Plain, but far from simple: Australia's plain packaging legislation and the WTO dispute settlement process

Molly attended the 2012 WTO Public Forum in Geneva where she represented James Cook University: School of Arts and Social Sciences. She is currently studying a Bachelor of Law and Arts and is also the Vice President of the JCU Law Students Society and a mentor in the Young Diplomats Program.

Abstract

In 2010, the Rudd Government announced a raft of comprehensive anti-smoking reforms, controversially including the world’s first laws demanding the plain packaging of tobacco products.  Years later, as the Gillard Government prepares to bring that same legislation into force, the issue of plain packaging remains contentious, being brought under extensive scrutiny on a domestic, regional and international scale.  This paper predominantly focuses on the issue at an international level, seeking to consider the plain packaging provisions in light of the challenge mounted against them by Ukraine within the World Trade Organisation’s (WTO) dispute settlement mechanism.  In this respect, the case provides the perfect backdrop against which the operation of the WTO’s dispute settlement process can be assessed. 

The paper is set out in several parts: firstly, relevant background information to the issue is briefly provided; secondly, the key legal issues involved in the dispute are detailed and the prospects of success for Australia’s plain packaging legislation is analysed; thirdly, the tension between commercial trade and public health interests is highlighted; and, finally, given the likelihood of Australia successfully defending the legislation, the nation’s potential to invoke new public health rules and norms of global significance is also discussed by reference to regime theory.  Subsequently, recommendations for future action are laid out, stipulating that the Australian Government stay firm on its ambitious stance towards tobacco packaging.  Such a position may ultimately see the nation reinvigorate its status as a middle power capable of harnessing its modest diplomatic sway in order to implement positive change on a global level. 

Introduction

In Australia, the past few decades have been marked by a heightened civic awareness and concern regarding the effects of smoking upon public health.  Accordingly, over the past years, the Australian federal and state governments have embarked on a multitude of policy strategies to address the troubling onslaught of health risks associated with tobacco consumption.  The reforms implemented so far have been many and varied, encompassing bans on the advertisement of tobacco products, even extending to online promotional material; restrictions on smoking cigarettes in public places; the publication of graphic health warnings on tobacco product packaging; and the production and distribution of an $85 million anti-smoking social media campaign, focused on improving public education and raising general awareness.1Furthermore, in 2010, the Australian Government sought to deter the purchase of tobacco products through taxation measures, raising the excise applying to those products by 25% and diverting the additional revenue towards improving national health and hospitals.  As a result, the prevalence of tobacco use has substantially decreased to a daily smoking rate of 15.1% amongst Australians aged 14 years and above as of 2010, giving Australia one of the lowest smoking rates in the world and, consequently, one of the highest average life expectancies.  However, tobacco remains the leading cause of preventable death and disease in Australia, taking approximately 15, 000 lives on a yearly basis.2Furthermore, tobacco was responsible for inflicting $31.5 billion worth of social costs upon the Australian economy in 2004.3Therefore, despite considerable progress, it is evident that the issue of tobacco consumption and its devastating ramifications for public health continue to plague Australian society, prompting further action be taken by the current government to reduce the current use, and prevent the future use, of tobacco. 

Consequently, in its most controversial set of reforms yet, the Australian Government has proposed groundbreaking legislation compelling the plain packaging of tobacco products sold within Australia from 1 December, 2012.4The radical new laws will prohibit the use of corporate logos and brand imagery, as well as other images, colours and promotional text on the product packaging.  Instead, in order to comply with the legislation, all packaging must be a standard shade of dark brown in a matte finish; display a standard font size, position and style; and exhibit a graphic health warning that visibly spans over 75% of its front.5Based on extensive research, it is expected that by removing branded packaging as a final frontier for tobacco marketing, mandatory plain packaging legislation will reduce the popular appeal and glamour of those tobacco products, particularly for young people, and more readily draw consumers’ attention to the health warning labels.6Thus, the policy has been framed as the next step in significantly altering social attitudes towards the lethal health hazard of tobacco use in Australia. 

