments such as the FCTC. As the plain packaging episode has shown the incoherence challenges can also extend to the conflicts between international law, in one of its various manifestations, and domestic law.

While incoherence is intrinsic to the existence of multiple sources of legal rules, principles and policies, the question arises as to how conflicts are resolved among them. In domestic systems ‘secondary legal rules’ prescribe how inconsistencies among primary rules are authoritatively resolved,[83] but there are limited secondary rules at the international level. ‘Internal’ inconsistencies among the components of a set of treaties are more manageable, such as through the DSU in relation to the WTO covered agreements. There is less dispute resolution coherence in FDI in the context of different forums operating with different rules, such as those of UNCITRAL and ICSID, and the absence of formal systems of precedent and appeal. However, the issue highlighted in this article is the horizontal incongruence among international rules and governance systems. Here the way issues are framed is not insignificant: matters coming to the WTO or an investment tribunal are framed in terms of trade or investment principles respectively, with health policies entering the arenas as outliers. If the issues were framed in terms of health norms, and the impact on them of trade and investment policies, the outcomes might well be different, particularly within different tribunals.

Incoherence between international and domestic law is currently inescapable, given the fact that most domestic courts given precedence to national law and international tribunals to global norms. This creates the real prospect of the plain packaging laws endorsed by the highest court in Australia being found non-compliant with WTO law or rules of the relevant BIT. This saga will be played out in future months and years and will have implications for many other countries considering similar public health measures though domestic law.

[1] Professor of Law, Bond University, Australia, and University of the Witwatersrand, Johannesburg. The author acknowledges the outstanding research assistance provided by Joshua Lessing, Tutor in Law, Bond University.

[2] See Joel Trachtman, ‘Fragmentation and Coherence in International Law’, at http://ssrn.com/abstract=1908862.

[3] Trachtman, note 1 above.

[4] UNCTAD, World Investment Report 2012.

[5] This was reinforced by the latest UNCTAD Global Investment Trends Monitor (23 October 2012) which highlights a decline of 8% in 2012 global FDI compared with the same period of 2011.

[6] World Trade Organisation, ‘International Trade Statistics’, (2012), 13, available at http://www.wto.org/english/res_e/statis_e/its2012_e/its12_toc_e.htm).

[7] Growth in the Chinese economy has slowed to its lowest rate since early 2009, with GDP growth coming in at 7.4 per cent in the September quarter (the average growth for the last 30 years has been 10 per cent).

See J Garnaut, ‘China slows, but relief ahead’, Sydney Morning Herald, (19 October 2012), available at http://www.smh.com.au/business/china/china-slows-but-relief-ahead-20121018-27tvc.html#ixzz2AHqk6aqt; see also World Bank, ‘World databank: World Development Indicators (WDI) & Global Development Finance (GDF), The World Bank, http://databank.worldbank.org/ddp/html-jsp/QuickViewReport.jsp?RowAxis=WDI_Ctry~&ColAxis=WDI_Time~&PageAxis=WDI_Series~&PageAxisCaption=Series~&RowAxisCaption=Country~&ColAxisCaption=Time~&NEW_REPORT_SCALE=1&NEW_REPORT_PRECISION=0&newReport=yes&IS_REPORT_IN_REFRESH_MODE=true&IS_CODE_REQUIRED=0&COMMA_SEP=true.

[8] International Monetary Fund, IMF World Economic Outlook: Coping with High Debt and Sluggish Growth, (2012), 1, http://www.imf.org/external/pubs/ft/weo/2012/02/pdf/text.pdf.

[9] See http://www.tobacco-facts.net/2009/04/cigarettes-the-only-legal-product.

[10] Excise increases are usually justified in terms of health policies and budgetary pressures.

