Strategic litigation at any cost?

I have blogged about the Tobacco Plain packaging case here, here and here. The dispute brings to the fore many aspects of dispute settlement at the WTO itself - like what is national interest, domestic policy space and international economic law, employment issues and trade as well as corporate interests and national positions.

This piece in the Jakarta Globe which gives a background on Indonesia's entry into the dispute  brought another angle to the dispute - strategic preparation in dispute settlement.

"For Indonesia, this is another opportunity for it to develop and enhance its understanding of how, when, and why to use the WTO dispute settlement system to further its own export interests. Indonesia started out by being a rather reluctant user of the system, when it was on the receiving end of complaints brought by several developed countries against its indigenous car program in 1996." 

 Is this another facet of strategic litigation at any cost at the WTO?

After Australia, it is EU now - Tobacco packaging regulation goes global

After Australia, it is the EU now which is going ahead with a tobacco packaging regulation that has health warnings as well as a ban on flavored cigarettes. Reuters and IELP blog reported about it. After the Cloves Cigarettes and Australian Tobacco Plain Packaging case, will this be the next biggest battleground (once the EU regulations are enacted) for the tobacco industry to agitate?

"Manufactures have increasingly looked to developing Asian and African markets to compensate for falling European sales where rising incomes have led to a big increase in sales of cigarette brands such as Marlboro in recent years, making those markets a major source of revenue growth for tobacco firms. 

Due be published on Wednesday, the proposals must be jointly approved by EU governments and the European Parliament before they can become law, a process that could take up to two years. 

"There's going to be a long way to go once these proposals are published," said Simon Evans, a spokesman for Imperial Tobacco. "We are confident looking many years into the future that the EU will be an area where we can sustainably grow and develop our business."

The WTO dispute settlement mechanism and tobacco seem to be going along rather too often...

Dominican Republic, a tobacco dispute and some observations

(courtesy - alum.mit.edu)

The debate on Tobacco Plain Packaging has reached the doorstep of the WTO dispute settlement. Australia's Plain Packaging legislation has been challenged by the Dominican republic, Honduras and Ukraine. I have blogged about it earlier here and here. A request for consultation was made in the dispute (DS441) and reports that the consultations failed have come in. So what next? Establishment of a panel.

While Dominican republic's request for consultation is found here which lays down the legal challenge to the measure, Reuters reported the statement of the Dominican Republic's Ambassador to the WTO which captured a number of issues:

"4.The plain packaging measures represent a dramatic regulatory intrusion into the appearance of products that may be sold lawfully in Australia, literally wiping design features off tobacco packaging and individual cigarettes and cigars. These design features include trademarks and geographical indications that Members have agreed to protect under the TRIPS Agreement, and which serve the valuable purpose for both producers and consumers of differentiating products that compete lawfully on the market in Australia.  

5.     Turning to the TBT Agreement, these plain packaging measures restrict international trade by eliminating competitive opportunities for tobacco products that are forced to appear in the marketplace in virtually identical retail packaging. 

6.     The WTO system ensures that measures restricting core intellectual property rights and international trade are permissible solely insofar they are effective in serving a legitimate objective. Australia's plain packaging measures do not meet this standard: they eviscerate the very function of trademarks and geographical indications and destroy competitive opportunities for tobacco products, with no credible evidence that they will reduce tobacco prevalence. Indeed, the evidence shows that the plain packaging measures will undermine Australia's goal to reduce tobacco prevalence. By commoditizing the market for tobacco products, the measures will inflict price competition, resulting in lower prices and higher consumption. Further, requiring products to be sold in similar plain packaging will facilitate illicit trade. 

7.     The Dominican Republic has requested that, rather than introduce these plain packaging measures, Australia employ tobacco control measures that would be truly effective in reducing tobacco consumption and also consistent with its WTO obligations.  Unfortunately, Australia has proceeded to introduce its plain packaging measures." 

Some observations:

1. Dominican republic's claim is that the regulatory objective of public health could be achieved by Australia even without Plain Packaging.
2. The Intellectual property rights of a developing country's products are impacted by a measure by a developed world. TRIPS being used to further developing countries interests?
3. Employment opportunities and the centrality of the tobacco industry in the economy of the Republic is being used as a point to highlight the dramatic impact the measure could have on lives and jobs.
4. This could be extended to other products like liquor and food products on the same principle and hence can be detrimental to international trade and intellectual property rights.