Domestic and international opposition

Despite its potential to invoke momentous long-term social change, the proposed plain packaging legislation has been predictably met with massive resistance from big tobacco companies.  On a domestic scale, this ultimately culminated in the mounting of a High Court challenge, whereby a number of the big tobacco companies, including British American Tobacco, Philip Morris, Imperial Tobacco and Japan Tobacco International.  Jointly, the companies claimed that the Australian Government’s plain packaging policy was unconstitutional as it divested them of their intellectual property rights without due compensation.7However, the application was ultimately rejected by a majority judgement, in what was hailed as ‘a massive win for public health... [and] the global tobacco companies’ worst defeat’.8

However, the war on tobacco is far from over as, interestingly, a national policy intended to improve the public health of Australian citizens has evolved into the highest profile international trade dispute that Australia has ever faced.  On the same day that the High Court ruling was handed down, Ukraine formally requested that a dispute settlement panel be established through the World Trade Organisation (WTO), alongside pending complaints from Honduras and the Dominican Republic that remain in the consultation stage of the process.9In its claim, Ukraine has contested that Australia’s plain packaging legislation contradicts several of its obligations across multiple WTO agreements in regards to intellectual property and barriers to trade.  Although Australia has since declined Ukraine’s request for a panel, a second request from Ukraine will see the matter progress to the WTO’s dispute settlement body, where the complaints will be examined in light of the various trade rules undertaken by Australia as a member-state of the WTO.10   

Ukraine’s claims and commercial interests 

Firstly, Ukraine and the other complainants have alleged that, by enacting the tobacco plain packaging regulations, Australia has violated its commitments to the protection of international trademarks under the Agreement on Trade-Related Aspects of Intellectual Property Rights (the ‘TRIPS Agreement’) and as a party to the Paris Convention.11The most viable of the grievances lodged by Ukraine is in relation to Article 20 of the TRIPS Agreement, which provides that:  

The use of a trademark in the course of trade shall not be justifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking with those of other undertakings.12

Essentially, Ukraine has protested to the plain packaging legislation on the grounds that its provisions constitute an illegitimate constraint on the ability of the tobacco industry to use registered trademarks as a means of differentiating their goods from others.13As a result, tobacco companies have asserted that such a lack of distinctiveness will inevitably expose Australia to the heightened risk of illicit tobacco trade and open Australian markets up to counterfeited tobacco products, though these claims have been greatly exaggerated to the general populace.14Although one cannot be entirely certain as to the eventual consequences of the laws once put into practice, the real question underlying Article 20 is whether such restrictions on tobacco trademarks can be deemed ‘justifiable’.  On the basis of the policy’s public health objectives, it does seem that the Australia Government has a strong case to propound in its defence, though this will be discussed further in the next section.  

Secondly, Ukraine has argued that Australia’s plain packaging measures contravene the Agreement on Technical Barriers to Trade (the ‘TBT Agreement’) by creating a barrier that illegitimately impedes the trade of tobacco products between Australia and other states.  Pursuant to Article 2.2 of the TBT Agreement, ‘technical regulations shall not be more trade-restrictive than necessary to fulfil a legitimate objective’.15Thus, Ukraine has submitted that Australia’s plain packaging legislation would operate contrarily to this rule, by excessively obstructing the trade of tobacco in pursuit of public health objectives.     

Interestingly, the biggest dilemma that stems from these claims does not primarily concern their substance, but goes to Ukraine’s motives in lodging the complaint to the WTO at all, given that it has not traded tobacco with Australia since 2005 and therefore has negligible tobacco trade interests directly affected by the legislation.16As home to a subsidiary of Philip Morris International and other big tobacco enterprises, there is a strong suspicion that Ukraine is acting as a proxy state on behalf of the multinational tobacco companies, as corporations are not entitled to bring an action to a WTO panel themselves.17Additionally, it should be noted that the big tobacco companies have also sought to protect their interests by targeting trade agreements at a bilateral level, with Philip Morris Asia transferring its Australian shares to Hong Kong so that it may invoke the investor-state arbitration mechanism allowed under the Hong Kong-Australia bilateral investment treaty.18Although this matter is admittedly beyond the scope of this paper, it does serve to further demonstrate the political potency of non-state actors, particularly multinational corporations, and their increasingly influential role within the international political economy.  Furthermore, the WTO challenge against Australia is especially contentious in that it raises questions as to how the intrusion of these corporations’ private commercial interests can be reconcilable with the WTO’s state-based rules and processes and public health considerations, an issue that will now be discussed in more detail.   

