Global health governance at a crossroads: trademark protection v. tobacco control in international investment law.

• Author: Vadi, Valentina S.

"As it is unhealthy, I will never smoke again, but now I smoke the last cigarette"

Italo Svevo, La Coscienza di Zeno (1923).

According to the World Health Organization, tobacco consumption causes the death of five million people each year. Countries have increasingly adopted regulations aimed at diffusing public awareness and have massively adhered to the World Health Organization Framework Convention on Tobacco Control, which has established a cognitive and normative consensus for promoting global public health through tobacco control. Despite these successful approaches, the tobacco business has been facilitated by foreign investment protection, which has increased competition and lowered tobacco prices. By extensively protecting investor's rights to promote foreign direct investment and to foster economic development, international investment governance risks undermining the fundamental goals of tobacco control. This article investigates the relationship between international investment law and tobacco regulation.

As investment agreements broadly define the notion of investment, tension exists when a State adopts tobacco control measures interfering with foreign investments, as regulation may be considered tantamount to expropriation under investment rules, in addition, investment treaties provide foreign investors with direct access to investment arbitration. Thus, foreign investors can directly challenge national measures aimed at protecting public health and can seek compensation for the impact on their business of such regulation. As a result, the mere threat of an investor-state dispute may have a chilling effect on policy-makers. Several questions arise in this context. Are investment treaties compatible with states' obligations to protect public health? Is investor-state arbitration a suitable forum to protect public interests? Are there any limits to the power of states to enact public health regulations?

In the light of parallel developments before other international law fora, this article critically assesses the clash between public health law and international investment law before investment treaty tribunals and offers a systematic and updated analysis of the recent case law. The article then concludes with some policy options that may help policy makers and adjudicators reconcile the different interests at stake.

INTRODUCTION I. GLOBAL HEALTH GOVERNANCE AND THE FRAMEWORK CONVENTION ON TOBACCO CONTROL II. THE "TOBACCO WARS": CASE STUDIES IN INTERNATIONAL INVESTMENT LAW 2.1 Expropriation 2.2 Non-Discrimination 2.3 Fair and Equitable Treatment 2.4 The Prohibition of Unreasonable Measures III. RECONCILING INVESTOR RIGHTS AND TOBACCO CONTROL IN INVESTMENT LAW 3.1 Interpretation 3.1.1 Textual Interpretation 3.1.2 Teleological Interpretation 3.1.3 Subsidiary Sources of International Law 3.1.4 Systemic Interpretation 3.2 Stipulating ad hoc Safeguards CONCLUSIONS INTRODUCTION

Tobacco control is an important aspect of contemporary public health governance. Whatever its conceptualization, be it considered a human rights issue (1) or a mere public policy objective, (2) the legitimacy of such a goal is uncontested. It is estimated that tobacco use causes the death of more than five million people a year and that this figure could rise to more than eight million by 2030 unless measures are taken to control the tobacco epidemic. (3) In addition to the fundamental humanitarian concerns raised by the tobacco epidemic, the economic literature provides further ground for tightening tobacco control measures: a World Bank study examines the long-term costs of treating tobacco illness vis-a-vis the short-term economic benefits derived from tobacco production and trade. (4) In the light of these public policy concerns, countries have increasingly adopted regulations aimed at raising public awareness and have massively adhered to the World Health Organization Framework Convention on Tobacco Control (FCTC), (5) which has established a "cognitive and normative consensus" for promoting global public health through tobacco control. (6)

However, international trade law risks undermining the goal of tobacco control by significantly reducing tariff and non-tariff trade barriers, lowering the prices of tobacco products and thus causing an increase in cigarette smoking, particularly in low income countries. (7) In parallel, investment treaties have furthered foreign direct investment in the tobacco business, thus increasing competition and lowering tobacco prices. (8) While most doctrinal contributions on the subject have focused on the complex interplay between tobacco control and trade, (9) this article explores the less studied linkage between tobacco control and investment treaty guarantees. As investment treaties broadly define the notion of investment, a potential tension exists when a State adopts tobacco control measures that interfere with foreign investments because such regulation may be considered a violation of investment treaty provisions protecting the trademarks of tobacco companies. Moreover, because investment treaties provide foreign investors with direct access to investment arbitration, foreign investors can directly challenge national measures aimed at tobacco control and can seek compensation for the impact of such regulation on their business. Indeed, a number of investor-state arbitrations have dealt with tobacco control measures and the time is ripe for a comprehensive analysis and critical assessment.