The statement concludes thus:

"10.     In recent years, we have witnessed a considerable development success story in our tobacco sector. Through significant investments by our producers, we have transformed our industry from being an exporter of tobacco leaf to being one of the world's premium producers of processed tobacco products, in particular cigars. Indeed, today, the Dominican Republic is the world's largest exporter of cigars. 

11.     We are proud of these achievements, and conscious also of the value of such development to the employment and income of our population. We are concerned that plain packaging will eradicate this cornerstone of our economy, whilst failing to achieve Australia's health objectives."

Trade, employment, intellectual property rights, public health objectives, interests of developing countries, domestic policy space and a dispute - this is what WTO disputes are all about!

Tobacco industry's view on Plain Packaging

The Australian Tobacco Plain Packaging legislation has been challenged at the WTO. Reports about New Zealand too going the Australian way have been blogged about here. The plain packaging case raises several issues pertaining to international trade rules, domestic policy choice, public health in the context of the right to trade with reduced barriers as well as the impact on employment in the tobacco industry. There are multiple stakeholders and varied interests. In fact, allegations that the disputes initiated by a few countries against the Australian measure was prompted by tobacco industry interests brings tot he spotlight the varied interests that eventually play out in an international trade dispute.

A representative of British Tobacco, New Zealand had this view on how New Zealand's plain packaging legislation violated WTO rules and that it is detrimental to New Zealand's interest to go in for plain packaging considering that other New Zealand exports like wine and liquor could face a similar situation in the outside market. Stressing on the violation of the TRIPS Agreements it states:

"New Zealand is a party to several multilateral and bilateral trade agreements that include protection of intellectual property, including brands. Forcing any product into a plain package denies the owner of the intellectual property, which includes the products' branding, the right to use what legally belongs to them. The New Zealand Government's plain-packaging proposal would prevent tobacco manufacturers from using their branding and, in doing that, breach New Zealand's international trade obligations and compromise our ability to participate in the international trading market. 

The Australian Government's decision to introduce plain packaging has already resulted in WTO challenges from the Ukraine, Honduras and the Dominican Republic, while other countries, including Mexico, Indonesia, Russia and Chile, are opposed to the introduction of plain packaging in Australia. 

There is no doubt that New Zealand will be next off the block if it goes ahead with plain packaging."

Comparing a proposed measure by Thailand requiring graphic health warnings to be on all domestic and imported beer, wine and liquor bottles with the plain packaging legislation, the view seeks New Zealand to revoke its plain packaging move in the trade interests of New Zealand.

One may not necessarily agree with the above view, but it is nevertheless interesting. What if there is plain packaging of different liquors? Can it be equated with tobacco plain packaging? What is in the national interest of New Zealand - it's domestic, liquor interests or public health policy? Are they incompatible at all as the view above suggests?

Plain packaging of tobacco - Employment, developing country and a dispute

Apart from Honduras and Ukraine which have challenged the legislation on plain packaging of tobacco products of Australia, the Dominican Republic is also a complainant in the WTO dispute (DS441). The request for consultation is here. I have blogged about the issue here, here and here.The WTO website shows that this is Dominican republic's first case as a complainant as a WTO member. Challenging a developed country like Australia in the WTO is an indication of the level playing, rule based system that the dispute settlement system of the WTO offers to both the developed and developing worlds. 

Reuters recently reported that the Dominican Republic had now requested for the establishment of a WTO Panel, presumably because the consultations did not lead to any results.

"HE Luis Manuel Piantini, Ambassador of the Dominican Republic to the WTO, explains: "Tobacco has been an intrinsic part of the Dominican culture and heritage for centuries, and the tobacco sector is vital for our development.  Our producers have made enormous investments - including in intellectual property - to turn the Dominican Republic from a simple tobacco leaf exporter into one of the world's leading producers of premium cigars and the world's largest exporter of cigars.  This a significant achievement for a small developing economy.  Plain packaging will wipe away these achievements - our premium cigars will be dressed as discount products, which people will continue to smoke; prices will ultimately fall, affecting the livelihood of more than a hundred thousand Dominican workers and their families.  The TRIPS and TBT agreements protect our commercial and development achievements."

