|FREQUENTLY USED ABBREVIATIONS AND ACRONYMS|
|80/80 Regulation||Adopted through Presidential Decree 287/009 dated 15 June 2009|
|Advisory Commission||National Advisory Commission for Tobacco Control of the Ministry of Public Health of Uruguay|
|Arbitration Rules||ICSID Rules of Procedure for Arbitration Proceedings dated 10 April 2006|
|BIT or Treaty||Agreement between the Swiss Confederation and the Oriental Republic of Uruguay on the Reciprocal Promotion and Protection of Investments dated 7 October 1988|
|c - [X]||Claimants' Exhibit|
|Challenged Measures||The 80/80 Regulations and the SPR|
|CLA - [X]||Claimants' Legal Authority|
|CM||Claimants' Memorial on the Merits dated 3 March 2014|
|CR||Claimants' Reply on the Merits dated 17 April 2015|
|Dec. Jur.||Decision on Jurisdiction dated 2 July 2013|
|FCTC||WHO Framework Convention on Tobacco Control dated 21 May 2003|
|Hearing||Hearing held in Washington, D.C., on 19-29 October 2015|
|ICSID Convention||Convention on the Settlement of Investment Disputes Between States and Nationals of Other States dated 18 March 1965|
|ICSID or the Centre||International Centre for Settlement of Investment Disputes|
|MPH||Ministry of Public Health of Uruguay|
|PAHO||Pan-American Health Organization|
|R - [X]||Respondent's Exhibit|
|RCM||Respondent's Counter Memorial on the Merits dated 13 October 2014|
|RfA||Request for Arbitration dated 19 February 2010|
|RLA - [X]||Respondent's Legal Authority|
|RR||Respondent's Rejoinder on the Merits dated 20 September 2015|
|SCJ||Supreme Court of Justice of Uruguay|
|SPR||Single Presentation Regulation adopted through Ordinance 514 dated 18 August 2008|
|TCA||Tribunal de lo Contencioso Administrativo|
|Tobacco Control Program||National Program for Tobacco Control of the Ministry of Public Health of Uruguay|
|Tr Day [x] [p.] [line]||Transcript of the hearing on the merits held in Washington D.C., on 19-29 October 2015|
|VCLT||Vienna Convention on the Law of Treaties|
|WHO||World Health Organization|
■ Order that Respondent withdraw the challenged regulations or refrain from applying them against Claimants' investments, and award damages incurred through the date of such withdrawal; or, in the alternative
■ Award Claimants damages of at least US$ 22,267 million, * plus compound interest running from the date of breach to the date of Respondent's payment of the award; and
Award Claimants all of their fees and expenses, including attorney's fees, incurred in connection with this arbitration; and
Award such other relief as the Tribunal deems just and appropriate.6
a. That it has jurisdiction over the claims presented by Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. as far as they are based on alleged breaches of the Agreement on the Reciprocal Promotion and Protection of Investments concluded on 7 October 1988 between the Swiss Confederation and the Oriental Republic of Uruguay;
b. That it has jurisdiction under Article 46 of the ICSID Convention over the Claimants' claim for denial of justice;
c. To make the necessary order for the continuation of the procedure pursuant to Arbitration Rule 41(4); and
d. To reserve all questions concerning the costs and expenses of the arbitral proceedings for subsequent determination.9
The action taken by Uruguay was taken in light of a substantial body of evidence that large graphic health warnings are an effective means of informing consumers of the risks associated with tobacco consumption and ofdiscouraging tobacco consumption. There is also a substantial body of evidence [sic] that prohibiting brand variants is an effective means of preventing misleading branding of tobacco products. These bodies of evidence, which are consistent with state practice , support the conclusion that the Uruguayan measures in question are effective means of protecting public health.10
[T]he Submission may be beneficial to its decision-making process in this case considering the contribution of the particular knowledge and expertise of two qualified entities [the WHO and the FCTC Secretariat] regarding the matters in dispute. It considers that in view of the public interest involved in this case, granting the Request would support the transparency of the proceeding and its acceptability by users at large.
In the light of all the foregoing considerations, the Tribunal decides to allow the filing by the Petitioners of the Submission in this proceeding pursuant to Rule 37(2). (¶¶ 28, 29).
PAHO and its Member States publicly recognize and fully support Uruguay's efforts to protect its citizens from the harmful effects of tobacco consumption, including through its implementation of the 80% Rule and the Single Presentation Rule measures and have expressed their deep concern about misinformation campaigns and legal actions instituted by the tobacco industry against tobacco contro1.
PAHO supports Uruguay's defense of the 80% Rule and the SPR, which are aimed at saving lives, and recognizes it as a role model for the Region and the world.