Public health and the potential for international change

While Australia’s plain packaging policy has been alternatively construed as a violation of private intellectual property rights and an unwarranted obstacle to international trade, it is also important to recognise the policy as a legitimate and groundbreaking step towards enhancing public health in Australia.  These ambitious health objectives pursued by the Australian Government will become especially relevant as Australia justifies its implementation of plain packaging legislation in the multilateral dispute proceedings brought before the WTO.  After all, the WTO and its constituent rules and agreements generally uphold policy instruments that prioritise legitimate interests such as human welfare and health over trade and commercial considerations, acknowledging public health to be ‘important in the highest degree’.19Accordingly, corporate intellectual property rights are able to be subordinated to public health issues under the Doha Declaration on TRIPS and Public Health, which declares that ‘the TRIPS agreement does not and should not prevent members from taking measures to prevent public health’ and explains that ‘the Agreement can and should be interpreted in a manner supportive of WTO members’ right to protect public health’.20Therefore, in undertaking the obligations and recommendations outlined in the World Health Organisation’s Framework Convention on Tobacco Control (the ‘WHO FCTC’), which endorse the adoption of plain packaging measures as a means of tangibly reducing smoking rates, the Australian Government has demonstrated an admirable commitment to the health of its citizens that is likely to be upheld in the WTO’s multilateral arbitration process. 

The World Health Organisation has appealed to its member nations, urging them to mirror Australia’s firm stance and enter ‘the brave new world of tobacco control’.21Currently, many other nations are contemplating the enactment of similar laws, including Britain, New Zealand, Canada, Norway and India, though the dawn of what has been dubbed the ‘Olive Revolution’ continues to hinge on how Australia fares in the upcoming WTO dispute against Ukraine.22Should Australia ultimately be successful in defending its plain packaging legislation to the WTO, it has the potential to guide and influence the regulations governing tobacco products within other states and thus initiate a groundbreaking regime conducive to global health and welfare.  Consistent with Krasner’s approach to regime theory, Australia, as the first nation to embark on plain packaging reforms, may well invoke an international regime by establishing a common set of coherent rules, norms, principles and procedures that influence the behaviour of other states on tobacco control.23  

In the past, international regimes have been effectively constructed in a range of issue areas, spanning across such areas as human rights, security, trade and the environment.  Take, for instance, the institutionalisation of an international environmental agenda, particularly over the past two decades, which has involved developing a set of norms and rules to produce desirable ecological behaviours amongst states.  The formation of environmental regimes has usually been achieved through a combination of formal and informal means, for example, the operation of international institutions, treaties and agreements such as the United Nations Framework Convention on Climate Change (UNFCCC); the creation of new and widely accepted norms and practices; the use of substantial scientific evidence; and the mobilisation of pressure groups and civil society.24Once formed, such regimes reconcile the liberal and realist traditions of international relations, as the ideal patterns of state behaviour and cooperation are shaped by norms that maximise the interests of all states involved and yet remain entirely consistent with the preservation of separate national interests.25Likewise, an international regime on tobacco packaging regulations would also coordinate action within the broader field of public health, an area of common interest and mutual benefit for participating states. 

In the long-term, such a regime could ultimately see similar plain packaging rules and conventions institutionalised amongst an increasing number of states, creating an expectation of international cooperation for the improvement of global health.26Thus, the plain packaging initiative could once again see Australia actively reassert itself as a middle power, capable of recognisably ‘punching above its weight’ as a global citizen and exerting a diplomatic influence in an area of international significance.27In this respect, the trade dispute awaiting Australia before the WTO could perhaps be the start of something much bigger.  A great deal rests on its successful resolution. 

Recommendations  

Despite the multitude of claims that it is set to face on the international stage, Australia’s legal prospects in defending its plain packaging scheme subject to the WTO framework appear to be strong.  Therefore, it is not expected that Australia should encounter any negative implications flowing from the dispute, such as the invalidation of its plain packaging provisions.  However, the consequences of the dispute will inescapably extend beyond those for the participating governments, but will also impact the commercial trade interests of the corporations involved, as well as broader public interests. 

Conclusion 

Consequently, it is submitted that the Australian Government should defend its plain packaging policy without fear of reproach and continue along its path of innovative anti-smoking reforms.  After all, Australia is currently on the cusp of pioneering a new regime on global health by institutionalising a new set of norms and expectations in the issue area of tobacco marketing.  In light of this, the case will inevitably illustrate the many idiosyncrasies of the WTO and its dispute settlement process, as it demonstrates its ability to balance tensions between commercial and public interests in order to facilitate progressive public health policies, but also its susceptibility to manipulation by corporate power by stealth.  Though one cannot be entirely certain which way the dispute will be resolved, it is hoped that the case will produce a new set of social attitudes on tobacco use, both domestically and on a global scale.  Despite the challenges launched upon it from every which direction, the Australian Government should not shy away from pursuing such ambitious reform.  The potential to effect tangible long-term health benefits on a national and international level, regardless of the precise extent to which this ultimately eventuates, is simply too great to forgo. 

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