By Cecilia Olivet and Alberto Villareal and cross-posted from The Guardian
This month, campaigners celebrated the legal defeat of tobacco giant Philip Morris by Uruguay at the World Bank-hosted international centre for the settlement of investment disputes.
Philip Morris filed its controversial $25m (£19m) claim for damages at the World Bank arbitration court six years ago, saying it had “no choice but to litigate” due to Uruguay’s introduction of graphic warnings on cigarette packets. On 8 July, two of the three arbitrators ruled that Uruguay had the right to continue its anti-cigarette campaign, and that Philip Morris should reimburse $7m (£5.3m) in legal costs.
The David-Goliath battle between Uruguay and Philip Morris is an iconic case because it so clearly illustrates the way corporations can use international investment treaties to attack regulations made in the public interest.
So does Big Tobacco’s defeat by Uruguay mean that the growing public opposition to these investment treaties is mistaken? The corporate arbitration lawyers that take up many of the cases – and their supportive political allies – are keen to say that it proves the system can work fairly.
The question however is for whom is the system working? In investment arbitration cases, states never win. States can never file lawsuits against investors, so the best-case scenario for them is if the tribunal dismisses the investor’s accusations.
In this case, although Philip Morris was required to contribute $7m for legal costs, Uruguay will still have to pay a further $2.6m in financial costs and much more in terms of the non-material resources it has taken to fight this…