Interesting points from the Dominican Republic standpoint:

1. The critical role of the tobacco industry in the national economic growth perspective of the country

2. Livelihood of many locals will be affected by the measure

3. Investments and intellectual property rights impacted

4. Export of tobacco products integral part of the developing economies growth story

5. Multilateral trade rules protect the country's interests

6. Domestic pressures would definitely favor local employability against public health concerns of another country

What considerations will the Panel depend upon? Are the interests of developing countries and employment relevant at al in the dispute settlement process? Will they have a role to play in deciding the compatibility of the Australian measure? Australia's health concerns versus the Dominican Republic's economy - what will prevail? Include in this the business interests of Tobacco companies - it does make a heady cocktail that the WTO dispute settlement has to confront.

Domestic policy space, trade agreements and protectionism - A balance required?

The Tobacco Plain Packaging dispute has reached the doorstep of the WTO. An Australian legislation that mandates that both imported and locally made tobacco products must not have any kind of advertising on the package has been challenged as a violation of Australia's obligations under the WTO. I have blogged about the issue here, here, here and here.

Simon Lester in a recent piece in the Jurist has brilliantly discussed the issue in the context of protectionism, non-discrimination, domestic policy space and international trade. While curbing protectionism (treating imported goods less favorably than local goods) remains the main focus of international trade agreements, it is clear now that trade rules go much beyond it. It impacts not only discriminatory treatment but also whether a measure is an unreasonable restriction on international trade. This has a major impact on domestic policy space since the interpretation of what constitutes a "reasonable restriction" becomes debatable. It has the potential to lead to international trade agreements treading on sovereign decisions disturbing the delicate balance between international law and domestic sovereignty. This often leads to calls for rejecting multilateralism and pursuing unilateral policies in "national interest".

"Complaints about a purely domestic regulation in these international fora may seem odd, but they are a direct consequence of the expanding scope of trade agreements and provide a good illustration of the difficulties for domestic policy-making caused by this broad scope. The complaints highlight an important, but often overlooked, question regarding today's trade agreements: what is free trade? Traditionally, practicing free trade simply meant not being protectionist. However, today's trade agreements go beyond anti-protectionism in a number of ways, which leads to the potential conflict between trade agreements and domestic regulation that we see with the plain packaging cases."

The implementation and interpretation of international trade agreements will constantly face this challenge of balancing competing interests of national, domestic policy making with the imperatives of international trade. Often the line will be blurred and domestic policy choice will be challenged. To what extent this will be accepted by the WTO members is a crucial question. WIth the negotiations reaching a stalemate at Doha, the dispute settlement mechanism will face serious strain trying to balance these competing interests. Should the interpretation limit itself to non-discrimination and be more liberal in allowing domestic space in other cases? Will such an approach ease the tensions and promote international trade? Or should the Panels and Appellate Bodies take a proactive role in ensuring that free trade is not restricted in anyway - whether based on national treatment or otherwise. As Simon correctly points out it is a delicate balance to be treaded very carefully.

"Existing international trade rules are a balancing of competing concerns and interests, developed over the years through a complex negotiating process. Questioning particular aspects after the fact is not without its dangers. Trade liberalization over the past few decades has benefited the world greatly. At the same time, challenges to laws like the plain packaging one risk undermining support for the broader push for such liberalization. It may not be a coincidence that multilateral trade liberalization has stalled in recent years, just as the scope of these agreements has expanded. No matter what the resolution of the plain packaging cases in international courts, they may be a chance to examine just what the goal of trade agreements should be.  

Fighting protectionism is not without its own controversy, but a focus on protectionism, with rules narrowly tailored for that purpose, may avoid sensitive issues relating to health and other social policy regulation, and thus make further trade liberalization, with its accompanying benefits, possible."

Apart from the tobacco legislation, would the stand of Canada in the Canadian Seal dispute also fall under the category of exercise of legitimate domestic policy space? 

Employment, Dominican republic and Tobacco Plain packaging

(Cigarette manufacturing in the Dominican Republic)

The Dominican Republic is one of the complainants along with Ukraine and Honduras against the Tobacco Plain Packaging legislation of Australia. This piece in the Dominican Today about the dispute highlights the centrality of tobacco manufacturing in the Dominican Republic:

"While tobacco has been cultivated in the Dominican Republic for more than five centuries, the Dominican tobacco industry is a hundred years old. Tobacco export revenues represent roughly 8% of total exports in merchandise. The Dominican Republic is the largest net exporter of cigars in the world. Tobacco products represent 8.5% of fiscal revenue on merchandise taxation. There are around 5,500 tobacco producers, employing approximately 55,000 agricultural workers. Tobacco manufacturing employs another 63,000 people, of which 60 percent are women. Combined with the entire tobacco production chain, the industry thus generates around direct 118,000 jobs which supports approximately 350,000 people, according to information published by the Tobacco Institute of the Dominican Republic."

