Australia may lead the world, but the world can’t breathe freely yet.

It is rare for the world to be watching when the High Court of Australia makes a decision. But so it was yesterday with British American Tobacco Australasia Limited & Ors v Commonwealth, the so-called ‘plain packaging’ case. The case concerned a challenge by several multinational cigarette companies (aka ‘Big Tobacco’) to the federal Tobacco Plain Packaging Act 2011, due to come into effect in December this year. The Act prohibits, among other things, the use of logos and trademarks on cigarette packets, and requires in their place health warnings on a background described as ‘drab dark brown’, and the printing of brand names in a small, generic font. The idea is to make packets as unglamorous, indeed disgusting, as possible and thus reduce smoking by repelling purchasers. Several other countries, apparently, are contemplating similar legislation; they watched for confirmation that this world-first initiative would survive. The decision, upholding the Act in its entirety and ordering the plaintiffs to pay costs, was greeted with resounding applause.
The international interest, no doubt, is encouraging for the Australian government and inspiring for anti-smoking campaigners. Still, it is intriguing, even faintly nonsensical, for other countries to take heart from this decision. The BATA challenge was mounted on numerous grounds, but revolved, essentially, around the particular constitutional claim that the Act compulsorily acquires the companies’ intellectual property without proper compensation. Section 51 (xxxi) of the Australian Constitution (the provision that starred, albeit misleadingly, in the iconic 1997 comedy ‘The Castle’) empowers the Commonwealth to acquire property, but requires ‘just terms’ in return. There may well be counterparts in the laws and constitutions of other countries, but existing Australian case law is unlikely to provide a trans-national precedent, and this latest case is unlikely to alter this.
Fascinating and frustrating at the same time, the Court only handed down its Orders yesterday, telling us that ‘at least a majority’ had found the law to be constitutionally valid (is someone still making up his or her mind?) and reserving the reasons for a later date. Analysis of the reasoning must therefore be speculative. But while we don’t know what the Court will say, we have some idea of what it will not say. Australia, it seems clear, has resisted the invitation to go down the ‘regulatory takings’ road that the United States has pioneered and other countries have followed.
The Fifth Amendment of the U.S. Constitution (upon which Australia’s section 51 (xxxi) was more or less modelled) requires that ‘just compensation’ must be given when private property is taken for public use. This provision evolved in the twentieth century to apply not only to actual acquisition, but also to the regulation of property that goes ‘too far’, not merely impairing value or utility, but depriving the owner of the property’s use or economic value, or thwarting ‘investment backed expectations’. Zoning and land use laws were the seedbed of the doctrine in the 1920s, and have generated the greatest challenges. The Supreme Court has not been consistent in its approach, however, and it has looked to the degree to which the public interest is served by the relevant law against the extent of the regulation. This of course, is the rub in the present case. There can be no doubt that the cigarette companies’ economic value and investment backed expectations will be affected by the Act, and that such an argument would be central if a similar U.S. law were to pass, but how much weight would the countervailing public interest be given? As Chief Justice French said, when invited by BATA to consider the regulatory takings argument, ‘none of the [U.S.] cases to which you have taken us involve somebody putting into the marketplace a substance which places at risk of serious and fatal disease … all who use it.’
But this aside, no one on the Court seemed to want to bite at the regulatory takings carrot. The decision, at a guess, will rest instead on the familiar argument (one that does not arise under U.S. takings law) that the Act (which merely adjusts statutory rights) does not involve an acquisition. To breach section 51 (xxxi) something first has to be ‘acquired’ by the Commonwealth. What is acquired does not have to be the same as what was lost, but some Commonwealth benefit has to be made out. No one was seriously arguing that the cigarette companies’ intellectual property had been transferred to the Commonwealth. BATA, however, submitted that a benefit lay in the ‘negative use’ of property, in the Commonwealth’s ability to impose its own design, etc, on BATA’s property, and in its use of the property for its own ends. The Court, it is clear, did not embrace these propositions. We wait now, to find out why.
Meanwhile, other countries should not celebrate too soon, but would be wise to hold off for the WTO’s ruling in the challenge brought by Ukraine, Honduras, and the Dominican Republic to the Australian Act alleging breach of international trade law. That is where the international lesson will really lie. Meanwhile, in Australia (with a ruling that paradoxically reverses the grounds for the fictional ‘little man’s’ victory against big commercial interests depicted in ‘The Castle’) the government and, with it, the ordinary public can breathe freely. At least for the moment.

Author Helen IrvingPosted on August 16, 2012