Philip Morris Asia Limited v. Commonwealth of Australia (Procedural Order No.4)
Philip Morris Asia (PMA) commenced arbitral proceedings against Australia in relation to Australia's Tobacco Plain Packaging Act and associated regulations (the plain packaging legislation) pursuant to the Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments (the Treaty).
The plain packaging legislation mandates every aspect of the retail packaging of tobacco products including the appearance, size and shape of tobacco packaging. It prohibits the use of trade marks, symbols, graphics and other images, and mandates that brand names and variants must be printed in a specified font and size against a uniform drab brown background. The plain packaging legislation came into full effect on December 1, 2012.
PMA alleges that by implementing the plain packaging legislation Australia has violated several of its obligations under the Treaty. It says that the plain packaging legislation virtually eliminates its branded business by expropriating intellectual property, transforming it from a manufacturer of branded products to a manufacturer of commoditized products with the consequential effect of substantially diminishing the value of PMA's investment in Australia - in circumstances where PMA alleges that plain packaging will undermine rather than support the purported public health rationale of the legislation. On that basis, PMA alleges that, in contravention of the Treaty, Australia has: expropriated its investments; failed to provide its investments fair and equitable treatment; unreasonably impaired its investments; and failed to accord its investments full protection and security. PMA is seeking damages from Australia in the order of "billions" of dollars.
In its response, Australia asserts that PMA acquired its interest in PM Australia after the Australian Government had announced its decision to implement plain packaging, and therefore that PMA's claim must fail on both jurisdiction and on the merits. Further, even if that were not the case, Australia rejects each and every of PMA's claims of breach of its obligations pursuant to the Treaty. Further still, Australia says that the plain packaging legislation is a non-discriminatory regulatory action of general application designed and adopted by the Australian Government to achieve the most fundamental public welfare objective - the protection of public health (i.e. the police powers exception).
An ad hoc Tribunal has been established to adjudicate the dispute pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law (the UNCITRAL Arbitration Rules), with its registry in the Permanent Court of Arbitration.
The Tribunal has made a number of Procedural Orders (see under "Related Documents"). In this Order (Procedural Order No. 4), the Tribunal ruled on Australia's request that the proceedings be bifurcated so that a ruling on Australia's jurisdictional arguments would occur before a substantive hearing on the merits of the case. PMA resisted bifurcation. Following written and oral arguments, the Tribunal ruled that a decision on bifurcation should be postponed until after a Statement of Claim and full Statement of Defence on all aspects of the case were submitted.
The hearing of argument on bifurcation was subsequently held in February 2014, and decided in Australia's favour. See: Philip Morris Asia Limited v. Commonwealth of Australia (Procedural Order No.8).