Australia has had a victory in the first step of the plain packaging challenge being played out in an international investment tribunal.
The Permanent Court of Arbitration has ordered that Australia will be allowed to challenge Philip Morris Asia's right to contest our plain packaging laws, on the grounds that the company only bought shares in its Australian arm so that it could launch the case.
If Australia wins, it could see the legal challenge wrap up far earlier than expected, at far less cost, as well being a blow to corporations that engage in "treaty shopping", or buying shares in countries to use trade treaties to their advantage.
Jonathan Liberman, the director of the McCabe Centre for Law and Cancer, said the tribunal had essentially decided to agree to the request to split the case in two because they had accepted that Australia's objections were, on the face of it, ''serious and substantial''.
Australia believes the fact that Philip Morris Asia only acquired its shares in the Australian company 10 months after the government had announced it would implement plain packaging means it does not rightly fall under a trade agreement we have with Hong Kong.
''The Australian Government argues that an investor cannot buy into a dispute by making an investment at the time when a dispute is either existing or highly probable,'' Mr Liberman wrote in an update on the case.
In addition, the government believes Philip Morris Asia made ''false and misleading'' claims when it applied to buy Philip Morris Australia and filled in a statutory notice explaining why it was intending to do so.
''It argues that the true purpose of Philip Morris Asia's investment was to place [it] in a position where it could bring the claim once the legislation had been enacted,'' he said.
It was on these two objections that the tribunal decided to split the case, hearing them before any full case was to proceed.
"The fact that they have decided they were worth hearing first means they think they have a substantial chance of success,'' Mr Liberman said. ''If Australia wins on these grounds, it will set an important precedent. It would send a clear message that this kind of 'treaty-shopping' behaviour should not be allowed.''
Professor of health policy at Curtin University Mike Daube said if Australia won, even on jurisdictional grounds, it would inspire confidence in other countries.
''It is clearly in the industry's interests to keep dragging this process on, because the longer it's going on, the longer they can say it is under review,'' he said, adding the company had tried to have all the hearings held in secret.
''We’ve already had the High Court victory, and as soon as a big international decision goes that will send out a pretty big signal.''
Chris Argent, a spokesman for Philip Morris, said it would be inappropriate to respond to Australia's allegations outside of the tribunal.
But he said the plain packaging laws entailed the destruction of brands.
"Building a brand is a long-term, significant investment that international law protects from arbitrary government action of exactly the sort at the heart of our claim," he said. "The forced removal of our brands and trademarks by the Australian Government is a clear violation of the terms of the bilateral investment treaty between Australia and Hong Kong, and we believe we have a very strong case for actual damages that may amount to billions of Australian dollars."
"The transfer of ownership of the Australian operation to PM Asia occurred long before plain packaging was adopted.”