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Uruguay: Arbitration Panel Affirms Enforcement of Anti-Tobacco Legislation

(Aug. 26, 2016) On July 8, 2016, an International Centre for Settlement of Investment Disputes (ICSID) arbitration panel, meeting in Washington, D.C., decided an arbitration case filed by Philip Morris International (PMI) against the government of Uruguay in which PMI sought compensation for economic damages as a result of Uruguay’s enforcement of its anti-tobacco laws. (El Estado de Uruguay Ganó el Juicio que le Inició Philip Morris por su Política Antitabaco, INFOBAE (July 8, 2016).)

Through Decree 268/2005, Uruguay became the first country in the world to impose a ban on smoking in public spaces. (Decreto 268/2005 Se eliminan “Areas de Fumadores” en Restaurantes, Bares y Lugares de esparcimiento, Ministerio de Salud Pública, Ministerio de Educación y Cultura, Ministerio de Vivienda, Ordenamiento Territorial y Medio Ambiente (Sept. 5, 2005) NORMATIVA Y AVISOS LEGALES DEL URUGUAY.) Uruguay has also raised taxes on tobacco products and required businesses to include warning signs and graphic images, including the depiction of diseased lungs and rotting teeth, on cigarette packages. In addition, it has banned the use of the words “light” and “mild” from cigarette packaging in order to discourage smokers from believing that smoking those cigarettes is less harmful to one’s health. (Ley Nº 18.256 Control del Tabaquismo, (Mar. 10, 2008) NORMATIVA Y AVISOS LEGALES DEL URUGUAY.)

PMI had argued that Uruguay’s measures violated a bilateral investment treaty between Uruguay and Switzerland, but the ICSID rejected this argument.  According to President Tabaré Vazquez, the adoption of health protection measures aimed at regulating tobacco use and protecting Uruguayan people’s health has been recognized by the ICSID decision as the exercise of the legitimate power of a sovereign country to adopt measures safeguarding public health. (El Estado de Uruguay Ganó el Juicio que le Inició Philip Morris por su Política Antitabaco, supra.)

In its July 8, 2016 decision, the ICSID dismissed PMI’s demand for smoking regulations to be repealed or not to be applied to the PMI, or, as a last resort, for compensation for damages to be paid to the company in the amount of 22 million dollars. Instead, the ICSID ordered PMI to pay Uruguay seven million dollars as a refund for legal fees arising from the litigation. (Id.)