Academic journal article Australian International Law Journal

Costs Awards by International Courts and Tribunals: Key Lessons from Philip Morris V. Australia

Academic journal article Australian International Law Journal

Costs Awards by International Courts and Tribunals: Key Lessons from Philip Morris V. Australia

Article excerpt

I Introduction

In 2017 at Singapore, a second and final award regarding costs was issued by an arbitral tribunal constituted pursuant to a 1993 Hong Kong-Australia investment treaty. Australia had been a respondent in arbitral proceedings conducted under the auspices of the Permanent Court of Arbitration (PCA) in accordance with Rules of Arbitration formulated by the United Nations Commission on International Trade Law, as revised in 2010 (the 2010 UNCITRAL Rules). The claimant, Philip Morris Asia Limited (PM Asia) was a limited liability company incorporated under Hong Kong law. PM Asia had commenced arbitration under a bilateral investment treaty challenging Australia's enactment and enforcement of legislation requiring all tobacco products manufactured and sold in Australia to be in plain packaging.

The costs award issued in Philip Morris Asia Limited (Hong Kong) v The Commonwealth of Australia (Philip Morris v Australia) is explained in Part 1 of this article. The background to the dispute, the parties' contentions and the tribunal's essential findings and conclusions are described. Part 2 reviews some of the key implications of this costs award in light of recent trends in international commercial arbitration and investment treaty arbitration as well as the established practice of significant international courts and arbitral institutions. Reference will be made to relevant provisions of national and international law. This article contends that, considered overall, the award in Philip Morris v Australia is broadly consistent with comparable precedents. In the particular circumstances of this case, an award of costs which followed the event and made in favour of the prevailing party was moderated by comparative success and the reasonableness of Australia's claimed costs.

II The Costs Award In Philip Morris v Australia

A. Background (1)

Australia's federal Parliament adopted the Tobacco Plain Packaging Act 2011 (Cth) and Tobacco Plain Packaging Regulations 2011 (Cth) to discourage the use of tobacco products and for related purposes. This measure sought to improve public health and give effect to Australia's obligations under the Framework Convention on Tobacco Control. (2) Australia had ratified this treaty in 2003. (3) The treaty requires State parties to adopt and implement effective measures concerning the packaging and labelling of tobacco products, including health warnings and other messages. (4) Each party must comprehensively ban all tobacco advertising, promotion and sponsorship in accordance with their constitution. (5) A suite of measures was proposed to give effect to these obligations, including plain packaging. (6) In 2009 a federal taskforce recommended that Australia mandate the sale of cigarettes in plain packaging and increase the size of graphic health warnings. (7) During April 2010 plain packaging measures were implemented. Australia's legislation prohibits the display on tobacco products and their packaging of all tobacco company logos, symbols and other images that may have the effect of advertising or promoting tobacco products. All tobacco packaging must have a dark olive brown matt finish, as well as display specific text and graphic health warnings.

PM Asia contended that these steps expropriated its Australian investments and breached specific commitments made by Australia under a bilateral investment treaty, being an Agreement between Hong Kong and Australia. (8) That Agreement by its preamble seeks to create favourable conditions for greater investment (9) by the investors (10) of one State into the area of the other. Australia and Hong Kong must not deprive investors from each other State of their investments or subject them to measures equivalent to deprivation, except under due legal process for a public purpose related to the host State's internal needs, on a nondiscriminatory basis, and accompanied by compensation. (11 ) Fair and equitable treatment must be accorded to investments and investor returns as well as their full protection and security. …

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