Tobacco giant invokes investor-state dispute mechanism

Tobacco giant Philip Morris is invoking the investor-state dispute mechanism in a bilateral investment agreement to challenge the Australian government's move to require the company to adopt plain packaging for its cigarette boxes to make smoking unattractive.

Australia has signed a free trade agreement (FTA) with the US, which is the main base of Philip Morris, but the treaty does not include investor-state dispute mechanism. The company is apparently using the existence of a subsidiary company in Hong Kong to pursue this case by using the Australian-Hong Kong bilateral investment treaty which it warned could cost Australia billions of dollars in compensation. Under the investment agreement, companies are allowed to sue the host government if its business is negatively affected by government policies.

The Australian government has some of the world's strictest restrictions for cigarette packaging. From January 2012 it plans to stop manufacturers showing logos, branding, colours and promotional text on tobacco packaging.
Cigarette packets will also show graphic images depicting the health consequences of smoking on the front and back.

This development highlights the dangers of signing trade or investment treaties which could give corporations the right to sue governments over legitimate health or other public interest regulation.

The US is very likely to require that investor-state dispute settlement be included in the Trans Pacific Partnership Agreement (TPPA), a provision which it has previously insisted on in its other trade agreements.
Australia has rejected the inclusion of investor-enforcement powers in the Australia-US FTA in 2005. It is also committed to rejecting similar powers in the TPPA. Other countries should also consider such a move as well as revisit existing trade and investment agreements they have already signed or under negotiation to reject such a provision and other provisions which can undermine a government's ability to take measures it deemed is in the public interest.


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Item 1

Tobacco giant to challenge packaging laws Updated Mon Jun 27, 2011 11:29am AEST

Tobacco giant Philip Morris says it is launching a legal challenge to the Federal Government's plain packaging laws, and has warned any compensation bill could run to billions of dollars.

The Government wants to force tobacco companies to sell their products in plain packaging without company logos and particular colours, saying the move will make smoking less attractive.

Philip Morris's Asian operation, which distributes popular cigarette brands Marlboro and Peter Jackson in Australia, argues the Government is breaching a bilateral investment treaty between Australia and Hong Kong.

The company says it will begin its challenge today by serving a notice of claim on the Government, triggering a three-month negotiating period, and says if there is no resolution the matter will go to international arbitration.

Philip Morris says eventual damages could amount to billions of dollars.
Company spokeswoman Anne Edwards says the Government has left Philip Morris with no other option than a legal challenge.
She says the legal challenge will take place under UN trade rules and it would be binding.

"The bilateral investment treaty that the Australian Government has signed with Hong Kong is essentially an agreement whereby the Australian Government undertakes to protect investment in Australia by Hong Kong investors and vice versa," she said.

The Government says it always expected legal challenges to the proposed laws but it says it will push ahead with them anyway.
Prime Minister Julia Gillard says the Government is not scared by the latest threat.

"We're not taking a backward step, we've made the right decision and we'll see it through, and we're very confident we can deliver plain paper packaging," she said.

'Misery and death'

Federal Health Minister Nicola Roxon says the Government is on "very strong legal ground" and can withstand the legal challenge.
Ms Roxon says the Government action is "breaking new ground around the world".

"This is the first time any country has taken this step and of course our Government would take proper advice to ensure that we can do that," she said.

"Australians expect the Australian Government to be able to take action which are in the community's interests and in the interest of public health.
"The World Health Organisation recommends that states consider taking this action. We believe that it will be an effective part of our fight against tobacco and our determination to reduce the harm caused from smoking."
Ms Roxon says big tobacco will fight "tooth and nail" against the plain packaging laws.

"[They have deep pockets] because they make very large profits out of a lot of misery and death caused to thousands of Australians every year, so we already spend billions of dollars dealing with the harms caused from tobacco," she said.

"Tobacco is unlike any other legal product in the world. We know so much about the harm it causes. We know that there is not a single safe cigarette or amount of smoking that can be done in a way which may not lead to very severe health outcomes.

"So in those unusual circumstances, taking steps as we have already done in Australia to severely restrict advertising, has not been able to be challenged and similarly we think this next sensible, logical step will not be successfully challenged either."

