TWN Info Service on WTO and Trade Issues (Apr12/03)
2 April 2012
Third World Network

Ukraine initiates dispute over Australia's packaging bill
Published in Published in SUNS #7332 dated 19 March 2012

Geneva, 16 Mar (Kanaga Raja) -- Australia's plain packaging bill for tobacco products has come up for challenge at the World Trade Organisation (WTO), with Ukraine initiating a dispute this week over this issue.

A "request for consultations", the first step in the dispute, was filed by Ukraine at the WTO on 13 March.

Under the dispute settlement procedures, Australia is obliged to reply to the Ukrainian request within ten days of receipt of the request and shall enter into consultations within a period of no more than 30 days after the date of receipt of the request.

If the consultations fail to settle the dispute within 60 days after the date of receipt of the request for consultations, Ukraine may request the establishment of a panel.

The Australian legislation on plain packaging for tobacco products had come up for discussion last year at both the TRIPS Council and the Committee on Technical Barriers to Trade (TBT).

The Australian legislation was again discussed at a meeting of the TRIPS Council this February, with the Dominican Republic, Cuba, El Salvador, Honduras, Ukraine, Chile, Zimbabwe and Mexico voicing concerns about the compatibility of the Australian measure with the TRIPS Agreement.

At that meeting, Australia had defended its measure as being in the interest of public health, and that this was based on a broad range of studies and was supported by public health advocates. Norway, New Zealand and Canada had expressed general support for Australia. (See SUNS #7323 dated 6 March 2012.)

According to the official request for consultations, made public on the WTO website a few days after Ukraine had filed its dispute, Ukraine said that its authorities had instructed it to request consultations with the Government of Australia "concerning certain Australian laws and regulations that impose trademark restrictions and other plain packaging requirements on tobacco products and packaging".

According to Ukraine, Australia's measures impose significant trademark restrictions and other so-called "plain packaging" requirements regarding the appearance and packaging of tobacco products.

The challenged measures are contained in the Tobacco Plain Packaging Act 2011 and its implementing Tobacco Plain Packaging Regulations 2011; the Trade Marks Amendment (Tobacco Plain Packaging) Act 2011; and any further implementing regulations and related acts, policies, or practices adopted by Australia that guide, amend, supplement, replace, and/or implement the above mentioned measures.

The Ukrainian request for consultations said that the measures are applicable to all tobacco products grown or manufactured for human consumption.

It further said that they impose criminal penalties for virtually any action, including manufacture, supply, or packaging of tobacco products, that is not in compliance with the "tobacco product requirements" of the Plain Packaging Act and its implementing Regulations.

According to Ukraine, the Plain Packaging Act provides that "[n]o trade mark may appear anywhere on a tobacco product" other than as permitted by the Regulations.

The Plain Packaging Act further provides, inter alia, that "[n]o trade mark may appear anywhere on the retail packaging of tobacco products," other than the brand name, variant, business or company name and other relevant legislative requirements.

The appearance of the brand name is regulated by the Plain Packaging Act and the implementing Regulations.

Ukraine noted that the Plain Packaging Act further requires that tobacco product packages be "drab dark brown" (specified as Pantone 448C in the Regulations) in a matte finish, with no other colours, logos, or brand features visible on the package, other than the brand and variant name in a standard form and font below the graphic health warning.

Tobacco product packaging will continue to contain graphic health warnings, which are increasing from 30 percent to 75 percent of the front surface of each package and continue to cover 90 percent of the back surface of the package.

Ukraine further noted that the Plain Packaging Act and its implementing Regulations also regulate the physical features of retail tobacco packaging, imposing a standard form on the type and size of the package to be used.

The Plain Packaging Act provides that cigarette packs and cartons must have a standardized shape with no decorative elements, and that cigarette packs must have flip-top openings. The lining of cigarette packs must only be foil backed with paper, or a material allowed by the Regulations.

According to the Ukrainian request for consultations, Australia's measures, especially viewed in the context of Australia's comprehensive tobacco regulatory regime, appear to be inconsistent with a number of Australia's obligations under the TRIPS Agreement, the TBT (Technical Barriers to Trade) Agreement, and GATT 1994, including but not limited to the following provisions of these agreements:

-- Articles 1.1, 2.1, 15, and 16 of the TRIPS Agreement and Articles 6quinquies, 7, and 10bis of the Paris Convention as incorporated in the TRIPS Agreement because the measures, which discriminate against tobacco-related trademarks based on the nature of the product, fail to give effect to the trademark holder's legitimate rights with respect to the trademark, fail to accord effective protection of the trademark "as is," and fail to prevent acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor;

-- Article 20 of the TRIPS Agreement because the measures constitute an unjustifiable encumbrance on the use of trademarks;

-- Article 1 of the TRIPS Agreement because Australia has failed to give effect to Article 20 of the TRIPS Agreement in Australia's domestic laws and regulations;

-- Article 27 of the TRIPS Agreement because by regulating the physical features of the patented packs, the measures prevent the normal exploitation and thus the enjoyment of the patent rights for tobacco products in a manner that discriminates based on the field of technology;

-- Article 2.2 of the TBT Agreement because the measures constitute an unnecessary obstacle to trade and are more trade restrictive than necessary to achieve the stated health objectives; and

-- Article III: 4 of the GATT 1994, Article 3.1 of the TRIPS Agreement, and Article 2.1 of the TBT Agreement because the measures fail to respect the national treatment requirement set out in these provisions by not providing equal competitive opportunities to imported tobacco products and foreign trademark right holders as compared to like domestic tobacco products and trademark right holders.

Ukraine underlined that these violations nullify or impair the benefits accruing to it under the aforementioned Agreements. +