Philip Morris Asia, owner of Philip Morris Ltd. in Australia, is challenging Australia's plain packaging law for cigarettes before an international arbitration court hoping to suspend the legislation and obtain billions of dollars in compensation for business losses from the Federal Government.

The Hong Kong-based PMA served a notice of arbitration to Canberra on Monday for violating the 1993 bilateral investment treaty between Australia and Hong Kong. The treaty requires the two governments to protect investors from both countries.

The serving of the notice follows the passage of plain packaging legislation for tobacco products by the Australian Parliament.

"The notice served on the Australian Government today begins the formal legal proceedings under the Arbitration Rules of the United Nations Commission on International Trade Law 2010. PMA is proposing Singapore as the seat of arbitration and that the appointing authority be the Secretary-General of the Permanent Court of Arbitration (PCA) at The Hague," PMA said in a press release.

The PCA administers cases arising out of international treaties, including bilateral and multilateral investment treaties.

"We are left with no option. The Government has passed this legislation despite being unable to demonstrate that it will be effective at reducing smoking and has ignored the widespread concerns raised in Australia and internationally regarding the serious legal issues associated with plain packaging," said PMA spokesperson Anne Edwards. "We are confident that our legal arguments are very strong and that we will ultimately win this case."

PMA cited five violations by Canberra of the bilateral agreement in relation to its cigarette business in Australia. It said the plain packaging law to take effect December 2012 unlawfully expropriates the company's investments and valuable intellectual property without compensation.

PMA also claimed that Canberra failed to provide fair and equitable treatment to PMA's investments in Australia, unreasonably impairs PMA's investments in the country, fails to fully protect and secure its investments, and violates the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), the Paris Convention for the Protection of Industrial Property and the WTO Agreement on Technical Barriers to Trade (TBT).

PML which has been manufacturing and selling cigarettes in Australia since 1954. Over this time, PML has built well-known, even iconic, brands such as Marlboro, Alpine, Longbeach, Peter Jackson, choice and GT.

"Plain packaging turns tobacco products into a commodity, robbing PML of its ability to differentiate its products from competitor brands, and thereby substantially diminishing the value of PMA's investments in Australia," said the PMA press release.

On June 27, PMA first notified the Government that it would take legal action under Australia's Bilateral Investment Treaty with Hong Kong if Australia proceeded to pass plain packaging legislation. In accordance with the terms of the BIT, the notice triggered a three month mandatory negotiation period between PMA and the Australian Government.

Philip Morris Asia is challenging the plain packaging law for cigarettes in Australia.