Uruguay has won a landmark lawsuit against Philip Morris International, which was suing the South American country for its strict regulations on smoking in what was seen as a test case for the tobacco industry.
The full decision can be found here. A good summary of the outcome by Foley Hoag (Uruguay's lawyers) is here and explains the following:
4. What were the specific legal findings?
A. Uruguay did not violate any of its obligations under the Switzerland/Uruguay Bilateral Investment Treaty, or deny Philip Morris any of the protections provided by that Treaty. Specifically:
• Uruguay’s regulatory measures did not “expropriate” Philip Morris’s property. They were bona fide exercises of Uruguay’s sovereign police power to protect public health, developed by highly trained tobacco control experts and physicians in the Ministry of Public Health with the support of experts from civil society.
• The measures did not deny Philip Morris “fair and equitable treatment” because they were not arbitrary; instead, they were reasonable measures strongly supported by the scientific literature, and had received broad support from the global tobacco control community.
• The measures did not “unreasonably and discriminatorily” deny Philip Morris the use and enjoyment of its trademark rights, because they were enacted in the interests of legitimate policy concerns and were not motivated by an intention to deprive Philip Morris of the value of its investment.
• Uruguay’s courts did not “deny justice” to Philip Morris. Instead, the Tribunal found that Philip Morris received due process and fair treatment from the Uruguayan courts.
I was less convinced by this statement:
E. The decision is also significant because it erects a barrier to the cynical use of international arbitration by Philip Morris and other tobacco companies to stop States from taking reasonable measures to protect public health. Not only have Philip Morris’ claims against Uruguay been rejected, but the company has been ordered to pay Uruguay’s legal fees. Its strategy of misusing the arbitration process to dissuade States from adopting meaningful regulation of tobacco marketing has failed. States need no longer fear the risks or costs of such a challenge to their sovereign rights.
Let me push back a bit against the argument that Philip Morris' use of ISDS here was "cynical." Note that there is a dissent in which one arbitrator found violations, so 33.3% (one out of three) arbitrators believed Philip Morris had a good claim. And my sense has always been that Philip Morris genuinely believed its rights have been violated. Finally, there are not that many expropriations of foreign investment these days (4 or so per year, based on the latest data I've seen). So what are companies supposed to challenge with ISDS under the thousands of investment treaties/FTA chapters? I think the practical answer is that it will often be measures kind of like this one, where a government believes it is acting in the public interest but a company thinks it has been treated badly.
