Philip Morris Brands Sàrl, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay (formerly FTR Holding SA, Philip Morris Products S.A. and Abal Hermanos S.A. v. Oriental Republic of Uruguay)

Case summary

At a glance

Parties: Philip Morris Brands Sàrl and Philip Morris Products S.A. (Switzerland), and Abal Hermanos S.A. (Uruguay), v. the Oriental Republic of Uruguay
Case no.: ICSID Case No. ARB/10/7 (formerly FTR Holding SA and others v. Uruguay)
Forum and rules: ICSID Convention arbitration
Treaty: Switzerland–Uruguay BIT of 7 October 1988
Tribunal: Prof. Piero Bernardini (President), Mr. Gary Born, Judge James Crawford
Sector: Tobacco; trademarks; public health regulation
Outcome: Claims dismissed (8 July 2016). Gary Born dissented on two issues.
Amount: Claimed: at least USD 22.267 million. Awarded: nothing. The claimants were ordered to pay USD 7 million towards Uruguay's costs, plus all the Tribunal's fees and ICSID's charges.

The dispute

Uruguay adopted two tobacco-control measures. The Single Presentation Requirement (Ordinance 514 of 18 August 2008) allowed only one variant per cigarette brand, so Abal stopped selling seven of its thirteen variants, among them Marlboro Gold, Blue and Green. The 80/80 Regulation (Decree 287 of 15 June 2009) enlarged the health warnings on the front and back of packs from 50% to 80%. Philip Morris argued that the measures expropriated its trademarks and goodwill, denied it fair and equitable treatment, impaired the use of its investment, breached an umbrella clause, and that Uruguay's courts had denied it justice.

Key holdings

Jurisdiction upheld. The Tribunal unanimously rejected Uruguay's objections and held that it also had jurisdiction over the later claim for denial of justice. Decision on Jurisdiction (2 July 2013), ¶ 236
Trademarks are property that can be expropriated. But under Uruguayan law and the international conventions it is party to, a trademark gives only an exclusive right to exclude others from the market, not an absolute right to use the mark free of regulation. Award, p. 83–84
No expropriation. The measures were a valid exercise of Uruguay's police powers to protect public health: they were adopted in good faith, were non-discriminatory, were proportionate, and were capable of contributing to their aim. Award, p. 95
No breach of fair and equitable treatment (Article 3(2)). Neither measure was arbitrary; the Tribunal noted the margin of appreciation that national regulators have in public-health matters. It upheld the Single Presentation Requirement by majority and the 80/80 Regulation unanimously. The claimants had no legitimate expectation that such measures would not be adopted. Award, pp. 119–133
The umbrella clause (Article 11) covers contract claims, but trademark registrations are not "commitments" within it. The impairment claim (Article 3(1)) failed for the same reasons as the fair and equitable treatment claim. Award, pp. 136–145
No denial of justice. The Tribunal held this by majority for the proceedings on the 80/80 Regulation; it also found none in the proceedings on the Single Presentation Requirement. Gary Born dissented on denial of justice and on the Single Presentation Requirement. Award, pp. 161–174; Born dissent
Costs follow the event, adjusted. The claimants pay USD 7 million of Uruguay's costs and all the Tribunal's fees and ICSID's charges (USD 1,485,714.08); otherwise each side bears its own costs. Award, operative part

Procedural history

19 February 2010Request for Arbitration filed. ICSID registers it on 26 March 2010.
2 July 2013Decision on Jurisdiction: the Tribunal affirms its jurisdiction.
February–March 2015The WHO and the WHO FCTC Secretariat (12 February 2015), and then PAHO (18 March 2015), are given leave to file non-disputing party (amicus) submissions.
19–29 October 2015Hearing on the merits in Washington, D.C.
8 July 2016Award: all claims dismissed, with Gary Born's concurring and dissenting opinion.
26 September 2016Decision on Rectification: minor corrections; most of the requested changes are refused, some by majority.

Tribunal, counsel and experts

Decided by: Piero Bernardini President — appointed by the institution
Gary B. Born Co-arbitrator — appointed by the claimant (Dissented in the Award; partial dissent on rectification decision)
James Crawford Co-arbitrator — appointed by the respondent
For the claimant: Sidley Austin LLP · LALIVE · Shook, Hardy & Bacon LLP
For the respondent: Foley Hoag LLP · Daniel M. Price PLLC
Experts: Carlos E. Delpiazzo (claimant) · Eduardo Jiménez de Aréchaga (respondent) · Daniel Hugo Martins (respondent) · Stuart Dekker (claimant) · Dushyant Ailani (claimant)