Ms Roxon says she will not comment on whether or not the Government will negotiate until it has been served with the legal material.
 

Item 2

Australian Fair Trade and Investment Network

Level 3, Suite 3B, 110 Kippax St
Surry Hills, NSW, 2010
Phone: 02 9212 7242
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Email: campaign@aftinet.org.au
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www.aftinet.org.au

Media release 27 June, 2011
Government should stand firm on tobacco plain packaging legislation, and withdraw from restrictive treaties, says Fair Trade group

"The move by Philip Morris tobacco company to sue the Australian government using an obscure bilateral investment treaty with Hong Kong shows the dangers of signing trade or investment treaties which could give corporations the right to sue governments over legitimate health or other public interest regulation," Dr Patricia Ranald, Convener of the Australian Fair Trade and Investment Network said today.

"The Australian government does not have such an investment treaty with the United States, which is the main base of the Philip Morris Company.
Public campaigning also prevented the Howard government from including the right of corporations to sue governments in the Australia-US Free Trade Agreement in 2004. The company is apparently using the existence of a subsidiary company in Hong Kong to pursue this case, said Dr Ranald.

"The ALP government's trade policy announced on April 12, 2011, confirmed that it will not agree to give corporations the right to sue governments in any future free trade agreements or bilateral treaties. This policy is a response to community and public health advocacy, and to recommendations of the Productivity Commission, which found there was no economic justification for corporations to have the right to sue governments. It was also a rebuff to tobacco companies' threats to use such provisions against the plain packaging legislation", explained Dr Ranald.

"We support the right of governments to regulate in the interests of public health. The Australian government plain packaging legislation is based on a World Health Organisation recommendation to reduce the ability of tobacco companies to market their products to young people. We are confident that the general framework of international law enables governments to implement World Health Organisation recommendations and to regulate to protect public health.

"We urge the government not to be intimidated and to stand firm and proceed with its plain packaging legislation" said Dr Ranald. "Far from withdrawing this legislation, the government should instead consider withdrawing from all bilateral treaties which restrict its legitimate ability to regulate."

Contact Dr Patricia Ranald 0419 695 841
 

Item 3

27 June 2011

Tobacco Firm Sues Australia over Plain Packaging, Confirms Risks of TransPacific Partnership Deal

Tobacco giant Philip Morris announced today that it will use a foreign investment treaty to sue the Australian government for introducing plain packaging tobacco laws.*

'This is exactly what we have been warning could happen if US firms are given powers to sue the government under the Trans-Pacific Partnership Agreement,' said Professor Jane Kelsey of the University of Auckland Law School.

'Indeed, this case shows the risks already exist. The Howard Government rejected the inclusion of investor-enforcement powers in the Australia US Free Trade Agreement in 2005. The Australian Labor Government is committed to rejecting similar powers in the TPPA. But Philip Morris has found a back door route to protect its profits.'

Philip Morris is a US company. In a classic exercise of treaty shopping, it is using an obscure Bilateral investment Treaty that Australia signed with Hong Kong in 1991 tobring the case in an offshore international tribunal and seek billions of dollars in compensation for lost revenues.

New Zealand has a similar bilateral investment treaty with Hong Kong that was signed in 1995.  Ironically, submissions on updating that as part of the New Zealand Hong Kong free trade agreement close on 30 June.

'The champions of these agreements dismiss concerns that they could be used to challenge public policies that are in the national interest, such as tobacco controls, offshore mining regulation or stricter telecommunications laws.'

'They have claimed that there isn't a problem because similar powers exist in some of our other agreements, and have never been used against us - like our 1995 agreement with Hong Kong.'

'This development should send shock waves through the Parliament, local government and ordinary citizens', warned Professor Kelsey.

'It's clearly not enough to stop these powers being included in a TPPA.
All New Zealand's trade and investment agreements that have investor-state enforcement powers need to be revisited as well.'


Contact: Professor Jane Kelsey 021 765 055
Australia: Pat Ranald, AFTINET, 61 2 82689714

*see www.abc.net.au/news/stories/2011/06/27/3254069.htm?section=justin