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Tobacco plain packaging—investor-state arbitration

On 1 December 2011, the Tobacco Plain Packaging Act 2011 (the Act) received Royal Assent and became law in Australia.

The Act forms part of a comprehensive range of tobacco control measures to reduce the rate of smoking in Australia and is an investment in the long term health of Australians. Smoking is one of the leading causes of preventable death and disease in Australia.

Tobacco plain packaging is a legitimate public health measure which is based on a broad range of peer reviewed studies and reports, and supported by leading Australian and international public health experts. Further information regarding the implementation of tobacco plain packaging is available on the Department of Health website.

Philip Morris Asia is challenging the tobacco plain packaging legislation under the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments (Hong Kong Agreement). This is the first investor-state dispute that has been brought against Australia.

Philip Morris Asia is arguing that Australia's tobacco plain packaging measure constitutes an expropriation of its Australian investments in breach of Article 6 of the Hong Kong Agreement. Philip Morris Asia further argues that Australia's tobacco plain packaging measure is in breach of its commitment under Article 2(2) of the Hong Kong Agreement to accord fair and equitable treatment to Philip Morris Asia's investments. Philip Morris Asia further asserts that tobacco plain packaging constitutes an unreasonable and discriminatory measure and that Philip Morris Asia's investments have been deprived of full protection and security in breach of Article 2(2) of the Hong Kong Agreement. Australia rejects these claims.

This webpage will be updated regularly to provide information on relevant developments.


Publicly available arbitration documents

On 27 June 2011, Philip Morris Asia served Australia with a written notification of claim pursuant to Article 10 of the Hong Kong Agreement.

On 21 November 2011, Australia received a formal Notice of Arbitration from Philip Morris Asia.

Australia formally responded to Philip Morris Asia's claim on 21 December 2011. In its response, Australia rejected the claims made by Philip Morris Asia and outlined arguments Australia intended to make in defending its right to implement the tobacco plain packaging measure.

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Conduct of the arbitration

The arbitration is being conducted under the United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules 2010. The tribunal hearing the case is composed of three arbitrators. Australia appointed Professor Don McRae of the University of Ottawa as an arbitrator. Philip Morris Asia appointed Professor Gabrielle Kaufmann-Kohler as an arbitrator. The Secretary-General of the Permanent Court of Arbitration appointed Professor Dr Karl-Heinz Böckstiegel as the presiding arbitrator.

The tribunal was constituted on 15 May 2012. The First Procedural Meeting was held on 30 July 2012 in Singapore. A hearing on Australia's request for bifurcation of the proceedings—splitting the arbitration into jurisdiction and merits phases—was held on 20 and 21 February 2014. On 14 April 2014 the tribunal decided to bifurcate proceedings.

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Summary of procedural orders

All publicly available procedural orders issued by the tribunal can be obtained from the Permanent Court of Arbitration website.

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Decision on Australia's preliminary jurisdictional objections

On 14 April 2014 the Tribunal agreed with Australia's request that the arbitration proceedings should be "bifurcated" (split) into a preliminary phase to consider Australia's objections to the Tribunal's jurisdiction, and a subsequent merits phase were Australia's jurisdictional objections unsuccessful.

The Tribunal conducted a hearing in Singapore from 16 to 19 February 2015 to consider Australia's objections to its jurisdiction to determine the merits of Philip Morris Asia's claim. At the conclusion of the hearing, the Tribunal reserved its decision.

On 18 December 2015 the Tribunal issued a unanimous decision agreeing with Australia's position that the Tribunal has no jurisdiction to hear Philip Morris Asia’s claim. The confidentiality regime governing the arbitration means that the substance of the decision cannot be published until confidential information disclosed in the decision has been removed. The body running the arbitration—the Permanent Court of Arbitration—will publish the decision on its website once confidential information has been removed.

World Trade Organization challenges to tobacco plain packaging

The Department of Foreign Affairs and Trade (DFAT) has primary responsibility for the Australian Government's defence of the tobacco plain packaging measure in the World Trade Organization (WTO). The Office of International Law within the Attorney-General's Department is providing DFAT with additional support.

The WTO Dispute Settlement Body has established dispute settlement panels at the requests of Ukraine (on 28 September 2012), Honduras (on 25 September 2013), Indonesia (on 26 March 2014), Dominican Republic (on 25 April 2014) and Cuba (on 25 April 2014) in relation to Australia's tobacco plain packaging measure. The five complainants are arguing that the measure is inconsistent with Australia's WTO obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights, the Agreement on Technical Barriers to Trade and the General Agreement on Tariffs and Trade 1994.

To date, a record number of WTO members (in excess of 40) have joined those disputes as third parties.

On 5 May 2014, the WTO Director-General appointed Mr Alexander Erwin (Chair, South Africa), Professor François Dessemontet (Member, Switzerland) and Dame Billie Miller (Member, Barbados) as panelists to hear the disputes. All five disputes will be heard together, pursuant to a harmonised timetable.

In response to Australia's request, the panel issued preliminary rulings on 19 August 2014 regarding the scope of the complainants' claims. These rulings were published on 27 October 2014.

The Chair of the panel informed the Dispute Settlement Body on 10 October 2014 that the panel expects to issue its final report to the parties in the second half of 2016.

Information about the tobacco plain packaging disputes in the WTO, and the WTO and its dispute settlement processes more generally, is available from Department of Foreign Affairs and Trade website. All enquiries relating to the WTO tobacco plain packaging disputes should be directed to DFAT.

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Constitutional challenges to tobacco plain packaging

Two challenges to the tobacco plain packaging legislation were heard by the High Court of Australia between 17–19 April 2012: British American Tobacco Australasia Limited and Ors v. Commonwealth of Australia and J T International SA v. Commonwealth of Australia.

On 15 August 2012, the High Court handed down orders for these matters, and found that the Tobacco Plain Packaging Act 2011 is not contrary to s 51(xxxi) of the Constitution. On 5 October 2012 the Court handed down its reasons for the decision. By a 6:1 majority (Heydon J in dissent) the Court held that there had been no acquisition of property that would have required provision of 'just terms' under s51(xxxi) of the Constitution.

The parties' written submissions, the full transcript of proceedings and the High Court's orders and reasons can be viewed on the High Court of Australia website.

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