Australia's Plain Packaging Laws Win in International Arbitration Tribunal
Wednesday 18 May 2016 @ 10.47 a.m. | Corporate & Regulatory | IP & Media | Trade & Commerce
Over the last year we have reported several times on the attempts of Philip Morris to bring down the Plain Packaging of Tobacco Laws introduced by the Gillard government back in 2011. For our previous articles: see The Legal Cost of Free Trade: Tobacco Plain Packaging Dispute Continues and also Australia Wins Plain Packaging Investor-State Dispute With Philip Morris Asia.
It was reported today that:
"An international tribunal [Permanent Court of Arbitration (PCA)] has unveiled a secret ruling confirming it rejected a bid by tobacco giant Philip Morris to sue Australia over its plain packaging laws . . ."
The attempt to sue Australia has been referred to by the PCA as "an abuse of rights" according to an ABC News report on the case which refers to the "heavily redacted 186 page ruling dating from 17 December 2015", where the PCA said it had no jurisdiction with respect to the case brought by Philip Morris.
Background
Australia became in 2012, the first country in the world to mandatorily require that cigarettes must be sold in plain packaging - a measure taken on health grounds which the government argued would reduce smoking rates. In Australia the legislation was challenged in the High Court and was upheld as valid by that court (see JT International SA v Commonwealth of Australia [2012] HCA 43 decided 5 October 2012). Following this and the fact that the legislation was, or looked to be, followed by other nations, including France and Great Britain, Phillip Morris and the tobacco industry took to the international legal stage to try and defeat plain packaging laws.
The Argument on the International Stage
At the center of the tobacco industries' argument against the plain packaging laws has been the claim that it ". . . impinge on their trademark intellectual property".
International legal action was led by Philip Morris who lodged the challenge with the PCA in "The Hague" back in 2011 after the plain packaging legislation was first passed into law. It used a 1993 international trade deal between Australia and Hong Kong that included foreign investment protections known as "investor-state dispute settlement provisions" (ISDS) to make its arguments.
The PCA Findings
In what is reported to be a "unanimous ruling" the PCA found that "the main and determinative reason" for a restructuring of the [Philip Morris]company as far back as 2005 was to enable it ". . . to bring a claim under the treaty, using an entity from Hong Kong" after it received "ample warnings that such legislation was being considered ".
The PCA ruled that:
"The record indeed shows that the principal, if not sole, purpose of the restructuring [by Philip Morris] was to gain protection under the treaty in respect of the very measures that form the subject matter of the present arbitration, . . ."
Resulting from this finding the PCA concluded that:
"The tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights, . . ."
And went on to find that the claims by Philip Morris's were "inadmissible" and "precluded [the PCA] from exercising jurisdiction over this dispute".
Comment and Reaction
The PCA's unanimous decision agrees with Australia's position that it [the PCA] has no jurisdiction to hear Philip Morris's claim.
It was reported that Philip Morris slammed the decision, saying ". . . it does not validate plain packaging in Australia or anywhere else".
SMH reported that Marc Firestone, Philip Morris's international senior vice president, said:
"It is regrettable that the outcome hinged entirely on a procedural issue that Australia chose to advocate instead of confronting head on the merits of whether plain packaging is legal or even works, . . ."
The responsible Minister Fiona Nash "welcomed the decision", and said that:
". . . plain packaging [legislation] is a legitimate public health measure which is consistent with Australia's international obligations. . . We welcome the unanimous decision by the tribunal agreeing with Australia's position that it has no jurisdiction to hear Philip Morris' claim, . ."
The Public Health Association of Australia is also reported to have welcomed the decision.
Full Decision not Yet Available
The full decision of the PCA is subject to a "confidentiality protocol governing the arbitration" which means the substance of the decision cannot be published at present. However the PCA will post the decision on its website once issues regarding confidentiality are resolved.
Is it Over?
Reports so far indicate that the arbitration is over, barring any proceedings with respect to the recovery of costs by Australia and any appeal by Philip Morris Asia in Singapore.
As regards an appeal SMH reports that it understands the federal government has received legal advice saying such a challenge would likely be unsuccessful.
Philip Morris Asia's use of the ISDS mechanism is the first ever use of the trade agreement based provision against Australia.
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