INTERNATIONAL ARBITRATION 1/3LY
PHIL IP MORRI S V. AUSTRAL I A – JURI SDI CT IONAL CHALLENGES IN FORE IGN INVESTMENT ARBI TRAT ION
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 fromAustralia’s enactment of the Tobacco Plain Packaging Act 2011 (Cth) (TPPA), which, as the title suggests, requires all cigarette packaging to be plain andwithout branding. Before the enactment of the TPPA, cigarettemanufacturers in Australia packaged their cigarettes with their unique branding, including registered trademarks (although theywere also required to display certain healthwarnings). PMAsia claims that its investments in Australia (which include its 100 per cent shareholding in PhilipMorris (Australia) Limited (PMAustralia), other subsidiaries, and intellectual property) are substantially affected by Australia’smeasures to regulate themanner inwhich tobacco products are packaged under the TPPA. In its Notice of Arbitration dated 21 November 2011, PMAsia has asserted that the TPPA is “extraordinary and severe” and fundamentally alters PMAsia from “a branded to a commoditised business” 7 . PMAsia 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 . PMAsia 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 PMAsia’s investments in Australia 12 . Professors Karl-Heinz Bockstiegel, Gabrielle Kaufmann-Kohler and DonaldM. 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 InMay 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 PMAsia is an “investor” for the purposes of the Australia-Hong Kong BIT; and • whether PMAsia has valid “investments” in Australia.
BETH CUBIT T, TOM FRENCH, RUPERT COLDWELL & LUKE C ARBON, PARTNER, SENIOR A SSOCIATE AND A SSOCIATES AT CLYDE & CO
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