Plain packaging and indirect expropriation of trademark rights under BITs: does FCTC help to establish a right to regulate tobacco products?

Recently the giant tobacco company Philip Morris served its notice to launch an investor-to-state dispute settlement proceeding against the Australian Government for its introduction of plain packaging requirements on tobacco products. It is an important event in the field of intellectual property, investment and international health law. The fundamental questions involved are whether the restriction of trademark rights as a result of the plain packaging requirement is a compensable indirect expropriation under BITs or whether it falls within the scope of government's right to regulate and thus become not compensable. This paper is of the view that the requirement of plain packaging will deprive the essential value or core function of trademark rights and thus constitutes an indirect expropriation under BITs. However, such indirect expropriation meets the public interest requirement and the necessity requirement. The paper further argues that sovereign States have an inherent right to regulate domestic economic activities. Since the pain packaging requirements provided in the FCTC Guidelines are expected to protect the value of human lives and health, the protected values clearly outweigh the affected commercial interests of tobacco companies. Also the justification for host States to adopt a plain packaging policy is strong. Thus, the interpreters of BITs need to pay higher respect to the host State's sovereign power concerning its right to regulate tobacco products for a legitimate purpose. The conclusion of the paper is that the host States should enjoy a defense of the right to regulate to refuse compensation. The author believes that this is the only reasonable conclusion to avoid possible conflicts between different treaty systems (BITs and the FCTC) and between different legal systems and fields (trademark law, investment law and international health law).