Australian WTO win marks final victory for tobacco plain packaging law and public health

June 11, 2020: The World Trade Organisation appellate body decision against several countries that challenged Australia’s plain packaging law is the final victory in a ten-year battle against tobacco companies’ use of trade and investment law against public health.

The Australian law passed with bipartisan support in 2011. It was recommended by the World Health Organisation and designed to reduce the numbers of young people becoming new smokers. Research showed that young people were attracted to the glamorous images on the packaging, and that plain packaging could reduce the attraction.

The tobacco companies responded with a three-pronged strategy to obstruct the law. They claimed billions of dollars of compensation in the High Court, which found there was no case for compensation under Australian law and ordered the companies to pay all of the government’s legal costs.

The US Philip Morris company also took a case to an international tribunal using provisions in some trade and investment agreements that allow single foreign investors to sue governments for compensation over changes in law or policy (Investor-State Dispute Settlement or ISDS). The US company could not sue under the US-Australia FTA because that agreement had no ISDS clause. The company found a Hong Kong-Australia investment agreement containing ISDS, shifted some assets to Hong Kong, claimed to be a Hong Kong company and sued the Australian Government, claiming billions in compensation. It took over four years and millions in legal fees for the tribunal to decide in December 2015 that Philip Morris was not a Hong Kong company. Despite winning, the Australian government had to pay $12 million of the total of its $24 million in legal costs, which were not decided until 2017, and not published until 2019.

The tobacco companies also supported three countries to lodge a government-to-government dispute in 2012 to the WTO alleging that the law was a breach of WTO trade rules on intellectual property rights and technical barriers to trade. Australia won the first level of the dispute in 2018, which was then taken to the WTO appellate body. The final decision in favour of Australia was published on June 9, 2020.

This is the last decision of the WTO appellate body because the United States has blocked appointments as part of its ‘America first’ trade policy. However other WTO members have agreed to use an alternative dispute resolution system, so the system is not dead yet.

AFTINET has criticised the power dynamics in the WTO which is dominated by the largest players, lobbied by global corporations and needs fundamental changes. But we support the concept of a multilateral rules-based system that includes all governments, as it potentially gives more voice to the needs of smaller and low-income countries. This is preferable to bilateral trade wars based on might-is-right principles.

The tobacco cases reinforce our arguments that ISDS should be excluded from trade and investment agreements, and that we need a multilateral rules-based trade system that is consistent with public health, human rights, labour rights and environmental sustainability. Nearly all governments agreed to these principles through the Sustainable Development Goals (SDGs) in 2015, but they have not been integrated into WTO goals or practice. A blueprint for achieving these goals can be found in "A New Multilateralism for Shared Prosperity: Geneva Principles for a Green New Deal" published by the UN Conference on Trade and Development (UNCTAD).