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PM Key says tobacco giant Philip Morris can't sue NZ under free trade rules, in the way it is threatening to sue Aussie govt

PM Key says tobacco giant Philip Morris can't sue NZ under free trade rules, in the way it is threatening to sue Aussie govt

Tobacco giant Philip Morris, which has signalled it may sue the Australian government for compensation for lost earnings due a law change, will not be able to carry out a similar action against the New Zealand government under free trade agreement rules, Prime Minister John Key says.

Under an Australian bilateral investment treaty with Hong Kong, Philip Morris is threatening to sue the Australian government for compensation for lost earnings if the government goes ahead with a law change that will force plain packaging on cigarette boxes. See more at Reuters here.

New Zealand's government is considering similar legislation, as are the Canadian and British governments. They are all watching the case closely, which, if a resolution is not worked out in three months, could end up with the private firm suing the Australian government for billions of dollars.

“My understanding is it’s excluded – that risk is excluded in New Zealand because we specifically in putting together our FTA protected our rights in terms of public health in New Zealand,” Key told reporters at his post cabinet press conference in Wellington Monday afternoon.

“We don’t believe that there will be frivolous claims taken – that’s not our expectation – and when we negotiate FTAs we look closely at those," Key said.

“If that same case happened in New Zealand, on the best advice that I’ve had, actually we wouldn’t be able to be sued, because we will be protecting the public interest in terms of health.”

But Key could not rule out a scenario where the New Zealand government could be sued by a private corporation under a free trade deal.

“I can’t rule that out because there [are] a million permutations and combinations there. Someone can always take an action against a government, but whether they’re successful that’s a different issue.”

New Zealand is one of nine countries negotiating with the United States on the US joining the Trans Pacific Partnership free trade agreement. However concerns have been raised that US negotiators would pressure for clauses where US firms would be able to sue sovereign nations under free trade rules for the loss of earnings due to law changes. It is also feared that private companies may be able to force governments to alter legislation to free up some sectors of the economy, with those fears in New Zealand centred around Fonterra and Pharmac.

Trade Minister Tim Groser has said drug buying agency Pharmac's fundamentals are not on the negotiating table, although he will not say publically what the government considers those fundamentals to be. He will not rule out changes will be made to Pharmac due to the free trade negotiations. See more here.

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11 Comments

Based on the super transparent negotiations...sounds like rubbish to me.

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Free trade rules? Then its not free trade if it has rules....

Cue Bono?

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Depends whether you see a philosophical difference between freedom and anarchy.  The latter is great news for the big and strong; the former requires the big and strong to accept some constraints, so as to protect freedom for the small and weak.

Free trade "rules" are basically countries agreeing not to constrain trade or to use it as an economic weapon.  As such the main beneficiaries are smaller countries who don't have the economic musclepower to win trade wars.

The rule that Philip Morris is invoking is in principle a sound one - if you are going to invest in a country, it's reasonable to expect that that country won't change the rules in such a way as to destroy the value of your investment.  There would usually be a "carve-out" or an exception for regulation for legitimate public purposes, and if the Australians don't have one for the protection of public health - then the more fools they. 

However, that's not to say that a host state can impose any regulation, not matter how arbitrary, disproportionate or blatantly designed to hit foreign-owned companies only (eg "Tobacco companies with the initials PM must use warning labels") - and then simply stick a notice saying "public health" on it to make it all right. That's probably what Philip Morris are testing here. You want to retain the absolute right to treat foreign investment however you like - Fine, don't sign any bilateral investment treaties. But don't be surprised if foreign investors then decide to take their money elsewhere.

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Depends whether you see a philosophical difference between freedom and anarchy.  The latter is great news for the big and strong; the former requires the big and strong to accept some constraints, so as to protect freedom for the small and weak. 

Hows that working out lately?

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Not sure what you're getting at, sorry

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...the former requires the big and strong to accept some constraints, so as to protect freedom for the small and weak. 

Hows those constraints and free trade agreements working out for the small and weak in the past 30-40 years ?

 

 

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Far short of perfect, of course, but better than they would have done with no rules at all. 

As witness I submit the NZ-Australia apples dispute. Yes, it took ages and consumed a lot of resource for NZ to win its case at the World Trade Organisation. But if it had not been for the WTO and its rules, NZ would not have been able to do anything at all about Australia's groundless exclusion of its apples.

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Yep fantastic result only took 158 overpaid gits 8 years to work it out....lol....

But really in that judgement Cue Bono?

Id say the 158 overpaid unelected gits did all right for starters...

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“If that same case happened in New Zealand, on the best advice that I’ve had, actually we wouldn’t be able to be sued, because we will be protecting the public interest in terms of health.”

ha ha hahahh............

good luck with that one....So depending on the whim of the day it could include - 

MacDonalds/ KFC,

Cars are bad for health - out they go.

Alcohol - can't have that.

Kronic – can’t allow that (besides the breweries hate it). 

Yep…whatever you like could be considered as bad for health…..prepare for the tobacco Companies to run the same line… they hardly have a history of rolling over.....

 

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Surely the gov could just make tabacco illegal, which would totally the total sale of it.

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Another black market commodity! Excellent I see a unintended consequences...

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