British American Tobacco (UK) Ltd & Ors, R (On the Application Of) v Secretary Of State For Health

INDEX

INTRODUCTION, SUMMARY AND CONCLUSIONS

These applications for judicial review are brought by manufacturers who represent the major part of the world’s supply of tobacco products. Legislation was enacted by Parliament which conferred upon the Secretary of State (Footnote: ¹) the power to lay before Parliament, for its consideration and promulgation, regulations which restrict the ability of the tobacco companies to advertise their brands on tobacco packaging or upon tobacco products themselves. Parliament duly promulgated The Standardised Packaging of Tobacco Products Regulations 2015 (“the Regulations”). These specified the 20^th May 2016 as the day upon which they became effective. The Claimants challenge the Regulations as unlawful under international law, EU law and domestic common law.

The decision by Parliament to introduce the Regulations was in large measure in furtherance of the policy laid down by the World Health Organisation (WHO) in a singular treaty of 2004, the Framework Convention on Tobacco Control (“FCTC”). This is one of the most widely endorsed treaties in the history of the UN. In this convention the WHO has laid down a series of control measures some of which are said to be mandatory and a further series of measures which contracting states are encouraged to adopt, one of which is a prohibition on advertising on packaging and upon tobacco products. This latter measure is known as “standardised packaging”. At base it involves a substantial limitation being imposed upon the ability of manufacturers to advertise or place branding upon the outer packaging or the tobacco product itself. The Regulations do not however involve all tobacco products being sold in a homogeneous, undifferentiated manner. The manufacturers can still place the brand name and variant name upon the box and in this way they can still communicate their identities to consumers and differentiate themselves from their competitors. But the manner in which the name and brand may be used is highly regulated in order, in effect, to strip away as much of the attractiveness of the branding or advertising as possible.

The FCTC has been adhered to by 180 countries worldwide and this includes all of the Member States of the EU and the EU itself. In the EU legislation has been adopted to implement the mandatory part of the FCTC in the form of “Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC” (“the TPD”). The TPD requires certain restrictions to be introduced into the laws of the Member States upon, inter

The first country worldwide to introduce standardised packaging restrictions was Australia, in 2012. The Australian Government, which gave evidence to the High Court, says that the legislation is working well and the available data suggests that it is having a salutary effect upon prevalence and use of tobacco in Australia. The Government conducted a post-implementation review which was published in 2016 which was based upon a mixture of qualitative and quantitative evidence and which substantiated the view of the Government of Australia that the measures were beginning to achieve their desired objective.

The Regulations in this jurisdiction were introduced however by Parliament without the benefit of a full analysis having been undertaken of the Australian evidence. The view taken by Parliament was that the evidence available to it indicated that the measure would be effective and that there was a real risk to public health and welfare if there was a delay in promulgation pending some subsequent full-blown analysis of the Australian experience for purposes of comparison.

Many other countries worldwide are either preparing to implement equivalent standardised packaging rules or are contemplating such a course of action.

I refer repeatedly in this judgment to a number of key judgments. It is convenient at the outset to identify the judgments here for ease of cross-referencing. They are:

The tobacco companies have attacked the Regulations deploying the full gamut of challenges ranging from international law through EU law and human rights law right down to domestic common law. Some of their challenges prayed in aid fundamental principles of property established in the 18^th century. In order to provide some order to the complaints made by the tobacco companies I have grouped them under 17 Grounds of Challenge. Some of these grounds have multiple parts to them. In broad terms these challenges and grounds fall into 7 categories. Before addressing each category I should record that although different Claimants assumed responsibility for different and specific arguments (with some limited exceptions) they all adopted the totality of the arguments advanced.

The first category challenges the legality of the Regulations upon the basis that they implement the TPD, the instrument of EU law which has introduced legislation to implement the FCTC. The Claimants submit the TPD is itself illegal. A reference was made by the High Court to the Court of Justice of a series of questions raising challenges to the legality of the TPD in Philip Morris. On 4^th May 2016 the Court of Justice handed down its judgment emphatically rejecting these challenges. The parasitic domestic law challenge thus necessarily fails. The analysis of the Court of Justice has a bearing upon a number of grounds raised in these proceedings and because of this I have addressed it at the outset of this judgment (Ground 1 – See Section E below).

The second ground (Ground 2 – See Section F below) raises a fundamental issue about the way in which evidence submitted by the tobacco industry should be treated. Specifically it focuses upon a challenge to the way in which the Secretary of State treated the expert evidence served by the tobacco companies during the consultation process leading up to the adoption of the Regulations. It is argued that the Government acted unlawfully because it attributed only “limited” weight to this evidence upon the (erroneous) basis that it lacked independence and otherwise failed to meet “best practice” standards for the preparation of evidence. The argument was advanced primarily by BAT but its arguments were adopted by the other Claimants. The position of the Secretary of State is that the generality of the evidence of the tobacco companies was indeed markedly deficient and inferior. This has given rise to two particular grounds of challenge. The first is the general complaint that it was unlawful to give only “limited” weight to the tobacco industry evidence since this unfairly discounted the probative value or worth of that evidence; the second and narrower but essentially similar argument was advanced by BAT alone and was that the specific evidence adduced by BAT had been singled out for adverse and unlawful treatment. BAT contended that its position was different to that of the other tobacco companies who participated during the consultation process because of the sheer volume and quality of the BAT evidence. The tobacco companies not only challenge the approach adopted by the Secretary of State but they also retaliate and attack the impartiality of the experts called to give responsive evidence on the side of the

The next three grounds (Grounds 3-5 – See Sections G, H and I below) challenge the proportionality of the Regulations upon the basis: (a) that in the light of the now available Australian data it can be seen that the Regulations will fail to be suitable and appropriate to achieve their stated objective and in fact will be counter-productive; (b) that in any event the Regulations are not “necessary” because there are less extreme measures which could have been adopted which would have been of equal efficacy (for example tax); and (c), that when one looks at proportionality in the round and balances the competing public and private interests the Regulations amount to an intolerable and unlawful interference with the tobacco companies’ private law rights of property. These three grounds are advanced as free-standing grounds of challenge.

The next group of challenges (Grounds 6-8 – See Sections J, K and L below) allege a violation of the principle of respect for property. This is advanced in three different ways: (a) under Article 1 of the First Protocol of the European Convention on Human Rights (respectively “A1P1” and “ECHR”); (b) under Article 17 of the Charter of Fundamental Rights of the European Union (“The Fundamental Charter”); and (c) under the common law.

Following this the Claimants have advanced a series of technical challenges (Grounds 10, 11, 12 – See Sections N, O and P below) to the legality of the Regulations. The object of this is to establish that the Regulations are ultra vires either the TPD, or broader principles of EU or international law. There is no particular single unifying theme to these challenges. In broad terms they allege that the manner in which the Regulations have been adopted involve a misdirection of law, a failure to address relevant considerations, and the taking of action which exceeds the jurisdiction and competence of the United Kingdom.

In addition the Claimants also contend (Grounds 9 and 14 – See Sections M and R below) that the Regulations involve violations of other broad EU law provisions in particular: (a) Article 34 TFEU on the free movement of goods; and (b) Article 16 of the Fundamental Charter on freedom to trade.

Next BAT (alone) challenges the legality of the consultation process which is said to have been conducted in a manner which is unfair and unlawful towards it: Ground 13 – Section Q. I have already referred to the fact that BAT has alleged that both generally in relation to tobacco industry evidence and specifically in relation to its particular expert evidence the Secretary of State acted unlawfully by according only “limited” weight to that evidence (dealt with under Ground 2). BAT also contends that: (a) its evidence was inadequately reflected in the drafting of final submissions made by civil servants to the Secretary of State in December 2014 before he laid draft Regulations before Parliament; and (b) the civil servants unlawfully attached weight to a particular piece of evidence that had not been put out specifically to the tobacco companies for their views during the consultation. There is also a complaint that Parliament acted unlawfully in not awaiting the outcome of the reference to the Court of Justice in Philip Morris before promulgating the Regulations: Ground 15 at Section S below.

Finally, the tipping Claimants, who are the companies that manufacture, under contract from the tobacco companies, the paper for tips that fit onto cigarettes, support the submissions of the tobacco companies but also submit: (a) that properly interpreted the TPD does not allow Member States to impose restrictions upon branding or advertising upon tobacco products themselves (as opposed to the outer packaging); and (b), in any event the relevant provision (Regulation 5) within the Regulations which addresses advertising and branding on the product is disproportionate for want of a proper supporting evidence base: See Grounds 16 and 17 – See Sections T and U below.

In the remaining part of this introduction I summarise, shortly, some of the central issues which arise in this litigation.

A core issue in this litigation concerns the intrinsic quality of the evidence submitted during the consultation, but also in the course of this judicial review. A remarkable feature of the WHO Convention (the FCTC) is that it marks out the tobacco companies as entities which have deliberately sought to undermine national health polices and it translates this considered position into a strong recommendation to the contracting states that, in effect, they apply great circumspection when assessing evidence submitted to them by tobacco interests. The FCTC position is said to be “evidence based”, a claim that the tobacco companies submit is “manifestly” absurd. The FCTC contains at its heart two propositions of real significance for the present case. The first is that tobacco use is an “epidemic” of global proportions which exerts a catastrophic impact upon health. The tobacco companies do not dispute or seek to undermine the universal medical consensus as to the profound harm caused by smoking. The second, and most controversial in the context of the present proceedings, is that the tobacco companies have over multiple decades set out, deliberately and knowingly, to subvert attempts by government around the world to curb tobacco use and promote public health.

The first proposition is the premise for most of the substantive provisions of the FCTC which set out to curb smoking and tobacco consumption. The second proposition is based upon the experience of the US courts in litigation involving the tobacco companies in the course of which the tobacco companies were, after protracted interlocutory disputes about discovery and privilege, required to divulge truly stupendous quantities of internal documentation (exceeding 50 million pages). This material has now been placed in the public domain and is searchable on-line. The WHO has produced its own practical guide to searching the material. The analysis conducted of these documents by bodies such as WHO, and by the US courts, has led to some stark and, from the perspective of public health, unpalatable conclusions: in particular that the outward facing public statements of the tobacco companies are contradicted by their own inward facing private deliberations and analyses. One instance of this concerns the claim by the tobacco companies that they do not market their products towards children. This proposition (repeated in this litigation) has been rejected in the US courts and by the WHO upon the basis, inter alia, of internal tobacco company documents. The FCTC requires that contracting states should exercise vigilance when dealing with the tobacco companies and should ensure that they act with accountability and transparency. The FCTC does not however spell out in detail how those principles should translate into the national laws and practices of the contracting states.

In these proceedings I have analysed the conclusions of the WHO and the US courts because they bear upon the dispute between the Secretary of State and the tobacco companies as to the reliability of the evidence submitted by the tobacco companies in the course of the pre-legislative consultation, but also in this litigation. Put bluntly the Government says that the intrinsic quality of the tobacco company’s evidence is inferior as not being in compliance with methodological best practice accepted worldwide by the scientific and technical research communities. These include such matters as: the importance of peer review of research results; the independence of researchers and experts from vested interests; the cross-referability of the reports of experts instructed by the tobacco companies against the internal documents of the tobacco companies themselves; the qualifications and competence of tobacco company experts to opine upon particular topics; and the practice of the tobacco company experts of ignoring or dismissing the pre-existing and adverse literature. To say that the parties disagree fundamentally about these matters is an understatement.

In my judgment the Government was entitled to conclude that the tobacco companies’ evidence did fall below acceptable standards during the consultation. The conclusions which have arisen from the US courts about the sharp discord between what the tobacco companies think inside their own four walls and what they then say to the outside world (especially through experts), are so damning and the evidence of the discord so compelling and far reaching that it is not at all surprising that the WHO concluded that there was an evidence base upon which to found their recommendations to contracting states to apply vigilance and demand accountability and transparency in their dealing with the tobacco companies.

In coming to this conclusion I have not applied any sui generis rule which singles out the tobacco companies for particular and adverse treatment. The requirement that experts should act with transparency and accountability is hardly surprising. It is in fact the cornerstone of the “best practice” regimes applied by regulators worldwide when they seek to evaluate empirical evidence advanced by companies (outside the field of tobacco control) under investigation. Indeed, one of the Claimants’ own experts described the principles of transparency and openness as the “foundational tablets of the scientific enterprise”. The approach now adopted by the international research community and by regulators represents common sense rules of evaluation which resonate strongly in a case such as the present. Further these principles are consistent with the obligations which experts and parties owe to the Court and which are required under the Civil Procedure Rules (“CPR”) which govern civil litigation in this jurisdiction.

I have accordingly sought to apply these principles to all of the evidence before me, from whatever source. I have applied the sorts of methodological standards that in my judgment are world-wide norms and which make sense to apply to the present facts. As a generality, the Claimants’ evidence is largely: not peer reviewed; frequently not tendered with a statement of truth or declaration that complies with the CPR; almost universally prepared without any reference to the internal documentation or data of the tobacco companies themselves; either ignores or airily dismisses the worldwide research and literature base which contradicts evidence tendered by the tobacco industry; and, is frequently unverifiable. I say “largely” because the quality of the evidence submitted to this Court (which included all of that tendered during the consultation) was sometimes of remarkably variable quality. Some of it was wholly untenable and resembled diatribe rather than expert opinion; but some was of high quality, albeit that I am still critical of it, for instance, because it ignores internal documents or was unverifiable.

It was submitted to me that the experts instructed by the tobacco companies were highly skilled and experienced professionals. Some of the work that they have produced for the purpose of this litigation (and in particular the empirical work) is indeed extraordinarily sophisticated. However, as was observed in the US Courts the simple fact that an expert has a high pedigree or is a Harvard professor or a Nobel Prize winner is not a reason not to apply to their work exactly the same rigorous standards as are applied to the work of others. The report of a Nobel Prize winner as presented to a Court might be a remarkably good piece of work but if it lacks peer review or ignores contradictory internal documents or is unverifiable, its probative value may nonetheless be substantially diminished. Nobel Prize winners should in any event be strong adherents of the very highest of international research best standards; and if they fail to live up to these standards a Court must say so and act accordingly.

A point referred to repeatedly by international regulators, who routinely have to address empirical analyses of great complexity authored by individuals of stature and experience and who are leaders in their fields, is that transparency, accountability and verifiability are critical. The more detailed and sophisticated the evidence tendered the greater the need for the regulator or decision maker to be able to de-construct that evidence right down to the tips of its roots in order to be able to evaluate its core structure and the assumptions upon which it is predicated and to assess them against all the available data.

In this case the evidence submitted by the Claimants’ experts is not capable of being verified nor its underlying assumptions tested. It has been subjected to sustained criticism by the experts instructed by the Secretary of State and these criticisms extend not only to the substantive conclusions but especially to its methodological integrity.

Nonetheless, I endeavoured to conduct an exercise for myself in order to determine whether the methodological criticisms launched at the Claimants’ experts were justified. This entailed taking each criticism (for instance that a piece of research was not peer reviewed, or was outside the expert’s normal field of competence, or included assumptions which were not backed up with evidence, or which ignored the existing literature base, or which appeared to arrive at a conclusion which ran counter to internal documents of the tobacco companies) and checking its accuracy against the other documents in the voluminous Court file. My conclusion was that, where I was able to conduct a proper cross-check, it was a validly made criticism. It is notable that the Claimants have not materially challenged the detailed and highly particularised methodological criticisms made of their expert evidence. Rather they attack the criticism at source, contending that the “best practice” principles advocated by the Secretary of State are irrelevant, misguided or flawed and that accordingly criticisms based upon these principles simply do not strike home.

In my judgment the best practice principles are just that - “best” practice. They are tried and tested across the international scientific, medical, social science, legal and economic communities. These principles fall, neatly, under the broad heading of “transparency” referred to in the FCTC; and they are logical forensic tools to be applied by a Court to evaluate evidence. Applying these standards I have rejected the Claimants’ challenge to the manner in which their evidence has been treated.

Recent judgments of the Supreme Court and the Court of Justice (see at paragraph [7] above) have indicated that in relation to proportionality challenges the Courts must consider the most up to date evidence and must engage in detail with that evidence. It is accepted that the actual intensity of review may be variable and may depend upon the margin of appreciation to be accorded to the decision maker. But, nonetheless the Court must form its own conclusion about the evidence and the fact that up to date evidence is admissible means that the assessment by the Court might be of evidence that was not before the original decision maker (here Parliament). In many cases this exercise might not present particular difficulties because the new evidence may be relatively limited in compass or may be straightforward.

In this case however, in relation to the first part of the proportionality test (whether the measure is appropriate and suitable to meet its avowed objective), the Claimants have launched a root and branch attack upon the suitability and appropriateness of the Regulations and they have adduced a very substantial body of new expert economic, econometric and other, evidence which sought to demonstrate that in the postimplementation period in Australia, relevant data demonstrated that the standardised packaging rules were not working and in actual fact were serving to increase, not decrease, prevalence and use of tobacco. None of this evidence was adduced during the consultation process and it was hence not considered during the decision making process leading up to the promulgation of the Regulations by Parliament.

The Claimants submit that this new evidence is utterly compelling. The evidence relied upon by Parliament was essentially qualitative and “soft” and based upon such evidence as surveys, focus group studies, elicitation studies and a variety of soft psychological testing results. But post-Australian implementation there is now “hard” evidence of how standardised packaging will actually work in a market which is similar to that of the United Kingdom. Given that both prevalence and use can be measured with hard data, this evidence ousts the probative value of all prior “soft” evidence.

Put shortly it is argued that the evidence now generated in Australia proves that measures of this sort will harm but not improve public health and that accordingly the Regulations are neither suitable nor appropriate and fail the proportionality test. The Claimants advance a theory which, in very simplified terms, works like this: standardised packaging will by its very nature wipe out the attractiveness of branding. As such all tobacco packaging and products will become uniformly drab. Brand loyalties will in consequence weaken and consumers will “downtrade” to the lower priced products. In further consequence they will, on average, spend less on tobacco products than before. All things being equal if prices go down demand tends to go up so that downtrading will lead to an increase in use of tobacco. This increase will not be counterbalanced or netted off by the demand depressing effects of standardised packaging because there is no proper evidence that factors such as the increased saliency of health warnings and/or the reduction in appeal of tobacco packets and products will exert any serious demand depressing effects. As such they will not counteract the stimulant effect on demand of downtrading.

The Secretary of State contends to the contrary that standardised packaging will generate modest but significant reductions in prevalence. He relies upon the substantial corpus of qualitative research worldwide conducted over more than two decades which analyses, from a wide variety of perspectives, how different consumers react to different advertising, promotional and branding techniques and he says that this type of evidence is powerful and one directional and that it remains cogent and relevant even in a world where data relating to prevalence and use from Australia is becoming available. He also relies upon quantitative regression analyses conducted by his own instructed experts and by experts instructed by the Australian Government based upon the actual experience in Australia which it is said, and notwithstanding that it is still early days, shows that standardised packaging is working in Australia.

The response of the Claimants to refute the evidence of the Secretary of State is to adopt three broad lines of attack: (i) they adduce expert evidence which challenges the worldwide qualitative evidence and research base upon the basis that it is simply illogical and adopted flawed and unreliable techniques; (ii) they adduce expert economic evidence to establish that the economic theory of downtrading leading to increased demand is logical and consistent with normal principles of market economics; and (iii), they adduce new quantitative regression analyses to establish that in actual fact their prediction that downtrading would cause demand to increase has been borne out by experience and events in Australia.

I have reviewed in depth all of the expert evidence in this case. I do not, by any means, refer to all of it in this judgment. I have found that the Secretary of State has adduced ample evidence to support the suitability and appropriateness of the Regulations. I accept that in accordance with internationally accepted best practice the qualitative and quantitative evidence has to be examined as a whole, and in the round. I have found that the econometric regression analyses conducted by the experts instructed by the Secretary of State is consistent and in line with the qualitative evidence and also consistent with a detailed post-implementation review conducted by the Australian Government (2016) which included new quantitative analysis. I reject the submission of the tobacco companies that their evidence is compelling; it is far from such. I accept the thrust of the methodological criticisms levelled by the Secretary of State at the Claimants’ evidence, though I emphasise that my conclusion on proportionality is independent of my findings on methodological quality. My core conclusion is that the Secretary of State has simply proven his case and my conclusion about methodological flaws simply reinforces my prima facie conclusion.

I have come to similar conclusions in relation to the second and third parts of the proportionality challenge. I reject the submission that there is a less intrusive but equally effective way of addressing the Government’s health concerns, namely by an increase in tax, and for this reason the Regulations are a (proverbial) sledgehammer to crack a nut when a nut cracker would have done and hence unnecessary (Ground 4). I also reject the submission that applying a “fair balance” test of proportionality and balancing the public and private interests the Regulations are disproportionate (Ground 5). As to this latter point the submission of the tobacco companies was that there was nothing exceptional about tobacco which was a lawfully marketed product. The companies had a powerful private interest in their property rights (mainly trade marks) which trumped the public interest arising. Counsel for the Secretary of State reformulated the argument as a claim that the tobacco companies had the right to maximise their profits for the benefit of shareholders by promoting a product that shortened lives and caused a health epidemic of colossal proportions and which imposed upon the state a vast financial cost. If one examines the issue purely by comparing the monetary losses the tobacco industry assert that they will incur against the costs which would be saved to the public purse by the Regulations the balance comes out very clearly indeed on the side of the public purse. Yet it is wrong to view this issue purely in monetised terms alone; there is a significant moral angle which is embedded in the Regulations which is about saving children from a lifetime of addiction, and children and adults from premature death and related suffering and disease. I therefore reject the Claimants’ case that the Regulations are disproportionate.

A substantial amount of expert econometric and other evidence was placed before the Court most of it focused upon the proportionality argument. I have set out in this judgment (at paragraphs [630] – [648]) my conclusions about the limits of what can properly be expected of a Court confronted with this sort of evidence. In particular this case has brought home to me that under the instruction now given to Courts hearing proportionality challenges to arrive at their own conclusions upon the basis of up to date evidence, there is a real risk that Courts will find themselves overwhelmed by highly technical and complex evidential disputes which they may not be capable of resolving. If this is so then there is a consequential risk that perfectly sound applications for judicial review on proportionality grounds will fail, where otherwise they should have succeeded, simply because the judicial process is not well suited to untangling the complexities involved. I have set out my concerns in some detail in this judgment and also suggested an approach to the way in which such evidence is handled in the future which might alleviate the problem. I have also set out my views on how the constitutional relationship between the Courts and decision makers and legislatures is affected by the task imposed upon Courts by this exercise.

The Claimants contend that under A1P1 (Ground 6), under the Fundamental Charter (Ground 7) and under domestic common law (Ground 8) they have a property right (their intellectual property and goodwill) which has been unlawfully expropriated from them by the Regulations without compensation. I accept that their trade marks and other relevant intellectual property amount to “possessions” or “property” which in principle are capable of falling with the protective principles involved. I also accept that in principle certain types of goodwill can also amount to a protectable interest (though on the facts of the case it is not possible to form a concluded view as to the extent to which there are goodwill related rights arising). I reject the submission however that the rights have been expropriated. Title to the rights in issue remains in the hands of the tobacco companies; the Regulations curtail the use that can be made of those rights but they are not expropriated. Indeed, the rights remain important in the hands of the tobacco companies because the word marks can still be used on packaging and will serve their traditional function as an identifier of origin. I accept that the figurative marks cannot be used in this manner but they still have certain, admittedly very limited, vestigial uses, which the Regulations do not curtail. Further the restrictions imposed pursue a legitimate public health based interest; a conclusion not challenged by the Claimants. These two factors (retention of title and measures imposed for legitimate public interest reasons) are in large measure sufficient to defeat in law the submission that the rights have been expropriated. But if I am wrong in this and the Claimants’ rights have been expropriated I have then to decide whether compensation should be paid. The law indicates that in cases of true expropriation full compensation is payable save in “exceptional” circumstances. In my judgment it is quite obvious that the circumstances are exceptional. Tobacco usage is classified as a health evil, albeit that it remains lawful. There is no precedent where the law has provided compensation for the suppression of a property right which facilitates and furthers, quite deliberately, a health epidemic. And moreover, a health epidemic which imposes vast negative health and other costs upon the very State that is then being expected to compensate the property right holder for ceasing to facilitate the epidemic.

In my judgment this is not a case of expropriation but a case of curtailment of use.

A variety of technical grounds were advanced by the Claimants to show that the Regulations were unlawful. These are the national counterparts of the arguments advanced by the same Claimants before the Court of Justice and which were rejected in Philip Morris. I have set out in this judgment why I reject these grounds. At base Parliament, both under international law relating to health (WHO) and intellectual property (e.g. in TRIPS) and under EU law, has a broad discretion to adopt on a precautionary and prospective basis measures designed to protect against health problems. And that is what the Regulations do. A number of the challenges focus upon what is said to be the essence or substance of a trade mark and upon the competence or jurisdiction of the Member States to enact legislation to regulate the use of trade marks in connection with the preservation of health. It is contended that the Regulations are unlawful or ultra vires if they intrude upon trade mark rights or impair those rights. These arguments operate upon the premise that a trade mark proprietor cannot be prevented from using a trade mark at all even when it facilitates a health epidemic. In my judgment the law is very clear: It is no part of international, EU or domestic common law on intellectual property that the legitimate function of a trade mark (i.e. its essence or substance) should be defined to include a right to use the mark to harm public health, and the Member States have a broad power to adopt health legislation even when it intrudes upon other rights belonging to manufacturers of products which cause the health problem. The technical arguments to the contrary were advanced with forensic skill but stripped down to below their respectable veneers their bare essentials are exposed as unsustainable.

The challenges advanced under this head include a challenge to the right to conduct business under Article 16 of the Fundamental Charter which it is said the Regulations violate. As to this it is clear from case law that this is (for obvious reasons) a highly circumscribed right and all manner of different laws and regulatory measures (tax, environmental, health and safety, etc) limit the freedom that business otherwise enjoys to do as it pleases. Indeed the express language of Article 16 confers the freedom subject to compliance with both EU and national laws. This ground adds nothing new to the other legal challenges. If the Claimants cannot prevail under these other grounds there is no scope for them to succeed under Article 16. A further challenge was made under Article 34 TFEU. This prohibits hindrances to the free movement of goods across borders. The Regulations do create to some degree obstacles to inter-state trade. But Article 34 TFEU is subject, inter alia, to overriding public health grounds (in Article 36 TFEU) and accordingly whether or not this ground succeeds is parasitic upon the success of other more specific grounds. As such it also adds nothing to the other challenges. And since no other challenge succeeds then these challenges also fail.

BAT challenged, in a variety of ways, the consultative process which led up to the Secretary of State laying draft regulations before Parliament for its consideration and promulgation. There is nothing in these objections. BAT was able to submit, and did submit, a substantial volume of material during that process. The civil servants conducted an extensive consultative exercise. They received a great deal of evidence from the tobacco companies, much of it mutually supportive and directed in identical lines of travel. The civil servants summarised this evidence in detailed final submissions to the Minister. The Minister then laid draft regulations before Parliament for its independent consideration (by affirmative resolution). It is clear from the Hansard record of proceedings in Parliament that the draft regulations were subjected to vigorous debate and that many parliamentarians spoke out for the position of the tobacco companies. I can detect not a hint of unfairness in the procedure adopted towards BAT. Their arguments were summarised fairly and squarely and the short point is that Parliament made up its own mind aware of the full range of arguments on all sides of the debate, including as to the relevance of the Australian experience.

