The tobacco giant Philip Morris has launched legal action against the Australian government over the country's plans to strip company logos from cigarette packages and replace them with grisly images of cancerous mouths, sickly children and bulging, blinded eyes.
The government believes the rules will make the packages less attractive to smokers and turn Australia into the world's toughest country on tobacco advertising. Several cigarette makers have threatened lawsuits, arguing the move illegally diminishes the value of their trademarks. Philip Morris , producer of Virginia cigarettes and Marlboro Gold brand is the first to file a claim for compensation.
"We would anticipate that the compensation would amount to billions," said a Philip Morris spokeswoman, Anne Edwards.
The legislation, which will be introduced to parliament in July, would ban cigarette makers from printing their logos, promotional text or colourful images on packs. Brand names would instead be printed in small type and feature large health warnings and gruesome, full-colour images of the consequences of smoking. The law would be phased in over six months, starting in January 2012.
Hong Kong-based Philip Morris Asia Limited, which owns the Australian affiliate Philip Morris Limited, filed a notice of claim on Monday arguing the legislation violates a bilateral investment treaty between Australia and Hong Kong.
The tobacco company says the treaty protects companies' property, including intellectual property such as trademarks. The plain packaging would severely diminish the value of the company's trademark, Edwards said.
"Our brands are really one of the absolute key valuable assets that we have as a company. It's what helps us compete, it's what enables us to distinguish our products," she said. "This move ... would essentially amount to confiscation of our brand in Australia."
The government denied the proposal breaks any laws and said it would not back down.
"Our government is determined to take every step we can to reduce the harm by tobacco," the health minister, Nicola Roxon, said. "We won't be deterred by tobacco companies making threats or taking legal action."
The Australian prime minister, Julia Gillard, also brushed off Philip Morris's threats. "We are not going to be intimidated by big tobacco's tactics," she told the Australian Broadcasting Corporation.
The legal notice filed on Monday opens a three-month period of negotiation between the two sides. Philip Morris said if a "satisfactory outcome" was not achieved by the end of the three months, it would seek arbitration.
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