Philip Morris v Australia: A crushing blow to Big Tobacco or a deferral of sentencing for plain packaging?

In this guest post, Ashley Schram, Ronald Labonté, and Arne Ruckert ask whether the recent decision in the legal battle between Australia and Phillip Morris is a victory for public health. 

The world has been waiting for a decision in the legal battle between Australia and Philip Morris Asia (PMA) over tobacco plain packaging. On December 18th, 2015 the decision was finally in, and the verdict was: ‘no decision’. The arbitrators dismissed the case on jurisdiction, unanimously deciding they had no authority to rule. Headlines around the world heralded this as a defeat of Big Tobacco and a victory for Australia and public health [1–3], but was it actually? Does this ‘non-decision’ equate to a loss for Philip Morris?  As Marc Firestone, Senior Vice President and General Counsel for Philip Morris International (PMI) observed, “There is nothing in today’s outcome that addresses, let alone validates, plain packaging in Australia or anywhere else.” The case that many nations were waiting for to get the green light for tobacco plain packaging, is now permanently an amber light.

Back in 2010 the Australian government announced its plan to introduce tobacco plain packaging as a public health measure, legislation that mandates all aspects of cigarette packaging including the specified position, font, size, and colour of the brand name, and prohibits the use of any trademarks [4]. Less than one year after this announcement PMA purchased Philip Morris Australia in order to gain access to the investor-state dispute settlement (ISDS) procedures within the bilateral trade agreement signed between Hong Kong and Australia in 1993. Just four months after this acquisition, in June 2011, PMA notified Australia of its intention to sue over its plain packaging legislation in international arbitration [5].

Legal analyses suggested that PMA was unlikely to be successful in the merits-based stage of arbitration [6,7]. Presuming that such legal scholars were correct, having the case dismissed during the jurisdiction phase was arguably the best possible outcome for PMA by prolonging a process referred to as regulatory chill. This occurs when a government reduces the severity of, delays implementation of, or abandons a regulation altogether to avoid a possible trade or investment dispute, and its associated legal costs and potential financial penalties.

If we maintain the assumption that PMA would not have been able to win the decision on the merits of the case, the alternative scenario would have been for the tribunal to find that they had jurisdiction over the case, engage in multi-year proceedings on merits, only to ultimately decide in favour of Australia. In this alternative scenario Philip Morris would have, at best, gained a few more years of regulatory chill on tobacco plain packaging. Not to suggest that a few more years of regulatory chill is an insignificant thing; the threat of litigation is an exceedingly cost-effective tool for tobacco companies to dissuade new tobacco-control measures. PMI has initiated an ISDS challenge against related legislation in Uruguay [8,9]; and, alongside other transnational tobacco companies, has threatened Namibia, Togo and Uganda with similar lawsuits they argue would cost these governments millions of dollars to defend and lose [10]. While the Australian case hung in the balance, other states were less likely to introduce plain packaging [11]; the New Zealand government officially stating it was waiting for a decision in the case before proceeding with its own legislation [12]. A decision for PMA on jurisdiction would have bought a few more years of uncertainty and regulatory chill around plain packaging; but the loss at the merits stage would have rendered them ‘all bark and no bite’.

The decision of the tribunal not to decide on the merits of the case means a protracted period of regulatory chill until another country steps up to take Australia’s place. Canada’s recent announcement to pursue tobacco plain packaging [13] may indicate the entry of a new champion. However, it was reported that Australia’s legal bills as of 2015 had already totalled as much as 50 million AUD [14], meaning the Canadian government will require significant political will to go to ‘battle’ with Big Tobacco. Moreover, because the case was dismissed on jurisdiction the ‘non-decision’ offers nothing to Canada (or the rest of world) about the merits of tobacco plain packaging in international investment arbitration.

So did PMA lose? In Australia, yes, plain packaging legislation won’t be overturned and they won’t be compensated for loss of sales in that country. But did PMA lose on the world stage? No. They demonstrated that countries introducing such legislation would incur significant legal fees and avoided any substantive rulings that could be used as precedent in future cases.

