This case raised the spectre of the worst fears of people who are concerned about the impact of International Trade Agreements such as the TPP (Trans Pacific Partnership Agreement).
Here we had the Australian Government being sued by Philip Morris in regards to plain paper packaging of cigarettes, not in an Australian Court but in a Tribunal based in Hong Kong.
This was in accordance with an agreement between the Government of Hong Kong and the Government of Australia “for the promotion and protection of investments” which was signed on 15th September 1993 as a treaty.
As such the Australian Government subjected itself to the Jurisdiction of a Hong Kong Tribunal in accordance with the United Nations Commission on International Trade Law Rules of Arbitration as revised in 2010 (“UNCITRAL RULES”).
Philip Morris and their legal team thought they could force the Australian Government’s hand and force the jurisdiction into a Hong Kong Tribunal. Not for lacking of trying it took a 186 page judgment from the Permanent Court of Arbitration to rule that :-
1. The Claims raised in this arbitration were Inadmissible.
2. Therefore the tribunal is precluded from exercising its jurisdiction over this dispute.
3. Costs are reserved for a final award limited to costs.
It is worthy to note here the reasoning :-
In view of the above considerations, the Tribunal concludes that the commencement of treaty based investor-State arbitration constitutes an abuse of right (or abuse of process) when an investor has changed its corporate structure to gain the protection of an investment treaty at a point in time where a dispute was foreseeable. A dispute is foreseeable when there is a reasonable prospect that a measure that may give rise to a treaty claim will materialise.
It is not that the application itself was without merit, it is that they (Philip Morris) tried to use a company restructure to take advantage of the treaty.
They go on to add
In the present case, the Tribunal has found that the adoption of the Plain Packaging Measures was foreseeable well before the Claimant’s decision to restructure was taken (let alone implemented).
In light of the foregoing discussion, the Tribunal cannot but conclude that the initiation of this arbitration constitutes an abuse of rights.
This case highlights the dangers of such international treaties and although Philip Morris lost this time it was not for lack of trying, in fact they took extreme steps of restructuring their entire corporate structure just to be able to try and sue the Government,
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