Tobacco companies prepare multi-billion compensation claims over UK plain packaging

 

Taxpayers could be forced to pay tobacco industry up to £11 billion industry for trademark losses

 

Source: The Telegraph

By John Bingham, Social Affairs Editor

21 May 2015

 

Tobacco companies are preparing to launch what could be one of the biggest ever legal claims against the British Government for losses as a result of the introduction of plain packaging for cigarettes.

 

They are expected to begin lodging papers at the High Court as early as Friday, seeking a multi-billion compensation payout for being stripped of the right to use instantly recognisable brands.

 

Lawyers will argue that forcing them to use entirely unbranded packaging would amount to deprivation of a highly valuable intellectual property.

 

Plain packaging is due to come in next May

 

Although the companies would leave it to the court to determine the exact level of compensation, industry analysts have suggested their combined value of the industry in the UK could be as much as £11 billion.

 

A collective payout on that scale would wipe out almost the whole of the Government’s planned £12 billion welfare savings and dwarf the £8 billion of extra cash for the NHS promised by the Conservatives at the General Election.

 

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The Telegraph understands that Philip Morris International, the company behind Marlboro cigarettes, is likely to be among the first to lodge papers with most of the major tobacco companies following soon after.

 

Lawyers for the companies are expected to base their claim around a legal opinion drawn up by Lord Hoffmann, the former senior Appeal Court judge, which concludes that banning the use of branding on cigarette packaging altogether could be a breach of trademark law.

 

The opinion also argues that denying a company the right to use an internationally recognised trademark in Britain could also be in breach of the principle of free movement of goods within the European Union.

 

MPs approved new legislation introducing plain packaging in March in a vote which saw more than 100 Conservatives including several ministers vote against.

 

Tobacco companies say the plain packs deprive them of highly valuable intellectual property

 

The change could come into effect next May but the process of publishing secondary regulations could delay the process until 2017.

 

Supporters of the change argued strongly that new unbranded packaging bearing large and graphic health warnings would help discourage younger people from taking up smoking, with major health benefits for the country.

 

But opponents said it amounted to more “nanny state interference” which could end up fuelling the trade in illegal tobacco.

 

Sir Gerald Howarth, the Conservative MP and former defence minister, who opposed plain packaging, said: “This was always on the cards, several of us warned the Government that if they were to go down this road one likely consequence would be that the companies would seek legal redress to protect their intellectual property.

 

“We can’t have governments simply confiscate people’s assets and intellectual property is an asset as anyone who has been in business knows.

 

“£11 billion would wipe out an entire year’s tax take from tobacco and of course that would add more pressure on the Government to reduce the deficit, they are under enough pressure as it is to try to eliminate the deficit and start paying down the national debt.

 

“It is completely and utterly avoidable, they are going to be wasting time and taxpayers’ money going to the High Court to defend their decision.”

 

A research paper published by analysts at BNP Paribas last year said that the cigarette industry in the UK is likely to be worth between £9 billion and £11 billion. It said that a payout on that scale seemed excessive because the industry would not see all of their profits wiped out but that a figure “in the billions” was plausible.