Thus, tobacco manufacturing and export is one of the main industries here as well as employment generator. It supports families and gives employment to a large number of women. Is this irrelevant in a dispute international trade law? If the Australian legislation, which is an exercise of its domestic policy space, is held to be compatible with WTO law (GATT, TBT and TRIPS), is the question of employment and job creation irrelevant to the issue. This is another classic case of the "loser" in globalization. An industry which was thriving can be possibly hurt by measures taken by other countries which may not be incompatible with international trade law. Those employed in these industries constitute a domestic constituency. How does the politics of domestic interests play out in international trade relations? While Dominican Republic's domestic will to engage in the trade is not impacted per se, the Australian measure does impact it in a negative way. Do considerations such as employment potential figure in the debate at all?

Tobacco Plain packaging panel established at the WTO

(bbc.co.uk)

The dispute panel with respect to the Australian Tobacco Plain packaging legislation is finally constituted at the WTO. I have blogged about it earlier here, here and here.. Ukraine, Honduras and the Dominican Republic are pitted against Australia. The dispute raises intricate questions about issues of public health, domestic regulatory space, intellectual property, international trade and protectionism.

Ukraine raised these primary issues in the complaint:

"In its request for the establishment of a panel, Ukraine said that Australia’s measures “erode the protection of intellectual property rights” and “impose severe restrictions on the use of validly registered trademarks”. Ukraine’s statement also said that “Ukraine considers that governments should pursue legitimate health policies through effective measures without unnecessarily restricting international trade and without nullifying intellectual property rights as guaranteed by international trade and investment rules”. Ukraine also considers that the measures “are clearly more restrictive than necessary to achieve the stated health objectives” and thus violate the Agreement on Technical Barriers to Trade as an “unnecessary obstacle to trade”."

Australia defended the move thus:

"Australia showed surprise and disappointment that Ukraine decided to challenge Australia’s tobacco plain packaging measures since this step “is at odds with the policies being pursued within Ukraine to comply with the WHO Framework Convention on Tobacco Control”. Australia mentioned that Ukraine has also taken many measures in accordance with this Convention and said that the tobacco plain packaging “is a sound, well-considered measure designed to achieve a legitimate objective — the protection of public health”, which the WTO recognizes as a fundamental right of its members. Australia added that the measure is “clearly non-discriminatory”, “nor is [it] more restrictive than necessary to fulfil its legitimate objective”."

Interesting support for Ukraine from Zimbabwe, Honduras, Dominican Republic, Nicaragua and Indonesia.

" Zimbabwe said that 200,000 farmers and their families in the country depend on tobacco for their livelihood. Honduras said that the WHO Framework Convention is indicative and non-binding. Nicaragua said that tobacco is one of the most important items in the country’s exports."

Diverse interests and issues coalescing here:

1. Intellectual property rights of tobacco product manufacturers

2. Public health concerns

3. Domestic policy space to regulate in relation to public health

4. Restrictions on international trade

5. Right to trade in tobacco products

6. Relationship between international conventions relating to health and the multilateral trading system

7. Livelihood and employment issues

8. National business interest vis a vis public health 

With New Zealand announcing its intention of introducing plain packaging legislation, and a number of third party members, including India, Indonesia, United States,Turkey, Oman, Japan, European Union and Argentina in this dispute, it sure promises to be keenly contested dispute. Not surprisingly, Ukraine seems to have abandoned the violation of "national treatment" principle argument, unless it remains in the detailed submission. Atleast prima facie, there seems to be no less favorable treatment to imported tobacco products as compared to locally made tobacco products. Both will have to follow the plain packaging requirement.

Is the Australian Plain Packaging legislation violating national treatment?

The Dominican Republic was the latest complainant to the Tobacco Plain Packaging dispute at the WTO against Australia. I had blogged about it here. The request for consultations of the Dominican Republic touched on aspects of alleged violations of the TRIPS, TBT and GATT Agreements. 

