Govt could be sued over plain tobacco packs

The Government may yet back away from plain packaging on tobacco as it faces a "reasonably high risk" of legal action that would cost millions of dollars in legal costs alone.

Associate Health Minister Tariana Turia yesterday released a discussion document on the Government's plan to strip branding off all tobacco packets. A regulatory impact statement on the plan revealed warnings of a possible "negative reputational impact" and compensation claims from disgruntled tobacco companies.

"If a legal challenge was mounted against New Zealand by a tobacco company in relation to alleged breaches of international investment agreements, the remedy sought would include payment of compensation," Health Ministry officials said.

A figure was not put on any potential compensation claim but it would be based on the loss in value of the company's investments, including its trademarks.

British American Tobacco, Imperial Tobacco and Philip Morris have all filed action against the Australian Government for its plain packaging policy, due to take effect in October. The claims could run to billions of dollars if successful. The Dominican Republic last week joined Ukraine and Honduras in action against Australia via the World Trade Organisation.

As in Australia, there was a "reasonably high risk" New Zealand would be forced to defend itself against legal action, which might cost $3m-$6m - on top of $1.5m-$2m to defend a WTO case, officials said. But they still recommended following Australia's lead, partly because it would restore the trans-Tasman mutual recognition arrangements. A temporary exemption for tobacco from the arrangements expires in October next year and would need to become permanent if New Zealand did not follow Australia's lead on plain packaging.

Philip Morris corporate affairs manager Christopher Bishop yesterday said the company would be making a submission on the Government's proposal. Plain packaging "violated numerous international laws and trade treaties", and would "trigger a variety of adverse consequences", he said.

Prime Minister John Key said there were "lots of things to consider" before plain packaging was progressed. "We're likely to be cautious about what we do but, nevertheless, it's possible that we'll do it," he said.

New Zealand is among a group of countries to have objected through the WTO to a proposal from Thailand for mandatory warning labels on alcohol, including wine. Some believe that if New Zealand forced plain packaging on cigarettes it would have to accept similar restrictions on alcohol.

Submissions on the paper close on October 5 and Cabinet is expected to decide on the proposal in November.

The Dominion Post