Australia has won an international legal battle to uphold its world-leading tobacco control measures, with Philip Morris failing in its long-running attempt to challenge plain packaging laws under a bilateral trade agreement with Hong Kong.

The decision could give other countries greater confidence to follow Australia’s lead in outlawing tobacco company logos on cigarette packets and moving to drab, uniform designs dominated by graphic health warnings.

Philip Morris Asia Limited launched its challenge against the Australian government in 2011, seeking to rely on an argument that the ban on trademarks breached foreign investment provisions of Australia’s 1993 Investment Promotion and Protection Agreement with Hong Kong.

But the arbitral tribunal has declined jurisdiction to hear the case, the company said in a statement issued on Friday.

The minister responsible for tobacco policy, Fiona Nash, said: “We welcome the unanimous decision by the tribunal agreeing with Australia’s position that it has no jurisdiction to hear Philip Morris’s claim.”

Philip Morris said it was reviewing the decision in detail to consider its next options, but sought to head off suggestions that other countries should follow suit.

“There is nothing in today’s outcome that addresses, let alone validates, plain packaging in Australia or anywhere else,” said Marc Firestone, Philip Morris International senior vice president and general counsel.

“It is regrettable that the outcome hinged entirely on a procedural issue that Australia chose to advocate instead of confronting head on the merits of whether plain packaging is legal or even works.”

But the Public Health Association of Australia welcomed the decision as “the best Christmas present for public health nationally and internationally”.

“Smoking in Australia is falling in adults, in children and by tobacco volume sales,” said the association’s chief executive, Michael Moore.

“Now the tobacco companies have lost another crucial legal bid to stop this life-saving measure. The message is loud and clear – plain packaging works, and it is here to stay.”

Professor Mike Daube, who chaired the government’s expert committee that recommended plain packaging, said the tobacco companies were “desperate to prevent plain packaging here and internationally because they know it works”.

Todd Harper, the chief executive of the Cancer Council Victoria, said the implementation of plain packaging on a global scale was “the worst nightmare of the tobacco industry”.

“Overnight we have heard that France will progress with plain packaging, marking yet another country to adopt this important tobacco control initiative,” he said.

“Other countries should feel confident that bullying tactics of big tobacco cannot stand in the way of public health measures.”

Australia’s plain packaging laws were introduced by Julia Gillard’s Labor government in 2011. The laws banned tobacco companies from displaying their distinctive colours, brand designs and logos on cigarette packs.

In 2012, the Australian high court rejected a domestic challenge against the laws brought by major tobacco companies.

The Australia-Hong Kong investment treaty at the heart of the international challenge contained the type of “investor-state dispute settlement mechanism” that has caused controversy in trade policy debates.

The Greens senator Peter Whish-Wilson said Australia had “dodged a bullet” because of the jurisdictional ruling, but kept signing trade deals that gave corporations “the right to sue us for making laws that might impinge on a foreign corporation’s profits”.

Whish-Wilson renewed his concerns about the 12-country Trans Pacific Partnership and said such clauses were “the Damocles Sword hanging over Australia’s sovereignty and our right to legislate in the public interest”.

Labor’s health spokeswoman, Catherine King, seized on the ruling as a vindication of the strategy adopted by the former health ministers Nicola Roxon and Tanya Plibersek.

“As feared by tobacco companies, Australia’s lead is now creating an unstoppable momentum with France today joining Britain and Ireland in voting to introduce plain packaging, and dozens of other countries set to follow,” King said.

The permanent court of arbitration is yet to publish the decision outlining its reasons.

But in legal arguments (PDF) about why the claims under the Hong Kong agreement should fail, Australia said the company bringing the challenge – Philip Morris Asia – had acquired its shares in Philip Morris Australia in early 2011 “in the full knowledge” of the government’s decision in 2010 to introduce plain packaging.

Guardian Australia has been told the decision means the arbitration is over, other than any proceedings related to the recovery of Australia’s costs and subject to any appeal Philip Morris Asia may seek to launch in Singapore, which is the seat of the arbitration.

The government still faces a separate challenge against plain packaging in the World Trade Organisation after Ukraine, Honduras, Indonesia, Dominican Republic and Cuba argued the measure breached Australia’s international obligations. A decision is expected in the second half of 2016.

The foreign affairs minister, Julie Bishop, and the trade minister, Andrew Robb, said the government was committed to defending the international challenges because the plain packaging laws were “an important and legitimate measure” designed to protect public health.