Do new smoking regulations breach WTO law?

Delroy Beckford, Guest columnist

The new smoking regulations have generated much discussion about the uncertainty of where smoking is allowed, whether the regulations are draconian, and also whether there was sufficient consultation with stakeholders prior to their promulgation.

Perhaps in response to these criticisms and misgivings, and further consultation, Health Minister Dr Fenton Ferguson is reported recently as considering amendments to the 'Smoking Ban Regulations'.

The issues generated by the regulations are relevant not only in the domestic context but also in relation to international obligations. Similar smoking regulations have been the subject of World Trade Organisation (WTO) disputes and complaints by WTO members, prompting countries intending to introduce such legislation to ensure the consistency of such regulations with their multilateral obligations.

Some cigarette-producing countries likely to be impacted by plain packaging legislation in Australia, for example, have lodged complaints to the WTO and, in other instances, their domestic producers have sought to challenge such legislation under domestic constitutional law or under bilateral investment treaty provisions.

With the advent of the WTO, domestic legislation is now subject to more scrutiny because of members' obligation to ensure that new legislation or amendments are consistent with WTO obligations.

Pursuant to Article XVI: 4 of the WTO Agreement, for example, members are enjoined to implement their WTO obligations in good faith and to 'ensure the conformity of its laws, regulations and administrative procedures with its obligations as provided in the annexed agreements'.

To be sure, the Public Health (Tobacco Control) Regulations 2013 are seemingly intended to be consistent with international obligations, in particular the Framework Convention on Tobacco Control under the auspices of the World Health Organisation (WHO), which, among other things, provides for plain packaging and the use of graphic labelling to highlight the harmful effects of tobacco.

Of concern to cigarette companies is any labelling obligation which would affect their intellectual property rights, for example, the requirement that health warnings be of a certain font or size that would reduce the space on the package devoted to promotional usage for logos, colours and brand images.

This concern is likely to fall within Article 20 of the WTO TRIPS Agreement. Article 20 provides as follows:

"The use of a trademark in the course of trade shall not be unjustifiably encumbered by special requirements, such as use with another trademark, use in a special form or use in a manner detrimental to its capability to distinguish the goods or services of one undertaking from those of other undertakings. This will not preclude a requirement prescribing the use of the trademark identifying the undertaking producing the goods or services along with, but without linking it to, the trademark distinguishing the specific goods or services in question of that undertaking."

The three special requirements mentioned are illustrative and not exhaustive, and the provision may thus be read to cover special requirements, including the limited designated space on the package to be devoted to the manufacturer's brand images, whether this may be seen as a requirement for use in a 'special form' as one of the examples already covered.

The TRIPS Agreement provides a justification for such measures on public-health grounds, but the extent of this public health flexibility is unclear. Guidance from the public health exception under GATT is somewhat informative. It exempts measures "necessary to protect human, animal or plant life or health". Seemingly, the 'necessity' test under GATT involves a more stringent requirement than the 'justifiability' test under the TRIPS Agreement.

Under either test, WTO members would certainly have the right to determine the level of protection of health that they consider appropriate in a given situation, but this has to be balanced against the necessity of the measure in terms of its trade restrictiveness.

AGREEMENT OF TECHNICAL BARRIERS TO TRADE

The nature of the Public Health (Tobacco Control) Regulations 2013 also makes it likely to be challenged under other provisions of the WTO Agreement, including the Agreement on Technical Barriers to Trade (TBT).

Doubtless, the tobacco regulations, which govern packaging and mandatory labelling requirements, may be classified as technical regulations under the TBT Agreement defined as:

"Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method."

Two obligations under the TBT Agreement are worthy of note, namely, the duty to consult WTO members on the proposed technical regulation, except in cases of urgency in addressing the objective being pursued; and the duty to permit WTO members a reasonable interval between publication of the regulation and its implementation or entry into force.

The duty to consult arises if the technical regulation is not based on an international standard or the content of the technical regulation is not in accordance with the technical content of relevant international standards, and the technical regulation may have a significant impact on the trade of WTO members.

Treating the Framework Convention on Tobacco Control as a relevant international standard, it would seem that a duty to consult other WTO members does not arise before promulgation of the regulation. The Public Health (Tobacco Control) Regulations 2013, however, does not make reference to the Framework Convention on Tobacco Control as a (or the) relevant international standard for the content of the technical regulation.

This is not to suggest that the absence of a reference to the convention is dispositive on the issue of whether the duty to consult is violated under the TBT Agreement if, for example, the legislative history of the regulation to be gathered from the Hansard reports indicates that the convention is the relevant international standard.

In circumstances whereby the regulations are promulgated without any debate in Parliament to be included in a Hansard report indicating the relevant international standard, the burden then rests on a country to justify that its technical regulation is in accordance with an international standard to avoid being in breach of the TBT Agreement, specifically the obligations to publish a notice of the proposed regulation before promulgation and to consult with other WTO members before promulgation of the regulation.

Legitimate Objectives and Trade Restrictiveness

The TBT Agreement also prohibits technical regulations that are "more trade-restrictive than necessary to fulfil a legitimate objective, taking account of the risks non-fulfilment would create".

No issue may seriously be taken on whether the regulation is designed to fulfil a legitimate objective such as the protection of human health or safety. However, legitimate objectives aside, the regulation can nonetheless run afoul of WTO law if it is more trade restrictive than necessary.

If there is a less trade-restrictive means to attain the objective, the regulation is in breach of WTO rules. In the recent US-Tuna II decision, the appellate body considered as relevant the following factors in determining whether a technical regulation is more trade restrictive than necessary.

1. There is an alternative measure capable of meeting the objective pursued;

2. The alternative measure is reasonably available; and

3. The alternative measure is less trade restrictive than the challenged measure.

The appellate body has made clear that a technical regulation does not violate the TBT Agreement just by being trade restrictive. In other words, a technical regulation can be trade restrictive if it is in pursuit of a legitimate objective, but the trade restriction should not be unnecessary.

The appellate body did not clarify the meaning of 'reasonably available' less trade-restrictive alternative in interpreting the TBT Agreement, but if guidance is to be sought from the interpretation of other agreements, a reasonably available alternative exists when it is economically feasible and can accomplish the same levels of protection as the measure subject to challenge.

Of course, a WTO member imposing a measure is under no obligation to prove that its measure is the least trade restrictive among several options it considered before imposition of the measure, but it is nonetheless prudent to consider probable arguments proposing a less trade-restrictive alternative to pre-empt, effectively, any likely WTO challenge.

And, of course, even if there is no violation of a WTO Agreement per se, a non-violation complaint may be brought whereby the claim alleges a nullification or impairment of benefits conferred under an agreement or that the objective of the agreement has been frustrated.

Such complaints are not yet available under the TRIPS Agreement and there is little success to date of such claims under GATT 1994, partly because of the fact that many complaints are in the main violation complaints and, where non-violation and violation claims are simultaneously made against the measure at issue, a WTO panel usually rules on the non-violation claim if it has ruled against the claimant on the violation claim.

Nonetheless, the WTO is not averse to considering such claims in appropriate circumstances, and it may be that this is not to be overlooked as a possibility with other likely claims as are now being made before the WTO regarding similar legislation.

Dr Delroy S. Beckford, an attorney-at-law, is adjunct senior lecturer, international trade law, at the Faculty of Law, UWI, Mona, and author of 'Power and Judicial Activism in the WTO: The Appellate Body's Interpretation of Trade Remedy Agreements'. Email feedback to columns@gleanerjm.com and delroy.beckford@gmail.com.