Tuesday, March 20, 2012

Ukrainian complaint against Australia's Tobacco Plain Packaging


The recent Ukranian measure of requesting for consultations in a dispute relating to plain packaging of tobacco products has raised several interesting questions. I have earlier blogged about Australia's plain packaging measure here, here and here.

Australia, through a legislation, has mandated that tobacco sold in Australia should be with only the specified plain packaging and the legislation prevents tobacco advertising and promotion on tobacco products and tobacco product packaging by making it an offence to sell, supply, purchase, package or manufacture tobacco products or packaging for retail sale that are not compliant with plain packaging requirements.

The measure has been defended by Australia on the grounds of public health. Recently Ukraine has initiated the dispute settlement mechanism at the WTO with this request for consultation.

"Australia's measures, especially viewed in the context of Australia's comprehensive tobacco regulatory regime, appear to be inconsistent with a number of Australia's obligations under the TRIPS Agreement, the TBT Agreement, and GATT 1994, including but not limited to the following provisions of these agreements:

 Articles 1.1, 2.1, 15, and 16 of the TRIPS Agreement and Articles 6quinquies, 7, and 10bis of the Paris Convention as incorporated in the TRIPS Agreement because the measures, which discriminate against tobacco-related trademarks based on the nature of the product, fail to give effect to the trademark holder's legitimate rights with respect to the trademark, fail to accord effective protection of the trademark "as is," and fail to prevent acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; 
 Article 20 of the TRIPS Agreement because the measures constitute an unjustifiable encumbrance on the use of trademarks; 
 Article 1 of the TRIPS Agreement because Australia has failed to give effect to Article 20 of the TRIPS Agreement in Australia's domestic laws and regulations; 
 Article 27 of the TRIPS Agreement because by regulating the physical features of the patented packs, the measures prevent the normal exploitation and thus the enjoyment of the patent rights for tobacco products in a manner that discriminates based on the field of technology;
 Article 2.2 of the TBT Agreement because the measures constitute an unnecessary obstacle to trade and are more trade restrictive than necessary to achieve the stated health objectives; and
 Article III:4 of the GATT 1994, Article 3.1 of the TRIPS Agreement, and Article 2.1 of the TBT Agreement because the measures fail to respect the national treatment requirement set out in these provisions by not providing equal competitive opportunities to imported tobacco products and foreign trademark right holders as compared to like domestic tobacco products and trademark right holders.  

 These violations nullify or impair the benefits accruing to Ukraine under the aforementioned Agreements."
While the main challenges to the Australian measure are on the grounds of it being in violation of the TRIPS, TBT and GATT provisions, what is interesting is that Ukraine has initiated this request for consultation. The involvement of Ukraine has evoked considerable media attention here and here. The issue of the rationale for Ukraine having filed the complaint is being raised since Ukranian tobacco exports to Australia are minimal. Other domestic compulsions of tightening of tobacco advertising (surprisingly) are being touted as the underlying cause for Ukraine to be the complainant as a quid pro quo measure to the Tobacco industry. A very critical analysis of the Ukranian tobacco industry is found here in this campaign material.

Irrespective of the underlying motivations for the complaint, Australia would have to defend its move at the WTO. The dispute brings to the fore many interesting issues:

1. What would be the interpretation of the public health exception in the context of the TRIPS, TBT and GATT vis a vis barriers to international trade?
2. The varying and complex domestic interests involved in a WTO dispute are playing out here? Are the interests of multinational tobacco companies operating in Ukraine the same as the "Ukranian" national interest? Since exports from Ukraine would be affected thus affecting workers interests in the Ukranian units, does this constitute "domestic interest"? What is the position of the Government vis a vis consumer interests in Ukraine against tobacco on health grounds?
3. Subsidisation of WTO disputes is another interesting area of debate? Who bears the cost of this WTO dispute in Ukraine? The country or the tobacco manufacturing companies? Are there formal processes to handle this?

While one awaits Australia's formal response to the request for consultations, the interplay of the above externalities would be as interesting!

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