Uruguay's tobacco control measures are a reasonable and responsible response to the deceptive advertising, marketing and promotion strategies employed by the tobacco industry, they are evidence based, and they have proven effective in reducing tobacco consumption. For this simple reason, the tobacco industry is compelled to challenge them. (footnotes omitted).11
[T]he Submission may be beneficial to its decision-making process in this case considering the contribution of the particular knowledge and expertise of a qualified entity, such as PAHO, regarding the matters in dispute. It considers that in view of the public interest involved in this case, granting the Request would support the transparency of the proceeding and its acceptability by users at large.
In the light of all the foregoing considerations, the Tribunal has decided to allow the filing by the Petitioner of the Submission in this proceeding pursuant to Rule 37(2). (¶¶ 30-31)
The alleged "unique composition of its membership," the only argument
provided by the Petitioner, is not a sufficient basis to consider that the Avaaz Foundation may offer a perspective, particular knowledge or insight that is different from that of the disputing parties nor one that is relevant to this arbitration.
The Tribunal further notes that, as recognized by the Petitioner, the Petition is
submitted late in the proceedings, when one of the Parties' has presented all of
its scheduled written pleadings to the Tribunal. The intervention of a nondisputing party therefore may disrupt the proceeding and unfairly prejudice one of the Parties. (p. 2)
Pursuant to [Arbitration Rule 37(2)], the Tribunal must not only consider whether the person or organization that seeks to intervene has the required expertise or experience, but also whether it is sufficiently independent from the disputing parties to be of assistance to the Tribunal. Prior ICSID tribunals have already recognized the importance of the lack of connection between the petitioner and the disputing parties for the tribunal's determination to accept or deny non-disputing parties' submissions.
The Respondent has brought to the Tribunal's attention, the "close relationship between ASIPI and Claimants," by identifying the participation of Claimants' lawyers on the management board and on specific thematic committees of ASIPI. The Tribunal cannot ignore this detailed information.
In addition, the Tribunal highlights that the Petition has been submitted little over one month before the start of the hearing for the merits phase of these proceedings
Consistent with its prior determinations on this question, the Tribunal considers that this belated intervention will disrupt the proceeding and has the potential to unduly burden and unfairly prejudice the Parties, including in connection with their current preparation of the forthcoming hearing. [...] (p. 2)
For the Claimants:
Mr. Marc Firestone
Ms. María del Carmen Ordóñez López
Mr. Diego Cibils
Ms. Tiffany Steckler
Ms. Luisa Menezes
Mr. John Bails Simko
Mr. Steve Reissman
Mr. Marco Mariotti
Party Counsel: Ms. Avery Archambo
Mr. Stanimir A. Alexandrov Mr. Hisham El-Ajluni
Mr. James E. Mendenhall Mr. Carlos Brandes
Ms. Jennifer Haworth McCandless Mr. Ken Reilly
Ms. Marinn Carlson Ms. Madeleine McDonough
Mr. Patrick Childress Mr. Bill Crampton
Ms. Courtney Hikawa Ms. Catherine Holtkamp
Ms. María Carolina Durán Mr. Leland Smith
Mr. Andrew Blandford Mr. Stuart Dekker
Mr. Michael Krantz Mr. Dushyant Ailani
Ms. Samantha Taylor
For the Respondent:
Dr. Miguel Toma
Dr. Jorge Basso
Ambassador Carlos Gianelli
Dr. Carlos Mata Prates
Dr. Inés Da Rosa
Dr. Verónica Duarte
Ms. Marianela Bruno
Party Counsel: Ms. Christina Beharry
Mr. Paul S. Reichler Mr. Yuri Parkhomenko
Mr. Lawrence H. Martin Dr. Constantinos Salonidis
Ms. Clara E. Brillembourg Ms. Analía González
Professor Harold Hongju Koh Mr. Eduardo Jiménez de Aréchega
Mr. Andrew B. Loewenstein Ms. Francheska Loza
Ms. Melinda Kuritzky Ms. Gabriela Guillén
Mr. Nicholas Renzler Ms. Nancy López
Mr. José Rebolledo Mr. Oscar Norsworthy
Ms. Anna Aviles-Alfaro
The following persons were examined:
On behalf of the Claimants :
Mr. Chris Dilley Mr. Diego Cibils
Mr. Nicolás Herrera
Professor Julián Villanueva Professor Jan Paulsson
Professor Alexander Chernev Mr. Brent Kaczmarek
Professor Jacob Jacoby Mr. Kiran P. Sequeira
Professor Gustavo Fischer
Professor Christopher Gibson Professor Alejandro Abal Oliú
On behalf of the Respondent :
Dr. Jorge Basso, Minister of Public Health Dr. Eduardo Bianco, Uruguayan Medical
Dr. Winston Abascal, Ministry of Public Union/Tobacco Epidemic Research Cente
Health (CIET Uruguay)
Dr. Ana Lorenzo, Ministry of Public Health
Dr. Andrea Barrios Kübler Dr. Joel B. Cohen
Dr. Nuno Pires de Carvalho Dr. Timothy Dewhirst
Professor Nicolas Jan Schrijver Dr. David Hammond
Dr. Santiago Pereira Mr. Jeffrey A. Cohen
- Brands, brand families. Until 2009, Abal sold cigarettes under the following six brands: Marlboro, Fiesta, Philip Morris, Premier, Galaxy, and Casino. The bundle of variants sold under a particular brand is known as a "brand family."27
