The battle over Australia's law compelling the standardised packaging of tobacco is set to come to a head after two years of procedural wrangling.

The case will now be settled in court by the World Trade Organisation (WTO) after five countries brought the action against Australia arguing the law was a restriction on intellectual property rights.

Introduced in 2012, the law is the first of its kind and has been widely criticised as ineffective and a boon to black marketeers.

"Its plain packaging measure is failing to have the desired health effects of reducing smoking prevalence and remains detrimental to our premium tobacco industry," said Katrina Naut, the Dominican Republic's director-general of foreign trade.

The agreement reached between Australia and the five complainants ensures the case will commence within weeks. Director-general of the WTO Roberto Azevedo will appoint three panellists by the 5 May to judge the dispute.

Among the host of complaints against the prohibition was that the removal of all branding from tobacco products hampers the ability of tobacco producers to differentiate their premium products from other competitors.

The ruling could set an important precedent for other countries considering plain packaging of tobacco, as well other products such as food and alcohol.

The UK government recently revived its plans to introduce standardised tobacco packaging. This was in spite of the fact that a Department of Health (DoH) consultation in 2012 found 64 per cent of respondents opposing the policy.

The cost to the UK from intellectual property lawsuits, such as the one being brought against Australia, could be extremely high. The Institute of Economic Affairs (IEA) cited expert estimates which say the policy could lead the UK government being liable for as much as £5bn in compensation, in a report on plain packaging released earlier this month.

The evidence so far from Australia's plain packaging experiment has been less than impressive. Cigarette sales in 2013 rose 0.3 per cent, while sales of illicit cigarettes rocketed by 154 per cent, according to a KPMG report.

In 2013, illicit tobacco accounted for 13.9 per cent of the market a 2.1 per increase on the previous year. Government figures also showed a jump in the number of seizures of illicit tobacco by 60 per cent between 2011/12 and 2012/13.

Commenting on Ireland's plan to introduce plain packaging, Japan Tobacco International said: