Last updated: September 2018
Suggested citation: Greenhalgh, EM, George A, Zhou S and Liberman, J. 16.5 Legal cases initiated by the tobacco industry. In Scollo, MM and Winstanley, MH [editors]. Tobacco in Australia: Facts and issues. Melbourne: Cancer Council Victoria; 2018. Available from http://www.tobaccoinaustralia.org.au/chapter-16-litigation/16-5-legal-cases-initiated-by-tobacco-industry1
16.5.1 Litigation in national courts to overturn state or national legislation
Governments seeking to adopt effective, evidence-based domestic tobacco control measures, including tobacco plain packaging, smoke free laws, large graphic health warnings and bans on advertising, promotion and sponsorship have faced legal challenges in national courts from the tobacco industry or others advocating for its interests. Litigation brought by the tobacco industry and its advocates has been invoked with the aim of thwarting implementation of effective tobacco control measures, diverting valuable government resources to the defence of these challenges, and creating a regulatory chill to dissuade other countries from adopting regulatory measures.
Domestic challenges against tobacco control measures may be based on procedural or administrative grounds, including claims that the government has failed to follow required regulatory processes, does not have the authority to enact the measures, or has not undertaken adequate consultation in the development of the measures. Litigation in national courts may also be based on substantive grounds including arguments that the measures infringe the commercial rights of the tobacco industry or infringe the personal rights of consumers.
Substantive claims in relation to infringement of commercial rights include claims that rights to commercial expression, intellectual property, and/or economic freedom have been violated. An example of a domestic challenge to national tobacco control legislation based on alleged infringement of intellectual property rights was observed in relation to Australia’s plain packaging measure. As described in chapter 19, in November 2011, Australia became the first country in the world to legislate for tobacco ‘plain packaging’ measures. Four major tobacco companies — British American Tobacco (BAT), Imperial Tobacco, Japan Tobacco and Philip Morris—challenged the plain packaging scheme in the High Court of Australia, Australia’s highest court.1 The tobacco companies claimed that the plain packaging legislation ‘acquired’ their intellectual property rights without ‘just terms’ compensation being provided to them. The challenge was unsuccessful. The Court held that although the plain packaging scheme regulated the tobacco manufacturers' intellectual property rights and imposed controls on the packaging and presentation of tobacco products, it did not confer a proprietary benefit or interest on the Australian Government or any other person. The Court held that the plain packaging measures did not constitute an ‘acquisition of property', and therefore the provision of just terms compensation was not required.
The second category of arguments made by the tobacco industry or others advocating for its interests pertains to the alleged violation of the personal freedoms of tobacco product consumers. For example, the tobacco industry argues that bans on tobacco advertising and promotion infringe upon the rights of consumers to receive information or that smoke free laws violate smokers’ rights to personal autonomy and protection against discrimination. In upholding tobacco control laws against such challenges, courts have rejected claims that any relevant right or freedom has been infringed; and/or found that any infringement of any relevant right or freedom is justified by the laws' protection of health.