The gist of the request for consultation is found here:

"These measures regulating the plain packaging and appearance of tobacco products for retail sale appear to be inconsistent with Australia's obligations under the following provisions of the TRIPS Agreement, the TBT Agreement and the GATT 1994: 

 Article 2.1 of the  TRIPS Agreement, which incorporates the provisions of the  Paris Convention for the Protection of Industrial Property, as amended by the Stockholm Act of 1967 ("Paris Convention"), in particular, (i) Article 6quinquies of the  Paris Convention,because trademarks registered in a country of origin outside Australia are not protected  "as is"; and, (ii) Article 10bisof the  Paris Convention, because Australia does not provide effective protection against unfair competition, for example, creating confusion between the goods of competitors;

 Article 3.1 of the TRIPS Agreement, because Australia accords to nationals of other Members 
treatment less favourable than it accords to its own nationals with respect to the protection of 
intellectual property;

 Article 15.4 of the TRIPS Agreement, because the nature of the goods to which a trademark is 
to be applied forms an obstacle to the registration of the trademark;

Article 16.1 of the  TRIPS  Agreement, because the measures prevent owners of registered 
trademarks from enjoying the rights conferred by a trademark;

 Article 20 of the  TRIPS Agreement, because the use of trademarks in relation to tobacco products is unjustifiably encumbered by special requirements, such as (i) use in a special form,for example, the uniform typeface, font, size, colour, and placement of the brand name, and, (ii) use in a manner detrimental to the trademark's capability to distinguish tobacco products of one undertaking from tobacco products of other undertakings;   

 Article 22.2(b) of the  TRIPS Agreement, because Australia does not provide effective protection against acts of unfair competition with respect to geographical indications, for example, creating confusion  among consumers with respect to the origin of goods;

 Article 24.3 of the TRIPS Agreement, because Australia is diminishing the level of protection it affords to geographical indications as compared with the level of protection that existed prior to 1 January 1995;  

 Article 2.1 of the  TBT Agreement, because the technical regulations at issue accord to imported tobacco products treatment less favourable than accorded like products of national origin; 

 Article 2.2 of the  TBT Agreement, because the technical  regulations at issue create unnecessary obstacles to trade because they are more trade-restrictive than necessary to fulfill a legitimate objective; and, 

 Article III:4 of the GATT 1994, because the measures at issue accord to imported tobacco products treatment less favourable than accorded like products of national origin."

While the TRIPS and TBT violations require analysis, the Article III:4 GATT violation surprised me. The Plain Packaging Legislation is equally applicable to imported as well as domestically made products. Thus, locally made Australian cigarettes too must follow the same conditions. There is no de jure discrimination on this account. As far as defacto discrimination is concerned, does the imposition of plain packaging requirements on imported tobacco products have an impact on the competitive conditions in favour of local products? Does it accord less favourable treatment to imported products or are local products advantaged? To me, both imported and local products are treated in the same manner. It seems that the national treatment violation contention is not on very strong grounds. Am I missing something here? The rest of the contentions is set for a whole lot of jurisprudential interpretation by the Panel and Appellate Body. 

Motivations to join a dispute - Dominican Republic joins consultations in Australia Tobacco Plain Packaging dispute

(A cigar factory worker in Santiago, Dominican Republic)

The challenge to the Australian Plain Packaging legislation seems to be spreading with the Dominican Republic, a major exporter of cigars, joining the consultation as a party at the WTO. I have blogged about the issue here and here.


Business beyond the Reef and Trade, Investment and Health Blog had interesting pieces yesterday about this. 

The WTO website announced that the Dominican Republic had notified the WTO of a request for consultation. The grounds of the earlier challenge were centred wround the provisions of the TRIPs, GATT and TBT Agreements. Unlike Honduras and Ukraine which have no or negligible tobacco exports to Australia, Dominican Republic has a significant tobacco export trade to Australia. As per the Observatory of Economic Complexity, the Dominican Republic has 4.9% of exports as cigar exports and 7.15% of its exports to Australia were cigars.

Interestingly, many countries have joined the consultations in the two cases that have been filed at the WTO. Guatemala, Norway, Uruguay, Brazil, Canada, the European Union, New Zealand, Canada and El Salvador,Brazil, Canada, El Salvador, Indonesia, New Zealand, the Philippines, Uruguay, Zimbabwe  and Nicaragua requested to join the consultations and have joined the consultations as per Article 4 (11) of the DSU which states:

" Whenever a Member other than the consulting Members considers that it has a substantial trade interest in consultations being held pursuant to paragraph 1 of Article XXII of GATT 1994, paragraph 1 of Article XXII of GATS, or the corresponding provisions in other covered agreements(4), such Member may notify the consulting Members and the DSB, within 10 days after the date of the circulation of the request for consultations under said Article, of its desire to be joined in the consultations.  Such Member shall be joined in the consultations, provided that the Member to which the request for consultations was addressed agrees that the claim of substantial interest is well-founded.  In that event they shall so inform the DSB.  If the request to be joined in the consultations is not accepted, the applicant Member shall be free to request consultations under paragraph 1 of Article XXII or paragraph 1 of Article XXIII of GATT 1994, paragraph 1 of Article XXII or paragraph 1 of Article XXIII of GATS, or the corresponding provisions in other covered agreements."

