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.
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)
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.
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.
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)
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.
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.
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.
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.
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.
Subsequent regulations exceed the scope of the originating law.
Type of Tobacco Product
None
Limitations regarding the use of quotes The quotes provided here reflect statements from a specific decision. Accordingly, the International Legal Consortium (ILC) cannot guarantee that an appellate court has not reversed a lower court decision which may influence the applicability or influence of a given quote. All quotes have been selected based on the subjective evaluations undertaken by the ILC meaning that quotes provided here may not accurately or comprehensively represent a given court’s opinion or conclusion, as such quotes may have originally appeared alongside other negative opinions or accompanying facts. Further, some quotes are derived from unofficial English translations, which may alter their original meaning. We emphasize the need to review the original decision and related decisions before authoritatively relying on quotes. Using quotes provided here should not be construed as legal advice and is not intended to be a substitute for legal counsel on any subject matter in any jurisdiction. Please see the full limitations at https://www.tobaccocontrollaws.org/about.
"In view of the above considerations, the Tribunal concludes that the commencement of treaty based investor-State arbitration constitutes an abuse of right (or abuse of process) when an investor has changed its corporate structure to gain the protection of an investment treaty at a point in time where a dispute was foreseeable. A dispute is foreseeable when there is a reasonable prospect that a measure that may give rise to a treaty claim will materialise.
In the present case, the Tribunal has found that the adoption of the Plain Packaging Measures was foreseeable well before the Claimant’s decision to restructure was taken (let alone implemented). On 29 April 2010, Australia’s Prime Minister Kevin Rudd and Health Minister Roxon unequivocally announced the Government’s intention to introduce Plain Packaging Measures. In the Tribunal’s view, there was no uncertainty about the Government’s intention to introduce plain packaging as of that point. Accordingly, from that date, there was at least a reasonable prospect that legislation equivalent to the Plain Packaging Measures would eventually be enacted and a dispute would arise. Political developments after 29 April 2010 did not involve any change in the intention of the Government to introduce Plain Packaging Measures and, thus, were not such as to change the foreseeability assessment."
Limitations regarding the use of quotes The quotes provided here reflect statements from a specific decision. Accordingly, the International Legal Consortium (ILC) cannot guarantee that an appellate court has not reversed a lower court decision which may influence the applicability or influence of a given quote. All quotes have been selected based on the subjective evaluations undertaken by the ILC meaning that quotes provided here may not accurately or comprehensively represent a given court’s opinion or conclusion, as such quotes may have originally appeared alongside other negative opinions or accompanying facts. Further, some quotes are derived from unofficial English translations, which may alter their original meaning. We emphasize the need to review the original decision and related decisions before authoritatively relying on quotes. Using quotes provided here should not be construed as legal advice and is not intended to be a substitute for legal counsel on any subject matter in any jurisdiction. Please see the full limitations at https://www.tobaccocontrollaws.org/about.
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.