The Guardian | 9 October 2016
TPP trade deal: plain packaging challenge triggered ’hysteria’, lawyer tells MPs
by Katharine Murphy
The legal counsel to tobacco giant Philip Morris has told a parliamentary committee that people have responded hysterically to a landmark legal case challenging Australia’s plain packaging laws.
Philip Morris, in the first investor-state dispute ever brought against Australia, used a 1993 investment agreement between Australia and Hong Kong to challenge the then Labor government’s plain packaging laws.
The case was thrown out in December 2015 when an international tribunal issued a decision that it had no jurisdiction to hear Philip Morris Asia’s claim.
The action was considered an important test case in investor-state litigation and it prompted the New Zealand government to delay implementation of its own plan packaging proposal until the decision had been handed down.
The federal parliament’s treaties committee has been conducting an inquiry into the Trans-Pacific Partnership, and has heard evidence from Sam Luttrell, a lawyer at the Perth-based legal firm Clifford Chance – the largest legal practice in Australia dealing with investor-state dispute settlement cases.
Luttrell confirmed to the committee during a recent hearing about the TPP that he was counsel for Philip Morris in the landmark plain packaging case, which he said had been mightily overblown.
“I was counsel for Philip Morris, and I would just like to say, picking up on something I said earlier, that I think there was a good deal of hysteria around the Philip Morris case,” he told the committee.
“There was a very intense and often heated dialogue surrounding that case whilst it was on foot, and then you heard a deafening silence when Australia saw that claim off — and saw that claim off on a preliminary basis.”
The American-led trade pact, the TPP, contains an investor-state dispute settlement (ISDS) clause, and such clauses are an increasingly controversial feature of international trade agreements.
ISDS clauses give overseas investors powers to sue the Australian government if legislation is introduced harming their investments.
The Turnbull government is a strong supporter of the TPP and the prime minister used a recent trip to the United States to urge the US Congress to ratify the trade pact because it underscores America’s strategic commitment to the rule of law in the Asia-Pacific region.
China is not a party to the TPP, and is pushing a rival trade pact, through Asean – the regional comprehensive partnership.
Barack Obama is making what is being characterised in the US as last-ditch efforts to persuade Congress to support the controversial trade deal. Both presidential hopefuls Donald Trump and Hillary Clinton say they oppose it.
But some analysts believe the trade deal could be ratified during the so-called lame-duck session – the period between the US election result in November and the inauguration in January.
Both Labor and the Greens opposed ISDS clauses in trade agreements.
Philip Morris’ counsel told parliament’s treaties committee “a country like Australia, with a tradition of reliance on exports, a history of foreign investment in the Asia-Pacific and a future in which its highly mobile, well-educated populace is increasingly engaged in cross-border services, has everything to gain from participating in initiatives like the TPP.”
“But still there has been a heated debate in Australia around the TPP’s investment rules, in particular the ISDS mechanism of the treaty,” Luttrell said.
“Much of what has been said in this debate is and has been simply, in my view, an overreaction to a single case, being the claim by Philip Morris against Australia, which Australia successfully knocked out on a preliminary basis.”
Luttrell was asked during the hearing by ALP backbencher Josh Wilson for his view on regulatory chill – a situation that develops when countries second-guess themselves or do not go down a particular regulatory path out of fear that policy making would trigger an ISDS liability.
The lawyer said the evidence for regulatory chill was “largely anecdotal at present, but there have been cases where states have stayed their legislative hand when faced with investor claims”.
“Whether they should or should not have done so is a question of whether the regulation was good or bad. There is, I think, in the regulatory chill thesis an unwritten assumption that regulation is good,” Luttrell said.
“I would say, and it is very much my experience, that regulations often deserve to be chilled.”
“I absolutely disagree, and even the proponents of ISD appearing before the committee have tended to accept there’s no value in or need for ISD provisions between us and countries like the US, Japan, and Canada,” the ALP backbencher said.
Wilson contended Australia had already endured a “brush with death” during the landmark Philip Morris case.
“Phillip Morris had a serious go at killing off an important health reform in Australia and succeeded in delaying a similar reform in NZ for three years,” he said.
“In my view ISD represents an unconscionable risk and at the very least should be excluded between Australia and the US, Japan, and Canada, just as we have already excluded it between Australia and New Zealand.”