Australia: Challenging Legislation

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In 2011, four tobacco companies launched legal action to challenge Australia's plain packaging law.

Contents

Plain Packs Court Battle

In April 2011 The Australian[1] reported that Philip Morris Limited (PML) and British American Tobacco Australia (BATA) were using Freedom of Information laws to obtain tens of thousands of documents - avoiding the more expensive legal discovery process - in preparation for the court challenge to plain packaging for cigarette packets.

The news article also reported that Slater & Gordon lawyer James Higgins had said that the information-gathering exercise of PML and BATA was ironic, given the tobacco companies destroyed their own internal documents to avoid liability for the effects of their products. He said the companies would stop at nothing to prevent plain packaging in Australia, fearing an international precedent that would affect global profits. "They will use every tactic that is available to them," he added. [1]

Philip Morris

Hours after the Australian Parliament passed the world's first plain packaging legislation on 21 November 2011, a Philip Morris Asia (PMA) press release announced that PMA had started formal legal proceedings under the Arbitration Rules of the United Nations Commission on International Trade Law 2010, claiming the legislation did not comply with The Australia – Hong Kong Bilateral Investment Treaty.[2] This ad-hoc tribunal meets "behind closed doors" and documentation is usually "kept out of the public domain". [3]

This is also contentious as PMA bought a large number of shares in Philip Morris Limited (Australia) after the Australian government announced that they would be considering plain packaging. Andrew Mitchell (international law expert) highlighted that the timing of Philip Morris Asia’s acquisition of shares in Philip Morris Australia on 23 February 2011, a whole 14 months after the Government announced its intention to introduce plain packs, is a concern. It suggests the acquisition was a strategic move in order to make this argument.[4] “It will be very difficult to argue that at the time of making that investment they had a legitimate expectation that plain packaging wasn’t going to be introduced when the Government had already announced it was going to do exactly that,” he said.[4]

In addition to a legal claim in relation to the Bilateral Investment Treaty, on 20 December it was announced that PMA's Australian affiliate, Philip Morris Limited (PML), would challenge the legislation in Australia's High Court.[5]

British American Tobacco

BATA also challenged Australia's plain packaging legislation in the High Court. On 1 December 2011, the day the legislation was given Royal Assent, The Herald Sun reported that BATA had started legal proceedings claiming the legislation was "unconstitutional and invalid due to the fact the Federal Government is trying to acquire our valuable intellectual property without compensation.[6] A BAT media release[7] stated that the legal proceedings will operate as a "test case" on the validity of the legislation relation to various property rights of the Winfield and Dunhill brands, claiming that:

  • As a legal company selling a legal product we have consistently said we will defend our valuable intellectual property on behalf of our shareholders.
  • The tobacco black market will be flooded with counterfeit cigarettes as they’ll be easier to copy and smuggle into the country once all packs look the same, and taxpayers will miss out on billions in tobacco excise while organised crime gangs make millions.
  • Cheaper more accessible illegal tobacco will actually increase smoking.
  • Legal cigarette prices will also be reduced as the industry is forced to compete on price rather than brands, also increasing smoking rates even further.

Imperial Tobacco

Imperial Tobacco launched legal action on 6 December 2011, filing an application to the High Court of Australia to challenge the legality of the legislation.[8] "Unchallenged, the Australian government would otherwise be able to simply take the intellectual property of legal entities," claimed Imperial Tobacco Australia General Manager Melvin Ruigrok.

Later in 2012, prior to the impending plain packaging legislation due to come into force on 1 Dec, Imperial pre-empted plain packaging using its Peter Stuyvesant brand. Please visit Plain Packaging: Imperial Tobacco Australia Pre-empts Legislation. Imperial Tobacco had set out their intention to test the validity of the laws using this brand in 2011.[9]

Japan Tobacco International

On 14 December 2011, Japan Tobacco International (JTI) announced it too was starting legal action in the High Court. "This legislation will stop JTI from using its brands, which are its most valuable property, and is unconstitutional. For this reason, we have commenced a legal challenge to this legislation in Australia's highest court," said Stefan Fitz, JTI's Regional President for Asia Pacific. The company also claimed that there "is no reliable evidence that demonstrates the effectiveness of such legislation".[10]


High Court Ruling

The key issue before the court was whether, under the constitution, plain packaging represented an ‘acquisition of property’ by the government, from which they could benefit.[11] On the 15 August 2012, the High Court in Australia ruled that plain packaging law was constitutionally valid.[12] The reasons for the High Court’s decision were not published alongside the ruling and are expected at a later date. According to The Sydney Morning Herald, president of the Australian Council on Smoking and Health, Mike Daube, said that the ruling was “a massive win for public health” and that “It is also the global tobacco industry’s worst defeat” to date.[12]

On the day of the ruling, British American Tobacco (BAT), Philip Morris Limited (PML) and Imperial Tobacco all issued press releases criticising the ruling, with some promising further legal action.[11][13][14]

PML spokesperson Chris Argent said “we will have to wait to read the court’s opinion to fully assess today’s decision. Regardless, the legality of plain packaging, including whether Australia will have to pay substantial compensation to Philip Morris Asia remains an issue and will be considered in other legal challenges.”