The WHO FCTC has played an important role in defending tobacco control measures against legal challenge in many domestic jurisdictions, including:
o rights or duties that might be invoked in support of tobacco control measures (such as rights to health and rights to life)
o restrictions on rights or interests claimed by the tobacco industry (such as public interest or public health limitations or exceptions to property rights, freedom of expression or economic freedom)
o legal concepts such as necessity or proportionality that limit or condition exercises of government power
For more information on domestic legal challenges to implementation of tobacco control measures, and the role of the WHO FCTC in the defence of these measures please see: http://untobaccocontrol.org/kh/legal-challenges/domestic-courts/ and http://untobaccocontrol.org/kh/legal-challenges/role-of-the-who-fctc/
16.5.2 Use of international trade and investment agreements to challenge national tobacco control measures
Parties to the WHO Framework Convention on Tobacco Control (FCTC—see Chapter 19), including Australia, have been progressively implementing its obligations, including the introduction of more extensive and restrictive tobacco control policies. In response, the tobacco industry is increasingly taking advantage of international trade and investment agreements in an attempt to block tobacco control measures.2 Health experts have argued that trade and investment agreements potentially threaten health because they facilitate the spread of tobacco, an enormously harmful and addictive product, to new markets, and because they provide additional fora for the tobacco industry to launch legal challenges against measures to regulate tobacco.3
Trade agreements seek to reduce barriers to trade between signatory states; barriers may be financial (e.g., tariffs that make foreign goods more expensive) or regulatory (e.g., laws that are more burdensome on imports than on domestically produced products). In the context of international trade law, a number of tobacco control measures have been discussed before the World Trade Organization (WTO), the central multilateral body dealing with the rules of international trade between states. International trade law, governed by WTO Agreements, regulates trade in goods and services between states with the aim of establishing a predictable system of trade, reducing unnecessary obstacles to international trade in goods and services, and providing minimum standards in relation to the protection of intellectual property rights. The preamble to the Marrakesh agreement establishing the WTO states Parties recognise that their relations should be conducted with ‘a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development’.4
National tobacco control measures have also been challenged under international investment agreements. International Investment Agreements (‘IIAs’) — including bilateral investment treaties (‘BITs’), investment chapters in free trade agreements (‘FTAs’) and investment contracts between the State and investors — aim to promote and protect foreign investment and economic development by offering a broad range of protections to investors and their investments in the territory of the other contracting party or parties.
Challenges under trade and investment law have been made to state measures that ban flavoured cigarettes, restrict point-of-sale marketing and advertising, place graphic warnings on cigarette packaging, and raise taxes on tobacco; each of these strategies is effective in reducing uptake and supporting cessation attempts. Tobacco companies and tobacco growing countries have claimed that these tobacco control measures infringe protections in trade or investment agreements and that states should pay compensation or change their policy.5 Examples include:
Challenges to banning flavoured cigarettes
In 2009, the Family Smoking Prevention and Tobacco Control Act was signed into law and banned the sale of flavoured cigarettes in the US, including clove cigarettes, with the notable exception of menthol. This measure aimed to reduce smoking among young people, who are the most common users of flavoured cigarettes.6 Indonesia is the primary producer of clove cigarettes, and most clove cigarettes consumed in the US prior to the ban were imported from Indonesia, whereas menthol cigarettes were predominantly produced in the US. Indonesia successfully argued that the law amounted to discrimination contrary to Article 2.1 of the WTO Technical Barriers to Trade (TBT) Agreement, which stipulates that ‘like’ products (e.g., clove and menthol cigarettes) must be treated comparably under state regulations. The panel and Appellate Body found that preventing youth smoking was clearly a public health objective and that banning flavoured cigarettes was an appropriate way of addressing that objective. However, the panel and Appellate Body concluded that it was discriminatory to exempt menthol flavours from the ban, as both clove and menthol appealed to youth and the US had not demonstrated that there were legitimate public health grounds for distinguishing between them.7, 8
Challenges to plain packaging
Research to date on the effects of plain packaging in Australia has shown that it is achieving its goals of reducing the appeal of smoking and increasing the effectiveness of health warnings.9, 10 Several countries have followed Australia’s lead in the implementation of plain packaging, including Ireland, the UK, France, and New Zealand. Each of these announcements has provoked swift reactions from the tobacco industry.11 Philip Morris Asia (PMA) unsuccessfully challenged Australia’s plain packaging laws, contending that the legislation contravenes the 1993 Australia – Hong Kong Bilateral Investment Treaty.12 Four tobacco-producing countries - Cuba, the Dominican Republic, Honduras, and Indonesia - have challenged plain packaging in the WTO, arguing that the legislation is more trade-restrictive than necessary for the achievement of a public health objective and breaches certain WTO obligations relating to the protection of trademarks. On 28 June 2018, the WTO panel hearing the case decided in favour of Australia on all grounds, finding that plain packaging contributes to its public health objectives, that it is therefore no more trade-restrictive than necessary for public health, and that it does not violate any relevant intellectual property obligations.13 Honduras and the Dominican Republic have appealed the panel’s report to the WTO’s Appellate Body.
