Scottish Labour MEP David Martin today welcomed the news that Philip Morris has lost its case to sue the Australian government for cigarette plain packaging legislation. The case was brought under the investor to state dispute settlement (ISDS) mechanism which allows investors to sue foreign governments if they believe the terms of an investment agreement have been violated.
David Martin, who is the Socialist and Democrat Group spokesperson for international trade in the European Parliament said:
"This is long overdue but a welcome decision. Phillip Morris should never have been in a position to be able to challenge legitimate health legislation. That is simply not acceptable public policy.
"It is very good news that the case has been dismissed, and a strong message that the right of governments to regulate in the public interest always comes first."
Philip Morris took the case against Australia's plain packaging legislation through its subsidiary based in Hong Kong, taking advantage of provisions in a bilateral investment treaty between Australia and Hong Kong. The case was dismissed as arbitrators ruled they did not have the jurisdiction to hear the case.
David Martin added:
"The case also highlights some important developments in international investment arbitration. Labour MEPs are against ISDS precisely because it has allowed companies to take advantage in this way.
"So-called 'treaty shopping' where companies use subsidiaries to launch cases under their preferred investment agreement must be completely banned. It is welcome news that the Philip Morris case was thrown out on this basis, but we must ensure it is a watertight provision to prevent similar cases.
"The case also highlights the importance of the 'loser pays' principle to prevent future frivolous cases being launched by companies trying their luck. This makes a mockery of provisions which are intended for cases of legitimate discrimination by foreign governments.
"Although this is good news, the details of the decision are not public because of confidentiality clauses in the investment agreement. This is not acceptable when public money and policies are involved.
"Labour MEPs and our sister parties in the Socialist and Democrat Group in the European Parliament have been clear that we do not want ISDS in our trade and investment agreements. We are pleased the European Commission has started to listen.
"Any future investment protection mechanisms, including the new Investment Court System proposed by the Commission, must be a fully transparent public court where legitimate public policy decisions are fully protected, treaty shopping is forbidden and companies are prohibited from launching cases simply because their profits may be affected.
"Investment arbitration is a last resort for genuine discrimination. There must be no room for companies to take advantage of this"