For instance, in a recent move to tighten its tobacco control regulation, Australia has adopted plain packaging, a packaging regime that requires the removal of colors, designs, and logos from cigarette packs while allowing the brand name to be displayed in a standard font. (10) Allegedly, plain packaging aims to reduce the incidence of smoking by making cigarette packets less appealing: The Bill will require all cigarettes to be sold in unattractive olive-green packs. (11) Health warnings depicting mouth cancer and other effects of smoking will cover seventy- five percent of the packs' fronts. (12)

Confronted with this groundbreaking initiative, Philip Morris Asia Limited, which is based in Hong Kong and owns the Australian affiliate Philip Morris Limited, (13) filed a notice of investor-state arbitration, (14) arguing that the legislation violates the Australia-Hong Kong bilateral investment treaty. [hereinafter BIT]. As the BIT protects intellectual property such as trademarks, the company argues that plain packaging is affecting the value of the company's trademark. (15) Although Australia is a relatively small tobacco market, tobacco companies fear that the adoption of plain packaging by the Australian government will set a landmark precedent that could be emulated by other countries in a sort of domino effect. (16) However, the Australian government has not stepped back. The Australian Prime Minister, Julia Jillard, stated: "We're not going to be intimidated by big tobacco tactics, whether they're political tactics, whether they're public affairs kind of tactics out in the community or whether they are legal tactics ... We're not taking a backward step. We've made the right decision and we'll see it through." (17) She also reaffirmed that "We are confident of our reforms---confident we can deliver them and confident that they will make a difference to the number of people who smoke...." (18) The outcome of the arbitration, however, is uncertain given the unique nature of the challenge: Never before has an arbitral tribunal been asked to rule on plain packaging. (19)

The threat of an investment dispute, however, may prove potent in less industrialized countries where it may have a chilling effect on policy makers. (20) When three subsidiaries of Philip Morris lnternational (PMI) filed an arbitration claim against Uruguay because of its tobacco control regulation, it was reported that Uruguay was going to water down tobacco control legislation. (21) Uruguay's gross domestic product is half the size of the company's $66 billion in annual sales. (22) Serendipitously, in November 2010, Mayor Michael R. Bloomberg of New York pledged his financial assistance to the state's legal defense. (23) The Uruguayan legislation differs from the Australian legislation in that it adopts more traditional tools of tobacco control, albeit expanding their scope significantly. (24)

In what has become a massive clash between government and corporate interests, such investor-state arbitrations represent a laboratory of confrontation between public health and investors' rights in international investment law and arbitration. An analysis of the relevant legal issues raised by these cases may have significant ramifications both for tobacco control regulation and, more broadly, for the development of international investment law and its interplay with general international law. (25) While public health law acknowledges the fundamental and irreconcilable conflict between the tobacco industry's interests and public health policy interests, (26) only a few investment treaties provide for general exceptions for public health reasons. (27) Interestingly, in the pending PMI v. Uruguay arbitration, the claimants "do not challenge the Uruguayan Government's sovereign right to promote and protect public health," (28) but claim that "the Government cannot abuse that right and invoke it as a pretext for disregarding the Claimants' legal rights." (29) Several questions arise in this context. Are investment treaties compatible with states' obligations to protect public health? Is investor-state arbitration a suitable forum to protect public interests? Are there any limits to the power of states to enact public health regulations?

In addressing these questions, this article argues that excessive protection of investment treaty guarantees may negatively affect tobacco control policies. However, the existing customary canons...