Challenges to health warnings
In 2009, Uruguay introduced restrictions on the packaging of cigarettes, requiring cigarette packs to carry graphic health warnings covering at least 80% of the front and back of the pack. This was an increase from the 50% requirement introduced in 2006. Uruguay also requires each brand of tobacco product to only be available in one variant, to prevent tobacco companies from using comparative pack designs within brand families to imply misleading descriptors, such as "light" and "mild", that were banned under a previous law.14, 15 Research has shown that Uruguay’s tobacco control measures have been associated with a substantial, unprecedented decrease in tobacco use.16 Philip Morris International filed a complaint against Uruguay in 2010, claiming that these measures violate a 1988 treaty between Uruguay and Switzerland, where Philip Morris has its operational headquarters. Philip Morris claimed that Uruguay expropriated its intellectual property rights, and that Uruguay’s measures violated its obligations to provide fair and equitable treatment to investors. The case was heard by an ad hoc investment tribunal constituted under the rules of the International Centre for the Settlement of Investment Disputes,17 who in 2016 ruled in favour of Uruguay on all grounds.
Challenges to point-of-sale display bans
In 2010, Norway banned point-of-sale displays of tobacco products in retail outlets in order to reduce exposure to tobacco advertising and subsequently reduce uptake and use, particularly by young people. Philip Morris Norway sued the Norwegian Government, alleging that the ban was incompatible with the 1994 European Economic Area Agreement (EEA), in that it purportedly was a measure ‘equivalent to a quantitative restriction’ on the free movement of goods in the European single market. In 2012, the Oslo District Court ruled that the display ban was not a quantitative restriction, and concluded that it is a necessary measure to protect public health.18
Although some of these challenges were unsuccessful or are still pending, a broader concern is that they will create ‘regulatory chill’; that is, on top of delaying, undoing, or obstructing policies in states where the challenges are brought, they will discourage other states from introducing similar tobacco control legislation.19 Defending these challenges is an enormously expensive and lengthy process, and can therefore act as a deterrent to other countries.5
As such, tobacco has become a point of contention in the negotiation of new trade and investment agreements, particularly in the context of negotiations regarding two major multilateral trade deals—the Trans-Pacific Partnership (TPP),20 an Asia-Pacific regional agreement involving 12 countries, including Australia, and the Transatlantic Trade and Investment Partnership (TTIP),21 a proposed agreement between the US and European Union. Many such concerns revolve around investor-state dispute settlement (ISDS) provisions, which allow foreign investors to directly bring claims under international law without needing to convince their home government to bring a case on their behalf.5 Although ISDS provisions have been common in international investment agreements since the 1960s, their increasing use by foreign investors and the uncertain scope of some international investment protections have led to concerns about the impact of ISDS on states’ ability to regulate in the public interest, both in terms of public health and more broadly.22
A key development to address such concerns from the perspective of tobacco control has been the adoption of tobacco ‘carveouts’ in trade and investment agreements. The CPTPP includes a clause allowing parties to elect to ‘deny the benefit’ of ISDS to challenges against tobacco control measures. A similar exclusion of tobacco from ISDS has been adopted in the Singapore-Australia bilateral investment treaty. Public health groups have also called for tobacco products to be exempted from the TTIP.23 Such ‘carveouts’ for tobacco control measures in trade and investment agreements are part of a broader suite of reform measures for trade and investment agreements which have been discussed by countries at both the WHO FCTC Conference of the Parties 24 and at the UN Conference on Trade and Development, the lead UN agency for investment policy.25 Tobacco companies have also sought to influence the negotiation of trade agreements – Philip Morris previously engaged a large international law firm to lobby lawmakers on potential tobacco provisions in the TPP and TTIP26 – reflecting the importance of these agreements to public health policy.2
For more information on the use of international trade and investment agreements to challenge national tobacco control measures, please see: http://untobaccocontrol.org/kh/legal-challenges/trade/ and http://untobaccocontrol.org/kh/legal-challenges/investment/
16.5.3 Legal action against tobacco industry critics
The tobacco industry has, on a number of occasions, used lawsuits in an attempt to silence and intimidate its critics. Such litigation aims to assist the tobacco industry or to reduce the capacity of those working in tobacco control. The same aggressive tactics are adopted in relation to initiation of claims as are used in the defence of claims (as outlined in Section 16.2). The cases below illustrate this process.