[11] The American Journal of Public Health has published research showing that increases in the price of cigarettes and public education campaigns are critical in reducing rates of consumption; see Emery, Choi, Szczypka, Chaloupka, ‘The Effects of Smoking-Related Television Advertising on Smoking and Intentions to Quit Among Adults in the United States’ (2012) 102(4) American Journal of Public Health 751, 751; see also Franks, Jerant, Leigh, Lee, Chiem, Lewis and Lee, ‘Cigarette Prices, Smoking, and the Poor: Implications of Recent Trends’, (2007) 97(10) American Journal of Public Health 1873; but see also Farrelley, and Engelen, ‘Cigarette Prices, Smoking, and the Poor, Revisited’, (2007) 98(4) American Journal of Public Health 582.

[12] The retail sale of tobacco products without the specified displays is prohibited from 1 December 2012. For more on the subject see M Scollo and M Winstanley (eds), Tobacco in Australia: Facts and Issues (3ed, 2008, Cancer Council Victoria, Melbourne), available from: http://www.tobaccoinaustralia.org.au.

[13] JT International SA v Commonwealth of Australia [2012] HCA 43 (5 October 2012), British American Tobacco Australasia Limited v Commonwealth of Australia [2012] HCA 43 (5 October 2012).

[14] Tobacco Plain Packaging Act 2011, its implementing regulations, as amended by the Tobacco Plain Packaging Amendment Regulation 2012 (No. 1) and the Trade Marks Amendment (Tobacco Plain Packaging) Act 2011, which built on the earlier Tobacco Advertising Prohibition Act 1992 (Cth). The government aims to reduce the proportion of adults smoking from 15% to 10% of the population by 2018. The legislation was based on the recommendations of a National Preventative Health Taskforce and was preceded by a consultation exercise in which tobacco companies, including Phillip Morris Ltd, participated.

[15] The industry employs about 2000 people and in the 2007 financial year made a combined net profit of $586m – see Scollo and Winstanley, note 12 above.

[16] In this regard there are no contentions that the measures contravene the national treatment or MFN principles.

[17] In Australia government-funded bodies such as the Preventative Health Taskforce and QUIT have also impacted on smoking levels. Duty-free allowances for cigarettes were also reduced from 250 cigarettes to 50 cigarettes, and for tobacco from 250 grams to 50 grams.

[18] This involved a claim under s 51(xxxi) of the Australian Constitution.

[19] The finding was consistent with precedents in Phonographic Performance Co of Australia Ltd v Commonwealth of Australia (2012) 286 ALR 61;and Grain Pool of Western Australia v Commonwealth of Australia (2000) 170 ALR 111.

[20] There were, notably, only two references across all the judgments to ‘international obligations’, namely to compliance with international health obligations being a purpose for the laws. However even the dissenting judge described tobacco manufacturers as purveyors of ‘lies and death’ – per Heydon J at [193].

[21] A Philip Morris spokesperson was reported to state that the domestic decision would have ‘no legal bearing’ on the cases pending in the WTO or under the Hong Kong-Australia BIT.

[22] British American Tobacco v the Minister of Health, [2012] ZASCA 107 (20 June 2012).

[23] Section 39(1(b) of the Constitution, as extrapolated in Glenister v President of the Republic of South Africa and others 2011 (3) SA 347 (CC). The SCA also referred to the s 27 (1) right of access to health care services and the obligations this imposes on the state.

[24] The propensity is also reflected in International Trade Administration Commission v SCAW South Africa (Pty) Ltd 2010 (5) BCLR 457 (CC).

[25] See Canada (Attorney-General) v JTI-MacDonald Corp , 2007 SCC 30, para 47.

[26] Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, in consultations on 18 July 2012, WT/DS441. In April 2012 Honduras challenged the plain Packaging laws even before their domestic constitutionality had been tested and has since requested a panel – Australia —Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging , in consultations on 4 April 2012, WT/DS435/16. A similar case has been brought by Ukraine – Australia — Certain Measures Concerning Trademarks, Geographical Indications and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging, panel established on 28 September 2012, WT/DS434/11. While there are cigarette exports from Honduras to Australia this is not the case with Ukraine. The Dominican Republic exports cigars, including to Australia - seeTim Colebatch, ‘Plain packaging challenge spreads’ (20 July 2012) The Sydney Morning Herald, available at http://www.smh.com.au/opinion/political-news/plain-packaging-challenge-spreads-20120719-22d62.html.

[27] Handed down on 14 August 2012.

[28] Articles 2.1, 3.1, 15.4, 16.1, 20, 22.2(b) and 24.3.

[29] Articles 2.1 and 2.2.

[30] Article III:4.

[31] There have been seven tobacco cases decided before the WTO – Thailand - Restrictions on Importation of and Internal Taxes in Cigarettes, GATT Panel Report DS10/R, adopted 7 November 1990, BISD 37S/200; Japan - Japanese Restraints on Imports of Manufactured Tobacco from the United States, Report of the Panel adopted on 11 June 1981 (L/5140 - 28S/100); Armenia — Measures Affecting the Importation and Internal Sale of Cigarettes and Alcoholic Beverages (DS411 – in consultations); United States — Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Appellate Body DS406/ R, adopted, with recommendation to bring measures into conformity, on 24 April 2012; Thailand — Customs and Fiscal Measures on Cigarettes from the Philippines, Report of the Appellate Body DS371/AB/R adopted, with recommendation to bring measures into conformity on 15 July 2011; Dominican Republic — Measures Affecting the Importation and Internal Sale of Cigarettes, Report of the Appellate Body DS302/ R adopted, with recommendation to bring measure into conformity on 19 May 2005; Dominican Republic — Measures Affecting the Importation of Cigarettes, In consultations on 28 August 2003 DS300/R; Peru — Taxes on Cigarettes, Terminated on 12 July 2001, DS227/R.

[32] See the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments, 1993. The Hong Kong connection is based on Philip Morris’s Australian operations being owned by Hong-Kong based Philip Morris Asia Limited.

[33] Phillip Morris had previously filed other investment claims against tobacco control measures, for example against Urugay: Philip Morris Brand Sàrl (Switzerland), Philip Morris Products S.A. (Switzerland) and Abal Hermanos S.A. (Uruguay) v Oriental Republic of Uruguay (ICSID Case No ARB/10/7).

[34] There is some irony in Australia being subject to ISDS before an international tribunal given that the government decided in 2011 that it would no longer agree to ISDS procedures in trade or investment agreements, though existing treaties, such as that with Hong Kong, leave the state exposed to liability. See Trade Policy Statement, ‘Trading our Way to More Jobs and Prosperity’. The government’s argument was it did not support provisions conferring greater legal rights on foreign businesses than those available to domestic businesses. In anticipation of the legislation under discussion government indicated that it would not accept provisions that limit its capacity to place health warnings or plain packaging requirement on tobacco products. An earlier Productivity Commission report on ‘Bilateral and Regional Trade Agreements’ had identified policy and financial risks in conventional ISDS provisions (13 December 2010).

[35] Umbrella clauses require each contracting party to a BIT to observe any obligations they have entered into with regard to investments with the other contracting party. The scope of these clauses is not settled.

[36] See Australia’s Response to the Notice of Arbitration, 2011, in the UNCITRAL arbitration case, # 33-35.

[37] See Laurence Boulle, ‘ADR in Cross-Border Investment Disputes’ (2011) ADRB 93.

[38] See Andrew Mitchell and Tania Voon, ‘Regulating tobacco flavours: implications of WTO law’, (2011) 29 Boston University International Law Journal 383, 412.

[39] See generally Andrew Mitchell and Sebastian Wurzberger, ‘Boxed In? Australia’s Plain Tobacco Packaging Initiative and International Law’, (2011) 27 Arbitration International 623.

[40] The Australian government contends that the BIT tribunal lacks jurisdiction as PM Asia acquired its assets (shares) in PM Australia in 2011 after government announced its intention to introduce plain packaging laws.

[41] Other cases involve measures taken in Norway, Canada, Uruguay and the US, some involving bans on adding chocolate, clove and sweetening additives to cigarettes. See Mitchell and Voon, note 41 above.

