Uruguay’s Legal Victory May Re-Ignite Global Fight against Big Tobacco

Issue 28, Winter/Spring 2016

International court upholds tiny South American country’s efforts to curb smoking

It’s a true David-and-Goliath story: Uruguay, a South American nation with a population of less than 4 million, has been successful in beating back a legal challenge to its anti-smoking laws launched by one of the world’s biggest tobacco companies.

In July, the independent World Bank court known as the International Center for Settlement of Investment Disputes, settled in favor of Uruguay continuing its aggressive anti-smoking efforts.

The plaintiff in the case, tobacco behemoth Philip Morris International, not only lost the case but has been ordered by the court to pay Uruguay about $7 million in legal fees, Bloomberg reported.

The victory is seen as a watershed moment in the growing fight between nations bent on lowering smoking rates and the companies that market tobacco to their citizens.

After the unanimous decision from the court in favor of Uruguay, “I got phone calls from everywhere,” said Eduardo Bianco, a cardiologist in Uruguay who is also president of the Tobacco Epidemic Research Center, an anti-smoking organization.

He told Bloomberg that, as a result of the July decision, “We are almost certainly going to be seeing other countries taking more aggressive measures to protect public health.”

The story began in the mid-2000s, when Uruguay’s then-president Dr. Tabare Vazquez – an oncologist – banned smoking in public and also ordered that half of the area of cigarette packs be covered with health warnings. Those warnings included gruesome images of victims of cancer and other smoking-linked illnesses.

Vazquez  left office in 2010, but not before extending those warnings to cover 80 percent of the front and back of each cigarette pack, and mandating that tobacco companies only use one packaging design for all their brands.

Tobacco taxes are also high, comprising two-thirds of the average cost of a pack of cigarettes.

All of these anti-smoking efforts seem to have paid off: Adult smoking rates in Uruguay dropped from 32 percent in 2006 to 22 percent in 2013, Bianco told Bloomberg, and smoking rates for teens plunged even more dramatically.

None of this happened without a fight from Big Tobacco, however.

Phillip Morris brought its claim to the World Bank court, saying that Uruguay’s new rules infringed on the company’s intellectual property rights and curtailed competition. The company also made the claim that anti-smoking efforts like those made by Vazquez’ government don’t work, and only encourage a black market in cigarettes. Phillip Morris asked for $25 million in damages.

As the court battle dragged on, Uruguay elected a new president in 2010 – a heavy smoker and ex-guerrilla fighter, Jose Mujica.  According to Bloomberg, Mujica upheld his predecessor’s anti-smoking initiatives, saying tobacco products required regulation.

Mujica’s term ended in 2015 and Vazquez was returned to office as president.

Experts believe that Uruguay’s legal win has implications that extend far beyond the small country’s borders.

Paul Reichler was lead counsel for Uruguay in the World Bank arbitration. He believes that Philip Morris launched the suit to send a message to other countries that efforts to curb smoking could be very costly.

“If a state knows it could cost tens of millions of dollars to pursue a case, and then possibly pay hundreds of millions of dollars [in] damages, clearly it’s going to think twice about taking legal action,” he told Bloomberg. “This was typical intimidation.”

Instead, experts say, Uruguay’s victory may now boost efforts in countries worldwide that are mulling actions similar to those carried out in Uruguay.

However, even Uruguay has a long way to go to cut smoking rates.

As reported by Bloomberg, Euromonitor – a group that tracks global tobacco markets – reported that cigarette sales actually rose by 8 percent in Uruguay between 2010 and 2014. Anti-smoking advocates believe that even though more Uruguayans are quitting the habit, smokers who remain may be smoking more intensely.