What are the motivations of countries to join a dispute? Canberra Times has an interesting piece on the dispute and states:

"The case before the WTO is still in the preliminary stage of consultations. Australia has refused to give ground, so the original complainants now have the option of requesting a disputes panel. That can take up to a year, and the loser then appeals, which can take another few months before there is a final ruling. Compliance with the ruling can take longer still.

The 12 countries that have joined the WTO consultations have a range of motives: three are neighbours of Honduras. Some, such as Indonesia, are significant tobacco producers; Indonesia's biggest tobacco maker Sampoerna, now part of the Philip Morris empire, withdrew its clove-flavoured Kretek cigarettes from Australia in 2009 rather than display the ghoulish warnings required by existing packaging laws.

But New Zealand has joined the case because it is considering similar legislation to Australia, and the European Union, which has interests on both sides, also signed up to the case as a neutral observer."

So, what can the motivations be for countries to join consultations or request for consultations:

1. If the domestic producers are impacted by the measures, and their exports would be affected, this would be a natural reason to engage in consultations.

2. The country joining for consultation may also be intending to impose similar measures as those challenged in the consultation. Thus, this consultation would serve as a good testing ground for analysing their measures.

3. In international trade politics, initiating a dispute sometimes is for strategic reasons to offset another dispute that the two countries face or are likely to face. It can be used as a bargaining chip in times of negotiation.

4. Even though a country may not have significant trade interests with the country that it seeks consultations with, it may have substantial interests with other countries on the same issue or measure at hand. 

5. Business interests may also play a role in persuading countries to challenge a measure though a country has no trade interest with the other country.

6. Some countries may perceive disputes as "training grounds" for their teams to get familiarised with the DSU and its functioning. It could be art of a strategic litigation strategy to get involved in WTO proceedings.

Any other motivations?

Australia's Tobacco Plain Packaging row - Whose interests really?

The International Business Times had an interesting piece on Australia's position on the Tobacco Plain Packaging row. I have blogged about it here, here, here and here.

"The Australian government vowed to repeal efforts by giant tobacco firms to frustrate its aim of further limiting the flow of cigarette products in the country.

These efforts, according to Health Secretary Jane Halton, include the deployment of lawyers by tobacco companies to give out legal assistance to Honduras and Ukraine, two countries that had apparently launched legal challenges on Australia's soon-to-be implemented cigarette plain packaging law."

Two interesting issues come out in this position:

1. Subsidisation: It is apparent that interests of large Tobacco Companies are at stake here and their business interests have propelled the disputes at the WTO. Is it alright for national teams to comprise of lawyers from these tobacco companies? Is this an example of multiple interests being accommodated in the national position - Government lawyers, trade specialists, industry lawyers and lawyers of companies directly affected by the measure. Ukraine and Honduras seem to have adopted this approach. Who foots the bill for this dispute? Would it be legitimate for Ukraine and Honduras to take assistance from the Tobacco companies in this regard?

2. Trade interests: Ukraine and Honduras do not have extensive trade relations with Australia. Why did they initiate the dispute then? Are tobacco exports from these two countries substantial to justify this action? As per the Observatory of Economic Complexity, Ukraine exports 1.1% of world cigarette exports. While Australia imports substantially from China (20%), Ukraine does not figure in the list of countries engaged in exporting to Australia.

This brings us to the question - What motivated Ukraine to file a WTO complaint against Australia which it does not significantly export to? Was it prospects of a future market? Was it about taking  a stand against plain packaging which may affect it"s trade interests if larger trading partners adopted the same measure? Or were "national" interests and "business" interests of large tobacco companies coalescing? Should private parties be allowed directly to initiate disputes at the WTO at their own cost? Though this is not permitted by the present legal framework, would it in effect obliterate the need for seeking "national" interests to pursue purely business interests? What is at stake for the people of Ukraine and Honduras in this dispute? 