[42] Under the TBT Agreement the respondent could contend that the packaging regulations were not adopted with a view to creating unnecessary obstacles to trade, and that they had the legitimate objective of protecting human health or safety, as accommodated by Art 2.2 of the Agreement.

[43] See Andrew Mitchell and Tania Voon, ‘Regulating tobacco flavours: Implications of WTO law’, (2011) 29 Boston University International Law Journal 383.

[44] Lo refers to them as ‘treaty networks’ to emphasise their overlapping coverage - Chang-fa Lo, ‘External Regime Coherence: WTO/BIT and Public Health Tension as an Illustration’, keynote speech at the Society of International Economic Law Conference, Singapore, 12 July 2012.

[45] However the interface between environmental agreements and trade norms have been prominent in the Doha Round of trade deliberations – see http://www.wto.org/english/tratop_e/dda_e.htm. See Andrew Mitchell, ‘In Search of Coherence Between Trade and Health: Inter-Institutional Opportunities’ (2010) 25 Maryland Journal of International Law 143.

[46] See Chang-fa Lo, above at n 7.

[47] The authority for legislation is found in Arts 19 and 20 of the WHO Constitution – see http://apps.who.int/gb/bd/PDF/bd47/EN/constitution-en.pdf.

[48] WHO Framework Convention on Tobacco Control: Guidelines for Implementation of Article 11, (November 2008), and Guidelines for Implementation of Article 13, (November 2008).

[49] The WHO and the FCTC Secretariat both supported publicly the Australian plain packaging legislation.

[50] See the WHO Framework Convention on Tobacco Control, at http://whqlibdoc.who.int/publications/2003/9241591013.pdf.

[51] Tobacco Plain Packaging Act 2011 (Cth) s 3(1)(d).

[52] See http://www.wto.org/english/thewto_e/coher_e/wto_who_e.htm.

[53] See on this principle United States — Standards for Reformulated and Conventional Gasoline, Appellate Body report adopted 20 May 1996, DS2/AB/R.

[54] This the ‘last in time’ principle, acknowledged in the Vienna Convention on the Law of Treaties, but easier to apply in domestic law than in international law circumstances.

[55] In the Beef-Hormones case the Appellate Body acknowledged that the precautionary principle might be part of international environmental law but not general international law, but found it in applicable to the case. In the GMO case a panel was not prepared to refer to an environmental treaty as an interpretive aid: European Communities — Measures Concerning Meat and Meat Products (Hormones), Appellate Body report adopted on 13 February 1998, WT/DS26/AB/R; WT/DS48/AB/R .

[56] Art 31.3(c).

[57] European Communities — Measures Affecting the Approval and Marketing of Biotech Products, panel report adopted on 21 November 2006, WT/DS291/R/Corr.1; WT/DS292/R/Corr.1; WT/DS293/R/Corr.1.

[58] For example in United States — Import Prohibition of Certain Shrimp and Shrimp Products, ruling adopted on 6 November 1998, DS58/AB/R.

[59] United States — Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Panel DS406/R, appealed on 5 January 2012.

[60] For instance, the Appellate Body commented that it had received a letter from the Director General of the WHO expressing offering technical assistance in areas covered by the WHO's mandate and the Division asked the participants to comment on the letter. In light of the fact that the parties had placed a considerable amount of materials regarding WHO legal instruments and the WHO's work in the area of tobacco control on the Panel record, and ‘mindful of its mandate on appeal under Article 17.6 of the DSU’, the Division did not deem it necessary to request assistance from the WHO.

[61] United States — Measures Affecting the Production and Sale of Clove Cigarettes, Report of the Appellate Body DS406/R, adopted, with recommendation to bring measures into conformity, on 24 April 2012, at [235].

[62] Of the draft trade measures notified to the WTO under the TBT Agreement, the largest group relates to human health and safety.

