The Permanent Court of Arbitration has recently ordered tobacco company Philip Morris to pay the Australian government’s costs, after Philip Morris failed to get the Australian government’s plain packaging legislation overturned. For the uninitiated, the makes it mandatory for tobacco companies that wish to conduct business in Australia to sell their products using only a generic drab dark packaging. The legislation requires tobacco packaging to feature large, visually-arresting health warnings which are designed to make cigarettes unappealing to smokers.

The plain packaging legislation was opposed by tobacco companies and various countries. One rationale was that the mandatory use of plain packaging make it difficult, if not impossible, for brand owners to market their products using unique marks and design elements. The law also makes it that much more difficult for tobacco companies to protect their trade marks, as the plain packaging makes it that much easier for counterfeiters to produce and profit off fake products. It was also argued that any meaningful public health effects brought by the plain packaging law will be negated if cheap counterfeit tobacco products flood the Australian market.

This arbitration was brought on slightly different grounds. When Philip Morris took the case to the Permanent Court of Arbitration, it tried to argue that a ban on trade marks will breach foreign investment provisions, citing the conditions of a 1993 trade agreement between Australia and Hong Kong to support its argument. The court was very critical of Philip Morris’ arguments, and ruled against the tobacco company.

The Permanent Court of Arbitration’s ruling against Phillip Morris marks the third failure of the tobacco industry’s battle against the Tobacco Plain Packaging Act, after its previous failures to overturn the legislation at the High Court of Australia and the World Trade Organisation (WTO.)

The final costs figure that Philip Morris has been ordered to pay consist of the court fees and expenses, including the cost of expert witnesses, travel, solicitors, and counsel, as well as interest. The actual amount is redacted from the Permanent Court of Arbitration’s new ruling. But former Australian Federal Treasurer Wayne Swan (who helped draft the plain-packaging laws and was called by Australia to give evidence during secret hearings in 2015) estimates the case cost to have been “around $50 million” in legal fees.

This article is general information only, at the date it is posted.  It is not, and should not be relied upon as, legal advice.  This article might not be updated over time and therefore may not reflect changes to the law.  Please feel free to contact us for legal advice that is specific to your situation.