Foley Hoag Helps Uruguay Secure Landmark Victory Over Philip Morris

July 08, 2016

Arbitral Tribunal Affirms Uruguay’s Sovereign Right to Regulate Tobacco

An international arbitral tribunal today rejected a challenge by Philip Morris International, Inc. (“PMI”) to Uruguay’s strict tobacco-control measures, aimed at reducing cigarette consumption and its devastating impact on public health.

The case had attracted widespread international attention because it pitted the sovereign right of Uruguay to protect the health of its 3.5 million people against the commercial interests of tobacco giant PMI.

Foley Hoag LLP partners Paul Reichler, Lawrence Martin and Clara Brillembourg, of Washington, DC, and Andrew Loewenstein of Boston led Uruguay’s legal defense team.

“This precedent-setting decision not only upholds Uruguay’s public health measures, but sends a strong signal to other countries that they can move forward with strong tobacco control regulations without fear of intimidation by big tobacco companies like Philip Morris,” said Reichler.

“The credit for this accomplishment goes to Uruguay’s President Tabaré Vázquez—a true champion of public health, and a principled advocate of strong measures to reduce smoking and save lives,” Reichler added. “It was under his guidance that this case was brought to a successful conclusion.”

The arbitral tribunal was convened in 2010 pursuant to the terms of the bilateral investment treaty between Uruguay and Switzerland under the auspices of the International Centre for Settlement of Investment Disputes, in Washington.

Philip Morris challenged two of Uruguay’s tobacco control measures: the requirement that graphic warning labels cover 80% of the front and back of cigarette packs, and the requirement that each brand of cigarettes have only a single presentation (i.e., that there only be one type of Marlboro cigarette on the market, not Marlboro Red, Marlboro Gold and Marlboro Blue).

The tribunal rejected Philip Morris’ claims that the two challenged regulations were arbitrary, constituted an expropriation, and infringed on PMI’s trademark rights. Rather, the arbitral tribunal affirmed the two measures as reasonable exercises of Uruguay sovereign right—and duty—to protect public health from the death and disease smoking causes.

Uruguay showed that, as a result of these and other measures, the smoking rate among adults in Uruguay dropped from 35% to 22% between 2005 and 2014. Among adolescents, the impact was even greater; the smoking rate dropped dramatically to just 8.4%.

In addition to upholding Uruguay’s challenged measures, the arbitral tribunal ordered Philip Morris to reimburse Uruguay for its legal fees and other costs incurred in the case, a sum in excess of $7 million.

“The tribunal’s decision should put an end to the uncertainty that the tobacco companies have cultivated about whether countries can and should move firmly to reduce the incidence of death and disease smoking causes by adopting reasonable tobacco control policies,” said Foley Hoag’s Lawrence Martin. “The tribunal made clear that people matter more than profits.” 

Uruguay’s successful defense against PMI’s challenges was led by Dr. Miguel Toma, Secretary of the Presidency, and Dr. Carlos Gianelli, Uruguay’s Ambassador to the United States. In addition to Foley Hoag LLP, Uruguay was represented by Professor Harold H. Koh of Yale Law School.

A fact sheet on the case can be found here