Philip Morris has threatened to take the Australian government to court over the proposed introduction of plain cigarette packaging in 2012.
The legislation, which mandates that cigarettes be sold in green packets without any logos, is popular, with 59 percent of Australians approving, the New York Times reports.
Australia already taxes tobacco heavily, with smokers pay about $16.70 a pack.
It is the latest blow for big tobacco — the U.S. recently introduced nine graphic labels that companies will have to place at the top of cigarette boxes.
And according to Reuters:
The fight over cigarette packaging is being closely watched by other tobacco firms and governments, with New Zealand, Canada and Britain among countries considering similar laws.
Philip Morris claims that plain packaging will affect their ability to compete against other brands and that the law violates Australia's bilateral investment treaty with Hong Kong, Reuters reports.
The notice sets a mandatory three-month period for the two sides to negotiate an outcome. If there is no agreement, Philip Morris Asia said it would seek compensation.
"Failing that, we aim to go ahead with a compensation claim for the loss to our business in Australia that would result from plain packaging," Philip Morris Asia spokeswoman Anne Edwards said, Reuters reports.
According to Australia's ABC network, the Australian government said it "can withstand an attack from big tobacco," and regardless, international laws allowed nations to act in the public interest.
"The World Health Organization makes clear and recommends in its tobacco control convention that states should consider taking this step of introducing plain packaging for the sale of tobacco products," Australia's Health Minister Nicola Roxon told the ABC.
And anyway, Philip Morris was likely more concerned about the precedent this law sets for other countries than the small Australian market.