The Australia – Hong Kong Bilateral Investment Treaty

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The Australia – Hong Kong Bilateral Investment Treaty (BIT) was established in 1993 by the governments of Hong Kong and Australia.
The Treaty’s purpose was to create favourable conditions for greater investment and to promote economic cooperation, by providing reciprocal protection for investments made in one country by investors from the other. 1

Used in Attempts to Undermine Introduction of Plain Tobacco Packaging in Australia

In November 2011, Philip Morris Asia served the Australian government ‘a legal notice of arbitration’, claiming that Australia’s plain packaging legislation was in breach of the Australia-Hong Kong BIT.2
The tobacco company argued that plain packaging:

1. Amounted to unlawful expropriation of the company’s investments and valuable intellectual property without compensation (Article 6(1));

2. Failed to provide fair and equitable treatment to the company’s investments in Australia (Article 2(2));

3. Unreasonably impaired its investments in Australia (Article 2(2));

4. Failed to provide full protection and security for the company’s investments in Australia (Article 2(2));

5. Breached Australia’s international obligations in relation to the company’s investments (Article 2(2)) by violating The Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), the Paris Convention for the Protection of Industrial Property and the World Trade Organization Agreement on Technical Barriers to Trade (TBT).

On 18 December 2015, the Permanent Court of Arbitration (PCA) issued a unanimous decision that it had no jurisdiction to hear Philip Morris Asia’s claim.345
In July 2017, it was announced that the PCA had also ordered Philip Morris Asia to pay the Australian government’s incurred legal costs and an additional 1.5% interest.6
In March 2019, public information was made available in response to a series of freedom of information (FOI) requests lodged by Australian Members of Parliament, journalists and health advocates, revealing that the case had cost the Australian government close to AU$ 24 million (about $18.5 million) in legal defence and arbitration costs.7 8
The PCA ordered the tobacco company to cover only 50% of the Australian government defence costs and 75% of the arbitrator’s fees. As a result, “despite the tribunal’s finding of abuse of process committed by Philip Morris”, Australia is left to cover up to $12 million in legal fees for the investment treaty case.9
Covering such high legal fees can be challenging for countries, as happened in the case of Philip Morris vs the Government of Uruguay. In this case, the South-American country had to receive funding from Bloomberg Foundation to be able to afford the costly legal fees to defend their tobacco regulations.

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  1. Agreement between the Government of Hong Kong and the Government of Australia for the Promotion and Protection of Investments, The Government of the Hong Kong Special Administrative Region of the People’s Republic of China website, accessed July 2017
  2. Philip Morris Asia Files Lawsuit Against the Australian Government over Plain Packaging, Philip Morris Asia Limited News Release 21 November 2011, accessed April 2019
  3. J. Mather, Philip Morris loses case against Australia’s plain packaging law, Financial Review, 18 December 2015, accessed April 2019
  4. D. Hurst, Australia wins international legal battle with Philip Morris over plain packaging, The Guardian, 18 December 2015, accessed April 2019
  5. G. Hutchens, Australian government wins plain packaging case against Philip Morris Asia, The Sydney Morning Herald, 18 December 2015, accessed April 2019
  6. Permanent Court of Arbitration, PCA Case No. 2012-12: Final Award Regarding Costs, PCA website, 8 March 2017, accessed July 2017
  7. G. Hutchens, C. Knaus, Revealed: $39m cost of defending Australia’s tobacco plain packaging laws,The Guardian, 01 July 2018, accessed April 2019
  8. P. Ranald, When even winning is losing. The surprising cost of defeating Philip Morris over plain packaging, The Conversation, 26 March 2019, accessed March 2019
  9. J. Hepburn, Final costs details are released in Philip Morris v. Australia following request by IAReporter, IAReporter, 21 March 2019, accessed March 2019