Plain packaging risks lawsuits

Otago Daily Times, Dunedin

Plain packaging risks lawsuits

By Simon Cunliffe

Opinion | Smoko

16 May 2012

Smoking is bad for our health.

Smoking is detrimental to our economic well-being - smoking-related conditions and diseases cost the health service in this country millions and millions of dollars each year. But moves to reduce or stop smoking in this country could cost us just as much if not more.

This is a prospect that potentially lies in wait should New Zealand sign up, in its entirety, to the Trans Pacific Partnership (TPP), a trade and investment treaty currently being negotiated between this country, Australia, the United States and several Asian nations.

And should we believe this is hype and could never happen, we only have to look across the ditch. The Australian Government is being sued, potentially for billions of dollars, by big tobacco companies including Philip Morris and British American Tobacco, for introducing plain packaging on cigarette packets in an attempt to discourage the habit, particularly among the young.

The tobacco companies are claiming this amounts to an appropriation of their intellectual property and in case we might think that this expensive little spat pertains to some peculiarity in Australia’s legislative framework, here’s a warning shot across our bows.

Last month, as reported in The New Zealand Herald, Susan Jones, head of corporate and regulatory affairs at British America Tobacco, said the company would take "every action necessary" in this country to protect its intellectual property rights "as would any other business faced with the removal of their brands".

"A government prohibition on a company’s right to use their own intellectual property constitutes property removal".

The rub is, that under certain clauses in the mooted TPP, the question of whether the government of the day had the right to take such actions would not even be decided in the courts of New Zealand, rather in an international tribunal set up under the auspices of the TPP.

Last week, a letter signed by more than 100 eminent international judges, lawyers and academics emerged with stark warning against the acceptance, holus bolus, of the TPP. Many are not necessarily against the TPP per se; rather their specific concerns relate to the foreign investor protections and Investor-State clauses in such agreements.

It is under these clauses that corporations can, and have, sued governments for enacting legislation they consider to undermine their business. The signatories base some of their concerns on the experience of governments under existing bilateral investment treaties (BITs) and free trade agreements (FTAs).

These clauses date back to the 1950s and had their origins in the protections built into early trade agreements should unstable governments, for example, expropriate land or factories - "real" property - in which foreign companies had invested. There is good sense in this.

But as the letter points out, claims under BITs and FTAs have in the last decade or so increased exponentially.

"Over $US675 million [$NZ867 million] has been paid out under US BITs and FTAs alone, 70% of which pertained to governments’ natural resource and environmental policies, not to traditional expropriations." Under a variety of free trade and investment treaties, such tribunals have not only awarded huge damages in favour of corporations against governments for policies undertaken on such grounds, but have also demanded that governments countermand the decisions of their own highest courts.

In a recent instance, an order by a tribunal ruling in a case involving oil giant Chevron in Ecuador ordered the government to stop the enforcement of its own appeal court ruling - thus violating the constitutional convention of separation of powers.

Looking back at the history of such clauses in similar agreements there are numerous instances that would seem counter-intuitive - and just plain wrong - to most ordinary people: for example, under the North American Free Trade Agreement, the Canadian government was sued and settled a case involving MMT, a nerve toxin, by paying US-based Ethyl Corporation $US13 million in compensation; Canada’s Methanex Corporation took a case for $US970 million against a Californian ban on MTRE, a chemical thought to be cancer causing and which was leaching into local groundwater.

And so on.

Critics of Investor-State clauses in the TPP suggest, if included and signed, the right to sue in New Zealand will extend beyond simple property rights to include financial instruments, mining concessions, intellectual property and government actions. Defenders suggest appropriate exemptions can be built in to the agreements. Australia does not believe so and will not accede to such clauses and their dispute resolution mechanisms.

If New Zealand and its negotiators have any sense, they will act likewise.

Not to do so risks ceding the authority of our courts, and thus of our domestic laws, to international tribunals with a seemingly unhealthy interest in the financial wellbeing of multinational corporations.

 Simon Cunliffe is a Wellington writer.