Trade law and tobacco: plain sailing?

This June, a WTO panel issued its long-awaited report on a highly sensitive subject: Australia’s Tobacco Plain Packaging Act 2011 (the “TPPA”). The TPPA sought, among other things, to terminate decades of tobacco branding practices, in order to reduce smoking and improve public health in Australia, and it did this by prohibiting the placing on the packaging of tobacco products of any trademarks or other marks, except for the brand name, the name of the manufacturer, and the specification of the product variant, using standardised fonts, and by requiring the use of uniform packaging for all tobacco products sold in Australia, specifying their colour, shape and size, and layout.

The WTO proceedings follow an unsuccessful constitutional challenge by British American Tobacco to the TPPA in the Australian High Court, and another unsuccessful claim by a Philip Morris subsidiary under the Australian-Hong Kong bilateral investment treaty (on admissibility grounds). This time it was WTO Members challenging the Australian legislation, specifically, Cuba, the Dominican Republic, Honduras, Indonesia and Ukraine (although Ukraine withdrew its claims prior to the hearing).

There were two main sets of claims. One related to trademark protections under the WTO TRIPS Agreement; the other related to the question of whether the TPPA could be justified on public health grounds under the WTO TBT Agreement. Australia was successful on all claims, though Cuba and the Dominican Republic have now lodged an appeal.

This blogpost addresses a side issue, which is the role that is played by the WHO Framework Convention on Tobacco Control (the “FCTC” or “Convention”) – an international agreement that sets global standards for national tobacco control policies – in the context of WTO law. Under general international law, one treaty can potentially have a bearing on another treaty in two ways. It may modify that treaty, and it may be used to interpret that treaty. The Appellate Body has frequently rejected both of these options for external treaties having a bearing on WTO law. It has left the door open only to such external treaties that are concluded by all WTO Members, which in practice means “agreements” in the form of WTO decisions.

But there is also a third option: to treat an external treaty as evidence of a fact relevant to the interpretation and application of WTO law. This was the option chosen by the WTO panel, which helped the panel to determine, among other things, the existence of a health risk, the effectiveness of various tobacco control measures (e.g. those relating to packaging and health warnings as well as possible alternatives to plain packaging), and the gravity of the consequences of not reducing the use of, and exposure to, tobacco products. This was done despite the fact that the FCTC is silent on plain packaging, while its implementing guidelines merely recommend consideration of such a measure: treated as a source of scientific information rather than of international rules, the guidelines were equally important as the Convention itself, even though they are merely non-binding instructions intended to help with the implementation of FCTC obligations. At the same time, the WTO panel disagreed with Australia that the FCTC guidelines should have been regarded as international standards which would have created a rebuttable presumption of conformity with the necessity requirement of the TBT Agreement.

There are clear advantages to this third approach to external treaties in the WTO legal system. It means that there is no need for WTO panels to deal with the difficult (and highly controversial) normative questions over the relationship between WTO law and other rules of international law. It also allows panels to overcome the problem of identity of the parties and guarantee the consistency of the outcome. In Australia – Plain Packaging, two of the complainants (the Dominican Republic and Indonesia) were not FCTC parties, so legally speaking that Convention could not influence the interpretation of their respective WTO obligations. But there is no such barrier to using the Convention as evidence of facts in a dispute that involves them. A similar approach has also been taken by other international courts and tribunals. For example, the investment tribunal in Philip Morris v Uruguay and the Court of Justice of the European Union in Philip Morris v Secretary of State both relied on the FCTC and its guidelines as a means of demonstrating the reasonableness of various tobacco control measures, holding that they are based on “best available scientific evidence”.  

Making the FCTC a prime factual point of reference for all tobacco-related trade disputes has important systemic consequences. It strengthens the legal position of national governments in this policy space and it gives states a measure of comfort that tobacco control legislation will not conflict with their international obligations. This is not just a theoretical argument. New Zealand postponed the adoption of a similar tobacco control law, awaiting the outcome of the Australian trade dispute. Trade concerns also played a role in shaping the new EU Tobacco Products Directive, under which plain packaging was eventually envisaged as a mere option for EU Member States rather than a pan-European standard. Interestingly, the United Kingdom was one of the few countries that decided to introduce a plain packaging without waiting for the outcome of the WTO proceeding.

Whether this approach is also adopted by the Appellate Body remains to be seen. But, based on the Appellate Body’s past practice (EC – Seal Products and US – Shrimp, for example) chances that it will are very high.

Written by Lukasz Gruszczynski, Associate Professor at the Polish Academy of Sciences.

Edited by the Linklaters Trade Practice. The views and opinions expressed here are the personal opinions of the author(s) and do not necessarily represent the views and opinions of Linklaters.