By James Grubel
CANBERRA (Reuters) - Australia's highest court will rule on the world's toughest anti-cigarette marketing laws on Wednesday in what has become a major test case for global tobacco companies in their fight against restrictions on the sale of their products.
Australia's laws will force tobacco companies to remove all branding from cigarette packets from this December, and allow tobacco to be sold only in plain olive-colored packages which carry graphic health warnings.
The laws follow World Health Organisation recommendations, and are being closely watched by Britain, Norway, New Zealand, Canada and India, which are considering similar measures to help fight smoking.
Tobacco giants British American Tobacco, Britain's Imperial Tobacco, Philip Morris and Japan Tobacco challenged the laws in Australia's High Court, claiming the rules were unconstitutional because they effectively extinguished their intellectual property rights.
"My prediction is that the government will win, in light of past precedent and how the arguments proceeded," intellectual property law expert Matthew Rimmer, from the Australian National University, told Reuters.
"Other countries, such as the United Kingdom and potentially Norway and India, will be looking to see if the threats of the tobacco industry are merely bluster, or if they have some force to them," he said.
A win for the government would be a blow to tobacco companies and would end any domestic challenges to plain packaging. All political parties in Australia support the plain packaging laws, passed by parliament in November, so there is little hope a future government would overturn the laws.
The plain packaging rules do, however, still face a number of challenges under global trade rules.
Australia is already fighting trade complaints in the World Trade Organization (WTO) from three nations; Ukraine, Honduras and the Dominican Republic, who claim the laws unfairly restrict trade, although their trade with Australia is negligible.
Tobacco companies have also signaled a potential challenge under a bilateral Australia-Hong Kong investment agreement.
Rimmer said tobacco companies could also use a proposed new Trans Pacific Partnership (TPP) trade deal to mount a further challenge if the TPP agreement includes controversial investor-state dispute settlement provisions.
Australia has strongly opposed lobbying by big business to include investor-state dispute settlement provisions in the TPP because that would undermine the ability of a government to pass domestic laws.
Rimmer said a surprise tobacco company win could force the government to either re-jig the laws so they comply with Australia's constitution, or to compensate tobacco companies for the loss of any trademark marketing rights.
He said the High Court challenge rested on tobacco company claims that the government has effectively taken their intellectual property and trademarks without paying compensation.
The case hinges on rights under the Australian constitution that say the government acquisition of property must be on just terms.
But the government argued it has not acquired any property, leaving the tobacco companies in ownership of the trademarks, and that the laws were needed to protect public health.
The plain packaging laws have been championed by Australia's Attorney-General Nicola Roxon, who was previously health minister and whose father was a smoker who died of oesophageal cancer when she was 10.
Australia wants to cut the number of smokers from around 15 percent of the population to 10 percent by 2018. Authorities say smoking kills around 15,000 Australians a year.
The World Health Organisation estimates more than 1 billion people around the world are regular smokers, with 80 percent in low and middle income countries.
Industry analysts are worried plain packaging laws could spread to emerging markets like Brazil, Russia and Indonesia and threaten sales growth.
(Editing by Raju Gopalakrishnan)