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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