However, the expert warned about the dangers of signing investment protection treaties. The one signed between Uruguay and Switzerland gave Philip Morris ground to file a lawsuit against Uruguay in the first place. Often times these treaties are signed without assessing their impacts under the pretext that they attract investment, something that has yet to be proven, said Correa on Thursday, at a workshop for journalists called “Philip Morris’s lawsuit against Uruguay: background and potential consequences of investment treaties”, organized by REDES-Friends of the Earth Uruguay.

Correa and German Velazquez spoke at the event. They are both researchers with the South Centre, an intergovernmental organization of developing countries based in Geneva (Switzerland). Real World Radio was there. On Thursday evening FESUR joined REDES-FoE to organize a public event under the same name.

Tabare Vazquez administration (2005-2009) passed several health policies aimed at lowering tobacco use in Uruguay. Some of the measures included preventing tobacco companies from selling the same brand of cigarettes under different presentations and that a warning about the risk entailed by smoking should be included in 80% of the pack of cigarettes on both sides.

Philip Morris argued that these policies damaged their interests and violated their intellectual property rights. They claimed that the government indirectly expropriated their investment without paying a compensation. For this reason, in 2010 the company filed a lawsuit against the Uruguayan state before the International Center for Settlement of Investment Disputes (ICSID), a World Bank tribunal. The company based the suit on the investment protection treaty signed between Uruguay and Switzerland, where the company’s headquarters are. The trial is ongoing.

During the workshop on July 26, Correa warned that ICSID usually rules in favor of investors because it is tasked with defending their interests. Argentina has a “long experience of adverse rulings from ICSID”.

The lawyer of the South Centre focused his presentation on a summary of Uruguay’s legal defense in the case against Philip Morris. The defense “is based on ICSID’s lack of competence” to decide on this case.

The first argument of Uruguay’s defense is that Philip Morris failed to comply with the dispute procedure established under the investment treaty between Uruguay and Switzerland. The agreement explains that there should first be a “phase of friendly discussion of the controversy” and then, in case this fails, the investor may resort to national tribunals of the country where it invested. Philip Morris skipped these first steps and went directly to ICSID. “The argument of the Uruguayan government has grounds and it is reasonable so it should be considered by the arbitration tribunal”, said Correa.

The second argument is based on competence. “There is an interesting provision in the investment treaty, according to which the parties recognize the right of the other of not allowing economic activities for reasons of public health”, said the lawyer. “This is an exception to the investors’ rights”. This poses a question of competence: “Is an arbitration court able to dismiss a measure adopted by a State for public health reasons when there is an express rule in the investment treaty that says that if the measure obeys those reasons it is not within the agreement’s jurisdiction?”. It is a clear clause in the agreement between Uruguay and Switzerland that is not very usual in investment treaties. “It would seem that in this case there is also a strong argument from Uruguay to say that it is not something that can be taken to court”, said Correa.

The third argument put forward by Uruguay poses the dilemma of what investments may be protected under investment treaties. The lawyers suggest that in order to protect an investment it should have a certain positive effect in the country’s territory. “In this case what is being argued is that the costs linked with the habit of smoking are bigger than the benefit from the selling of cigarettes”, said Correa. Uruguay’s argument claims that Philip Morris’s investment is therefore not liable to protection.

From 2004 to 2009 the Uruguayan state spent 700 million USD on the treatment of people with smoking-related diseases, according to Alberto Villarreal, of REDES – FoE. Nearly 5,000 people die every year of such diseases.

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