The Australian High Court has found that the Gillard Government’s Tobacco Plain Packaging Act 2011 does not breach that section of the constitution that prohibits federal legislation acquiring property except on just terms. But the authority of the High Court may be challenged by international trade and investment processes that contest the rule of law not only in this country, but globally.

The federal plain packaging legislation was enacted in compliance with obligations under international law embodied in the World Health Organization’s (WHO) Framework Convention on Tobacco Control. In reaching its decision, the High Court was fulfilling the constitutional role allocated to it under a social contract entered into by the Australian people in 1901.

This compact has since been reinforced by acceptance and implementation of such decisions and the process behind them for over a century by Australian federal and state politicians, judges and the general populace. A central part of the contract is that Australia will be governed by a rule of law, with its implicit predictability and certainty.

Australian taxpayers (through their governments) have invested an enormous amount of time and resources in creating a system of governance predicated on the capacity of a non-corrupt judiciary to decide on disputes by fairly interpreting laws promulgated in advance in public.

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Foreign corporations operating in Australia benefit from such an equitable governance structure. Indeed, it is one of the primary reasons they invest here. Australia regularly ranks very highly in rule of law rankings of nations around the world. And as legal scholar Brian Tamanaha reminds us in one of the seminal works on the subject, “No other single political ideal has ever achieved global endorsement.”

Yet Australia is about to confront, for the first time, the possibility that a decision of the highest court in our land will in effect be overturned by off-shore tribunals with only a tenuous connection to Australian legal traditions. Such off-shore investment tribunals are not accountable to the Australian populace and have extremely limited capacity to refer to governance arrangements directly endorsed by Australian citizens.

Unaccountable tribunals

On 13 March 2012, Ukraine requested consultations in the World Trade Organisation (WTO) with Australia concerning Australia’s Tobacco Plain Packaging Act 2011 and its implementation.

Ukraine’s argument is that Australia’s plain packaging legislation breaches various provision of the WTO Trade Related Intellectual Property (TRIPS) Agreement; the Technical Barriers to Trade (TBT) Agreement; and the General Agreement on Tariffs and Trade(GATT) 1994. Interestingly, there’s no mention of the WTO being required to take the WHO and its Framework Convention on Tobacco Control into account in this consultation.

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In another potential challenge, the multinational tobacco company Phillip Morris has re-badged itself for this purpose as an Asian company based in Hong Kong and lodged an investor-state complaint against the Australia under the Hong Kong-Australia Bilateral Investment Treaty (BIT).

Unlike the WTO dispute, this will not involve a standing body but will allow an ad hoc gathering of three trade arbitrators to rule (without the requirement of exhausting local remedies and without prospect of appeal) on whether Australia has to pay damages to this tobacco company for passing legislation found to be constitutional and a fulfilment of Australia’s international legal obligations under a WHO treaty.

Such disputes may only be the beginning of a new off-shore phase of jurisprudence with the potential to undermine the authority of the High Court and the rule of law in Australia.

Unaccountable arbitrators

Philip Morris International has lobbied the US Trade Representative (USTR) to include investor state dispute settlement in the Trans Pacific Partnership Agreement (TPPA). On 12 June 2012, a leaked copy of the investment chapter for the TPPA confirmed its provisions would allow foreign firms to skirt Australian domestic courts and laws to directly sue our government in the International Centre for the Settlement of Investment Disputes (ICSID).

Arbitrators would be paid by the hour (often over several years of proceedings), could act as a legal representative in one case and an arbitrator in another, and would have vested financial interests in verdicts for corporations. Governments cannot initiate suits before this tribunal.

They would not be required to take the constitutional, legislative or international human rights context (including standard legal due process procedures) into account, or maintain a public record of their decisions. All of this undermines their capacity to claim they are part of the rule of law.

John O'Neill/Wikimedia Commons.

Defending the rule of law

The capacity of these three types of tribunals to potentially have the final say on such an important public health issue (as well as those likely to face future generations of Australians in areas such as environmental sustainability and financial sector stability) is a direct affront to the rule of law, not only in this country but globally.

The leaked TPPA text would even provide investors with a right to demand compensation for “indirect” expropriation (Article 12.12) and allow foreign investors to claim government actions (such as the plain packaging laws) require technically unlimited financial compensation because of a slightly higher burden in complying with the law (Article 12.4 and 12.5). Such proposals give foreign investors (such as tobacco multinationals) greater rights than domestic investors.

In its April 2011 trade policy statement, the Australian Government vowed to no longer include provisions on “investor-state dispute settlement” in bilateral and regional trade agreements that it signs. Australia deserves high praise for refusing to agree to a TPPA investor state provision. But it’s surprising that the various Australian law councils haven’t taken up the issue and supported the federal government’s stance in favour of preserving from such threats the rule of law in this country.