Philip Morris Invokes BIT Against Australia’s Plain Packaging Law

by Julian Ku

I haven’t been following Australia’s new law requiring plain packaging for tobacco products, but I am a bit surprised that Philip Morris has filed a notice of arbitration claiming the law violates Australia’s bilateral investment treaty with Hong Kong.  Here is PM’s argument:

Australia is in breach of the BIT because plain packaging:

  • Amounts to unlawful expropriation of PMA’s investments and valuable intellectual property without compensation (Article 6(1))
  • Fails to provide fair and equitable treatment to PMA’s investments in Australia (Article 2(2))
  • Unreasonably impairs PMA’s investments in Australia (Article 2(2))
  • Fails to provide full protection and security for PMA’s investments in Australia (Article 2(2))
  • Breaches Australia’s international obligations in relation to PMA’s investments (Article 2(2)) by violating The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), the Paris Convention for the Protection of Industrial Property and the WTO Agreement on Technical Barriers to Trade (TBT)

My initial (not very informed) take is that the Article 2(2) “fair and equitable treatment” argument is stronger than the Article 6(1) expropriation argument. The expropriation argument will have to overcome the BIT’s exception for acts taken “under due process of law, for a public purpose related to the internal needs of that Party, on a non-discriminatory basis…”  It is worth thinking about the whether the typical protections for investments provided by BITs should incorporate IP protections. It is a plausible argument, but I doubt it will prevail.  But I encourage any commenters with more expertise to jump in!

http://opiniojuris.org/2011/11/21/philip-morris-invokes-bit-against-australias-plain-packaging-law/

5 Responses

  1. Don’t forget the “compensation” part of the expropriation provisions.  A government can expropriate under certain conditions, but it still has to pay!

    Simon

  2. PMA seeks a suspension of the legislation due to its conflict with Australia’s obligations under the BIT. The concern I have is whether an arbitral tribunal can order such a suspension, provided that much of investment case-law involves only pecuniary damages? Won’t such an order (interim or otherwise) be an interference in the sovereign sphere of Australia?

  3. Perhaps a silly question, but in hopes of gaining some expert advice, is there any chance that Australia could win this one on ‘general regulatory measures’, claiming that public interest is more important than the possession rights of PMI? Or would it obviously be a case of ‘fair and equitable’?

  4. The Hong Kong – Aus BIT protects intellectual property as an investment falling within the scope of the treaty. This is quite common in bilateral investment treaties. The practice is not without its detractors, and does not fit with the definitions of investment put forward in arbitral awards such as Salini and Malaysian Historical Salvors but the practice nonetheless is quite entrenched.

  5. In my view, PM’s most interesting argument is that Australia also breached the BIT by violating its international obligations contained in TRIPS and other IP treaties. In this respect, the last bullet point refers to Article 2(2) of the BIT, which contains not only the FET and FPS standards but also the “umbrella clause” and a “preservation of rights” clause. I wonder which of these standards PM will try to invoke.

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