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(Part A) select and present the most promising argument for the Claimant
After a deep analysis of the findings that leaded to the rejection of the claim based on expropriation under article 5 of the BIT we considered that the most promising claim for Philip Morris in that case is the denial of fair and equitable treatment under article 3(2) of the Bilateral Investment Treaty.
Indeed, the article 5 of the treaty aims to protect investments from direct or indirect expropriation or nationalisation and the arbitration recognize that trademark can be qualified as investment.
Since the claimants invokes the indirect expropriation, the award consider that it must be proven that the challenging measures, creates the same effects of a direct expropriation or nationalisation and the existence of a major adverse impact on the investment considered as a whole. This impact should be great in intensity and the duration must be significant. Thus, Philip Morris claims that there’s an indirect expropriation and therefore request a compensation.
However, the Tribunal controversially rejected this request on the basis of the “Police Power Doctrine” which excludes for compensation any measure that is considered as valid exercise of police power. To fulfill the test of validity the regulation action must be taken in good faith, pursuing a goal of public welfare, non discriminatory and proportionate. Therefore the tribunal consider the 80/80 and the SPR measures as a valid exercise of police power and since established that there was no expropriation in that case.
We would like to underline how determinant was this reasoning in the rejection of the claim, considering that there is no consistency among tribunals regarding the “police power doctrine”. Moreover it is also important to highlight that the recent CETA includes a provision explicitly excluding those regulation from the definition of expropriation.
As the claim based on expropriation under article 5 of the BIT failed on merits, Philip Morris argued on the basis of the article 3(2) of the BIT which confer the right of fair and equitable treatment.
We consider this claim as being the most promising since it leaded to the dissident opinion written by arbitrator Gary Born which consider the SPR as an unprecedented requirement manifestly arbitrary and disproportionate constituting a denial of fair and equitable treatment under Article 3(2) of the BIT and international law.
Nevertheless the tribunal predominantly adopted another point of view:
In the analysis of the legal standards the tribunal respond that the absence of any reference in that article to the treatment in accordance to “international law” or “customary international law” or to a minimum standard of treatment as provided by some other investment treaties does not mean that the BIT creates an “autonomous FET standard”.
In fact, article 3(2) must be interpreted according to normal canons of treaty interpretation such as the article 31 and 32 of the VCLT. Those includes interpretation in accordance with general international law and customary international law.
Philip Morris claims that since there is no evidential basis on the effectiveness of the challenged measures those are arbitrary and violate article 3(2) on regarding the “legitimate expectation” and the “stability of the legal framework”.
Based on the definition of “ELSI” case, the Tribunal concludes that the challenged Measures are not “arbitrary,” since Uruguay is aiming to a legitimate public purpose and there is a legitimate connection between the public purpose and the utility of the regulation. Furthermore the tribunal apply the principle of the “margin of appreciation” rejecting the argument claiming that this concept has no application in the proceedings. Thus, “The sole inquiry for the Tribunal… is whether or not there was a manifest lack of reasons for the legislation.” That means that states are allowed to implement domestic legislation in a novel way, even if the efficacity is not proven, as long as the sine qua non condition of bona fide is fulfilled.
In fine the tribunal deal with “legitimate expectations” and “stability of the Uruguay legal system” as components of the FET Standard and concludes that manufacturers of harmfuls products have no reasonable expectation of regulatory stability.
(Part B)
1) “can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.”
The same claim can be made, based on the article 8.10 of the CETA. This article must be interpreted with accordance to the articles 31 et 32 of the Vienna convention. Indeed, general international law and customary international law must be taken into account in the interpretation of thoses provisions. In other words, the standards of fair and equitable treatment has evolved since “Neer case” and today those standards are broader but not settled.
2) “Does intellectual property qualify as a foreign direct investment?”
Only under certain conditions. The term investment is used pretty broadly in most IIAS, in such way that practically all the time, IPRS can be included in the definition of the term. But as a matter of fact, they require some conditions that IPR’s must fulfill to beneficiate from the protection granted by the IIAS. Indeed, for example, the IP has:
1) to be be used “substantively in the host country” and be conceived as an investment that has to generate money
2) to be conceived as a financial value
3) to be recognized in the foreign state
Excellent!
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Question 1:
The most promising argument for Philip Morris is the expropriation under article 5 of the Bilateral Investment Treaty. Indeed, for the claimant, the Uruguay’s anti-smoking legislation had limited his right to use its legally protected trademark and had prevented heir proper display. By banning seven of thirteen variants of Abal’s cigarettes, Uruguay expropriated his brand assets, which results to « substantially » devaluate its cigarettes trademarks and investments in the country. The Claimant rejected the fact that his lack intellectual property rights could be the subject of an expropriation. By citing Uruguay’s Trademark Law, which is based on intellectual property conventions such as the Paris Convention, he alleged that his trademarks benefits from the same legal protection because Marlboro Gold and Marlboro Light (the disputed marks) have the same registration because of their “distinctive characteristic”. The Uruguay’s trademark law stipulates that the marks “are not deprived of trademark protection merely because they are not identical in all respects to Claimants’ registered trademarks.” The claimant’s expert, professor Fisher added that “variations in secondary, non-essential elements of trademarks neither invalidate the registration nor diminish the protection granted to the trademarks”.
Morover, the claimant claims that trademark accords its owner rights to use the marks and to protect under Uruguayan law. However the Tribunal noted that it wasn’t an absolute right. According to Professor Barrios, it’s only the “right to exclude third parties from the market that renders the exclusive use of the registered trademark in the marketplace possible.
Finally, about the fact to know whether the 80/80 regulation has expropriated the Claimants’ investment, the tribunal said that it’s not because you don’t have the right to use that trademark rights are not property rights.
The tribunal concluded that the answer largely depends on the facts of the individual case.
Question 2 :
Such a claim couldn’t be made against Belgium/an EU country based on the recently signed CETA because of its article 8.12 that specifies that expropriation of investment is possible for some exceptions including public purpose ( which is the case here ) : « A Party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except:
(a) for a public purpose;
(b) under due process of law;
(c) in a non-discriminatory manner; and
(d) on payment of prompt, adequate and effective compensation ».
The response to question 2 is not that straightforward.
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Charlotte Coomans, Marta Duch, Charles de Fierlant, Ana Valero, Catalina de Biolley
Philipp Morris vs. Uruguay: talking disputes
Part A, argument 4: Failure to observe commitments as to the use of trademarks under Article 11 of the Treaty
Philipp Morris’s claim:
The Claimants allege that by enacting the SPR and 80/80 Regulation, Uruguay breached its commitments to protect Philipp Morris’s right to use their trademarks. Indeed, they say that they fall into the scope of article 11 because they fulfill the components:
– a State obligation to observe
– commitments entered with respect to investments, which the State has failed to observe.
Therefore, Philipp Morris claims that they had a commitment from the government through trademark rights. By registering the trademark, the government had given a commitment that they could use the trademark.
Uruguay’s respond:
However, Uruguay responded to this claim by stating 4 points:
– Article 11 does not operate as an umbrella clause;
– Registration of a trademark does not constitute a “commitment” for purposes of Article 11
– the Claimants’ trademarks were not registered with Uruguay’s National Directorate of Industrial Property (DNPI) to benefit from legal protection so that the Respondent has no “commitments” in relation to the trademarks at issue in these proceedings because they are not owned by the Claimants.
– Uruguayan trademark law does not grant registrants a positive right to use the trademarks in commerce, but only a right to exclude others from doing so.
Tribunal’s analysis:
The first question in this claim is to find out whether article 11 is an umbrella clause
The Tribunal says that it is. But what does that mean? An umbrella clause is defined as any commitment that the government makes to the investor must be upheld.
The tribunal says that it is indeed an umbrella clause but you get no commitment coming out of general legislation. Why? Because even if the trademark belongs to you the conditions of using it can be changed through general legislation. Therefore, it is not personal to you.
Further development: In fact, the question for this Tribunal is whether a trademark falls between the two categories:
– whether it can be considered a commitment under general legislation or;
– because of the individual consideration involved in the initial grant as a specific commitment to as specific investment or investor.
The tribunal considers that a trademark is not a unique commitment agreed in order to encourage or permit a specific investment. Uruguay entered into no commitment with respect to the investment by granting a trademark. It did not actively agree to be bound by any obligation or course of conduct; it simply allowed the investor to access the same domestic IP system available to anyone eligible to register a trademark.
A trademark gives rise to rights, but their extent is liable to changes which may not be excluded by an umbrella clause: if investors what stabilizations they must contract for it. The Tribunal concludes that trademarks are not “commitments” falling within the intended scope of Article 11 of the BIT and therefore can be changed through general legislation.
Part B
Yes, such a claim could also be made against Belgium or any other EU country based on the CETA. There exists indeed, as for the BIT between Uruguay and Switzerland, an investor-state dispute settlement that permits investors to sue a state if it uses discriminatory practices.
Article 8.12 couldn’t be applied because it expresses in point 6 that: “For greater certainty, the revocation, limitation or creation of intellectual property rights, to the extent that these measures are consistent with the TRIPS Agreement and Chapter Twenty (Intellectual Property), do not constitute expropriation. Moreover, a determination that these measures are inconsistent with the TRIPS Agreement or Chapter Twenty (Intellectual Property) does not establish an expropriation”. It looks like the authors of the CETA anticipated that kind of suit.
The individual company could then invoke the article 20.13 of the CETA about the International Agreements concerning trademark that the States must respect (the entire chapter 20 is about intellectual property rights). But actually, chances to win the case are low since the states keep a right to legislate in the domain of public interest (which includes people’s health).
International investment laws protect investors when they conduct operations in a foreign state. Indeed, we can mention more than 3200 international investment agreements aiming to avoid as much as possible a negative interference from the foreign state with the investment. But each treaty as a different meaning of what it qualifies as an “investment”. This qualification is crucial because only investments benefit from the protection of those agreements. If intellectual property doesn’t respond to the qualification, it won’t be protected. And afterwards, even if intellectual property rights are included in the definition of investment, to be covered by IIAs they have to fulfill the other treaty requirements. So the fact that intellectual property is mentioned in the treaty will not be sufficient to be certain that a particular intellectual property will qualify as an investment in the treaty.
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A. Philipp Morris v. Uruguay
– Expropriation under article 5 of the Treaty
As Abal continues to be sufficiently profitable for its investors, the Government’s measure did not have a major impact on the Claimant’s investments. Indeed, the State’s measure should amount to a substantial deprivation to be considered as an irregular expropriation. Therefore this argument is tanked from the start.
– Denial of fair and equitable treatment under article 3(2) of the Treaty
Both the 80/80 and the SPR are implemented to protect public health and are recognized by the WHO and the PAHO as they are « effective means of protecting public health » and are seen as responsible measures against the harm tobacco has proven to cause.
The Tribunal gives reason to the Respondent concerning the « margin of appreciation »’s application as it can be applied when it concerns public health. As the issue arose in the administrative decision Chemtura v. Canada that concerns a similar situation (banish a pesticide on public health grounds).
The SPR
The measure, adopted by Ordinance 514 is intended to implement Article 11(1)(a) of the FCTC and is not considered to be discriminatory as it is applied to foreign and domestic investors alike.
The rationale of the SPR is to address the false perception that some brands of cigarets are healthier than others which the claimants accepts since they recognized the importance of including health warnings on packaging voluntarily. Yet Uruguay does not base the SPR on any other concrete evidence. The Tribunal concludes that its adoption is not a disproportionate measure nor is it discriminatory as it is not in breach of Article 3(2) of the BIT.
The 80/80 Regulation
The 80/80 Regulation is meant to implement Article 11(1)(b) of the FCTC which requires health warnings on cigarette packages « which should be 50% or more of the principal display areas but shall be no less than 30% of the principal display areas ». The Claimant argued that this measure is discriminatory in two ways. First, it is a punitive response to the use of alibi brands by Philipp Morris’s competitor Mailhos. Secondly, it encourages illicit sales from neighboring States.
On the first argument, the Ministry believes that the adoption of alibi brands diluted the intended effect of the SPR and that this situation called for further action but that it does not proves that the 80/80 Regulation is a punitive response. On the second point, the increase in cigarette smuggling has not been proved to be linked with the 80/80 Regulation.
– Impairment of use and enjoyment of the Claimant’s investments under Article 3(1) of the Treaty
As this argument is based on the interchangeability of the term « unreasonable » and « arbitrary » to establish that there is an « unreasonable » impairment of their investment under Article 3(1), we must point out that these facts have already been examined supra and that for the same reasons, the Tribunal concludes that there is no breach of Article 3(1). Indeed, the fact that Uruguay’s Constitution obliges the Government to adopt public health measures has no bearing on whether the Respondent has breached its obligations under the BIT.
