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First hearing in Philip Morris v. Australia arbitration is pushed into 2014, as New Zealand reveals it is awaiting outcome of Australian cases

Arbitrators hearing a claim by a Hong Kong affiliate of the Philip Morris tobacco company against the Commonwealth of Australia have bowed to a request by the claimant to move the date of a hearing on bifurcation from September 2013 to February 2014.

The claimant had sought the change, as well as an additional month and a half to submit a Statement of Claim, after hiring new lead counsel, the law firm Sidley Austin, last year.

In a subsequent procedural order, arbitrators granted the claimant’s request, after noting that Australia did not oppose the claimant’s request.

As such, the date of February 21, 2014 has been set for oral arguments on Australia’s request to have arbitrators tackle jurisdictional objections in a first phase of the case prior to turning to the merits.

Philip Morris has until March 28, 2013 to submit its Statement of Claim on all aspects of the dispute together with all evidence (documents, witness statements, expert statements) it wishes to rely on.

Australia then has until October 23, 2013 to file its Statement of Defence on all aspects of the dispute together with all evidence (documents, witness statements, expert statements) it wishes to rely on.

(In a recent report, we profiled the jurisdictional arguments that Australia is hoping to have addressed by the tribunal prior to an evaluation of the merits of the claims.)

New Zealand sculpts plans, but will keep them on ice pending outcome of cases

As the Philip Morris v. Australia arbitration slowly unfolds, it is being watched with particular interest in neighbouring New Zealand, whose Cabinet, in a decision taken in April of 2012, “agreed in principle” to introduce a plain packaging regime subject to the outcome of a public consultation process.

That consultation process has now concluded, and in a recent statement New Zealand’s Associate Health Minister has confirmed that her government will introduce legislation that mimics Australia’s controversial plain packaging regime for tobacco products. However, Minister Tariana Turia also revealed that New Zealand will wait for a resolution of the “legal cases” against Australia before moving forward with implementation of the plain packaging legislation.

“In making this decision, the Government acknowledges that it will need to manage some legal risks,” Minister Turia said. “As we have seen in Australia, there is a possibility of legal proceedings. To manage this, Cabinet has decided that the Government will wait and see what happens with Australia’s legal cases, making it a possibility that if necessary, enactment of New Zealand legislation and/or regulations could be delayed pending those outcomes.”

The statement does not clarify the “legal cases” that are being monitored; however it is well-known that Australia faces a trade law dispute at the World Trade Organization and the above-discussed BIT arbitration by Philip Morris.

Assurances may be hard to come by, even after Australia BIT case ends

In a Regulatory Risk Assessment prepared in 2012, New Zealand’s Health Ministry revealed that officials with New Zealand’s Ministry of Foreign Affairs and Trade (MFAT) identified “a reasonably high risk that if New Zealand implements pain (sic) packaging legislation, a WTO dispute settlement case or investment arbitration may be brought against New Zealand.” While MFAT was unable at that stage to quantify potential damages likely to be sought in any such investment arbitration, the Ministry noted it might need to spend between $3-6 million (NZ) on legal and arbitration fees.

MFAT also noted that “the ultimate resolution of (Australia’s BIT case) may influence whether New Zealand would face a similar challenge.”

While the outcome of the Philip Morris v. Australia BIT case could offer guidance as to certain avoidable pitfalls for other governments crafting plain packaging regimes, it should be stressed that it is far from assured that one panel of arbitrators would follow the approach of an earlier group of arbitrators with respect to the similar legal issues at stake.