In 1986, the National Health and Medical Research Council (NHMRC) published a report on ‘The Effects of Passive Smoking on Health’. In 1993, a working party was established to update the report, and the NHMRC invited public comment. The initial terms of reference for the updated report were:
The Tobacco Institute of Australia (TIA) objected to the terms of reference on the basis that they assumed that passive smoking did cause disease. The TIA contended that such a link had not been found definitively to exist. After initial negotiations broke down, the TIA commenced proceedings in the Federal Court. Those proceedings were subsequently settled, with both parties agreeing to amended terms of reference. The amended terms of reference were:
In subsequent correspondence, the NHMRC informed the TIA that ‘the working party will consider in the review all relevant scientific evidence, including all relevant scientific evidence submitted’ to the NHMRC by the TIA. In response, the TIA submitted a 34-page document, to which there were five attachments. The attachments were considerable. One contained 122 scientific publications. Another contained five bound volumes of comments by ‘independent’ scientists on the United States’ Environmental Protection Agency report on the Health Effects of Passive Smoking: Assessment of Lung Cancer in Adults and Respiratory Disorders in Children.
After the NHMRC published its draft report, the TIA brought proceedings in the Federal Court, alleging that the NHMRC, when writing the report, only considered papers published in the peer-reviewed scientific press. The NHMRC did not deny the allegation. The TIA argued that, as a result of this decision, the NHMRC had failed to comply with its statutory obligations, and failed to meet the promises made in the correspondence discussed above. This meant that the NHMRC had failed to accord procedural fairness to the TIA and the report did not comply with the requirements imposed by the Parliament.
Justice Finn noted that the legislation that created the NHMRC required the NHMRC, when preparing draft reports, to have ‘regard to any submissions received’. On this basis, his Honour found that the NHMRC had a statutory obligation to ‘positively consider’ the submissions made by the TIA. i 27 This obligation was supplemented by a common law obligation, which arose from the promise made by the NHMRC to consider all evidence submitted by the TIA.ii
The duty to provide ‘positive consideration’ precluded the adoption of an a priori criterion which excluded parts of the TIA’s submission from actual consideration. Instead, ‘positive consideration’ involved an active intellectual process directed at the submission.iii The practical effect of this was that the NHMRC ‘at least collectively, should have been fully aware of the actual contents of all or virtually all submissions received’. Although those assisting the working party had actually reviewed and summarised the TIA’s submissions and attachments, this was insufficient. The decision to exclude from consideration papers that were not published in peer-reviewed scientific press breached this obligation. On this basis, Justice Finn held that the NHMRC did not give genuine consideration to the TIA’s materials, and had therefore denied the TIA procedural fairness. The recommendations made by the working party had to be withdrawn.
The TIA commenced legal action following the Full Court’s decision in the early 1990s in the case between the Australian Federation of Consumer Organisations (AFCO) and the TIA (discussed above). The TIA sought injunctions to prevent a director of the Cancer Council of New South Wales from making public statements about the Court’s decision.
After the Full Court handed down its decision, the defendant (who was also Executive Director of Action on Smoking and Health), held a press conference and gave radio interviews. During these interviews, the defendant made a series of statements related to the link between smoking and disease. The statements related to whether the Full Court had overturned Justice Morling’s findings in relation to the link between smoking and disease. The basis of the claim was the same as that in the original proceedings; the TIA asked the Court to find that the statements were misleading and deceptive and therefore contrary to the New South Wales Fair Trading Act (the state equivalent to the Trade Practices Act).
The Supreme Court of New South Wales refused to hear the application, on the basis that the defendant’s statements did not take place ‘in trade or commerce’, but rather as Executive Director of ASH. The claim was therefore dismissed as the Act only applied to conduct engaged in ‘trade or commerce’.
