Australia says big tobacco aiding WTO challengers

"We know that the tobacco companies, because they have admitted it, are providing legal advice to WTO members in order to encourage them to take action against Australia," she said.

Halton was speaking at an event on the sidelines of the World Health Organization's annual ministerial assembly in Geneva, where WHO director-general Margaret Chan called for stepping up the "tooth-and-nail fight against one of public health's biggest enemies -- the tobacco industry."

Australia is planning to introduce tough new packaging regulations for tobacco from October 1 which will force producers to abandon distinct colorful branding and sell their cigarettes in uniformly drab packets with no adornments. Other tobacco products such as cigars must follow suit by December 1.

"We believe this deals with one of the last forms of tobacco advertising in our country - the packet," Halton said. "We are very very confident that we can withstand these attacks, our government will not be intimidated."

Smoking rates in Australia have declined to 15.1 percent in 2010 from some 30.5 percent in 1998. "Our objective in the next few years is to reach 10 percent and hopefully lower," she said.

Ukraine and Honduras have challenged the move at the WTO by saying it unfairly restricts trade, even though neither country has a significant share of the Australian market.

"We are a long way from both countries and we have very, very little trade with them," Halton said.

Both complainants have "requested consultations" with Australia, the first step in the WTO legal process. The first round of negotiations was held in the past month, she said.

"Our belief is that some people in the meeting were British American Tobacco lawyers," she told Reuters, adding that she wasn't aware of any date for a second round.

A spokesman for British American Tobacco confirmed to Reuters that the company had provided assistance for the WTO challenges but could not confirm that BAT lawyers were directly involved in the talks.

If the case is not settled by negotiation, Honduras or Ukraine could ask the WTO to set up a panel of arbitrators to judge the dispute. If Australia were to lose, it could be forced to undo some of its rules on tobacco.

The two trade suits have attracted a large number of countries as third party observers to the disputes, and some diplomats see them as test cases in the struggle by tobacco firms to halt a global tide of regulation that has sharply tightened the rules on cigarette sales over the past decade.

British American Tobacco, Imperial Tobacco and Philip Morris have launched High Court challenges against the Australian laws, saying they infringe their trademark rights.

Halton told Reuters that she expected that the High Court's decision could come by October.

She also said health must be factored into trade in future.

"When we negotiate new trade agreements, we need to be very clear that the right to protect health of our community is paramount. We will make sure we live up to our obligations under the Framework Convention on Tobacco Control," she told the talks, referring to the WHO's treaty ratified by 174 countries.

Philip Morris' chief financial officer Hermann Waldemer has said he expects more countries to challenge Australia's rules at the WTO, according to a transcripts analyst calls provided by ThomsonReuters Streetevents.

A Philip Morris spokeswoman told Reuters earlier this month that the firm was open to supporting governments that challenge Australia on plain packaging but it was not providing support to Ukraine in its WTO complaint.

(Reporting by Stephanie Nebehay and Tom Miles; Editing by Bob Burgdorfer)