Philip Morris challenges Australia on plain pack tobacco

Tobacco giant Philip Morris on Monday launched legal action against Australian laws forcing tobacco products to be sold in drab, plain packaging from late next year, and other tobacco companies said they would soon follow suit.

The tough legislation cleared by parliament is being closely watched by governments considering similar moves in Europe, Canada and New Zealand. It has angered tobacco firms worried it may set a global precedent and infringe on trademark rights.

Tobacco smoke

Cigarette smoking

“The government has passed this legislation despite being unable to demonstrate that it will be effective at reducing smoking and has ignored the widespread concerns raised in Australia and internationally regarding the serious legal issues associated with plain packaging,” Philip Morris spokeswoman Anne Edwards said in a statement.

Under the law, cigarettes, pipe tobacco and cigars have to be sold in olive green packs free from branding, but carrying graphic health warnings, from December 2012.

Tobacco export countries including Nicaragua, Dominican Republic and Ukraine have warned they may also challenge the laws under global trade rules, while Philip Morris said it had launched international legal action that could trigger compensation claims worth billions of dollars.

The international action is being brought by Philip Morris Asia Ltd, Hong Kong, the owner of the Australian affiliate, through a notice of arbitration under Australia’s Bilateral Investment Treaty with Hong Kong.

Philip Morris was also expected to launch separate domestic legal action when the laws received final administrative approval, while British American Tobacco and Imperial Tobacco were also planning to challenge the laws in Australia’s peak High Court.

“We are looking to go to the High Court after royal assent. We think probably in the next week or two weeks,” BATS spokeswoman Louise Warburton said .

Australia’s Health Minister Nicola Roxon, speaking after parliament’s lower house approved laws already passed by the upper house Senate last week, demanded tobacco companies respect the will of the parliament.

“The government has received comprehensive legal advice about this matter and are confident with our position,” Roxon told Reuters in emailed comments.

“Big tobacco is ignoring the will of the Australian parliament and is prioritising their profits over the lives of everyday Australians with this action,” she said.

The World Health Organization in 2005 urged countries to consider plain packaging, and estimated more than 1 billion are regular smokers, 80 percent of them in poor countries.

The Himalayan nation of Bhutan banned the sale of tobacco outright earlier this year.

Industry analysts say tobacco companies are worried that plain packaging could spread to important emerging markets like Brazil, Russia and Indonesia, and threaten growth there.

Legal experts have predicted both legal and WTO challenges to fail, as intellectual property rights agreements give governments the right to pass laws to protect public health.

Conservative opposition MPs, while backing the laws, urged Roxon to accept a th ree month moratorium on prosecutions and the enforcement of heavy fines for small tobacco sellers to give them time to adjust to the possible impact on sales.

Australia already bans tobacco advertising, smoking in public buildings and the public display of cigarettes in shops. In some states, it is illegal to smoke in a car if a child is a passenger.

Australia wants to cut the number of people who smoke from around 15 percent of the population to 10 percent by 2018. Health authorities say smoking kills 15,000 Australians each year with social and health costs of around $32 billion.

Australia’s tobacco market generated total revenues of around A$10 billion in 2009, up from A$8.3 billion in 2008, although smoking generally has been in decline. Around 22 billion cigarettes are sold in the country each year.

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