Foley Hoag Helps Uruguay Secure Landmark Victory Over Philip Morris

Arbitral Tribunal Affirms Uruguay’s Sovereign Right to Regulate
Tobacco

WASHINGTON–(BUSINESS WIRE)–An international arbitral tribunal today rejected a challenge by Philip
Morris International, Inc. (“PMI”) to Uruguay’s strict tobacco-control
measures, aimed at reducing cigarette consumption and its devastating
impact on public health.

The case had attracted widespread international attention because it
pitted the sovereign right of Uruguay to protect the health of its 3.5
million people against the commercial interests of tobacco giant PMI.

Foley Hoag LLP partners Paul Reichler, Lawrence Martin and Clara
Brillembourg, of Washington, DC, and Andrew Loewenstein of Boston led
Uruguay’s legal defense team.

“This precedent-setting decision not only upholds Uruguay’s public
health measures, but sends a strong signal to other countries that they
can move forward with strong tobacco control regulations without fear of
intimidation by big tobacco companies like Philip Morris,” said Reichler.

“The credit for this accomplishment goes to Uruguay’s President Tabaré
Vázquez—a true champion of public health, and a principled advocate of
strong measures to reduce smoking and save lives,” Reichler added. “It
was under his guidance that this case was brought to a successful
conclusion.”

The arbitral tribunal was convened in 2010 pursuant to the terms of the
bilateral investment treaty between Uruguay and Switzerland under the
auspices of the International Centre for Settlement of Investment
Disputes, in Washington.

Philip Morris challenged two of Uruguay’s tobacco control measures: the
requirement that graphic warning labels cover 80% of the front and back
of cigarette packs, and the requirement that each brand of cigarettes
have only a single presentation (i.e., that there only be one type of
Marlboro cigarette on the market, not Marlboro Red, Marlboro Gold and
Marlboro Blue).

The tribunal rejected Philip Morris’ claims that the two challenged
regulations were arbitrary, constituted an expropriation, and infringed
on PMI’s trademark rights. Rather, the arbitral tribunal affirmed the
two measures as reasonable exercises of Uruguay sovereign right—and
duty—to protect public health from the death and disease smoking causes.

Uruguay showed that, as a result of these and other measures, the
smoking rate among adults in Uruguay dropped from 35% to 22% between
2005 and 2014. Among adolescents, the impact was even greater; the
smoking rate dropped dramatically to just 8.4%.

In addition to upholding Uruguay’s challenged measures, the arbitral
tribunal ordered Philip Morris to reimburse Uruguay for its legal fees
and other costs incurred in the case, a sum in excess of $7 million.

“The tribunal’s decision should put an end to the uncertainty that the
tobacco companies have cultivated about whether countries can and should
move firmly to reduce the incidence of death and disease smoking causes
by adopting reasonable tobacco control policies,” said Foley Hoag’s
Lawrence Martin. “The tribunal made clear that people matter more than
profits.”

Uruguay’s successful defense against PMI’s challenges was led by Dr.
Miguel Toma, Secretary of the Presidency, and Dr. Carlos Gianelli,
Uruguay’s Ambassador to the United States. In addition to Foley Hoag
LLP, Uruguay was represented by Professor Harold H. Koh of Yale Law
School.

The entire Award, in English and Spanish, as well as President Vázquez’s
comments on it, will be made available online today at http://presidencia.gub.uy/.
A fact sheet on the case can be found here.

Contacts

Foley Hoag LLP
Audra Callanan, 617-832-7010
acallanan@foleyhoag.com