Australia prevails in arbitration with Philip Morris over tobacco plain packaging dispute

A tribunal at the Permanent Court of Arbitration has issued a decision dismissing a high-profile case between cigarette multinational Philip Morris and the Commonwealth of Australia.

The PCA website indicates that a Decision on Jurisdiction and Admissibility was issued on December 17, 2015. A source involved in the case has confirmed to IAReporter that the tribunal has dismissed the investor’s claims of breach of the Australia-Hong Kong bilateral investment treaty.

Subsequent to this, Philip Morris issued a press release confirming the result, and lamenting that the case was decided on the basis of “… a procedural issue that Australia chose to advocate instead of confronting head on the merits of whether plain packaging is legal or even works”.

Hearings occurred in February 2015; detailed legal arguments have remained confidential

The tribunal of Gabrielle Kaufmann-Kohler, Don McRae and Karl-Heinz Boeckstiegel had earlier determined in April 2014 that the proceedings would be bifurcated into a preliminary phase and, if necessary, a later merits phase. Hearings on Australia’s jurisdictional and admissibility objections were held in February 2015.

As we previously discussed (see here), Australia had filed the objections on several grounds, including a complaint that the claim represented an abuse of process due to corporate restructuring engaged in by Philip Morris, as well as a complaint that Philip Morris’ investment in Australia was not admitted in accordance with Australian law, and a complaint that the dispute between the investor and the state was already on foot when Philip Morris acquired its investment in Australia in February 2011.

The tribunal’s detailed reasoning for rejecting jurisdiction is not yet known. The award will not become public until the parties agree on the redaction of any confidential information contained in the award.

Although the broad contours of Australia’s jurisdiction and admissibility objections could be gleaned from an earlier “response” to Philip Morris’s request for arbitration (which we analyzed here), the more detailed subsequent legal arguments filed in the case have remained confidential.

As we’ve reported, Australia’s Attorney General’s office denied a request by Investment Arbitration Reporter under the country’s freedom of information law for access to a detailed defence pleading filed on jurisdiction and merits last year. IAReporter then requested an internal review of that decision, but that review failed to overturn the agency’s earlier rejection of our request.

The claimant has also declined to release its own briefs in the case.

It remains possible that the detailed briefs could be published now that the case has concluded.

Notwithstanding dismissal of the BIT claim, a separate claim against Australia at the World Trade Organisation remains pending, with a decision expected ‘not before the first half of 2016’, according to the WTO’s website.