- Variants. Before 2009, Abal sold thirteen variants within its six brand families. Variants within a given brand family share certain characteristics such as quality, brand heritage, or taste but may also exhibits slightly different characteristics. Marlboro was Abal's most important brand family. The Marlboro brand family consisted of four variants— Marlboro Fresh Mint, Marlboro Red, Marlboro Blue, and Marlboro Gold.28
- Associated intellectual property rights. These intellectual property rights consist of the trademarks associated with the brand markings on the products that Abal sold before 2009. Abal owns the trademarks associated with the Premier and Casino brand families, while the Claimants PMP and PMB own and license to Abal the trademarks for all of the other products that Abal currently markets in Uruguay or previously marketed in Uruguay before the SPR.29
Determined to give priority to their right to protect public health,
Recognizing that the spread of the tobacco epidemic is a global problem with serious consequences for public health that calls for the widest possible international cooperation and the participation of all countries in an effective, appropriate and comprehensive international response,
Reflecting the concern of the international community about the devastating worldwide health, social, economic and environmental consequences of tobacco consumption and exposure to tobacco smoke,
Seriously concerned about the increase in the worldwide consumption and production of cigarettes and other tobacco products, particularly in developing countries, as well as about the burden this places on families, on the poor, and on national health systems,
Recognizing that scientific evidence has unequivocally established that tobacco consumption and exposure to tobacco smoke cause death, disease and disability, and that there is a time lag between the exposure to smoking and the other uses of tobacco products and the onset of tobacco-related diseases,
Recognizing also that cigarettes and some other products containing tobacco are highly engineered so as to create and maintain dependence, and that many of the compounds they contain and the smoke they produce are pharmacologically active, toxic, mutagenic and carcinogenic, and that tobacco dependence is separately classified as a disorder in major international classifications of diseases,
Relationship between this Convention and other agreements and legal instruments
1. In order to better protect human health, Parties are encouraged to implement measures beyond those required by this Convention and its protocols, and nothing in these instruments shall prevent a Party from imposing stricter requirements that are consistent with their provisions and are in accordance with international law.[...]
To achieve the objective of this Convention and its protocols and to implement its provisions, the Parties shall be guided, inter alia, by the principles set out below:
1. Every person should be informed of the health consequences, addictive nature and mortal threat posed by tobacco consumption and exposure to tobacco smoke and effective legislative, executive, administrative or other measures should be contemplated at the appropriate governmental level to protect all persons from exposure to tobacco smoke.
Packaging and labelling of tobacco products
1. Each Party shall, within a period of three years after entry into force of this Convention for that Party, adopt and implement, in accordance with its national law, effective measures to ensure that:
(a) tobacco product packaging and labelling do not promote a tobacco product by any means that are false, misleading, deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards or emissions, including any term, descriptor, trademark, figurative or any other sign that directly or indirectly creates the false impression that a particular tobacco product is less harmful than other tobacco products. These may include terms such as "low tar", "light", "ultra-light", or "mild"; and
(b) each unit packet and package of tobacco products and any outside packaging and labelling of such products also carry health warnings describing the harmful effects of tobacco use, and may include other appropriate messages. These warnings and messages:
(i) shall be approved by the competent national authority,
(ii) shall be rotating,
(iii) shall be large, clear, visible and legible,
(iv) should be 50% or more of the principal display areas but shall be no less than 30% of the principal display areas,
(v) may be in the form of or include pictures or pictograms.
2. Each unit packet and package of tobacco products and any outside packaging and labelling of such products shall, in addition to the warnings specified in paragraph 1(b) of this Article, contain information on relevant constituents and emissions of tobacco products as defined by national authorities.
1. Parties recognize that a comprehensive ban on advertising, promotion and sponsorship would reduce the consumption of tobacco products.
