INTERNATIONAL ARBITRATION 1/3LY
PHILIP MORRIS V. AUSTRALIA – JURISDICTIONAL CHALLENGES IN FOREIGN INVESTMENT ARBITRATION
In November 2013, Philip Morris Asia (PM Asia) commenced arbitration proceedings against Australia under the 1993 Agreement between the Government of Australia and the Government of Hong Kong for the Promotion and Protection of Investments (Australia-Hong Kong BIT). In this article, we explore Australia’s objections to jurisdiction of PM Asia’s claims under the Australia-Hong Kong BIT ahead of the preliminary hearing on jurisdiction to be heard early next year. BACKGROUND TO THE DISPUTE The dispute arises from Australia’s enactment of the Tobacco Plain Packaging Act 2011 (Cth) (TPPA), which, as the title suggests, requires all cigarette packaging to be plain and without branding. Before the enactment of the TPPA, cigarette manufacturers in Australia packaged their cigarettes with their unique branding, including registered trademarks (although they were also required to display certain health warnings). PM Asia claims that its investments in Australia (which include its 100 per cent shareholding in Philip Morris (Australia) Limited (PM Australia), other subsidiaries, and intellectual property) are substantially affected by Australia’s measures to regulate the manner in which tobacco products are packaged under the TPPA. In its Notice of Arbitration dated 21 November 2011, PM Asia has asserted that the TPPA is “extraordinary and severe” and fundamentally alters PM Asia from “a branded to a commoditised business” 7 . PM Asia relies on the provisions of the Australia-Hong Kong BIT which prohibit expropriation 8 and unreasonable impairment 9 , as well as those which afford fair and equitable treatment 10 and full protection and security to foreign investments in Australia 11 . PM Asia also relies on an umbrella article in the BIT, which requires Australia to observe as a treaty obligation any other relevant obligation it may have in relation to PM Asia’s investments in Australia 12 . Professors Karl-Heinz Bockstiegel, Gabrielle Kaufmann-Kohler and Donald M. McRae have been appointed to the arbitral tribunal, which is administered by the Permanent Court of Arbitration. The arbitration is governed by the UNCITRAL Arbitration Rules 2010 (UNCITRAL Rules) and the seat of the arbitration is Singapore. 13 Most foreign investment arbitrations are referred to the International Centre for Settlement of Investment Disputes (ICSID) under the relevant BIT. However, Article 10 of the Australia-Hong Kong BIT specifies that the UNCITRAL Rules will govern any dispute which is referred to arbitration under the BIT. JURISDICTIONAL CHALLENGES In May 2014, the tribunal bifurcated the proceedings for the purposes of addressing three jurisdictional objections raised by Australia. A preliminary hearing on jurisdiction is scheduled to commence on 16 February 2015 (no further timetabling has been set down beyond the preliminary hearing). Generally, Australia’s objections are: • whether a dispute exists between the parties; • whether PM Asia is an “investor” for the purposes of the Australia-Hong Kong BIT; and • whether PM Asia has valid “investments” in Australia.
BETH CUBITT, TOM FRENCH, RUPERT COLDWELL & LUKE CARBON, PARTNER, SENIOR ASSOCIATE AND ASSOCIATES AT CLYDE & CO
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