Uruguay Bilateral Investment Treaty (BIT) Litigation

Background:
In 2010, three Philip Morris International companies (“PMI”) initiated international arbitration proceedings against Uruguay, claiming that the country violated multiple provisions of the Uruguay-Switzerland Bilateral Investment Treaty (BIT).  The BIT, which is one of more than twenty the country has entered into, provides protections for investments made in Uruguay, including brands, intellectual property, and ongoing business enterprises.  PMI claims that two regulations implemented by Uruguay in 2009 breach the protections guaranteed by the BIT and damage their investments in the country.  

PMI is making these claims before an international tribunal, which consists of three arbitrators, in accordance with the rules of the World Bank’s International Centre for Settlement of Investment Disputes (ICSID).  The proceedings involve two stages:

Stage 1: Jurisdiction
Uruguay filed a preliminary challenge to whether the Tribunal has jurisdiction to make a decision regarding PMI’s claims.  Arguments on the jurisdictional issues took place on 5-6 February 2013 in Paris. On July 2, 2013 the Tribunal ruled that it does have jurisdiction, taking this case to the second stage.

Stage 2: Merits
The parties currently are briefing the merits of PMI’s claims that Uruguay breached the BIT.  A hearing on the merits of the dispute likely will be held in the third quarter of 2015, and we anticipate that a decision will be issued in late 2015 or the first half of 2016.

The two regulations PMI opposes are:

  1. “Single Presentation” Ordinance: This regulation restricts competition to the detriment of foreign investors because it prohibits sales of more than one variation of cigarettes under a single brand name.  For example, Marlboro Red, Gold, Blue and Green cannot be sold at the same time.  Only one of those variants may be in the market. As a result, PMI was forced to withdraw 7 out of 12 cigarette varieties from sale in the country.
  2. 80% Health Warning Requirement:  Until 2009, health warning labels covered 50% of cigarette packaging in Uruguay, an amount PMI did not oppose.  Uruguay increased the size to 80% on both the front and back of the pack, despite the fact that the 2009 Global Adult Tobacco Survey found that the awareness of the health risks of smoking is universal in the country. This requirement violates Uruguay’s BIT agreement because it leaves virtually no space on the pack for the display of legally protected trademarks.

These measures go beyond the tobacco regulations enacted in virtually every country and have not been shown to reduce smoking rates. They also do nothing to address, and could further promote, the proliferation of black market cigarettes, which in 2009 amounted to nearly 1 in 4 of all tobacco products consumed in Uruguay[1].

PMI is not seeking to overturn any other tobacco control regulations in Uruguay, such as public place smoking restrictions, advertising restrictions, or reasonably sized graphic warnings on cigarette packs that accurately depict the health risks of smoking.  In fact, PMI supported regulation in these areas. 

Damages Sought by PMI:

PMI is seeking approximately $25 million USD for actual damages caused by the regulations, including to our Uruguayan affiliate.  Those damages are the direct result of Uruguay’s decision to disregard its commitments to investors, which include respecting and protecting investments such as intellectual property rights. The heart of this case focuses on such fundamental principles as the rule of law and whether or not Uruguay must keep the promises it makes. 

Encuentre una versión en español de la declaración.

[1] Eriksen M, Mackay J, Ross H. The Tobacco Atlas. Fourth Ed. Atlanta, GA: American Cancer Society; New York, NY: World Lung Foundation; 2012.

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