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Big tobacco accused of legal trick

Date

Lenore Taylor

Philip Morris says the plain packaging laws will adversely affect its investment in the company's Australian operation.

Philip Morris says the plain packaging laws will adversely affect its investment in the company's Australian operation. Photo: Reuters

THE Gillard government has accused tobacco giant Philip Morris of engaging in corporate restructuring as a ''trick'' to find new legal avenues to challenge plain cigarette packaging laws.

The company has launched a multibillion-dollar compensation claim against the government through its Hong Kong arm, Philip Morris Asia, claiming the packaging laws breach a trade treaty between Hong Kong and Australia.

Philip Morris Asia says the laws adversely affect its investment in the company's Australian operation, which was supposed to be protected under the 20-year-old trade treaty.

Illustration: Ron Tandberg.

Illustration: Ron Tandberg.

But the government has hit back, saying the challenge should be thrown out because Philip Morris Asia did not acquire its shareholding in the Australian operation until almost a year after the packaging policy was announced.

Attorney-General Nicola Roxon said the government's response, filed last night, showed Philip Morris Australia had engaged in corporate restructuring to use the treaty to challenge the plain packaging laws after they had been announced.

Canberra's response says: ''Philip Morris Asia acquired its shares in Philip Morris Australia on 23 February, 2011, both in the full knowledge that the decision had been announced by the Australian government to introduce plain packaging, and also in circumstances where various other members of the Philip Morris group had repeatedly made clear their objections … [which] had not been accepted by the government.''

Accusing ''big tobacco'' of using ''every trick in the playbook'', Ms Roxon said she was confident the plain packaging laws would be upheld.

The government announced its plain packaging plan in April last year, and the legislation was passed last month. On the same day, Philip Morris Asia lodged a notice of arbitration with the United Nations Commission on International Trade Law, seeking suspension of the laws and compensation for losses flowing from them. At the time, the company said it was seeking damages ''of the order of billions of Australian dollars''.

In its response, the government says ''pre-existing disputes'' cannot be ''repackaged'' as claims under the treaty ''many months after the measure has been announced''. It also contends that even under the treaty, it is able to make laws to protect public health.

Alongside its complaint under international trade law, Philip Morris this week joined three other tobacco companies in taking High Court action against the laws.

Philip Morris, which has a 37 per cent market share in Australia with brands including Marlboro and Alpine, said the law effectively acquired its ''valuable brands and intellectual property'' without compensation. The world-first legislation will from next December strip all branding from cigarette packs and force them to be drab green in colour, with large, graphic health warnings.

Tobacco companies are fighting the laws through every possible means because they are seen as an international test case. The government says smoking costs billions of dollars in health and lost productivity.

"Let there be no mistake, big tobacco is fighting the government for one very simple reason - because it knows, as we do, that plain packaging will work,'' Ms Roxon said.

The government has appointed Canadian professor Don McRae as its representative on the tribunal that will hear the case, with another appointment to be made by the company and one by the tribunal itself. The case could take years.

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