BATA (Australia’s cigarette market share leader) released a statement titled “Serious unintended consequences start 1 December”. Their spokesperson Scott McIntyre said the legislation was a bad piece of law that would have serious unintended consequences. “We still believe that the government had no right to remove a legal company’s intellectual property but British American Tobacco Australia will comply with this and every other law.”[13]

BATA’s statement restates its position’s on plain packaging, claiming that there is no evidence that it will work to reduce uptake and smoking prevalence. It also argues that as a result of increases in counterfeit and price wars between tobacco companies, youth smoking will inadvertently increase due to the increased availability of cheap cigarettes. BATA also claimed that the government will lose tax revenues “while crime bosses bank big profits” from the increase in counterfeiting and smuggling.[13]

Imperial Tobacco, which has a smaller market share in Australia than PML and BAT, released a statement reiterating earlier arguments that plain packaging will only benefit criminals and will have detrimental impacts on the revenue of retailers and government. Their statement also said that they “will continue to defend our legitimate right to utilise our trademarks to differentiate our brands from those of our competitors”.[14]

In the UK, industry front group Forest has claimed that the ruling in Australia will not affect its campaign against plain packaging . The Director of Forest, Simon Clark encouraged the UK government not to follow Australia’s lead and to listen instead to the 235, 000 signatures of the Hands Off Our Packs campaign.[15] However, as a result of a FOI request the Department of Health in the UK made a number of its documents public which question the integrity of the Hands Off Our Packs campaign.


International legal challenges

In addition to the challenges made by PMA under the auspices of The Australia – Hong Kong Bilateral Investment Treaty other legal challenges have now been made via the World Trade Organization (WTO).

On the day of the High Court ruling on 15 August 2012, PML stated that this ruling had no bearing on other cases being brought against the Australian government with regard to plain packaging laws. PML sued the government for breach of the WTO member obligations and of the Bilateral Treaty (BIT) with Hong Kong. Decisions on these challenges are reportedly expected in the next 2-3 years. Argent commented on this saying “We believe that Philip Morris Asia’s investment treaty case and the WTO challenges are strong. As such there is still a long way to go before all the legal questions about plain packaging are fully explored and answered.[11]

The Ukraine, Honduras, and the Dominican Republic have all started dispute cases with Australia stating that the new plain packaging laws are inconsistent with parts of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement, the Technical Barriers to Trade (TBT) Agreement and the General Agreement on Tariffs and Trade (GATT). Australia refused each of the three countries’ first requests to establish a WTO dispute panel. The WTO disputes procedure allows this, but Australia is not permitted to refuse should a second request be made.

In September 2012, the Ukraine’s second request to establish a panel was successful. On the WTO website it states that the Ukraine disputes panel with Australia is ‘established, but not yet composed’.

Industry Support of Country Challenges

All three of these countries who filed dispute cases with the WTO have received financial support from multinational tobacco companies to assist them in these efforts.[16] Philip Morris International covered some of the legal costs associated with the Dominican Republic’s case. Likewise, British American Tobacco provided financial resources to Ukraine and Honduras. Additionally, Cuba’s claim, which also challenged the WTO on the same grounds, was partially funded by Philip Morris.

Counter Evidence

Visit the following pages to learn how the industry developed the intellectual property argument as a defence to plain packaging in the early 1990s.

Relevant TobaccoTactics Pages

This page is part of a series of pages in the Category: Plain Packaging in Australia:


Notes

  1. 1.0 1.1 Ben Packham Cigarette makers use FOI laws, The Australian 29 April 2011
  2. Philip Morris Asia Limited, Philip Morris Asia Files Lawsuit Against the Australian Government over Plain Packaging, News Release, 21 November 2011, accessed December 2011
  3. Kyla Tienhaara, 'Air of intrigue in move against plain packaging', Canberra Times, 24 November 2011, accessed December 2011
  4. 4.0 4.1 L. Mezrani, Tobacco challenges unlikely to succeed, 17 August 2012, accessed October 2012
  5. Philip Morris International, Philip Morris Limited Files High Court Challenge Against the Australian Government Over Plain Packaging, Media Release, 20 December 2011, Accessed December 2011
  6. The Herald Sun, British American Tobacco sues the Gillard Government , 1 December 2011, accessed 2 December 2011
  7. British American Tobacco, High Court plain packaging proceedings commence, Media Release, 1 December 2011, accessed 2 December 2011
  8. The Washington Post, 'Imperial Tobacco becomes 2nd company to challenge packaging laws in Australia’s High Court', 6 December 2011, accessed 6 December 2011, original link now removed
  9. Reuters, Imperial Tobacco challenges Australia plain packaging, 5 December 2011, accessed 15 December 2011
  10. PRNewswire, Japan Tobacco International (JTI) Launches High Court Challenge to Australia's Plain Packaging Laws, 14 December 2011, accessed 15 December 2011
  11. 11.0 11.1 11.2 Philip Morris Limited, Philip Morris Limited comments on Australian High Court decision on plain packaging for tobacco products, 15 August 2012, accessed August 2012
  12. 12.0 12.1 Mark Metherell, Big Tobacco loses high court battle over plain packaging, The Sydney Morning Herald, 15 August 2012, accessed August 2012
  13. 13.0 13.1 13.2 British American Tobacco Australia, Serious unintended consequences start 1 December, 15 August 2012, accessed August 2012
  14. 14.0 14.1 Imperial Tobacco, Imperial Tobacco responds to the outcome of the Australian legal challenge against plain packaging for tobacco products, 15 August 2012, accessed August 2012
  15. Forest, Aussie ruling on plain packaging won't affect UK campaign says Forest, 15 August 2012, accessed August 2012
  16. Andrew Martin, Philip Morris Leads Plain Packs Battle in Global Trade Arena, Bloomberg, 22 August 2013, accessed July 2014
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