– Failure to observe commitments as to the use of trademarks under article 11 of the Treaty
The Claimants allege that by enacting the SPR and 80/80 Regulation, the Respondent
breached its commitments to protect the Claimants’ right to use their trademarks. In
particular, they alleged that by granting the trademarks over Abal’s different cigarette
brands, the Respondent “committed to ensuring the Claimants the full range of rights
that trademark holders enjoy in Uruguay, including the right to use trademarks and the right to exclude others from doing so.” Such commitments arose from Uruguay’s
decision to accept the Claimants’ trademark registrations. The Respondent failed to
observe that obligation by virtue of the SPR and 80/80 Regulation. Failure to honor them constitutes a violation of Uruguay’s obligations under Article 11’s umbrella clause. Yet, a trademark is not a unique commitment « agreed in order to encourage or permit a specific investment ». A trademark gives rise to rights, but if investors want stabilisation, they have to contract for it.
Looking at all the arguments given by Philipp Morris and Uruguay throughout the case, we advance that there is a breach of Article 3(2) of the Treaty as Uruguay does not ensure fair and equitable treatment (the standard under the BIT is seen as broader than the minimum standard under international law by Switzerland) when asking an increase in the size of the health hazard signs on the packages and when asking to resell only one type of product per brand.
Yes, there are plenty of proof to support the fact that tobacco is a health hazard and that there is a misperception of the health risks attached to lower tar cigarettes but the SPR goes beyond what is necessary and plainly limits Philipp Morris’s investments when it asks to limit to one type of cigaret per brand without any concrete proof that this will diminish the percentage of smokers.
When looking at the 80/80 Regulation, it can also be seen as a limitation of Philipp Morris’s investment as it does not concretely proof its effectiveness against the actual regulation in place. Nowhere can we find concrete explanations for the proportionality of these actions to reach their goal. This is why we believe that the denial of fair and equitable treatment under Article 3(2) of the Treaty was Philipp Morris’s most promising argument.
B. CETA
It’s hard to tell as each party can provide other limited exceptions. Trademarks rights are therefore meant to be restricted by states as long as states take into account the legitimate interest of the investors. Knowing that Tobacco compagnies cannot market their brands, packages are the only place where a brand’s trademark can be seen. Also, knowing that there should be an equal treatment of investors, as long as they warn users, it can be found discriminatory to prohibit them from using their trademark as cigarets are not the only hazardous product sold on the EU market.
Based on Article 17.2(1) provision, uniformisation of packaging could severely harm the user’s ability to distinguish the different brands available on the market which can be seen as an inappropriate measure because it goes against the fulfillment of the objectives of the agreement.
Does intellectual property can qualify as a foreign direct investment?
In the case of Tobacco companies, trademark is one of the main element that allows users to differentiate the several products available on the market.
In the IP provisions of the CETA, we can read that many EU products rely heavily on brand exclusivity, therefore on trademark. They are essential to every businesses’s marketing strategies as they allow them to have some sort security against competitors.
Nonetheless, as a FDI is an investment made that establishes either effective control, or at least substantial influence over the decision making of a foreign business, IP could be seen as one, but as IP rights do not have global standards of enforcements, it is hard to see how they can assure effective control over a foreign business.
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A) After reading the July 2016 award and listening to the online ICTSD conference of October 2016, I selected the fourth promising argument for the claimant which is the: Impairment of use and enjoyment of the Claimant’s investments under Article 3(1) of the Treaty. Indeed, the tribunal said that the case of Mister Morris didn’t allow him to be expropriated and mad the object of fair treatment. The third solution is compatible with all the things say during the conference because the tribunal didn’t say that the claimant will be private of the all the enjoyment of his right (what dismissed the fourth argument) but that it will be between the hands of the regulatory power of the states. This has for consequence to notice the impairment of his use and enjoyment. Furthermore, it has been said that another investment claim of the claimant was dismissed.
B) We can read about the CETA that the Europe and the Canada want to improve the protection of the products. That’s not a bad things at all because the aim is to avoid the infringement of the intellectual property right. That has for consequence that the CETA will impose regimes of restriction to the holder of products. Anyway, we can notice some similarities with the claim of Mister Morris and affirm that the same claim could be mad against Belgium and the Europe. Indeed, the holder of the products hasn’t totally the control on his products, like mister Morris.
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(A)
In cases involving expropriation under art. 5, the court has to examine if the investor has been deprived (wholly or partially) of the use, enjoyment or benefit of the investement. Furthermore, all lawful expropriations must be accompanied by effective and adequate compensation, even when actions are carried out for a public purpose.
This provision has been used by the claimant and is related to indirect expropriation. In this case, the tribunal said that “(…) in order to be considered an indirect expropriation, the gvt’s (measures’) interference with the investor’s rights must have a major adverse impact on the Claimants’ investment” and “(…) as long as sufficient value remains after the Challenged measures are implemented, there is no expropriation”. According to the tribunal’s reasoning, a trademark can be be expropriated.
If your right to trademark is being limited, it can be considered as an expropriation. Some property right scan be embodied in trademark but theses rights are not absolute. Indeed, the state can infringe these rights for reasons such as public purposes and there won’t be a compensation if the state’s measure is executed in compliance with the state’s public power.
If someone limits your trademark, you can consider it as an expropriation. There are property rights in trademark but they are not absolute. The state can infringe that rights for public purpose. No compensation if the measure is a valid exercise of the state’s public power. Expropriation is thus permitted but under certan conditions only.
The most promising argument among all those that has been listed must be the one concerning the expropriation under article 5 of the Treaty. In order to consider that the article 5 was violated, the Tribunal must examine whether the investor was deprived of the use, enjoyment or benefit of investment. In other words, the Tribunal has to decide if the measure have substantially deprived the investments of their value. In that case there will be a lawful expropriation, there must be an effective and adequate compensation. To consider that a governmental measure falls under the article 5, the claimants must show that the measures have had a severe economic impact on the claimants’ business. The claimants relate on indirect expropriation as the measures interfere with the investor’s rights. In this case, the claimants allege that by effectively banning seven of Abal’s thirteen variants and substantially diminishing the value of the remaining ones, the Respondent breached article 5 of the Treaty.
(B)
This same type of claim could totally be made against Belgium or an EU country based on the CETA. The provision on which the plaintiff could rely is the provision 8.12 of CETA providing that “A party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except for a public purpose (A), under due process of law (B); in a non-discriminatory manner (C) and on payment of prompt, adequate and effective compensation (D). Those are the exceptions listed that allow a party to expropriate. Moreover, the article 8.18 provides that an investor of a Party may submit tot the Tribunal a claim that other Party has breached an obligation under several section of CETA including the section C in which there is the provision 8.12, the one on which the investor could rely against a plain packaging law.
MENDA Macy, ESAKWA Jennifer and NIBAKUZE Ines.
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Question A
In 2009, the Uruguayan government passed two regulations in order to reduce the appeal of cigarette packs. These two regulation are about Single Presentation Requirement (SPR) and about 80/80 Regulation. The SPR requires that only one variant of package per brand family is permitted. The 80/80 Regulation states that 80% of the front package and 80% of the back package have to be covered with graphic health warnings. Philip Morris will thus have to increase these warnings from 50% to 80%. Quite obviously, these laws imposing advertising bans on cigarettes packs do not provide a great excitement for tobacco companies. In these short words, we are going to present what we think is the most promising argument for the tobacco company to challenge plain packaging laws before courts.
The legal avenue that says that there is a failure to observe commitments as to the use of trademarks under Article 11 of the Treaty is not the best argument. Indeed, even if Philip Morris claims they have a commitment from the government through trademark rights by registering the trademark, it can be changed by general legislation.
Another avenue would be the article 5 of BIT. This article deals with expropriation. But in order to be considered an expropriation, the attacked measure must have a major adverse impact on the Claimant’s investment. But as long as there is still a sufficient value that remains, the article 5 cannot be considered. And here, the Claimant continues to make a profit. Property rights in trademarks exist for sure, but they are not absolute as the state can encroach them for public purposes, in this case for the protection of public health. The two measures constitute probably a valid exercise regarding to the State’s police powers.
The avenue that seems the most promising is the “denial of fair and equitable treatment” under Article 3(2) of the Treaty which states that: “each contracting party shall ensure fair and equitable treatment within its territory (…)”. For the breach of fair and equitable treatment to be considered, Philip Morris had previously argued that the two regulations had no effectiveness whatsoever. Philip Morris can also argue, as they did previously, that the regulations are arbitrary as they do not have a public purpose and that, moreover, they constitute a breach of their legitimate expectations and a breach of the obligations of the legal stability.
But the problem is that international courts have a hard time when it come to dealing with scientific issues as their judicial methods differs from the scientific ones. They thus have difficulties to actually measure the efficacy and effectiveness of the impacts of a measure.
The Tribunal thus argued that it is not necessary to consider the actual effects of the measure. It considered that what matters is whether the measure was “reasonable” at its time of adoption.
The tribunal considered that the government used good faith to solve a health related problem and the tribunal used a minimum standard of treatment from the international law . With the international standard, it does not matter if the results of the regulation are good or bad as long as the measure was “reasonable”
We can see that the Tribunal faces difficulties dealing with that FET argument.
Question B.
1. Can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.
Yes, that kind of claim could be excepted and in that case investors could rely on the article 8.12 of CETA to base an action against Belgium or another Member State. In that article, the agreement provides that « a Party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except for a public purpose; under due process of law; in a non-discriminatory manner; and on payment of prompt, adequate and effective compensation ».
Based on that provision, the investors could argue that adopting plain packaging laws would be considered as an expropriation of their intellectual property. For instance, in such a case plain packaging laws forbade the use of Philip Morris’ trademark which according to the plaintiffs could be considered as an expropriation. But, the provision provides itself exceptions where such expropriation could be justified. And so « public purpose » is one of them. In other terms, Belgium could adopt plain packaging laws in order to reduce the use of tobacco because that would be justified as a « public purpose » which is the preservation of public health. Of course, investors will try to defend themselves by pretending to be subject to discriminatory rules compared to other business areas. But here again, « public purpose » can be considered as a legitimate objective which allows to those laws no to be discriminatory. So perhaps the last solution that could be considered for investors is to ask for payment of prompt, adequate and effective compensation.
2. You should as well discuss whether intellectual property qualifies as a foreign direct investment.
With the adoption of CETA we want to uphold Europe’s standard in some areas. For instance, concerning IPRs, CETA will improve the copyright protection of musicians, artists, and others working in the creative industries but more than that, it will strengthen patents for new pharmaceuticals which is very important in terms of foreign investment because at the most your protection is high, the more incentives you will have to invest. And if European companies want to do business in Canada, they need to rely on the protection of their patents, trademarks, designs, copyrights or geographical indications. The EU wants to ensure that the EU goods and works are properly protected in Canada just as Canadian ones are protected in the EU.
So we are inclined to think that intellectual property can be qualified as an investment and we see that in many International Investment Agreements (IIA) the term « investment » covers IPRs. But, the fact that you own or use IPRs doesn’t automatically qualify them as an « investment ». Indeed, sometimes other requirements have to be met. For instance, sometimes IIA require that investments have a financial value, patents could be subordinated to different prerequisites and then be recognized as a protection in a country but not in an other. In conclusion we can say that IPRs will be considered as « investment » whether investors might see their patents, trademarks, designs, copyrights or geographical indications protected or if on the contrary, their IP protected will be subject to the conditions of the host state IPL: Talking Disputes: Philip Morris vs Uruguay
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Question A
In 2009, the Uruguayan government passed two regulations in order to reduce the appeal of cigarette packs. These two regulation are about Single Presentation Requirement (SPR) and about 80/80 Regulation. The SPR requires that only one variant of package per brand family is permitted. The 80/80 Regulation states that 80% of the front package and 80% of the back package have to be covered with graphic health warnings. Philip Morris will thus have to increase these warnings from 50% to 80%. Quite obviously, these laws imposing advertising bans on cigarettes packs do not provide a great excitement for tobacco companies. In these short words, we are going to present what we think is the most promising argument for the tobacco company to challenge plain packaging laws before courts.
The legal avenue that says that there is a failure to observe commitments as to the use of trademarks under Article 11 of the Treaty is not the best argument. Indeed, even if Philip Morris claims they have a commitment from the government through trademark rights by registering the trademark, it can be changed by general legislation.
Another avenue would be the article 5 of BIT. This article deals with expropriation. But in order to be considered an expropriation, the attacked measure must have a major adverse impact on the Claimant’s investment. But as long as there is still a sufficient value that remains, the article 5 cannot be considered. And here, the Claimant continues to make a profit. Property rights in trademarks exist for sure, but they are not absolute as the state can encroach them for public purposes, in this case for the protection of public health. The two measures constitute probably a valid exercise regarding to the State’s police powers.