And moreover, even if I had concluded that there was some element of unfairness I would not have found that this was material. This is for two reasons. First, the submissions made for BAT were at a high level of generality and appeared to assume that the Secretary of State was the actual decision maker. They took no account of the fact that Parliament took its own independent decision after full debate. The submissions did not explain how any individual failings on the part of civil servants or Ministers could have exerted any tainting impact upon the decision subsequently made by Parliament. There is, on the evidence, simply no arguable causal nexus or connection identified and any such failing would in any event be de minimis and immaterial. Secondly, in so far as any such failing related to evidence going to the proportionality argument it was also BAT’s argument (and that of the other tobacco companies) that what happened before Parliament was in any event irrelevant since what mattered was the position before this Court. It must follow that prior failings lost their potency when this judicial review started.

The tipping manufacturers produce paper for the filter tips for cigarette sticks. They do so under contract to the tobacco manufacturers. They submit that properly construed the TPD does not allow for any sort of restriction to be imposed upon the product itself and this includes the tips. Accordingly, Regulation 5 which does just this is ultra vires the TPD. I reject this submission. There are three principles of construction which lead me to this conclusion. First, the TPD is not, so far as definitions of terms are concerned, comprehensive and it does not define “packaging”. That term clearly covers the outer-packaging and any inner-packaging inside a box; but, when read purposively against the object sought to be achieved and against the international law obligations the TPD purports to implement, the phrase is capable of a wider meaning whereby “packaging” includes everything into which tobacco is packed or encased. This would include all that which encases or surrounds the actual tobacco and this would include the paper which constitutes the stick and the tips, as well as outer packaging and wrapping. Secondly, even if the term “packaging” is narrowly construed (as the Claimants submit) and refers only to the outer packaging then on ordinary EU law principles of construction legislatures may still take anti-avoidance measures to ensure that the effectiveness, or “effet utile”, of the chosen measure is achieved. Indeed this point is made in the FCTC and by the WHO which identify advertising placed on the tobacco product itself as a way for tobacco companies to circumvent the main restrictions in the FCTC on advertising on the outer packaging. As such it is in accordance with normal rules of construction to introduce a restriction on advertising and branding placement on the product itself in order to ensure the effectiveness of the restriction upon the placing of adverts and branding on the outer packaging. Thirdly, even if the above two arguments are wrong, it is an error on the part of the Claimants to contend that the power of the Member States to introduce further legislation is limited by the terms of the TPD. That is a measure of partial harmonisation and in the gaps and interstices left by the mandatory provisions of the TPD there is ample opportunity and a right for Member States to introduce additional legislation, in particular that which is consistent with the international law obligations of the Member States and the EU under the FCTC. Regulation 5 which governs restrictions on the product itself is therefore within the competence of Parliament even if it is not covered by the TPD. I therefore reject the submission that Regulation 5 is ultra vires.

As to the submission that there is an inadequate evidence base to support the introduction of the disputed Regulation 5 on proportionality grounds, I reject this on the evidence. The Secretary of State has proven that there is an adequate evidence base to support the measure both when it was introduced and now.

For the reasons set out in this judgment all of the applications for judicial review fail. The Regulations were lawful when they were promulgated by Parliament and they are lawful now in the light of the most up to date evidence.

THE FACTS

There are before the Court a series of expedited claims for judicial review. These claims were linked together and directions were made treating them as a single set of proceedings. In order to ensure that all issues could be dealt with by the Court in a manageable way a single set of directions was made governing the conduct of the case. This required considerable cooperation between the parties. (Footnote: ²) By the end of the case I had received in excess of 700 pages of written legal submissions from the parties. The Claimants relied upon 25 expert reports and the Defendant upon 5 expert reports. Multiple files of annexes included the evidence base behind the various expert reports. The written evidence also comprised numerous witness statements. A very substantial literature base of national and international research material was also placed before the Court. The actual hearing was divided up over 7 extended days with different Claimants’ teams taking responsibility for leading the written and oral submissions on specific issues. I should record my gratitude to all counsel for the high calibre of the written and oral advocacy on the many issues arising.

Although I have read and absorbed the totality of the voluminous material that was before the Court it has not been necessary to record or refer to it all in this judgment. A great deal of evidence dealt with factual matters that, in the event, were not materially in dispute between the parties. I have also endeavoured to synthesise and summarise much of the expert evidence which was placed before the Court in order to make what is already a long judgment, more digestible.

Restrictions of a similar type to those contained in the Regulations are also under consideration in many other countries throughout the world. To date however only Australia has implemented equivalent measures. In that jurisdiction the tobacco companies challenged the introduction of standardised packaging under the Australian Constitution. The challenge was unsuccessful and was finally determined by the High Court of Australia in JT International SA & British American Tobacco Australasia

The present challenge in this jurisdiction is the first occasion that the full gamut of arguments surrounding standardised packaging has been raised. These arguments range far and wide and focus (inter alia) upon: (a) the scope and effect of relevant international treaties and conventions; (b) the scope and effect of EU law relating to tobacco control; (c) the scope and effect of EU law relating to national and Community trade marks; (d) the jurisdictional competence of Member States of the EU to enact any legislation which adversely affects the rights of trade mark users; (e) the legality (vires) of the Regulations; (f) the scope and effect of international, EU and domestic laws on the expropriation of property; (g) the legality of the consultative procedure adopted by the United Kingdom leading up to the adoption by Parliament of the disputed legislation; (h) the efficacy of the chosen policy in terms of actual health outputs; (i) the necessity for the Regulations; (j) whether the legislation strikes a fair balance between the competing interests arising; (k) the compatibility of the Regulations with EU rules on the free movement of goods and the right to operate a business; (l) the applicability of various provisions of the Fundamental Charter; and (m) the approach to be adopted towards the assessment of expert evidence in this field both under international law and under domestic civil law. It has seemed to me that no even remotely or marginally arguable stone has been left unturned.

The Claimants in the main proceedings all manufacture and/or supply tobacco products in particular in the form of ready-made cigarettes, and roll your own tobacco for sale in the United Kingdom. They account for the preponderant part of the world supply of tobacco products.

The Claimants in the connected proceedings manufacture and supply tipping paper, which is the paper which surrounds the filter on cigarettes.

The Defendant is the Secretary State for Health. He was responsible, following a consultation process, for exercising a statutory power to place draft legislation before Parliament under an affirmative resolution procedure. He was not the actual decision maker (that being Parliament) but he has the locus to act, in these proceedings, for the Crown.

The Intervener, “Action on Smoking and Health” (“ASH”), is a campaigning charity that works to eliminate the harm caused by tobacco products. It was established in 1971 by the Royal College of Physicians. It provides the secretariat for the All Party Parliamentary Group on Smoking and Health. It is funded largely through subventions from Cancer Research UK and the British Heart Foundation.

The Claimants challenge the Standardised Packaging of Tobacco Products

A substantial volume of material was placed before the Court as to the impact of the Regulations upon each of the individual Claimants. In large measure there is no disagreement as to the Regulations themselves or as to their broad effect. This is logical since the object behind the Regulations is to suppress the use of trade marks belonging to the Claimants as a means of advertising and promoting tobacco products manufactured and sold by the Claimants. It would therefore be surprising if there was any suggestion by the Secretary of State that the impact of the Regulations was anything less than profound and explicitly intended so to be. The Impact Assessment which accompanied the Regulations states that the object of the Regulations is to

“reduce the appeal of tobacco products” and it must surely be common sense that so far as the Government is concerned the greater the reduction in appeal and the more dramatic the deterrent effect of the Regulations, the better.

The Regulations are specified to come into force on the 20^th May 2016 in relation to the production of tobacco products and on the 21^st May 2017 in relation to their supply. The Regulations standardise the material, shape, opening and content of the packaging of readymade cigarettes. Similar controls are applied in relation to roll your own cigarettes. The Regulations also include specific prohibitions in relation to the labelling of tobacco products. The objective of the Regulations is to introduce plain or standardised packaging and, in substantial measure, to restrict the branding permitted on tobacco packaging. The Regulations achieve this end by mandating the design elements of a package. The only permitted colour for the packaging of a tobacco product what is described as “a drab brown with a matt finish”. The Regulations prescribe the text that may be lawfully printed on packs. Other than standardised text as to the number of cigarettes and the producer only the brand name and the variant of the cigarette is permitted. And, moreover, this is permitted only in a uniform presentation with a specified Helvetica font, case, colour, type face, orientation, and size (font size 14 for brand name and 10 for variant name). The surface of the packaging must be smooth and flat with no ridges, embossing or similar distinguishing features. The package must contain uniform lining. The appearance of the cigarettes must be plain white with a matt finish with white or imitation-cork coloured tipping paper. Permitted text must adopt a uniform presentation with a specified font, case, colour, type face, orientation and placement identifying the brand and variant name. Packaging which makes a noise, produces a smell or changes after retail sale is prohibited.

The Regulations are set out in Section D(9) below.

Whilst it is clear that the purpose of the Regulations is to strip away from manufacturers and suppliers their ability to promote the product to consumers the Regulations nonetheless (inter alia): (i) do not ban the sale of cigarettes altogether; (ii) permit the brand name to be placed on the package; (iii) permit new brand names to be developed and placed on packaging; (iv) permit the identity of the producer to be placed on the packet; and (v), permit promotion at the wholesale level.

It is important (in particular for the law relating to proportionality) to be clear about the Government’s policy objectives in adopting the Regulations. The legitimacy of the objective sought to be achieved by the regulation is always a relevant issue in any proportionality challenge. It does not however figure much in this litigation because it was not submitted by the Claimant tobacco companies that the pursuit of the objective of seeking to suppress tobacco consumption and use was not a legitimate objective. There are two broad strands to the objective. First, there is the general and broad health policy pursued by the Government of seeking to suppress both the supply and demand of tobacco products. Secondly there are, within this broader strategy, a number of more specific objectives. Given that the specific objectives are said to be a continuation of the broader, macro, strategy it is necessary to set out the Government case on both.

At base the objective of the Government is plain and obvious and is to improve public health by suppressing the prevalence and use of tobacco. In this connection, “prevalence” refers to the extent to which smoking is widespread and “use” refers to the intensity of use by individual smokers. The expression “consumption” is sometimes used as an alternative to “use”. The salient facts were set out in a witness statement prepared by Mr Jeremy Mean, who is presently the Deputy Director for Tobacco Control within the Department of Health. Additional information was set out in the evidence of the Chief Medical Officer, Professor Dame Sally Davies. None of this evidence has been challenged by the Claimants, who unequivocally accept that tobacco products are harmful. I summarise certain of the key facts below.

Nearly 19% of adults in the United Kingdom currently smoke and there are nearly 8 million smokers in England alone. Smoking is the primary cause of preventable morbidity and premature death, accounting each year for over 100,000 deaths in the United Kingdom. Deaths from smoking are more numerous than the next six most common causes of preventable death combined. As well as being the leading cause of preventable morbidity, smoking also causes a range of non-fatal diseases, many of which are chronic and require on-going treatment. According to the Royal College of Physicians, “smoking has now been positively associated with over 40 diseases and the list continues to grow. For most diseases, the association with smoking is strong and viewed as causal.”

Smoking is a behaviour most commonly adopted in childhood or by young adolescents. Very few adults over the age of 25 start smoking. Evidence suggests that around 207,000 children aged between 11 and 15 years old start smoking every year in the United Kingdom, i.e. about 600 every day. Children whose parents or siblings smoke are 90% more likely to become smokers. Evidence suggests that if smoking is seen by young people as a normal part of life, they are much more likely to take up smoking. The impact of second-hand smoke is also a critical health issue. Smoking is highly addictive. The Royal College of Physicians has stated that the way in which nicotine causes addiction is similar to drugs such as heroin. Moreover, because of neurological immaturity children can become addicted extraordinarily quickly, literally within weeks of first smoking.

The majority of smokers want to quit. However, only a small percentage of quitters are successful in quitting smoking for two or more years (based upon 2008 figures).

Smoking has significant adverse societal costs. Quite apart from personal costs smoking also imposes costs upon the NHS and society and is one of the main causes of health inequalities. The independent review into health equalities in England concluded that:

“Tobacco control is central to any strategy to tackle health inequalities as smoking accounts for approximately half of the difference in life expectancy between the lowest and highest income groups. Smoking-related death rates are two to three times higher in low income groups than in wealthier social groups.”

The Claimants pay approximately £10 billion in taxes per annum to the Exchequer. However, the overall (net) economic costs of tobacco use to society have been estimated to be about £13.74 billion per annum.

Smoking prevalence in Great Britain has decreased from 24% in 2005 to 19% in 2013 (the latest statistics available). Nevertheless, smoking rates plateaued at around 21% and 20% between the years of 2007 and 2012, before dropping approximately 1 percentage point in 2013.

The overarching objective of the Regulations is therefore to reduce smoking to the maximum degree in order to improve health. This is the common objective of all tobacco policies or measures. The goal is not to reduce smoking by any particular percentage figure. The control programmes apply a mix of complementary and mutually reinforcing educational, clinical, regulatory, fiscal, economic and social strategies in the effort to reduce smoking prevalence and use. The need for states to adopt multifaceted and complementary approaches is one recognised by the WHO in the FCTC which explicitly encourages the adoption of “comprehensive” anti-smoking strategies, and is also an approach adopted by other jurisdictions across the world, such as Australia. The importance of this is that, as the FCTC reflects, there is a broad consensus at the level of international health policy that to combat smoking requires a portfolio policy approach in which the problem is treated in a variety of different ways.

Individual policies or measures may have their own aim or aims. Many aims are common to all or most tobacco control policies (e.g. reducing second-hand smoke). However, tobacco policies may also be targeted at reducing or removing a specific driver for demand and/or addressing a specific threat or concern identified by the Government. For example, two of the six internationally recognised strands for comprehensive tobacco control programmes are: (a) stopping the promotion of tobacco; and (b) making tobacco less affordable. Policies designed to form part of strand (a) (e.g. a ban on tobacco advertising) will have some different goals to those designed to form part of strand (b) (e.g. the imposition of a specific tax), while having common objectives such as helping or incentivising people to quit smoking. Policies directed towards preventing youths taking up smoking in the first place will, again, be different to those directed at encouraging quitting. Indeed, statistics show that most first time adopters are under the age of 25 so that policies directed at preventing take-

Tobacco control programmes evolve and develop in the light of new research and changing circumstances. In the absence of a continuous effort to maintain pressure on supply and demand prevalence rates increase or previous rates of decline may stagnate. The policy endorsed by the WHO thus seeks to ‘future proof’ itself by urging contracting Member States to remove loopholes in new or existing policies.

I turn now to the specific objectives behind the Regulations. These are to eradicate the attractive force of design on cigarette packaging and on the products themselves. Following the introduction over the past 20 years or so of policy measures targeting the impact of advertising, promotion and sponsorship (including the introduction of an advertising ban and display ban), the packaging of tobacco products and the appearance of the cigarettes themselves have become key promotional vehicles for tobacco manufacturers. In 2006, a spokesman for Gallaher (now part of JTI) noted that “marketing restrictions make the pack the hero”. Branded packaging has been described as the “silent salesman” and the manufacturers’ “billboard”. Tobacco companies do not divulge their internal documents and they have not done so in this litigation. But in the course of litigation elsewhere, and especially in the United States, they have been compelled to provide discovery and there is thus a large body of indicative material that gives an insight into the internal thought processes within the manufacturers. This material suggests that a cat and mouse game is employed between the companies and Governments. As the scope for promotion shrinks through successive legislative interventions so the tobacco companies focus increasingly upon the territory that is left. The importance of the present case is that the packaging and the product itself constitute virtually the last opportunity for tobacco companies to promote their product.

The Defendant’s position is that there is clear evidence establishing a causal relationship between packaging advertising and smoking initiation, especially among the young. Psychology is critical. Brand imagery appeals to the psychological and social needs of the consumer. Over the last decade the tobacco market has seen a proliferation of tobacco brands and brand variants. Colours and branding on packaging and on cigarettes themselves are used to enhance the appeal of products, including to the young, and to communicate different messages to the consumer in relation to the strength, quality and harmfulness of the product. The market has also seen the introduction of innovative packaging intended to introduce a ‘wow’ factor through, for example, ‘GlideTec’ packs (Imperial) which are designed to embrace the “sociability of smoking”. Slimmer packs are designed to appeal particularly to women, as fashion statements. Texture and lacquer are used on packs to provide a positive connection between the smoker and the packaging they handle frequently. The packaging company Vaassen said of tobacco packs:

“… the real experience [for the smoker] begins when they are holding the pack in their hands”.

(Cited in Vasseen (2011) “Optimise your brand with an inner foil lid” Tobacco Journal International 2:115; cited in Moodie C et al “Plain Tobacco Packaging: A Systematic Review”, University of Stirling (Stirling Review)).

The increase in brands and brand variants entering the market in recent years coincides with the introduction of tobacco control measures restricting the ability of tobacco manufacturers to advertise and market their products. In his evidence on behalf of the Secretary of State, Mr Mean stated that this is shown by internal documents disclosed by the Claimants in the past:

“… historic tobacco [industry] documents show … the way in which Philip Morris, in the face of marketing their products in a restrictive environment, considered product and packaging innovation as “concept areas” for development. On packaging innovation for example, in discussion of the development of an oval pack, the proposition behind the concept was identified as providing a “distinctive young masculine appearance” and noted that this idea was well received in concept study results which concluded that the “pack has tremendous appeal amongst young smokers””.

The packaging and appearance of cigarettes evolve continuously as tobacco manufacturers seek actively to promote their products despite other restrictions in place, and to incentivise increased purchase levels and, as a consequence, their profits.

The tobacco industry has sought to argue, in these proceedings and in others, that all of its marketing activity, including packaging, aims solely to persuade existing adult smokers to switch brands rather than to persuade people (including in particular children) to take up smoking. This argument is unsustainable. It is not possible to design a product to appeal to adults (over 18s) without appealing, even inadvertently, to children. A number of the tobacco companies have strenuously denied that they target their product on children or even that they are interested in the impact of tobacco on children (see paragraphs [294ff] below). But the Government medical advisers all say that, targeted or not, the lure to children remains strong and this is plain and obvious to the manufacturers.

In this context the Secretary of State identifies the following as the specific aims of the Regulations: (i) discouraging people from starting to use tobacco products; (ii) encouraging people to give up using tobacco products; (iii) helping people who have given up, or are trying to give up, using tobacco products not to start using them again; (iv) reducing the appeal or attractiveness of tobacco products; (v) reducing the potential for elements of the packaging of tobacco products other than health warnings to detract from the effectiveness of those warnings; (vi) reducing opportunities for the packaging of tobacco products to mislead consumers about the effects of using them; (vii) reducing opportunities for the packaging of tobacco products to create false perceptions about the nature of such products; (viii) having an effect on attitudes, beliefs, intentions and behaviours relating to the reduction in use of tobacco products; and (ix) reshaping social norms around tobacco use to promote health and wellbeing (which includes in part the ‘denormalisation’ of or reshaping of social norms surrounding smoking). The aims set out above were identified during the pre-legislative consultation exercise. They are referred to in Section 94(4) Children and Families Act 2014.

The Claimants argue that the Regulations seek, in effect, to close down the vestigial right and opportunity for manufacturers and suppliers to market their brands. They take as their starting point the pre-existing regulatory environment which, as I have already observed, in a variety of ways curtails the rights of manufacturers and suppliers to promote their products. The Claimants thus submit:

“The production, sale, export and import of tobacco products is, and has always been, lawful in the UK. Yet manufacturers of tobacco products, including the Claimants, operate in a highly restricted environment. There is extensive regulation of tobacco products and packaging at both a domestic and European level, the substance of which is detailed in evidence before the Court. The measures taken are wide-ranging, including for example restrictions on where products can be used (tobacco products are banned from being smoked in enclosed public places), to whom they can be sold (see the raising of the minimum age to 18), how they can be purchased (see the banning of tobacco vending machines) and how they can be packaged…”.

The Defendant exhibited to its evidence a comprehensive list of all of the measures which had been adopted in the United Kingdom from 2003 onwards. This demonstrated that over that period the Government had been involved in a multifaceted programme to suppress supply and demand. It highlighted the numerous policies and initiatives designed, for instance, to curtail the prevalence of tobacco use by vulnerable groups such as children and young adults. The measures adopted included a series designed to limit advertising and promotion. The Claimants, for their part, also highlighted certain key legislative EU and national measures which had since the late 1980s already curtailed substantially the commercial ability of the tobacco companies to promote their products. In summary form these include:

The parties rely upon the regulatory history and context for different reasons.

The Claimants submit that because there has been so much restrictive legislation in the past the scope for them to advertise and promote their brands has perforce focused (now) predominantly upon the packaging and the actual product. It follows, and the evidence submitted by the tobacco companies bears this out, that a vast amount of thought, creativity and ingenuity has gone into packaging design. It follows that, until the adoption of the Regulations, the packaging of products and the products themselves have become the only remaining places where the Claimants may use their trade marks and they are, as it was put, “therefore critical”.

The Defendant says, in effect, “quite so” – it is for the very reason that advertising and promotion is now focused almost exclusively upon the packaging and the product that this has become an area that Government must tackle if it is to succeed in making continued headway into tobacco usage and prevalence. It is precisely because advertising on packaging and on the product has become so effective that it must, in consequence, be curtailed.

There is another relevance to the issue of regulatory context and this is in relation to whether, for the purposes of the law relating to the expropriation of property, the Regulations deprive the owners of their property rights or merely control the use of that property. The Defendant points out that the Regulations are no more than the continuation of a long line of use restrictions and that the Claimants have never in the past objected to them as amounting to a deprivation of their actual rights; the Claimants submit that the Regulations are, in essence, the last nail in the coffin and it is these measures that now result in de facto deprivation of the rights themselves. The Claimants’ point was made by many deponents from the tobacco industry. I cite just one (from BAT) by way of illustration:

“Plain packaging would prevent BAT from using any of its registered trade marks and unregistered marks on its packs (consisting of stylised word marks, device marks and marks that are a combination of both device and word marks) other than non-stylised word marks, which must be used in prescribed font and size. In the UK market there is already an existing comprehensive ban on tobacco advertising and promotion as well as the recently introduced ban on retail displays. Against this background, the limited space on cigarette packs, and the marks used on them, are to all practical purposes the only means by which BAT can communicate the different qualities of its products to adult smokers and differentiate its brands from those of its competitors and from other brands and products within its own brand portfolios, other than on the basis of price. Plain Packaging will effectively eliminate such differentiation. This would result in the loss of the value of BAT’s intellectual property rights and the goodwill attaching to those rights…”.

The Claimants refer to “the destructive effect” of the Regulations on the Claimants’ brands. It is said that it is self-evident that the Regulations would effectively destroy the manufacturers’ brands which will in essence all look and feel the same. One expert who gave evidence on behalf of the Claimants suggested that losses to brand value could be in the region of “billions” of pounds and throughout this case this headline grabbing figure has been used to denote the scale of losses which would be caused by the Regulations. In relation to Philip Morris an expert instructed on its behalf estimated that the loss in brand value to the company, which holds a market share of just under 8% for ready-made cigarettes, was between £340 million and £515 million. Counsel for the tobacco companies during the hearing, whilst being chary of attributing hard valuations, nonetheless described the financial impact as “truly immense”. It was candidly accepted that this case was about “profits”. As I explain later in relation to the issue of valuation (See Section I(4)) I reject completely the expert evidence which postulates losses of “billions”, but I do accept that there will be significant lost value flowing from the introduction of the Regulations.

As with much of the factual evidence there is not a great deal of room for dispute about broad generalities. The purpose of the Regulations is to eliminate the otherwise attractive power of the trade marks. Such rights are, in practical terms, valuable in a market place because they are attractive and they provide information to consumers which can stimulate demand for that brand both generally and for that brand to the competitive detriment of rivals. In one sense if the trade marks did not have these powerful attributes there would be no point in suppressing them.

A number of legal issues concern the analysis of the legal nature of the rights used to conduct advertising and promotion. In this section I set out some background information about the rights used by the Claimants. The principal focus of this litigation concerns trade marks and related rights. In particular the Claimants own, variously, UK national, Community trade marks, and international trade mark registrations and applications. Two of the Claimants (Imperial and BAT) also rely upon relevant copyright, patents and design rights, registrations and applications.

It is an obvious point to make that trade marks represent an important weapon in a trader’s armoury designed to promote the sales of that trader’s products both generally and in competition with those of rivals. In their various witness statements the Claimants emphasise the commercial function of trade marks: “The collective impact of these individual features is to present a recognisable brand which is familiar to consumers and easy to identify”; “... a brand enables consumers to clearly and quickly identify, distinguish and differentiate products, including from other brands or brand variants”; “… for manufacturers, brands provide an important means of competition, distinguishing one brand or product from another”; “… brands are extremely valuable intangible assets”.

There was a significant amount of evidence before the Court on the commercial breadth and strength of the different Claimants’ trade mark portfolios. Once again there is no need to set out, in extenso, the evidence for me to be able to accept the basic proposition that the trade marks owned by the Claimants comprise substantial and valuable portfolios of intellectual property rights, and that the Claimants’ brands may have value both individually and collectively (the sum is greater than the individual parts). For instance JT International owns in excess of one hundred registrations of tobacco products sold in the UK and some of those trade marks are of a long standing nature. The first Benson and Hedges trade mark in the United Kingdom was applied for in 1883 and the Gold pack has been protected by registered trade mark for in excess of 50 years. The Claimants’ registered trade marks come in a variety of forms including: device or design marks; pack-front marks; background pack-front marks; names in distinctive typefaces; combinations of marks; colours claimed as an element of the trade mark; and word marks.

In addition to trade marks a number of Claimants rely upon other property rights. In particular various Claimants rely upon goodwill in the sense of the goodwill which attaches to (in essence) registered trade marks: see by way of description Boehringer Ingelheim Ltd v VetPlus Ltd [2007] Bus LR 1456 paragraphs [36] – [37]. Once again a considerable body of evidence was placed before the Court to establish that there can be goodwill attached to the trade marks and other intellectual property rights. I accept that proposition which to me seems self-evident. The evidence, for instance, refers to various illustrative corporate transactions entailing the licence and sale of brands where a major component of the consideration paid was said to be attributable to goodwill.

It is also said that substantial resources are invested in the development and building up of goodwill. One relevance of this in the present case is that it is contended that the goodwill amounts to “property” which is protected by the law of passing off and/or where registered, trade mark infringement and, it is submitted, that the Regulations unlawfully deprive the Claimants of the goodwill attached to their marks by “cutting them off from the heritage with which they are associated”. The Claimants point out that such goodwill is distinct from goodwill in the business arising independently of the trade marks as the Courts have recognised: e.g. Mertrux Ltd v HMRC [2013] EWCA Civ 821 paragraph [40]. Imperial and BAT also rely upon patents, design rights and copyright. All of this is for the purpose of categorising these rights as “personal property” which falls within the definition of “possessions” for the purpose of the submission relating to the law concerning the deprivation of property rights without compensation (cf. Grounds 6, 7 and 8).

THE CONSULTATION PROCESS LEADING UP TO THE PROMULGATION OF THE REGULATIONS

I turn now to the process which led to the adoption of the Regulations. This is relevant to those Grounds which challenge the consultation process but it also provides background information relevant to the Grounds relating to proportionality and property rights (Grounds 3-8). It is important to remember that the ultimate decision maker was Parliament and that the process of promulgation was by affirmative resolution which thereby necessitated Parliament addressing itself specifically to the measures to be adopted. It is abundantly clear from Hansard that Parliament engaged in depth with the merits and de-merits of the arguments; it cannot on any view be said that Parliament rubber stamped the legislation.

