The Legality of Plain Packaging under International Law

Plain packaging is recommended by the guidelines of the World Health Organisation Framework Convention on Tobacco Control, and has been successfully implemented in Australia since 2012. Research anticipates its effectiveness in the Indian context as well.
Although strongly opposed by the tobacco industry, plain packaging measures are entirely compatible with international law.

The research for this article was conducted through an internship programme funded by the Australia-India Institute Taskforce on Tobacco Control at the South-East Asia Regional office of the International Union Against Tuberculosis and Lung Disease (The Union) in New Delhi. The Taskforce developed a policy document advocating the introduction of plain packaging in India. This article is an extension of the analysis and recommendations of the policy document. It has benefi ted from detailed comments provided by Jonathan Liberman, Mark Davison, Matthew L Myers, Nevin C Wilson, Pranay Lal and Anil G Jacob.

Australia’s historic cigarette plain packaging legislation, in force since 2012, has inspired debate over similar measures in India.¹ The guidelines to Articles 11 and 13 of the Framework Convention on Tobacco Control (FCTC) recommend plain packaging to “increase the noticeability and effectiveness of health warnings” (WHO 2011: 59), and “to eliminate the effects of advertising or promotion on packaging” (ibid: 95). Research indicates that plain packaging could have immense public health benefits in the Indian context too (AII 2012).
Shortly after the Australian High Court upheld the plain packaging legislation, a Private Member’s Bill was tabled in the Lok Sabha proposing an amendment to the Cigarettes and Other Tobacco Products (Prohibition of Advertisement and Regulation of Trade and Commerce, Production, Supply and Distribution) Act (COTPA), 2003, to introduce plain packaging in India.² The bill proposes standardised packaging with enlarged health warnings occupying a minimum of 60% of the principal display area of the package, allowing brand names or word marks to appear only once in a prescribed colour, size and style.³ As in the Australian legislation, this bill seeks to maximise consumer information and minimise promotional aspects of tobacco product packaging by regulating, inter alia, the use of trademarks. It prohibits the use of non-word marks, and requires use of word marks in a special manner on product packaging. If enacted, challenges to the legality of plain packaging in India may be anticipated based on the tobacco industry’s response in Australia.⁴
International Trademark Law
A World Trade Organisation (WTO) challenge to plain packaging measures basically boils down to two issues. The first issue deals with the nature of rights conferred by the registration of trademarks under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. While plain packaging restricts the freedom of tobacco trademark owners to use their trademarks as they please, it does not interfere with the trademark owner’s right to prevent unauthorised use by third parties. This negative right – the right to prevent unauthorised use – is in fact the only right guaranteed by trademark registration under the TRIPS regime.
The second issue deals with the extent to which states may lawfully regulate the use of registered trademarks. Since trademark use is already heavily restricted by laws prohibiting tobacco advertisement, promotion and sponsorship, it does not need much argument that certain kinds of prohibitions on trademark use have been accepted without challenge under TRIPS. What is unique about trademark regulation under plain packaging laws is the positive requirement to use trademarks in a special manner, which, as this article demonstrates, is justifiable under the TRIPS Agreement.
Registration of Trademarks
Article 15(4) of TRIPS,⁵ which echoes Article 7 of the Paris Convention, deals with the registration of trademarks, stating that “the nature of the goods or services to which a trademark is to be applied shall in no case form an obstacle to registration of the trademark”.
Simply put, a trademark cannot be denied registration for the sole reason that it is used in connection with tobacco products. Tobacco industry advocates interpret this section as “product neutrality provisions” (Basham and Luik 2011: 7) and argue against plain packaging on the grounds that it restricts the use of tobacco trademarks, while affording protection to trademarks of all other products.⁶ But, considering that TRIPS as well as the Paris Convention are entirely silent as to a positive right to use trademarks,⁷ this reading of Article 15(4) relies heavily on the use of trademarks being “inextricably linked to registration”, as the Lalive (2009: para 17) report indeed argues. The same report, however, admits that there are circumstances under which use may not immediately follow registration; for example, where registered trademarks are attached to products that cannot be legally sold (ibid: para 23).⁸ Moreover, there are indications even within TRIPS and the Paris Convention that distinguish registration of trademarks from use of trademarks. Article 19 of TRIPS, for example, envisages “circumstances arising independently of the will of the owner of the trademark which constitute an obstacle to the use of the trademark”.
Lending support to the interpretation delinking registration from use, a 1994 communication from Ludwig Bauemer, then Director of Industrial Property Law Department at the World Intellectual Property Organisation (WIPO), expressed that “Article 7 [of the Paris Convention] only concerns the initial registration but not the subsequent fate of the mark”.⁹ Regarding the plain packaging debate he specifically concluded that “it does not seem that Article 7 of the Paris Convention could serve as a basis for challenging existing or planned requirements of Paris Union member States regarding the plain packaging of tobacco products”.¹⁰
Rights Conferred by Registration
Article 16 of TRIPS, laying out rights conferred by trademark registration, provides an exclusive right only to prevent third parties from unauthorised use of registered trademarks. The Panel on “European Communities – Protection of Trademarks and Geographical Indications for Agricultural Products and Foodstuffs (Complaint by Australia)” (WTO 2005: para 7.246) has elaborated this principle as follows:

