International tobacco giant Philip Morris will take legal action to try and force the Gillard government to back down on its plain-packaging legislation.
"We don't take legal action lightly, but we have no other option. We believe we have a very strong legal case," spokeswoman for the company, Anne Edwards, told the Australian newspaper on Monday.
The legal action by the company, which manufactures brands such as Marlboro and Peter Jackson, will occur under a bilateral investment treaty between Australia and Hong Kong.
The company will argue that because it's Australian operation is owned by Philip Morris Asia (PMA), which is based in Hong Kong, the plain-packaging legislation will adversely impact upon an investment protected by the treaty.
The notice of claim to be served on Monday will start a three-month period of negotiation and if there is no resolution the matter will proceed to arbitration.
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"PMA will be seeking the loss in value of its investments in Australia that will result from plain packaging," Ms Edwards said.
"The damages may amount to billions of dollars."
Federal Health Minister Nicola Roxon has pledged to introduce and pass the legislation this year and have it operational by January.
The legislation will ban all commercial branding from cigarettes, mandating olive-green packaging with prominent health warnings.
