WTO Dispute Settlement: Ukraine files dispute against Australia (13 March 2012) on Tobacco Plain Packaging Bill 2011

The following information is taken directly from the World Trade Organization’s dispute settlement web page which reports that on 13 March 2012, Ukraine requested consultations with Australia under the WTO’s dispute settlement system with respect to Australia’s Tobacco Plain Packaging Bill 2011 which the WTO website noted imposes “trademark restrictions and other plain packaging requirements on tobacco products“.

On 15 March 2012, the WTO disseminated Ukraine’s request for consultations (reproduced below) with Australia on “Certain Measures concerning Trademarks and Other Plain Packaging Requirements Applicable to Tobacco Products and Packaging” (WT/DS434/1). The Ukraine submission can be found on the following link: /wp-content/uploads/Ukrainecomplaintobacco_0.doc

This follows intense discussions on this matter at the June 2011, October 2011 and February 2012 sessions of the WTO TRIPS Council. As the WTO notes below, further information on this dispute will be provided in document WT/DS434/1. Yet again public health considerations and commercial interests collide at the WTO. The outcome of this case will be closely watched by policy makers as the specter of a WTO dispute settlement panel deciding on how trade rules, in this case trademarks, intersect with public health objectives and obligations of WTO members, particularly in their implementation of the WHO Framework Convention on Tobacco Control.

The WTO explains that with respect to a request for consultation,

The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.

Here is the information provided by the WTO secretariat on the following site: http://wto.org/english/news_e/news12_e/ds434rfc_13mar12_e.htm

WTO: 2012 NEWS ITEMS
13 March 2012

DISPUTE SETTLEMENT

Ukraine files dispute against Australia

On 13 March 2012, Ukraine requested consultations with Australia under the dispute settlement system concerning the latter’s laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products.

Further information will be available within the next few days in document WT/DS434/1

What is a request for consultations?

The request for consultations formally initiates a dispute in the WTO. Consultations give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation. After 60 days, if consultations have failed to resolve the dispute, the complainant may request adjudication by a panel.

The WTO summaries of the TRIPS Council deliberations on Australia’s Tobacco Plain Packaging Bill 2011 provide a good insight of the the contours of the debate thus far.

The impetus for WTO discussions on Australia’s Tobacco Plain Packaging Bill 2011 is a submission by Australia to the WTO Committee on Technical Barriers to Trade (TBT) on 8 April 2011 under a notification under Article 10.6 of WTO Agreement on Technical Barriers to Trade which states:

“The Secretariat shall, when it receives notifications in accordance with the provisions of this Agreement, circulate copies of the notifications to all Members and interested international standardizing and conformity assessment bodies, and draw the attention of developing country Members to any notifications relating to products of particular interest to them”.

The Australian submission described the objective of the Bill by noting that the “legislation implements Australia’s measure for the restriction of advertising and promotion on tobacco products and their packaging, consistent with Australia’s obligations under Articles 5, 11 and 13 of the World Health Organization Framework Convention on Tobacco Control.”

The Australian paper provided the following information on its proposed regulations:

Regulations specific to cigarettes will require packs to appear in a form similar to the images appended to the Consultation Paper (indicated in 8). In particular, these regulations will:
– require packs to be coloured a particular shade of dark olive brown, in a standard rectangular shape with a standard flip-top opening; and
– restrict the use of decorative elements on cigarette sticks themselves, including brand names, use of colour, bands and novel filter designs and colours.

Following the Australian submission to the WTO TBT Committee, the Dominican Republic requested a special agenda item of the June 2011 TRIPS Council be devoted to the discussion of tobacco plain packaging.

The WTO summary of these discussions provides the report on the positions taken by WTO members on this item. It would appear from the record that Canada, the European Union, Japan, and the United States were silent on this matter.

“In this new agenda item, the Dominican Republic objected to a draft Australian law requiring cigarettes to be sold in plain packaging without logos or trademarks. The brands would be identified simply in a standard typeface with large graphic health warnings.

Support or sympathy for the Dominican Republic came from Honduras, Nicaragua, Ukraine, the Philippines, Zambia, Mexico, Cuba and Ecuador.