Accordingly, the consultation process that preceded the laying before Parliament of the draft Regulations was for the purpose of a Ministerial decision as to the form of draft regulations to be laid before Parliament for its consideration.

I set out below a summary of the main stages that the legislation went through from consultation to promulgation.

The Stirling Review was commissioned in 2011 by the Department of Health led by researchers at the University of Stirling. It examined the evidence examining the proposed benefits of standardised packaging. It considered several measures of appeal and in particular perceptions (the attractiveness of standardised packages; the quality of cigarettes in standardised packages; smoker identity and personality attributes associated with standardised packages). The investigation also examined whether standardised packaging increased the salience of health warnings (the ability of a person to notice and recall health warnings on packages, or the seriousness or believability of the warnings). In addition the review considered whether and how perceptions of the harmfulness and strength of standardised packages differed from branded packs (and how different kinds of plain packages differed in this regard). It also looked at whether and how standardised packages impacted upon smoking related attitudes and beliefs, perceived impact on others, and perceived impact on own smoking-related intentions and behaviours.

The review examined and reviewed 37 pre-existing studies. The authors concluded that there was strong evidence to support three contentions. These have been described as “intermediate effects” and are encapsulated under the headings: (a) reduction in appeal; (b) increasing the salience of health warnings; and (c) increasing perceptions of harm:

“Plain packaging has been shown to: A. reduce pack and product appeal, by making packs appear less attractive and of lower quality, and by weakening the positive smoker identity and personality attributes associated with branded products B. increase the salience of health warning, in terms of improving the recall and perceived seriousness and believability of warnings, and C. reduce the confusion about product harm that can result from branded packs”.

A Research Update produced independently by researchers at the University of Stirling, and by essentially the same team, in September 2013 looked at 17 further published studies and concluded that in sum this added weight to the earlier findings. They excluded from their review unpublished (non peer-reviewed) work. Notably, a greater proportion of the studies featured in the Research Update were UK-based than in the 2011 review.

A number of limitations in the evidence base were recognised in the Stirling Review: (i) there were no randomised controlled trials of standardised packaging; (ii) many studies exhibited significant methodological flaws; and (iii), the studies often examined hypothetical situations and attitudes which affected their predictive value. However, the point was made that the individual limitations were mitigated by the fact that, overall, the research was consistent in its conclusions. In the (subsequent) Chantler Review (discussed below), Sir Cyril Chantler endorsed the findings of the Stirling Review and expressly observed that the failure by the tobacco companies to disclose internal research put into context their criticisms of the Stirling conclusions:

“4.8

Contrary to the criticisms made, the authors rightly place emphasis on the overall consistency of results collected through multiple study designs and across several countries (and the absence of evidence pointing in the other direction). This is a commonplace of research analysis which involves determining the direction of effect and, where possible, effect size. In my view, it does not seem to be a fair criticism that drawing studies from peer reviewed journals with a public health orientation represents a biased approach. There has been ample opportunity for the tobacco industry to present the undoubtedly extensive results of its own internal market research, for example focus group research exploring brand switching, but to date this has not been forthcoming other than as a result of litigation in the United States.”

On 9^th March 2011, the Government published Healthy Lives, Healthy People: A Tobacco Control Plan for England. This set out 6 different types of measure for the control of tobacco over a five year time horizon. The document foreshadowed a consultation on standardised packaging. On 16^th April 2012 a Consultation on Standardised Packaging of Tobacco Products (the “2012 Consultation”) was published. The then Minister for Health stated:

“The Government have an open mind at this stage about introducing standardised packaging. Through the consultation, we want to understand whether there is evidence to demonstrate that standardised packaging of tobacco products would have an additional public health benefit over and above existing tobacco control initiatives.”

Consultees were invited to respond to three options: (a) “do nothing”; (b) introduce standardised packaging; and (c) adopt“[a] different approach to tobacco packaging to improve public health”. The Department did not rule out considering additional alternative ways to reduce the promotional impact of tobacco packaging upon smoking.

The 2012 Consultation sought responses to 27 questions. A link to the Stirling Review was provided. Paragraph 1.3 of the 2012 Consultation stated: “… Any decisions to take further policy action on tobacco packaging will be taken only after full consideration is given to consultation responses”. There has been no suggestion that any of the times ultimately permitted for consultation responses was too short or in any way inadequate. In excess of 2,400 detailed responses and nearly 666,000 campaign responses were received. They were reviewed with the assistance of external consultants.

In October 2012, Australia’s plain packaging legislation came into force, with full (albeit staged) implementation required by December 2012.

A submission was provided to Ministers by civil servants dated 12 February 2013. This was accompanied by 20 Appendices (the “February 2013 Submission”). This provided an assessment of the evidence available at that time. It put four options to the Minister. It did not contain a recommendation. Two of the options were: (a) to defer a decision until the Australian experience had been evaluated; and (b), to decide not to proceed with the policy at all.

The Summary Report: July 2013 / the position in relation to Australia

On 12^th July 2013 the Government published a summary report on the 2012 Consultation responses. On the same date, the Secretary of State made a statement to Parliament. He noted that the views expressed in response to the consultation were polarised. Then the Minister stated:

“Having carefully considered these differing views, the Government has decided to wait until the emerging impact of the decision in Australia can be measured before making a final decision on this policy. Currently, only Australia has introduced standardised packaging, although the Governments of New Zealand and the Republic of Ireland have committed to introduce similar policies. Standardised packaging, therefore, remains a policy under consideration…”.

Although it was considered appropriate to wait for further information about the

The decision to defer sparked considerable Parliamentary activity and this led to the enactment of section 94 of the Children and Families Act 2014 which empowered the Secretary of State to lay draft regulations before Parliament. Even though the policy remained under active consideration by the Department, many parliamentarians wished further progress to be made on the issue because of the important public health benefits it was expected to bring about. The enactment of section 94 thus prompted the Government to appoint Sir Cyril Chantler to review not only the evidence considered in preparing the February 2013 Submission but any new evidence.

The review was announced on 28 November 2013. The Minister stated that the Government would introduce standardised packaging if, following the review and consideration of wider issues, the Government was “satisfied that there are sufficient grounds to proceed, including public health benefit”.

Sir Cyril Chantler (“Chantler”) is a paediatrician and medical researcher. He was informally recommended to the Department by the independent Chief Medical Officer. Upon the basis of the evidence before the Court, I am satisfied that he was appointed upon the basis of his qualifications and reputation and because he was accepted as a neutral expert competent to provide impartial advice to the Government. As the Chief Medical Officer explained, in a highly polarised field such as tobacco control, having an independent expert to assess the weight of the evidence was desirable.

The Chantler Review Report was dated 31^st March 2014 and was published on 3 April 2014. The Report summarised the arguments for and against standardised packaging. The review did not repeat the exercise conducted in 2012 (the Stirling Review) but sought to build upon it.

Chantler set out a description of the methodology he used. This included reviewing existing evidence and new submissions, meeting with experts on all sides of the debate (including experts commissioned by the Tobacco Claimants whose evidence submitted to Chantler was also before the Court). He also considered the evidence then existing from Australia and he went to Australia to meet relevant officials and experts. In relation to the firmness of any final conclusion he made the important point (at paragraph [1.19] – set out below) that given the multifaceted nature of the regulatory restrictions imposed it was “difficult” both at the time and in the future (“in due course”) to separate the effect of plain packaging from other measures. He also highlighted the problem faced by researchers which was that they could not conduct double blind randomised control trials (such as were routine in drug trials). His conclusion (at paragraph [1.20] – see below) was that, viewed in the round, there was, nonetheless, a “considerable volume” of relevant evidence to evaluate:

“The Review’s methodology

1.8

On 16 December 2013 I published a Method Statement which set out the method I intended to adopt in carrying out my review (see Annex A).

1.9

In accordance with the Method Statement, the Review Team and I began by considering the existing evidence relevant to the public health issue I had been asked to consider. This involved giving careful consideration to the Summary Report of the Department of Health’s 2012 consultation, reviewing full text versions of a range of detailed responses to that consultation from the main stakeholders and both the Stirling Review and subsequent Research Update published in September 2013.

1.10

Following publication of the Method Statement, some 50 new submissions were received, which brought to light several new papers, including some “in press” or in the process of peer review. The submissions also included a number of organisation’s member opinion surveys, and the views of, amongst others, packaging businesses.

1.11

All submissions to the Review were read and key points of argument and supporting evidence identified for follow-up. In several cases I contacted experts who had articulated what appeared to be the key arguments and/or summation of evidence, and arranged face to face meetings with them to explore their views in greater detail. This included meetings with experts such as Professors Devinney and Steinberg, who had produced detailed critiques of the Stirling Review and the drivers of smoking initiation respectively.

1.12

In addition to meeting with experts, in accordance with my Method Statement I held two main meetings to discuss the views of the principal bodies representing each side of this polarised debate. Accordingly, I met with representatives of the Smokefree Action Coalition on 27 January 2014 and the Tobacco Manufacturers Association on 29 January 2014 in order to better understand and explore their respective views. I also met with representatives of Philip Morris Ltd on 29 January 2014 as they are not a member of the Tobacco Manufacturers Association. I am publishing the transcripts of these meetings.

1.13

A number of papers referenced in the tobacco industry’s submissions were considered in detail after identification of those that appeared most relevant to the task. The voluminous literature on tobacco control was also scrutinised to the extent time allowed, including material sourced from references in submissions, published papers and previous reviews.

1.14

As anticipated in my Method Statement, I also commissioned some further expert advice to assist me in the analysis of the key evidence. In particular, I commissioned two specific pieces of independent analysis on the qualitative and quantitative studies in the Stirling Review (and the subsequent Research Update) using Critical Appraisal Skills Programme assessment tools. These were undertaken by academics at Southampton University and Kings College London respectively.

1.15

Finally, I also sought to take account of the emerging evidence relating to the implementation of plain packaging in Australia. In particular, I met with a range of stakeholders in Australia during March 2014, including representatives of the tobacco industry, leading public health academics, and key departments of the Australian Commonwealth Government.

1.16

A list of all published evidence considered by the Review will be made available separately, together with copies of the submissions sent in response to the Method Statement and further evidence sent to the Review which generally arose in follow-up to questions posed in meetings or in response to specific requests.

1.17

I have not sought to distinguish between different types of tobacco products for the purposes of this Review but have looked at tobacco in general. All tobacco products are dangerous in their health effects. The Review has, however, focused on cigarettes and roll-your-own tobacco in view of their overall prevalence and particularly their use by children and young people. I note in this regard the approach, taken in the revised European Tobacco Products Directive (mentioned further below) in relation to these products which differs from that taken for more mainstream products but preserves power to intervene further as necessary. I see the scope of any standardised packaging scheme as one matter for policy makers to consider further in the event of a decision to introduce such a scheme.

1.18

Given my terms of reference, much of the Review’s time was spent considering the likely impact of standardised packaging on young people. For clarity, in this report references to “children” are generally used to refer to those under 18 years of age (who are unable legally to purchase tobacco), and references to “young adults” are to 18-24 year olds. In practice however, I considered it necessary to consider the effects of standardised packaging across the age range as a continuum. This is because addiction to smoking can involve a number of stages after first initiation, including prolonged progression through occasional use and later consolidation to becoming a habitual smoker. Coupled with the fact that once established, giving up smoking is extraordinarily difficult, there is a clear rationale for targeting anti-smoking efforts at children and young people whenever possible.

The nature of the evidence

1.19

I have been asked whether the evidence shows that it is likely that there would be a public health impact. This is clearly not an issue which is capable of scientific proof in the manner one might apply, for example, to the efficacy of a new drug. There have been no double blind randomised controlled trials of standardised packaging and none could conceivably be undertaken. The most direct experiment to test the efficacy of standardised packaging might be to compare the uptake of smoking in non-smoking children with cigarettes in branded packaging and to see which group smoked more. But given the highly addictive and harmful nature of smoking, such an experiment could, rightly, never receive ethical approval. In any case such an experiment would need to be conducted over a long period and within a large population in which other variables were held constant. Indeed in Australia it will be difficult in due course to separate the effect of plain packaging from other factors such as changes in pack sizes introduced by the manufacturers, and price and tax increases.

1.20

However there is a considerable volume of other evidence from interested parties on all sides of the debate, augmented by further tobacco control publications, internal tobacco industry documents, wider marketing literature and practice, all of which I have taken into account in arriving at a considered view of likely effects, grounded in the best available evidence”.

The Secretary of State points out that the Chantler Review represented a form of peer review of the conclusions of the Stirling review which itself was a peer review of the extant material in the public domain in particular that which was peer reviewed.

Intermediate outcomes: Chantler accepted that it was “entirely compatible with known risk factors for smoking uptake such as peer pressure and parental smoking”

The need for a multifaceted approach to regulation: Chantler concluded that the regulation of smoking necessitated a multifaceted approach incorporating a variety of regulatory approaches:

“I am struck by the emphasis in the published literature, and in oral evidence from experts, that the nature of tobacco control measures is rarely about single, one-off solutions. Given the extraordinary difficulty of quitting smoking, it would be surprising if this were not the case. This is summed up by the Royal College of Physicians Tobacco Advisory Group, who have said:

“It is important that policies continue to be developed, improved and innovated to retain initiative and impact with smokers and the general public. It is also important to consider that the individual components of tobacco control policy typically have modest effects. It is their collective impact in the context of a comprehensive range of policies that becomes substantial””.

Extent of health benefit: Chantler accepted that the conclusions of the Stirling review were modest and that the evidence base had its limitation but he nonetheless formed the judgment that the evidence was all in one direction and that the so-called “intermediate outcomes” (reduction in appeal, increased salience of health warnings, reduction in confusion, etc) were to be categorised as health benefits which would reduce smoking in the long term:

“6.2.

The specific evidence base, centred on the Stirling Review and update, is relatively modest, and put forward in awareness of its limitations due in particular to constraints on study design. But it points in a single direction, and I am not aware of any convincing evidence pointing the other way. It strongly supports the intermediate outcomes identified, and, taking into account the wider evidence around marketing, and drawing on modern behavioural psychology, there is a clear plausible link to behaviour. Whilst standardised packaging may have a modest effect, it is the nature of public health measures that small effects mount up at a population level.

6.3

The “intermediate outcomes” are debatably public health benefits in themselves. For people to be less confused about the harms of smoking is a good thing even if it does not immediately result in them smoking less. It is hard to see how the clearly documented intermediate effects could possibly increase smoking, and easy to see to how, over time they could reduce it”.

The intrinsic quality of the evidence: Chantler also addressed an issue which has loomed large in all debate over impending legislation between the state and the tobacco industry, namely bias and perceptions of bias. He rejected the criticism made by the tobacco companies that those that advised the Government were biased against the industry. Conversely, he articulated scepticism about the methodological efficacy of research results generated by the tobacco companies. He also criticised the tobacco companies for adopting unrealistic criticisms of the output of existing researchers (see e.g. paragraphs [4.13] and [4.14]). He cited with apparent approval an article by Ulucanlar S, Fooks GJ, Hatchard JL and Gilmore (Footnote: ³):

“4.15.

In a recently published article Ulucanlar (et al) argue that the tobacco companies’ evidence was “underpinned by three complementary techniques that misrepresented the evidence base. First, published studies were repeatedly misquoted, distorting the main messages. Second, ‘mimicked scientific critique’ was used to undermine evidence; this form of critique insisted on methodological perfection, rejected methodological pluralism, adopted a litigation (not scientific) model, and was not rigorous. Third, tobacco companies engaged in ‘evidential landscaping’, promoting a parallel evidence base to deflect attention from standardised packaging and excluding companyheld evidence relevant to standardised packaging”.

The point is a significant one. It is an issue that I address fully in relation to Ground 2 in this judgment. Chantler referred to an important judgment in the US given by Judge Kessler (the US Judgment - see paragraph [7] above). He said this:

“6.9

It is always possible to confuse passionate interest with bias. In this regard I note the opinion of Judge Kessler at the conclusion of a seven-year lawsuit involving scrutiny of thousands of documents and examination of many expert witnesses. Namely that: “Much of the Defendants’ criticisms of

Government witnesses focused on the fact that [they] had been

long-time, devoted members of “the public health community.” To suggest that they were presenting inaccurate, untruthful, or unreliable testimony because they had spent their professional lives trying to improve the public health of this country is patently absurd.” (Footnote: ⁴)

6.10

My overall findings are not dissimilar to those of previous reviews that have looked at this issue. For example, the findings of the study by RAND Europe undertaken for the European Commission in the context of revision of the European Tobacco Products Directive:

“While there is still some debate about the feasibility of implementing this measure and about the evidence base for the impact on tobacco consumption, the types of studies presented […] provide evidence of the role and importance of cigarette packaging design in attracting consumers (both current smokers and aspiring smokers) to tobacco products. Thus, given the importance of product attractiveness in product purchasing decisions and evidence that such packaging detracts from the health warning currently placed on such products, it is apparent that plain packaging would have some deterrent impact (albeit difficult to quantify) on the consumption of tobacco products. It might also be envisaged that this impact could be greater in deterring consumers who are non-smokers and therefore not yet addicted to nicotine from taking up smoking. Also, given the evidence on cigarette design attractiveness to different target populations, the impact of plain packaging could also have a particularly positive effect on these groups, encouraging them to reduce their cigarette consumption and uptake”.

The impact upon children and youth: Chantler also firmly rejected the submission of the tobacco companies that standardised packaging could produce a perverse appeal (as opposed to a deterrent effect) for children. He noted that this view originated from a 2008 consultation on the future of tobacco control which sought views on plain packaging, and the adverse impact of advertising upon children was listed there as a “potential disadvantage”. The text continued to say however that “the Department of Health is not aware of any research evidence that supports such concerns”. Chantler was of the view that the concern expressed by the tobacco companies was speculative and lacking in supporting evidence. He was not aware of any suggestions that this effect has been seen to date in Australia. He stated: “Whilst not entirely lacking plausibility, at least for a subset of young people, the lack of evidence suggests that this effect, if manifested at all, would not overturn the broader effect on appeal described above.” (ibid paragraph [4.23]).

Ultimate effect of standardised packaging would enhance public health: The final conclusion of Chantler was that standardised packaging would, on balance, advance public health:

“6.11

In conclusion research cannot prove conclusively that a single intervention such as standardised packaging of tobacco products will reduce smoking prevalence. For various reasons as cited it is not possible to carry out a randomised controlled trial. Even if it was possible it would be extremely difficult to control for all the various confounding factors which are known to affect smoking. However after a careful review of all of the relevant evidence before me I am satisfied there is sufficient evidence derived from independent sources that the introduction of standardised packaging as part of a comprehensive policy of tobacco control measures would be very likely over time to contribute to a modest but important reduction in smoking prevalence especially in children and young adults. Given the dangers of smoking, the suffering that it causes, the highly addictive nature of nicotine, the fact that most smokers become addicted when they are children or young adults and the overall cost to society, the importance of such a reduction should not be underestimated”.

The conclusions of the independent economist: The tobacco companies argue strongly that standardised packaging will lead to “downtrading” which, all things being equal, would lead to an increase in demand. This is an issue which is addressed at length in relation to Ground 3 below. Chantler decided to test the issue of the price effects of standardised packaging by instructing an independent economist to review the issue. The conclusions were set out in Annex C to the Report. In relation to demand for tobacco the economists concluded that standardised packaging would have two effects. First it would make tobacco products less desirable; and secondly, consumers would therefore be willing to pay less for tobacco than hitherto:

“In so far as consumers value branded packaging, then a move to standardised packaging reduces the desirability of tobacco products. This is a reduction in demand, or ‘willingness to pay’ that, under standard economic theory, can be expected to lead to both a fall in price and a fall in consumption. In this respect, whilst the magnitude of effect of standardised packaging can be debated, the direction of effect from the initial demand change will almost certainly be to reduce consumption of tobacco.

One of the consequences of changing demand is likely to be trading down towards lower cost products. This is because consumers no longer value premium products as highly after desirable packaging is removed. These effects are reported in research produced for Phillip Morris International (PMI) and for Japan Tobacco International (JTI). However, existing smokers display extremely high brand loyalty and will have been exposed over their lives to many thousands of branding images prior to the introduction of standardised packaging, so their brand memory will be strong. In Australia, there is some evidence that an existing trend for ’down-trading’ towards value brands may have accelerated since the introduction of plain packaging. However, much of this effect is likely to be the result of the significant tax increases that have also been introduced.

Overall, if standardised packaging was working, a degree of down-trading would be expected to occur, especially in the long-term. This reflects that tobacco in standardised packaging becomes less desirable than it was in branded packaging and therefore the amount consumers are willing to pay for tobacco products is reduced”.

In response to the Review (having received an early copy), the independent Chief Medical Officer, Professor Dame Sally Davies, wrote to the Minister endorsing the Review. She also commissioned internal reports from the Deputy Senior Medical Officers which corroborated her conclusion and that of Chantler.

The response of the Government to the Chantler Review: April 2014

On 4 April 2014, the Parliamentary Under Secretary for Public Health announced the Government’s response to the Chantler Report:

“In light of [Sir Cyril Chantler’s] report and the responses to the previous consultation in 2012 I am therefore currently minded to proceed with introducing regulations to provide for standardised packaging. However, before reaching a final decision and in order to ensure that that decision is properly and fully informed, I intend to publish the draft regulations, so that it is crystal clear what is intended, alongside a final, short consultation, in which I will ask, in particular, for views on anything new since the last full public consultation that is relevant to a final decision on this policy. I will announce the details about the content and timing of that very shortly but would invite those with an interest to start considering any responses they might wish to make now”.

The 2014 Consultation document was published six weeks after the announcement of 4^th April 2014. Paragraph [1.1] of the 2014 Consultation document explained that:

“The Government has not yet made a final decision on whether to introduce standardised packaging of tobacco products. This consultation will inform decision making by the Department of Health and Devolved Administrations on whether to introduce standardised packaging. We want to hear the views of interested people, businesses and organisations. We particularly seek new, or additional, information relevant to standardised packaging that has arisen since the 2012 consultation”.

Draft regulations were also provided with the 2014 Consultation document so that consultees could understand how the policy would work in practice. All of the Claimants responded to the 2014 Consultation. In total, the Department received a further 1,307 detailed responses and 136,404 campaign responses.

Contingency planning and notification to the European Commission

I turn now to the procedure adopted by the Secretary of State in notifying the draft Regulations to the European Commission. Contingency steps were taken in relation to the adoption of the Regulations because of the looming of the 2015 General Election and the onset of purdah. As part of these contingency plans on 29^th August 2014 the United Kingdom notified the draft regulations to the European Commission in accordance with Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 (the “Technical Standards Directive”) and Article 24(2) TPD. Article 24 TPD is set out at paragraph [238] below.

The decision to notify was taken independently of the final substantive decision whether or not actually to introduce standardised packaging. The Defendant thus explained in his written submissions to the Court:

“As it was anticipated that the notification would attract detailed comment from other Member States, and thus that the usual three-month standstill period would need to be extended by a further three months, it was decided that the notification should be made before the final policy decision was reached so that if the decision was to enact the Regulations, this would still be viable before the end of the Parliamentary session. BAT and Imperial attach significance to the fact that in response to the notification certain Member States served detailed opinions objecting to the draft Regulations. However, many Member States did not. Moreover, BAT and Imperial do not refer to the fact that a number of other countries support the introduction of standardised packaging (other than Australia), including Ireland, New Zealand, France, and Norway. As set out above, the Guidelines to the FCTC recommend that all members of this important WHO Treaty consider introducing the policy”.

The TPD is promulgated pursuant to Article 114 TFEU. It provides:

“Article 114

1.

Save where otherwise provided in the Treaties, the following provisions shall apply for the achievement of the objectives set out in Article 26. The European Parliament and the Council shall, acting in accordance with the ordinary legislative procedure and after consulting the Economic and Social Committee, adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market.

2.

Paragraph 1 shall not apply to fiscal provisions, to those relating to the free movement of persons nor to those relating to the rights and interests of employed persons.

3.

The Commission, in its proposals envisaged in paragraph 1 concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts. Within their respective powers, the European Parliament and the Council will also seek to achieve this objective.

4.

If, after the adoption of a harmonisation measure by the European Parliament and the Council, by the Council or by the Commission, a Member State deems it necessary to maintain national provisions on grounds of major needs referred to in Article 36, or relating to the protection of the environment or the working environment, it shall notify the Commission of these provisions as well as the grounds for maintaining them.

5.

Moreover, without prejudice to paragraph 4, if, after the adoption of a harmonisation measure by the European Parliament and the Council, by the Council or by the Commission, a Member State deems it necessary to introduce national provisions based on new scientific evidence relating to the protection of the environment or the working environment on grounds of a problem specific to that Member State arising after the adoption of the harmonisation measure, it shall notify the Commission of the envisaged provisions as well as the grounds for introducing them.

6.

The Commission shall, within six months of the notifications as referred to in paragraphs 4 and 5, approve or reject the national provisions involved after having verified whether or not they are a means of arbitrary discrimination or a disguised restriction on trade between Member States and whether or not they shall constitute an obstacle to the functioning of the internal market.

In the absence of a decision by the Commission within this period the national provisions referred to in paragraphs 4 and 5 shall be deemed to have been approved.

When justified by the complexity of the matter and in the absence of danger for human health, the Commission may notify the Member State concerned that the period referred to in this paragraph may be extended for a further period of up to six months.

7.

When, pursuant to paragraph 6, a Member State is authorised to maintain or introduce national provisions derogating from a harmonisation measure, the Commission shall immediately examine whether to propose an adaptation to that measure.

8.

When a Member State raises a specific problem on public health in a field which has been the subject of prior harmonisation measures, it shall bring it to the attention of the Commission which shall immediately examine whether to propose appropriate measures to the Council.

9.

By way of derogation from the procedure laid down in Articles 258 and 259, the Commission and any Member State may bring the matter directly before the Court of Justice of the European Union if it considers that another Member State is making improper use of the powers provided for in this Article.

10.

The harmonisation measures referred to above shall, in appropriate cases, include a safeguard clause authorising the Member States to take, for one or more of the non-economic reasons referred to in Article 36, provisional measures subject to a Union control procedure”.

It will be seen that under Article 114(5) Member States are empowered to “introduce” measures in the field of “protection of the environment or the working environment” and a notification procedure is laid down. It has not been suggested by the Defendant that the power to adopt the Regulations emanated from this provision; but rather that it comes from Article 24(2) TPD which is broader and includes in particular public health grounds. The Commission responded on 10^th November 2015 and indicated that it had assessed the evidence submitted in the context of “…the free movement of goods” but chose to offer no opinion under the Technical Standards Directive. The Commission stated that it would monitor “implementation” and, significantly, would follow international developments “…particularly at the level of the World Health Organisation”.

On 16^th December 2014 a submission (the “December 2014 Submission”) was placed before Ministers seeking directions on how to proceed with policy development on standardised packaging. The submission set out the relevant evidence to enable ministerial decision making and followed analysis of the responses to the 2014 Consultation and preparation of an impact assessment (see below). The submission sought directions on two policy options which were: (a) to proceed with standardised packaging of tobacco products; or (b) not to proceed with standardised packaging.

