Australia took a world first step last year in passing legislation mandating plain packaging of tobacco products. Now, while the Australian Government goes in to battle with tobacco companies over the legality of its actions, New Zealand makes its first move in the same direction.

The Australian regime requires all cigarettes, pipe tobacco and cigar products sold in Australia to be in plain olive-brown packets with branding, trade mark logos, colours and promotional text removed and only the plain printed brand name featured.

The New Zealand Government has agreed in principle to introduce a regime in line with Australia following a public consultation process to be carried out later this year.

In Australia the legislation has faced widespread opposition from tobacco companies. The Australian Government is currently involved in a High Court action with major tobacco companies who consider the legislation amounts to an appropriation of their property by the government without the compensation required by law.

If the New Zealand Government proceeds with plain packaging legislation, they are likely to face similar legal challenges from tobacco companies claiming an illegal confiscation of proprietary rights in their intellectual property.

However, New Zealand also has obligations under the Framework Convention on Tobacco Control which includes policies around packaging of tobacco products. Having committed to a goal for New Zealand to be smoke free by 2025, the sentiment is that the Government needs to take drastic measures to achieve this.

Nevertheless these obligations sit side by side with New Zealand's intellectual property obligations such as those imposed by World Trade Organisation treaties and other obligations under free trade agreements.

New Zealand considers itself to be an exemplary free trade citizen, a status that could be jeopardised by legal action at the World Trade Organisation, such as that initiated against Australia, if the decision is made to introduce similar plain packaging legislation.

New Zealand could also face multimillion dollar lawsuits undertaken by tobacco companies under free trade agreements. Investment chapters in free trade agreements allow companies to initiate lawsuits themselves against Governments on the grounds that the value or profitability of their investments are seriously affected by new policies introduced by the Government.

Phillip Morris is currently using such agreements to challenge the Australian tobacco legislation and while New Zealand has different agreements in place, it is likely to fall foul of the same fate especially in light of the proposed Trans-Pacific Partnership Agreement which New Zealand is due to ratify later this year and which would give those kinds of powers to US investors, providing a more direct pathway for the tobacco companies to sue.

Prime Minister John Key is nevertheless confident that the Government can proceed with plain packaging if they wish to do so on the basis of advice from Trade Ministers that there is nothing in current trade agreements which precludes New Zealand imposing plain packaging.

Nevertheless, there is no doubt that tobacco companies will fiercely push back against the legislation with every legal argument available to them to retain their rights in highly valued trade marks and branding.

Susan Jones, Head of Corporate and Regulatory Affairs at British American Tobacco New Zealand has voiced what is likely to be the shared attitude of the entire New Zealand tobacco industry which is that they "will take every action necessary to protect...intellectual property rights as would any other business faced with the removal of their brands".

Even if following the proposed consultation process plain packaging legislation is passed in New Zealand, the Australian experience demonstrates this will only be the beginning of the matter in terms of how successfully the legislation can be implemented.

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