TOBACCO CONTROL LAWS

Philip Morris Asia v Australia

Philip Morris Asia challenged Australia's tobacco plain packaging legislation under a 1993 Bilateral Investment Treaty between Australia and Hong Kong. This was the first investor-state dispute brought against Australia.

Philip Morris Asia initiated the arbitration in November 2011, immediately after the legislation was adopted. Australia responded with jurisdictional objections and sought a preliminary ruling on these issues. The tribunal bifurcated the proceedings and on 18 December 2015 issued a unanimous decision agreeing with Australia's position that the tribunal had no jurisdiction to hear the claim.

The main objection to jurisdiction was that at the time the dispute arose, Philip Morris Asia was not a foreign investor in Australia. The government announced its decision to proceed with plain packaging legislation in April 2010. At that time, 100% of the shares in Philip Morris Asia were owned by the parent company located in Switzerland (which had no investment treaty with Australia). Philip Morris International then undertook a restructure in 2011 which meant that Philip Morris Asia, located in Hong Kong, became the sole owner of the shares in the Australian subsidiaries. 

The Tribunal found that Claimant’s restructure was for the principal, if not the sole, purpose of gaining protection under the Treaty so as to bring a claim against the plain packaging legislation. As such Philip Morris Asia's claim was an 'abuse of rights'. This concluded the arbitration in Australia's favour, subject to finalisation of the costs claim.

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PHILIP MORRIS ASIA LIMITED -and- THE COMMONWEALTH OF AUSTRALIA PCA Case No. 2012-12

  • Australia
  • Dec 17, 2015
  • The Permanent Court of Arbitration under The United Nations Commission on International Trade Law Rules of Arbitration (UNCITRAL RULES)

Parties

Plaintiff Philip Morris Asia Limited

Defendant The Commonwealth of Australia

Legislation Cited

Tobacco Plain Packaging Act 2011

International/Regional Instruments Cited

Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments

Related Documents

None

Type of Litigation

Challenge to Government Policies Relating to Tobacco Control/Public Health
Tobacco companies or front groups may challenge any legislative or regulatory measure that affects their business interests. Unlike public interest litigation, these cases seek to weaken health measures. These cases frequently involve the industry proceeding against the government. For example, a group of restaurant owners challenging a smoke free law as unconstitutional.
Trade Panel/Investment Tribunal/Arbitration
Governments may bring complaints before intergovernmental bodies on tobacco-related issues. For example, one country may complain that another country’s tax regime discriminates against its exported tobacco products. In some cases, a treaty may allow a private party to file a complaint against a government before an intergovernmental body.

Tobacco Control Topics

Packaging and Labeling Measures
Measures to regulate the marketing on tobacco packages. This includes both bans on false, misleading, deceptive packaging, as well as required health warnings on packaging. (See FCTC Art. 11)

Substantive Issues

Right to Freedom of Expression
A violation of the right to expression, free speech or similar right to express oneself without limitation or censorship. The industry may claim that a regulation infringes on their right to communicate with customers and the public. Similarly, they may claim that mandated warnings infringe on their freedom to communicate as they desire.
Right to Procedural Due Process
A violation of the right to procedural fairness. For example, a party may claim that a government agency did not consult with public or stakeholders when issuing regulations.
Right to Property
A violation of property rights, sometimes in the form of an expropriation or a taking by the government. The tobacco industry may argue that regulations amount to a taking of property rights because they prevent the use of intellectual property such as trademarks.
Intellectual Property Violation
Regulations may infringe on intellectual property rights, which may be protected by international treaties. The industry may argue that bans on "deceptive" packaging that eliminate the use of colors, numbers or trademarks threaten intellectual property rights.
Investment Treaties Violation
A claim of infringement on investment expectations as protected by international investment treaties.
Trade Violation
A claim of an infringement of any international trade agreement, including General Agreement on Tariffs and Trade (GATT), Technical Barriers to Trade (TBT), Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), or bilateral treaties.
Ultra Vires Regulation
Subsequent regulations exceed the scope of the originating law.

Type of Tobacco Product

None

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