The basis upon which Ministers were invited to take this decision was that they concluded that there were “sufficient grounds to do so”. Ministers were made explicitly aware that if they decided in favour of proceeding with the proposal this would involve the laying before Parliament of Regulations. They were advised of the fact that the timetable would be “extremely tight” given the need to ensure “proper Parliamentary scrutiny” before Parliament rose ahead of the upcoming election. The submission comprises an 81 paragraph summary of the relevant issues and of the positions of the opposing parties to the debate. It comprised 14 annexes which set out further detail on each of the main areas of consideration and it also included a “reference folder” which contained the key documents referred to in the submission. The submission as a whole submitted to Ministers was a comprehensive document.

A number of features of the submission are relevant to the grounds of challenge. In particular, one such ground (Ground 13) alleges that the Claimants’ evidence, and in particular the expert evidence, was insufficiently and unfairly summarised in the submission. As to this the submission provides a summary of the criticisms made of the Chantler Report and in particular it records the tobacco companies’ objection that Chantler contained an insufficient evidential basis upon which to introduce legislation, that the Report relied upon unsound and hypothetical evidence and incorrectly concluded that branded packaging contributed to increased tobacco consumption. The submission also sets out the complaint that the Chantler Report was not independent, relying upon expert opinions from tobacco control advocates and those with conflicts of interest and that it unfairly dismissed evidence which did not support the policy (i.e. Chantler was guilty of predetermination). The submission also records the complaint of the tobacco industry that Chantler relied too heavily upon the Stirling Review and paid insufficient attention to data available from Australia. For example, it is recorded that the tobacco companies were of the view that Chantler had ignored a KPMG report upon illicit tobacco markets in Australia. They also referred to a report from London Economics submitted by PMI which concluded that the data from Australia did not demonstrate a change in smoking prevalence following the introduction of plain packaging.

Paragraph [22] of the December 2014 Submission lists the principal points advanced by the tobacco industry:

“22.

The main issues raised in response to the consultations by opponents to the policy were:

•

In relation to the evidence base – 1) It would not be effective in reducing smoking prevalence since tobacco packaging is not a relevant factor in people’s decisions to smoke or quit and, 2) given the lack of evidence the government has not demonstrated that the benefits would outweigh the adverse consequences.

•

It would increase the illicit tobacco trade in the UK.

•

It would have other significant adverse unintended consequences such as lowering prices and thereby increasing smoking, reducing government revenue, and harming small businesses.

•

It creates a further burden on retailers, as it would be more difficult to manage stock and increase transaction times for selling of tobacco.

•

It would cause UK job losses in tobacco manufacturing and packaging industries.

•

It is unlawful as it would breach UK, EU and international laws and agreements and be an expropriation of intellectual property rights, requiring payment of compensation by the Government.

•

There a number of alternative evidence-based options that are proportionate, effective, workable and can achieve public health objectives”.

The submission also recognised, explicitly, that the evidence base supporting public health benefits of standardised packaging had limitations. These limitations were said to be unavoidable and were a direct result of the nature of the question and the fact that only one country had implemented the policy to date, and had done so only relatively recently. It recorded the objections of the tobacco industry as being “vocal” regarding the limitations and gaps in the evidence base. In Annex C to the Submission a detailed, 52 paragraph, analysis of the strengths and weaknesses of the evidence in support of the introduction of advertising restrictions is set out. This Annex acknowledges the limitations inherent in the research base in support of legislation. It also sets out the criticisms advanced by the tobacco companies of that research base and examines those criticisms. It is notable that nowhere in either the Submission or in the Annexes is it said that the evidence supplied by the tobacco companies is to be given discounted weight relative to that advanced in support of restrictive measures by reason of methodological flaws contained within the tobacco companies’ evidence.

It is right to record that the document came to the conclusion that, on balance, the existing evidence base supported the introduction of restrictive advertising measures.

In relation to the risks of “downtrading” (which forms a central basis for the Claimants’ submissions under Ground 3) the December 2014 Submission accepts that there “may be” increased price competition whereby in time smokers would downtrade from premium to lower priced brands. And it is recorded that the Department accepted that some downtrading “may occur” if standardised packaging was introduced into the United Kingdom. The Submission stated that some support for this conclusion could be found in the Australian data but that the results may be due to tax increases introduced there. The Department was of the view that insofar as downtrading did occur the impact of any price reduction could be mitigated by HMT through increased taxation.

In relation to illicit trade the Department took the advice of HMRC. A summary of the conclusions of HMRC was set out at Annex K to the submission. It recorded that the tobacco industry had identified an increase in illicit tobacco as a possible unintended consequence of the introduction of the Regulations. The conclusion of HMRC was that there was no evidence to suggest that the introduction of standardised packaging would have a significant impact upon the size of the illicit market or would prompt a step-change in the activity of organised crime gangs. HMRC did anticipate that it might prompt some change in the mechanics of fraud and to the composition of the illicit market but that this could be mitigated and managed through modifications or extensions to existing intervention methodologies. In Annex L further analysis was provided of the risk that the introduction of standardised packaging would increase illicit trade. This took greater account of evidence emanating from Australia. It provided a summary of the conclusions in the KPMG April 2014 Report “Illicit tobacco in Australia: 2013 Full Year Report”. This report, prepared on behalf of the tobacco industry, was provided to Ministers in the reference folder which accompanied the actual submission. The Annex provides the view of HMRC on the KPMG Report. The view was that the evidence from Australia was still emerging and that the picture was complex and incomplete. In paragraph [28] of Annex L the following is stated:

“The KPMG Report indicates a rise in the illicit tobacco market in Australia. However, this Report is funded by tobacco companies and KPMG itself has said that it is a misrepresentation of the Report “to suggest it supports the contention that plain paper packaging could lead of itself to an increase in tobacco smuggling and duty avoidance””.

In relation to data generated by the Australian Government (the Australian Customs and Border Protection Services Data) the Annex reported that this showed an increase in confiscation of cigarettes in 2012/2013 but observed that it was unclear whether this reflected the general variation of figures from year to year, increased enforcement activity or an increase in illicit trade. The Annex then stated:

“It is worth noting that there are significant differences between the markets in the UK and Australia, particularly in terms of the proximity to other countries, so the lessons learnt from the introduction of standardised packaging in Australia may not necessarily translate to the UK”.

The view of the authors of the December 2014 Submission was that the HMRC assessment was the most comprehensive and reliable information available and that

The Minister was provided with a further impact assessment (see below). This was ultimately published on 10^th February 2015. This included a rebuttal of the key arguments advanced by the Claimants and others who opposed standardised packaging. It is the most detailed analysis of the conclusions arrived at during the consultation process and it can fairly be said to represent the most up to date analysis put to Ministers. Although it cannot be said necessarily to reflect Parliament’s thinking it can, nonetheless, be said to represent the most comprehensive justification extant at the time of promulgation of the Regulations.

The impact assessment (the “2014 Impact Assessment”) considered, in the light of previous Ministerial decisions, three options: (a) to do nothing and await the introduction of the TPD; (b) to adopt standardised packaging; or (c) to defer the decision (again). A detailed cost/benefit analysis was conducted.

The conclusion in the 2014 Impact Assessment was that the expected societal benefits from reduced smoking prevalence and the resultant lives saved would be materially larger than the expected costs to society from reduced taxation revenue and costs to businesses. The assessment was published on 10^th February 2015. The total quantified benefits were put at £30 billion with the total quantified costs of £5.2 billion and therefore a net benefit to the public interest of circa £25 billion.

I set out below paragraphs [1] – [38] of the assessment. These represent, in summary form, the most comprehensive statement of reasons which it might fairly be said reflected the view of the Secretary of State when laying draft regulations before

Paragraphs [1]-[38] are important and are as follows:

“What is the problem under consideration? Why is government intervention necessary?

1.

Tobacco use remains one of the most significant challenges to public health across the United Kingdom and is the leading cause of premature death in the UK. The Government remains concerned about the take up of smoking by young people, the difficulty that adult smokers have in quitting smoking, high levels of relapse of those smokers that do attempt to quit and the consequences for the health of others from exposure to second hand smoke (SHS). Tobacco use also contributes significantly to health inequalities.

2.

The Government has a policy to stop the promotion of tobacco. Action to stop the promotion of tobacco has been taken over many years. The Tobacco Advertising and Promotion Act 2002 (TAPA) prohibits tobacco advertising. The Health Act 2009 requires the end of tobacco displays in England (in large stores from 2012 and all other tobacco retailers in 2015). A Cancer Research UK report on plain packaging says that tobacco packaging serves multiple functions for tobacco manufactures. It is used to promote the product using the same strategies employed by other manufacturers of consumer goods, specifically packaging innovation, design and value packaging. Packaging is viewed as a key marketing tool for tobacco companies, according to both their own internal documents and also the retail press. Packaging has a wider reach than advertising and is the most explicit link between the company and the consumer. Tobacco packaging and branding is a key element of tobacco marketing and promotion in the UK today.

3.

Evidence suggests that the majority of existing smokers would prefer not to smoke. Almost 7 smokers in 10 say they would like to quit, yet only half actually make a quit attempt. Furthermore, less than 3% of smokers successfully quit each year. The smoker who wishes to give up smoking faces many obstacles, particularly the psychological and physiological components of addiction. Out of the smokers who do attempt to quit, approximately half do so without any assistance. These unassisted quit attempts are associated with the highest rates of relapse. In general, attempts to stop smoking are accompanied by powerful urges to smoke/cravings which are a major source of relapse and occur despite the individual concerned wanting to remain abstinent. Cravings overpower and undermine resolve to remain abstinent. These problems present examples of the difference between what smokers would prefer to do and what they are actually able to do with respect to tobacco consumption. The policy objectives include supporting smokers who want to quit and helping those who have quit avoiding relapse into smoking. In doing so, they will be better able to exercise their free choice in consumption decisions.

4.

Introducing standardised packaging represents a policy option for the Department of Health in England and for the Devolved Administrations in Scotland, Wales and Northern Ireland, as part of their wider comprehensive tobacco control strategies, to improve public health by reducing tobacco use. Research evidence suggests that standardised packaging of tobacco products would contribute to the Government’s public health policy objectives by reducing the appeal of cigarettes (including hand rolling tobacco), packs and brands, increasing the salience of health warnings, making perceptions of product harm and strength more accurate and reshaping smokingrelated attitudes, beliefs, intentions and behaviour.

5.

Tobacco control policy across the UK aims to reduce youth uptake of smoking, and to encourage and support quitting amongst smokers who wish to quit; standardised packaging is expected to have a positive impact on both.

6.

Smoking rates are today broadly the same among men and women. Around two-thirds of smokers say that they started smoking regularly before the age of 18. In 2009, the Public Health Research Consortium (PHRC) published a review of young people and smoking in England. The review found that the onset of smoking is a function of individual factors (e.g. self-image), social and community factors (e.g. family circumstances) and societal factors (e.g. tobacco marketing). Moodie et al. (2008) summarise the different research undertaken on tobacco advertising and smoking uptake by young people, and has found that:

Research has consistently revealed that tobacco advertising and promotion increases the likelihood that adolescents will start to smoke, whether employing cross-sectional research, prospective research, time series studies or systematic reviews. The cumulative evidence indicates that there is a dose-response relationship, where greater exposure to advertising and promotion results in higher risk, even when controlling for known causative factors such as low socioeconomic status, parental and peer smoking… Furthermore, we know that tobacco branding is continuing to drive UK teen smoking even after TAPA (2008).

7.

Of particular concern is the impact of tobacco packaging on young people who might not yet be in a position to make properly informed or considered adult lifestyle choices. Growing up in homes where smoking by adults is the norm, children are more likely to become smokers themselves and to take up smoking at an earlier age, perpetuating smoking into new generations. Pupils who live in a household where someone else smoked are more likely to smoke than those who do not live with any smokers, and, in England, 37% of pupils live with someone who smokes.

8.

The impact of tobacco marketing (including branding) may be a key factor in youth smoking uptake. The British Medical Association says:

Young people are greatly influenced by their sense of what is normal and attractive; and this in turn is affected by the messages and imagery attached to different behaviours. Thus, particular fashions, music styles and forms of recreation become more or less popular over time. Young people’s smoking is susceptible to these same forces, but in this case the associated imagery seems, for some young people at least, to remain consistently positive. This capacity to remain ‘forever cool’ belies the reality: smoking continues to be the leading cause of ill health and premature death in the UK.

Pro-smoking imagery originates from three overlapping sources.

First, it is part of the social milieu: young people see others – parents, peers and public figures – smoking and this reinforces the normalcy of the habit. In Great Britain, smoking still has around 10 million role models. The detritus of smoking also provides a reminder of the apparent normalcy of the behaviour.

Second, entertainment media depict smoking on a regular basis. Images of smoking are commonplace in films, television shows and magazines, and can influence the attitudes and behaviours of young people. Other forms of media such as the internet represent a growing concern in this respect.

Third, young people are exposed to the positive images of smoking generated by tobacco industry marketing. The ban on tobacco advertising in the UK has greatly restricted the more traditional forms of marketing (e.g. billboards); however, ubiquitous distribution, increasingly elaborate point-of-sale displays, attractive pack liveries and evocative brand imagery continue to provide key marketing opportunities that influence young people.

9.

Research suggests that standardised packaging would help to re-shape social norms around the use of tobacco products, assisting people to understand that tobacco use is highly addictive and can be hugely damaging to health. According to an article in the Bulletin of the World Health Organisation, ‘for decades, the tobacco industry has taken advantage of the package as a venue for creating positive associations for their product’.

10.

While smoking prevalence has fallen steadily in England since its peak in the mid-20th century, smoking rates are today higher than average among particular groups meaning that smoking has emerged as one of the most significant contributors to health inequalities in England. The association between smoking and inequalities is today apparent from evidence of who smokes. Smoking is most common among those who earn the least, and least common among those who earn the most. In 2010, smoking prevalence was more than twice as high among people in routine and manual occupations compared with managerial and professional occupations. Smoking rates are high in particular ethnic and social groups. Smoking rates among people with mental health problems is significantly higher than among the general population.

11.

The difference in smoking between social groups widens throughout adulthood as people from more affluent groups are more able to quit, for a variety of reasons. Differences in motivation do not account for the differences in smoking rates between social groups, as desire to quit remains broadly the same. There is likely to be a number of reasons why people from less affluent backgrounds are less successfully able to quit, including levels of addiction and the socially reinforcing nature of smoking in groups and communities where smoking rates are high.

12.

Smoking is the main cause of differences in illness and death between the poor and wealthy. The Government’s Healthy Lives, Healthy People White Paper published in 2010 sets out that one of the Government’s key objectives will be to improve the healthy life expectancy of the population, improving the health of the poorest, fastest. The independent review into health inequalities in England, ‘Fair Society, Healthy Lives’, proposed ‘the most effective evidence-based strategies for reducing health inequalities in England’ and made the following recommendation: Tobacco control is central to any strategy to tackle health inequalities as smoking accounts for approximately half of the difference in life expectancy between the lowest and highest income groups. Smokingrelated death rates are two to three times higher in low-income groups than in wealthier social groups.

13.

In England and Wales, at least half of the excess risk of death observed in unskilled manual workers by comparison with professionals is attributable to smoking. Similar effects of smoking on health inequalities were also seen in the United States, Canada and Poland. A 28-year cohort study in Scotland examined the impact of smoking on survival between social classes, and found that the differences in survival between smokers and never smokers are much greater than those between smokers in different social positions.

14.

The total cost of treating childhood disease caused by second hand smoke has been estimated at £23m per annum in the UK. We expect this to reduce if legislation to make private vehicles carrying children smokefree is introduced. We would expect this cost to be reduced in proportion to any reduction in parental smoking which might result from a standardised tobacco packaging policy. But, as in previous IAs related to tobacco control policies, we have not otherwise included an impact on NHS costs for the treatment of smoking-related diseases. Although recent research has claimed that quitting may lead to reduced lifetime healthcare costs, the required modelling of cost consequences of deferred mortality requires further development.

Summary and Conclusion of Tobacco Standardised Packaging Impact Assessment

15.

There is a substantial body of evidence regarding the factors associated with the uptake of smoking by young people and the factors that can inhibit smokers who wish to quit and induce relapse among smokers who have tried to quit. This evidence strongly suggests that the implementation of standardised packaging (“the intervention”) could both reduce the uptake of smoking by young people and create a more supportive environment for those who wish to quit. Recent research has considered the impact specifically of tobacco packaging and branding (including standardised packaging) on the self-image of smokers and on the likelihood of quitting, and has confirmed that introducing standardised packaging could bring substantial benefits for public health.

16.

Quantification of the likely scale of the impact on smoking take up and prevalence is difficult. There is, however, experience in the UK and internationally of other tobacco control interventions, particularly those involving tobacco advertising, promotion and marketing, to provide insight into expected impacts of introducing standardised packaging. Researchers who have specialised in tobacco control are in an informed and experienced position to integrate existing policy experience with the research studies on tobacco packaging. Independent academic research was commissioned by DH to gather an expert view on the likely scale of impact of standardised packaging from a range of tobacco control experts from around the world. The consensus (based on the median of reported views) of these experts is that the intervention would be expected to generate after two years:

•

a decline in the proportion of 11-15 year olds who have ever smoked of 3 percentage points (the proportion of this population who have ever smoked was 27% at the time of the research, so the 3 percentage points would represent a fall of 11% (3 in 27)); and

•

a decline in adult smoking prevalence of 1 percentage point (the proportion of this population smoking was 21% at the time of the research, so would represent a 4.8% (1 in 21) fall), as more people find themselves able to quit.

17.

The benefits and costs in this IA are assessed on the basis of additional benefits and costs that would be likely to accrue over and above existing tobacco control measures and anticipated measures in place at the time of standardised packaging implementation. This includes the benefits and costs of recently commenced legislation in England to end tobacco sales from vending machines, ending the open public display of tobacco products in shops by April 2015, and the benefits and costs arising due to the revised TPD.

18.

Based upon the European Tobacco Product Directive (TPD) Impact Assessment we estimate around a 1.9% reduction in the number of smokers might plausibly be achieved by TPD without standardised packaging, including a 1% reduction due to packaging and labelling aspects. We account for TPD within Option 1 (our “Do Nothing” option), so only the incremental gain of standardised packaging provides our central estimates (i.e. the 11% and 4.8% figures in the above bullet points become a net reduction of 10% and 3.8% to prevent doublecounting)

19.

At this time it is difficult to conclude what the impact of standardised packaging on Australian smoking prevalence has been, due to confounding issues of changes to tobacco prices. There are also general difficulties of sample size when investigating impacts that are expected to be relatively small. Also the policy is at an early stage and data on medium and longer term trends do not exist yet. However the evidence that is available is consistent with a hypothesis such as the consensus one above that the policy would contribute to a modest decrease in prevalence.

20.

With the intervention sustained for ten years following the policy implementation date (the standard policy appraisal period), such shifts in smoking behaviour would generate very large health benefits – estimated in total at 0.49m life years (discounted). These health gains, using standard DH methodology (based upon surveys of citizens’ willingness to pay for mitigation of health risks), are valued at £29bn.

21.

There is considered to be lost economic productivity due to smoking breaks and tobacco-related absenteeism, therefore this policy is expected to decrease this loss and provide productivity gains of £0.9bn (discounted over the lifetime of those who exhibit behaviour change in the 10 years following policy implementation).

22.

We estimate a cost saving associated with the production of simpler standardised rather than branded packs, of £0.23bn (discounted over 10 years). Only a small portion of this will accrue to the UK.

23.

There are other benefits discussed but not quantified and not included in the Net Present Value calculations. When considering consumer surplus the orthodox approach is based on rational consumer behaviour. However, for addictive goods, this theory is not a plausible approach. For addictive goods, branding may act as a cue that stimulates craving. Removing the cue helps the addict to realise their true preferences. Any reduction in consumption due to standardised packaging might therefore be taken to reflect true preferences. The approach leaves the analyst with the task of assessing both the costs and the benefits realised by those who, in the wake of reduced branding, either do not become smokers or are enabled to quit. In addition to the health benefits listed above, there is pecuniary gain from reduced spending by quitters of around £5.7bn. However, there are offsetting withdrawal pains that quitters endure and any loss of any pleasure associated with smoking. There are also pecuniary gains for those who do not take up smoking, of £880m. These children are not addicted and hence have no offsetting withdrawal pains, but they do lose smoking related pleasures. As the assumptions that would be required to calculate non-health net gains would be relatively unconventional at this time, and were not included in the consultation IA, so they are not included in the NPV.

24.

There are also expected to be benefits in terms of reduced morbidity and mortality due to second hand smoke exposure. There would be reduced costs to local authorities, and to businesses, for litter collection due to fewer discarded cigarette butts.

25.

We also expect there to be a reduction in health inequalities. In 2010, 13% of the managerial and professional group were smokers compared with 27% of the routine and manual group. If display of branded packets induces take-up within the home and explains the link between parental smoking and take-up, standardised packaging may be helpful in tackling the differences in acculturation to smoking across socio-economic groups.

26.

We consider the possibility that standardised tobacco packaging would be easier and cheaper to copy, so increasing the supply of counterfeit tobacco in standardised packs. We also consider the possibility that smokers may be more likely to seek out branded products in a standardised packaging environment. There are also counter arguments to these possibilities as well as the mitigation factors and options, and evidence from Australia in relation to these risks. We conclude that there is a sizeable likelihood that there will be no discernible increase in the illicit market or cross border shopping (CBS), but there is a chance of an increase. A reasonable statistical expectation is of a 0.4% transfer from the UK duty paid market to UK duty unpaid market (both illicit and CBS are part of the UK duty unpaid market), would imply a £31m UK loss to tobacco manufacturers, wholesalers and retailers.

27.

There are also expected losses to the exchequer of £5.0bn. These losses mainly come from the reduction in tobacco consumption. They also come about if smokers downtrade from higher price brands to lower price brands (which are taxed less).There is also a contribution from a potential increase in cross border shopping and illicit trade.

28.

In general we assume that normal profits lost due to reduced tobacco sales will be offset by sales of non-tobacco within the economy. However, some of the value of these sales is due to the value of brands that have already been created, and whose value is diminished by the intervention. This diminution of value needs to be reckoned as a one-off cost of the policy. With standardised packaging we expect a more rapid decline in sales of high price than of low price brands because of a greater likelihood of quitting among smokers of high price brands and due to downtrading from high price to low price brands among those who continue to smoke. The impact on returns to UK business (tobacco manufacturers, wholesalers and retailers) attributed to the reduction in brand value is estimated to have a present value of £190m.

29.

The impact on small and micro businesses is uncertain, but the small and micro business sector may have relatively higher transitional losses compared to larger businesses due to lost footfall-related sales.

30.

Standardised packaging may encourage printing to switch from gravure printing to cheaper offset lithography so some gravure machines may become redundant. In any case the value of the produce of packaging manufacturers will drop, diminishing the profit stream associated with this business. An estimate of this impact is the expected drop in the economic value of the capital stock which might be affected. We estimate that £10-£15m worth of machinery may become redundant and use this as an estimate of the lost profit stream to packaging manufacturers.

31.

We expect there to be a very short lived increase in serving time whilst shop assistants familiarise themselves with the new system and customers become aware of the change in appearance. We value this loss of time to tobacco retailers and those purchasing tobacco at £0.80m.

32.

The Direct impact upon all UK based business for One In Two Out (OITO) purposes is set out in the OITO section of the IA.

33.

We need to consider not only the consumer surplus associated with smoking (discussed above) but that associated specifically with branded products, the loss of the ability of those who continue to smoke to gain the intangible benefit associated with smoking a particular brand that only the packaging of that brand, as it is currently available, can produce.

34.

It is hard to assess how many of the 9.9 million or so people expected to continue smoking would suffer any felt loss from the absence of this particular avenue of self-expression, and to quantify the loss. Personal branding might be substituted by purchase of other branded goods. There is some further evidence that such branding carries a positional good externality i.e. the positive branding associated with premium brands inspires embarrassment and hostility in others not able to afford such self-branding. For these reasons, we have not quantified the loss of consumer surplus from branding.

35.

Those who continue to smoke may also feel as though they have suffered a restriction in freedom. However, from a societal perspective, there is reason to discount the importance of this loss of freedom. For individuals to carry and personally to display branded packets of cigarettes may contribute to encouraging others, including children, to take up smoking and to deter quitting by those who wish to quit. Tobacco packaging and branding plays a promotional role and helps to shape social norms around smoking. The freedom to have branded tobacco, therefore, carries a cost to others; and society arguably need not accord value to a freedom that involves inflicting harm on others.

36.

One unquantified cost is a reduction in the ability of tobacco companies to compete through product differentiation because of different packaging.

37.

The gross gain of standardised packaging (that could be valued) before considering costs or unquantified impacts is assessed as £30bn. The gross costs of standardised packaging (that could be valued) are assessed as £5.2bn. This gives a net gain of around £25bn. Since the benefits are estimated to be much larger than the costs, the risk of the policy having a net loss is considered small. Furthermore, if the policy had a smaller impact than expected on smoking prevalence then although the benefits would decrease, so would the largest element of cost (that to the exchequer).

38.

The intervention is worth pursuing now, notwithstanding these costs and risks. We believe that the cost of delaying a decision on whether to implement the intervention (Option 3) is too great in public health terms, particularly in view of the following considerations:

•

we can already benefit from the experience of Australia in determining the detail of any legislation and in implementing the intervention;

•

the potential health gains are very substantial and dramatically outweigh quantified costs;

•

the deferral of such gains would adversely affect the life expectancy of large cohorts of children and adult would-be quitters in every year of deferral;

•

if the true impact of standardised packaging is substantially smaller than assumed in this IA (but not zero) it would still be net beneficial to act now;

•

evidence from Australia is valuable, but there are considerable uncertainties that will remain;

•

if standardised packaging is implemented, monitoring of extent of impacts, such as any impact on cross-border shopping or the size of the illicit market would identify where mitigating action is needed; the information conveyed by such monitoring is likely to be much more directly pertinent to the policy context in the UK than that which can be gathered from other countries that have implemented the intervention (such as Australia)”.

In the context of the 2014 Impact Assessment it is necessary to backtrack slightly and consider a 2013 elicitation study conducted by Pechey et ors. This was relied upon in the 2014 Impact Assessment in relation to the quantification of potential costs and benefits. Researchers were commissioned to conduct an elicitation study whereby experts were interviewed to test their reactions to certain premises (Footnote: ⁵). This was a study regarding the likely impact on smoking rates in adults and children of plain packaging of tobacco products. Thirty-three tobacco control experts were recruited from the UK (14), Australia (12) and North America (7). Their views were elicited via telephone interviews, and then pooled on a linear basis. Elicited estimates consisted of (1) the most likely, (2) the highest possible, and (3) the lowest possible, value for the percentage of (a) adult smokers and (b) children trying smoking, two years after the introduction of plain packaging (all other things being constant) in a target country in the expert’s region of residence.

The median estimate for the impact on adult smoking prevalence was a 1 percentage point decline (99% range 2.25 to 0), and for the percentage of children trying smoking the median estimate was a 3 percentage point decline (99% range 6.1 to 0), the latter estimated impact being larger than the former (P < 0.001, sign test). There were no differences in either estimate by region but there was considerable variability between experts’ estimates within regions. The study showed that tobacco control experts felt the most likely outcomes would be a reduction in smoking prevalence in adults, and a greater reduction in the numbers of children trying smoking. The results did however reveal a significant variability in the estimated size of these impacts. No expert estimated an increase in smoking as a likely outcome.

