Victory for Public Health in Australia, But Big Tobacco Threatens Counterattack through Trade Pacts

Last week, public health advocates rejoiced when Australia’s High Court (its Supreme Court equivalent) upheld the country’s landmark tobacco control “plain packaging” laws against a legal attack from Big Tobacco.  Phillip Morris, British American Tobacco, Imperial Tobacco, and Japan Tobacco had sued the government, arguing that the new requirement to sell cigarettes packages with large health warnings rather than brand trademarks would constitute an uncompensated taking of their intellectual property rights. Ultimately, the court ruled that the public health law did not violate the constitution of Australia, where smoking kills 15,000 people each year. Starting on December 1^st, all cigarettes and tobacco products will be sold in plain, brand-free packages with graphic health warnings. 

Australian Attorney-General Nicolos Roxon welcomed the ruling as “a watershed moment for tobacco control around the world.”

Despite this legal victory for public health at Australia’s highest court, unfortunate provisions in trade and investment pacts provide Big Tobacco with additional avenues to attack Australia’s plain packaging policies in foreign tribunals. Internationally, the law already faces attack at both the World Trade Organization (WTO) and through an obscure investment treaty.

Only hours after the ruling, Ukraine filed a formal complaint against the law at the WTO, arguing that the plain packaging law violates Australia’s commitment under the WTO and requesting the establishment of a formal disputes panel. Honduras and the Dominican Republic have also filed complaints. When asked if he thought the big tobacco companies were behind Ukraine's decision to launch its WTO case, Australia’s Trade Minister Craig Emerson said that he was "not aware of tobacco being a big industry in Ukraine, so one would wonder why it would have a big interest in this".

Australia’s plain packaging is also being challenged by tobacco company Philip Morris under the Hong-Kong-Australia bilateral investment treaty (BIT). The U.S. company incorporated a subsidiary in Hong Kong in order to launch the attack through this obscure treaty. A tribunal of three private sector lawyers constituted under the United Nations Commission on International Trade Law (UNCITRAL) will conduct the arbitration to decide whether the laws have had a significant negative impact on Philip Morris’ investment in Australia.

The extreme investor rights contained in the BIT pose particular threats to the case for plain packaging policies. According to Dr. Kyla Tienhaara, a trade law expert at Australian National University (ANU), “The investor-state dispute under the Hong Kong treaty is particularly concerning for supporters of the legislation. Unlike the WTO, there’s no exception under the treaty for public health measures. And unlike in the Australian Constitution, 'expropriation' (the act of a government taking private property) is defined very broadly.”

These cases, which demonstrate the danger of allowing investors a supranational avenue to attack public interest laws, have strengthened Australia’s commitment to not allow foreign investors to sue its government before panels of international trade arbitrators. Australia has refused to be subjected to investor-state dispute settlement in the Trans-Pacific Partnership (TPP), which is being pushed by multinational companies including Philip Morris.  (The TPP's leaked investment chapter, meanwhile, reveals that the pact would require all other countries, including the US, to allow foreign investors to sue their national governments).  

Australia is facing pressure domestically in response to this rejection of investor-state suits in TPP. The Australian Chamber of Commerce and Industry (ACCI) has launched a “Right to Sue” campaign, and has sent a letter to the Prime Minister urging the government to consider including ISDS (Investor-State Dispute Settlement) in future FTAs. (You can find a good analysis of the misleading claims of the campaign and letter here.)

Through progressive tobacco regulation policies, Australia has set an important precedent in placing a higher value on domestic public health policies over foreign investor rights. Unfortunately, trade and investment pacts provide Big Tobacco with second and third avenues to subvert the will of the Australian people and its highest court. The good news is that other countries will inevitably follow Australia’s lead on tobacco control policies.  Hopefully they will also follow Australia's prudent decision to reject extreme foreign investor rights in trade pacts like the TPP.  

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