cigarette

Phillip Morris has announced that it plans to sue Australia under the Australia-Hong Kong (SA) Bilateral Investment Treaty over the planned plain packaging legislation.

What the Government is proposing to do

Under the proposed Tobacco Plain Packaging Bill 2011, tobacco companies would be required to adopt a prescribed form of packaging for tobacco products.

In its most recent form, this would involve all tobacco companies using the same olive brown colour for their packaging with large, graphic images and health warnings. Some illustrations here. The contemplated regulations would limit brand names to be positioned on the top, bottom and a designated position on the front of the box in Lucida sans serif font, point size 14. (See pp. 12 and 13 of the Consultation Paper (pdf).

The trade mark lawyers amongst us will notice that clause 15 of the proposed bill will preclude a registered trade mark from being removed for non-use resulting from the strictures imposed by the proposed legislation.

The announced intention is for the laws to come into full operation on 1 July 2012. The proposal is only in exposure draft form at this stage, with public comment being scheduled to have closed by 6 June. However, the Opposition has apparently indicated its support for the Government’s position.

What Phillip Morris claims

If you read a newspaper in Australia, you can hardly have failed to notice the advertisements taken out by the tobacco companies violently opposed to this plan. There is also a website.

Phillip Morris has taken matters a step further and lodged a notice of claim against Australia under the Australia-Hong Kong (SAR) Bilateral Investment Treaty.

Unlike Free Trade Agreements and WTO / TRIPS, apparently, companies can bring claims against a party (alleged) to be in breach of its treaty obligations, not just another country party.

It would appear that Phillip Morris is not just after compensation but also an order requiring Australia to suspend operation of the law.

Details about the basis of Phillip Morris’ claim are sketchy at this stage. According to Phillip Morris’ own News Release:

“The forced removal of trade marks and other valuable intellectual property is a clear violation of the terms of the bilateral investment treaty between Australia and Hong Kong. We believe we have a very strong legal case and will be seeking significant financial compensation for the damage to our business”.

The speculation is that Phillip Morris will argue that the proposed law is an expropriation of Phillip Morris’ investments (trade mark rights) without fair compensation: see Article 6.

According to its Press Release, Phillip Morris has apparently garnered support from an eminent Georgetown professor (and Harvard graduate) for its position.

The Government has previously denied its plans will breach its international obligations.

Assoc. Prof. Jurgen Kurtz at Melbourne University has a very interesting consideration of the issues, noting that there is case law which would support the Government’s position as well as a contrary line. Prof. Rothwell from the ANU also explores the issues. He also reportedly contends that Phillip Morris may well have lodged its complaint too soon as the bill is not law yet, although, presumably, that would not preclude another complaint at a later stage.

The News Release also indicates that a period of 3 months’ negotiating follows before an arbitration proceeding is implemented under the Arbitration Rules of the United Nations Commission on International Trade Law 2010. The process will not be a short one!