The Pechey Study authors record the concerns expressed by some of the experts as to the absence of hard data upon which they were asked to base their views and the views of these experts, however skilled they were, were only best estimates. The authors recommend that in future a comparison of the experts’ views with “actual impact” evidence would be helpful in verifying the experts’ conclusions. The Pechey review was peer reviewed and was conducted by independent researchers. The procedure adopted for the study was described in the following way:

“Procedure

A semi-structured telephone interview was used to elicit subjective judgments for the impact of plain packaging on (a) the prevalence of smoking in adults and (b) the percentage of children trying smoking. The script was developed by the authors from those used in similar studies. Prior to interview participants were sent a copy of a recent systematic review on the impact of plain packaging of tobacco products to ensure that all participants had the same summary of the most recent evidence relating to plain packaging. This did not provide numerical estimates of the likely impact of plain packaging policies on the two outcomes of interest in this study. During the interview, the interviewer provided the prevalence rates for the two outcomes of interest and asked participants to estimate the expected values of these two years after the introduction of plain packaging in their region, and the lowest and highest likely values, holding all other relevant factors constant (e.g. with current controls regarding the sale of tobacco still being in force, and the price and current prevalence levels being stable over the two year period). Subsidiary questions were used to explore the range of plausible values provided, to ensure that experts felt they would be extremely surprised if the actual values fell outside the range they had provided (‘extremely’ was described as a 1% chance), given the tendency of individuals to provide too narrow a range in these types of study. Finally, participants were asked to outline the reasoning behind the estimates they provided”.

The consensus opinion of the experts was a decline in the proportion of 11-15 year olds who had ever smoked of 3%. The percentage of this population who had ever smoked was 27% at the time of the research so the 3% represents a fall from 27% of the population to 24% of the population which, itself, represented a prevalence fall of 11%. So far as adults were concerned a decline in smoking prevalence of 1% point was estimated. The proportion of this population that was smoking was 21% at the time so this represented a fall in prevalence of 4.8% estimated (i.e. 1 in 21). The variations in the estimates given by the various experts was also taken into account in the sensitivity analyses conducted as part of the 2014 Impact Assessment.

Upon receipt of the December 2014 Submission and further advice from the Chief Medical Officer the Minister made the final decision to lay draft standardised packaging regulations before Parliament. This decision was announced on 21^st January 2015. Subsequently, on 12^th February 2015, the Department published a summary report “Consultation upon Introducing Regulations for Standardised Packaging of Tobacco Products”. It also published the 2014 Impact Assessment which had been approved as “fit-for-purpose” from the Government’s Regulatory Policy Committee, a final Equalities Analysis, and, the assessment conducted by HMRC of the “Potential Impact on the Illicit Market”.

On 18^th February 2015 the Department made a submission to the Minister setting out the response of the UK to the detailed opinions served by other Member States pursuant to the Technical Standards Directive. A copy of the submissions made to the European Commission were before the Court. In its response to the Commission the United Kingdom summarised the evidence which had led to the Ministerial Decision. The submission included an analysis of potential other alternative measures. The submission stated of the suggestion that there were alternative means of combating tobacco usage:

“We have looked carefully at those suggestions. Many of the suggestions presented as “alternatives” have been or are being implemented as part of the UK comprehensive tobacco control policies. They are not alternative ways of combating the promotional impact of tobacco packaging in a meaningful way, as effectively or to the same extent. In the context of a comprehensive policy, they may be considered as complementary, rather than as alternative to standardised packaging. Packaging is the last major promotional avenue for tobacco products, which is why this action is important”.

The Government also set out its position on potential risks to illicit trade, and to the risk of downtrading. In relation to reduction in tax revenue the Government stated:

“The UK Government accepts that there will be a loss of tax revenue from tobacco products as a result of tobacco control policies. Whilst tax revenues need to be taken into account, it is not possible to make a proper comparison between the benefit to health and wellbeing that comes from helping smokers to quit and any loss in tax revenues”.

In particular, the Government relied upon the fact that in the FCTC contracting States were under obligations to meet the treaty objective to reduce continually and substantially the prevalence of tobacco use and exposure to tobacco smoke through the implementation of “comprehensive tobacco control strategies”. The Government stated that since it became a party to the treaty in 2004 it had taken its international obligations very seriously. The Government recognised that the FCTC guidelines were not binding. However, the fact that the contracting parties had agreed that the guidelines reflected their “consolidated view of a desirable means of fulfilling their FCTC obligations” was important.

In relation to the suggestion advanced by a number of other Member States that the UK should await the legal proceedings brought against Australia before the World Trade Organisation, the Government stated:

“The case for action in the UK is clear. If all countries were to wait for the results of all the various actions against Australia this would delay the long term process of changing social norms about smoking, and mean that some children and young people would not be prevented from taking up smoking, and adult smokers would not be supported to the same degree in their efforts to quit. The sooner we act, the sooner the health benefits will accrue”.

The conclusion of the Government was in the following terms:

“Standardised packaging is a proportionate and justified response to the significant harm caused by tobacco. For the good of public health, we aspire to a smoke free future”.

The draft Regulations were laid before Parliament on 23 February 2015 for approval by way of affirmative resolution and were adopted following the normal process of scrutiny and after debate in the Delegated Legislation Committee and in the House of Lords. The Regulations were signed by the Minister on 19 March 2015. The affirmative resolution procedure enabled Parliament to consider the proposed regulations and form its own view after appraisal. The Supreme Court has held that whether a measure has been subjected to an affirmative resolution procedure is a consideration which is pertinent to the margin of appreciation which a Court accords the decision maker: See R (on the application of SG & Ors) v Secretary of State for Work and Pensions (SWWP) [2015] UKSC 16 at paragraphs [92] and [93] per Lord Reed:

“94.

As I have explained, the Regulations were considered and approved by affirmative resolution of both Houses of Parliament. As Lord Sumption observed in Bank Mellat v H M Treasury (No 2) [2013] UKSC 39; [2014] AC 700, para 44:

“When a statutory instrument has been reviewed by Parliament, respect for Parliament's constitutional function calls for considerable caution before the courts will hold it to be unlawful on some ground (such as irrationality) which is within the ambit of Parliament's review. This applies with special force to legislative instruments founded on considerations of general policy””.

THE RELEVANT LEGISLATIVE FRAMEWORK

Many of the issues of law raised in the present case involve a close analysis of a large number of international, EU and domestic legislative provisions. In this section I have set out the relevant material where relevant setting out my conclusions on issues of construction and effect which arise.

The starting point is the FCTC. This is important for a wide variety of reasons. First, it is a Convention signed by 180 states including all of the Member States of the EU and by the EU itself. Second, it is a basis for the relevant EU legislation (the TPD). Third, it has been accepted by the European Court of Human Rights as a legitimate basis upon which States may, in principle, derogate from property rights within the confines of the rules regulating the expropriation or control of property rights (in casu A1P1). Fourth, it is referred to as one of the principal reasons leading the Secretary of State to lay the Regulations before Parliament. Fifth, the Court of Justice in long established case law has attached considerable weight to policies adopted by the WHO. Sixth, the response to the notification of the Regulations by the European Commission was to the effect that it would monitor implementation and take account of developments at the level of the WHO, i.e. under the FCTC: See paragraph [124] above. Seventh, it is the basis for the principle that FCTC contracting states should ensure that evidence submitted by tobacco companies should meet high standards of transparency and accountability.

The Convention was adopted by the World Health Organisation (“WHO”). It opened for signature on 16 June to 22 June 2003 in Geneva, and thereafter at the United Nations Headquarters in New York, the depositary of the Treaty, from 30 June 2003 to 29 June 2004. The Convention is now closed for signature. It is one of the most widely endorsed treaties in UN history. States wishing to become a party, but who did not sign the Convention by 29 June 2004, may still do so by means of accession, which is a one-step process equivalent to ratification.

The FCTC has a high status in EU law. EU legislation in the field of tobacco advertising must be construed in the light of the FCTC. The TPD expressly refers in Article 1 to the TPD as being an instrument intended to meet the EU’s obligations under the FCTC. In Philip Morris such was the importance of the FCTC that even the Guidelines to the Convention were treated as of “particularly high evidential value” (ibid paragraph [175]).

EU legislation must as a general principle be interpreted in accordance with source international law obligations. In Case C-61/94 Commission v Germany [1996] ECR I3989 at paragraph [52] the Court considered an argument that provisions of an EU regulation (on inward processing) excluded the operation of an agreement concluded under the GATT. The EU regulation did not refer to the international agreement but the Court held that this was not significant. It held:

“52.

When the wording of secondary Community legislation is open to more than one interpretation, preference should be given as far as possible to the interpretation which renders the provision consistent with the Treaty. Likewise, an implementing regulation must, if possible, be given an interpretation consistent with the basic regulation. Similarly, the primacy of international agreements concluded by the Community over provisions of secondary Community legislation means that such provisions must, so far as is possible, be interpreted in a manner that is consistent with those agreements”.

In case T-237/08 Retuerta v Office for Harmonisation in the Internal Market (Trade marks and Designs) (OHIM) [2010] ECR II-1583 the Court of First Instance addressed the relationship between an EU regulation and the Agreement on Trade Related Aspects of Intellectual Property Rights (“TRIPS”). This was in the context of a judicial review of a decision relating to trade marks for wines containing geographical indications. The Court held:

“63.

The fourth recital in the preamble to Regulation No 3288/94 states that 'Article 23(2) of the TRIPs Agreement provides for the refusal or invalidation of trade marks which contain or consist of false geographical indications for wines and spirits without the condition that they are of such a nature as to deceive the public, and that 'a new subparagraph (j) has to be added to Article 7(1) of Regulation (EC) No 40/94.

64.

It should be recalled that, since the Community is a party to the TRIPS Agreement, it is required to interpret its trade mark legislation, as far as possible, in the light of the wording and purpose of that agreement (see Anheuser Busch, paragraph 21 above, paragraph 42 and the case law cited).

65.

It is settled case-law that a provision of an agreement entered into by the Community with non-member countries must be regarded as being directly applicable when, regard being had to the wording, purpose and nature of the agreement, it may be concluded that the provision contains a clear, precise and unconditional obligation which is not subject, in its implementation or effects, to the adoption of any subsequent measure (Joined Cases C-300/98 and C-392/98 Dior and Others [2000] ECR I-11307, paragraph 42).

66.

The Court has however already held that, first, having regard to their nature and structure, the WTO Agreement and the annexes thereto are not in principle among the rules in the light of which the Court is to review measures of the Community institutions in the context of an action for annulment (Dior and Others, paragraph 65 above, paragraph 43) and, second, the provisions of the TRIPS Agreement, an annex to the WTO Agreement, are not such as to create rights upon which individuals may rely directly before the courts by virtue of Community law (Dior and Others, paragraph 65 above, paragraph 44).

67.

It follows that, although the provisions of the TRIPS Agreement do not have direct effect, it is nevertheless true that the trade mark legislation, that is to say, in the present case, Article 7(1)(j) of Regulation No 40/94, must, as far as possible, be interpreted in the light of the wording and purpose of that agreement”.

A similar conclusion was arrived at in relation to the scope of protection accorded to patents under Article 9 of Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection of biotechnological inventions, in the light of Articles 27 and 30 of TRIPS. In Case C-428/08 Monsanto v Cefetra et ors (6^th July 2010) the Court having held that Article 9 contained an exhaustive definition of the scope of the rights in question (ibid, paragraphs [51]-[63]) held:

“70.

By its fourth question, the national court asks, essentially, whether Articles 27 and 30 of the TRIPS Agreement affect the interpretation given of Article 9 of the Directive.

71.

In that regard, it should be borne in mind that the provisions of the TRIPS Agreement are not such as to create rights upon which individuals may rely directly before the courts by virtue of European Union law (Joined Cases C-300/98 and C-392/98 Dior and Others [2000] ECR I'11307, paragraph 44).

72.

If it should be found that there are European Union rules in the sphere in question, European Union law will apply, which will mean that it is necessary, as far as may be possible, to supply an interpretation in keeping with the TRIPS Agreement, although no direct effect may be given to the provision of that agreement at issue (Case C-431/05 Merck Genéricos - Produtos Farmacêuticos [2007] ECR I'7001, paragraph 35).

73.

Since the Directive constitutes European Union rules in the sphere of patents, it must therefore, as far as may be possible, be interpreted in such a manner.

74.

It is clear that the interpretation given in the present judgment of Article 9 of the Directive does not run counter to that obligation”.

The FCTC entered into force on 27 February 2005. It is stated by WHO to be an evidence-based treaty that reaffirms the right of all people to the highest standard of health and representing a “paradigm shift in developing a regulatory strategy to address addictive substances”. It focuses upon demand reduction strategies as well as supply issues. The foreword to the FCTC describes tobacco use as an “epidemic” and points out that advertising contributes to that adverse consequence:

“The WHO FCTC was developed in response to the globalization of the tobacco epidemic. The spread of the tobacco epidemic is facilitated through a variety of complex factors with cross-border effects, including trade liberalization and direct foreign investment. Other factors such as global marketing, transnational tobacco advertising, promotion and sponsorship, and the international movement of contraband and counterfeit cigarettes have also contributed to the explosive increase in tobacco use”.

The preamble to the FCTC sets out the policy which underlies its substantive provisions. Although the recitals are not numbered in the original I have numbered them below for ease of cross-reference. It is worth setting the preamble out in full:

“The Parties to this Convention,

1.

Determined to give priority to their right to protect public health,

2.

Recognizing that the spread of the tobacco epidemic is a global problem with serious consequences for public health that calls for the widest possible international cooperation and the participation of all countries in an effective, appropriate and comprehensive international response,

3.

Reflecting the concern of the international community about the devastating worldwide health, social, economic and environmental consequences of tobacco consumption and exposure to tobacco smoke,

4.

Seriously concerned about the increase in the worldwide consumption and production of cigarettes and other tobacco products, particularly in developing countries, as well as about the burden this places on families, on the poor, and on national health systems,

5.

Recognizing that scientific evidence has unequivocally established that tobacco consumption and exposure to tobacco smoke cause death, disease and disability, and that there is a time lag between the exposure to smoking and the other uses of tobacco products and the onset of tobacco-related diseases,

6.

Recognizing also that cigarettes and some other products containing tobacco are highly engineered so as to create and maintain dependence, and that many of the compounds they contain and the smoke they produce are pharmacologically active, toxic, mutagenic and carcinogenic, and that tobacco dependence is separately classified as a disorder in major international classifications of diseases,

7.

Acknowledging that there is clear scientific evidence that prenatal exposure to tobacco smoke causes adverse health and developmental conditions for children,

8.

Deeply concerned about the escalation in smoking and other forms of tobacco consumption by children and adolescents worldwide, particularly smoking at increasingly early ages,

9.

Alarmed by the increase in smoking and other forms of tobacco consumption by women and young girls worldwide and keeping in mind the need for full participation of women at all levels of policy-making and implementation and the need for gender-specific tobacco control strategies,

10.

Deeply concerned about the high levels of smoking and other forms of tobacco consumption by indigenous peoples,

11.

Seriously concerned about the impact of all forms of advertising, promotion and sponsorship aimed at encouraging the use of tobacco products,

12.

Recognizing that cooperative action is necessary to eliminate all forms of illicit trade in cigarettes and other tobacco products, including smuggling, illicit manufacturing and counterfeiting,

13.

Acknowledging that tobacco control at all levels and particularly in developing countries and in countries with economies in transition requires sufficient financial and technical resources commensurate with the current and projected need for tobacco control activities,

14.

Recognizing the need to develop appropriate mechanisms to address the long-term social and economic implications of successful tobacco demand reduction strategies,

15.

Mindful of the social and economic difficulties that tobacco control programmes may engender in the medium and long term in some developing countries and countries with economies in transition, and recognizing their need for technical and financial assistance in the context of nationally developed strategies for sustainable development,

16.

Conscious of the valuable work being conducted by many States on tobacco control and commending the leadership of the World Health Organization as well as the efforts of other organizations and bodies of the United Nations system and other international and regional intergovernmental organizations in developing measures on tobacco control,

17.

Emphasizing the special contribution of nongovernmental organizations and other members of civil society not affiliated with the tobacco industry, including health professional bodies, women’s, youth, environmental and consumer groups, and academic and health care institutions, to tobacco control efforts nationally and internationally and the vital importance of their participation in national and international tobacco control efforts,

18.

Recognizing the need to be alert to any efforts by the tobacco industry to undermine or subvert tobacco control efforts and the need to be informed of activities of the tobacco industry that have a negative impact on tobacco control efforts,

19.

Recalling Article 12 of the International Covenant on Economic, Social and Cultural Rights, adopted by the United Nations General Assembly on 16 December 1966, which states that it is the right of everyone to the enjoyment of the highest attainable standard of physical and mental health,

20.

Recalling also the preamble to the Constitution of the World Health Organization, which states that the enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition,

21.

Determined to promote measures of tobacco control based on current and relevant scientific, technical and economic considerations,

22.

Recalling that the Convention on the Elimination of All Forms of Discrimination against Women, adopted by the United Nations General Assembly on 18 December 1979, provides that States Parties to that Convention shall take appropriate measures to eliminate discrimination against women in the field of health care,

23.

Recalling further that the Convention on the Rights of the Child, adopted by the United Nations General Assembly on 20 November 1989, provides that States Parties to that Convention recognize the right of the child to the enjoyment of the highest attainable standard of health,

Have agreed, as follows…”.

Recitals 7, 8, 9 and 20 highlight the need to protect children from the effects of tobacco. Recital 18 highlights the need for contracting States to be “alert” to efforts by the tobacco industry to “subvert” control efforts. The 19^th recital makes clear that the Convention incorporates the principles set out in Article 12 of the International Covenant on Economic, Social and Cultural Rights (“ICESCR”), adopted by the United Nations General Assembly on 16 December 1966. This refers to a “right of everyone to the enjoyment of the highest attainable standard of physical and mental health”. This is a “right” which can quite properly be classified as a human or fundamental right. Article 12 ICESCR explicitly embodies this “right” and is in the following terms:

“Article 12

1.

The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health.

2.

The steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for:

(a)

The provision for the reduction of the stillbirth-rate and of infant mortality and for the healthy development of the child;

(b)

The improvement of all aspects of environmental and industrial hygiene;

(c)

The prevention, treatment and control of epidemic, endemic, occupational and other diseases;

(d)

The creation of conditions which would assure to all medical service and medical attention in the event of sickness”. (iv) The prohibition on advertising in the FCTC

Article 1(c) defines advertising and promotion in the following very broad and sweeping terms:

“‘tobacco advertising and promotion’ means any form of commercial communication, recommendation or action with the aim, effect or likely effect of promoting a tobacco product or tobacco use either directly or indirectly…”.

Article 2 makes clear that the measures laid down in the FCTC represent minimum requirements and do not preclude the adoption of stricter measures provided they are consistent with the Convention and with international law:

“1.

In order to better protect human health, Parties are encouraged to implement measures beyond those required by this Convention and its protocols, and nothing in these instruments shall prevent a Party from imposing stricter requirements that are consistent with their provisions and are in accordance with international law”.

The central objective of the FCTC is set out in Article 3; it condemns tobacco products in ringing terms:

Article 4 sets out a long list of principles which contracting states are to pursue in fulfilment of this overarching objective. Article 4(1) starts with an iteration of the threats posed by tobacco products:

“Every person should be informed of the health consequences, addictive nature and mortal threat posed by tobacco consumption and exposure to tobacco smoke and effective legislative, executive, administrative or other measures should be contemplated at the appropriate governmental level to protect all persons from exposure to tobacco smoke”.

Article 4(2) provides, so far as relevant:

“Strong political commitment is necessary to develop and support, at the national, regional and international levels, comprehensive multisectoral measures and coordinated responses, taking into consideration:

(a)

the need to take measures to protect all persons from exposure to tobacco smoke;

(b)

the need to take measures to prevent the initiation, to promote and support cessation, and to decrease the consumption of tobacco products in any form;

…”.

In the Chapter dedicated to measures designed to reduce demand there is a specific article focusing upon packaging and labelling of tobacco products. This identifies all of the ways in which tobacco might be promoted and requires the prohibition of advertising in relation to such matters. So, for instance, it identifies any advertising or promotion that might convey erroneous impressions about health effects or hazards or emissions (Article 11(1)(a)). It obligates contracting States to require health warnings to be included on packaging (Article 11(1)(b)).

The 11^th recital expresses serious concern at “all” forms of advertising. Specifically with regard to tobacco advertising, promotion and sponsorship Article 13 imposes an obligation or duty on contracting states to impose prohibitions on all advertising where consistent with constitutional principles:

Parties recognize that a comprehensive ban on advertising, promotion and sponsorship would reduce the consumption of tobacco products.

Each Party shall, in accordance with its constitution or constitutional principles, undertake a comprehensive ban of all tobacco advertising, promotion and sponsorship. This shall include, subject to the legal environment and technical means available to that Party, a comprehensive ban on cross-border advertising, promotion and sponsorship originating from its territory. In this respect, within the period of five years after entry into force of this Convention for that Party, each Party shall undertake appropriate legislative, executive, administrative and/or other measures and report accordingly in conformity with Article 21.

A Party that is not in a position to undertake a comprehensive ban due to its constitution or constitutional principles shall apply restrictions on all tobacco advertising, promotion and sponsorship. This shall include, subject to the legal environment and technical means available to that Party, restrictions or a comprehensive ban on advertising, promotion and sponsorship originating from its territory with cross-border effects. In this respect, each Party shall undertake appropriate legislative, executive, administrative and/or other measures and report accordingly in conformity with Article 21.

As a minimum, and in accordance with its constitution or constitutional principles, each Party shall:

prohibit all forms of tobacco advertising, promotion and sponsorship that promote a tobacco product by any means that are false, misleading or deceptive or likely to create an erroneous impression about its characteristics, health effects, hazards or emissions;

require that health or other appropriate warnings or messages accompany all tobacco advertising and, as appropriate, promotion and sponsorship;

restrict the use of direct or indirect incentives that encourage the purchase of tobacco products by the public;

require, if it does not have a comprehensive ban, the disclosure to relevant governmental authorities of expenditures by the tobacco industry on advertising, promotion and sponsorship not yet prohibited. Those authorities may decide to make those figures available, subject to national law, to the public and to the Conference of the Parties, pursuant to Article 21;

undertake a comprehensive ban or, in the case of a Party that is not in a position to undertake a comprehensive ban due to its constitution or constitutional principles, restrict tobacco advertising, promotion and sponsorship on radio, television, print media and, as appropriate, other media, such as the internet, within a period of five years; and

prohibit, or in the case of a Party that is not in a position to prohibit due to its constitution or constitutional principles restrict, tobacco sponsorship of international events, activities and/or participants therein.

Parties are encouraged to implement measures beyond the obligations set out in paragraph 4.

Parties shall cooperate in the development of technologies and other means necessary to facilitate the elimination of crossborder advertising.

Parties which have a ban on certain forms of tobacco advertising, promotion and sponsorship have the sovereign right to ban those forms of cross-border tobacco advertising, promotion and sponsorship entering their territory and to impose equal penalties as those applicable to domestic advertising, promotion and sponsorship originating from their territory in accordance with their national law. This paragraph does not endorse or approve of any particular penalty.

Parties shall consider the elaboration of a protocol setting out appropriate measures that require international collaboration for a comprehensive ban on cross-border advertising, promotion and sponsorship”.

Guidelines adopted by the WHO on Article 13 (entitled “Guidelines for implementation of Article 13: Tobacco advertising, promotion and sponsorship”) emphasise the need for a comprehensive, all embracing, and multifaceted approach to curbing advertising. Paragraphs [4] – [24] of the Guidelines set out to describe the myriad ways in which tobacco advertising can occur. For present purposes it is necessary only to focus upon those specific provisions which are the locus classicus of the TPD. However, it is important to bear in mind that these particular provisions are intended under the FCTC to be but one part of a much wider, prohibitive jigsaw. Paragraphs [15] – [17] address the way in which manufacturers use attractive designs on packaging to promote their products and it explicitly endorses and encourages the use of plain design in relation to both the outer pack and the product itself:

“Packaging and product features

15.

Packaging is an important element of advertising and promotion. Tobacco pack or product features are used in various ways to attract consumers, to promote products and to cultivate and promote brand identity, for example by using logos, colours, fonts, pictures, shapes and materials on or in packs or on individual cigarettes or other tobacco products.

16.

The effect of advertising or promotion on packaging can be eliminated by requiring plain packaging: black and white or two other contrasting colours, as prescribed by national authorities; nothing other than a brand name, a product name and/or manufacturer’s name, contact details and the quantity of product in the packaging, without any logos or other features apart from health warnings, tax stamps and other governmentmandated information or markings; prescribed font style and size; and standardized shape, size and materials. There should be no advertising or promotion inside or attached to the package or on individual cigarettes or other tobacco products.

17.

If plain packaging is not yet mandated, the restriction should cover as many as possible of the design features that make tobacco products more attractive to consumers such as animal or other figures, “fun” phrases, coloured cigarette papers, attractive smells, novelty or seasonal packs.

Recommendation

Packaging and product design are important elements of advertising and promotion. Parties should consider adopting plain packaging requirements to eliminate the effects of advertising or promotion on packaging. Packaging, individual cigarettes or other tobacco products should carry no advertising or promotion, including design features that make products attractive”.

An important, and indeed singular, provision of the Convention which is relevant to issues arising in this case is Article 5(3). This is a remarkable provision which operates upon the express premise that government is the victim of attempts to undermine it by the tobacco industry. It requires contracting states to “protect” their health policies from the “vested interests of the tobacco industry”:

Each Party shall develop, implement, periodically update and review comprehensive multisectoral national tobacco control strategies, plans and programmes in accordance with this Convention and the protocols to which it is a Party.

Towards this end, each Party shall, in accordance with its capabilities: (a) establish or reinforce and finance a national coordinating mechanism or focal points for tobacco control; and (b) adopt and implement effective legislative, executive, administrative and/or other measures and cooperate, as appropriate, with other Parties in developing appropriate policies for preventing and reducing tobacco consumption, nicotine addiction and exposure to tobacco smoke.

In setting and implementing their public health policies with respect to tobacco control, Parties shall act to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law”.

This follows on from the 18^th recital to the Convention (see paragraph [158] above) which extols contracting states to be “alert” to “efforts by the tobacco industry to undermine or subvert tobacco control efforts”.

The Guidelines on Article 5.3 (entitled “Guidelines for implementation of Article 5.3 – Protection of public health policies with respect to tobacco control from commercial

A significant part of the basis for this conclusion is the inferences drawn by WHO from the internal documents disclosed by the tobacco companies in US litigation. The implications of this are examined in relation to Ground 2 below.

Paragraph 5 encourages contracting states to implement these guidelines to the greatest extent possible within their national laws. Paragraph 11 explains that these concerns are evidence based:

“11.

The broad array of strategies and tactics used by the tobacco industry to interfere with the setting and implementing of tobacco control measures, such as those that Parties to the Convention are required to implement, is documented by a vast body of evidence. The measures recommended in these guidelines aim at protecting against interference not only by the tobacco industry but also, as appropriate, by organizations and individuals that work to further the interests of the tobacco industry”.

Paragraph 7 explains that contracting states must ensure that efforts to protect tobacco control from commercial and other vested interests are comprehensive and effective. Parties should implement measures in all branches of government that may have an interest in affecting, or the capacity to affect, public health policies with respect to tobacco control.

An important recommendation is to: “Require that information provided by the tobacco industry be transparent and accurate.” Paragraphs [24] and [25] elaborate upon this and then set out practical recommendations to be followed:

“24.

