Philip Morris Sues Uruguay Over Anti-Smoking Campaign
One can surmise the many things tobacco companies have in common with fast food corporations, including the fact they must expand their business abroad while sales stagnate on both sides of the Atlantic. The result is that the World Health Organization estimates that 70 percent of the 8.4 million deaths that will be attributed tobacco use in 2020 will occur in developing countries. One country that has long run an aggressive anti-smoking campaign is Uruguay.
Former and now current President Tabaré Vázquez, an oncologist, was part of the Uruguayan’s government effort to convince its citizens to stop smoking. The results were dramatic: Tobacco use declined rapidly between 2006 and 2009, and it kept falling during the administration of his successor and now predecessor, José Mujica. Among the many tactics was the adoption of graphic, and even gruesome, warnings on cigarette packages. In addition, cigarette companies can only sell one brand of smokes within Uruguay: branding with words such as “light,” “extra,” “green” or “gold” are prohibited because they allegedly convince consumers they are smoking a cheaper option. Philip Morris International, in turn, has responded with a fully-loaded litigation assault on the tiny country of 3 million.
Both the tobacco industry and its critics are keenly watching how Philip Morris’ lawsuit against the Uruguayan government will unfold. Philip Morris’ complaint is that the Uruguayan regulations requiring 80 percent of a cigarette pack to be covered with health warnings and images leaves no room for the company’s trademarks. The company is suing Uruguay under the bilateral investment treaty between Uruguay and Switzerland, and a ruling should come during the third quarter of this year. The International Center for Settlement of Investment Disputes (ICSID), under the trade agreement between two countries, will settle the lawsuit by binding arbitration.
For advocacy organizations such as Avaaz, which is running a signature campaign in support of Uruguay’s policies, this dispute is a classic David versus a corporate Goliath fight. After all, Uruguay’s GDP in 2013 was about US$55.7 billion, while Philip Morris’ revenues the same year totaled approximately US$80.2 billion. Avaaz and other anti-smoking advocates have accused the ICSID of a history of ruling in favor of corporate interests. Also in Uruguay’s corner are Bloomberg Philanthropies, the eponymously named foundation launched by New York City’s former mayor, and the Gates Foundation. These organizations argue that if Philip Morris wins its legal battle with Uruguay, smoking bans in other countries will come under threat.
Philip Morris, however, responds that the company supports regulation of smoking in public spaces, some graphic warnings and advertising restrictions; however, the 80 percent health warning requirement and limit on the number of brands “restricts competition to the detriment of foreign investors” and are deal-breakers. Philip Morris is seeking US$25 million in damages for Uruguay’s “decision to disregard its commitment to investors.”
Picking a fight with a small country is certainly an interesting tactic for Philip Morris, which posts extensive information about its corporate social responsibility programs on its website. While there is ample information about the company’s sustainability work, the link to how it helps nonprofits with “critical social issues” draws a blank. How fitting for an industry that has long suffered a public relations image crisis, as unleashing lawyers to undermine a country’s sovereignty leaves Philip Morris once again appearing to be little more than a corporate bully.
Published earlier today on Triple Pundit.