Summary of Philip Morris International’s (PMI) investment dispute and International Centre for Settlement of Investment Disputes’s (ICSID) ruling85
| PMI’s claims | Tribunal ruling | Tribunal quotes |
| (1) Regulations expropriate PMI’s property rights without compensation | a.) Regulations did not substantially deprive PMI’s value of investment as a.) PMI could continue selling tobacco in Uruguay and | ‘As long as sufficient value remains after the Challenged Measures are implemented, there is no expropriation. As confirmed by investment treaty decisions, a partial loss of the profits that the investment would have yielded absent the measure does not confer an expropriatory character on the measure.’ (P 286) |
| b.) The state can exercise its right to regulate in the public good (police powers) | ‘Protecting public health has long since been recognised as an essential manifestation of the State’s police powers’ (P 291) | |
| c.) The registration of PMI’s trademarks does not grant them the right to use those trademarks | ‘The Tribunal notes that there is nothing in the Paris Convention that states expressly that a mark gives a positive right to use’ (P 260) ‘nowhere does the TRIPS Agreement, assuming its applicability, provide for a right to use’ (P 262) ‘The Claimants (PMI) also argue that a trademark is a property right under Uruguayan law which thus accords a right to use. Again, nothing in their argument supports the conclusion that a trademark grants an inalienable right to use the mark.’ (P 266) ‘The Tribunal concludes that under Uruguayan law or international conventions to which Uruguay is a party the trademark holder does not enjoy an absolute right to use, free of regulation, but only an exclusive right to exclude third parties from the market so that only the trademark holder has the possibility to use the trademark in commerce, subject to the State’s regulatory power’ (P 271) | |
| (2) Regulations are arbitrary and not supported by evidence so they do not accord PMI with fair and equitable treatment | Regulations were not arbitrary as they fulfilled Uruguay’s national and international legal obligations for protecting public health under the FCTC | ‘It should be stressed that the (Challenged Measures) have been adopted in fulfilment of Uruguay’s national and international legal obligations for the protection of public health’ (P 302) ‘For a country with limited technical and economic resources, such as Uruguay, adhesion to the FCTC … represented an important if not indispensable means for acquiring the scientific knowledge and market experience needed for the proper implementation of its obligations under the FCTC’ (P 393) ‘In these circumstances there was no requirement for Uruguay to perform additional studies or to gather further evidence in support of the Challenged Measures’ (P 396) |
| (3) Regulations do not meet PMI’s legitimate expectations of a stable regulatory environment | Given the harmful effects of tobacco, it would be reasonable to expect stronger regulation of tobacco over time | ‘In light of widely accepted articulations of international concern for the harmful effects of tobacco, the expectation could only have been of progressively more stringent regulation on the sale and use of tobacco products. Nor is it a valid objection to a regulation that it breaks new ground.’ (P 430) |
| (4) Uruguayan courts have not dealt properly with PMI’s domestic legal challenges and there was a denial of justice | The domestic rulings may appear unusual but investment tribunals should not act as courts of appeal to national courts to find a denial of justice | ‘In general, when considering procedural improprieties arbitral tribunals have adopted a high threshold for a denial of justice. For a denial of justice to exist under international law there must be ‘clear evidence of … an outrageous failure of the judicial system’ or a demonstration of ‘systemic injustice’ …’ (P 500) |
FCTC, Framework Convention on Tobacco Control; PMI, Philip Morris International.