After Ukraine, its Honduras - Australia's tobacco plain packaging challenged

(photo: Tobacco field at Rancho Jamastran in Danli, Honduras)

After Ukraine it was the turn of Honduras to challenge the Australian Tobacco Plain Packaging measure. The WTO website reported that Honduras had requested for consultations with Australia under the dispute settlement system concerning the latter’s certain measures concerning trademark and other plain packaging requirements applicable to tobacco products and packaging.

In this press release Honduras stated that plain packaging is not an appropriate measure to address smoking prevalence and not in conformity with Australia's WTO obligations. It also justified the request on the ground that the tobacco industry has been part of Honduras' history for more than half a century and that Australia's measure would affect domestic employment both directly and indirectly.

Is the Honduras measure guided by factors external to its domestic concerns? Benn Mcgrady in this blog piece raises some contradiction between Honduras' local legislation relating to tobacco control and its international position. Conflicting, complex interests?

Ukraine's complaint against Australia's plain packaging - Serious allegations -

The controversy around the Ukranian complaint against the Australian Tobacco Plain Packaging legislation at the WTO refuses to die down. I had blogged about it here and here. The Sydney Morning Herald carried this potentially explosive piece on the origins of the dispute:

"Ukraine is taking Australia to the World Trade Organisation over its plain packaging of tobacco laws although it has not traded any tobacco with Australia since at least 2005, a Ukrainian government insider has revealed.

Konstantin Krasovsky, the head of the Tobacco Control Unit in the Institute for Strategic Research in the Ministry of Health of Ukraine, said the decision was made in secret within the Ministry of Economics, despite the Ukrainian President attempting to crack down on the tobacco industry.

Dr Krasovsky, who attended the World Conference on Tobacco or Health in Singapore last week, told the Herald: ''There is no economic interest whatsoever … no one in Ukraine will suffer from Australian plain packaging''.

Dr Krasovsky believes the letter requesting the WTO dispute resolution was not written by a citizen of Ukraine, as it was written first in English and then in Ukrainian and it had not been run past the Ministry of Health, as would be usual practice."

Without going into the merits of the report, it must be considered with due caution. Firstly, the report is by an Australian medical journalist writing in an Australian paper reporting on the dispute. Secondly, Konstantin Krasvosky has been at the forefront of the anti-tobacco movement in Ukraine and his views on this issue would be predictable. However, the allegations are pretty serious. Hasn't there been enough internal national debate before the complaint was initiated? Is the complaint in the interest of the people of Ukraine or domestic/international business interests based in Ukraine? This brings us back to the fundamental issue of varying stakeholder interests in WTO disputes. It is not my case that these interests should not exist. In reality, they do exist. However, a country's position at the WTO has to be a considered one keeping in view the diverse interests and a conscious decision as to what is really in the "national" interest.

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!

Australia's Tobacco Plain Packaging - reaching the WTO's doorsteps

The WTO website reported on a Trade Related Intellectual Property Rights Council Meeting held wherein, inter alia, the issue of Australia's Tobacco Plain Packaging legislation was discussed. I had earlier blogged about the issue here. 

"The Dominican Republic said that Australia’s Tobacco Plain Packaging Bill 2011 was inconsistent with the TRIPS Agreement, and that it would destroy the value of trademarks and limit information for consumers. It said it was not unaware of the health risks of tobacco but believed Australia could have chosen other measures that would have been consistent with the TRIPS Agreement. Chile, Cuba, El Salvador, Honduras, Mexico, Ukraine and Zimbabwe also expressed concerns about compatibility of the Australian measure with the TRIPS Agreement.

 Australia said that the measure was adopted by the Australian Parliament last November, and that it would be implemented at retail level on 1 December 2012. It defended the measure as taken in the interest of public health, and based on a broad range of studies. Canada, New Zealand and Norway expressed general support for Australia. The World Health Organization, speaking as an observer, endorsed the Australian measure, noting that tobacco use kills 6 million people every year, and is a major cause of diseases such as cancer and diabetes."

Is the dispute slowing inching its way towards the WTO?  It would be interesting to see the stakeholder interests being played out here? Would the tobacco exporting countries be the main opponents to this legislation? What role would the large tobacco manufacturers and companies play? What role would public health activists, anti-tobacco activists and consumer groups play in this dispute? All in all, diverse set of stakeholders as usual.