Implications of Free Trade &
Investment Agreements (FTIAs)
for NZ’s Smokefree 2025 Policies
Professor Jane Kelsey, School of Law, The University
of Auckland, NZ
Focus of this presentation
1. Background to the report
2. Key observations
3. Example of Australia’s plain packaging law
4. Tobacco issues in the Trans-Pacific
Partnership Agreement negotiations
9 August 2012
Background
• Maori Affairs Committee 2010 – FTIA issues invisible
• Cabinet papers & RIA – minimal FTIA content redacted
• Tobacco industry pressure raised profile of issue
• Complex and secretive area
Report International Trade Law & Tobacco Control
aims to identify legal pressure points, legal risks and
chilling effect from current and proposed FTIAs
9 August 2012
Key observations (i)
• Smokefree goal needs more assertive policies
• Long phase-in has less legal risk, but not by 2025
• Industry will challenge most potent, most vigorously
• Uses legal arguments & disputes tactically to ‘chill’
• Industry helps countries fund WTO disputes
• WTO issues involve in goods, services, TBT, IP
• Interpretation of WTO public health exception is
improving, but rarely succeeds as a defence
9 August 2012
Key observations (ii)
• Tobacco companies (esp PMI) aggressively using
investor-state dispute powers in FTIAs
• Unpredictable, lengthy and invisible process
• Legal costs average $8m, sometimes $50m
• ISDS disputes aim to chill and deter 3rd countries
• NZ has 6 agreements with ISDS
• New ‘comfort’ language does not protect public policy
• New NZ FTIAs must be consistent with FCTC
• Deeper and more extensive obligations increase risk
9 August 2012
Australia’s plain packaging law
3 legal challenges
(i)4 tobacco companies
constitutional challenge in Australian courts
allege ‘taking of property’ (trademark)
based on Australian law
case has been heard
decision awaited
9 August 2012
World Trade Organization dispute
Brought by Ukraine, Honduras, Dominican Republic, maybe others
Legal support from PMI and BAT
Alleges breach of
• intellectual property rights (trademark, goodwill)
• technical barriers to trade (not evidence based or least
burdensome option to achieve goal)
NZ joined as third party
Uneven WTO jurisprudence
Australia & NZ oppose Thai alcohol labels on same basis
Successful dispute means Aust must withdraw measure or face
trade sanctions
9 August 2012
Investor-state dispute
Philip Morris Asia launched dispute under Australia Hong Kong
bilateral investment treaty
Changed ownership of PM Australia to take advantage of treaty
Alleges breach of
– fair and equitable treatment
– security and protection of investment
– indirect expropriation
Likely to rely on OIA, RIA, political statement & industry reports
Private hearing, in Singapore, tribunal just appointed
Ad hoc process, reasoning & outcomes unpredictable, no appeal
Potentially large award of damages unless policy is reversed
9 August 2012
Tobacco & the TPPA
9 country negotiation of ‘21st century’ FTIA
US: Industry & tobacco states v tobacco control lobby
USTR proposes middle ground ‘tobacco exception’
(i) defence against complaints adapts current exception
(ii) only regulation by delegated agency, not legislation
(iii) not apply to investment rules
Not tabled cos tobacco industry kickback
Concern that implies existing exception inadequate
9 August 2012
Exception not address A/NZ concerns
Exception does not apply to investment rules
Australia opposes any ISDS powers in TPPA
US proposes more extensive IP rules, benefit tobacco
Transparency & regulatory coherence chapters give
rights for industry to influence domestic decisions,
contrary to FCTC Art 5.3
Tobacco carveout not address other NCDs
NZ must ensure new treaties are FCTC compatible
9 August 2012
Final observations
Governments have the right to regulate tobacco
as they see fit in the public interest
But potential collisions with FTIAs
Compatibility issues with Australia under TTMRA
No tidy solution to competing priorities
Expect enormous pressure & public campaigns
by industry
9 August 2012
Smokefree by 2025 will require
 Awareness and assessment of arguments
 Commitment to policies
 Strategic decisions about which fights to pick
 Political will following Australia’s example
9 August 2012