4. As a minimum, and in accordance with its constitution or constitutional principles, each Party shall:
(a) prohibit all forms of tobacco advertising, promotion and sponsorship that promote a tobacco product by any means that are false, misleading or deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards or emissions;(…)
5. Parties are encouraged to implement measures beyond the obligations set out in paragraph 4.
■ M onitor tobacco use and prevention policies,
■ P rotect people from tobacco smoke,
■ O ffer help to quit tobacco use,
■ W arn about the dangers of tobacco,
■ E nforce bans on tobacco advertising, promotion and sponsorship,
■ R aise taxes on tobacco.
Article 11.1(b)(iv) of the Convention specifies that health warnings and messages on tobacco product packaging and labelling should be 50% or more, but no less than 30%, of the principal display areas. Given the evidence that the effectiveness of health warnings and messages increases with their size, Parties should consider using health warnings and messages that cover more than 50% of the principal display areas and aim to cover as much of the principal display areas as possible. The text of health warnings and messages should be in bold print in an easily legible font size and in a specified style and colour(s) that enhance overall visibility and legibility.54
43. Article 11.1(a) of the Convention specifies that Parties shall adopt and implement, in accordance with their national law, effective measures to ensure that tobacco product packaging and labelling do not promote a tobacco product by any means that are false, misleading, deceptive or likely to create an erroneous impression about the product's characteristics, health effects, hazards or emissions, including any term, descriptor, trademark or figurative or other sign that directly or indirectly creates the false impression that a particular tobacco product is less harmful than others. These may include terms such as "low tar", "light", "ultra-light" or "mild", this list being indicative but not exhaustive. In implementing the obligations pursuant to Article 11.1(a), Parties are not limited to prohibiting the terms specified but should also prohibit terms such as "extra", "ultra" and similar terms in any language that might mislead consumers.
46. Parties should consider adopting measures to restrict or prohibit the use of logos, colours, brand images or promotional information on packaging other than brand names and product names displayed in a standard colour and font style (plain packaging). This may increase the noticeability and effectiveness of health warnings and messages, prevent the package from detracting attention from them, and address industry package design techniques that may suggest that some products are less harmful than others.55
Parties should prohibit the use of any term, descriptor, trademark, emblem, marketing image, logo, colour and figurative or any other sign that promotes a tobacco product or tobacco use, whether directly or indirectly, by any means that are false, misleading or deceptive or likely to create an erroneous impression about the characteristics, health effects, hazards or emissions of any tobacco product or tobacco products, or about the health effects or hazards of tobacco use. Such a prohibition should cover, inter alia, use of the terms "low tar", "light", "ultra-light", "mild", "extra", "ultra" and other terms in any language that may be misleading or create an erroneous impression.56
■ Presidential Decree No. 36/005 ("Decree 36"), requiring the inclusion of the warning texts described in paragraph 99 above, to cover 50% of the front and back of tobacco packaging instead of the side of the package.63
■ Decree 169/005, regulating smoking areas within restaurants, bars and recreation areas, and prohibiting the advertisement of tobacco products and/or brands on television channels during so-called "safe harbor" hours for the protection of minors.64
■ Decree 170/005, prohibiting the sponsorship, through advertising and promotion of tobacco-derived products, in sporting events in Uruguay.65
■ Decree 171/005 ("Decree 171"), " extending" what was mandated by Decree 36, insofar as the health warnings in the packages of tobacco products should not only occupy 50% of the total display areas, but that they shall also be periodically rotated, and include images and/or pictograms. Decree 171 further prohibited the use of terms such as "low tar," "light," or "mild" on tobacco products, and gave the MPH the discretion to define the type, legend, images and pictograms to be included thereon.66
■ Presidential Decree 214/005, providing that public offices were considered "100% tobacco smoke-free environments."67
■ Presidential Decree 268/005, providing that "all enclosed premises for public use and any work area, whether public or private, intended for common use by people" had to be 100% tobacco smoke-free environments.68
■ Presidential Decree 415/005, confirming that all pictograms must be approved by the MPH, further defining the eight types of images to be printed on the lower 50% of the principal display areas of all packs of cigarettes and tobacco products (as set forth in Decree 171/005), and providing that one of the two sides of the packs of cigarettes should be occupied entirely by the text health warning.69
■ Presidential Decree 202/007, attaching three images combined with six legends to be printed on 50% of the display areas of all packs of cigarettes and tobacco products, further to Decree 171/005.70
■ Decree of July 2007, imposing a 22% Value Added Tax on tobacco products. Tobacco products were previously exempt from VAT.71
Article 1. (General principle). All persons are entitled to the enjoyment of the highest possible level of health, improvement of all labor and environmental health issues, as well as prevention, treatment and rehabilitation from diseases, pursuant to several international agreements, pacts, statements, protocols and conventions which have been ratified by law.
Article 2 . (Subject-matter). This law pertains to public order and its objective is to protect the inhabitants of the country against the sanitary, social, environmental and economic consequences of tobacco consumption and exposure to tobacco smoke.