The avenue that seems the most promising is the “denial of fair and equitable treatment” under Article 3(2) of the Treaty which states that: “each contracting party shall ensure fair and equitable treatment within its territory (…)”. For the breach of fair and equitable treatment to be considered, Philip Morris had previously argued that the two regulations had no effectiveness whatsoever. Philip Morris can also argue, as they did previously, that the regulations are arbitrary as they do not have a public purpose and that, moreover, they constitute a breach of their legitimate expectations and a breach of the obligations of the legal stability.
But the problem is that international courts have a hard time when it come to dealing with scientific issues as their judicial methods differs from the scientific ones. They thus have difficulties to actually measure the efficacy and effectiveness of the impacts of a measure.
The Tribunal thus argued that it is not necessary to consider the actual effects of the measure. It considered that what matters is whether the measure was “reasonable” at its time of adoption.
The tribunal considered that the government used good faith to solve a health related problem and the tribunal used a minimum standard of treatment from the international law . With the international standard, it does not matter if the results of the regulation are good or bad as long as the measure was “reasonable”
We can see that the Tribunal faces difficulties dealing with that FET argument.
Question B.
1. Can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.
Yes, that kind of claim could be excepted and in that case investors could rely on the article 8.12 of CETA to base an action against Belgium or another Member State. In that article, the agreement provides that « a Party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except for a public purpose; under due process of law; in a non-discriminatory manner; and on payment of prompt, adequate and effective compensation ».
Based on that provision, the investors could argue that adopting plain packaging laws would be considered as an expropriation of their intellectual property. For instance, in such a case plain packaging laws forbade the use of Philip Morris’ trademark which according to the plaintiffs could be considered as an expropriation. But, the provision provides itself exceptions where such expropriation could be justified. And so « public purpose » is one of them. In other terms, Belgium could adopt plain packaging laws in order to reduce the use of tobacco because that would be justified as a « public purpose » which is the preservation of public health. Of course, investors will try to defend themselves by pretending to be subject to discriminatory rules compared to other business areas. But here again, « public purpose » can be considered as a legitimate objective which allows to those laws no to be discriminatory. So perhaps the last solution that could be considered for investors is to ask for payment of prompt, adequate and effective compensation.
2. You should as well discuss whether intellectual property qualifies as a foreign direct investment.
With the adoption of CETA we want to uphold Europe’s standard in some areas. For instance, concerning IPRs, CETA will improve the copyright protection of musicians, artists, and others working in the creative industries but more than that, it will strengthen patents for new pharmaceuticals which is very important in terms of foreign investment because at the most your protection is high, the more incentives you will have to invest. And if European companies want to do business in Canada, they need to rely on the protection of their patents, trademarks, designs, copyrights or geographical indications. The EU wants to ensure that the EU goods and works are properly protected in Canada just as Canadian ones are protected in the EU.
So we are inclined to think that intellectual property can be qualified as an investment and we see that in many International Investment Agreements (IIA) the term « investment » covers IPRs. But, the fact that you own or use IPRs doesn’t automatically qualify them as an « investment ». Indeed, sometimes other requirements have to be met. For instance, sometimes IIA require that investments have a financial value, patents could be subordinated to different prerequisites and then be recognized as a protection in a country but not in an other. In conclusion we can say that IPRs will be considered as « investment » whether investors might see their patents, trademarks, designs, copyrights or geographical indications protected or if on the contrary, their IP protected will be subject to the conditions of the host state IPL: Talking Disputes: Philip Morris vs Uruguay
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A. The most promising argument for the claimant is failure to observe commitments as to the use of trademarks under Article 11 of the Treaty.
Indeed, trademarks confer an exclusive right to their owners. This allows owners to prevent third parties from using their trademarks without their consent.
No identical signs with the trademark in relation to the product or service can be used. No similar product with the product or service may be used without the consent of the trademark owner.
The idea of identity and similarity in trademarks law has a great importance.
As a result, by filing a lawsuit against the Uruguayan government, Philip Morris considers that he is prejudiced on the respect of the commitments entered into in the context of the use of his tobacco brand.
Indeed, binding measures such as the banning of certain ranges or the packaging of dissuasive messages constitute a violation of Article 11, which gives to the claimant a right to use his mark in accordance with the framework laid down by international provisions.
B. That kind of plaint could be made against Belgium/an Eu country based on the CETA. Indeed, tobacco or others multinationals could lodge complaints about the prevention policy developed by States. The CETA includes an arbitral court named ICS. It’s a system for settling conflicts between investors and States. There is a risk of traty shopping to find the free trade treaty that will allow them to pursue the country targeted. Investors may rely on provisions relating to copyright enforcement and measures which struggle against counterfeits infringement. Does intellectual property qualify as a foreign direct investment? I.e. : are every investor’s IP rights protected in any host countries ? It depends on the different IIAs (international investment agreements), i.e. 3200 texts, which contain no global standard definition to answer this question! It seems like IP rights are mostly considered in those texts as « investments », but IIAs also often require other conditions to be fulfilled in order to enjoy the full benefits they’re offering. And therein lies the rub! Depending on the IIA, those requirements can sometimes consist in IP rights having a financial value, or that the concerned IP right shall “be granted in accordance with the legal regime of the host state”. Therefore, all IP rights might not meet all those additional requirements, and not be considered as “foreign direct investment”, consenquently their protection could be lower as the investors cross borders.
Bambi Lessa José, Kabeya Yombo, Wastiau Valentine, Bozkurt Aybike, Saozinha Correia
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A. The Claimant’s most promising argument : denial of fair and equitable treatment
The most promising argument seems to be that of “denial of fair and equitable treatment under article 3(2) of the Treaty”. Indeed, in its analysis, the court struggles a bit. The evidence was not really convincing that the measures would be effective, so the court had to fall back on a weaker concept of “reasonable at the time” despite lack of scientific proof.
The argument of the Claimants is based on Article 3(2) of the BIT (Rubric: “Protection and Treatment of Investments”), on the basis that the Challenged Measures amount to unfair and equal treatment, for several reasons.
First, the Claimants allege that the measures are arbitrary because they are harmful to the Claimants’ investments (trademark) and do not serve a public purpose. This can be assessed by examining “the rationality of the measure and of the decision-making process that led to it, the existence of a genuine public purpose, and whether there was a reasonable connection between the objectives pursued by the state and the utility of the chosen measures.”
Concerning SPR, the Claimants contend that the government failed to prove that there was a connection between its objective in adopting the measure and the actual measure itself, and thus was arbitrary. The prohibition of different variant packages within one brand family is not reasonably related to the goal that the government wants to achieve, which is to avoid consumers from being misled by the packaging. Indeed, the Claimants allege that SPR was adopted without sufficient empirical evidence of its effectiveness nor meaningful deliberations by the government, and that the measures did not even have an effect on the consumption of tobacco.
As to the 80/80 Regulation, it is, according to the Claimants, arbitrary in the sense that it was not adopted following due deliberations by the public authorities, and that there was no sufficient evidence that the objective of raising awareness of the health effects of smoking would be fulfilled by this measure.
Second, the Claimants allege that their legitimate expectations, based on the fact that they own and are entitled to use intellectual property rights in a country that was always tobacco-friendly, were eviscerated by the Uruguayan government. Indeed, the SPR and 80/80 Regulation affect the basic expectations that determined the Claimants’ decision to make an investment: they preclude the company from fully using its valuable brand assets and marketing different products.
Third, the regulations affect the legal stability of Uruguay, on which the Claimants had relied to make their investment. Indeed, regulations can be made by the State, but within an acceptable margin of change, whereas the SPR and 80/80 Regulation alter the business circumstances of the market and undermine legal stability and predictability.
B. Claim based on the CETA
A similar claim could be brought against an EU country on the basis of the CETA.
Although Article 8.9 of the Treaty establishes that governments have the right to regulate to achieve public policy objectives (such as the protection of public health), the Claimants can rely on a few provisions protecting investments.
Regarding fair and equitable treatment, it is clearly defined in Article 8.10 (“Treatment of investors and covered Investments”) of the CETA. Indeed, the fair and equitable treatment obligation can only be considered to have been breached in certain precise circumstances:
– Denial of justice in criminal, civil or administrative proceedings;
– A fundamental breach of due process, including a fundamental breach of transparency, in judicial and administrative proceedings.
– Manifest arbitrariness;
– Targeted discrimination on manifestly wrongful grounds, such as gender, race or religious belief;
– Abusive treatment of investors, such as coercion, duress and harassment.
Legitimate expectations can be taken into account in order to assess whether there is a breach of the fair and equitable treatment obligation, but only in situations where a specific promise or representation was made by the State.
The Claimants could thus argue that one or more of the circumstances giving rise to a breach of fair and equitable treatment occurred in the adoption of the regulation at issue, and strengthen its argument by showing that the State had provided legitimate expectations.
Furthermore, taking into account legitimate expectations where there is a promise or representation made by the State can be compared to the Umbrella Clause under Article 11 of the BIT in the Philipp Morris case. Indeed, a state must observe its commitments.
Concerning expropriation, Article 8.12 of the CETA provides that: “A Party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except: (a) for a public purpose; (b) under due process of law; (c) in a non-discriminatory manner; and (d) on payment of prompt, adequate and effective compensation.”
Thus, the Claimants could try to prove that there was expropriation of their investment (only measures which are manifestly excessive with regard to their rationale, and that substantially deprive the investor of the fundamental attributes of property could amount to indirect expropriation) and that one of the four above-mentioned conditions was not fulfilled.
Finally, in order to appreciate whether intellectual property qualifies as a foreign direct investment, it is necessary to refer to Article 8.1 of the CETA. Indeed, prima facie, intellectual property rights can be considered as investments (see (g)), but it is important to underline that there are additional requirements that need to be to be fulfilled. Article 8.1 holds that the asset has to have “the characteristics of an investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.” These conditions must thus be fulfilled for the intellectual property right to qualify as an investment.
Amongst characteristics of an investment, a question can be raised concerning the necessity of it having a financial value, such as mentioned in the article by Lukas Vanhonnaeker. However, it is very largely considered that intellectual property rights are highly valuable to companies.
Furthermore, the article presents another condition that can be taken into account: whether the intellectual property right is recognized in the legal regime of the host state. This condition is likely to be fulfilled, as there is a high degree of harmonization within EU intellectual property law.
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A) According to us, the most promising argument for the claimant is the expropriation under article 5 of the Treaty. As a matter of fact, expropriation is the act of a government in taking privately owned property and using it for the purposes designed to benefit the overall public. The claimants, Philip Morris and Abal Hermanos argued a violation of article 5 based on several reasons, among which the most important allegation being that their trademarks were reduced by the regulations and that the State of Uruguay could not properly expropriate their interest in this case. At the end of the day their allegations were controversially dismissed, even if they had several arguments in their favor. In fact, if someone limits your trademark you can consider it as an expropriation. Here, the tribunal insisted on the fact that property rights in trademark are not absolute, which means that the state can infringe those rights for public purpose. In such a situation, even if the measure is a valid exercise of the state’s public power, the claimants should get a compensation. Indeed, we are of the meaning that it is not because one has a public purpose that it does not have to compensate. Accordingly, in the three-step analysis made to determine an indirect expropriation, even if a lawful expropriation is carried out to achieve a public purpose you still generally have a right to get a fair compensation. The purpose of such a rule is to protect intellectual property.
However, in this case, the Tribunal relied on the police powers doctrine in taking its decision, and found out that there was no expropriation whatsoever. From this standpoint they considered that since there was no substantial deprivation of the claimant’s investment as a whole, the indirect expropriation could not apply and therefore that the challenged measures stayed valid and did not give rise to compensation. One needs to highlight that this police powers doctrine is not consistent among tribunals, meaning that on the basis of the same article 5 other judges could have come to a totally different conclusion. Hence, according to the claimants, the state police powers do not constitute a defense against expropriation. Uruguay itself does not suggest that the police powers of the State are absolute. They are limited to governmental action that is not discriminatory or taken in bad faith, including the protection of health, whose scope has to be appreciated by the judge.
