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24 May 2016

Philip Morris international arbitration (re Australian plain packaging law)


In 2012, Philip morris Asia challenged the Australian Government before an international arbitration tribunal on new legislation requiring tobacco to be packaged plainly. They argued the legislation constituted an unreasonable and discriminatory practice against their products and failed to accord fair and equitable treatments to their investments. In 2015, the tribunal found that it did not have jurisdiction. 


In December 2012, the Australian Tobacco Plain Packaging Act banned tobacco companies from displaying their brand and logos on cigarette packets.  The legislation was designed to reduce smoking, one of the leading causes of preventable death in Australia.  

Hong Kong-based Philip Morris Asia acquired Philip Morris Australia in February 2011. In June 2011, Philip Morris Asia challenged the Australian Government before an international arbitration tribunal on the tobacco plain packaging legislation.  The dispute was filed pursuant to the 1993 Agreement between Australia and Hong Kong for the Promotion and Protection of Investments, which contains an investor-state dispute settlement mechanism.

Philip Morris Asia claimed that the ban on trademarks breached a number of foreign investment provisions contained in the investment agreement.  It argued that the plain packaging measure constituted an expropriation of its investments.  It also argued that the measure was in breach of Australia’s commitment to accord fair and equitable treatment to Philip Morris Asia's investments.  Finally, it argued that the measure constituted an unreasonable and discriminatory measure and that Philip Morris Asia's investments had been deprived of full protection and security.

The Australian Government responded that the case should be dismissed on jurisdictional grounds without requiring a hearing on the substance of the claim.  Australia argued that since Philip Morris Asia had acquired its shares in Philip Morris Australia in February 2011 in the full knowledge of the 2010 government’s decision to introduce plain packaging, the company did not have an investment in Australia at the time the measures were announced, and was thus not protected by the agreement.

In April 2014, the tribunal granted Australia’s request that the government’s procedural objections be heard in a preliminary phase of the proceedings.  In February 2015, the tribunal heard Australia’s objections to its jurisdiction to decide on the substance of Philip Morris’ claim.  In December 2015, the tribunal found that it did not have jurisdiction. 

- Australia wins international legal battle with Philip Morris over plain packaging, Daniel Hurst, Guardian, 18 Dec 2015
- Philip Morris Says Australia’s Plain Cigarette Package Proposal is Illegal, Robert Fenner, Joe Schneider, Bloomberg, 27 Jun 2011

Allens Arthur Robinson [Philip Morris Asia representative]
- Notice of Claim, 27 Jun 2011
- Notice of Arbitration, 21 Nov 2011

Australian Government:
- Response to the Notice of Arbitration, 21 Dec 2011
- Tobacco plain packaging—investor-state arbitration