Tobacco giants British American Tobacco, Britain's Imperial Tobacco, Philip Morris and Japan Tobacco challenged the laws in Australia's High Court, claiming the rules were unconstitutional because they effectively extinguished their intellectual property rights.

In a brief statement, the High Court said a majority of its seven judges believed the laws did not breach Australia's constitution. A full judgment will be released later.

The decision means cigarettes and tobacco products must be sold in plain olive green packets without branding from December 1. The plain packages will also carry graphic health warnings.

The laws are in line with World Health Organization recommendations and are being watched closely by Britain, Norway, New Zealand, Canada and India, who are considering similar measures to help fight smoking.

Australian Attorney-General Nicolas Roxon hailed the ruling as "a watershed moment for tobacco control around the world".

"The message to the rest of the world is big tobacco can be taken on and beaten," said Roxon, whose father, a smoker, died of cancer when she was 10.

"Without brave governments willing to take the fight up to big tobacco, they'd still have us believing that tobacco is neither harmful nor addictive," she said after the ruling.

New Zealand's Associate Health Minister Tariana Turia, a strong anti-smoking campaigner, said the decision gave New Zealand more confidence to push ahead with its planned plain-packaging measures.

"While we have different domestic laws to our Australian neighbors, it does give us a greater sense of security as we move through our consultation process," Turia said.

BLACK MARKET

The Australian decision is a blow to tobacco companies and ends any domestic Australian challenges to plain packaging. British American Tobacco Australia said the measures would fuel a black market for cigarettes.

"It's still a bad law that will only benefit organized crime groups which sell illegal tobacco on our streets," BAT Australia spokesman Scott McIntyre said after the decision, his comments echoed by other companies involved.

"Even though we believe the government has taken our property from us, we'll ensure our products comply with the plain packaging requirements and implementation dates."

Industry analysts are worried plain packaging laws could spread to emerging markets like Brazil, Russia and Indonesia and threaten sales growth. The court's decision was welcomed by anti-smoking groups.

"We hope other nations follow Australia's lead and eliminate the use of tobacco packaging as a marketing tool, to help reduce the global tobacco death toll -- which is on track to reach half a billion people this century," said Australia's Cancer Council chief executive Ian Oliver.

CHALLENGES REMAIN

The plain packaging rules do, however, still face a number of challenges under global trade rules.

Australia is already fighting trade complaints in the World Trade Organization (WTO) from Ukraine, Honduras and the Dominican Republic, who claim the laws unfairly restrict trade, although their trade with Australia is negligible.

Philip Morris also said it would launch a legal challenge against the laws under a bilateral Australia-Hong Kong investment agreement.

"We believe that Philip Morris Asia's investment treaty case and the WTO challenges are strong. As such, there is still a long way to go before all the legal questions about plain packaging are fully explored and answered," PML spokesman Chris Argent said in a statement.

Companies could also use a proposed new Trans Pacific Partnership (TPP) trade deal to mount a further challenge if the TPP agreement includes controversial investor-state dispute settlement provisions.

Australia has strongly opposed lobbying by big business to include investor-state dispute settlement provisions in the TPP because that would undermine the ability of a government to pass domestic laws.

The World Health Organization estimates more than 1 billion people around the world are regular smokers, with 80 percent in low and middle income countries.

Australia wants to cut the number of smokers from around 15 percent of the population to 10 percent by 2018. Authorities say smoking kills around 15,000 Australians a year.

(Additional reporting by Gyles Beckford in WELLINGTON; Editing by Paul Tait)

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