B) Furthermore, the police powers doctrine that we just talked about is incorporated in new treaties like the CETA (article 8.9 Investment and regulatory measures). Accordingly, CETA makes clear that EU and Canada preserve their right to regulate and to achieve legitimate policy objectives, such as public health. As a consequence, governments can change their laws, including in a way that affects investors’ expectations of profit and that the application of EU’s state aid law does not constitute a breach of investment protection standards. CETA also points out what constitutes indirect expropriation (annex 8.12) for the first time in a EU agreement, in order to avoid claims against legitimate public policy measures. As such, legitimate public policy measures taken to protect health do not constitute indirect expropriation, which can only occur when the investor is substantially deprived of the fundamental attributes of property such as the right to use, enjoy and dispose of its investment and a detailed case-by-case analysis is also introduced to determine whether an indirect expropriation has taken place.
In addition, the article 8.12 (2) says that the compensation given in case of an expropriation should amount to the fair market value of the investment at the time immediately before the expropriation. Valuation criteria shall include the value, the asset value including the declared tax value of tangible property, and other criteria to determine a fair market value.
Notwithstanding, an investor may rely on other different provisions against a plain packing law that a EU country would enact (precisely article 8.10: treatment of investors and of covered investments, among which, for instance, point 1. The fair and equitable treatment)
Moreover, does intellectual property qualify as a foreign direct investment? One emphasizes that there are always risks in conducting business with countries that do not share the same commitment to property rights and whose intellectual property regimes differ from the ones we know. That is precisely the reason for international investment agreements (IIA). But to benefit from them, intellectual property rights must qualify as investments under the relevant treaty. Sometimes, additional requirements are needed to enjoy the protections of a given IIA.
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The obligation of plain packaging imposes to tobacco industries to product plain tobacco packaging, namely without marketing elements. Concretely, it is not necessary that cigarette packages contain any distinctive sign: there must be a solid color package, and only the name of the brand to differentiate packets between them. This obligation is involved in anti-tobacco control policy, which has raised many public debates. Some opponents of this obligation said that it violates intellectual property. The first country to adopt this measure was Australia in 2011. Three arguments were retained by tobacco industries to challenge plain packaging: First avenue, tobacco companies have challenged the constitutionality of those laws, claiming for instance that they should be considered as an undue “taking” of their property. A second avenue involves WTO law. The third avenue is based on bilateral investment treaties.
The present case involves a complaint against Uruguay’s anti-smoking legislation held by Philip Morris, a famous company who saw its cigarette trademark and investment in the country being devalued. As a result, the claimant Philip Morris claims a right to compensation evaluated to $25 million, and this under the Treaty bonding Switzerland and Uruguay (the Bilateral Investment Treaty). Eventually, on July, 8, 2016, Morris’ challenge is rejected under the arbitration of the ICSID (International Centre for Settlement of Investment Disputes) and the company is then condemned to pay Uruguay $7 million plus additional fees and expenses of legal prosecution.
Three questions need to be considered at this stage:
A. Select and present the most promising argument for the Claimant among the four following ones:
According to us, the most promising argument for Philip Morris is the « Denial of fair and equitable treatment under Article 3(2) of the BIT. Philip Morris stated that the SPR and the 80/80 Regulations had no effectiveness and that it wasn’t fair because they do not have a public purpose. Furthermore, he said that there is a breach of their legitimate expectations as well as the obligations of the legal stability. The Tribunal used a minimum standard of treatment coming from the international law (which is pretty low). The Tribunal looked only at the facts: The Uruguayan government saw a problem (smoking addiction) and tried to solve it in good faith by imposing new rules.
The majority of the ICSID’s decision was significantly influenced by certain considerations (see §399 of the case). In that way, the margin of appreciation is not limited to the ECHR context but also under BIT. With the international standards used here, it does not matter if the results of the regulations are good or bad. The Tribunal said that the only thing that matters is that the regulations were aligned to public purpose.
However, the dissenting opinion of the arbitrator Gary Born (§168) rejected the finding of the majority. He stated that there is no connection between SPR and its only articulated objective, the focus is settled on the under-inclusive character of SPR.
Caveat! The terms of the Bilateral Investment Treaty cannot be understood to provide the host state with the margin of appreciation which is a concept developed in the ECHR. Moreover, the deterrent effect of the investment arbitration on states that intend to issue public health leads to regulatory chill. Hence the dissenting opinion of Mr. Born raises convincing arguments in favor of Philip Morris.
B. Subsequent question: Can we expect that the same type of claim could be made against Belgium/ an EU country based on recently signed CETA?
After running through the CETA treaty and his factsheet concerning their intellectual property rights, we see that, indeed, EU has a real interest in better protecting its brands and products in the Canadian market. This means looking at the rules that affect trade, such as the protection and enforcement of intellectual property rights. In that way, the EU negotiated a meaningful chapter on intellectual property with Canada (Chapter Twenty of CETA) to avoid other infringement of the IPR in Canada and vice versa. Consequently, EU sought to improve the situation and thus enhanced the level of protection in certain areas for its products in Canada to a comparable level to that of the EU. For instance, in copyright, geographical indications and in pharmaceutical sector. It is important to be reminded that EU is not aiming to go beyond rules that are already applied in the EU and in its Member States. Various international legal texts already provide a range of IP protection, such as the WTO, the TRIPs and the BITS.
In chapter twenty of the CETA, there is a section about public health concern. It provides: ARTCILE 20.3: « Public health concerns 1. The Parties recognize the importance of the Doha Declaration on the TRIPS Agreement and Public Health (“Doha Declaration”), adopted on 14 November 2001 by the WTO Ministerial Conference. In interpreting and implementing the rights and obligations under this Chapter, the Parties shall ensure consistency with this Declaration. 2. The Parties shall contribute to the implementation of and respect the Decision of the WTO General Council of 30 August 2003 on Paragraph 6 of the Doha Declaration, as well as the Protocol amending the TRIPS Agreement, done at Geneva on 6 December 2005 ».
Thereby, we can certainly say that the kind of claim aforementioned can be expected on the base of the CETA, because this protection relies actually on other international texts.
Sources: CETA Treaty, Factsheet: CETA and Intellectual property rights protection.
C. Conclusion: discussion whether intellectual property qualifies as a foreign direct investment.
The interaction between intellectual property and international investment law raises numerous questions, as we have just seen in the Philip Morris case. Indeed, intellectual property is nowadays recognized as a critical intangible asset for corporations, which are more and more dependent not only on national economies, but also on foreign direct investment. Thus, in their best interest, those intellectual property owners should always keep in mind the protection of their intangible assets and especially when they are managing business in countries that do not share the same involvement in property rights. However, international investment law tends to protect investors when they’re conducting operations in a foreign state. This protection is regulated by more than 3,200 international investments agreements (IIAs, etc.), including bilateral investment treaties (BITs) and investment chapters in free trade agreements (FTAs). But, in order to enjoy the protection of such agreements, intellectual property must qualify as an investment. The question is whether it can be considered as such?
Actually, most international investments agreements give a definition of the term “investment” that includes intellectual property rights as, for instance, the German 2008 Model BIT which lists, in particular, “copyrights and related rights, patents, trademarks”, etc.
But, even if intellectual property has been incorporated into the general definition of “investment” under IIAs, other requirements are necessitated to enjoy the protection of a given IIA. For example, IIAs often require that investments have a financial value, or that the relevant intellectual property right must be granted in accordance with the legal regime of the host state.
Given all of the above, and considering the fact that intellectual property is an important asset for companies, it can be considered as a foreign direct investment for the latter since many of the international investments agreements name it as such, as long as it met the additional requirements that can be asked (see, for example, 1st article of the US 2012 Model BIT).
Show lessInteresting reference to the margin of appreciation (under ECHR).
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The most promising argument for the claimant is the expropriation under Article 5 of the Treaty. The Article 5 prohibit the indirect expropriation. The nature of an indirect expropriation is a measure taken by the government that interference with the investor’s rights. The measure must have a major adverse impact on the Claimant’s investments. Here the measure taken by the government is a measure having the same nature and effect against investments belonging to Philip Morris. The measure is: firstly, Philip Morris must use plain packaging for tobacco products. So using a single presentation that allows only one variant of cigarettes per brand family; secondly, Philip Morris must increase the size of the graphic health warnings from 50% to 80% that appearing on cigarette packages. These measures made by Uruguay will clearly reduce the investment made by Philip Morris on his company (based in Uruguay) and will reduce their profit.
The second most promising argument for the claimant would probably be the denial of fair and equitable treatment under article 3(2) of the treaty. Indeed, this articles states that « each contracting party shall ensure fair and equitable treatment within its territory ». Here, Philip Morris can argue that the obligation of having a single presentation requirement is unfair since it has no effectiveness: it doesn’t seem to reduce the amount of tobacco bought by the people. So why couldn’t they then just keep their previous package? The tribunal stated that it didn’t matter whether this legislation had an effect or not: the government saw a problem and tried to solve it in good faith by imposing new rules. So it doesn’t matter if the result of the regulation are good or bad. Well this is questionable since it then looks very arbitrary: how can you trust justice if there is no looking back at the imposed measures and retroaction after it is put on place ? Philip Morris could definitely use the argument that this is an unfair treatment since first of all, they’ve been taken away their original idea of packaging without having a word to say and secondly, the tribunal doesn’t even check if the regulation is effective or not. This is almost bullying towards tobacco companies.
Can we expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact. The same type of claim could definitely be made against Belgium or another member state of the union regarding plain packaging laws. The plaintiffs could in this case rely on the article 8.12 of the agreement which provides that « a Party shall not nationalise or expropriate a covered investment either directly, or indirectly through measures having an effect equivalent to nationalisation or expropriation (“expropriation”), except for a public purpose; under due process of law; in a non-discriminatory manner; and on payment of prompt, adequate and effective compensation. » The plaintiffs could argue that plain packaging laws might end up as an expropriation of their intellectual property.
Nevertheless, the provision specifically says that such expropriation could be justified by « public purpose » which would be the preservation of public health in this case. On the other hand, tobacco companies could make the case that this would discriminate them compared to other businesses. Then again, the « expropriating Party » would see its actions justified by a legitimate objective which is the one that we mentioned above. All that remains for the affected investor is the « payment of prompt, adequate and effective compensation. »
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Question A: Which of the four arguments given by the claimant is the most convincing?
Seeing that all the different arguments have anyway been rejected since the claimants lost the case, our main task will be here to analyze which one had the most weight and was more likely to make them win the case.
According to our group, the failure to observe commitments as to the use of trademarks under Article 11 of the Treaty was the most promising one.
The claimants allege that by enacting the SPR and 80/80 regulation, the respondent breached its commitments to protect the Claimants‘ right to use their trademarks. Particularly because they’ve committed to ensuring the Claimants the full range of rights that trademark holders enjoy in Uruguay, including the right to use trademarks and the right to exclude other from doing so.
Claimants allege that they should enjoy a full range of rights as holders of those trademarks and more specifically the right to use them in commerce and the right to exclude other from doing so, which rights the Respondent undertook the obligation to protect when it accepted the Claimants trademark applications. Yet, they failed to honor them by virtue of the SPR and 80/80 regulation. Indeed, it substantially challenged the right to use those trademarks as the umbrella clause provides under Article 11 of BIT.
Question B:
It’s not sure whether a tobacco company could introduce a claim based on the CETA treaty.
Some provisions might be relied on but, given their general phrasing, one may not predict the issue of such a claim.
First, we may emphasize on article 20.15 which deals with trademark and provides that «Each Party may provide other limited exceptions, provided that these exceptions take account of the legitimate interests of the owner of the trademark and of third parties ».
The rights provided by a trademark are thus not to be taken as absolute, but when restricting them, States must take into account the legitimate interests of owners. In that respect, it may be underlined that the packaging of cigarettes is the last place where cigarette makers may use their trademark in order to promote their products (advertising being forbidden).
Moreover, investors should be treated equally (8.6) and cigarettes producers are not the only one that produce unhealthy products. Therefore, while they already warn their users on their packaging, it might be found discriminatory to prohibit them (and not alcoholic beverages producers for instance) from using their trademark. On the other hand, though, article 8.9, §2 provides that « the mere fact that a Party regulates, including through a modification to its laws, in a manner which negatively affects an investment or interferes with an investor’s expectations, including its expectations of profits, does not amount to a breach of an obligation under this Section ». So the question calls for a nuanced answer.
Since article 17.2 (1) provides that « The Parties recognize the importance of free and undistorted competition in their trade relations. The Parties acknowledge that anti-competitive business conduct has the potential to distort the proper functioning of markets and undermine the benefits of trade liberalisation. », it could be considered that, while advertising for cigarettes is already forbidden, the uniformisation of packaging will definitely prevent the distinction between the different brands in competition. Knowing that the typical smoker of cigarettes essentially defines himself through the brand of the product he smokes, standardization will remove a major (perhaps the most significant) factor of differentiation on which a company is able to make profit. Therefore it can be considered as an inappropriate measure “which go against the fulfilment of the objectives of the agreement” (article 17.2 (2)).
