Philip Morris International (PMI) is suing the Australian government over its plans to introduce plain tobacco packaging from next year.

The Marlboro manufacturer claims that the government's plan, which would require it to remove all logos and replace them with large pictorial health warnings on a drab olive green background, would violate its intellectual property rights and rob it of its ability to differentiate itself from competitor brands.

It is taking legal action using Australia's bilateral investment treaty with Hong Kong. The rules are designed to protect investments made by Asian companies against discriminatory treatment.

"We believe we have a strong legal case and will be seeking significant financial compensation for the damage to our business," said a spokeswoman.

"Legal action is not a course we take lightly, but the Australian government has left us with no other option. It has consistently ignored the concerns expressed by a broad range of domestic and international stakeholders about the adverse consequences of plain packaging and has failed to demonstrate that the policy will stop people from smoking."

The notice served on the Australian government begins a mandatory period of three months, during which the parties must attempt to negotiate a satisfactory outcome.

If this is not achieved, PMI will then proceed to the next step of arbitration proceedings pursuant to the Arbitration Rules of the United Nations Commission on International Trade Law 2010.

Last month British American Tobacco said it would also launch a legal challenge to the proposals.

The row is being closely followed by politicians in the UK who are set to consult on similar plans later this year.

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