To take effective measures preventing interference of the tobacco industry with public health policies, Parties need information about its activities and practices, thus ensuring that the industry operates in a transparent manner. Article 12 of the Convention requires Parties to promote public access to such information in accordance with national law.

25.

Article 20.4 of the Convention requires, inter alia, Parties to promote and facilitate exchanges of information about tobacco industry practices and the cultivation of tobacco. In accordance with Article 20.4(c) of the Convention, each Party should endeavour to cooperate with competent international organizations to establish progressively and maintain a global system to regularly collect and disseminate information on tobacco production and manufacture and activities of the tobacco industry which have an impact on the Convention or national tobacco control activities.

Recommendations

5.1

Parties should introduce and apply measures to ensure that all operations and activities of the tobacco industry are transparent.

5.2

Parties should require the tobacco industry and those working to further its interests to periodically submit information on tobacco production, manufacture, market share, marketing expenditures, revenues and any other activity, including lobbying, philanthropy, political contributions and all other activities not prohibited or not yet prohibited under Article 13 of the Convention.

5.3

Parties should require rules for the disclosure or registration of the tobacco industry entities, affiliated organizations and individuals acting on their behalf, including lobbyists.

5.4

Parties should impose mandatory penalties on the tobacco industry in case of the provision of false or misleading information in accordance with national law.

5.5

Parties should adopt and implement effective legislative, executive, administrative and other measures to ensure public access, in accordance with Article 12(c) of the Convention, to a wide range of information on tobacco industry activities as relevant to the objectives of the Convention, such as in a public repository”.

I return later, in the context of the analysis under Ground 2 (cf. Section F of the Judgment), to the implications of this for judicial proceedings where tobacco companies adduce evidence.

The Agreement on Trade-Related Aspects of Intellectual Property Rights

I turn now to summarise the second international law instrument which is important to the legal analysis arising. TRIPS is an international agreement administered by the World Trade Organization (WTO). It lays down minimum standards for various forms of intellectual property regulation as applied to nationals of other WTO members. It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994. TRIPS introduced intellectual property law into the international trading system for the first time.

Article 16 identifies the rights conferred. The rights are expressed to be in the negative, namely “the exclusive right to prevent”. However the Article makes clear that it is not inconsistent with TRIPS for contracting states “...making rights available on the basis of use”. Article 16 thus creates a floor right and leaves it to the contracting states to expand rights to include use. But TRIPS does not itself do that: See italicised text below. Article 16(1) is in the following terms:

The owner of a registered trade mark shall have the exclusive right to prevent all third parties not having the owner's consent from using in the course of trade identical or similar signs for goods or services which are identical or similar to those in respect of which the trade mark is registered where such use would result in a likelihood of confusion. In case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed. The rights described above shall not prejudice any existing prior rights, nor shall they affect the possibility of Members making rights available on the basis of use”.

The interrelationship between trade marks and other, superior, public policies is an important issue in this litigation and forms a part of a number of the Claimants’ submissions. Trade marks are qualified rights and they do not under TRIPS have a fixed or uniform content or substance because they may be subjected to limitations imposed in national law justified by reference to overriding public policy. The combined effect of Articles 7, 8 and 17 makes this clear. Article 7 makes the important point that intellectual property must serve but not subvert the public interest. In particular usage must be reconciled with “social and economic welfare” and “a balance of rights and obligations”:

Article 8 confers on contracting states the right to introduce exceptions to trade mark use rights based upon the protection of “... public health and nutrition”:

Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology”.

The WTO Ministerial Conference has adopted a declaration which elaborates upon the importance of public health as a proper reason to derogate from intellectual property rights. This declaration is, on ordinary principles of international law, relevant in interpreting TRIPS. Article 31 of the Vienna Convention states that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. This includes: “(a) any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty; (b) Any instrument which

The DOHA Declaration was adopted by the WTO Ministerial Conference of 2001

It is significant that in the FCTC the prevalence and use of tobacco is described as an “epidemic” which is the term used in Paragraph 1 of the Declaration. It is also significant that in EU trade mark regulations the relevance and validity of this Declaration is acknowledged (See Recital 21 of the amended, recast, TMD – see paragraphs [198] – [199] below).

Article 17 recognises that other limited exceptions can be made to trade mark rights provided these are balanced against the proprietor’s “legitimate interests”. It follows, a fortiori, that some proprietary interests are not “legitimate”:

Article 20 also implicitly acknowledges that the use of trade marks may be “encumbered by special requirements” but only subject to a test of justification:

TRIPS also creates exceptions to usage rights where they collide with competition law. Article 40 provides:

Members agree that some licensing practices or conditions pertaining to intellectual property rights which restrain competition may have adverse effects on trade and may impede the transfer and dissemination of technology.

Nothing in this Agreement shall prevent Members from specifying in their legislation licensing practices or conditions that may in particular cases constitute an abuse of intellectual property rights having an adverse effect on competition in the relevant market. As provided above, a Member may adopt, consistently with the other provisions of this Agreement, appropriate measures to prevent or control such practices, which may include for example exclusive grantback conditions, conditions preventing challenges to validity and coercive package licensing, in the light of the relevant laws and regulations of that Member.

Each Member shall enter, upon request, into consultations with any other Member which has cause to believe that an intellectual property right owner that is a national or domiciliary of the Member to which the request for consultations has been addressed is undertaking practices in violation of the requesting Member's laws and regulations on the subject matter of this Section, and which wishes to secure compliance with such legislation, without prejudice to any action under the law and to the full freedom of an ultimate decision of either Member. The Member addressed shall accord full and sympathetic consideration to, and shall afford adequate opportunity for, consultations with the requesting Member, and shall cooperate through supply of publicly available nonconfidential information of relevance to the matter in question and of other information available to the Member, subject to domestic law and to the conclusion of mutually satisfactory agreements concerning the safeguarding of its confidentiality by the requesting Member.

A Member whose nationals or domiciliaries are subject to proceedings in another Member concerning alleged violation of that other Member's laws and regulations on the subject matter of this Section shall, upon request, be granted an opportunity for consultations by the other Member under the same conditions as those foreseen in paragraph 3”.

FCTC and TRIPS

It is plain from the above that intellectual property rights are not absolute and must be balanced against other competing public interests. In particular the right to use a trade mark can, under national law, yield to limitations imposed in the pursuit of superior public policy considerations. There is no canonical list of the public interests that may or may not be resorted to on the part of contracting states to limit intellectual property rights and a good deal of discretion is accorded to the signatories. What is however clear is that intellectual property rights can be derogated from in the name of public health since this is one of the few public interests which is explicitly identified. It is a point I return to later but it is worth emphasising here: For all the above reasons TRIPS and the FCTC can be read together without any risk of them colliding or being mutually inconsistent.

The TMD lays down minimum rights which are to be implemented into national law relating to trade marks. A new, recast, directive was adopted in 2015. To the extent relevant I address this at paragraphs [195ff] below. The recitals to the TMD make clear that it is not intended to be exhaustive of all of the laws capable of affecting trade marks. In particular it is exclusive of neither international law nor domestic law on other (non-trade mark) matters:

“Whereas this Directive does not exclude the application to trade marks of provisions of law of the Member States other than trade mark law, such as the provisions relating to unfair competition, civil liability or consumer protection”.

Article 7 TMD seeks to implement the rules on free movement of goods contained within the TFEU and encapsulates the well known principle of the exhaustion of rights:

“Exhaustion of the rights conferred by a trade mark

1.

The trade mark shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent.

2.

Paragraph 1 shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialization of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market”.

An issue in the present case (under Ground 10) concerns the extent to which a directive can in principle exhaustively and definitively define the rights conferred on proprietors of intellectual property rights. I set out below the principles of law which govern the interpretation of directives. These show that the rights conferred by directives on proprietors cannot be taken as exhaustive. Directives are species of subordinate legislation and cannot depart from the superior rights and obligations set out in the Treaties themselves. For this reason the Court of Justice has repeatedly made clear that whilst a trade mark serves important functions, including those set out in relevant trade mark legislation, it is nonetheless subject to further limits imposed by the Treaty.

By way of illustration this was made clear in Case C-348/04 Boehringer Ingelheim KG Boehringer Ingelheim Pharma GmbH & Co. KG Glaxo Group Ltd v Swingward Ltd [2007] ECR I-3391 (26^th April 2007) (“Boehringer”) where the issue related to whether a proprietor could use a trade mark to hinder parallel imports of pharmaceutical products because of the trade marks being used on the imported packaging. As to this it has been long settled that rights conferred by specific trade mark legislation cannot oust the more fundamental rights of free movement contained within the Treaties.

Advocate General Sharpston usefully summarised the position. She explained how the essence or substance (“specific subject matter”) of a trade mark had to be defined by reference to the Treaty and not just the relevant directive. In paragraphs [5] – [14] she first explained what was meant by the specific subject matter of a trade mark (paragraph [5] – [10]) as set out in case law under the treaty provisions on movement of goods and she then explained that attempts within the TMD (in particular in Articles 5 and 7) to describe the extent and limits of trade mark rights had to be read subject to the treaty (paragraphs [11] – [14]):

“5.

The historical roots of this case-law are of course Articles 28 and 30 EC. Article 30 looms large in the pleadings in this case. Article 28 in contrast gets little mention. It must not however be forgotten that Article 30 is the exception to the fundamental rule enshrined in Article 28 that goods should be able to move freely between Member States. As a derogation from that basic rule, Article 30 is to be strictly construed.

6.

In so construing Article 30 in the context of intellectual and industrial property rights, the Court at an early stage developed the concept of the specific subject-matter of the right, ruling that Article 30 "only admits derogations from [the free movement of goods] to the extent to which they are justified for the purpose of safeguarding rights which constitute the specific subject-matter of such property". That principle makes it possible to determine, in relation to each type of intellectual property, the circumstances in which the exercise of the right will be permissible under Community law, even though in a cross-border context such exercise by definition impedes free movement.

7.

Also at an early stage the Court defined the specific subjectmatter of a trade mark right as "the guarantee that the owner of the trade mark has the exclusive right to use that trade mark, for the purpose of putting products protected by the trade mark into circulation for the first time". From that definition the doctrine of exhaustion of trade mark rights followed naturally. The Court thus concluded that "the exercise, by the owner of a trade mark, of the right which he enjoys under the legislation of a Member State to prohibit the sale, in that State, of a product which has been marketed under the trade mark in another Member State by the trade mark owner or with his consent is incompatible with the rules of the EEC Treaty concerning the free movement of goods within the Common Market".

8.

The Court further developed the concept of the specific subject-matter of a trade mark right in Hoffmann-La Roche, explaining that "the essential function of the trade mark ... is to guarantee the identity of the origin of the trade-marked product to the consumer or ultimate user, by enabling him without any possibility of confusion to distinguish that product from products which have another origin [and to] be certain that a trade-marked product ... has not been subject at a previous stage of marketing to interference ... such as to affect the original condition of the product". Safeguarding the specific subject-matter of a trade mark therefore includes the right to prevent "any use of the trade mark which is liable to impair the guarantee of origin".

9.

The specific subject-matter of a trade mark thus has two components. First, there is the right to use the mark for the purpose of putting products protected by it into circulation for the first time in the EC, after which that right is exhausted. Second, there is the right to oppose any use of the trade mark which is liable to impair the guarantee of origin, which comprises both a guarantee of identity of origin and a guarantee of integrity of the trade-marked product.

10.

Those core rights are reflected in the Trade marks Directive. Article 5(1) provides that a trade mark confers on its proprietor "exclusive rights therein", and in particular the right to prevent the use in the course of trade of (a) an identical sign in relation to identical goods or services and (b) an identical or confusingly similar sign with regard to identical or similar goods or services.

11.

Without qualification, Article 5(1)(a) would give the proprietor of a mark the right to prevent all such use in relation to the goods which it covers. Proprietors could thus prevent imports into one Member State of such goods from another Member State and negate the free movement of goods guaranteed by Article 28 EC. That would however be contrary both to the Treaty and to the stated objective of the Directive, which is intended "to eliminate disparities between the trade mark laws of the Member States which may impede the free movement of goods and the freedom to provide services and distort competition within the common market" and hence to safeguard the functioning of the internal market. Article 7(1) therefore provides that the trade mark owner's right to prevent use of the mark "shall not entitle the proprietor to prohibit its use in relation to goods which have been put on the market in the Community under that trade mark by the proprietor or with his consent", thus encapsulating the doctrine of Community exhaustion of trade mark rights.

12.

Although Article 7(1) has been described as an exception to the rule in Article 5(1), I do not consider that that is a strictly accurate analysis of the relationship between the two provisions. It seems to me that it is more helpful to describe them as counterbalancing each other. If the language of rule and exception is invoked, then it would be more in the spirit of the interrelationship of Articles 28 and 30 EC for Article 5(1), which potentially restricts imports, to be construed as an exception to Article 7(1), which reflects the basic principle of the free movement of goods.

13.

In contrast, Article 7(2) states that Article 7(1) "shall not apply where there exist legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is changed or impaired after they have been put on the market". Article 7(2) therefore clearly is an exception to the basic principle of the free movement of goods. Accordingly, it should not be generously construed. It follows that an overbroad interpretation should not be given either, in general, to the term "legitimate reasons" or, in particular, to the notion of the "condition" of the goods being "changed or impaired".

14.

Articles 5 to 7 of the Directive effect a complete harmonisation of the rules relating to the rights conferred by a trade mark and accordingly define the rights of proprietors of trade marks in the Community. The Court has nevertheless already stated that its previous case-law under Article 30 EC must be taken as the basis for determining whether a trade mark owner may under Article 7(2) oppose the marketing of repackaged products to which the trade mark has been reaffixed. The same canons of interpretation must apply to other variants of repackaging to which trade mark owners take objection. The Directive must be construed in accordance with the Treaty framework and the core rights developed by the Court and defined above”.

Boehringer (ibid) thus made clear that the very notion of a trade mark in the TMD had to be understood in its wider legal context. In an earlier, seminal, authority in this area (Case C-427/93 Bristol Myers Squibb v Paranova [1996] ECR I-3457) the Court of Justice had made all of these points clear. It explained that the issue had to be understood in the context of the hierarchy of legislative norms. As with any other piece of secondary legislation the TMD had to be construed in the light of the Treaty rules on free movement of goods (ibid paragraph [27]) and further that the provision had been framed to correspond with the language and terminology used by the Court in earlier judgments in interpreting the superior Treaty rules on the free movement of goods (ibid paragraph [31]). In the face of an argument that the TMD permitted a proprietor to use a trade mark in a manner which would be inconsistent with the Treaty the Court stated:

“35 To accept the argument that the principle of exhaustion under Article 7(1) cannot apply if the importer has repackaged the product and reaffixed the trade mark would therefore imply a major alteration to the principles flowing from Articles 30 and 36 of the Treaty.

36 There is nothing to suggest that Article 7 of the directive is intended to restrict the scope of that case-law. Nor would such an effect be permissible, since a directive cannot justify obstacles to intra-Community trade save within the bounds set by the Treaty rules. The Court's case-law shows that the prohibition on quantitative restrictions and measures having equivalent effect applies not only to national measures but also to those emanating from Community institutions (see, most recently, Case C-51/93 Meyhui v Schott Zwiesel Glaswerke [1994] ECR I-3879, paragraph 11)”.

The reference by the Court to its judgment in Meyhui is to the fundamental constitutional principle that even the Community institutions cannot depart from the Treaty; and this, of course, is a reason why subordinate legislation cannot be inconsistent with the Treaty since if it could it would imply (wrongly) that the legislative institutions were constitutionally competent to depart from the Treaties themselves, which they are not.

The cases cited above concern the relationship between the rights conferred by the TMD and the Treaty rules on the free movement of goods. To take another obvious illustration a right conferred by a directive (such as the TMD) could not permit the right holder to facilitate a price fixing cartel or abuse a dominant position contrary to Articles 101 and 102 TFEU which prohibit such conduct. Such directly effective and fundamental prohibitions cannot be undermined by secondary legislation. The TMD is silent as to the relationship between trade mark usage and competition but no one has suggested in this litigation that because of this silence the TMD must be construed

The Claimants submitted that 2015 recast amendments to the TMD must be taken into account, not least because of the (uncontroversial) principle that once an EU measure is adopted but prior to expiry of the implementation period Member States are, due to the general principle of cooperation and solidarity, required to refrain from acting in a way that would undermine the new legislation. In the text below I explain how the revisions to the TMD also make clear that the statutory delineation of trade mark rights remains subject to a series of overarching legal and policy limitations.

The TMD was “recast” in December 2015 by Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks (Recast) (the “recast TMD”). This measure (like the TPD) was adopted under Article 114(1) TFEU. The relevant substantive provisions of the recast TMD do not become effective before January 2019 (under Article 54).

For present purposes it suffices to point out that the recast TMD provides: (i) for derogations to usage rights based upon general national law; (ii) that it is to be read consistently with international law including TRIPS; and (iii), that the exclusive rights conferred upon proprietors are expressed in negative terms relating to the prevention of unauthorised use by third parties. These are evident from Recitals 40 and 41 and Article 4(3) and Article 10.

As to both the right of Member States to create public interest exceptions to trade mark use rights and as to the relationship between the TMD and national and international law Recitals 40 and 41 provide:

“(40)

This Directive should not exclude the application to trade marks of provisions of law of the Member States other than trade mark law, such as provisions relating to unfair competition, civil liability or consumer protection.

(41)

Member States are bound by the Paris Convention for the Protection of Industrial Property (‘the Paris Convention’) and the TRIPS Agreement. It is necessary that this Directive be entirely consistent with that Convention and that Agreement. The obligations of the Member States resulting from that Convention and that Agreement should not be affected by this Directive. Where appropriate, the second paragraph of Article 351 of the Treaty on the Functioning of the European Union should apply”.

Recital 40 casts the right of Member States to create exceptions in general terms and refers to unfair competition, civil liability and consumer protection only as examples (“such as”). Recital 41 is important since the TMD does not seek to define what those provisions of national law “other than” trade mark law are which curtail use, but it is clear from the recital that this would be strongly influenced and possibly determined by international law such as TRIPS. Of some significance is Recital 21 which recognises that the DOHA Declaration on TRIPS and public health (set out and considered at paragraphs [180] – [181] above) is valid and relevant to the operation of EU law.

The substantive reflection of this is found in Article 4(3) entitled “Absolute grounds for refusal or invalidity” which confers a power (“may”) on Member States to refuse registration or to permit revocation where the “use” is contrary to national law. As such the TMD recognises the right of Member States to introduce derogations to trade mark rights based upon public policy and empowers them to reflect this by refusing registration or in revocation. But it does not compel Member States to do this; they “may” refuse registration or revoke a trade mark upon that broader public interest ground. Article 4(3) reads:

“3.

Any Member State may provide that a trade mark is not to be registered or, if registered, is liable to be declared invalid where and to the extent that: (a) the use of that trade mark may be prohibited pursuant to provisions of law other than trade mark law of the Member State concerned or of the Union...”.

As to the identification of the exclusive rights conferred upon trade mark holders this is covered by Article 10 entitled “Rights conferred by a trade mark”. Article 10(1) and (2) states:

“1.The registration of a trade mark shall confer on the proprietor exclusive rights therein.

2.Without prejudice to the rights of proprietors acquired before the filing date or the priority date of the registered trade mark, the proprietor of that registered trade mark shall be entitled to prevent all third parties not having his consent from using in the course of trade, in relation to goods or services, any sign where...”.

Article 10(2) then proceeds to identify the conditions which must exist to justify a proprietor being able to prevent third party use (e.g. that the third party mark must be identical and used in relation to goods or services which are identical etc). Article 10(3) lists a series of usages which “may be prohibited” i.e. it is up to the discretion of individual Member States to decide whether they wish to introduce such rights into national law. By way of example Article 10(3)(e) permits Member States to confer upon proprietors the right to prevent third party usage “ ... using the sign on business papers and in advertising”.

Recital 16 describes in policy terms the rationale behind the need to grant rights of preclusion; it is to ensure that the trade mark performs its function which is as an indication of origin:

“16.

The protection afforded by the registered trade mark, the function of which is in particular to guarantee the trade mark as an indication of origin, should be absolute in the event of there being identity between the mark and the corresponding sign and the goods or services”.

The recast TMD also explains that the essential function of a trade mark is connected to actual usage. However, it does so by way of a limitation on the proprietor’s right to use, namely if the trade mark is not used it may be lost. Recitals 31 and 32 accordingly explain:

“(31)

Trade marks fulfil their purpose of distinguishing goods or services and allowing consumers to make informed choices only when they are actually used on the market. A requirement of use is also necessary in order to reduce the total number of trade marks registered and protected in the Union and, consequently, the number of conflicts which arise between them. It is therefore essential to require that registered trade marks actually be used in connection with the goods or services for which they are registered, or, if not used in that connection within five years of the date of the completion of the registration procedure, be liable to be revoked.

(32)

Consequently, a registered trade mark should only be protected in so far as it is actually used and a registered earlier trade mark should not enable its proprietor to oppose or invalidate a later trade mark if that proprietor has not put his trade mark to genuine use. Furthermore, Member States should provide that a trade mark may not be successfully invoked in infringement proceedings if it is established, as a result of a plea, that the trade mark could be revoked or, when the action is brought against a later right, could have been revoked at the time when the later right was acquired”.

So far as the relationship between the recast TMD and the superior rules of the Treaty are concerned Recital 28 states that the specific provisions in the directive on free movement of goods are designed to follow from the relevant Treaty principles:

“(28)

It follows from the principle of free movement of goods that the proprietor of a trade mark should not be entitled to prohibit its use by a third party in relation to goods which have been put into circulation in the Union, under the trade mark, by him or with his consent, unless the proprietor has legitimate reasons to oppose further commercialisation of the goods”.

The recast TMD is based upon the conclusion that it is a proportionate measure and one which, is in accordance with the principle of subsidiarity in Article 5 TFEU: cf. Recital 42. Since the directive is expressly stated to be a recasting there is no duty on Member States to implement it by altering national law save in respect of “...those provisions which represent a substantive amendment as compared with the earlier Directive.” (Recital 45).

The recast TMD does not address at all the relationship between trade marks and competition policy. But the recast TMD was brought into effect following the report prepared by the Commission “Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions: A Single Market for Intellectual Property Rights Boosting creativity and innovation to provide economic growth, high quality jobs and first class products and services in Europe” (Brussels, 24.5.2011 COM(2011) 287 final). This Communication was one of the policy documents which led to the recasting of the TMD: See Recital 6. The Communication emphasises that the use of all intellectual property rights must be subject to competition law:

“Promoting creation and innovation and driving economic growth are common goals of intellectual property and competition law. Strong protection and enforcement of IPR should be accompanied by rigorous application of competition rules in order to prevent the abuse of IPR which can hamper innovation or exclude new entrants, and especially SMEs, from markets”.

The relevant point is that the recast TMD (like its predecessor) does not address the relationship between trade marks and superior Treaty rules; this is because it is simply assumed, and hence implicit, that the rights in the measure are of necessity subject to all overarching relevant Treaty rules.

I turn now to the CTMR which is the specific subject matter of Ground 10. The regulation sets out a system for the creation of EU wide, Community trade marks

Recital 11 makes clear that trade marks are property rights:

“A Community trade mark is to be regarded as an object of property which exists separately from the undertakings whose goods or services are designated by it. Accordingly, it should be capable of being transferred, subject to the overriding need to prevent the public being misled as a result of the transfer. It should also be capable of being charged as security in favour of a third party and of being the subject matter of licences”.

Article 1 is at the heart of one of the Claimants’ grounds. It introduces the concept of the “unitary character” of a CTM. It is to have “equal effect” across the Community.

The Claimants point out that the raison d’etre of the concept of unitariness is as a stimulant to Europe wide competition and the integration of the market which are ideals entrenched elsewhere in the Treaties. The object and purpose of the “unitary character” is explained at Recitals (2), (3) and (4):

“(2)

It is desirable to promote throughout the Community a harmonious development of economic activities and a continuous and balanced expansion by completing an internal market which functions properly and offers conditions which are similar to those obtaining in a national market. In order to create a market of this kind and make it increasingly a single market, not only must barriers to free movement of goods and services be removed and arrangements be instituted which ensure that competition is not distorted, but, in addition, legal conditions must be created which enable undertakings to adapt their activities to the scale of the Community, whether in manufacturing and distributing goods or in providing services. For those purposes, trade marks enabling the products and services of undertakings to be distinguished by identical means throughout the entire Community, regardless of frontiers, should feature amongst the legal instruments which undertakings have at their disposal.

1.

For the purpose of pursuing the Community’s said objectives it would appear necessary to provide for Community arrangements for trade marks whereby undertakings can by means of one procedural system obtain Community trade marks to which uniform protection is given and which produce their effects throughout the entire area of the Community. The principle of the unitary character of the Community trade mark thus stated should apply unless otherwise provided for in this Regulation.

2.

The barrier of territoriality of the rights conferred on proprietors of trade marks by the laws of the Member States cannot be removed by approximation of laws. In order to open up unrestricted economic activity in the whole of the internal market for the benefit of undertakings, trade marks should be created which are governed by a uniform Community law directly applicable in all Member States”.

The object of Article 1(2) has been further explained in case-law. In Case C- 149/11

Community trade marks are not absolute. Article 4 defines a CTM. Under Article 6 it is to be obtained by registration. Articles 7 and 8 govern the grounds on which registration may be refused. CTMs which are contrary to public policy may not be registered. Article 7(1)(f) provides:

“1.

The following shall not be registered:

…

(f)

trade marks which are contrary to public policy or to accepted principles of morality…”.

Article 9 provides that a CTM “shall confer on the proprietor exclusive rights therein”, which are then defined in negative terms as a right to prevent:

“A Community trade mark shall confer on the proprietor exclusive rights therein. The proprietor shall be entitled to prevent all third parties not having his consent from using in the course of trade …”.

Once the requirements of the CTMR are satisfied, a CTM is guaranteed uniform protection throughout the EU. The principle of the “unitary character” means that a CTM must (“shall”) be given “equal effect throughout the Community”. Article 1(2) also identifies a non-exhaustive range of acts which are unlawful unless done in respect of the whole Community, including the registration, transfer or surrender of a

Article 110 is an important provision which confirms that Member States may introduce measures to restrict the use of a CTM to the extent that national law prohibits the use of a national trade mark. The article is relevant in the present case because the Claimants argue that it cannot be relied upon by Parliament to derogate from the “unitary” scope of the CTMs that they own and which are, otherwise, curtailed by the Regulations. Article 110 clarifies that where Member States for legitimate reasons prohibit use under domestic law then they have a concomitant power to do the same in relation to the use of a CTM. The measure does not compel Member States to take the same measures against CTMs that they take against the use of domestic trade marks; the provision is permissive (“may”). The context to the provision is apparent from the titles to the sections of the Regulation in which it sits. First, it is positioned under Title XI to the Regulation which concerns “Effect on the Laws of the Member States”. Secondly, it is also in Section 2 of Title XI entitled: “Application of national laws for the purpose of prohibiting the use of Community trade mark”. Specifically the particular title to Article 110 itself is “Prohibition of use of Community trade marks”. Article 110(2) provides:

“2.

This Regulation shall, unless otherwise provided for, not affect the right to bring proceedings under the civil, administrative or criminal law of a Member State or under provisions of Community law for the purpose of prohibiting the use of a Community trade mark to the extent that the use of a national trade mark may be prohibited under the law of that Member State or under Community law”.

