Uruguay won an arbitration case against US tobacco giant Philip Morris, which sued the state claiming its strict anti-tobacco law harmed the cigarette maker's business, both sides said Friday.

"The Uruguayan state has emerged victorious and the tobacco company's claims have been roundly rejected," Uruguayan President Tabara Vasquez said in a televised address.

He was citing a decision by the World Bank's arbitration body, the International Center for Settlement of Investment Disputes.

Philip Morris reacted by saying "we respect" the verdict, which is binding in any case.

"For the last seven years, we have already been complying with the regulations at issue in the case, so today’s outcome doesn’t change the status quo," Marc Firestone, vice president of the US company, said in a statement.

Philip Morris had "never questioned Uruguay’s authority to protect public health," he added.

The case was more about getting "clarification" under international law about "an important, but unusual, set of facts," he said.

Philip Morris sued Uruguay in 2010 for $25 million over legislation enacted in 2006 banning smoking in public and tobacco advertising.

Uruguay became the first Latin American country and fifth in the world to ban smoking in public places under Vazquez, an oncologist who was serving a previous term as president (2005-2010) before returning to power last year.

The company argued the law violated an investment treaty between Uruguay and Switzerland.

Specifically, it complained about a ban on vendors selling different types of the same brand of cigarettes, and expanding anti-smoking health warnings to cover 80 percent of packets' surfaces.


Plain packaging

The Uruguay verdict adds to Philip Morris's legal losses as it seeks to defend its business from increasingly tough anti-smoking laws in several countries.

The European Union's top court ruled in May that new laws in the bloc on plain tobacco packaging and a ban on menthol cigarettes were legal, rejecting a challenge by Philip Morris and other cigarette companies.

Britain and France imposed neutral packaging soon after, with retailers in both countries given months to sell existing branded cigarette stocks.

Norway and New Zealand said in May that they would follow suit.

The international move toward plain packaging comes as Philip Morris last year lost a four-year struggle to overturn legislation in Australia requiring cigarettes to be sold only in logo-free packs featuring graphic health warnings.