Tobacco giant Philip Morris has threatened to sue the Australian government for new cigarette packaging laws that will require the company to introduce brand-less cigarette packets with dire health warnings.
The company will strip logos from cigarette packets and replace them with grisly images of cancerous mouths, sickly children and bulging, blinded eyes.
Philip Morris Asia said on Monday it had served a notice of legal claim on the government, arguing that plain packaging would rob it of the ability to differentiate its own brands from those of competitors.
The notice, served under Australia's bilateral investment treaty with Hong Kong, holds the government responsible to protect Hong Kong investments in Australia.
It sets a mandatory three-month period for the two sides to negotiate an outcome and if there is no agreement, Philip Morris Asia said it would seek compensation in projected losses.
But the new legislation is not expected to take effect until January 2012.
"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," said Anne Edwards, a Philip Morris Asia spokeswoman.
Julia Gillard, Australia's prime minister, said on Monday she would go ahead with the new packaging laws despite the legal action.
"We're not going to be intimidated by big tobacco's tactics, whether they're political tactics, whether they're public affairs kind of tactics out in the community or whether they're legal tactics," she said.
"We're not taking a backward step. We've made the right decision and we'll see it through."
Ben Worsley, a journalist with Australian Broadcasting Corporation, told Al Jazeera there was widespread public support for the new measures.
He said the legislation comes against a backdrop of a ban on smoking in pubs, restaurants, clubs, sporting venues and in cars where there are children.
"Smokers in Australia are increasingly marginalised and Philip Morris obviously recognises this next step will go a lot further, which is why they have served this notice to the Australian health minister," Worsley said.
Anne Jones, of the campaign group Action on Smoking and Health in Australia, said the new law would be effective and would draw the youths away from smoking.
"The packaging is a very powerful form of advertising and all the research shows plain packaging will reduce the appeal of the pack, particularly for children," she told Al Jazeera.
"It will remove the misleading and deceptive information on the pack, mostly through colour coding, implying that these cigarettes are a lighter model and therefore safer, which is not true."
The tobacco industry has been running TV advertisements against the plain packaging laws, asking Australians whether they want to live in a "nanny state".
New Zealand, Canada, the European Union and Britain are considering similar plain package laws.
Jurgen Kurtz, director of international investment law at the University of Melbourne, said that if the claim is heard, the government could win on the grounds the legislation was designed to protect public health.
Philip Morris has made and sold cigarettes in Australia since 1954 and built up well-known brands such as Marlboro, Alpine, Longbeach and Peter Jackson.
British American Tobacco, whose brands include Winfield, Dunhill and Benson & Hedges, has said the government's plans would infringe international trademark and intellectual property laws.
The company has also flagged possible legal action.