11/10/2011 01:41 EST | Updated 01/09/2012 05:12 EST

Australia ready to fight big tobacco in courts over plan to ban advertising on cigarette packs

CANBERRA, Australia - The Australian government said Thursday it is ready to fight big tobacco companies in court to enact the world's toughest laws on cigarette promotion — rules that would ban logos and other advertising on cigarette packs.

The Senate is scheduled to pass legislation Thursday that would prohibit tobacco companies from displaying their distinctive colours, brand designs and logos on cigarette packs in a bid to make smoking less attractive to the young. Cigarettes would be sold in drab, olive green packs, with brand names dwarfed by health warnings and graphic images of smoking's consequences.

The government said that the laws will come into force in December 2012.

Tobacco giants argue that the move illegally diminishes the value of their trademarks. They have threatened a court battle for billions of dollars in compensation.

Health Minister Nicola Roxon said her government was "determined to take away the last method of advertising" cigarettes in Australia.

"We're not going to be bullied into not taking this action just because tobacco companies say they might fight us in the courts," she told reporters. "We're ready for that if they do take legal action."

British American Tobacco Australia Ltd., the Australian market leader, on Thursday warned it will soon challenge the law in the Australian High Court, and claimed the government was on "shaky legal ground."

"No other country in the world has implemented plain packaging and there are many good reasons for that," spokesman Scott McIntyre said in a statement.

Australia is a relatively small tobacco market, where the rate of smokers is 17 per cent and falling, compared with around 20 per cent of American adults. But tobacco companies fear that if Australia's law stands, countries with more lucrative and growing markets could adopt the same strategy.

The warnings and often gruesome, full-colour images of the consequences of smoking, such as mouth cancer and gangrenous toes, would cover 75 per cent of the packs' front. Graphic health warnings currently cover only 30 per cent.

Offenders would face fines of up to 1.1 million Australian dollars ($1.2 million) for a company and AU$220,000 for an individual. Australia already bans advertising at the point of sale.

Hong Kong-based Philip Morris Asia Limited, which owns the Australian affiliate Philip Morris Limited, filed a notice of claim against the government in an Australian court in June arguing that the legislation violates a bilateral investment treaty between Australia and Hong Kong.

Philip Morris says the treaty protects companies' property, including intellectual property such as trademarks. It says plain packaging severely diminishes the value of the company's trademark.