Canada: An Update On Plain Packaging For Tobacco Products

Last Updated: July 25 2018
Article by John McKeown

Since the publication of our previous articles concerning plain packaging there have been a number of interesting developments. To view our previous articles click the following links:

Plain Packaging for Tobacco Products

Smoke Screen: Is Tobacco Plain Packaging Legislation a Control of Use or a Deprivation of the Right to Use a Mark? What is the Nature of a Trademark?

The Background

The Framework Convention on Tobacco Control (FCTC) is an international treaty negotiated under the World Health Organization. It is one of the most widely embraced treaties in the history of the UN. There are currently 180 parties to the Convention. The FCTC requires parties to the Convention to adopt a series of mandatory tobacco control measures, and recommends that the parties take further action when possible. One such recommended measure is the implementation of plain or standardized packaging of tobacco.

Countries that have Implemented Plain Packaging for Tobacco Products

All member states of the European Union and the EU itself have signed the FCTC. The treaty was adopted into the EU legislation in 2014. To date France, Hungary, Ireland, Romania, the Republic Of Slovenia and the United Kingdom have implemented specific legislation. Non EU countries Norway and Turkey have also implemented plain packaging.

Chile and Uruguay have implemented plain packaging as have Australia and New Zealand.

In Canada on May 16, 2018, the Government passed an Act to Amend the Tobacco Act and the Non-smoker's Health Act, which permits Health Canada to mandate plain packaging for cigarettes, amongst other changes. The Act does not specify how plain packaging should be imposed, but Health Canada has stated that it will "provide ... a range of options such as standardized colour, font and finish, and prohibitions on promotional information and brand elements, such as logos."

Many other countries are in the process of implementing laws to require plain packaging or examining the issues.

Legal Challenges

Countries that have implemented plain packaging legislation have been subject to proceedings brought by tobacco companies, including international investor-state challenges as a result of the alleged devaluation of intellectual property. To date the tobacco companies have been unsuccessful in all of the proceedings but until very recently a significant proceeding has been outstanding and unresolved.

WTO Dispute 435

Resolving trade disputes is one of the core activities of the WTO. A dispute arises when a member government believes another member government is violating an agreement or a commitment that it has made in the WTO. A ruling is made by a panel and endorsed (or rejected) by the WTO's full membership. An appeal to the Appellate Body based on points of law is possible.

In this proceeding Honduras, the Dominican Republic, Cuba, Indonesia (the Complainants) lodged a complaint with the WTO concerning Australia's legislation implementing tobacco plain packaging (the TPP measures). Argentina, Brazil, Canada, China, the European Union, Japan, the Republic of Korea, Malawi, New Zealand, Nicaragua, Norway, Oman, Singapore, South Africa, Turkey, Uruguay, Zambia, Zimbabwe, Chile, Ecuador, Egypt, India, Malaysia, Mexico, Panama, the Russian Federation, the Kingdom of Saudi Arabia, Trinidad and Tobago, the United States, Guatemala, Nigeria, Peru, the Philippines, Chinese Taipei, Thailand and Ukraine were third parties to the proceeding.

After a lengthy period of deliberation the Panel delivered a report of more than 800 pages which dismissed all of the Complainants' submissions.

The first series of arguments alleged the TPP measures violated the Agreement on Technical Barriers to Trade. The Panel concluded that the TPP measures were not more trade restrictive than necessary to fulfil its legitimate objective of protecting public health. The Panel considered the impact of the TPP measures on the appeal of tobacco products to consumers, on the effectiveness of graphic health warnings and on the ability of the package to mislead consumers about the harmful effects of smoking. In addition, the Complainants failed to demonstrate that there were alternatives to the TPP measures that were less restrictive and would make an equivalent contribution to the objective.

The second series of arguments alleged the TPP measures violated the Agreement on Trade-Related Aspects of Intellectual Property Rights. The Panel disagreed and concluded that the TPP measures:

  • were consistent with Australia's obligations to protect trademarks and the obligation to protect against unfair competition provided by Article 10bis of the Paris Convention (1967);
  • did not constitute an "obstacle" to the registration of a trademark;
  • did not interfere with the exclusive right to prevent using a trademark where such use would result in a likelihood of confusion;
  • were consistent with the obligations relating to protecting well-known marks as the Article did not oblige Members to ensure that private parties are in a position to retain their well-known trademark status;
  • while imposing special requirements that encumbered the use of trademarks, were nonetheless enacted within the latitude that Members have to implement measures to protect public health;
  • did not amount to "unfair competition" with respect to geographical indications (GIs) or diminish the protections available to GIs that existed under Australia's national law prior to the date of entry of the WTO Agreement.

Finally, concerning compliance with Article IX:4 of the General Agreement on Tariffs and Trade 1994, the Panel concluded that the limitations on the use of the Cuban Habanos sign and the Cuban Government Warranty Seal did not constitute the "marking of imported products" as covered by Article IX:4. Further, the Panel found that the TPP measures did not reduce the value of the product in a "material degree" and that the GATT was not concerned with safeguarding price premiums that the use of origin-related signs may accord to imported products.

It is possible to appeal this decision to the Appellate Body, a standing body of seven persons that hear appeals from reports issued by panels in disputes brought by WTO Members. To date Honduras has indicated that an appeal will be made to the Appellate Body.

Comment

It remains to be seen what effect the WTO decision will have on the implementation of tobacco plain packaging. Leaving aside any possible appeal from the decision the scope of further attacks by tobacco companies is becoming limited as a result of this decision and other more specific decisions. However, in Canada and the US past challenges by tobacco companies have been based on alleged interference with freedom of expression, which to date has not been directly considered for plain packaging.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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