Warning: Investment Agreements Are Dangerous to Your Health
Sy, Deborah, The George Washington International Law Review
Governments are currently enacting a broad menu of tobacco control measures. It is important for them to be aware of how these measures may draw legal challenges by tobacco industry investors through international investment agreements. This Article outlines the grounds upon which the tobacco industry could base a claim against host states attempting to fulfill various obligations under the World Health Organization Framework on Tobacco Control (WHO FCTC), and provides a general analysis of the relief that the public health objectives, principles, and standards outlined under the WHO FCTC can afford.
This Article notes that although most of the tobacco industry arguments are weak, the threat of a tobacco industry-initiated claim remains high. Consequently, states would be wise to begin exploring options to minimize uncertainty regarding the scope of their regulatory discretion and to take action before claims are sought. This Article proposes some options to remove the tobacco industry from the protection system of international investment agreements, with specific recommendations for the WHO FCTC parties to take collective action, as well as for the host states to consider the renegotiation of bilateral investment treaties.
In the 1990s, the international community coalesced around a global solution to the tobacco epidemic.1 After six sessions of arduous negotiations on strategies to counter the ability of the tobacco industry to "influence national policies and use every international and domestic legal means to oppose strong control measures and thwart attempts to regulate its commercial practices,"2 the World Health Organization (WHO) Framework Convention on Tobacco Control (FCTC) was adopted by the World Health Assembly, and by 2005, it entered into force.3
The FCTC outlined the regulation of all significant aspects of tobacco trade, such as taxes,4 illicit trade,5 advertising,6 product regulation,7 and packaging,8 in order to assist states, particularly developing ones, to develop strong tobacco control measures.9 It also empowered health ministers to adopt more effective tobacco control measures and to defend them from other ministries, such as those in trade, finance, and agriculture, which had previously protected tobacco industry interests.10
Many of the 172 parties to the FCTC have succeeded in utilizing this instrument to promote comprehensive tobacco control policies. Some countries have lead by example in their respective regions. For example, Uruguay has taken the lead in the Latin American region in implementing tobacco control measures. Some of these FCTC measures include: banning smoking in all enclosed public places, requiring graphic health warning labels on cigarette packages, banning misleading terms and descriptors, and banning tobacco advertising.11
Challenging these efforts to ban misleading descriptions and to require graphic health warnings, Philip Morris International (PMI), through its subsidiaries, filed an investment claim in early 201012 against Uruguay, a country with a gross domestic product (GDP) that is less than half the transnational tobacco company's total market capitalization.13 The case filed by PMI's subsidiaries, FTR Holding, Phillip Morris Products S.A., and Abel Hermanos S.A. (collectively referred to as PMI),14 was the first in which a transnational tobacco company brought claims as a "foreign investor" under an international investment agreement (IIA).15 PMI alleged that Uruguay's tobacco control measures constituted indirect expropriation of its intellectual property, which required just and adequate compensation.16 Observers posit that this is part of a larger strategy to bring "regulatory chill"17 to tobacco control measures. 18 Others fear that a win in favor of the tobacco industry in this case could lead to a slippery slope that would question the credibility and legitimacy of the investor-state dispute system. …