In such sense, measures aiming at the control of tobacco are established, in order to reduce in a continuous and substantial manner the prevalence of tobacco consumption and exposure to tobacco smoke, pursuant to the World Health Organization Framework Agreement for Tobacco Control, which was ratified by Law No. 17,793 of 16 July 2004.
Article 8. (Packaging and labeling of tobacco products). - It is forbidden for packages and labels of tobacco products to promote such products in a false, wrong or misleading way which may lead to a mistake regarding their features, health effects, risks or emissions.
It is likewise forbidden to use terms, descriptive features, trademarks or brands, figurative signs or any other kind, which have the direct or indirect effect of creating a false impression that a certain tobacco product is less harmful than others. (emphasis added)
Article 9. (Health warnings in tobacco products’ packaging and packets).-All packaging and packets of tobacco products and all external labeling and packaging thereof must contain health warnings and images or pictograms describing the harmful effects of tobacco consumption or other appropriate messages. Such warnings and messages must be approved by the Ministry of Public Health, as well as large, clear, visible and legible, and shall occupy at least 50% (fifty percent) of the total main exposed areas. These warnings must be periodically modified in accordance to the implementation regulation.
All packaging and labeling of tobacco products and all external labeling and packaging of the same, as well as the warnings specified in the above paragraph shall contain information regarding the main [all] [sic] components of tobacco smoke and emissions thereof, pursuant to the instructions furnished by the Ministry of Public Health.
Article 6. Manufacturing companies or importers shall quarterly submit to the Ministry of Public Health an affidavit, addressed to the National Program for Tobacco Control of such Ministry, in which they will report the presence of the toxic substances to be established by the Ministry of Public Health. The information mentioned above shall be published in two newspapers of the capital city.
Article 12 . It is herein established that health warnings shall be rotated every 12 (twelve) months; such warnings shall be approved by the Ministry of Public Health.
The use of descriptive terms and elements, trademarks or brands, figurative signs or signs of any other nature, such as colors or combination of colors, numbers or letters, that have the direct or indirect effect of creating the misleading impression that a certain product is less harmful than others is forbidden.
2. One of the two lateral display areas on cigarette packs and tobacco product containers shall be taken up in full by the following statement: ‘This product contains nicotine, tar and carbon monoxide,' with no specification as to the amount thereof. […]
3. Each brand of tobacco products shall have a single presentation, such that it is forbidden to use terms, descriptive features, trademarks, figurative signs or signs of any other kind such as colors or combinations of colors, numbers or letters, which may have the direct or indirect effect of creating a false impression that a certain tobacco product is less harmful than another, varying only the pictograms and the warning according to article 1 of the present Ordinance .78
It is ordered that the health warnings to be included on packages of tobacco products, including images and/or pictograms and messages, shall cover 80% (eighty per cent) of the lower part of each of the main sides of every cigarette package and in general of every packet and container of tobacco products and of any similar packaging and labelling.94
It is herein ordered that the pictograms to be used in the packages of tobacco products are defined in six (6) images combined with the corresponding legends (back and front), which shall be printed in the 80% lower area of both main panels of any unit packet of cigarettes and in general in any packet and package of tobacco products[…]..
Since May 31st of the year 2005, when the decree was enacted that prohibited deceptive terms, which was later also adopted in Law 18,256, attempts have been made time and again to avoid compliance with the legal provisions. Every time measures have been taken in an endeavor to correct the situation, there is an attempt once again to avoid compliance with those provisions. Therefore, it is this Program’s understanding that consideration should be given to expanding the pictograms and legends to 90% of both main faces, as is expressly authorized by Article 9 of Law 18,256 when it states ‘[s]aid warnings and messages must be approved by the Ministry of Public Health, must be clear, visible, and legible, and must occupy at least 50% (fifty percent) of the total principal exposed surfaces.’98
According to the [...] CIET the smoking prevalence in Uruguay keeps declining and in 2013 it fell towards the 19% mark. Restrictive measures that put increasing pressure on the industry and smokers since the first bans were put in force in 2005 resulted in a significant reduction in the total number of smokers, especially between 2008 and 2012. However, this fall in prevalence shows significantly faster rates than the decline of volume sales during the review period, which means that those still smoking are doing it more intensively, or at least purchase more cigarettes.128
[A]n assessment of the impact of national tobacco control policies on three dimensions of tobacco use in Uruguay (per person consumption, adolescent prevalence, and adult prevalence) demonstrates consistent decreases in smoking in Uruguay since the country initiated a comprehensive control program in 2005.133
The percentage of smokers who reported that warning labels on cigarette packs were a reason to think about quitting increased from 25% in 2008-09 (when the warnings were symbolic and covered only 50% of the front and back of the pack) to 31% in 2010-11 and 30% in 2012 (when the images were more graphic and covered 80% of the front and back of the pack). In addition, gaps in smokers' awareness of stroke and impotence as smoking-related health effects were reduced after the introduction of pictorial health warnings specifically addressing these health effects.
