Recall that the tobacco carveout originated in the TPP, but has now spread to new FTAs/IIAs involving Singapore. Interestingly, the tobacco carveout was not in the recent Australia-Indonesia FTA (there was a broader public health exclusion instead), but it does appear in the revised Australia-Hong Investment Agreement (their original investment agreement was the source of the plain packaging investment complaint):
Section C: Settlement of Disputes between an Investor and the Host Party 14
14 No claim may be brought under this Section in respect of a Party’s control measures of tobacco products (including products made or derived from tobacco), cigarettes, imitation smoking products, and other smoking products such as Electronic Nicotine Delivery Systems and Electronic Non Nicotine Delivery Systems including electronic cigarettes. A “control measure” of a Party includes measures with respect to production, consumption, importation, distribution, labelling, packaging, advertising, marketing, promotion, sale, purchase or use, as well as fiscal measures such as internal taxes and excise taxes, and enforcement measures, such as inspection, recordkeeping and reporting requirements. “Tobacco products” means products under Chapter 24 of the Harmonised System, including processed tobacco, or any product that contains tobacco, that is manufactured to be used for smoking, sucking, chewing or snuffing.
Notice that various non-tobacco products are covered: "imitation smoking products, and other smoking products such as Electronic Nicotine Delivery Systems and Electronic Non Nicotine Delivery Systems including electronic cigarettes." I'm not sure what the full range of "other smoking products" is, but it seems like it could be quite broad.
As a result, the following situation is possible (although I'm not saying it is likely). Imagine the local tobacco industry is tired of people shifting to alternative products such as e-cigarettes, which happen to be produced domestically by a foreign-owned competitor. The tobacco industry is powerful and successfully lobbies the government to ban the sale of the competing products. (This ban seems like it would constitute a "control measure” under the definition provided above.) A foreign-owned company that makes e-cigarettes wants to bring an investor-state claim, but cannot do so because of footnote 14.
That can't be what the drafters intended, and I'm not saying it is likely to occur. But it does suggest that there may be better approaches to establishing the proper balance between investment protection and regulation taken for a public purpose.
