British American Tobacco uses trade law to try to freeze plain packaging legislation in the Netherlands

February 10, 2020: British American Tobacco’s submission to the Dutch government in response to its plans to introduce new plain packaging legislation for cigarettes has included a veiled threat of arbitration under international trade law.

The submission argues that plain packaging is not an effective health measure, suggesting that the introduction of plain packaging legislation in Australia since 2012 has not had a statistically significant impact in reducing smoking rates. This is despite a 2016 review by the Department of Health finding that plain packaging:

  • “Has helped to reduce smoking and passive smoking in Australia
  • is having a positive impact
  • is expected to continue reducing smoking rates”

Australia’s decision to develop plain packaging legislation resulted in the US company Philip Morris tobacco bringing an investor-state dispute settlement (ISDS) case against Australia. The company shifted assets to Hong Kong and used ISDS in a Hong Kong investment agreement to claim billions in compensation for Australia’s law. It took over 4 years and $24 million in legal costs for the tribunal to decide that Philip Morris was not a Hong Kong company, and the case was an abuse of process, and the government only recovered half the costs.

In its submission British American Tobacco has also claimed that The Netherland’s plain packaging legislation violates international trade law, including the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS), the Technical Barriers to Trade Agreement, and the Netherland’s Bilateral Investment Treaties.

The submission does not directly threaten a case, however it uses the veiled threat that a case could be brought under either ISDS provisions in the Netherland’s Bilateral Investment Treaties or the WTO’s state-to-state dispute settlement body, to pressure the Netherlands government not to proceed with the new legislation.

There is extensive evidence that ISDS cases, or threats of ISDS cases, can lead to regulatory chill. For example, New Zealand delayed the implementation of its tobacco plain packaging legislation until after the Philip Morris case against Australia was concluded.