Finally, it might be interesting to discuss whether intellectual property can qualify as a foreign direct investment. When a company wants to expand in another country, it needs to make investments. The key feature of FDI is that it is an investment that is made in a long lasting perspective.
As we can see in the presentation of the IP provisions of the CETA, many EU products rely heavily on creativity and innovations that come hand in hand with brand exclusivity. Of course, when a firm considers investing, the trademarks which are essential to the marketing strategies of the company take a significant importance. When we decide to restrict the use of such trademarks, it is sure to harm the company’s business.
If most international investments agreements include IP rights in their definition of FDI, there seems to be no global standards regarding the way those rights are being enforced by the treaties.
However in this case, it seems to us that IP rights and trademark should qualify as foreign direct investments because as we said previously, the cigarette brands are of tremendous marketing importance since it is the main element that can differentiate the products. When investing in tobacco companies, firms that seek to establish a long lasting interest will have to take trademark into consideration.
Soline van den Hecke, Mathilde Hardt, Stéphanie Thiry, Amandine van Zuylen, Germain Haumont et Lucie de Crane
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QUESTION A. The most promising argument for Claimant among the following ones
1) Expropriation under article 5 of the Treaty
The Claimants also contend that under Article 5, all lawful expropriations must be accompanied by effective and adequate compensation, even when actions are carried out for a public purpose.191
“Public benefit” is not an exception from expropriation but instead one of several prerequisites for an expropriation to be considered consistent with the BIT.
The latter, according to the Claimants, is further emphasized by the lack of any provision in the BIT providing for “carve-outs, exceptions or saving presumptions for public health or other regulatory actions,” in clear contrast with other BITs such as the Uruguay-U.S. BIT, which contain such provisions.
2) Denial of faire and equitable treatment under Article 3(2) of the Treaty
According to the Claimants, the Respondent’s interpretation of BIT Article 3(2) as providing for the customary international law minimum standard of treatment is inapposite for the following reason :
It has no basis on the relevant case law. The case-law cited by the Respondent either refers to Article 1105 of NAFTA, which is not an issue in this arbitration, or does not support the argument that the FET clause provides for the minimum standard of treatment. 4
3) Impairment of use and enjoyment of the Claimant’s investments under Article 3(1) of the Treaty
The Claimants rely on the holding of the National Grid tribunal for its proposition that “arbitrariness” and “unreasonableness” are interchangeable terms. From this, they conclude that the same facts that demonstrate the Respondent’s violation of the fair and equitable treatment obligation on grounds of arbitrariness are also sufficient to establish an “unreasonable” impairment of the Claimants’ investment. 6
4) Failure to observe commitments as to the use of trademarks under Article 11 of the Treaty
The Claimants rebut Uruguay’s allegations that (i) the Claimants did not own the trademarks that were allegedly affected by the Challenged Measures and thus it cannot be considered to have made any “commitments” in relation to the Claimants, and (ii) Uruguay’s trademark law only confers upon trademark registrants the rights to exclude others from using the trademark, but not the right to use the trademarks in commerce.
QUESTION B: Can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.
Yes. According to art. 19.9 of the CETA, states are forbidden to adopt any « technical specification » which intentionally or indirectly creates unnecessary obstacles to international trade. « Technical specification » is previously defined in art. 19.1 of the CETA where the example of packaging is given. Taking the case of the loss of profit that could represent such regulation, it could be understood as discouraging firms to commercialize in a country, and therefore be an obstacle to international trade. Such infringement can be claimed in the course of a « domestic review procedure » (art. 19.17 CETA), where damages can be claimed against the state author of the regulation.
Relying on this IPdigIT post, you should as well discuss whether intellectual property qualifies as a foreign direct investment.
Investment is defined in the Chapter 8, Section A., art 8.1 of the CETA. To be protected as « investment », intellectual property must comply with the following requirements :
A certain duration
Commitment of resources
Expectations of profit or assumption of risk
Point (g.) of the agreement gives further the reaffirming inclusion of intellectual property rights.
Students : Soline Meurice, Cassandra Popleu, Marie Lilien, Julie Vanstalle and Louise Durin.
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The most promising argument for the Claimant is the one about the expropriation under Article 5 of the Treaty.
This argument is placed in the first place for a good reason. Uruguay expropriated seven of Abal’s thirteen variants when it enacted the SPR. This discontinuance constitutes an indirect expropriation because they still have their property right but they can’t benefit from it.
The Claimants assume that they have a property right due to trademarks. Hence they are entitled to a right to use regarding the Uruguayan Constitution (art. 7 and 32), the MERCOSUR protocol (art. 11), trademark law and property law.
This argument has a strong basis but the Tribunal decided that the Claimants did not have a right to use in regard of their trademarks. It’s only a matter of interpretation. This topic is controversial because even the experts didn’t agree on the issue.
Concerning the investments it is also a matter of interpretation because we could clearly say that these investments have lost some value in 2010.
Another Court could have ruled otherwise because the argumentation is legit.
Can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.
Art. 20.43: We see a definition of counterfeit geographical indication goods, which is what we are talking about in referring to “Plain packaging”.
Art. 20.48, §1: “Each Party shall provide that its competent authorities have the authority to order the destruction of goods following a determination referred to in Article 20.47 that the goods are infringing. In cases where such goods are not destroyed, each Party shall ensure that, except in exceptional circumstances, such goods are disposed of outside the channels of commerce, in such a manner as to avoid any harm to the right holder.” We could use this article in order to destroy the goods coming from the plain packaging law Belgium or another country from the EU could enact since it is infringing an intellectual property right.
Does Intellectual Property qualify as Foreign Direct Investment?
IP is part of the trend of FDI because it has become an increasingly common way to interact in the international scene. If IP is involved, corporations face an additional risk because the owners need to have the protection of their intangible assets in mind and need to be prudent when investing IP abroad, with countries with different IP regimes. International investment agreements help with those situations, but in order to benefit from the protection of these agreements, IP must qualify as an “investment” under the relevant treaty. Usually, the definition of “investment” includes IPRs. There are some agreements in which there is no list of each specific type of IP that should be included, whereas some other agreements provide that “every kind of asset” qualify as investments.
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Question A
1) Expropriation under Article 5 of the Treaty
According to the BIT, in its article 5, “neither of the Contracting Parties shall take, either directly or indirectly, measures of expropriation, nationalization or any other measure having the same nature or the same effect against investments belonging to investors of the other Contracting Party, unless the measures are taken for the public benefit as established by law, on a non-discriminatory basis, and under due process of law, and provided that provisions be made for effective and adequate compensation”. First and foremost, expropriation can be defined as the action of dispossessing an owner of his/her right of property. This concept originally applied to real property has been enlarged to the field of intellectual property. Philip Morris argued the validity of the two regulations adopted by the government, which, according to him breached the article 5 of the BIT. However, this argument is not promising. Indeed, the article mentioned above planned the possibility for a contracting party to take measures of expropriation in pursuant of a public benefit as established by the law, which was in the case, taken by the government. When the government adopted these regulations, they had a legitimate objective: protecting public health. For this reason, this argument isn’t the most promising because the government used, lawfully, his policy power for a legitimate reason. The contracting parties, when enacting the treaty both circumscribed this right which is, de facto, not absolute.
2) Denial of fair and equitable treatment under Article 3(2) of the Treaty
According to the article 3 (2) of the treaty “Each Contracting Party shall ensure fair and equitable treatment within its territory of the investments of the investors of the other Contracting Party”. Furthermore, this provision undoubtedly forbids the promotion, by a state, of a national investor. In this case, Philip Morris argues that the alleged legitimate objective followed by the respondent’s is not established as it failed to prove to protect public health. Moreover, these regulations caused harm to the claimant. Based on the legal standard, the contracting parties have divergent views. According to the tribunal, such a disposition must be interpreted in accordance with the principles of interpretation of international treaties. However, the tribunal said that what matters is the reasonable aspect of such regulations in casu. Did they pursue a reasonable objective? Without the shadow of a doubt, the government’s actions fulfill that criteria. This argument isn’t the most promising for the claimant.
3)Failure to observe commitments as to the use of trademarks under Article 11 of the Treaty.
With the argument of violation of Article 11of the BIT in that the state doesn’t fulfill its commitment Philip Morris had a better chance of winning. Bilateral investment protection agreements, such as the Transatlantic Free Trade Agreement (TAFTA) currently under negotiation, make it possible to place international firms and sovereign states on an equal footing. The former may sue the latter if they consider that certain laws threaten their profits. Even though these laws have been passed to protect health or the environment. Uruguayan anti-smoking legislation is one of the most restrictive in the world. Since 2006, the president of the country: limited to a single product by brand, printing anti-smoking messages on 80% of the surface of packages. Indeed, Philip Morris should more advocate that the commitment of the State in this legislation has a large extended. And thus, the law gave it intellectual property law framework. So, their trademark registration is within the scope of “commitments” covered by Article 11 of the BIT and we should be advanced that the Stade breached its contractual commitment.
4)Impairment of use and enjoyment of the Claimant’s investments under Article 3(1) of the Treaty
This argument is stronger than the first because in the first place there is clearly discrimination regarding the measures taken by the State in view of its too strict law. The state limited to a single product by brand. By doing this, Philip Morris no longer enjoys the investment. So the state breached the article 3 who said that the State “shall not impair by unreasonable or discriminatory measures the management, maintenance, use, enjoyment, extension, sale and, should it so happen, liquidation of such investments “. We regret that the court didn’t further consider this point because it was interesting to note the context in which the state was faced. Indeed, since the state has adopted a strict law it limits the right Philip Morris was to know sell all these products and not a single party. Therefore, the state saw to improve public health wanted to restrict the right to Philip and therefore the Stat brooked its commitment to him obvious. Thus, the State could lose on this ground.
Question B
Can you expect that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? Please identify the CETA provisions on which an investor can rely against a plain packaging law that Belgium/another EU country would enact.
Yes, this sort of claim is foreseen by CETA in Chapter Twenty-Nine concerning “Dispute Settlement”. Its provisions may be invoked in cases where a Party considers that the other Party has not achieved satisfactory results under these Articles and its trade interests are significantly affected. In this respect, such results shall be equivalent to those as if the body in question were a Party.
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A) To answer the first question, we have analyzed all arguments and decided which one fits the best :
1) Philip Morris, the complainant considers that the actions taken by the complainant violate the article 5 of the Treaty (BTI) concerning expropriation. The defendant argues in saying that it was not an expropriation because Uruguay is simply using its sovereign right through the police powers he possesses. What can we response ? First of all, it does not seriously affect the business of the company. Secondly, under the laws of Uruguay, they have no right to be expropriated, they are simply entitled to exclude third parties but no positive right, (a negative right). As a third arguments, they did not record the changes which has a big consequence : their title is not valid!
In order to use Article 5, applicants must prove that they have been amputated of the entire benefit of the investment, or at least considerably private. The plaintiffs can also claim that compensation for expropriation is necessary. For the plaintiffs, the expropriation also concerns intangible goods and can be applied in this case. The defendants don’t agree with that opinion because for them, it is not an expropriation.
2) Let’s see if the second argument is more relevant. The applicants assert that the Respondent, by enacting the contested measures, submitted their investments to unfair treatment contrary to Article 3 of the BIT. They rely on the following reasons: it is arbitrary, it undermines legitimate expectations and it reduces the legal stability that is promised in the Uruguay BIT.
Concretely they say that cigarettes are not good for health and that is why they have taken certain measures to protect the public order. After lengthy negotiations, they reached an agreement and the applicants agreed to put health warnings on the packs of cigarette. Nevertheless, the applicants are still of the opinion that cigarettes are safer than others and that for these cigarettes, whose composition and color are different, the measures taken by the respondent are unnecessary.
3) The Claimants invoke a violation of Article 3(1) of the BIT, which covers the impairment of use and enjoyment of its investments. According to him, the measures taken by the Respondent were unreasonable in a way that they “have clearly lost the use, enjoyment and extension of their investments in PMI’s portfolio of brands and intellectual property”. They allege that measures were arbitrary. This wasn’t a promising argument since it was rejected by the Court, which held in favor of the Respondent. The measures were applied equally and without discrimination to all tobacco brands, therefore the Court dismissed the claim for breach of Article 3(1).
4) The most promising argument is the one named “Failure to observe commitments as to the use of trademarks under Article 11 of the Treaty”. The Claimants invoke a violation of Article 11 of the BIT because they allege that the measures undermine their ability to use their trademark. Article 11 is an umbrella clause, which covers a State’s obligation to respect its commitments about investments. According to the Claimants, the trademark registration falls in the scope of commitments covered by this Article. Therefore they claim that Uruguay breached their commitments to accept the Claimant’s trademark registrations. The fact that they use only “one variant from each of their cigarette brands” prevents them from maintaining distinctive features of the trademarks they registered. Thus, by adopting these measures, Uruguay failed to observe its commitments towards the Claimants and their trademarks.
