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Australia versus Philip Morris. How we took on big tobacco and won

Previously sealed documents reveal the tobacco giant Philip Morris lost its case against Australia over plain packaging because the international tribunal considered it an “abuse of rights”.

Philip Morris sued Australia under the provisions of an obscure Hong Kong Australia investment treaty in 2012 after British American Tobacco and Japan Tobacco lost a challenge to the plain packaging legislation in the High Court.

As had its competitors in the failed High Court challenge, the manufacturer of Marlboro and Longbeach cigarettes argued Australia had confiscated its trade marks, turning from “a manufacturer of branded products to a manufacturer of commoditised products”.

Philip Morris wanted the tribunal to order Australia to withdraw the law or to award damages of at least $US4.2 billion plus compound interest at the Australian bank cash management rate dating back to the to the law’s introduction.

Its use of an outside tribunal rather than an Australian court to sue the government was unusual, in that it was making use of a provision available to foreign companies under trade agreements but denied to Australian companies.

The government spent more than $50 million defending the case, assembling a team including two Queens Counsels and two Senior Counsels and ferrying to Singapore witnesses including the former treasurer Wayne Swan and former judge Roger Gyles QC.

The 186-page judgement, unsealed on Tuesday, shows the tribunal rejected the claim at the first hurdle, finding Philip Morris had moved its Australian and Asian headquarters to Hong Kong for the express purpose of making the claim.

“The tribunal cannot but conclude that 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,” the judgement finds.

A spokesman for assistant health minister Fiona Nash said she welcomed the decision which validated the government’s decision to take on Philip Morris.

Originally rare, the use of so-called investor-state dispute settlement provisions in international treaties has ballooned in the past decade. Australia’s Productivity Commission counted 42 in 2014.

Productivity Commission count of iinvestor-state dispute settlement cases

Productivity Commission count of iinvestor-state dispute settlement cases

Investor-state dispute settlement provisions have been included in Australia’s recently-signed treaties with Korea and China and the 12-nation Trans-Pacific Partnership which has been signed but not yet ratified by the Australian parliament.

La Trobe University public health academic Deborah Gleeson said the victory would add to momentum for the spread of plain packaging legislation around the world, but she said it didn’t mean that investor-state dispute settlement provisions weren’t a threat to public health.

“If we ratify the Trans-Pacific Partnership transnational corporations based in the United States will gain an avenue to sue Australia. There’s an exclusion for tobacco control measures, but no solid exclusion for other health measures.”

Australia continues to face challenges to its plain packaging laws in the World Trade Organisation from tobacco-growing nations including Cuba, the Dominican Republic, Honduras and Indonesia. The Ukraine withdrew its challenge last year.

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