HONG KONG SAR, CHINA Law and Practice Contributed by: Lianjun Li, Matthew Townsend, Patrick Chong and Max Lam, Reed Smith
1.4 Key Industries There is no sector-specific dataset isolating investor– state arbitrations with a uniquely Hong Kong nexus, likely reflecting the relatively limited number of cases involving Hong Kong to date. 1.5 Major Arbitrations Perhaps the best-known investor–state arbitration involving a Hong Kong claimant is Philip Morris Asia Limited v The Commonwealth of Australia (PCA Case No 2012-12), a matter in which a Singapore-seated arbitral tribunal declined jurisdiction to hear a matter under the 1993 Hong Kong–Australia BIT. In particular, on 29 April 2010, Australia announced a plain-packaging policy as part of a broader strategy to reduce smoking. In November 2011, the Tobacco Plain Packaging Act 2011 was passed, which stand- ardises drab brown packs, bans logos and imagery on tobacco products, allows only standardised brand names, and requires large graphic health warnings. The Act’s objectives are to improve public health by (among other things) discouraging people from tak- ing up smoking and reducing exposure to tobacco smoke. Philip Morris Asia initiated arbitration under the 1993 Hong Kong–Australia BIT, claiming that the Act had expropriated its intellectual property and that it was denied fair and equitable treatment, and seeking an order for suspending enforcement of the relevant laws and compensation in the sum of billions of dollars. Australia argued that plain packaging was a legitimate public health regulation addressing a leading cause of death and disease, and that the commencement of the arbitral proceedings constituted an abuse of right, as Philip Morris Asia acquired its shares in the Australian business on 23 February 2011, after the plain packaging policy was announced. The Tribunal held that the initiation of a treaty-based investor–state arbitration constituted an abuse of rights (or an abuse of process) when an investor changed its corporate structure to obtain treaty pro- tection at a point in time when a specific dispute was foreseeable.
Applying that test, the Tribunal found that at least after the announcement on 29 April 2010, it was reason- ably foreseeable that legislation equivalent to the plain packaging measures would be enacted and that a dis- pute would follow. The Tribunal further found that the main and deter- minative, if not sole, purpose of Philip Morris Asia’s corporate restructuring was to bring a treaty claim via a Hong Kong entity. Accordingly, the Tribunal held that the arbitration con- stituted an abuse of rights, declared the claims inad- missible, and declined jurisdiction. 1.6 Reaction to Awards Made Against the State Based on publicly available information at the time of writing, Hong Kong has not been a party to an inves- tor–state arbitration. It therefore remains uncertain how Hong Kong would approach such matters. 2. Investment Treaties, Free Trade Agreements and Investment Laws 2.1 Bilateral and Multilateral Investment Treaties According to data compiled by the Hong Kong Trade and Industry Department, Hong Kong is currently signatory to 24 Investment Promotion and Protection Agreements (IPPAs) with foreign states. These IPPAs typically provide for: • fair and equitable treatment of investments; • full protection and security of investments; • non-discriminatory treatment of investments; • reasonable compensation for expropriation of investments; and • settlement of investment disputes between a con- tracting party and an investor of another contract- ing party. At the time of writing, the IPPA with Turkey has been signed and is pending entry into force. Separately, the IPPA negotiations with Maldives and Myanmar have concluded and the relevant IPPAs are pending sign-
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