B) Let’s go over subquestion B.
a) CETA is a new convention recently signed by Europe and Canada. It aims at creating a homogeneous market where IP’s right will have a better protection. To answer the subquestion we’ll have a look at the chapter 20 of the Convention which deals with intellectual property. With the CETA everyone will have access to the same market, meaning that anyone could check which product is already on the market. Anyone could also freely and easily enter the new market. This is a new and better economic vision.
But what about plain packaging ? As seen above, the intellectual property rights will be more protected. Plain packaging offers also a bigger protection because all products will be the same and thus no one will be confused and have to fight for a protection of their products. Furthermore, having homogeneous product would avoid creating discrimination.
But a person can also contest this plain packaging because it goes against the right of the owner and breaches their own intellectual property right (cf. the Article « Industry’s argument against plain packaging » on Wikipedia). In order to have such infringement, Belgium should provide a legal provision and instaure a purpose to allow plain packaging.
Another argument is about the article 20.19-4 of the Convention. It is well prohibited that « a person from manufacturing, preparing, packaging, labelling, selling or importing or advertising a food commodity in a manner that is false, misleading or deceptive or is likely to create an erroneous impression regarding its origin ».
Moreover, plan packaging goes against another provision of the Convention : having one same product creates a barrier because producers having a new product won’t be able to enter market. There is therefore a problem with the creation of the barriers which is prohibited by the Convention in the article 20.32 and 20.33.
If the country anyway decides to make a plain packaging and thus violates such rights, the owner should get a compensation for the breach of its intellectual property rights.
b) Are IPR considered as foreign direct investment ? Yes they are according to the article 8.1 of the Convention. The definition of investment covers the meaning of IPR’s.
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Part A :
The dispute between Philip Morris and Uruguay is about the tabacco control measures took by Uruguay which force to use a single presentation : one variant of cigarettes per brand and a smaller graphic of health issues due too cigarettes. Two regulations were took : the SPR and the 80/80 Regulation violation of the BIT.
The most promising argument for the Claimaint is the last one : the failure to observe commitments as to the use of trademarks under article 11. This article provides that either party shall guarantee the observane of the commitments it has entered into with respect to the investments of the investors of the other party.
The court in this case examinate two aspects : the first one is whether the article 11 operates as an umbrella clause and the second to determinate the scope of « commitments » entered into by the State.
The Claimant (Philipp Morris) claimed to have a commitment from the gouvernement to use their trademark. He says that the Respondent violated its commitments to protects his right to use their trademarks. In fact, the Respondent ensured the Claimant the full range of rights (including the right to use trademarks). He says that his article is an umbrella clause. This clause has different obligations and if a State fails at respecting those, the responsability of the State can be engaged.
Consenquetly, not honoring those rights leads to violation of Uruguay’s obligations under article 11’s umbrella clause. He did it by forcing the Claimant to use one variant from his cigarette brands and by adopting the Challenged Measures.
According to him, a trademark is a « commitment » within article 11.
The Respondent rejects what the Claimant said. He says that article 11 is not an umbrella clause, the registration of trademark isn’t a commitment, the trademarks of his were not registrated with DNPI and the Uruguay law grant a right to exclude others from using trademark.
If it appears that the article is an umbrella clause, they consider that the article can not be interpreted as covering commitments made under generally applicable municipal law. In other words the claimants’s trademark registration can not be covered by the « Article 11 ».
The Tribunal will take side and confirm that the trademark are protected by the Uruguay law. There is an umbrella clause so any commitment the gouvernement makes to the investors must be upheld. On the other hand, the Tribunal concludes that trademarks are not « commitments » and that the Claimants claim of breach is rejected.
Part B :
According to article 8.19 of the CETA, an investor should first settle a dispute amicably. A request for consultation shall be held within 60 days in « Brussels, if the measures challenged include a measure of the European Union; or the capital of the Member State of the European Union, if the measures challenged are exclusively measures of that Member State ». The type of claim that we’re dealing with – about a plain packaging law enact from Belgium/another EU country – couldn’t have recourse to mediation because the claim requires to be without prejudice to the legal position or rights of either disputing party. Article 8.22 states that if the dispute cannot be settled within 90 days of the submission of the request for consultations, the investor shall deliver to the European Union a notice requesting a determination of the respondent. The Member State shall be the respondent if the measures are exlusively measures of a Member state, and if the the measures concern the European Union, this one shall be the respondent.
Intellectual property can be qualify as a foreign direct investment but requires to be carefull. Indeed, foreign direct investmnent became a way to interact on the international scene but we have to keep in mind that other states could have different regimes about property rights an IP and so it is critical for IP owners to always controle the protection of their intangible assets. this is why the international investment law exists to protect the investor when he foreign invests in intellectual property. This is the reason of being of the 3200 investment agreements.
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A. Expropriation under Article 5 of the Treaty
According to the Claimants, to assess their expropriation claim under Article 5, the Tribunal must examine whether the investor was deprived, wholly or partially, of the use, enjoyment, or benefit of the investment. For the Claimants, to find a violation of Article 5, the Tribunal need not reach the conclusion that the Claimants were deprived entirely of the economic benefit of the investment. Rather, the threshold is whether the Challenged Measures have “substantially deprived” the investments of their value.
The Claimants address two defences raised by the Respondent: the police powers doctrine and the Claimants’ alleged lack of property rights—intellectual or other—that could be the object of an expropriation.
1° First, the Claimants consider that the police powers doctrine does not excuse the Respondent from liability for expropriating the Claimants’ investment. According to the Claimants, “under customary international law, the scope of the implicit exception for police powers is limited to State powers related to protection and security such as enforcement of the law, maintenance of the public order, and defence of the State.” State police power does not constitute a defence against expropriation.
2° Second, the Claimants also reject the Respondent’s allegations that Claimants lack intellectual property rights that could be the subject of an expropriation.
The analysis for an indirect expropriation is a 3-step analysis (investment, expropriation, lawful expropriation). In this third step (is the expropriation lawful), it is not because you have a public purpose that you don’t have to compensate. Even if you have a lawful expropriation which was carried out to achieve a public purpose, there is generally a right to get compensation.
The tribunal said that a trademark can be expropriated. If someone limits your trademark, you can consider it as an expropriation. There are property rights in trademark but they are not absolute. The state can infringe that rights for public purpose. No compensation if the measure is a valid exercise of the state’s public power.
B. After the Phillip Morris case, the question is, could it be possible to use the CETA to have the same mechanism that could be used by investors to sue an EU country, like Belgium, for a plain packaging law on cigarettes? We have to analyse the CETA and especially the provision on trademark law.
According to the article 20.15 of the CETA, intellectual property rights, in particular Trademark, are not absolute. They can suffer from exceptions. If a party to the Treaty wants to establish an exception to this right, it must be done after taking account of legitimate interests of the owner of the Trademark and of the third parties.
Concerning the expropriation, according to the article 8.12, a party of the CETA can expropriate a right contained in this Treaty at some conditions which are the same contained in the WIPO: for a public purpose; under due process of law; in a non-discriminatory manner; and on payment of prompt, adequate and effective compensation. But at the paragraph six of this article, this exception does not apply for intellectual property rights. The revocation, limitation or creation of IP rights is not considered as an expropriation if they are consistent with the TRIPS Agreement and the Chapter Twenty of the Treaty. So, an infringement to intellectual property rights cannot be attacked based on expropriation if it is consistent with TRIPS Agreement and that the country had taken account of the interests of each party. To the reverse, “a determination that these measures are inconsistent with the TRIPS Agreement or Chapter Twenty does not establish an expropriation”.
Another important point seems to finally be the section F of article 8 on resolution of investment disputes between investors and states. A long procedure in front of a tribunal is explained. It began with consultation and possibility of mediation (article 8.19 and 8.20) then a claim to the tribunal is possible with procedural requirements (article 8.22 and 8.23). Then, possibility of appeal in front of the tribunal of appeal (article 8.28). This procedure is very general but can be applied in case of trademark problem like what have been done by Phillip Morris.
Céline Moreau
Patrick Debroux
Charlotte Lenz
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A. I think that the best argument for the claimant is the first one about expropriation under the Article 5 of the Treaty. Expropriation is the act of a government in taking privately owned property, to be used for purposes designed to benefit the overall public. Here, the respondent expropriated their investment in violation of Article 5 of the BIT by imposing the SPR and 80/80 regulation. The respondent expropriated the Claimant’s brand assets, including the intellectual property and goodwill associated with each of the claimants’brand variants. First of all, to assess their expropriation claim, the tribunal need to see that the claimants were deprived of the economic benefit of the investment. Public benefit is not an exception from expropriation. However, it has affected the Claimants’s profits and revenues as smokers are less willing to pay premium prices for the claimants’ products.
The Claimant refers to Article 5 of the BIT which covers expropriation; indirect expropriation specifically. The Claimant states that although Uruguay did not take control of the company for themselves, they regulated it in a way that had the same effect on the company as expropriation would have had.
The Claimants specifically refer to the fact that by banning seven out of thirteen of Abal’s variants, which in turn substantially diminishes the value of the six left on the market, the government of Uruguay expropriated the Claimants’ brand assets; which would be in violation of Article 5 of the BIT between Switzerland and Uruguay.
B. we could base our argument on article 17.2 (1) « The Parties recognise the importance of free and undistorted competition in their trade relations. The Parties acknowledge that anti-competitive business conduct has the potential to distort the proper functioning of markets and undermine the benefits of trade liberalisation. » So this article says that it is important to have competition in the trade realtions. But if you have plain packaging, all packagings will look the same and you won’t see the difference between the several brands.
The following argument is a bit controversial. It concerns article 8.5, the principle of non discrimination should be invoked. Everybody has to be treated equally. So which means that all producers of unhealthy products should be treated in the same way. Therefore, if you prohibit cigarettes producers from using their trademark and not the other producers of unhealthy products, it is discrimination. However, this is subject to conversation because article 8.9 §2 says that when a party regulates « in a manner which negatively affects an investment or interferes with an investor’s expectations, it does not amount to a breach of an obligation under this section » so, it would not be discrimination. But I think that there are some limits.
As last argument, we could invoke Art. 20.15 which says that « Each Party shall provide for the fair use of descriptive terms, including terms descriptive of geographical origin, as a limited exception to the rights conferred by a trademark. In determining what constitutes fair use, account shall be taken of the legitimate interests of the owner of the trademark and of third parties. Each Party may provide other limited exceptions, provided that these exceptions take account of the legitimate interests of the owner of the trademark and of third parties. » The rights conferred by a trademark can be limited but the legitimate interests of the owners/producers are extremely important. So we could base our argument on this. In other words, we could say that legitimate interests has not been taken into account when they have limited the rights to trademark. Here, the producers have a legitimate interests in using their trademark because it was the only place where they could use it since advertisements about tobacco are forbidden.
Finally, I will discuss whether intellectual property qualifies a foreign direct investment. I think that in this case trademark can be qualified as a foreign direct investments because trademark is really important for tobacco companies, this is what makes one cigarette different of the other. When people invest in tobacco’s companies, even in other countries, they have to take into acount the trademark.
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A. Question 1
According to us, the second argument is the most convincing (about the Fair and Equal Treatment), just behind the first argument (about expropriation, which is a subject addressed by CETA in the article 8.12).
Article 3(2) of the BIT provides, under the rubric “Protection and Treatment of Investments”, insofar as relevant: « Each Contracting Party shall ensure fair and equitable treatment within its territory of the investments of the investors of the other Contracting Party. »
According to the claimants, the challenged measures (SPR and Regulation 80/80) are arbitrary for three reasons :
1) These measures “fail to serve a public purpose and yet at the same time they cause substantial harm to the Claimants;”
The respondent ’s arguments, that consist in defining the notion of « arbitrary » and claiming their good faith, are inadequate. Indeed, they can’t contest the fact that a certain harm has been caused to the claimants.
The main arguments laid down by the claimants regarding SPR are :
– The respondent failed to prove with scientific evidences that the regulation will ensure that consumers would not believe that one brand presents less risks for the health than another.
– The SPR was adopted without consideration of public officials
– The SPR did not further its stated objective because the consumption of tobacco did not decrease after the regulation was enacted. It added that the SPR’s requirement that tobacco producers publish in local papers the nicotine level of their cigarets brand could lead to the contrary of what they wanted to do.
