South Africa: SA Heads for Trade Battles over Cigarette Law

Source from:  Business Day (za)  12/21/2012

SOUTH Africa could join countries hauled before the World Trade Organisation for violating international trade agreements if it follows Australia and introduces laws for cigarettes to be sold in plain packaging, a Johannesburg lawyer said on Wednesday.

Legislation that came into force in Australia on December 1, requires that cigarettes be sold in plain olive-green packaging featuring graphic images of smoking's health consequences. This has precipitated a WTO dispute.

Draft tobacco-related regulations released by Health Minister Aaron Motsoaledi in March did not touch on packaging, but the Department of Health wants to strengthen antismoking regulations and controls on packaging are one way, department spokesman Joe Maila said on Wednesday.

Australia, Norway, New Zealand and Uruguay are in a standoff with Honduras, Nicaragua, Zimbabwe, the Dominican Republic and Ukraine, which claim the regulations violate international intellectual property rights rules, said Edward Nathan Sonnenbergs' associate Rachel Sikwane.

The Dominican Republic has requested that the WTO establish a panel to rule on the dispute. The trade body has yet to give such a panel the go-ahead.

Ms Sikwane said it was "likely" that the argument from South Africa, if the country introduced similar regulations, would be along the same lines as Australia's.

"The tobacco companies are likely to argue that a law requiring them to use unbranded packs contravenes the constitution, which says that no one should be deprived of property, and that in the case of an expropriation, compensation must be paid."

The tobacco companies would argue such legislation was tantamount to expropriation because it prevented them from using their trademarks, and the law said if a registered trademark was not used for five years, it was vulnerable to cancellation, she said.

The Department of Health, however, is likely to argue that the right to health must supercede intellectual property rights.

Two international tobacco companies, JT International and British American Tobacco lost their legal challenge to the Australian legislation when the country's high court ruled it was origin-neutral, nondiscriminatory and was in line with the World Health Organisation's Framework Convention on Tobacco Control.

British American Tobacco South Africa spokeswoman Itumeleng Langeni said the company was "strongly opposed" to plain packaging because there was no proof it would discourage people from smoking, and because it would worsen an "already significant illicit tobacco trafficking problem".

British American Tobacco South Africa buys more than 60% of all locally grown tobacco and accounts for around 65% of the country's market share, according to ISI Emerging Markets.

The Australian rules allow no branding and require that all tobacco products be sold in identical packets, with health warnings covering 75% of the front and 90% of the back. New Zealand has indicated it will follow suit.

Meanwhile, British American Tobacco said it had acquired Manchester-based CN Creative, which makes an "electronic" cigarette that helps smokers to quit.

It said its core business would remain in tobacco, but the deal would provide its customers with a "safer alternative". Enditem