Case Note: Philip Morris Asia v Australia

This case has been a flashpoint for recent debates over investor-state dispute settlement (ISDS). For Australia, subjected to its first ISDS claim, the case triggered extensive public discussion over whether to continue including ISDS clauses in future bilateral investment treaties (BITs) and investment chapters of free trade agreements (FTAs). More broadly, the case has been seen as epitomising all that is wrong with treaty-based ISDS: an unlikeable, pseudo-American multinational invoking a little-known treaty and an opaque arbitral procedure to claim billion-dollar damages arising from legislation enacted to protect public health. This distasteful image is likely to remain, especially in the public consciousness, despite the claim eventually being dismissed for treaty-shopping, and even though the award deserves to be analysed in broader context. Notably, the case is a rare successful invocation of abuse of right under general international law and even lowers the threshold for such an argument. The case may also encourage states to enhance their screening processes specifically to assess and manage litigation risks flowing from admitting a particular foreign investment.