Tobacco giant ordered to pay millions

Adam Gartrell, Health correspondent. The Sydney Morning Herald. 

Tobacco giant Philip Morris has been ordered to pay the Australian government millions of dollars in  legal costs after its failed bid to kill off plain packaging laws. While the exact figure is a closely-guarded secret – and is redacted from the Permanent Court of Arbitration’s new ruling – it’s believed the bill could be as high as $50 million.

The court published its decision at the weekend, bringing a six-year legal battle to a close. Big tobacco companies fought hard against the world-first plain-packaging laws – introduced by Julia Gillard’s Labor government in 2011 – and first took the case to Australia’s High Court.

When that failed, Philip Morris Asia mounted a challenge in the Singapore-based international court using provisions – known as investor-state dispute settlement –of an obscure Hong Kong-Australia investment treaty. The manufacturer of Marlboro and Longbeach cigarettes wanted the tribunal to order Australia to scrap the laws or to award damages of at least $US4.2 billion.

The court dismissed the case in 2015, labelling it an ‘‘abuse of rights’’.

Two years later, the court now says Philip Morris must cover Australia’s legal costs, plus an undisclosed percentage of the arbitration costs.

The company argued Australia’s claim for costs was ‘‘excessive’’ given its legal team ‘‘consisted primarily of public servants’’, saying it was well above what was claimed by Canada
($US4.5m) and the United States ($US3m) in similar investment disputes.

But the government argued its claim – which included the cost of its own lawyers, outside counsel, expert reports and witnesses, plus travel and accommodation – was justified, and the court agreed.

‘‘The tribunal does not consider that any of these costs claimed by the respondent were unreasonable and should not have been incurred,’’ the court found.

‘‘In making this assessment, the tribunal also takes into consideration the significant stakes involved in this dispute in respect of Australia’s economic, legal and political framework, and in particular the relevance of the outcome in respect of Australia’s policies in matters of public health.’’

The company was also ordered to pay interest, at the current cash rate of 1.5 per cent, between the decision date and the date of full payment. Former treasurer Wayne Swan helped draft the plain-packaging laws and was called by Australia to give evidence during secret hearings in 2015.

He believes the case cost ‘‘around $50 million’’.

‘‘It’s good to see that Australia’s world-leading legislation was upheld and that the abuse of process by Philip Morris has now resulted in costs going to the Australian government,’’ Mr Swan said on  Sunday. ‘‘This thing should never have been in the court in the first place.’’ Mr Swan said the case had reinforced his view hat investor-state dispute settlement clauses which allow foreign
corporations to sue governments for expropriation – and which were recently included in Australia’s trade deals with China and Korea – were bad.

The government is yet to comment on the decision to award costs. On its website, the Department of Health says: ‘‘The government does not intend to publicly release information concerning
the legal costs of defending challenges to tobacco plain packaging.’’

However, department secretary Martin Bowles has previously said the figure would be revealed once the case was fully resolved.