New Zealand's government has confirmed it intends to introduce plain packaging laws comparable to Australia's Tobacco Plain Packaging Act – but not until it sees how Australia's resulting international trade disputes play

Since 1 December 2012, all cigarettes legally sold in Australia have been in drab, dark brown packaging, with no logos or other branding apart from the name of the product in plain black lettering. The legislation is a move to lower smoking rates, in particular to prevent new smokers from picking up the habit. However cigarette companies have argued strongly against the plain packaging laws that severely curtail the use of their trade marks. Evidence as to the effectiveness of plain packaging is so far scarce, since Australia is the first country in the world to introduce such measures.

The Australian High Court decided in November last year that the tobacco companies' constitutional attack on the Tobacco Plain Packaging Act 2011, was unfounded, but World Trade Organization challenges continue. The High Court's decision was a rejection of the argument that the government, in banning the use of the companies' IP, was attempting to unjustifiably acquire their property rights.

WTO proceedings

Three World Trade Organization member states - Ukraine, Honduras and the Dominican Republic - have also brought WTO proceedings against Australia, claiming contravention of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the General Agreement on Trade Tariffs (GATT) and the Technical Barriers to Trade Agreement (TBT). Hong Kong based Philip Morris Asia, parent company of Philip Morris Australia, has also taken action against the Australian government under the 1993 Australia-Hong Kong bilateral investment treaty.

These kinds of international arbitration proceedings can take years to resolve, at a cost of several million. In an assessment paper on the impact of plain packaging released in July 2012, the Health Ministry estimated New Zealand could face legal costs of US$2.5m to US$5m for "international investment arbitration" and a further US$1.25m to US$1.7m to defend a WTO case.

New Zealand's plan

In late February Associate Health Minister Tariana Turia and Prime Minister John Key announced New Zealand's firm intention to proceed with plain packaging, and confirmed the estimated cost of defending international disputes would be up to US$5 million. The government says it intends to wait for the results of Australia's disputes, but is confident plain packaging will not violate New Zealand's international trade obligations.

Since New Zealand does not have a supreme constitution comparable to Australia or the United States, the government would not be vulnerable to the same kind of lawsuit the Australian High Court decided last year. The government has promised further consultation before legislation is introduced - this will include Parliamentary consultation to ensure the law complies with New Zealand's constitutional framework, including the Bill of Rights Act 1990. However, as a member of the WTO New Zealand is subject to rules regarding free trade, which limit the restrictions and conditions that can be placed on the sale of goods here.

The eventual outcome of Australia's WTO proceedings would give an indication of the likely results if New Zealand was to face similar arbitrations, but this is likely to be at least 18 months away. The dispute under Australia's bilateral treaty with Hong-Kong could take up to 5 years, however since this agreement does not include New Zealand, it is less relevant to the government's decision. However, if the as-yet-unpublished Trans-Tasman Partnership Agreement is concluded in that time, it may present another set of international trade obligations that must be considered.

This article originally appeared in The INTA Bulletin, 1 April 2013.