Court of arbitration finds Philip Morris Asia case to be ‘an abuse of rights’ and says it must pay Australia’s multi-million dollar legal costs

This article is more than 3 years old

This article is more than 3 years old

The tobacco manufacturer Philip Morris will be forced to pay millions of dollars in legal fees to Australia after its failed case against plain packaging laws.

Big tobacco companies have fought vigorously against the Gillard government’s plain packaging laws since they were introduced in 2011.

By banning logos and distinctive-coloured cigarette packaging, Australia’s laws went further than the advertising bans and graphic health warnings introduced in many other countries.

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Philip Morris, Imperial Tobacco and Japan Tobacco quickly attempted to have the laws overturned through a constitutional challenge in the high court, which they lost in 2012.



Philip Morris Asia then took a case to the permanent court of arbitration in 2012. It tried to use the conditions of a 1993 trade agreement between Australia and Hong Kong to argue a ban on trademarks breached foreign investment provisions.

The corporate giant not only lost but was criticised by the court, which found the case to be “an abuse of rights”.

The court published a decision on the payment of costs at the weekend, which it made in March. The decision, which brought five years of proceedings to a close, found Philip Morris Asia liable to pay Australia’s multimillion-dollar claim for legal costs.

The final costs figure was kept secret but Fairfax Media reported it as being up to $50m.

Australia successfully argued Philip Morris must pay its court fees and expenses, the cost of expert witnesses, travel, and solicitors and counsel. It also claimed interest. Australia had told the court its claim was modest and was a small proportion of what the tobacco giant had sought in damages.

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It said Philip Morris had sought to challenge a public health measure of critical importance to Australia, making it important to “mount a robust and comprehensive response to all aspects of the claim”.

Philip Morris had tried to argue the government’s costs were unreasonable for a “legal team that consisted primarily of public servants”.

The company argued that two similar countries, Canada and the US, had never claimed more than US$4.5m and US$3m respectively in costs and fees.

Australia’s claim was much more than that.

“The claimant emphasizes that, even excluding the fees of four outside counsel, the respondent’s government lawyers claim over [redacted] in fees, even though Australia itself pays them ‘very modest government salaries’,” the court’s decision read.

But the court found Australia’s claim was reasonable, rejecting Philip Morris’s arguments.

“Taking into account the complexity of issues of domestic and international law relevant in this procedure, particularly for a government team usually not engaged in such disputes, the Tribunal does not consider that any of these costs claimed by the Respondent were unreasonable and should not have been incurred,” it found.

“In making this assessment, the Tribunal also takes into consideration the significant stakes involved in this dispute in respect of Australia’s economic, legal and political framework, and in particular the relevance of the outcome in respect of Australia’s policies in matters of public health.”

Earlier this year big tobacco failed in a separate bid to have the laws overturned by the World Trade Organisation. The decision was widely seen as a green light for more countries to follow Australia’s lead.