I address this in detail at Section N(4) below in relation to Ground 10.

The CTMR was amended by Regulation (EU) 2015/2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark and Commission Regulation (EC) No 2868/95 implementing Council Regulation (EC) No 40/94 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade marks and Designs) (“the amended CTMR”). The purpose of the amended CTMR was to bring Regulation 207/2009 - the CTMR - up to date in the light of experience.

The terminology of Regulation (EC) No 207/2009 is updated and the ‘Community trade mark’ becomes the ‘European Union trade mark’ (‘EU trade mark’). The Office for Harmonization in the Internal Market (trade marks and designs) becomes the ‘European Union Intellectual Property Office’. The amended CTMR makes a large number of amendments to the procedures relating to the EU trade marks.

The unitary character of trade marks, set out in Article 1 CTMR, and the rights of Member States confirmed by Article 110, are unaffected by the amendments.

The exclusive rights conferred remain a right to prevent third party use. Article 9 thus commences with the following:

“Rights conferred by an EU trade mark

1.

The registration of an EU trade mark shall confer on the proprietor exclusive rights therein. 2.Without prejudice to the rights of proprietors acquired before the filing date or the priority date of the EU trade mark, the proprietor of that EU trade mark shall be entitled to prevent all third parties not having his consent from using in the course of trade, in relation to goods or services, any sign where ...”.

This Regulation became effective on 23 March 2016. However the substantive provisions must be applied only as from 1 October 2017 or, in relation to a small minority of provisions, from 1^st October 2018 (cf. Article 4).

Directive 2004/48/EC of the European Parliament and of the Council of 29

I refer briefly to the directive which harmonises trade mark enforcement rules. The Enforcement Directive lays down basic principles which are to be respected across the whole of the EU. The recitals make it clear that it is not exhaustive of the rules which apply and that it is to be read as subject to international law and in particular TRIPS. Recitals (4) – (6) provide:

“(4)

At international level, all Member States, as well as the Community itself as regards matters within its competence, are bound by the Agreement on Trade-Related Aspects of Intellectual Property (the "TRIPS Agreement"), approved, as part of the multilateral negotiations of the Uruguay Round, by Council Decision 94/800/EC and concluded in the framework of the World Trade Organisation.

(5)

The TRIPS Agreement contains, in particular, provisions on the means of enforcing intellectual property rights, which are common standards applicable at international level and implemented in all Member States. This Directive should not affect Member States international obligations, including those under the TRIPS Agreement.

(6)

There are also international conventions to which all Member States are parties and which also contain provisions on the means of enforcing intellectual property rights. These include, in particular, the Paris Convention for the Protection of Industrial Property, the Berne Convention for the Protection of Literary and Artistic Works, and the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organisations”.

I turn now from international law and general EU trade mark measures to measures specific to tobacco. The TPD is the second EU measure focusing upon control of the manufacture, presentation and sale of tobacco. The first was Directive 2001/37/EC of the European Parliament and of the Council. The TPD was adopted to reflect changes in “scientific, market and international developments” (cf. Recital 1). It was promulgated under Articles 53(1), 62 and 114 TFEU.

Article 114 empowers the EU to adopt measures for the approximation of laws, regulation and administrative action in the Member States which have as their object the establishment and functioning of the internal market. Article 114(3) states:

“The Commission in its proposals … concerning health, safety, environmental protection and consumer protection, will take as a base a high level of protection, taking account in particular of any new development based on scientific facts. Within their respective powers, the European Parliament and the Council will also seek to achieve this objective”.

A number of relevant points arise from the recitals to the Directive.

First there are substantial differences existing between the practices of the Member States in relation to the imposition of restrictions on the manufacture, sale and promotion of tobacco products: Recital 4 – “there are still substantial differences between the Member States' laws, regulations and administrative provisions on the manufacture, presentation and sale of tobacco and related products which present obstacles to the smooth functioning of the internal market.” These disparities should be eliminated (Recital 5).

Second, the TPD is a direct response to the FCTC and the WHO Guidelines which represent a “consensus” between, inter alia, the Member States. Further, this is consistent with the principle in Article 114(3) TFEU that EU law shall accord health matters a “high level of protection”:

“(7)

Legislative action at Union level is also necessary in order to implement the WHO Framework Convention on Tobacco Control (‘FCTC’) of May 2003, the provisions of which are binding on the Union and its Member States. The FCTC provisions on the regulation of the contents of tobacco products, the regulation of tobacco product disclosures, the packaging and labelling of tobacco products, advertising and illicit trade in tobacco products are particularly relevant. The Parties to the FCTC, including the Union and its Member States, adopted a set of guidelines for the implementation of FCTC provisions by consensus during various Conferences.

(8)

In accordance with Article 114(3) of the Treaty of the Functioning of the European Union (TFEU), a high level of health protection should be taken as a base for legislative proposals and, in particular, any new developments based on scientific facts should be taken into account. Tobacco products are not ordinary commodities and in view of the particularly harmful effects of tobacco on human health, health protection should be given high importance, in particular, to reduce smoking prevalence among young people”.

Third, EU policy (consistent with the objectives of the FCTC) has a particular focus on deterring young people from taking up smoking:

“(21)

In line with the purposes of this Directive, namely to facilitate the smooth functioning of the internal market for tobacco and related products, taking as a base a high level of health protection, especially for young people, and in line with Council Recommendation 2003/54/EC, Member States should be encouraged to prevent sales of such products to children and adolescents, by adopting appropriate measures that lay down and enforce age limits”.

Fourth, the packaging and labelling requirements are intended to ensure conformity with the FCTC:

“(24)

Adaptation of the provisions on labelling is also necessary to align the rules that apply at Union level to international developments. For example, the FCTC guidelines on the packaging and labelling of tobacco products call for large picture warnings on both principal display areas, mandatory cessation information and strict rules on misleading information. The provisions on misleading information will complement the general ban on misleading business to consumer commercial practices laid down in Directive 2005/29/EC of the European Parliament and of the Council”.

Fifth, the TPD addresses the implications of different types of labelling and packaging in the context of the conveyance to consumers of different (pro-smoking) messages:

“(25)

The labelling provisions should also be adapted to new scientific evidence. For example, the indication of the emission levels for tar, nicotine and carbon monoxide on unit packets of cigarettes has proven to be misleading as it leads consumers to believe that certain cigarettes are less harmful than others. Evidence also suggests that large combined health warnings comprised of a text warning and a corresponding colour photograph are more effective than warnings consisting only of text. As a consequence, combined health warnings should become mandatory throughout the Union and cover significant and visible parts of the surface of unit packets. Minimum dimensions should be set for all health warnings to ensure their visibility and effectiveness.

(26)

For tobacco products for smoking, other than cigarettes and roll-your-own tobacco products, which are mainly consumed by older consumers and small groups of the population, it should be possible to continue to grant an exemption from certain labelling requirements as long as there is no substantial change of circumstances in terms of sales volumes or consumption patterns of young people. The labelling of these other tobacco products should follow rules that are specific to them. The visibility of health warnings on smokeless tobacco products should be ensured. Health warnings should, therefore, be placed on the two main surfaces of the packaging of smokeless tobacco products. As regards waterpipe tobacco, which is often perceived as less harmful than traditional tobacco products for smoking, the full labelling regime should apply in order to avoid consumers being misled.

(27)

Tobacco products or their packaging could mislead consumers, in particular young people, where they suggest that these products are less harmful. This is, for example, the case if certain words or features are used, such as the words ‘low-tar’, ‘light’, ‘ultra-light’, ‘mild’, ‘natural’, ‘organic’, ‘without additives’, ‘without flavours’ or ‘slim’, or certain names, pictures, and figurative or other signs. Other misleading elements might include, but are not limited to, inserts or other additional material such as adhesive labels, stickers, inserts, scratch-offs and sleeves or relate to the shape of the tobacco product itself. Certain packaging and tobacco products could also mislead consumers by suggesting benefits in terms of weight loss, sex appeal, social status, social life or qualities such as femininity, masculinity or elegance. Likewise, the size and appearance of individual cigarettes could mislead consumers by creating the impression that they are less harmful. Neither the unit packets of tobacco products nor their outside packaging should include printed vouchers, discount offers, reference to free distribution, two-for- one or other similar offers that could suggest economic advantages to consumers thereby inciting them to buy those tobacco products.

(28)

In order to ensure the integrity and the visibility of health warnings and maximise their efficacy, provisions should be made regarding the dimensions of the health warnings as well as regarding certain aspects of the appearance of the unit packets of tobacco products, including the shape and opening mechanism. When prescribing a cuboid shape for a unit packet, rounded or bevelled edges should be considered acceptable, provided the health warning covers a surface area that is equivalent to that on a unit packet without such edges. Member States apply different rules on the minimum number of cigarettes per unit packet. Those rules should be aligned in order to ensure free circulation of the products concerned”.

Sixth, the TPD balances the need to protect health with other fundamental rights, proportionality and international law:

“(59)

The obligation to respect the fundamental rights and legal principles enshrined in the Charter of Fundamental Rights of the European Union is not changed by this Directive. Several fundamental rights are affected by this Directive. It is therefore necessary to ensure that the obligations imposed on manufacturers, importers and distributors of tobacco and related products not only guarantee a high level of health and consumer protection, but also protect all other fundamental rights and are proportionate with respect to the smooth functioning of the internal market. The application of this Directive should respect Union law and relevant international obligations”.

Recital 53 (set out below) refers to the directive as constituting “a first set of basic common rules”. The TPD is a measure of partial harmonisation. It reflects a form of lowest common denominator but leaves it to individual Member States to go further if they wish.

A second issue concerns the relationship between the TPD and international law but Recitals (53) – (55) address this matter:

“(53)

Tobacco and related products which comply with this Directive should benefit from the free movement of goods. However, in light of the different degrees of harmonisation achieved by this Directive, the Member States should, under certain conditions, retain the power to impose further requirements in certain respects in order to protect public health. This is the case in relation to the presentation and the packaging, including colours, of tobacco products other than health warnings, for which this Directive provides a first set of basic common rules. Accordingly, Member States could, for example, introduce provisions providing for further standardisation of the packaging of tobacco products, provided that those provisions are compatible with the TFEU, with WTO obligations and do not affect the full application of this Directive.

(54)

Moreover, in order to take into account possible future market developments, Member States should also be allowed to prohibit a certain category of tobacco or related products, on grounds relating to the specific situation in the Member State concerned and provided the provisions are justified by the need to protect public health, taking into account the high level of protection achieved through this Directive. Member States should notify such stricter national provisions to the Commission.

(55)

A Member State should remain free to maintain or introduce national laws applying to all products placed on its national market for aspects not regulated by this Directive, provided they are compatible with the TFEU and do not jeopardise the full application of this Directive. Accordingly and under those conditions, a Member State could, inter alia, regulate or ban paraphernalia used for tobacco products (including waterpipes) and for herbal products for smoking as well as regulate or ban products resembling in appearance a type of tobacco or related product. Prior notification is required for national technical regulations pursuant to Directive 98/34/EC”.

Article 8 governs health warnings. It provides as follows:

“CHAPTER II

Labelling and packaging

Article 8

General provisions

1.

Each unit packet of a tobacco product and any outside packaging shall carry the health warnings provided for in this Chapter in the official language or languages of the Member State where the product is placed on the market.

2.

Health warnings shall cover the entire surface of the unit packet or outside packaging that is reserved for them and they shall not be commented on, paraphrased or referred to in any form.

3.

Member States shall ensure that the health warnings on a unit packet and any outside packaging are irremovably printed, indelible and fully visible, including not being partially or totally hidden or interrupted by tax stamps, price marks, security features, wrappers, jackets, boxes, or other items, when tobacco products are placed on the market. On unit packets of tobacco products other than cigarettes and roll-your-own tobacco in pouches, the health warnings may be affixed by means of stickers, provided that such stickers are irremovable. The health warnings shall remain intact when opening the unit packet other than packets with a flip-top lid, where the health warnings may be split when opening the packet, but only in a manner that ensures the graphical integrity and visibility of the text, photographs and cessation information.

4.

The health warnings shall in no way hide or interrupt the tax stamps, price marks, tracking and tracing marks, or security features on unit packets.

5.

The dimensions of the health warnings provided for in Articles 9, 10, 11 and 12 shall be calculated in relation to the surface concerned when the packet is closed.

6.

Health warnings shall be surrounded by a black border of a width of 1 mm inside the surface area that is reserved for these warnings, except for health warnings pursuant to Article 11.

7.

When adapting a health warning pursuant to Articles 9(5), 10(3) and 12(3), the Commission shall ensure that it is factual or that Member States shall have a choice of two warnings, one of which is factual.

8.

Images of unit packets and any outside packaging targeting consumers in the Union shall comply with the provisions of this chapter”.

Articles 13 and 14 regulate what may be placed on tobacco products and upon packets and outside packaging. Article 13(3) puts it beyond doubt that the activities that may be prohibited include the use of trade marks:

“Article 13

Product presentation

1.

The labelling of unit packets and any outside packaging and the tobacco product itself shall not include any element or feature that:

(a)

promotes a tobacco product or encourages its consumption by creating an erroneous impression about its characteristics, health effects, risks or emissions; labels shall not include any information about the nicotine, tar or carbon monoxide content of the tobacco product;

(b)

suggests that a particular tobacco product is less harmful than others or aims to reduce the effect of some harmful components of smoke or has vitalising, energetic, healing, rejuvenating, natural, organic properties or has other health or lifestyle benefits;

(c)

refers to taste, smell, any flavourings or other additives or the absence thereof;

(d)

resembles a food or a cosmetic product;

(e)

suggests that a certain tobacco product has improved biodegradability or other environmental advantages.

2.

The unit packets and any outside packaging shall not suggest economic advantages by including printed vouchers, offering discounts, free distribution, two-for-one or other similar offers.

3.

The elements and features that are prohibited pursuant to paragraphs 1 and 2 may include but are not limited to texts, symbols, names, trade marks, figurative or other signs.

Article 14

Appearance and content of unit packets

1.

Unit packets of cigarettes shall have a cuboid shape. Unit packets of roll-your-own tobacco shall have a cuboid or cylindrical shape, or the form of a pouch. A unit packet of cigarettes shall include at least 20 cigarettes. A unit packet of roll-your-own tobacco shall contain tobacco weighing not less than 30g

2.

A unit packet of cigarettes may consist of carton or soft material and shall not have an opening that can be re- closed or re-sealed after it is first opened, other than the flip-top lid and shoulder box with a hinged lid. For packets with a flip-top lid and hinged lid, the lid shall be hinged only at the back of the unit packet”.

Article 24 entitled “Free movement” is an important provision which makes clear that Member States may adopt prohibitive measures justified on grounds of public health. It has been subject to much debate in Court and is the subject of a specific ground of challenge: Ground 11. It provides as follows:

“Article 24

Free movement

1.

Member States may not, for considerations relating to aspects regulated by this Directive, and subject to paragraphs 2 and 3 of this Article, prohibit or restrict the placing on the market of tobacco or related products which comply with this Directive.

2.

This Directive shall not affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive. Such measures shall be proportionate and may not constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States. Those measures shall be notified to the Commission together with the grounds for maintaining or introducing them.

3.

A Member State may also prohibit a certain category of tobacco or related products, on grounds relating to the specific situation in that Member State and provided the provisions are justified by the need to protect public health, taking into account the high level of protection of human health achieved through this Directive. Such national provisions shall be notified to the Commission together with the grounds for introducing them. The Commission shall, within six months of the date of receiving the notification provided for in this paragraph, approve or reject the national provisions after having verified, taking into account the high level of protection of human health achieved through this Directive, whether or not they are justified, necessary and proportionate to their aim and whether or not they are a means of arbitrary discrimination or a disguised restriction on trade between the Member States. In the absence of a decision by the Commission within the period of six months, the national provisions shall be deemed to be approved”.

Under Article 28 the Commission is under a duty, after five years, to submit to the Parliament, the Council and the European Economic and Social Committee and to the Committee of the Regions a report on the application of the Directive. This shall include “… in particular, the elements of the Directive which should be reviewed or adapted in the light of scientific and technical developments, including the development of internationally agreed rules and standards on tobacco and related products…” (Article 28(2)). Amongst the matters that the Commission must report upon are “experience” gained taking into account national and international legal, economic and scientific developments; and changes in market circumstances constituting “…a substantial change in circumstances”. The terms of the review are broad enough to capture the experience, worldwide, of those States that had introduced standardised packaging such as Australia and the United Kingdom.

The provision reads:

“Article 28

Report

1.

No later than five years from 20 May 2016, and whenever necessary thereafter, the Commission shall submit to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions a report on the application of this Directive. When drafting the report, the Commission shall be assisted by scientific and technical experts in order to have all the necessary information at its disposal.

2.

In the report, the Commission shall indicate, in particular, the elements of the Directive which should be reviewed or adapted in the light of scientific and technical developments, including the development of internationally agreed rules and standards on tobacco and related products. The Commission shall pay special attention to:

(a)

the experience gained with respect to the design of package surfaces not governed by this Directive taking into account national, international, legal, economic and scientific developments;

(b)

market developments concerning novel tobacco products considering, inter alia, notifications received under Article 19;

(c)

market developments which constitute a substantial change of circumstances;

(d)

the feasibility, benefits and possible impact of a European system for the regulation of the ingredients used in tobacco products, including the establishment, at Union level, of a list of ingredients that may be used or present in, or added to tobacco products, taking into account, inter alia, the information collected in accordance with Articles 5 and 6;

(e)

market developments concerning cigarettes with a diameter of less than 7,5 mm, and consumer perception of their harmfulness as well as the misleading character of such

cigarettes;

(f)

the feasibility, benefits and possible impact of a Union database containing information on ingredients and emissions from tobacco products collected in accordance with Articles 5 and 6;

(g)

market developments concerning electronic cigarettes and refill containers considering, amongst others, information collected in accordance with Article 20, including on the initiation of consumption such products by young people and non-smokers and the impact of such products on cessation efforts as well as measures taken by Member States regarding flavours;

(h)

market developments and consumer preferences as regards waterpipe tobacco, with a particular focus on its flavours.

The Member States shall assist the Commission and provide all available information for carrying out the assessment and preparing the report.

3.

The report shall be followed-up by proposals for amending this Directive, which the Commission deem necessary to adapt it - to the extent necessary for the smooth functioning of the internal market - to developments in the field of tobacco and related products, and to take into account new developments based on scientific facts and developments concerning internationally agreed standards for tobacco and related products”.

I turn now to the position in the United Kingdom. Section 94(1) and (2) of the Children and Families Act 2014 confer upon the Secretary of State the power to make regulations to achieve two specified purposes relating to the health of persons both under but also above aged 18. The policy objectives are defined as “reducing the risk of harm to, or promoting, the health or welfare of people”:

“Regulation of retail packaging etc of tobacco products

(1)

The Secretary of State may make regulations under subsection (6) or (8) if the Secretary of State considers that the regulations may contribute at any time to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18.

(2)

Subsection (1) does not prevent the Secretary of State, in making regulations under subsection (6) or (8), from considering whether the regulations may contribute at any time to reducing the risk of harm to, or promoting, the health or welfare of people aged 18 or over”.

Section 94(3) sets out certain conditions that the Secretary of State must in effect be satisfied of:

“(3)

The Secretary of State may treat regulations under subsection (6) or (8) as capable of contributing to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18 if the Secretary of State considers that—

(a)

at least some of the provisions of the regulations are capable of having that effect, or

(b)

the regulations are capable of having that effect when taken together with other regulations that were previously made under subsection (6) or (8) and are in force”.

Section 94(4) contains an important deeming provision:

“(4)

Regulations under subsection (6) or (8) are to be treated for the purposes of subsection (1) or (2) as capable of contributing to reducing the risk of harm to, or promoting, people’s health or welfare if (for example) they may contribute to any of the following—

(a)

discouraging people from starting to use tobacco products;

(b)

encouraging people to give up using tobacco products;

(c)

helping people who have given up, or are trying to give up, using tobacco products not to start using them again;

(d)

reducing the appeal or attractiveness of tobacco products;

(e)

reducing the potential for elements of the packaging of tobacco products other than health warnings to detract from the effectiveness of those warnings;

(f)

reducing opportunities for the packaging of tobacco products to mislead consumers about the effects of using them;

(g)

reducing opportunities for the packaging of tobacco products to create false perceptions about the nature of such products;

(h)

having an effect on attitudes, beliefs, intentions and behaviours relating to the reduction in use of tobacco products.

(5)

Regulations under subsection (6) or (8) are to be treated for the purposes of subsection (1) as capable of contributing to reducing the risk of harm to, or promoting, the health or welfare of people under the age of 18 if—

(a)

they may contribute to reducing activities by such people which risk harming their health or welfare after they reach the age of 18, or

(b)

they may benefit such people by reducing the use of tobacco products among people aged 18 or over”.

Section 94(6) empowers the Defendant to make provision about the retail packaging of tobacco products:

“(6)

The Secretary of State may by regulations make provision about the retail packaging of tobacco products”.

And these may include very specific provisions relating to a variety of types of advertising related activity:

“(7)

Regulations under subsection (6) may in particular impose prohibitions, requirements or limitations relating to—

(a)

the markings on the retail packaging of tobacco products

(including the use of branding, trade marks or logos);

(b)

the appearance of such packaging;

(c)

the materials used for such packaging;

(d)

the texture of such packaging;

(e)

the size of such packaging;

(f)

the shape of such packaging;

(g)

the means by which such packaging is opened;

(h)

any other features of the retail packaging of tobacco products which could be used to distinguish between different brands of tobacco product;

(i)

the number of individual tobacco products contained in an individual packet;

(j)

the quantity of a tobacco product contained in an individual packet.

(8)

The Secretary of State may by regulations make provision imposing prohibitions, requirements or limitations relating to—

(a)

the markings on tobacco products (including the use of branding, trade marks or logos);

(b)

the appearance of such products;

(c)

the size of such products;

(d)

the shape of such products;

(e)

the flavour of such products;

(f)

any other features of tobacco products which could be used to distinguish between different brands of tobacco product. (9) The Secretary of State may by regulations—

(a)

create offences which may be committed by persons who produce or supply tobacco products the retail packaging of which breaches prohibitions, requirements or limitations imposed by regulations under subsection (6);

(b)

create offences which may be committed by persons who produce or supply tobacco products which breach prohibitions, requirements or limitations imposed by regulations under subsection (8);

(c)

provide for exceptions and defences to such offences;

(d)

make provision about the liability of others to be convicted of such offences if committed by a body corporate or a Scottish partnership.

(10)

The Secretary of State may by regulations—

(a)

provide that regulations under subsection (6) or (8) are to be treated for the purposes specified in regulations under this subsection as safety regulations within the meaning of the

Consumer Protection Act 1987;

(b)

make provision for the appropriate minister to direct, in relation to cases of a particular description or a particular case, that any duty imposed on a local weights and measures authority in Great Britain or a district council in Northern Ireland by virtue of provision under paragraph (a) is to be discharged instead by the appropriate minister.

(11)

The Secretary of State may by regulations make provision amending, repealing, revoking or otherwise modifying any provision made by or under an enactment (whenever passed or made) in connection with provision made by regulations under any of subsections (6), (8), (9) or (10)”.

Finally for present purposes Parliament required the consent of the devolved administrations to be obtained before regulations could be made:

“(12)

The Secretary of State must—

(a)

obtain the consent of the Scottish Ministers before making regulations under any of subsections (6), (8), (9) or (10) containing provision which would (if contained in an Act of the Scottish Parliament) be within the legislative competence of that Parliament;

(b)

obtain the consent of the Welsh Ministers before making regulations under any of those subsections containing provision which would (if contained in an Act of the National Assembly for Wales) be within the legislative competence of that Assembly;

(c)

obtain the consent of the Office of the First Minister and deputy First Minister in Northern Ireland before making regulations under any of those subsections containing provision which would (if contained in an Act of the Northern Ireland Assembly) be within the legislative competence of that Assembly”.

The Regulations come into force in 20 May 2016, the deadline for the implementation of TPD.

The Regulations implement aspects of the TPD. However, the principal object is to introduce standardised packaging. It is undeniably correct, as the Claimants contend, that the Regulations will exert substantial limitations upon the tobacco companies’ use of their intellectual property rights. But the curtailment is not absolute. Standardised packaging entails a limited right to use trade marks on packaging and products and has no material impact on the use of trade marks outside the consumer context, for instance in relation to wholesale trade packaging or on corporate letterheads or in trade magazines. In addition, the Regulations do not prohibit the dissemination of information about the identity of the producer (Schedule 1(3)) so that, although this information is not communicated in the form of a trade mark, it can, nonetheless, operate in conjunction with permitted trade marks to facilitate the use of the mark as an indicator or identifier of origin. I set out below Regulations 3-6 which set out the rules now applicable to the packaging of cigarettes and to the appearance of the tobacco products themselves. There are equivalent restrictions imposed on hand rolled tobacco (in Regulations 7 and 8):

“Permitted colour or shade of packaging of cigarettes

3.—(1) No person may produce or supply any cigarettes in breach of any of the provisions of this regulation or Schedule 1 (exceptions to paragraphs (2) and (3)).

(2)

The only colour or shade permitted on or for the external packaging of a unit packet or container packet of cigarettes is Pantone 448 C with a matt finish, but this is subject to paragraph (4) and Schedule 1.

(3)

The only colour or shade permitted on or for the internal packaging of a unit packet or container packet of cigarettes, is either—

(a)

white, or

(b)

Pantone 448 C with a matt finish,

but this is subject to paragraph (4), Schedule 1 and paragraph 3(1) of Schedule 2.

(4)

Nothing in paragraph (2) or (3) prohibits any warning, statement, text, picture, image, symbol or marking which is required by any enactment (whenever passed or made) other than these Regulations; but see paragraph 3 of Schedule 1 which imposes conditions in relation to any text required in accordance with regulation 7(4)(a)(i) of the General Product Safety Regulations 2005 (name and address of producer)(7).

Material, shape, opening and contents of unit packet of cigarettes

4.—(1) No person may produce or supply any cigarettes in breach of any of the provisions of this regulation.

(2)

A unit packet of cigarettes must be made of carton or soft material.

(3)

A unit packet of cigarettes must be cuboid in shape, although any such cuboid may have bevelled or rounded edges.

(4)

A unit packet of cigarettes may contain an opening that can be re-closed or re-sealed after it is first opened but only if that opening is a flip top lid or a shoulder box hinged lid.

(5)

A flip-top lid may be hinged only at the back of the packet.

(6)

A shoulder box hinged lid may be hinged only along one of the two smallest sides of the packet.

(7)

The sides of a unit packet of cigarettes which is a shoulder box with a hinged lid must have a height (measured between the front and back surfaces of the packet) of at least 16 millimetres.

(8)

A unit packet of cigarettes must contain a minimum of 20 cigarettes.

Appearance of cigarettes

5.—(1) No person may produce or supply any cigarettes in breach of any of the provisions of this regulation.

(2)

The only colour or shade permitted on or for the paper, casing, filter or other material forming part of a cigarette (apart from the tobacco contained in it) is plain white with a matt finish, but this is subject to the following provisions.

(3)

Any paper or casing that surrounds the end of a cigarette that is not designed to be lit may be coloured in such a way as to imitate cork.

(4)

A cigarette may have text printed on it to identify the brand name and variant name of the cigarette but only if each of the following conditions is met.