Concerning 80/80 regulations, the claimants argue that this was made in order to punish Mailhos, and not for public health reasons. It sought to address a non-existent problem. Moreover, the claimants note that most of the sources the respondent cites as a basis for the 80/80 Regulation, did not, and could not, establish that larger health warnings would either increase awareness of smoking risks or reduce tobacco consumption
It seems logical that Uruguay can’t take measures before being sure these will be effective. We can’t just harm an economic situation of a company by measures that should potentially work.
2) The measures undermine the Claimants’ legitimate expectations with respect to the use and enjoyment of their investments. Indeed, the claimants contend that they made substantial investments based on their justifiable expectations that the Uruguayan Government would:
– allow the Claimants to continue to deploy and capitalize on their brand assets; This is a good argument because the financial situation of Philip Morris is certainly affected by the regulations and the measures.
– refrain from imposing restrictive regulations without a well-reasoned, legitimate purpose;
– respect the Claimants’ intellectual property rights;
– ensure that the Claimants had access to a just, unbiased, and effective domestic court system
Those expectations arose out of general statements (=art 1 and 4 of Uruguay’s Investments promotion law) and specific assurances linked to its property right. The fact that this argument relies on legal provisions is a very good point.
3) Finally, the claimants say that the regulations “destroy the legal stability that Uruguay pledged in the BIT and on which Abel has relied on when developing and deploying its brand assets during decades. This argument is quite good because Uruguay can’t just impose a company to change their ways of working after several years of stability and continuity.
B. Question 2
The articles of the CETA that could be interesting if we look at the ‘Intellectual Property Rights’ are predominantly exposed in the Chapter 20 of the CETA (articles 20.1 to 20.50). This chapter is divided into five sections, each section dealing with another subject. The subjects devoted are:
– « general provisions »
– « standards concerning IPR »
– « enforcement of IPR »
– « border measures »
– « co-operation »
With regard to the standards concerning IPR, protection is granted for many copyrights and related rights such as trademarks, geographical indications, designs, patents, pharmaceuticals, data protection and plant varieties. Furthermore, the CETA defines very precisely the enforcement of the IPR exposing all the obligations, the entitled applicants, focusing on the evidences, the right to information, injunctions, damages, legal costs and others.
There are also other articles related to IP rights like articles 8.15.(4) and 13.10.(6) which are only reservations and exceptions of the general principles dealing with investment and financial services, and articles 19.3.(c) (= general exception and security preventing a Party from imposing or enforcing measures necessary to protect intellectual property) and 19.16.(c) (= ‘Nothing in this Chapter shall be construed to require a Party, including its procuring entities, authorities and review bodies, to disclose confidential information if disclosure would prejudice the legitimate commercial interests of particular persons, including the protection of intellectual property’) contained in the Chapter nineteen about the government procurement.
More specifically, we can also talk about the articles 8.6, 8.7 and 8.10 of CETA. The articles 8.6 and 8.7 enable investors to contest a law about plain packaging that would be adopted by a EU country. Why ? Because these articles are about the fact that each party shall treat an investor of another Party in a way that is no less favourable than it treats its own investors (art. 8.6) or investors of a third country (art. 8.7). Then there is the article 8.10 which is about the fact that each party shall treat investors in a fair and equitable way, and with full protection and security.
If a dispute arises between investors and states, there is a mechanism organized by the articles 8.18 and following of the CETA. A tribunal is constituted and an investor of a Party can adress it’s claim about the breach of a Party’s obligation under articles 8.6 and following or under article 8.10. It could be the case if an investor would contest a law about plain packaging taken by an EU country.
COSTY Audrey, ANDRUSZYSZYN Patryk, VAN DE CALSEYDE Emilie, FERRARI Laura, CATTOIR Alicia, HANON DE LOUVET Violette
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A) The Philip Morris vs Uruguay case concerns a claim about the new anti-smoking legislation adopted by the Uruguay’s government. By way of reminder, the Claimants, referred as Philip Morris, contested two regulations adopted by the government. These regulations permit only one variant of cigarettes per brand company and also requires the graphic health warnings to be increased from 50 to 80 percent on the cigarette packages. According to them, these measures depreciate its cigarette trademarks and investments in their country. The Claimants consider that their company is entitled to compensation. For this reason, they brought a lawsuit before the International Centre for Settlement of Investment Disputes.
The most promising argument for the Claimant among these four claims is the failure to observe commitments as to the use of trademarks under Article 11 of the Treaty. This article provides that any commitments the government makes to the investors must be maintained. One of the main points of Philip Morris’ argument is that the government had a commitment towards the company on the basis of the trademark rights by registering the trademark. This provision represents what we call “an umbrella clause”, which is a clause that requires the host state to observe certain tasks towards foreign investors. According to this article of the BIT, Uruguay is obliged to respect its commitments made under the TRIPS and the Paris Convention. These two treaties provide some standards that states should carry out in order to protect the intellectual property rights. So, Philip Morris will have to prove that Uruguay’s legislation constitutes a discrimination against Uruguayan nationals relating to the enjoyment of its trademarks. It could also try to prove that their legislation do not meet the standards required by the TRIPS.
Sources : http://www.italaw.com/sites/default/files/case-documents/italaw7417.pdf https://en.wikipedia.org/wiki/Philip_Morris_v._Uruguay
B) The next question observes if the same type of claim could be made against Belgium/an EU country based on the recently signed CETA? So could the claim of “failure to observe commitments as to the use of trademarks” be made against one of the EU member states?
If we take a look at the CETA, we can find the article 20.15 which sets exceptions to the rights conferred by a trademark. This article basically enables countries that signed CETA to limit the rights that a trademark could give. Of course the states have to observe certain rules and have to motivate such a decision if they ever consider taking one. Legitimate interest of the owner of the trademark and of third parties should of course be taken into account. So having said this, we consider that the same type of claim of “failure to observe commitments” would hardly be made as the CETA states that the countries can put legitimate limits on the use of trademarks.
As to the question on the qualification of intellectual property as a foreign direct investment, Intellectual property rights do enhance appropriability, they are expected to foster investment in research and development and knowledge creation. So IPRs are something that is used to attract foreign investors. But can it be considered as an investment? As said in the article, most definitions of investment do include intellectual property rights, but this doesn’t mean that all of them do. Certain legislations have multiple other elements, additional requirements that have to be taking in consideration to qualify IP as an investment. Sometimes we cannot just automatically assume that IP is an investment because it does not correspond totally to the definition. In particular cases IP could qualify as an investment but only in those. There should be a concrete analysis. The scope of IPRs is way too vague to correspond to a particular definition. This is what creates sometimes uncertainties in the protection investors can get from country to country.
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Dear professor,
here is our answer for this assignment.
kind regards
Part A:
From our point of view, the most interesting and promising argument for the claimant is the expropriation under the article 5 of the Treaty.
This argument deals with a dilemma between the expropriation of the intellectual property of the claimant and the police power of a state to protect public health.
Under Art 5 of BIT between Switzerland and Uruguay:
“Neither of the Contracting Parties shall take, either directly or indirectly, measures of expropriation, nationalization or any other measure having the same nature or the same effect against investments belonging to investors of the other Contracting Party, unless the measures are taken for the public benefit as established by law, on a non-discriminatory basis, and under due process of law, and provided that provisions be made for effective and adequate compensation. The amount of compensation, interest included, shall be settled in the currency of the country of origin of the investment and paid without delay to the person entitled thereto”. (http://www.italaw.com/sites/default/files/laws/italaw6239.pdf).
According to the claimant’s position this disposition consists that the expropriation doesn’t need to concern the entire benefit of the investment but could concern only a substantial part of that investment. The claimant then continues that “under article 5, all lawful expropriations must be accompanied by effective and adequate compensation, even when action are carried out for a public purpose” (§. 183). The respondent’s 80/80 regulation has for consequences to destroy the brand equity of the six remaining variants, with two immediate alleged effect (§. 194).
In addition, the major point of that arguments concern the police powers of a state and their limits. The claimant point out that “the police power does not excuse the respondent from liability for expropriating the claimants’ investment” (§. 197). Indeed, the scope of police power concern customary international law and is limited to protection and security of the state. Thenceforth, for the company the state police power does not constitute a defense against expropriation. Indeed, the SPR and the 80/80 Regulation do not fall within the police power doctrine (§.199)
With regard to the article 5, the court said concerning the expropriation that “in order to be considered an indirect expropriation; the government’s measures interference with the investor’s rights must have a major adverse impact on the Claimants’ investments. As mentioned by other investment treaty decisions, the State’s measures should amount to a “substantial deprivation” of its value, use or enjoyment, “determinative factors” to that effect being “the intensity and duration of the economic deprivation suffered by the investor as a result of such measures.”
The tribunal thus asks if trade mark is even propriety which is thus suspect to expropriation. The court said yes there is a right of property but it is a relative right (you have the right to prevent others to use your trade mark) so the state can restrict it for public purposes.
Afterwards the courts ask the question “What is the standard for expropriation?” and answer that the standard of expropriation is the “valid exercise of police power”.
Finally, The tribunal ruled that “the adoption of the Challenged Measures by Uruguay was a valid exercise of the State’s police powers, with the consequence of defeating the claim for expropriation under Article 5(1) of the BIT” (§. 287).
Regardless the ruling of the court, the question of the expropriation and the police power is still controversial and is according to our group is the point the most interesting in that judgment.
Part B :
We can expect the same type of claims against plain packaging laws enacted by EU countries, based on several dispositions of the CETA. Most notably, CETA creates an independent investment court system, which would allow companies based in Canada to challenge laws of European countries (and sue the government) that would be a threat to their investments. Trademarks could effectively be seen as investments, at least following CETA, as it’s article 8.1 includes intellectual property rights in the definition of investments. First, a company could challenge plain packaging laws based on article 8.10 of CETA that accords a fair and equitable treatment to investors and investments and listing the type of conducts that can lead to a breach of this fair and equitable treatment (such as manifest arbitrariness or abusive treatment of investors). Companies could also challenge these laws based on the prohibition of indirect expropriation (substantial deprivation of the investor of the fundamental attributes of property such as the right to use, enjoy and dispose of its investment) under article 8.12 of CETA, but annex 8-A says that legitimate measures aiming at protecting health, security or environment don’t constitute direct expropriation if they are not manifestly excessive. Finally, companions could challenge those laws with article 20.13 in which parties commit to make all reasonable efforts to comply with several international agreements that encourage trademarks. They could also play on the new enlarged protection towards geographical indications (article 20.19) to challenge very strict plain packaging laws.
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In order to fight tobacco’s dangerous consumption, the state of Uruguay was about to take measures that would have injured the interests of the company PM. It was needed to determine wheter the state had the opportunity in that case to adopt it. We know that trademark can be subject to an expropriation. In that case we noted that the regulation was not reducing the value of the Philip Morris business and hence no form of expropriation and thus no compensation to be granted. It was also found that FET does not prohibit nor preclude the states of the possibility to take such measures if it is in order to achieve this type of objectives and that it was in good faith (they used the standard set in the FET).
On the other hand, the present case is also an interesting one because it encompasses different topics that are directly related to the very recent evolutions in terms of international relationships. It involves a series of controversial issues linked to the police powers of the states, the freedom of exportation and the forever running fight between the public and the private about what should be regulated by the first and in which way does it affect the second one. It is quite obvious that nowadays, a certain form of “arbitralisation” of law is taking place and that the law is now considered as a material which is controllable and reviewable. The actions of a government can be deconstructed by corporations that aim to protect their interests or to saveguard investments sometimes to the detriment of states’ democratic achievements.
A. Question
In our opinion, the first claim is the most promising one. About the expropriation under article 5 of the BIT, Philip Morris (PM) invocated this article deals which deals with indirect expropriation. By imposing the SPR and 80/80, Uruguay’s government expropriated the investment of PM in violation of article 5 of the Treaty.
The Tribunal has first to examine whether the investor was deprived, wholly or partially, of the use or benefit of the investment. For the Claimants, in order to find a violation of Article 5, the Tribunal need not to find that the Claimants were deprived entirely of the economic benefit of the investment.
The tribunal said that “(…) in order to be considered an indirect expropriation, the government’s (measures’) interference with the investor’s rights must have a major adverse impact on the Claimants’ investment” and “(…) as long as sufficient value remains after the Challenged measures are implemented, there is no expropriation”. The primary consideration is how much value remains after the expropriation. The tribunal said that a trademark can be expropriated. If someone limits your trademark, you can consider it as an expropriation. There are property rights in trademark but they are not absolute. The state can infringe that rights for public purpose. But there is no compensation if the measure is a valid exercise of the state’s public power.
