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Big tobacco companies won't be able to sue the Government over anti-smoking laws, Prime Minister John Key says.

Philip Morris Asia, based in Hong Kong, is threatening to sue the Australian government because it intends forcing tobacco companies to sell cigarettes in plain packets.

The action is being taken under a trade agreement between Australia and Hong Kong, and New Zealand has a similar arrangement.

The Green Party says Philip Morris could use the same tactic against New Zealand if Associate Health Minister Tariana Turia gets her way and follows Australia.

But Mr Key said today New Zealand's free trade agreements excluded that risk.

"The best advice I've had is that we wouldn't be able to be sued because we would be protected, in the public interest, in terms of health," he said at his post-cabinet press conference.

"Someone can always take an action against the Government, but whether they would be successful is a very different issue."

If the tobacco giant won a case against the Australian government it could claim billions of dollars in damages because its trademark had been compromised.

Mrs Turia said last month she wasn't going to be deterred by the company's threats.

However, she could not confirm the Government would go ahead with the policy.

"It's something that needs to be looked into really carefully -- we don't want to get ourselves into a situation where we're wasting taxpayer money fighting these tobacco companies because they're incredibly wealthy," she said.

Australia's plain packet law comes into effect in a year.

- NZPA