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Philip Morris International (PMI) (NYSE/Euronext Paris: PM) welcomed the decision by a World Bank arbitration tribunal to hear a claim that Uruguay violated multiple provisions of its Bilateral Investment Treaty (BIT) with Switzerland. In order to attract foreign investment, Uruguay signed more than twenty BITs under which it made firm commitments to respect intellectual property rights and the rule of law. At issue in this case are extreme and unnecessary restrictions imposed on the sale and packaging of tobacco products that conflict with Uruguay’s obligations under the treaty.
Commenting on the ruling, PMI spokesperson Julie Soderlund said:
“This ruling holds Uruguay accountable to its international obligations, accountability the country sought to avoid in domestic courts and again before this Tribunal.“The measures unjustifiably restrict legitimate businesses from selling their products and using their trademarks while increasing incentives for black market cigarettes, which already amount to a quarter of all tobacco products consumed in the country.“We look forward to a full and independent assessment of these arbitrary and unnecessary regulations.”
At issue in this case are two regulations that Uruguay imposed in 2009:
‘ 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,
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.
80% Health Warning Requirement: Until 2009, health warning labels covered 50% of cigarette packaging in Uruguay, a percentage that 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.
In rejecting Uruguay's jurisdictional objections, the Tribunal cleared the way for PMI to show that these two regulations are arbitrary, unnecessary and violate the country’s international commitments.