According to Uruguay, there is no expropriation. One of their argument is that the measures have not had a severe economic impact on the Philip Morris’ business. But this is not the job of the government to say what will be the consequences of the measures on the company.
The Tribunal also said that the trademark holder does not enjoy an absolute right of 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. The Tribunal found that the Claimants had property rights regarding their trademarks capable of being expropriated. But it then said that the 80/80 regulation could not have a substantial effect on the Claimants’ business since it consisted only in a limitation imposed by the law on the modalities of use of the relevant trademarks. The Tribunal found that the “effects of the SPR were far from depriving Philip Morris of the value of its business according to the standard that has been adopted for a measure to be considered expropriatory”. Here, the Tribunal finally ruled that there was no expropriation and thus, no right for compensation.
We can link this claim with the second one made by Philip Morris, which is “denial of fair and equitable treatment under Article 3(2) of the Treaty”. This article says: “Each contracting party shall ensure fair and equitable treatment within its territory (…)”. Philip Morris argued that these regulations weren’t fair and had so no effectiveness. As for the first claim, Philip Morris finds that the measures are not fair nor proportionate. The tribunal used a minimum standard of treatment coming from the international law (which is pretty low). The tribunal looked at the facts. The government saw a problem and tried to solve it in good faith by imposing new rules. The Tribunal finally ruled that: “(Fair and Equitable Treatment does) not preclude governments from enacting novel rules, even if these are in advance of international practice, (…). (FET) does not guarantee that nothing should be done by the host State for the first time”. The Tribunal also held here in favour of Uruguay thanks to the minimum standard used. If the standard chosen was a bit higher, the result would probably have been very different.
B. Question
As any convention, the Comprehensive and Economic Trade Agreement (also called CETA) creates new rights and obligations for the parties and it strengthen their close economic relationship. The CETA includes a specific chapter on intellectual property rights (chapter 20). The purpose of the CETA is to protect in a better way the European brands and products on the Canadian market. But, it also promotes the accessibility of the products to each other’s’ markets (art. 20.1). In other words, the intellectual property rights will be greatly enforced.
By taking the Philip Morris case as an example, we can imagine that an owner who has an IPR (such as a trademark right), is entitled to a great protection in the Canadian market as well as in the European market. Let’s suppose that this owner contests the plain packaging of cigarettes in a legal provision in Belgium. The first argument he can use, is the breach of his IPR because government makes an illegal appropriation of his trademark. Plain packaging can generate bad consequences and have an impact on economic and commercial rights of Tabaco producers and consumers. In fact, it can be hard for a consumer or even for a seller to make a difference between the various brands of cigarettes. Consumers may be confused about the “origin” of a cigarettes pack. However, under article 8. 12 of CETA which is about expropriation, a party can expropriate an IPR only for a public purpose (1), under due process of law (2), in a non-discriminatory manner (3), and on payment of prompt, adequate and effective compensation (4). Therefore, Belgium should have a legitimate public purpose: in this case, the government would like to reduce the consumption of cigarettes so that it would decrease the risk of cancers (public health argument). It will be provided in a legal provision. Plain packaging is imposed to each brand so it is not discriminatory. Finally, Belgium should pay a compensation for the Tabaco producers.
He can use article 20. 32, § 1 and 2 combined with article 20.33. In the first provision, we can read that each party shall ensure fair and equitable procedures to enforce IPR. Those procedures shall avoid “creation of barriers to legitimate trade and to provide safeguards against their abuse”. In this case, we think that plain packaging constitute a barrier to the functioning of the internal market (even before CETA, producers of Tabaco used that argument, under the European law: http://www.tobaccotactics.org/index.php/Industry_Arguments_Against_Plain_Packaging). Also, in the same provision, it mentions that “each party shall take into account the need for proportionality between the seriousness of the infringement, the interests of third parties and the applicable measures, remedies and penalties”. The owner in this case, is considered as an entitled applicant, under art. 20.33.
What’s more, the owner can mention article 20.40,§1 and 2, for having a compensation. If his intellectual property right was infringed and he was subjected to damages (for example, lost profits because the purpose of plain packaging is to reduce the consumption of cigarettes), the judicial authorities can impose to the infringer (in this case, a State) to pay “an adequate compensation for the injury the right holder has suffered “. Or, “as an alternative, a Party’s law may provide for the payment of remuneration, such royalty or fee, to compensate a right holder for the unauthorised use of the right holder’s intellectual property”.
At least, the owner can also invoke article 20.43. This provision is about counterfeit trademark goods. It means that “any goods, including packaging, bearing, without authorisation, a trademark which is identical to the trademark validly registered in respect of such goods, or which cannot be distinguished in its essential aspects from such a trademark, and which infringes the rights of the owner of trademark in question under the law of the Party in which the border measure producers are applied”. We can imagine that plain packaging could increase the counterfeit of cigarettes packs. This argument was also used by several Tabaco producers, as TMA who said that “ plain packs are also likely to lead yet further increases in smuggling of tobacco products and plain packs would make it so much easier for a counterfeiter to copy than existing branded packs making it even more difficult for a consumer to make a difference between the genuine and counterfeit products” (see: http://www.tobaccotactics.org/index.php/Industry_Arguments_Against_Plain_Packaging).
Finally, to respond the last sub question, Intellectual property rights can be considered as an investment, under chapter 8, article 8.1. IPR includes copyright and related rights, trademark rights, rights in geographical indications, rights in industrial design, patent rights and so one. (By the way, it seems that this provision doesn’t include a strict and closed list of IPR. Indeed, “the CETA Joint Committee may, by decision, add other categories of IPR”). The convention defines an “investment” as “every kind of asset that an inventor owns or controls, directly or indirectly, that has the characteristics of any investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk. It may take include 7.(g) intellectual property rights”. Even before the CETA appeared, lawyers (as L. Vanhonnaeker) noticed that IP was considered as a foreign direct investment: it was undeniable that IPL played a crucial interaction in the international scene because corporations always had transnational activities. Even if owners of IPR were entitled to protections, it could be hard for them to be always prudent and to have in mind all the protections when they invested abroad. In addition, there was always a “risk that a state didn’t share the same commitment to IPR and whose IP regimes could differ substantially from each others”. Nonetheless, international conventions tried to promote and enforce the protection of investors when they conducted operations in a host state and tried to avoid as much as possible “negative interference by the foreign state with the investment”.
Good analysis, thanks!
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The answers to these two questions (A and B) have been developed by Letycja Karetko, Mathilde De Koninck, Cedric Noukpoape and Nicolas Biessaux.
Philipp Morris v. Uruguay
A. Expropriation under Article 5 of the Treaty
Philipp Morris claims that the SPR (Single Presentation Regulation) and the 80/80 Regulations expropriated their investment, which is in direct violation of the Article 5(1) of the BIT. The Claimants allege that there were “substantially deprived” of their investments made. More precisely, the Respondent expropriated 7 of the 13 Abal’s variants: each variant is an individual investment and therefore the discontinuance caused Abal either to maintain its market share or maintaining its historical price premium: which substantially affected the Claimant’s revenues and profit; by consequence violated the article 5 of the of the BIT.
Moreover, the Claimants will argue that there is an expropriation of their intellectual property right. They will take in consideration the fact that a trademark “in an asset because it creates value by distinguishing goods in commerce. A trademark can only serve that function if it used”. Their claim will based, in connection with their claim on article 11, on saying that they were entitled to use their trademarks because according to Uruguayan law, “trademark are property and that all property owners have the right to use their property (recognized by the articles 7 and 32 of the Uruguay Constitution (…))”.
The Respondents will argue that they validly exercised police powers and therefore it cannot be considered as expropriation. The Claimants will answer by saying that such police powers doctrine does not protect the state from expropriating their investment and that the State police power “does not constitute a defense against expropriation”.
B. CETA PROVISION
– CHAPTER TWENTY
– SECTION B,
– SUB-SECTION B,
– Articles 20.13, 20.14 and 20.15
Based on the recently signed CETA, he same type of claim could arise against an EU member State as the EU is willing to give a higher protection to intellectual property based on the idea that important pillars of the EU such as jobs and even the EU’s growth are at stake when there is less/bad protection of intellectual property rights.
Does intellectual Property Qualify as a Foreign Direct Investment?
Nowadays, considering internationalization and recent technologies (like Internet) and recent cases (Philipp Morris v. Uruguay, it seems inevitable that corporations which own intellectual property for to be protected (which is one of the CETA’s goal: increase protection) against states which have different IP regimes.
Therefore, international investment law is a very smart way of guaranteeing protection of IP owners against state’s infringement of their rights. Nevertheless, the intellectual property rights have to be considered as investments (according to IIA’s): which still has no narrow standard to know which IPR’s are covered.
From my point of view, such international investment law can avoid conflicts between corporations and states but there is a need to define narrowly the term of “investment” otherwise there is a risk of arbitrary left, which could lead to unequal treatments in similar situations regarding member states.
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A.
Firstly, we must select and present the most promising argument; we chose argument number 1 : Expropriation under Article 5.
Uruguay expropriated the claimants’ investments in violation of Article 5. More specifically, by prohibiting the sale of seven of Abal’s thirteen variants, and by destroying the brand equity of the six remaining variants, Uruguay expropriated the brand’s assets, including the goodwill and the legal rights deriving from the associated intellectual property in violation of Article 5.
To confirm the legitimacy of such assertions, the Tribunal must examine to what extent the Claimants were deprived, totally or partially, of the economic benefits of the investment. According to them, to conclude to a violation of Article 5, it is sufficient to provide evidence that the « challenged measures have “substantially deprived” the investments of their value ». It’s not necessary to prove that the latters have been “totally” deprived of their value.
Furthermore, the Treaty contains no specific provision providing an exception that could be put forward for public health protection, contrary to what other Treaties provide (like the Uruguay-US BIT).
The claimants rejected the fact that the following arguments could justify expropriation measures:
– the host State acquired a benefit of a proprietary character after the expropriatory measure ;
– the State intended to expropriate the investment ;
– the claimants’ business stopped being an ongoing matter as a result of the expropriation.
Finally, the claimants contend that Article 5 protects:
– direct, indirect and de facto expropriations ;
– tangible assets ;
– intangible assets such as intellectual property.
B.
Secondly, starting with the last part of the question (whether intellectual property qualifies as a foreign direct investment), the issue is perfectly summarized in the article from Lukas Vanhonnaeker as follows: « international investment law aims to guarantee the protection of investors when they are conducting operations in a foreign state and to avoid as much as possible negative interference by the foreign state (or “host state”) with the investment. […] However, in order to benefit from the protection of such agreements, intellectual property, or intellectual property rights (IPRs), must qualify as “investments” under the relevant treaty. » In general, property rights are included in the definition of “investment” provided in the international investments agreements (sometimes explicitly, sometimes in a less clear manner). However, further requirements must usually be fulfilled in order to beneficiate from the IIA’s protection. For an example of such requirement, see Article 1(2)(iv) of the Ghana-India BIT which provides that, in order to be protected, the intellectual property right must be granted in accordance with the legal regime of the host state.
Regarding the CETA, the definition of investment as given in Article 8.1 seems to include IPR’s: “every kind of asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, which includes a certain duration and other characteristics such as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.” Moreover, IPRs are explicitly referred to in a list of “forms that an investment may take”. See also the definition of “covered investment”: “with respect to a Party, an investment: (a) in its territory; (b) made in accordance with the applicable law at the time the investment is made; (c) directly or indirectly owned or controlled by an investor of the other Party; and (d) existing on the date of entry into force of this Agreement, or made or acquired thereafter”. If these requirements are fulfilled, the intellectual property qualifies as foreign direct investment.
After exploring the link between IPRs and the notion of foreign direct investment, we can conclude that the same type of claim could be made against Belgium/an EU country based on the recently signed CETA. If so, the investor could rely on Articles 8.6 to 8.8 (non-discriminatory treatment; section C of the CETA investment chapter) or Articles 8.9 to 8.14 (investment protection; section D of the CETA investment chapter). Indeed, only those two types of claim can be brought to the investment dispute resolution tribunal established by the Treaty, cf. Article 8.18 (Scope). As explained in this presentation (link: http://trade.ec.europa.eu/doclib/docs/2013/november/tradoc_151918.pdf), “a claim cannot be brought to investment dispute settlement simply because an action has an impact on investors’ profits. Also it cannot be used by an investor to claim a breach of another part of the CETA agreement. For example, it cannot be used to obtain market access by investors. This is an important clarification.” More precisely, the section D of the CETA includes, inter alia: the obligation of fair and equitable treatment (8.10) and the forbidding of “expropriation” (8.12; taking into account several exceptions). These are two grounds that an investor could build a claim upon if a plain packaging law was adopted in Belgium/an EU country.
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