New developments on the Philip Morris case

By Gabriel Pittaluga, Pittaluga Abogados

All arguments wielded by Uruguay against Philip Morris on the International Centre for Settlement of Investment Disputes (ICSID) were dismissed by a court created by this body that assumed jurisdiction on the case. The court has a majority of favorable decisions for privates litigating against states, all of which are binding compliance and unappealable.

Among other elements Philip Morris, the world’s largest tobacco company, argues that a 2005 Uruguayan anti-tobacco law which requires that graphic health warnings cover 80 percent of cigarette packets violates its intellectual property rights and an Agreement for the Promotion and Reciprocal Protection of Investments celebrated between Switzerland and Uruguay in October 7, 1998.

In its answer to the complaint Uruguay stated that all measures against tobacco were taken for public health reasons, explaining that the country´s high percentage of adult and teen smokers constituted a "public health crisis”. Article 2 of the agreement with Switzerland provides the right for the parties of not allowing economic activities for various reasons, among them public health related ones.

However in its decision of July 2013 the court asserted that Uruguay not only accepted tobacco investments but also granted millionaires tax benefits in order to promote it. The court declared that despite the efforts made at the time to combat tobacco consumption, Uruguay “encouraged the activity by promoting the investments”.

Some experts argue that Philip Morris’s goal is to make this a “test case” to keep other countries (the company is also suing Australia and Thailand) from implementing restrictive tobacco policy. For that reason, given the advantage that Philipp Morris took on the case and the risk of losing the arbitration, the Uruguayan government announced it will strengthen its legal defense by hiring more lawyers.

On a May 12 official meeting in Washington DC, President José Mujica asked President Barack Obama political support on the matter. “This is more than World War I and World War II. It’s murder. We are in an arduous fight and we must fight against very strong interests”, he told him.