Political Hurdles for International Trade Deals Promote Transparency; Proliferation of Plain Packaging Laws and Associated Disputes

In the last few months there have been several key developments in international economic law:

  • The passage of both the Trans-Pacific Partnership (TTP) and Transatlantic Trade and Investment Partnership (TTIP) has been delayed due to political hurdles between the EU and the US. Local debate in the EU and US as to the benefits and costs of investor-state dispute settlement procedures (ISDS) has also arisen. While the US Congress has passed legislation to assist their adoption of the TPP, the current European political climate has made the future direction of ISDS in the EU unclear; and
  • Norway has announced it will implement standardised cigarette packaging while major tobacco companies have challenged UK plain packaging laws.

Political hurdles for the TTP lifted

After hitting repeated stumbling blocks in US Congress, the Trade Promotion Authority legislation (TPA legislation) eventually made headway. On 25 June 2015, the US Senate approved the TPA legislation and on 29 June the US President signed it into law.

The TPA legislation grants President Obama the power to submit completed trade agreements to Congress for a straight up-or-down vote without the possibility of amendment. The legislation was approved in the Senate late last month, following a debate as to the merits of ISDS.

On the international front, there have been ongoing negotiations in areas of trade and investment, particularly with respect to market access and intellectual property.

The previous ministerial level meetings of TPP member countries were postponed, reportedly due to the TPA legislation not being in place. However, negotiators did meet in Guam to discuss issues of intellectual property, textiles, investment and labour. It is anticipated that the passage of the TPA legislation will facilitate the resolution of the remaining contentious issues in the TPP negotiations, which include tariffs and quota removal on agriculture, with non-tariff barrier reductions on other goods.

While major US labour unions have lobbied against both the TPA legislation and the TPP on the basis that American workers would be detrimentally affected (by, for example, displacing local manufacturing and service sector jobs), business organisations have identified the trade deal as important in ‘levelling the playing field‘ for American businesses.

Political hurdles for the TTIP and ISDS

The European Parliament’s international trade committee (INTA) has outlined a series of recommendations in support of the TTIP’s trade and investment agenda, but the EU’s preferred format of the ISDS mechanism that it will formally propose to the US is far from clear. This follows the EU’s suspension of TTIP trade talks in early 2014 for the purpose of holding public consultations that were prompted by the ‘unprecedented public interest‘ in the negotiations.

INTA has proposed an independent arbitration court with publicly appointed judges and an appellate mechanism. This model is based on proposals from the EU Commission that were released in early May 2015.

The Commission’s proposals addressed the relationship between ISDS and domestic courts, including:

  • the right to regulate in the public interest; and
  • improving the function of arbitral tribunals through, for example, a permanent multilateral court and appellate mechanism to arbitrate investment disputes.

These proposals were based on the ISDS mechanism contained in a trade agreement negotiated between the EU and Canada (CETA) last year. The EU Commission has stated that the CETA ISDS is both innovative in its substance and procedure.

INTA made further recommendations on investment protection provisions, which were reportedly the result of a compromise between the European Parliament’s two largest groups, the Socialists & Democrats and the European People’s Party.  INTA’s recommendations are not binding, but are indicative of whether any agreement would be approved before a full session of the European Parliament.

Tobacco plain packaging

Developments have arisen in the sphere of tobacco plain packaging disputes. In its WTO claim against Australia, Ukraine made a request to suspend proceedings. Australia has supported this request. Ukraine based its decision to suspend its action on limited resources as well as absent ‘economic logic’. Whilst it is not clear how long the suspension will last, under the Dispute Settlement Understanding, Ukraine is allowed up to 12 months before the WTO Panel’s authority will lapse.

Meanwhile, Norway issued a notification under the WTO Technical Barriers on Trade Agreement, that it is proposing a requirement for all tobacco products to be sold in standardised packaging. Norway explained that the proposal will involve ‘uniform layout and design on all tobacco packaging, as well as a ban on manufacturers’ logos, trademarks, images, colours or other forms of advertising’. It is not clear when the new requirements will enter into force.

In the UK, tobacco companies British American Tobacco and Philip Morris have challenged the legality, under both English and EU law, of the UK’s plain packaging laws before the High Court. It is argued that the laws deprive the tobacco companies of trademark rights without fair compensation as well as preventing the free movement of goods.

In a press release, British American noted that it ‘did not ultimately prevail’ in its challenge against Australia’s plain packaging laws in the High Court owing to a ‘unique requirement in the Australian constitution that meant it would only win the case if it could prove the Australian Government had received a benefit by removing its brands’. British American stated that no such requirement exists in the UK.

Kyle Dickson-Smith, FCIArb. is an international lawyer and arbitration counsel at Appleton & Associates International Lawyers, who specialises in trade law and investment treaty disputes, such as the NAFTA. The views expressed in this article are those of Kyle Dickson-Smith and are not attributable to Appleton & Associates.