The ITC Uruguay Survey provides modest evidence of a positive impact of the single presentation policy. The percentage of smokers who had false beliefs that light cigarettes are less harmful than regular cigarettes decreased from 29% before the single presentation policy to 15% after the policy. However, in 2012, 29% of smokers stated that their current brand is a "light", "mild", or "low tar" brand and the majority (91%) of smokers believe that although Uruguay has implemented a single presentation policy, the same cigarettes are being sold under different names.134
[W]arning effectiveness remained unchanged or decreased slightly[...], after the warnings changed to smaller set of more symbolic images in 2008, covering 50% of the packages. At Wave 3, after implementation of larger, more graphic warning covering 80% of the package, warning effectiveness increased to levels higher than Wave 1, demonstrating that large, graphic images with clear health messages are more effective than smaller, more abstracts warnings.135
the Department of Sociology at the University of the Republic of Uruguay, the Research Centre for Tobacco Epidemic (CIET), and the National Institute of Public Health of Mexico - University of South Carolina in collaboration with the ITC Uruguay Project team centered at the University of Waterloo in Canada. ITC 2014 (R-313), p. 16.
■ Compañía Industrial de Tabacos Monte Paz S.A. (" Monte Paz " or " Mailhos "), a domestically owned company, which held a market share somewhere between 75% and 85% between 2007 and 2013.143 Monte Paz is Abal's main competitor.
■ British American Tobacco (South America) Limited Sucursal Uruguay (" BAT "), another multinational company, which closed its Uruguayan factory in 2003, and began importing the brands it commercialized from Argentina and Chile. In 2007, it held 7% of the Market, which decreased to less than a 2% market share as of 2012.144 According to Euromonitor, BAT "finally withdrew from the Uruguayan market in mid-2010."145 BAT continued nevertheless to have a presence in the Uruguayan market, by selling cigarettes in the Department of Maldonado through a distributor.146
Illicit trade which had continued fluctuating between 17% and 21% of the total sales (estimated at 20.9% in 2012), with small variations is usually tied to price increases of legitimate brands. Despite an apparently stronger pressure from the customs authority and the Ministerio de Economía y Finanzas, there is a steady flow of illegal brands from Paraguay, Brazil and to a lesser degree, Argentina.149
The right to a trademark is acquired by registration carried out in accordance with this Law.
Registration of a trademark shall imply the natural or legal person under whose name the trademark is registered in the rightful owner.
The exclusive property of a trademark is acquired only over products and services for which registration has been requested.
In the case of a trademark that includes the name of a product or service, the trademark shall be registered exclusively for the product or service included in the trademark.
The right to oppose the use of any trademark that could lead to confusion between goods or services shall belong to the person that meets all the requirements of the present law.
■ The Montevideo Treaty of 1892, providing in its Article 2 that "ownership of a trademark or a trade name includes the right to use it.";178
■ The 1979 Paris Convention for the Protection of Intellectual Property (" Paris Convention ");179
■ The 1994 the Agreement on Trade-Related Aspects of Intellectual Property Rights (" TRIPS Agreement ").180
The Tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In the absence of such agreement, the Tribunal shall apply the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of international law as may be applicable.
The Tribunal may not bring in a finding of non liquet on the ground of silence or obscurity of the law.
The provisions of paragraphs (1) and (2) shall not prejudice the power of the Tribunal to decide a dispute ex aequo et bono if the parties so agree.
Article 5(1) of the BIT refers to "any other measure having the same nature or the same effect" as an expropriation or a nationalization. Thus, indirect expropriation under the Treaty is defined in a different and apparently stricter way than in other treaties that make reference to measures, the effect of which, would be "tantamount" or "equivalent" to nationalization or expropriation.211 Be that as it may, in order to be considered an indirect expropriation, the government's measures interference with the investor's rights must have a major adverse impact on the Claimants' investments. As mentioned by other investment treaty decisions, the State's measures should amount to a "substantial deprivation" of its value, use or enjoyment, "determinative factors" to that effect being "the intensity and duration of the economic deprivation suffered by the investor as a result of such measures."212
First, the Claimants consider that the police powers doctrine does not excuse the Respondent from liability for expropriating the Claimants' investment. According to the Claimants, "under customary international law, the scope of the implicit exception for police powers is limited to State powers related to protection and security such as enforcement of the law, maintenance of the public order, and defense of the State."217 State police power does not constitute a defense against expropriation.218
(1) Gross Profit is calculated in the Audited Financial Statements as Net Operating Income less Cost of Sales for both Local and Export Sales.
