Philip Morris To Pay Part Of Australia’s Legal Costs For Plain Packaging Dispute

Thursday 13 July 2017 @ 11.47 a.m. | Trade & Commerce

Multinational tobacco company Philip Morris Asia has been ordered to pay the Commonwealth of Australia millions of dollars in legal costs as a result of its failed attempt to challenge Australia’s plain packaging laws.  While the exact legal costs were not released as part of the Permanent Court of Arbitration’s decision, the Sydney Morning Herald has reported “the bill could be as high as $50 million”.  The decision, which is final, was dated 8 March 2017 but only publicly released last weekend.

Procedural History

Philip Morris commenced the dispute in November 2011, under what is known as the “investor-state dispute settlement provisions (ISDS provisions) of a 1993 bilateral agreement between Australia and Hong Kong.  The move was a controversial one, as it was one of the first cases under the ISDS provisions brought against Australia.  See TimeBase’s earlier article for background to the earlier stages of the case.

Tribunal Decision

However, the Tribunal upheld an initial jurisdictional objection by Australia that Philip Morris had restructured in order to commence arbitration proceedings:

“the initiation of this arbitration constitutes an abuse of rights, as the corporate restructuring by which the Claimant acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining Treaty protection. Accordingly, the claims raised in this arbitration are inadmissible and the Tribunal is precluded from exercising jurisdiction over this dispute.”

This decision was released in December 2015 – for more information, see TimeBase’s earlier article on the decision.

Costs Dispute

The parties then made a number of submissions on costs, with Australia claiming that Philip Morris should pay costs in line with the “loser pays” approach, and Philip Morris submitting that each party should pay its own legal fees and one-half of the arbitration costs, and denying they were wholly unsuccessful in their case.

The Tribunal decided that Philip Morris should bear an undisclosed percentage of Australia’s costs in the case. Philip Morris also disputed the amount of the costs, saying Australia’s total was “unreasonable for a “legal team that consisted primarily of public servants.”” [at 74].  However, the Tribunal disagreed, saying at [101]:

Taking into account the complexity of issues of domestic and international law relevant in this procedure, particularly for a government team usually not engaged in such disputes, the Tribunal does not consider that any of these costs claimed by the Respondent were unreasonable and should not have been incurred. In making this assessment, the Tribunal also takes into consideration the significant stakes involved in this dispute in respect of Australia’s economic, legal and political framework, and in particular the relevance of the outcome in respect of Australia’s policies in matters of public health.

Rumour That Australia Has Won WTO Case

ABC News has also reported that Australia has been successful in its other ongoing case over plain packing, this one a dispute with Cuba, Honduras, the Dominican Republic and Indonesia at the World Trade Organisation.  ABC News has reported that the ruling is expected to be published sometime in July.

TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products. Nothing on this website should be construed as legal advice and does not substitute for the advice of competent legal counsel.


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