126.96.36.199 International examples
In 1976, Phillip Morris sued Thames Television, claiming deception and breach of copyright following its airing of Death in the West; a documentary film on the health effects of smoking. Philip Morris successfully obtained a court order preventing the film from being re-aired, and Thames later settled out of court and signed a confidential agreement that it would destroy all copies of the film. Nonetheless, both the film and photocopies of the confidential agreement were later leaked.28-30
In 1994, Philip Morris filed a $10 billion lawsuit against ABC News over a documentary that claimed Philip Morris and Reynolds controlled and manipulated nicotine levels to addict smokers. Philip Morris Companies sued ABC for libel, claiming it did not add measurable amounts of nicotine from outside sources to its cigarettes, and Reynolds filed a similar lawsuit several months later. The lawsuits were settled, and under the terms of the settlement, ABC had to pay the legal expenses of Philip Morris and Reynolds, as well as issue two apologies on prime-time television.31
Philip Morris also pursued litigation in the early 1990s against people working on the American Stop Smoking Intervention Study (ASSIST)—the largest, most comprehensive tobacco control intervention trial ever conducted in the US—by claiming that federal funds were being used for “illegal lobbying”. Most complaints brought against the ASSIST program were dismissed; however, the litigation still served to place an enormous burden on staff, delay program implementation, and create self-censorship in policy activities.32
In 1997, Californians for Scientific Integrity (a citizens group reportedly largely funded by the tobacco industry) sued the University of California, the California Department of Health Services, and the California Department of Education in the Superior Court of Sacramento County in California, alleging that a professor at the university, Stanton Glantz, had engaged in scientific misconduct at taxpayer expense by intentionally misrepresenting the data in his study that showed no significant change in restaurant revenues following the introduction of smokefree legislation, and that the University had misused public funds by allowing Professor Glantz to take part in health-related advocacy in connection with his research.28 The University's response brief argued:
The true agenda of this action was patently obvious—to muzzle scientists whose research publications and speech on subjects relating to tobacco, tobacco control and the politics of tobacco have been a thorn in the side of the industry for decades. The danger of this type of lawsuit cannot be overestimated. It is an obvious attempt to intimidate and silence a bothersome critic of a wealthy and powerful industry. The University of California should be a place where such controversial figures, whatever their views, may research, publish and speak, free from intimidation and harassment of the type this lawsuit represents.
The Court dismissed the suit on the grounds that there was no legal basis for a claim against the University. Californians for Scientific Integrity unsuccessfully appealed to the Court of Appeal of California, and the California Supreme Court subsequently denied review of the Court of Appeal’s judgment.28, 33
1. JT International SA v Commonwealth of Australia. 43 (5 October 2012). High Court of Australia, 2012. Available from: http://www.austlii.edu.au/au/cases/cth/HCA/2012/43.html.
2. Mitchell A and Sheargold E. Protecting the autonomy of states to enact tobacco control measures under trade and investment agreements. Tobacco Control, 2014. Available from: http://www.ncbi.nlm.nih.gov/pubmed/25361743
4. World Trade Organization (WTO). Marrakesh agreement establishing the world trade organization. Available from: https://www.wto.org/english/docs_e/legal_e/04-wto_e.htm.
5. Sud SR, Brenner JE, and Shaffer ER. Trading away Health: The influence of trade policy on youth Tobacco Control. The Journal of Pediatrics, 2015. Available from: http://www.ncbi.nlm.nih.gov/pubmed/25681200
6. U.S. Department of Health and Human Services. The Health consequences of smoking: 50 years of progress. A Report of the surgeon general. Atlanta, GA: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2014. Available from: http://www.surgeongeneral.gov/library/reports/50-years-of-progress/full-report.pdf.
