December 1, 2011 / 6:59 AM / 9 years ago

BAT challenges Australia plain pack tobacco laws

CANBERRA (Reuters) - British American Tobacco (BATS.L) on Thursday became the second tobacco giant to launch legal action against Australian laws forcing tobacco products to be sold in drab, plain packaging from next year, following the lead of Philip Morris (PM.N).

A man smokes as he passes the British American Tobacco offices in London May 6, 2009. REUTERS/Luke MacGregor

The laws, cleared by parliament, are being watched closely by governments considering similar moves in Europe, Canada and New Zealand. They have angered tobacco firms who fear they may set a global precedent and infringe on trademark rights.

BAT, lodging papers with Australia’s High Court in Sydney, said the tough world-first laws should be struck down because the government was infringing on the company’s intellectual property and branding without proper compensation.

“If the same type of legislation was introduced for a beer brewing company or a fast food chain, then they’d be taking the government to court and we’re no different,” the company’s Australian spokesman Scott McIntyre said.

McIntyre said the BAT proceedings in the High Court, Australia’s supreme judicial body, would be a test case on the validity of the plain pack laws to two leading brands in Australia — Winfield and Dunhill cigarettes.

A hearing is likely next year.

“If we’re successful, the decision should apply to other property and brands sold by BAT,” he said.

Under the law, cigarettes, pipe tobacco and cigars have to be sold in olive green packs free from branding, but carrying graphic health warnings, from December 2012.

Tobacco export countries including Nicaragua, Dominican Republic and Ukraine have warned they may also challenge the laws under global trade rules. Philip Morris said it had launched international legal action that could trigger compensation claims worth billions of dollars.

Philip Morris launched international action last month through its office in Hong Kong, lodging a notice of arbitration under Australia’s Bilateral Investment Treaty with Hong Kong.

The statement of claim to the court said BAT was “entitled to use the Trade Marks for tobacco products and the packaging of tobacco products in Australia.”

“Obviously we’d rather not be in a situation where we’re forced to take the government to court, but unfortunately for taxpayers the government has taken us down the legal path,” McIntyre said.

Australian Health Minister Nicola Roxon issued regulations on Thursday for the laws and said tobacco companies had a year to prepare for them to come into force.

“We know that packaging remains one of the last powerful marketing tools for tobacco companies to recruit new smokers to their deadly products, but now cigarette packets will only serve as a stark reminder of the devastating health effects of smoking,” Roxon said in a statement.

In 2005, the World Health Organization urged countries to consider plain packaging, estimating more than 1 billion people are regular smokers, 80 percent of them in poor countries.

The Himalayan nation of Bhutan banned the sale of tobacco outright earlier this year.

Industry analysts say tobacco companies are worried that plain packaging could spread to important emerging markets like Brazil, Russia and Indonesia, and threaten growth there.

Legal experts have predicted both legal and WTO challenges will fail because intellectual property rights agreements give governments the right to pass laws to protect public health.

Australia wants to cut the number of people who smoke from around 15 percent of the population to 10 percent by 2018. Health authorities say smoking kills 15,000 Australians each year, with social and health costs of around $32 billion (20 billion pound).

Australia’s tobacco market generated total revenues of around A$10 billion in 2009, up from A$8.3 billion in 2008, although smoking generally has been in decline. Around 22 billion cigarettes are sold in the country each year.

Editing by Lincoln Feast and Paul Tait

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