Australia's Win is ISDS's Gain

Christmas has come early for promoters of tobacco control, along with tobacco giant Philip Morris’s lawsuit against Australian plain product packaging legislation ruled invalid. Australia will not have to pay any problems to Philip Morris. Indeed, it is likely that there will be an order for Philip Morris in order to reimburse the Australian government’s costs in defending this particular suit.

This outcome is also an early Christmas present for defenders of much maligned buyer state dispute settlement (ISDS). The Philip Morris case had become the bogeyman of ISDS. It was held up as a reason to object to ISDS clauses in free trade agreements.

This is understandable. A tobacco company sued a government for enacting laws designed to improve public wellness. They used a little understood mechanism – ISDS – to sue, even with lost in Australian legal courts. International trade law conflicts rarely have such a clear-cut bad guy. It is natural to distrust the mechanisms they trusted. However, this victory – in the first ISDS claim brought against Australia – ought to allay those concerns.

The award

This determination is a victory for common sense. Philip Morris argued that the plain packaging legislation – which helps prevent them from using their images on the packages of their cigarettes and in advertising – was “expropriatory”. That’s it was akin to the government appropriating their assets without payment. Further, Philip Morris argued they were entitled to compensation for lost profits. I have previously noted that this position is nonsense. It has no basis in law. Philip Morris were seeking suspension from the plain packaging legislation and compensation of “an amount to be quantified but of the order of billions of Australian dollars.”] They will get nothing.

In a typically truculent press release, Philip Morris continued its attack on plain packaging. Its grandiose claim that the actual “real point” of the dispute went to “the essence of the guideline of law” is correct; though possibly not in the way they plan.

Ultimately, this dispute turned on a question of jurisdiction. Australia contended that Philip Morris was not entitled to bring ISDS proceedings. It argued that Philip Morris had improperly made a international “investment” to avail itself of those proceedings. It also argued which Philip Morris misrepresented the nature of its expense to the Australian government. Additional Australia argued that the situation constituted an abuse of correct. For these reasons, Australia argued that the case could not proceed. In essence, Australia was asking the tribunal to find that Philip Morris had – to use a colloquialism – attempted to “game” the machine. That jurisdictional argument succeeded.

While the actual specifics are not yet published, it is clear that the tribunal offers rejected Philip Morris’ capacity to bring this suit. Multinational companies are unable to use free trade contracts and investment treaties to do an end run around the proper procedures. This is entirely in keeping with the essence of the rule of law.

Myth busting

This case exposes most of the errors opponents of ISDS proceedings make. Claims that this kind of proceedings are secret are simply untrue. Large swathes of this challenge are available online, just as court procedures in Australia would be. The equivalent ISDS clause contained in the Trans-Pacific Partnership agreement goes further. It has very far-reaching and particular provisions requiring disputes to be resolved transparently.

Equally, we can now demonstrate that these cases proceed according to fairly standard legal procedures. Claims that such tribunals aren’t bound by precedent and therefore they aren’t bound to follow the ordinary lawful process are incorrect. That claim discloses a misunderstanding from the nature of precedent.

Many other areas do not share Australia’s technical rules of precedent – the “stare decisis” rule. Yet they still make predictable choices. Civil law countries utilize “jurisprudence constante”. This rule strikes a balance between the need for predictable decisions and the civil law insistence that just the legislature may make law. Worldwide law must accommodate a plurality of legal systems. Australia’s approach to legal reasoning is not the last word in rights. Predictable, coherent legal choices are possible even without strict application of stare decisis.

I previously called for a sober analysis of the costs and benefits of ISDS conditions. Australia’s victory over Philip Morris must take much heat out of this debate.

The bogeyman has been slain.

Australia’s plain product packaging win over Philip Morris should take the heat off ISDS is republished with permission in the Conversation