The Productivity Commission’s (PC) recently released Trade and Assistance Review warned that Australian taxpayers were facing a potential reaming from an investor-state dispute settlement (ISDS) law suite taken against Australia’s plain package cigarette laws by tobacco giant Philip Morris, under an obscure investment agreement with Hong Kong:
[Philip Morris Asia] is asking an arbitration panel to suspend the law and award substantial compensation for the financial damage that plain packaging will cause by commoditizing the cigarette market in Australia. (PMI 2014)…
…the ongoing costs to Australian taxpayers of funding the preparation and defence of the tobacco plain packaging legislation are likely to be substantial. Since the dispute was lodged, there have been eleven procedural orders determined by the PCA requiring legal representation by both parties.
…[There is] a lack of transparency regarding the true cost of including ISDS provisions in Australia’s trade agreements and investment treaties. The open-ended nature of these costs needs to be taken into account in any discussion regarding the appropriateness of such provisions and consideration of the net benefits (costs) that they entail.
Today, it has been revealed that Australian taxpayers are expected to spend more than $50 million defending the law suit – a figure that could rise significantly if Australia loses its first defence. From The Western Australian:
More than $50 million of taxpayer money is expected to go up in smoke defending cigarette plain packaging in a secretive international tribunal.
But costs will pile up if Australia loses on its first defence that Philip Morris indulged in cynical “venue shopping” by moving to Hong Kong to sue Australia.
Philip Morris claims plain packaging harms its intellectual property in such brands as Marlboro, Peter Jackson and Longbeach and called its own high-profile witnesses, including former High Court judge Ian Callinan, who testified on administrative law…
Australia argues that Philip Morris anticipated Labor’s plain packaging laws in 2011 and restructured its Australian subsidiary so it was owned by Hong Kong-based Philip Morris Asia.
This meant the company could sue Australia under so-called investor-state dispute settlement (ISDS) provisions of a 1993 agreement with Hong Kong that allowed compensation for “expropriation” of investments…
A Philip Morris spokesman said governments had the right to “experiment” with taxpayers’ money but should not be surprised when companies and countries asserted their rights.
Readers will recall that the Trans-Pacific Partnership (TPP) trade agreement, whose negotiations are expected to be concluded this week, is all but certain to include an ISDS clause.
Given the litigiousness of US corporations, we should therefore not be surprised when Australian taxpayers are called upon to defend further frivolous claims.
