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Waiting out the legal challenges to plain packaging - playing into the tobacco industry's hands?

Friday 4 October, 2013
by Jonathan Liberman

UPDATE: For information about procedural developments since this blog was published, see our page on the plain packaging dispute in the WTO.

Nearly two years after the passage of Australia's plain packaging legislation, and ten months after it came fully into effect, the international legal challenges continue. Slowly. And the tobacco industry, which is directly pursuing one of the challenges and providing support to the others, is telling governments considering stronger tobacco control measures to wait until the challenges are resolved.

The last few weeks have seen three developments in the World Trade Organization challenges to Australia's plain packaging legislation. The legislation was passed in November 2011 and has been in full operation since December 2012.

Indonesia becomes the fifth country to initiate proceedings against Australia. Dominican Republic and Cuba have also done so, requesting consultations with Australia on 18 July 2012 and 3 May 2013 respectively. 

The WTO dispute settlement process has several stages, from a request for consultations through to a WTO Panel (and Appellate Body) hearing. WTO dispute settlement is supposed to be ‘fast'. According to the WTO, ‘prompt settlement is essential if the WTO is to function effectively'. But things haven't been moving so promptly so far.

Many observers wonder whether it was more than a coincidence that Indonesia took the very first step around the same time as Ukraine and Honduras took steps that appeared to move the process forward. They wonder whether Indonesia will be given time to catch up to those that have gone before them, and whether another country might be waiting to be the next cab off the rank.

According to Reuters' Tom Miles:

Many governments may decide whether to press ahead with their own measures to discourage tobacco use only after seeing the outcome of the WTO case.

If Miles is right, one can speculate on who might and might not want the challenges to be resolved promptly (or at all); who benefits from the cases remaining in the system as long as possible (or indefinitely).

We were never sure whether the tobacco industry would follow through on its threat to bring a constitutional challenge to Australia's law. The industry was always going to lose that challenge, and losing a case that you have long claimed you will win isn't a great look. In hindsight, it seems obvious that the industry had to challenge. It had to send a message to other countries that it would make good on its threat rather than roll over, even in the face of legal reality, lest its threats lose their credibility. Presumably it calculated that, looking at the bigger picture, it could afford a loss in the High Court of Australia. But a loss in the WTO would be something different altogether. The global implications would be profound.

On this note, it has been reported that the tobacco industry has been providing support to countries that are challenging Australia's laws. According to Bloomberg, British American Tobacco is contributing to Ukraine's and Honduras' legal costs, and Philip Morris to those of the Dominican Republic. The two companies told the Financial Times back in April 2012 that they were providing such support. So, while in the WTO it is states that bring legal proceedings rather than corporations, the tobacco industry is intimately involved in what is happening.

Australia is not only facing complaints in the WTO, but also a challenge by Philip Morris Asia (PMA) under a bilateral investment treaty. The next stage in that case is a hearing in Singapore in February 2014 on the question whether the proceedings should be bifurcated, i.e. whether Australia's jurisdictional objections should be heard prior to or together with consideration of the merits of PMA's claim.

PMA filed its notice of claim on 27 June 2011 and its notice of arbitration on 21 December 2011. In October 2013, we are still four months from a hearing about how the case should proceed. It will probably then take some months for the tribunal to issue its decision on that question. Then a few months for the parties to make their submissions on the next stage (whatever that ends up being). Then there’ll be a hearing. Then some months for the tribunal to issue its decision. And so on. And we are quickly into 2015 and beyond. 

We are among the many who believe that Australia is on solid legal ground in both the WTO and investment proceedings. We believe that Australia's law is a sound exercise of its sovereign power to regulate; that it is non-discriminatory, based on evidence, and well-drafted, and has behind it the legal and political force of the WHO Framework Convention on Tobacco Control, its Article 11 and Article 13 guidelines, other decisions of its Conference of the Parties, and other international instruments including the Doha Declaration on TRIPS and Public Health.

In the work we do, we are increasingly seeing the tobacco industry discouraging governments from implementing tobacco control measures on the ground that Australia's plain packaging law is under challenge, and it would be prudent for governments to wait for these challenges to be resolved.

In our view, it is perfectly sensible for governments to keep an eye on what is happening in the challenges to Australia's law. But we don't believe that waiting them out is a tenable position. Governments could find themselves waiting for years - or forever. If they do this, they are playing into the tobacco industry's hands, and abdicating their duties to protect the health of their people.

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