7. Garcia-Navarro L. Once Philip Morris workers, now they clamp down on uruguay's smokers. NPR, 2015. Available from: http://www.npr.org/sections/parallels/2015/05/08/404557478/once-philip-morris-workers-now-they-clamp-down-on-uruguays-smokers
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10. Durkin S, Brennan E, Coomber K, Zacher M, Scollo M, et al. Short-term changes in quitting-related cognitions and behaviours after the implementation of plain packaging with larger health warnings: Findings from a national cohort study with Australian adult smokers. Tobacco Control, 2015; 24:ii26-ii32. Available from: http://tobaccocontrol.bmj.com/content/24/Suppl_2/ii26.full
12. Australian Government Department of Foreign Affairs and Trade. Freedom of information page. 2011. Available from: http://dfat.gov.au/about-us/corporate/freedom-of-information/Pages/freedom-of-information.aspx
13. World Trade Organization. Australia - certain measures concerning trademarks, geographical indications and other plain packaging requirements applicable to tobacco products and packaging – report of the panels. 2018. Available from: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds467_e.htm
14. No authors listed. Philip Morris sues Uruguay over graphic cigarette packaging. NPR, 2014. Available from: http://www.npr.org/blogs/goatsandsoda/2014/09/15/345540221/philip-morris-sues-uruguay-over-graphic-cigarette-packaging
15. No authors listed. An Uruguayan lawsuit with International implications for Philip Morris. Forbes, 2014. Available from: http://www.forbes.com/sites/greatspeculations/2014/09/22/an-uruguayan-lawsuit-with-international-implications-for-philip-morris/
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17. World Bank. ICSID Case No. ARB/10/7 Procedural Details. International centre for the settlement of investment disputes website. Available from: http://icsid.worldbank.org/en/Pages/cases/casedetail.aspx?CaseNo=ARB%2f10%2f7
18. Al-hamdani M. Commentary: The global tobacco litigation initiative: An effort to protect developing countries from big tobacco. Journal of Public Health Policy, 2014; 35(2):162-70. Available from: http://www.ncbi.nlm.nih.gov/pubmed/24573240
19. Tienhaara K. Regulatory chill and the threat of arbitration: A view from political science, in Evolution in Investment Treaty Law and Arbitration. Brown C and Miles K, Editors. Cambridge University Press; 2011. Available from: http://ebooks.cambridge.org/chapter.jsf?bid=CBO9781139043809&cid=CBO9781139043809A040.
20. Department of Foreign Affairs and Trade, Trans-pacific partnership agreement. Australian Government. Available from: http://dfat.gov.au/trade/agreements/tpp/Pages/trans-pacific-partnership-agreement-tpp.aspx.
21. Office of the United States Trade Representative. Transatlantic trade and investment partnership. Available from: http://www.ustr.gov/ttip
22. United Nations Conference on Trade and Development. World investment Report 2015: Reforming International investment governance. 2015. Available from: http://unctad.org/en/PublicationsLibrary/wir2015_en.pdf.
23. Action on Smoking and Health (ASH). Seven things you should know about TTIP. Available from: http://ash.org/programs/tobacco-trade/ttip/
24. Conference of the Parties to the WHO Framework Convention on Tobacco Control. Trade and investment issues, including agreements, and legal challenges in relation to the implementation of WHO FCTC: Report by the convention secretariat, FCTC/cop/7/21, (29 July 2016).
25. United Nations Conference on Trade and Development. UNCTAD reform package for the International investment regime. 2018. Available from: http://investmentpolicyhub.unctad.org/Upload/Documents/Reform_Package_web.pdf.
26. Flaherty S. Akin Gump to lobby for Philip Morris on trade pacts. Law 360, 1 April 2014. Available from: http://www.law360.com/articles/523938/akin-gump-to-lobby-for-philip-morris-on-trade-pacts
27. Nelson S. Illinois supreme court revisits lawsuit against tobacco company. WQAD 8 2015. Available from: http://wqad.com/2015/05/18/illinois-supreme-court-revisits-lawsuit-against-tobacco-company/
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29. Sharp R. "Death in the west' to be resurrected. The Glasgow Herald, 1982. Available from: http://news.google.com/newspapers?nid=2507&dat=19820511&id=3_A9AAAAIBAJ&sjid=5EgMAAAAIBAJ&pg=4909,1826559
30. Philip Morris Records. Letter to Hartogh,J., and Murray, RW. 1982. Available from: https://www.industrydocumentslibrary.ucsf.edu/tobacco/docs/#id=gngy0110
31. Landler M. The media business; ABC news settles suits on tobacco. New York Times, 1995. Available from: https://www.nytimes.com/1995/08/22/us/the-media-business-abc-news-settles-suits-on-tobacco.html
32. White J and Bero LA. Public Health under attack: The American stop smoking intervention study (ASSIST) and the Tobacco Industry. American Journal of Public Health, 2004; 94(2):240-50. Available from: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1448234/