Can big tobacco sue for compensation over the plain packaging laws, by virtue of Section 51(xxxi) of the Constitution?

The Tobacco Plain Packaging Bill 2011 will tonight pass the Senate and both British American Tobacco and Philip Morris have repeated threats of legal action against the government over what they claim is the effective seizure of their intellectual property.

Phillip Morris has filed a notice of claim against the Australian government for allegedly breaching the Australia-Hong Kong (SAR) Bilateral Investment Treaty which forbids the seizure or expropriation of foreign assets without compensation.  

Section 51(xxxi) of the federal constitution has a similar effect, which grants the government power to acquire property, but on just terms. The full text reads:

51. The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: -

….

xxxi. The acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws:

British American Tobacco has estimated a claim for losses of over $5 billion.

However, there are various tests which the tobacco companies must meet before  a claim for compensation under  section 51(xxxi) can be justified.

Is intellectual property “property” for the purposes of s51(xxxi)?

In Minister of State for the Army v Dalziel (1944), Starke J defined property as “every species of valuable right and interest including real and personal property, incorporeal hereditaments such as rents and services, rights-of-way, rights of profit or use in land of another, and choses in action” with McTiernan J  holding that property included both tangible and intangible property.

Therefore, tobacco trademarks are quite clearly property.

Is the intellectual property being “acquired” by the Government?

The text of the constitution reads “the acquisition of property”. Whether banning the use of trade marks on cigarette packets is “acquisition” is quite debatable and it may be that such a restriction would not be considered “acquisition” at all.

This perhaps is the motive behind the Government allowing the tobacco trade marks to remain on the register of trade marks - to argue that a restriction of use is not tantamount to acquisition.  

Related links

• Big tobacco ready for plain packaging legal challenge

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