[63] Tania Voon and Andrew Mitchell, ‘Implications of WTO Law for Plain Packaging of Tobacco Products’ in Mitchell, Voon and Lieberman (eds) Public Health and Plain Packaging of Cigarettes: Legal Issues (Edward Elgar, 2012).

[64] See Lo, note 46 above, 10.

[65] Declaration on the TRIPS agreement and public health, adopted on 14 November 2001, WT/MIN(01)/DEC/2, available at http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm.

[66] In terms of the Vienna Convention such agreements are valid sources of interpretive influence – Art 31(3((a).

[67] See for example European Communities – Measures Affecting Asbestos and Asbestos-Containing Products, WTO Doc WT/DS135/AB/R (5 April 2001) at [172].

[68] See Lo, note 46 above, 16. Another trade option would be to have a Ministerial Declaration on TRIPS and public health, along the lines of the earlier ministerial on compulsory drug licensing, to harmonise the IP and health norms and provide a source of law for international tribunals.

[69] This would be to give effect to the Vienna Convention on the Law of Treaties, Art 31.3(c).

[70] The Hong Kong based company, Phillip Morris Asia, purchased the shares in the Australian company, Phillip Morris Ltd, in 2011. The latter, not being a foreign investor, could not have brought the investment claim.

[71] Some BITs allow, at the election of investors, the use of any arbitration institution.

[72] See David Schneiderman, Constitutionalising Globalisation: Investment Rules and Democracy’s Promise, (Cambridge: Cambridge University Press, 2009).

[73] The government has been pressured to depart from this policy in relation to the Trans-Pacific Partnership Agreement (TTP), currently under negotiation. Its stance has also been criticised domestically, for example by the Australian Chamber of Commerce and Industry.

[74] In 2012 50 global jurists expressed concern that international investment systems were restricting governments’ ability to regulate in the interests of human development and environmental sustainability. In 2010 120 jurists signed a statement criticising the inclusion of ISDS in the TPP agreement currently under negotiation. The OECD has recently examined these issues in its public consultation on ISDS: OECD, ‘International Investment Agreements: Public Consultation on Investor-State Dispute Settlement’, (23 July 2012) Organisation for Economic Co-operation and Development, available at http://www.oecd.org/daf/internationalinvestment/internationalinvestmentagreements/publicconsultationisds.htm.

[75] See Mathew Rimmer, ‘The High Court and the Marlboro Man: the plain packaging decision’ (18 October 2012) The Conversation, available at http://theconversation.edu.au/the-high-court-and-the-marlboro-man-the-plain-packaging-decision-10014 . The evidence indicates that New Zealand, Norway, the UK, India and the EU have expressed interest in emulating the Australian legislation.

[76] Apart from South Africa, the following countries requested to join the consultations: New Zealand, Uruguay, Guatemala, Nicaragua, Norway, Honduras, Brazil, El Salvador, the European Union, Ukraine and Canada. Australia accepted the requests of Brazil, Canada, El Salvador, the EU, Guatemala, Honduras, New Zealand, Nicaragua, Norway, South Africa, Ukraine and Uruguay.

[77] See references in Lo, note 46 above, 13.

[78] Other countries were the Dominican Republic, Ukraine and Honduras, all active in WTO proceedings. See http://www.twnside.org.sg/title2/health.info/2012/health20120301.htm. New Zealand, Canada and Norway supported the Australian measures.

[79] South Africa — Anti-Dumping Duties on Frozen Meat of Fowls from Brazil, in consultations on 21 June 2012, WTO DS 439.

[80] See Foresti v Republic of South Africa, Case No ADR (AF) 07/01, ICSID.

[81] For some time growth in cigarette sales have occurred only in developing countries, with rapid declines occurring in the developed world.

[82] Needless to say internal incoherence can also prevail within provisions of a single treat, such as the GATT.

[83] The terms derive from H L Hart‘s classic The Concept of Law (2012, 3rd ed, OUP). See also Laurence Boulle, The Law of Globalisation (Kluwer Law, The Netherlands, 2009).


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