Air of intrigue in move against plain packaging
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Air of intrigue in move against plain packaging

In the advertising world of the TV show Mad Men, smokers sit and enjoy their habits at every desk and puff away in any public building, but over the past two decades Australia's smokers have become ever more invisible; exiled to the outside at work to indulge their cravings.

Now, if Philip Morris gets its way, even the company's legal challenge to the Government's push for plain packaging will - like the smokers they sell to - be virtually unseen to the public. Philip Morris is using a bilateral investment treaty to try to block the plain-packaging legislation from being implemented and to seek billions of dollars in compensation.

The company's claims will not be heard in an Australian court by respected judges, but by an ad-hoc tribunal that will meet in Singapore or another foreign country. Despite the compelling rationale that the public has a stake in investor-state disputes such as this one - because a public policy is being challenged and public funds will be used to pay compensation if the case is lost - the hearings will likely be held behind closed doors. Key documents, including the pleadings of both parties, may also be kept out of the public domain and even the final award may be difficult to obtain.

Transparency in investor-state dispute settlement has increased in recent years, thanks largely to the dedicated work of non-governmental organisations (particularly in Canada and the United States), which have directly petitioned tribunals for access to documents and permission to submit amicus curiae briefs outlining their own concerns. Hearings in some cases held at the International Centre for the Settlement of Investment Disputes in Washington, DC, can now be viewed on the internet.

Unfortunately, Philip Morris has requested that its dispute with the Australian Government be resolved under the much less progressive arbitration rules of the United Nations Commission on International Trade Law. For several years, there has been a debate within the commission about transparency in investor-state dispute settlement, but the body failed in the most recent update of its arbitration rules to deal with the issue.

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As such, the rules still allow one party to block publication of the award and veto any request by the other party to hold open hearings.

The Australian legal team defending the plain-packaging legislation should nevertheless aim for the highest possible level of transparency; it should disclose its own pleadings, request open hearings and welcome any amicus curiae briefs that may be submitted by NGOs. Such a position would be consistent with more recent treaty practice; for example, the investment chapter of the Australia-Chile Free Trade Agreement has provisions covering all of these issues.

Such efforts may be thwarted by Philip Morris, which is why Australia's delegation to the UN commission should also aggressively push for improvements to the existing arbitration rules. The recommendations made by the International Institute for Sustainable Development and the Center for International Environmental Law at a meeting of a commission working group in February this year provide a clear path forward. Thankfully, the Gillard Government has already taken the important step of committing to sign no further treaties that would bind Australia to this flawed system of arbitration. The Government appears to be holding firm on this position even in the face of considerable pressure from the US in the current negotiations for a Trans-Pacific Partnership Agreement.

A final step that could be taken by the Government would be to terminate Australia's existing bilateral investment treaties, including the one with Hong Kong that Philip Morris is using. Although such a move would not stop this particular dispute from proceeding, it would help to prevent similar cases from arising in the future.

  • Kyla Tienhaara is a research fellow with the Regulatory Institutions Network at the Australian National University.
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