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1. Hurst D. Australia wins international legal battle with Philip Morris over plain packaging. The Guardian [Internet]. 2015 Dec 18 [cited 2016 Jan 29]; Available from: http://www.theguardian.com/australia-news/2015/dec/18/australia-wins-international-legal-battle-with-philip-morris-over-plain-packaging

2. Hutchens G. Australian government wins plain packaging case against Philip Morris Asia. Syd. Morning Her. [Internet]. 2015 Dec 18 [cited 2016 Jan 29]; Available from: http://www.smh.com.au/federal-politics/political-news/australian-government-wins-plain-packaging-case-against-philip-morris-20151218-glqo8s.html

3. Taylor R. Philip Morris Loses Latest Case Against Australia Cigarette-Pack Laws. Wall Str. J. [Internet]. 2015 Dec 18 [cited 2016 Jan 29]; Available from: http://www.wsj.com/articles/philip-morris-loses-latest-case-against-australia-cigarette-pack-laws-1450415295

4. Australian Government Department of Health. Tobacco plain packaging – Your guide [Internet]. Australian Government Department of Health and Ageing; 2014 [cited 2015 Apr 26]. Available from: http://www.health.gov.au/internet/main/publishing.nsf/Content/tppbook

5. Chapman S. Australian government’s $50m investment in defending against Big Tobacco legal thuggery [Internet]. The Conversation. 2015 [cited 2016 Jan 29]. Available from: http://theconversation.com/australian-governments-50m-investment-in-defending-against-big-tobacco-legal-thuggery-45427

6. Voon T. Time to Quit? Assessing International Investment Claims against Plain Tobacco Packaging in Australia. J. Int. Econ. Law. 2011;14:515–52.

7. Voon TSL, Mitchell AD. Implications of International Investment Law for Plain Tobacco Packaging: Lessons from the Hong Kong–Australia BIT [Internet]. Rochester, NY: Social Science Research Network; 2012. Report No.: ID 2377919. Available from: http://papers.ssrn.com/abstract=2377919

8. Lencucha R. Philip Morris versus Uruguay: health governance challenged. The Lancet. 2010;376:852–3.

9. Levin M. Tobacco industry uses trade pacts to try to snuff out anti-smoking laws. NBC News [Internet]. 2012 Nov 29 [cited 2015 Apr 2]; Available from: http://investigations.nbcnews.com/_news/2012/11/29/15519194-tobacco-industry-uses-trade-pacts-to-try-to-snuff-out-anti-smoking-laws

10. Seccombe M. Big Tobacco’s plan to stub out plain packaging. Saturday Pap. [Internet]. 2014 Mar 8 [cited 2015 Apr 26]; Available from: http://www.thesaturdaypaper.com.au/opinion/topic/2014/03/08/big-tobaccos-plan-stub-out-plain-packaging/1394197200

11. New W. Australia Accuses Tobacco Industry Of “Regulatory Chill” In WTO Plain Packaging Case [Internet]. Intellect. Prop. Watch. 2014 [cited 2016 Jan 29]. Available from: http://www.ip-watch.org/2014/11/20/australia-accuses-tobacco-industry-of-regulatory-chill-in-wto-plain-packaging-case/

12. 3 News. Plain packaging court case paves way for NZ [Internet]. 3 News. 2015 [cited 2016 Jan 29]. Available from: http://www.3news.co.nz/politics/plain-packaging-court-case-paves-way-for-nz-2015122212#axzz3wTjBDC3y

13. Galloway G. Liberal pledge to demand plain cigarette packaging draws cheers. Globe Mail [Internet]. 2015 Oct 30 [cited 2016 Jan 29]; Available from: http://www.theglobeandmail.com/news/politics/liberal-pledge-to-demand-plain-cigarette-packaging-draws-cheers/article27054353/

14. Martin P. $50 million goes up in smoke defending plain packaging. Syd. Morning Her. [Internet]. 2015 Jul 28 [cited 2016 Jan 29]; Available from: http://www.smh.com.au/federal-politics/political-news/australia-faces-50m-legal-bill-in-cigarette-plain-packaging-fight-with-philip-morris-20150728-gim4xo.html

 

 

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