(2) Values are taken from the Audited Financial Statements as reported, then adjusted for inflation and reported in 2014 Pesos.
(3) Factory Closure Savings are calculated as UYUS 0,074 per stick multiplied by volume for each year after 2010. UYUS 0,074 is the per-stick savings Navigant calculates in its Appendix L adjusted for inflation and reported in 2014 Pesos.
(1) Abal Hermanos Financial Statements. December 31. 2004-December 31. 2013 (C-297, C-298. C-299. C-300. C-301. C-302. C-122. C-303. C-123. C-4121 .
(2) Inflation Data - International Monetary Fund (AG-441 .
(3) Second Navigant Report, ¶ 51 and Appendices L and M .
(4) Abal Historical Sales Volume and Revenue. 1999-2014 (C-3721 .
■ Article 31 of the Trademark Law, which provides that "[o]nce the registration application is submitted, no modifications will be allowed to the representation of the mark. All requests for modification shall be cause for a new registration."269
■ Article 13 of the Trademark Law, providing that when registration of a mark is granted, the holder cannot request a new registration for an identical mark for the same classes unless it first abandons the first registration.270
■ DNPI Resolution No. 21/2001, a technical Resolution, confirming that "modifications to the sign shall be grounds for a new registration request" and "only the modification of owners' names and domiciles due to typographical errors and limitation of protection shall be allowed."271
■ As to the MERCOSUR Protocol, it only uses affirmative language to describe a negative right.285 Its Preamble notes that it is intended to conform to the Paris Convention and the TRIPS Agreements, neither of which create a right to use.286 In any event, the MERCOSUR Protocol only applies between State Parties that have ratified it; that is, Uruguay and Paraguay.287 Even if were incorporated in Uruguayan law, something that the Respondent denies, it would not constitute a free-standing provision of universal application, but would apply along with its limitation and conditions (i.e. as only applicable to Paraguay). The Most Favored Nation clause of the TRIPS Agreement does not apply as the Mercosur Contracting Parties notified the TRIPS Council that they would avail themselves of the exception under Art. 4(d) of the TRIPS Agreement.
■ As to the Paris Convention and the TRIPS Agreement, the Respondent argues that the Claimants' Reply does not address the Paris Convention,288 and notes that a WTO panel has ruled that TRIPS Agreement only recognizes a negative right not a "positive right to exploit or use."289
■ As to the Montevideo Treaty, the Respondent alleges that it applies only as between the State Parties (Uruguay, Argentina, Bolivia, Paraguay, Peru),290 and Article 2, which Claimants cite for their proposition, in fact refers to the "right to use exclusively," which does not constitute an affirmative right to use in the sense the Claimants contend.291
a. Did the Claimants own the banned trademarks?
b. Does a trademark confer a right to use or only a right to protect against use by others?
c. Have the Challenged Measures expropriated the Claimants' investment?
The analysis of Claimants' Memorial seems to show that the Claimants are attempting to base their trademark rights to some of these marks on the fact that they form a part of a "trademark family" or that they are "derivative marks" derived from other trademarks that are indeed registered. Unlike other legal systems, the Uruguayan system does not provide protection for derivative trademarks (or trademark variants) or for trademark families, and therefore a claim based on the protection of a family of trademarks or their variants has no legal basis in Uruguayan Trademark Law, and consequently does not enjoy protection.310
It has also taken note that Professor Barrios, although supporting the Respondent's conclusions on ownership, admitted that whether a modified brand is covered by the trademark is not a literal exercise, since... trademarks must be taken as a whole, and not dismembering them into component parts for the purposes of analysis.... In other words we must bear in mind that the trademark is indivisible. It is the impression of the whole that must be taken into account for all intents and purposes."312
- Marlboro (a family comprised of Marlboro Red, Marlboro Gold, Marlboro Blue, and Marlboro Fresh Mint);
- Fiesta (a family comprised of Fiesta, Fiesta Blue, and Fiesta 50 50);
- Philip Morris (a family comprised of Philip Morris and Philip Morris Blue);
- Premier (a family comprised of Premier and Premier Extra);
- Galaxy (which was comprised of only one product, Galaxy); and
- Casino (which was comprised of only one product, Casino).