(5)

Those conditions are—

(a)

that the text appears parallel to, and not more than 38 millimetres from, the end of the cigarette that is not designed to be lit,

(b)

that the text does not contain any character which is not alphabetic, numeric or an ampersand,

(c)

that the first letter of any word is in upper-case type or lower-case type,

(d)

that the rest of any word is in lower-case type,

(e)

that the text is printed in Helvetica type,

(f)

that the colour of the text is black,

(g)

that the text is in a normal, weighted, regular typeface, and

(h)

that the size of the text is no larger than 8 point.

Further provisions about the packaging of cigarettes

6.

No person may produce or supply any cigarettes in breach of any of the provisions of Schedule 2 (further provisions about the packaging of cigarettes)”.

Regulation 13 is part of the basis of Ground 10. The Claimants submit that it highlights the illegality of the Regulations in the light of Article 110(2) CTMR (see Section N in relation to Ground 10 below). It reads:

“Regulations not to affect registration of trade marks etc

13.—(1) For the avoidance of doubt, nothing in, or done in accordance with, these Regulations—

(a)

forms an obstacle to the registration of a trade mark under the Trade marks Act 1994, or

(b)

gives rise to a ground for the declaration of invalidity of a registered trade mark under section 47(1) of that Act (grounds for invalidity of registration).

(2)

Without limiting paragraph (1), nothing in, or done in accordance with, these Regulations—

(a)

causes any trade mark to be contrary to public policy or to accepted principles of morality for the purposes of section 3(3)(a) of that Act (absolute grounds for refusal of registration),

(b)

amounts to an enactment or rule of law which prohibits the use of a trade mark for the purposes of section 3(4) of that Act,

(c)

amounts to a rule of law by which the use in the United Kingdom of any trade mark is liable to be prevented for the purposes of section 5(4) of that Act (relative grounds for refusal of registration),

(d)

causes an application for the registration of a trade mark under that Act to be one which is made in bad faith, or

(e)

prevents an applicant for the registration of a trade mark under that Act from having such a bona fide intention as is mentioned in section 32(3) of that Act (application for registration of trade mark).

(3)

Paragraph (4) applies for the purposes of section 6(3) of the

Trade marks Act 1994 (meaning of “earlier trade mark”) if the trade mark there mentioned is a registered trade mark and its use is affected by these Regulations.

(4)

A bona fide use of the trade mark is to be regarded as having taken place during the two years there mentioned if there would have been such use of the trade mark during that period were these Regulations not in force.

(5)

Paragraph (6) applies for the purposes of—

(a)

section 6A(3) of the Trade marks Act 1994 (raising of relative grounds in opposition proceedings in case of nonuse), or

(b)

section 47(2B) of that Act (grounds for invalidity of registration), if the earlier trade mark there mentioned is a registered trade mark and its use is affected by these Regulations.

(6)

If any provision of these Regulations causes any non-use of the trade mark within the period of five years there mentioned, such provision is to be regarded as a proper reason for that nonuse, provided that the trade mark would have been put to such genuine use as is there mentioned were these Regulations not in force.

(7)

Paragraph (8) applies for the purposes of section 46(1)(a) or (b) of the Trade marks Act 1994 (revocation of registration) if the use of the registered trade mark there mentioned is affected by these Regulations.

(8)

If any provision of these Regulations causes any non-use of the registered trade mark within the period of five years there mentioned, such provision is to be regarded as a proper reason for that non-use, provided that the registered trade mark would have been put to such genuine use as is there mentioned were these Regulations not in force.

(9)

To the extent that any provision of the Trade marks Act 1994 mentioned in this regulation (a “relevant provision”) applies to international trade marks (UK) (whether by virtue of that Act, the Trade marks (International Registration) Order 2008 or otherwise, and whether with or without modifications), then provision made by this regulation in relation to that relevant provision shall also apply (with any necessary modifications) to international trade marks (UK).

Regulation 21 requires the Secretary of State in consultation with the devolved authorities to conduct periodic reviews with the first report being published before no later than five years from the coming into force of the Regulations:

“Review

21.—(1) The Secretary of State must from time to time—

(a)

carry out a review of these Regulations, in consultation with the appropriate ministers in Wales, Scotland and Northern Ireland,

(b)

set out the conclusions of the review in a report, and (c) publish the report.

(2)

In carrying out the review, the Secretary of State must, so far as is reasonable, have regard to how Articles 13 and 14 of Directive 2014/40/EU of the European Parliament and of the Council of 3rd April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC(22) (which are implemented by means of regulations 4, 8 and 10 of these Regulations) is implemented in other member States.

(3)

The report must in particular—

(a)

set out the objectives intended to be achieved by the regulatory system established by these Regulations,

(b)

assess the extent to which those objectives are achieved, and

(c)

assess whether those objectives remain appropriate and, if so, the extent to which they could be achieved with a system that imposes less regulation.

(4)

The first report under this regulation must be published before the end of the period of five years beginning with the day on which these Regulations come into force.

(5)

Reports under this regulation are afterwards to be published at intervals not exceeding five years”.

GROUND 1: THE REGULATIONS ARE UNLAWFUL AS CONSTITUTING THE IMPLEMENTATION OF AN UNLAWFUL POWER UNDER ARTICLE 24(2) TPD:

The Claimants submit that the Regulations are unlawful because they purport to be predicated upon Article 24(2) TPD, which is itself unlawful. This latter issue had formed the basis of an earlier judicial review and since this ground raised an issue concerning the validity of EU legislation it was referred to the Court of Justice by the High Court in 2015. Advocate General Kokott gave her opinion on 23^rd December 2015 and the Court of Justice handed down judgment on 4^th May 2016. In line with the opinion of the Advocate General, the Court rejected the submissions of the Claimants and upheld the legality of the TPD, including Article 24(2): see Case C547/14 Philip Morris Brands SARL and Others (4^th May 2016) (“Philip Morris”).

It follows from the judgment of the Court of Justice that since the TPD and Article 24(2) are lawful, the parasitic or contingent challenge under national law predicated upon the invalidity of the TPD and article 24(2) necessarily fails.

The judgment, and the opinion of the Advocate General, provide important guidance on a range of issues which are relevant to other grounds which have arisen in this case. In particular they address: whether the regulation of tobacco control is a matter of exclusive or shared competence as between the Member States and the EU; the scope of the power / right of Member States to adopt tobacco control measures which are outwith the scope of the TPD; how public health interests and rights are to be reconciled with other fundamental rights; and the nature of the proportionality test. The judgment and opinion also address important matters relevant to the interpretation of the TPD, such as the importance of public health as both a legitimate objective to be pursued by the EU and Member States and public health as a fundamental right belonging to individuals; and the relevance of the FCTC and the WHO Guidance. The actual conclusions of the Court of Justice are accordingly relevant to (inter alia): Ground 7 (section K) on the scope and effect of Articles 17 and 52 of the Fundamental Charter in the context of the Claimants’ submissions about respect for property rights; Ground 9 (Section M) on Article 16 of the Fundamental Charter on the right to conduct business; Ground 11 (section O) on the application of the test under Article 24(2) TPD; Ground 12 (Section P) on the competence of the Secretary of State to adopt the Regulations at all; Ground 14 (section R) on the application of the rules on the free movement of goods; and Ground 16 (section T) on the argument of the Tipping Claimants that Regulation 5 is ultra vires the TPD. It is therefore relevant to set out the conclusions in some detail.

The following questions were referred to the Court. In its judgment, for various technical reasons, which it is not necessary to delve into, the Court did not address each of the questions posed (Footnote: ⁷). The full suite of Questions posed were as follows:

“Legal basis

1.

Is the Directive invalid in whole or in part because Article 114 TFEU does not provide an adequate legal basis? In particular:

(a)

In relation to Article 24(2) of the Directive:

(i)

on its proper interpretation, to what extent does it permit Member States to adopt more stringent rules in relation to matters relating to the “standardisation” of the packaging of tobacco products; and,

(ii)

in light of that interpretation, is Article 24(2) invalid because Article 114 TFEU does not provide an adequate legal basis?

(b)

Is Article 24(3) [of the Directive], which allows Member States to prohibit a category of tobacco or related products in specified circumstances, invalid because Article 114 TFEU does not provide an adequate legal basis?

(c)

Are the following provisions invalid because Article 114 TFEU does not provide an adequate legal basis:

(i)

the provisions of Chapter II of Title II [of the Directive], which relate to packaging and labelling;

(ii)

Article 7 [of the Directive], insofar as it prohibits menthol cigarettes and tobacco products with a characterising flavour;

(iii)

Article 18 [of the Directive], which allows Member States to prohibit cross-border distance sales of tobacco products; and,

(iv)

Articles 3(4) and 4(5) [of the Directive], which delegate powers to the Commission in relation to emission levels?

Proportionality and fundamental rights

2.

In relation to Article 13 [of the Directive]:

(a)

on its true interpretation, does it prohibit true and nonmisleading statements about tobacco products on the product packaging; and,

(b)

if so, is it invalid because it violates the principle of proportionality and/or Article 11 of the Charter of Fundamental Rights?

3.

Are any or all of the following provisions of [the Directive] invalid because they infringe the principle of proportionality:

(a)

Articles 7(1) and 7(7), insofar as they prohibit the placing on the market of tobacco products with menthol as a characterising flavour and the placing on the market of tobacco products containing flavourings in any of their components;

(b)

Articles 8(3), 9(3), 10(1)(g) and 14, insofar as they impose various pack standardisation requirements; and,

(c)

Articles 10(1)(a) and (c), insofar as they require health warnings to cover 65% of the external front and back surface of the unit packaging and any outside packaging?

Delegation/implementation

4.

Are any or all of the following provisions of [the Directive] invalid because they infringe Article 290 TFEU:

(a)

Articles 3(2) and (4) concerning maximum emission levels;

(b)

Article 4(5) relating to measurement methods for emissions;

(c)

Articles 7(5), (11) and (12) concerning the regulation of ingredients;

(d)

Articles 9(5), 10(1)(f), 10(3), 11(6), 12(3) and 20(12) concerning health warnings;

(e)

Article 20(11) concerning the prohibition of electronic cigarettes and/or refill containers; and/or,

(f)

Article 15(12) concerning data storage contracts?

5.

Are Articles 3(4) and 4(5) [of the Directive] invalid because they breach the principle of legal certainty and/or impermissibly delegate powers to external bodies that are not subject to the procedural safeguards required by EU law?

6.

Are any or all of the following provisions of [the Directive] invalid because they infringe Article 291 TFEU:

(a)

Article 6(1) concerning reporting obligations;

(b)

Article 7(2)-7(4) and 7(10) concerning implementing acts relating to the prohibition of tobacco products in certain circumstances; and/or,

(c)

Articles 9(6) and 10(4) concerning health warnings?

Subsidiarity

7.

Is [the Directive] and in particular Articles 7, 8(3), 9(3), 10(l)(g), 13 and 14 invalid for failure to comply with the principle of subsidiarity?

Before analysing discrete issues it is of some relevance to make some introductory observations which place the judgment into context. First, the challenge was to EU legislation, not to measures adopted by Member States. As such the test of proportionality described by the Court was in relation to challenges to EU legislation adopted following agreement by the Council of Ministers and the Parliament; and not the legislation of an individual Member State which does not have that level of international consensus attached to it. The Supreme Court in Lumsdon (ibid) observed that the test for proportionality at the EU level of EU legislation was less strict than that applied at the national level. Accordingly statements made by the Court about the nature of the proportionality test are of passing but not decisive relevance in this case. Second, in relation to the application of the proportionality test by the Court reference was made on a number of occasions to the paucity of information provided by the referring Courts. It will be evident to any reader of the judgment that the evaluation of the components of the proportionality test is very cursory and in many instances conclusionary. In my view this is a reflection of the fact that the parties did not place before the Court detailed evidence. Again I have therefore gained little assistance as to how I should approach the complex evidential issues arising in the present cases from the approach adopted by the Court of Justice to the assessment of the evidence before it; greater assistance is provided by the judgment of the Court of Justice in Scotch Whisky (ibid), which did (like the present case) concern a measure of a Member State.

I turn now to consider some of the principal factors treated by the Court of Justice as relevant to interpretation. In paragraph [57] of her opinion the Advocate General, in rejecting the submission that the adoption of the TPD pursuant to Article 114 TFEU was ultra vires, emphasised the importance of public health protection and the fact that the TPD in addition to fulfilling a function of improving the internal market also pursued “... a high level of health protection. That objective is precisely consistent with the task conferred on the Union legislature in primary law, as can be expressly seen from Articles 9 TFEU, 114(3) TFEU and 168(1) TFEU and the second sentence of Article 35 of the Charter of Fundamental Rights.”

The Court held likewise emphasising throughout the judgment that the pursuit of health was a fundamental objective of the EU and, indeed, an interest and right which was superior to other conflicting rights: see for example paragraphs [61], [144], [156], [170], [176] and [197]. In particular the Court emphasised as considerations warranting the elevation of public health as a guiding principle, the “addictive effects”

Both the FCTC and the WHO guidelines are important considerations capable of affecting EU law and policy. In the context of an argument that the TPD created obstacles to internal trade within the EU and was therefore unlawful in the light of Article 114 the Advocate General said:

“73.

… Be that as it may, it is settled case-law that recourse to Article 114 TFEU as a legal basis is possible if the aim is to prevent the emergence of future obstacles to trade resulting from multifarious development of national laws, provided the emergence of such obstacles is likely and the harmonisation measure adopted is designed to prevent them.

74.

That is precisely the case here, in particular if account is taken of the work of the World Health Organisation (WHO) as an international context.

75.

The EU institutions taking part in the preliminary ruling proceedings and some of the participating Member States have argued convincingly that under the WHO Framework Convention on Tobacco Control the Union and its Member States were called upon to limit or prohibit the use in tobacco products of ingredients which may improve their taste, including the use of menthol. Although this is not apparent from the wording of the Framework Convention itself, it is clear from the Guidelines for Implementation of Articles 9 and 10 which were adopted by the Conference of Parties a few years ago.

76.

Whilst those guidelines are not as such legally binding, they do constitute internationally applicable recommendations for implementation of the WHO Framework Convention by its Parties. They therefore also serve as a guide for the EU Member States which concluded that Framework Convention.

77.

In these circumstances, the Union legislature could legitimately assume that rules on the use of menthol and other characterising flavours in tobacco products would soon be adopted at national level if uniform provisions were not introduced at Union level.

78.

The reason for the fact, highlighted by some of the parties, that in reality hardly any national rules in this regard had been enacted in the EU Member States for a considerable period of time appears to be that the Commission had prepared for and initiated the legislative procedure for the adoption of the contested directive within the EU at more or less the same time as the WHO Guidelines appeared.

79.

Furthermore, the Union legislature could reasonably assume that any national rules to implement the WHO Framework Convention would differ from one Member State to the next and thus lead to the creation of new obstacles to trade in the internal market unless a harmonisation measure was adopted at Union level. Those Guidelines do not stipulate any specific measures for the Parties to the Convention, but accord them extremely broad latitude; in particular, the Guidelines allow them to choose between prohibitions and mere restrictions on the use of flavouring ingredients in tobacco products and only contain examples of such ingredients.

80.

Accordingly, the doubts expressed by a number of participating undertakings and by Poland as to the existence of present or future differences between Member States’ laws, regulations and administrative provisions are all unfounded”.

She considered it “self–evident” that Article 114 could be used to take account of developments at the level of international law or recommendations made by international bodies. She cited in support Article 3(5) TFEU which states:

“In its relations with the wider world, the Union shall uphold and promote its values and interests and contribute to the protection of its citizens. It shall contribute to peace, security, the sustainable development of the Earth, solidarity and mutual respect among peoples, free and fair trade, eradication of poverty and the protection of human rights, in particular the rights of the child, as well as to the strict observance and the development of international law, including respect for the principles of the United Nations Charter”.

The Court also attached very great probative weight to the FCTC and to the WHO Guidelines which were intended to assist the contracting parties (which includes all of the Member States and the EU) “…in implementing the binding provisions of that convention” (ibid paragraph [111]). These were drawn up on the basis of the very best scientific evidence and reflected an international consensus (ibid paragraph [112]). They were, whilst being non-binding, capable of exerting “decisive influence” (ibid paragraph [113]). Elsewhere the Court stated that for all of these reasons the Guidelines must “…be recognised as being of particularly high evidential value” (paragraph [175]). It is right to observe that the Court of Justice made these comments in the context of provisions of the TPD which are expressed as mandatory or “binding” under the FCTC whereas the standardised packaging provisions of the FCTC are measures which contracting states are urged and recommended to adopt but which are not stated to be mandatory. This fact does not (as the Claimants have submitted) mean however that the FCTC and WHO Guidelines are now wholly irrelevant. The TPD implements the whole of the FCTC including its mandatory and non-mandatory parts. Indeed Article 24 TPD and all of the myriad references to the TPD being a measure of partial harmonisation are a reflection of the fact that, in accordance with their own international law obligations under the FCTC, Member States of the EU acting in their dual capacities as contracting states of the FCTC might choose to adopt standardised packaging rules which go beyond the TPD and

I turn now to address a point which arose in the course of submissions which was also raised, albeit lightly, in the written submissions to the High Court, namely the argument that the legislation is unlawful because it will increase illicit trade. With regard to the submission that a ban on menthol cigarettes would increase illicit trade the Advocate General was deeply unimpressed:

“84.

A number of undertakings taking part in the preliminary ruling proceedings object that smuggling will increase and the black market in menthol cigarettes will flourish. However, this is no more than a mere assertion, with little by way of substantiation.

85.

Furthermore, it is also irrelevant whether smuggling and black market trade can be effectively prevented by the measures laid down in the Directive. Instead, the crucial factor is that it will become more difficult for consumers to continue to obtain supplies of menthol cigarettes and other flavoured cigarettes after a prohibition on the placing on the market of tobacco products with characterising flavours has taken effect. This alone justifies the view that such a prohibition cannot fail to help to ensure a high level of health protection. The fact that prohibitions may possibly be circumvented in isolated cases does not in general militate against their appropriateness for attaining the objective pursued”.

She was equally unimpressed (cf. ibid paragraph [99]) when the same argument was made about the TPD rules on packaging: “As regards the increase in smuggling and the flourishing of the black market predicted by some parties, I consider that argument to be just as unconvincing in the present context as previously in connection with the prohibition on characterising flavours”. See also her rejection of related arguments about threats to illicit trade at paragraph [182].

It can be presumed that the Court adopted the same view because it did not address the Claimants’ arguments in this regard.

I turn next to the issue of the scope of the right of Member States to adopt measures relating to the branding and promotional material. As explained above at paragraph [253] the issue of the power or competence of the Member States to adopt legislation such as the Regulations is directly relevant to a number of Grounds of challenge in this case. Question 1(a) posed by the High Court asked whether Article 24(2) was invalid because Article 114 TFEU did not provide a proper legal basis for it. The analysis of the question posed raised questions about the scope of the measure and the relative powers of the EU and the Member States. The Advocate General rejected the submissions of the Claimants that Article 24(2) TPD was unlawful. Her reasons on validity were essentially adopted by the Court. She also set out fully the issue surrounding the proper construction of the right or power conferred upon the Member States under Article 24(2). It is helpful to set out her analysis in full since it reflects the range of relevant arguments:

“The Member States’ right to establish further requirements in relation to the standardisation of the packaging of tobacco products (question 1(a))

105.

First of all, question 1(a) casts doubt on the legal basis for Article 24(2) of the Directive. Under that provision, the Directive does not ‘affect the right of a Member State to maintain or introduce further requirements, applicable to all products placed on its market, in relation to the standardisation of the packaging of tobacco products, where it is justified on grounds of public health, taking into account the high level of protection of human health achieved through this Directive. …’

106.

The applicants in the main proceedings and their interveners take the view that that provision cannot be based on Article 114 TFEU because it does not lead to the removal of obstacles to trade, but to the creation of such obstacles. In support of their view, the participating undertakings essentially claim that Article 24(2) of the Directive enables the Member States to undermine the free movement of goods in respect of tobacco products by introducing more stringent rules on packaging than those laid down at Union level.

107.

In this regard, the participating undertakings, like the

United Kingdom, Ireland and Norway, adopt a particularly broad interpretation of Article 24(2) of the

Directive. They presume that under that provision the Member States are to be permitted to impose more stringent requirements on the packaging of tobacco products in any respect, regardless of whether or not that aspect of the packaging has been the subject of harmonisation by EU law.

108.

In fact, on such a broad interpretation, Article 24(2) of the Directive could be contrary to the objective of Article 114 TFEU, which is based on improving the functioning of the internal market. On such an interpretation, the Directive would harmonise the requirements for the packaging of tobacco products, but at the same time give Member States the right to continue to derogate from that harmonisation without respecting the conditions and procedures specifically laid down for that purpose under Article 114(4) to (10) TFEU. As BAT aptly puts it, the harmonisation given with one hand would therefore be taken away by the other.

109.

However, it would be premature to conclude out of hand, without more in-depth consideration of the subject, that Article 24 of the Directive is incompatible with Article 114 TFEU and could not therefore be adopted on that legal basis. The broad interpretation of Article 24(2) of the Directive adopted by the participating undertakings, the United Kingdom, Ireland and Norway is not the only conceivable approach. In addition, according to established case-law, if secondary EU legislation permits more than one interpretation, its wording must be understood in such a way that it is consistent with primary law and its validity cannot be called into question.

110.

It seems to be perfectly possible to interpret Article 24(2) of the Directive in conformity with primary law, in particular ensuring that it is compatible with the legal basis of Article 114 TFEU. It is possible — in accordance with the view taken by the EU institutions taking part in the preliminary ruling proceedings, as well as France and Portugal — to adopt a narrow interpretation of Article 24(2) of the Directive and to interpret that provision of the Directive as permitting the Member States to adopt ‘further rules’ only in so far as the Union legislature itself has not carried out any harmonisation.

111.

Such a narrow interpretation of Article 24(2) is also most consistent with the purpose and scheme of Directive 2014/40. Contrary to the view apparently taken by the applicants in the main proceedings and some of their interveners, the Directive does not give rise to full harmonisation, but only partial harmonisation or — in the words of Article 1(b) — it seeks ‘to approximate the laws, regulations and administrative provisions of the Member States concerning certain aspects of the labelling and packaging of tobacco products’. This is also suggested by recital 53 in the preamble to the Directive, which states that ‘in light of the different degrees of harmonisation achieved’, the directive merely ‘provides a first set of basic common rules’ ‘in relation to presentation and the packaging’.

112.

It is true that the Directive includes an entire chapter with provisions on the labelling and packaging of tobacco products, ranging from the shape and the minimum content of unit packets to the requirement of (combined) health warnings and the prohibition of certain misleading statements on product packaging. Contrary to the view taken by a number of the undertakings taking part in the proceedings, there is nevertheless still scope for a wide variety of additional national rules on the labelling and packaging of tobacco products. In particular, it can be inferred from Article 28(2)(a) of the

Directive that certain package surfaces are not governed by the Directive and the Commission monitors, among other things, developments at national level.

113.

Thus, the Member States remain free, in particular, to lay down their own requirements as to colours of all parts of the packaging which are not reserved for warnings, extending as far as the standardisation of packaging. Colouring is regulated — indirectly — in the Directive at most in so far as Article 13 prohibits tobacco products being given a misleading or deceptively positive presentation.

114.

Against this background, the objection raised by some of the undertakings taking part in the preliminary ruling proceedings that a provision based on Article 114 TFEU, like Article 24 of the Directive, could not permit the Member States to adopt any more stringent national rules on the labelling and packaging of tobacco products because such matters in their entirety ‘fall within the scope of the Directive’ is unconvincing. That objection, which is probably fuelled by the fear of some of the undertakings concerned that national rules will be adopted to introduce plain packaging, ignores the fact that even today many aspects of the labelling and packaging of tobacco products are still to be regulated in EU law, not least colouring.

115.

If one were to follow the participating undertakings’ argument, the partial harmonisation of the Member States’ laws, regulations and administrative provisions pursued by Directive 2014/40 would be reinterpreted as full harmonisation. This would be contrary to the broad discretion which the Union legislature enjoys under Article 114 TFEU in selecting the most appropriate method of approximation. The Union legislature is not required, when having recourse to Article 114 TFEU, to decide ‘all or nothing’ between full harmonisation and no harmonisation at all but may also — as in this case — opt for partial harmonisation.

116.

The same conclusion follows, moreover, from the judgments relied on by the applicants in the main proceedings. It is true that in its first judgment on tobacco advertising the Court held a directive based on internal market competences, including on Article 100a of the EC Treaty (now Article 114 TFEU), to be unlawful because it did not contain any provisions on the free movement of products complying with the directive. However, if that passage of the judgment is read in context, it becomes apparent that the Court certainly did not intend to slam the door on the adoption of directives for the partial harmonisation of certain matters. Instead, it expressly recognised that internal market harmonisation measures could contain clauses allowing Member States to adopt stricter measures for the protection of the general interest.

117.

Only if the Union legislature were not seeking any free movement for products covered by and complying with a directive is it prevented from having recourse to Article 114 TFEU. In addition, the Union legislature may not permit the Member States to prevent, on grounds relating to the matters harmonised by the Directive, the import, sale or consumption of tobacco products which comply with the Directive.

118.

That is not the case here, however. First of all, Article 24(1) of the Directive expressly recognises the principle of the free movement of tobacco products which comply with the Directive. Second, Article 24(2) of the Directive, interpreted in the light of recital 53, permits the Member States to introduce ‘further requirements … in relation to the standardisation of the packaging’ only in so far as there is no harmonisation by EU law.

119.

Certainly, this kind of partial harmonisation means that products cannot automatically be exported from one Member State to another, even if their labelling and packaging complies with the requirements of the Directive in every respect, as each Member State may impose further requirements for nonharmonised aspects of product packaging. Nevertheless, such partial harmonisation also undeniably offers advantages for the functioning of the internal market, since whilst it does not eliminate all obstacles to trade, it does eliminate some. In the present case, this means, for example, that manufacturers of tobacco products throughout the internal market are able to use cigarette packets which have a uniform basic design and are required to adapt that design to the specificities of their respective national laws, regulations and administrative provisions only in certain details (colours, for example), but no longer in every respect.

120.

It is true that those provisions of Article 24(1) and (2) of the Directive and the relevant explanations in recital 53 therefore have primarily a clarificatory function. They explain the operation of the partial harmonisation pursued by the Directive. As is impressively illustrated by the fierce dispute between the parties over the lawfulness of possible national rules on the standardisation of packaging, such clarification can make good sense”.

The Court rejected the argument that Article 24(2) was invalid. It made clear that under the TPD and Article 24(2) Member States did not have the power to adopt any tobacco control measure without limitation since this would risk national laws being inconsistent and colliding with the mandatory provisions of the TPD (paragraph [71]). However, the Court made clear (at paragraph [88]) that the TPD was “… not intended to interfere with the policies of the Member States concerning the lawfulness of tobacco products as such”. The Member States were fettered only in relation to those “aspects” of control of tobacco products which were harmonised by the TPD. Member States could hence: “… maintain or introduce further requirements only in relation to aspects of the standardisation of the packaging of tobacco products which have not been harmonised by the directive” (paragraph [73]). In the present case, in the light of this judgment, the Claimants have argued that there is no free-standing right on the part of the Member States to adopt legislation in the field of tobacco control but that it is a right conferred only, in effect, by the good grace of the EU and is a strictly limited and circumscribed right. This argument mischaracterises the judgment of the Court of Justice for the following reasons which flow from general considerations of EU and international law, and from the judgment of the Court: