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Adventures in Bringing a Novel Tobacco Product to Market

Adventures in Bringing a Novel Tobacco Product to Market

Czech Republic
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The tobacco products market is heavily regulated in the Czech Republic, as it is across the European Union. A key document is the Tobacco Products Directive (2014/40/EU), which sets out a uniform, detailed framework for all EU member states. The TPD thus provides substantial direction regarding tobacco regulation, tobacco products, and electronic cigarettes, as well as novel tobacco products. It includes comprehensive definitions of various types of tobacco products and regulates their labeling and packaging, mandatory health warnings and security features, and how to place them on the EU market.

With that in mind, it would seem that introducing a novel tobacco product on the Czech market should be fairly straightforward, and once introduced in one EU market the manufacturer should be able to apply similar rules in other member states. Unfortunately this is not the case; in fact the opposite applies. While Czech tobacco legislation does comply with EU regulation in general, it is Byzantine in execution, with provisions that are confusing and surprisingly scattered across numerous and often contradictory legal acts. 

Although most of this legislation is simply a translation of EU rules, the devil, as always, is in the details. Czech laws are rife with minor deviations from the EU definitions, leading state authorities to adopt surprising – and for the manufacturer, ultimately expensive – interpretations. 

For example, a strict reading of a particular Czech law would likely yield the conclusion that the health warning for a smokeless tobacco product should cover 30 percent of the surface of the entire package. However, according to the English version of the TPD, the health warning should cover 30 percent of the “surface concerned.” As a result, there might be two completely different packages. On the TPD-compliant package, only the two main surfaces of the package will contain a health warning occupying a standard one-third of each surface, whereas on the one corresponding strictly to the text of the Czech translation the health warning would occupy almost half of each concerned surface. In order to find an EU-compliant interpretation that would get around the infamous gold-plating of a national legislator, one would have to analyze the different language versions of the TPD to determine the EU lawmaker’s intention.

Even if you conquer such hurdles, there is still copious room for surprises. One single product might be defined in different ways in the Czech Republic. This is the case for the novel tobacco product IQOS, which our client, Philip Morris, is preparing to launch in the Czech Republic. The IQOS device looks like an electronic cigarette, but it is not. The tobacco sticks that are heated in the device look like small cigarettes, but they are not. With IQOS the tobacco is not burnt but heated, meaning that what the user inhales is different than from an electronic cigarette – and that the legal definitions and applicable law differ as well.

Due to these inconsistencies in Czech legislation, IQOS and its tobacco sticks occasionally escape Czech regulation completely. The law on excise duty, which defines tobacco products subject to excise duties as cigarettes, cigars, cigarillos and smoking tobacco (this definition applied only to this specific law), did not include them until April 1, 2019. Similarly, the Act on Health Protection from the Harmful Effects of Drugs only prohibits the use of electronic cigarettes and “smoking” in public places. Thus, heating tobacco sticks in an IQOS device should be permitted in all places where regular smoking and use of electronic cigarettes is prohibited, i.e., in public transportation, airports, restaurants, etc. Notwithstanding this, the general approach is to allow the use of IQOS devices only where the use of electronic cigarettes is allowed.

As a result of all the considerations described above our lawyers have been thoroughly involved in helping Philip Morris with all stages of preparation for the launch of IQOS on the Czech Market – to the surprise of most of our client’s staff. We have been working with Philip Morris’s marketing, production, sales, reclamation, tax, and legal departments, as well as with the web designers, including the entire e-shop system, since the client has been made fully cognizant of the most relevant rule in (and not just in) Czech legislation: “Vigilantibus iura scripta sunt.”

By Roman Pecenka, Partner, and Kristyna Faltynkova, Senior Associate, PRK Partners 

This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Czech Republic Knowledge Partner

For more than 25 years PRK Partners has been providing top tier, comprehensive legal services in all areas of law – always at the highest professional level. The company’s offices in Prague, Ostrava and Bratislava, as well as its specialised teams of legal practitioners and tax advisors, allow PRK Partners to offer solutions to any kind of legal issues, providing an international point of view and in-depth knowledge of the respective local legal system.

The full-service law firm has worked on many of the region’s largest and most complex transactions. The firm puts emphasis on the highest standards of quality, efficiency and flexibility in its advisory services, which are tailored to the specific requirements of each client. 

Our team is composed of professionals with international education and experience. The firm frequently works on a non-exclusive basis with leading international law firms on large cross-border transactions.

PRK Partners is consistently recognised among the top law firms by leading international and domestic directories and ratings agencies and has been honoured with numerous awards: 

• National Law Firm of the Year 2016 by the Chambers Europe Awards, the most prestigious international law firm competition. This is the fifth award PRK Partners has received since the awards were first given; National Law Firm of the Year 2014, 2013 and 2010 and Law Firm of the Year 2012 for Best Client Service.

• 2018 Best Law Firm of the Year in the category of Banking &Finance and the absolute winner in the main category of the Domestic Law Firm of the Year awards organised by epravo.cz under the auspices of the Czech Bar Association three times since the award's inception (in 2016, 2013 and 2011).

• a finalist of the Central European Law Firm of the Year category in The Lawyer European Awards 2018. 

The firm has a strong commitment to corporate social responsibility and pro bono work.

PRK Partners is the exclusive member firm in the Czech Republic for Lex Mundi, the world’s leading network of independent law firms, with in-depth experience in 100+ countries worldwide. In addition, the firm is a member of Celia Alliance, AFI (Association for Foreign Investment) and CVCA (the Czech Private Equity and Venture Capital Association).

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