Interference with the investment's ability to carry on its business is not satisfied where the investment continues to operate, even if profits are diminished. The impact must be substantial in order that compensation may be claimed for expropriation.379
The police powers doctrine was propounded much earlier than its recognition by investment treaty decisions. The 1961 Harvard Draft Convention on the International Responsibility of States for Injury to Aliens already provided in Article 10(5) as follows:
An uncompensated taking of property of an alien or a deprivation of the use or enjoyment of property of an alien which results from... the action of the competent authorities of the State in the maintenance of public order, health, or morality... shall not be considered wrongful, provided
(a) it is not a clear and discriminatory violation of the law of the State concerned;
(b) it is not the result of a violation of any provision of Article 6 to 8 of this Convention [denial of justice];
(c) it is not an unreasonable departure from the principles of justice recognized by the principal legal systems of the world; and
(d) it is not an abuse of the powers specified in this paragraph for the purpose of depriving an alien of his property.386
A State is not responsible for loss of property or for other economic disadvantage resulting from bona fide general taxation, regulation, forfeiture for crime, or other action of the kind that is commonly accepted as within the police powers of states, if it is not discriminatory.387
It is now established in international law that States are not liable to pay compensation to a foreign investor when, in the normal exercise of their regulatory powers, they adopt in a non-discriminatory manner bona fide regulations that are aimed to the general welfare.
The tribunal added:
[T]he principle that the State adopts general regulations that are ‘commonly accepted as within the police power of States' forms part of customary international law today.392
[A]s a matter of general international law, a non-discriminatory regulation for a public purpose, which is enacted in accordance with due process and, which affects, inter alios, a foreign investor or investment is not deemed expropriatory..394
Irrespective of the existence of a contractual deprivation, the Tribunal considers in any event that the measures challenged by the Claimant constituted a valid exercise of the Respondent's police powers. As discussed in detail in connection with Article 1105 of NAFTA, the PMRA took measures within its mandate, in a non-discriminatory manner, motivated by the increasing awareness of the dangers presented by lindane for human health and the environment. A measure adopted under such circumstances is a valid exercise of the State 's police powers and, as a result, does not constitute an expropriation.395
For greater certainty, except in the rare circumstance when the impact of a measure or series of measures is so severe in light of its purpose that it appears manifestly excessive, non-discriminatory measures of a Party that are designed and applied to protect legitimate public welfare objective, such as health, safety and the environment, do not constitute indirect expropriations.396
The same provision is now to be found in the EU-Singapore FTA.397
■ It has no basis in the Treaty and it would be contrary to Article 31 of the VCLT, as the ordinary meaning of the terms "fair" and "equitable" does not refer to the minimum standard of treatment under customary international law. Similarly, the context, object and purpose of the Treaty do not support the Respondent's interpretation either.414
■ It has no basis on the relevant case law. The case-law cited by the Respondent either refers to Article 1105 of NAFTA, which is not an issue in this arbitration, or does not support the argument that the FET clause provides for the minimum standard of treatment.415
■ The statement of the Swiss Foreign Office of 1979 relied on by the Respondent to support its position, even if one were to consider it to be relevant (something that the Claimants deny), confirms that the fair and equitable treatment standard under the BIT is broader than the minimum standard of treatment under customary international law.416
■ Even if the fair and equitable treatment standard could be equated to the standard under customary international law, the standard has continued to evolve today through state practice and the jurisprudence of arbitral tribunals. International tribunals have consistently rejected the Neer standard as a statement of the current customary international law. Thus to establish a violation of Article 3(2), the Tribunal shall not assess whether Uruguay's treatment is "egregious," "shocking," or indicative of "willful neglect" or "bad faith."417
■ Instead, the Claimants allege that the Tribunal must assess "in light of all circumstances" whether Uruguay "ensure[d] that foreign investors are treated reasonably and objectively and are permitted to realize a reasonable return on their investments, free from unfair or unjust interference by the State."418
According to the Respondent, FET is a "legal term of art" that refers to the minimum standard of treatment accorded to aliens under customary international law.419 It is not an autonomous standard.420 Even if the standard has evolved from Neer, the level of scrutiny is in principle the same as in Neer, and the burden of proof is on the Claimants.421 Relying, inter alia, on the Glamis v. United States case, the Respondent maintains that even if the Neer standard is not reproduced verbatim by subsequent tribunals, the "same heightened standard for a breach of the minimum standard... continues to exist."422
[B]oth the substantive and procedural rights of the individual in international law have undergone considerable development. In the light of these developments it is unconvincing to confine the meaning of ‘fair and equitable treatment ' and ‘full protection and security ' of foreign investments to what those terms - had they been current at the time -- might have meant in 1920s when applied to the physical security of an alien. To the modern eye, what is unfair or inequitable need not equate with the outrageous or the egregious. In particular, a State may treat foreign investment unfairly and inequitably without necessarily acting in bad faith [...] '428
A foreign investor whose interests are protected under the Treaty is entitled to expect that the [host State] will not act in a way that is manifestly inconsistent, non-transparent, unreasonable (i.e. unrelated to some rational policy), or discriminatory (i.e. based on unjustifiable distinctions).433