BAT Vows Court Battle With Australia Over ‘Unconstitutional’ Cigarette Law

British American Tobacco Plc (BATS) said Australia’s cigarette plain-packaging law is unconstitutional and if enacted, the company will sue in the nation’s top court in a bid to repeal it.

The Australian Senate today passed the law and the lower house of parliament will now vote on amendments to the bill, which is to be implemented from December 2012, according to a statement from Australian Health Minister Nicola Roxon.

The country is the first to ban logos on cigarette packaging. Cigarettes will have to be sold in dark brown packages, with no company logos and the same font for all brands, according to a government statement.

“It is unconstitutional for the federal government to remove a legal company’s valuable property without compensation,” London-based BAT’s Australian unit said in an e- mailed statement before the Senate vote referring to the company’s trademarks. The cigarette maker said it “confirmed it will commence proceedings in the High Court against the federal government” should the legislation pass the Senate.

The Australian government announced the plan to ban branding on cigarette packs in April last year, along with a 25 percent increase in tobacco taxes and an A$85 million ($86 million) advertising campaign to combat smoking.

Roxon Responds

Smoking kills 15,000 Australians each year and costs the nation about A$31 billion annually in health and workplace expenses, according to the government. With 15.1 percent of the population aged 14 or over smoking daily, it is the country’s top drug and preventable health issue, the government said.

“We won’t be bullied by tobacco companies threatening litigation and we are prepared to fight them if they do,” Roxon said in Melbourne today.

Cigarette makers including BAT and Philip Morris International Inc., the world’s largest publicly traded tobacco company, have taken legal action against the Australian move.

Philip Morris said in June that it served the Australian government with a notice of claim stating its intention to pursue its case in international arbitration. The Australian proposal violates a treaty with Hong Kong and may cause billions of dollars in damages, the maker of Marlboro cigarettes said.

“No other country in the world has implemented plain packaging and there are many good reasons for that,” BAT Australia said in today’s statement. “It will make criminal gangs countless dollars as they reproduce plain-packaged cigarettes with ease.”

Cigarette packs in Australia already contain graphic warnings including pictures of diseased lungs that cover half the back of a package.

In the U.S., a federal judge on Nov. 7 blocked rules from taking effect that would order tobacco companies to display graphic health warnings, saying the move may violate their rights to free speech.

To contact the reporter on this story: Joe Schneider in Sydney at jschneider5@bloomberg.net

To contact the editors responsible for this story: Douglas Wong at dwong19@bloomberg.net

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