The Dominican Republic said it has “serious and grave” concerns that the proposed law would also violate the WTO’s intellectual property agreement and the linked Paris Convention. Among the legal concerns was that it would be a “special requirement” that would “unjustifiably” encumber the use of trademarks “in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings” (TRIPS Article 20).

The proposed law, the Dominican Republic argued, would hurt tobacco producers in small and vulnerable economies. It would fail to reduce smoking because the lower costs of the packaging and the competition on price — the only remaining marketing tool available — would make cigarettes cheaper and encourage higher consumption. It would also make counterfeiting easier, it said. But it added that it does recognize countries’ right to protect public health.

Australia explained why the law has been proposed — as the next available step in the campaign to deal with a major and lethal health hazard. Higher excise duties and the possibility of using anti-counterfeiting labelling would make the cigarettes more expensive and prevent smuggling, it said. Australia will do this in a way that complies with its international obligations, it added.

New Zealand, Uruguay and Norway said Australia’s draft law is justified. India did not comment on the law specifically but said studies show that plain packaging does reduce smoking. India, Brazil and Cuba stressed their view that countries have the right to implement public health policies without intellectual property being an obstacle — referring directly or indirectly to the 2001 Doha Declaration on TRIPS and Public Health.

Brazil, Chile, Ecuador and China described the issue as complex, requiring balance and a closer examination. Switzerland said it understands both sides of the debate and expects Australia to abide by its TRIPS obligations.”

——

WORLD TRADE

ORGANIZATION

WT/DS434/1

IP/D/30

G/TBT/D/39

G/L/985

15 March 2012

(12-1448)

Original: English

AUSTRALIA – CERTAIN MEASURES CONCERNING TRADEMARKS AND OTHER PLAIN PACKAGING REQUIREMENTS APPLICABLE TO TOBACCO PRODUCTS AND PACKAGING

Request for Consultations by Ukraine

The following communication, dated 13 March 2012, from the delegation of Ukraine to the delegation of Australia and to the Chairperson of the Dispute Settlement Body, is circulated in accordance with Article 4.4 of the DSU.

_______________

My authorities have instructed me to request consultations with the Government of Australia pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Article 64.1 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (the “TRIPS Agreement”), Article 14.1 of the Agreement on Technical Barriers to Trade (the “TBT Agreement”), and Article XXII of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”) concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging (the “measures”).

Australia’s measures impose significant trademark restrictions and other so-called “plain packaging” requirements regarding the appearance and packaging of tobacco products. The challenged measures are contained in:

* The Tobacco Plain Packaging Act 2011 (the “Plain Packaging Act”) and its implementing Tobacco Plain Packaging Regulations 2011 (the “Regulations”);

* The Trade Marks Amendment (Tobacco Plain Packaging) Act 2011; and

* Any further implementing regulations and related acts, polices, or practices adopted by Australia that guide, amend, supplement, replace, and/or implement the above mentioned measures.

The measures are applicable to all tobacco products grown or manufactured for human consumption.1 They impose criminal penalties for virtually any action, including manufacture, supply, or packaging of tobacco products, that is not in compliance with the “tobacco product requirements” of the Plain Packaging Act and its implementing Regulations.2 The Plain Packaging Act provides that “[n]o trade mark may appear anywhere on a tobacco product” other than as permitted by the Regulations.3 The Plain Packaging Act further provides, inter alia, that “[n]o trade mark may appear anywhere on the retail packaging of tobacco products,”4 other than the brand name, variant, business or company name and other relevant legislative requirements.5 The appearance of the brand name is regulated by the Plain Packaging Act and the implementing Regulations.6

The Plain Packaging Act further requires that tobacco product packages be “drab dark brown” (specified as Pantone 448C in the Regulations) in a matte finish, with no other colors, logos, or brand features visible on the package, other than the brand and variant name in a standard form and font below the graphic health warning.7 Tobacco product packaging will continue to contain graphic health warnings,8 which are increasing from 30 percent to 75 percent of the front surface of each package and continue to cover 90 percent of the back surface of the package.9 The Plain Packaging Act and its implementing Regulations also regulate the physical features of retail tobacco packaging, imposing a standard form on the type and size of the package to be used.10 The Plain Packaging Act provides that cigarette packs and cartons must have a standardized shape with no decorative elements, and that cigarette packs must have flip-top openings.11 The lining of cigarette packs must only be foil backed with paper, or a material allowed by the Regulations.12