[T]he [TRIPS] agreement does not generally provide for the grant of positive rights to exploit or use certain subject matter, but rather provides for the grant of negative rights to prevent certain acts. This fundamental feature of intellectual property protection inherently grants Members freedom to pursue legitimate public policy objectives since many measures to attain those public policy objectives lie outside the scope of intellectual property rights and do not require an exception under the TRIPS Agreement.

Davison (2012: 7) further establishes many difficulties in inferring a right to use trademarks without guidance in international law regarding exceptions to such a right.¹¹ In the light of several current regulations that prohibit trademark use – such as in tobacco advertising, promotion and sponsorship – it becomes clear that exceptions to such a right are not defined because the right itself does not exist (ibid).
Trademark Use
Article 20 of TRIPS¹² does not permit special requirements unjustifiably encumbering the use of trademarks in the course of trade. Examples of special requirements include use with another trademark, use in a special form, or use in a manner potentially reducing distinctiveness of the mark.
Davison (2012: 15) has observed that the requirements mentioned in this article favour an interpretation demanding the doing of something, as opposed to prohibition from doing something. He rightly points out that

the four examples of special requirements given by Article 20 generate an ejusdem generis in which ‘special requirements’ constituting the encumbrance are requirements relating to actual use, not partial or total prohibition of use. Thus, Article 20 applies only to positive requirements regulating the use of a trademark, not partial or total prohibitions of the use of a trademark (ibid: 11).