Australia’s measures, especially viewed in the context of Australia’s comprehensive tobacco regulatory regime,13 appear to be inconsistent with a number of Australia’s obligations under the TRIPS Agreement, the TBT Agreement, and GATT 1994, including but not limited to the following provisions of these agreements:

* Articles 1.1, 2.1, 15, and 16 of the TRIPS Agreement and Articles 6quinquies, 7, and 10bis of the Paris Convention as incorporated in the TRIPS Agreement because the measures, which discriminate against tobacco-related trademarks based on the nature of the product, fail to give effect to the trademark holder’s legitimate rights with respect to the trademark, fail to accord effective protection of the trademark “as is,” and fail to prevent acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;

* Article 20 of the TRIPS Agreement because the measures constitute an unjustifiable encumbrance on the use of trademarks;

* Article 1 of the TRIPS Agreement because Australia has failed to give effect to Article 20 of the TRIPS Agreement in Australia’s domestic laws and regulations;

* Article 27 of the TRIPS Agreement because by regulating the physical features of the patented packs, the measures prevent the normal exploitation and thus the enjoyment of the patent rights for tobacco products in a manner that discriminates based on the field of technology;

* Article 2.2 of the TBT Agreement because the measures constitute an unnecessary obstacle to trade and are more trade restrictive than necessary to achieve the stated health objectives; and

* Article III:4 of the GATT 1994, Article 3.1 of the TRIPS Agreement, and Article 2.1 of the TBT Agreement because the measures fail to respect the national treatment requirement set out in these provisions by not providing equal competitive opportunities to imported tobacco products and foreign trademark right holders as compared to like domestic tobacco products and trademark right holders.

These violations nullify or impair the benefits accruing to Ukraine under the aforementioned Agreements.

The Government of Ukraine reserves the right to raise additional claims regarding the measures at issue as a result of the consultations.

The Government of Ukraine looks forward to constructive consultations with Australia in response to this request and welcomes any suggestions that Australia might wish to make concerning the date and location for these consultations.

1 Plain Packaging Act, Section 4.

2 Plain Packaging Act, Chapter 3.

3 Plain Packaging Act, Section 26. Section 26 (2) further states that “No mark may appear anywhere on a tobacco product, other than as permitted by the regulations.”

4 Plain Packaging Act, Section 20(1).

5 Plain Packaging Act, Section 20(3). The relevant legislation requirements mean a health warning, a fire risk statement, a trade description and a measurement mark.

6 Plain Packaging Act, Section 21; Regulations, clause 2.4.1.

7 Plain Packaging Act, Section 19; Regulations, clause 2.2.1.

8 Graphic health warnings are regulated under the Australian Consumer Law, contained in Schedule 2 of the Competition and Consumer Act of 2010.

9 Competition and Consumer (Tobacco) Information Standard 2011 which amends the system of health warnings mandated through the Trade Practices (Consumer Product Information Standards) (Tobacco) Regulations 2004 (the 2004 Regulations). Graphic health warnings taking up 75 percent of the front surface of each package are mandatory from 1 December 2012.

10 Plain Packaging Act, Section 18; Regulations, clause 2.1.1.

11 Plain Packaging Act, Section 18(3)(b).

12 Plain Packaging Act, Section 18(3)(d).

13 Australia has in place a generalized advertisement ban for tobacco products, set out in the Tobacco Advertising Prohibition Act 1992 (the “advertisement ban”). In addition, in the eight Australian States and Territories, retail display bans prohibit the public display of tobacco products in specified categories of retail stores (the “retail display bans”). See, e.g., Australian Capital Territory’s “Tobacco Act 1927”, section 20; New South Wales’ “Public Health (Tobacco) Act 2008”, section 9; Western Australia’s “Tobacco Products Control Act 2006”, section 22; Northern Territory’s “Tobacco Control Act 2011”, section 20; Victoria’s “Tobacco Act 1987”, section 6(2AA); Tasmania’s “Public Health Act 1997”, section 72A; Queensland’s “Tobacco and Other Smoking Products Act 1998”, section 26A; South Australia’s “Tobacco Products Regulation Act 1997”, section 40. At the state and local level, Australia has also implemented bans on the consumption of tobacco products in certain areas and under certain circumstances (“smoking bans”).

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