The only effect of plain packaging which amounts to special requirements for the purpose of this article, therefore, is the requirement to use word marks in a prescribed size, colour and font on product packaging.
The wording of Article 20 clearly stipulates that even if a measure constitutes a special requirement encumbering the use of a trademark, such a measure is not necessarily unjustified. As Andrew Mitchell (2010: 419) notes, “the term ‘unjustifiable’ is a separate, independent qualification that is not inherent in all three examples”.
Justifiability of special requirements under Article 20 has not been considered in WTO jurisprudence. However, Article 8(1) of TRIPS supports justifiability on public health grounds, granting members the flexibility to “adopt measures necessary to protect public health and nutrition...provided that such measures are consistent with the provisions of this Agreement”.
The acceptance of the legitimacy of tobacco control as a public health goal is near-universal, and the immense international support for the FCTC strongly suggests that plain packaging measures are based on prevailing scientific consensus as a result of international negotiations. Article 8(1) of TRIPS read with paragraph 4 of the 2001 Doha Declaration, which emphasises that “the TRIPS Agreement does not and should not prevent members from taking measures to protect public health” (WTO 2001), strongly supports the conclusion that as long as a measure is adopted for the protection of public health, and is not inconsistent with the other provisions of the TRIPS Agreement, it would be justifiable for the purposes of Article 20.
International Agreements
The Investor-State Dispute Settlement (ISDS) clause available under most international investment agreements (IIAs) allows tobacco companies to bring claims directly against countries in which they have protected investments. The greatest threat of international investment arbitration is that if the tobacco industry succeeds in creating an “impression” of a strong case, it may cause “regulatory chill”, especially in developing countries like India. Regulatory chill is said to occur where the costs of bona fide regulation appear to outweigh the benefits, and states lose the will to pursue even legitimate policy goals, if it means having to pay huge amounts in compensation to investors. The threat of investment arbitration by tobacco companies over plain packaging has caused regulatory chill in the past, with notable examples of Canada and Australia setting aside proposals for such measures several years ago (PSC 2009: 28).
Recent Cases
More recently, claims have been raised by Philip Morris International (PMI) against Uruguay’s measures enlarging health warnings on tobacco product packaging under the Switzerland-Uruguay bilateral investment treaty (BIT),¹³ and Philip Morris Asia (PMA) against Australia’s plain packaging law under the Australia-Hong Kong BIT.¹⁴ The claims, which are substantially similar in both cases, allege, inter alia, violations of provisions concerning expropriation of investments, and the fair and equitable treatment (FET) standard (WHO 2012: 61).
The broad definitions of investment under many IIAs, including most that India has signed, virtually guarantee that any foreign entity with a financial interest in the host state will have standing to bring a claim as an investor. In both the cases mentioned above, neither PMI nor PMA would have obtained standing to bring the claims except by restructuring the company to prove investment interests under favourable treaties. Australia pointed this out in its response to PMA’s notice, saying there could be no grounds for complaint when PMA’s “decision to acquire an indirect interest in the Australian subsidiary [was taken] after the Government had announced its decision to implement plain packaging, and then did exactly what it said it was going to do” (ibid: 61-62).
Fair and Equitable Treatment
The FET standard, which is a core feature of IIAs, usually implies a guarantee that the host state will act in good faith towards the investor, with procedural fairness, meeting the investor’s legitimate expectations, without engaging in discriminatory treatment (ibid: 59). Tribunals have considered in many cases what constitutes a violation of the FET standard. In Glamis Gold vs United States, for example, the tribunal found that “an act must be sufficiently egregious and shocking – a gross denial of justice, manifest arbitrariness, blatant unfairness, a complete lack of due process, evident discrimination, or a manifest lack of reasons – so as to fall below accepted international standards”.¹⁵
In his opinion piece on PMI’s claims against Uruguay, Todd Weiler (2010: 27) comments on the necessity of examining the regulatory context of investments. He observes that PMI could not legitimately hold an expectation to enjoy freedom from trademark regulation when Uruguay had been regulating tobacco since 1984, and also given that the tobacco industry is generally among the most highly regulated industries across the globe.
Similarly, in the Indian context, tobacco regulation has been a very high priority over the last decade, in keeping with obligations under the FCTC as well as COTPA. Prohibitions on the use of tobacco trademarks are already in place with reference to advertising, promotions and sponsorship. The guidelines to Articles 11 and 13 of the FCTC specifically recommend the adoption of plain packaging measures. These factors indeed show that companies cannot hold a legitimate expectation to enjoy the perpetual use of tobacco trademarks without regulation.
Expropriation
Expropriation provisions, another core feature of IIAs, may refer to direct expropriation, i e, when the legal title to property is taken; or indirect expropriation, where the legal title remains with the owner, but the owner is deprived of the meaningful use of the investment (Mitchell and Wurzberger 2011). Indirect expropriation is a controversial area of investor-state arbitration, because it brings under scrutiny otherwise valid regulatory measures that adversely affect investments, potentially causing them to be considered compensable expropriations. Plain packaging measures, for example, are a valid exercise of the regulatory authority of a state for the protection of public health, and do not affect legal titles to tobacco trademarks, but may face allegations of being expropriatory in that they deprive trademark owners of use of their investment.
One tribunal has observed that the exercise of a state’s regulatory power, which makes certain activities less profitable or even uneconomic to continue, would not necessarily amount to expropriation for that reason alone.¹⁶ This ruling is consistent with a long-established principle of international law that a state may exercise its sovereign police powers without having to compensate investors for expropriation, as long as the state’s conduct is not discriminatory or in bad faith. As a result, it has been observed that police powers may either “constitute an exception to the obligation to pay compensation, or that a legitimate exercise of police powers means that a measure is not expropriatory in character” (WHO 2012: 57).
Similarly, the tribunal in Methanex Corporation vs United States of America, held that regardless of adverse effects on foreign investment, the only circumstance in which non-discriminatory regulations, if enacted with procedural fairness and for a public purpose, could be deemed expropriatory and compensable was if “specific commitments had been given by the regulating government to the then putative foreign investor contemplating investment that the government would refrain from such regulation”.¹⁷ Without doubt, the Government of India has in no way given anything close to such commitments to the tobacco industry.
Conclusions
Tobacco plain packaging laws, which implement the guidelines to Articles 11 and 13 of the FCTC, may face legal opposition in India on grounds of, inter alia, alleged violations of international trademark law and IIAs. Plain packaging measures require prohibitions on the use of non-word marks on tobacco product packaging, and regulation of the use of word marks requiring use in a special manner. Both these effects are entirely compatible with India’s obligations under the TRIPS Agreement.
Further, the decision to enact plain packaging measures is well within India’s sovereign regulatory authority, despite the impact this may have on investors’ ability to enjoy the use of tobacco trademarks in India. Under well-established principles of international law, India will not be bound to compensate investors for losses resulting from plain packaging measures, as the measures at issue would be non-discriminatory, enacted in good faith and in pursuance of legitimate public health goals upheld in the FCTC.