The legislation which takes effect in December 2012 bans the use of logos and brand imagery on cigarette packages.

Instead brand names are required to be printed in small, uniform font on dull olive green packaging. The government believes consumers will hate the olive green colour based on conducted research.

The law passed on Monday by parliament will make Australia the first country to restrict logos, branding, colours and promotion text on tobacco packets.

The new cigarette packs will include larger health warnings and graphic pictures of the negative effects of smoking.

One such picture shows mouth cancer, with blistered lips, decaying gums and brown rotting teeth.

These warnings and photographs will make up 75 per cent of the front of the new packaging, and 90 per cent of the back.

Tobacco companies have been fighting this legislation since its inception, and had threatened legal action when the government first announced its packaging plan last year.

“We are left with no option,” Anne Edwards, a spkesman for Philip Morris Asia, said in a statement. “The government has passed this legislation despite being unable to demonstrate that it will be effective at reducing smoking and has ignored the widespread concerns raised in Australia and internationally regarding the serious legal issues associated with plain packaging.”

Philip Morris Asia, based in Hong Kong, served the legal notice through an investment treaty between Hong Kong and Australia. The company will also file claims under Australian law.

The Melbourne-based company employs more than 800 people in Australia and held nearly 38 per cent of the local cigarette market in 2010, according to a company statement.

Health and Ageing Minister Nicola Roxon called the new law “an example for the world to follow.”

She said: “Plain packaging means that the glamour is gone from smoking and cigarettes are now exposed for what they are: killer products that destroy thousands of Australian families.”

Tobacco adverts on billboards and in magazines have long been outlawed.

Roxon said packaging is one of the last powerful marketing tools at the tobacco companies’ disposal.

She said: “Let there be no mistake, big tobacco is fighting against the government for one very simple reason — because it knows, as we do, that plain packaging will work.”

Philip Morris said it expects to lose “billions of dollars” in damages, and estimates the legal process will take two to three years.

The government says cigarettes kill 15,000 Australians a year, despite years of declining smoking rates in the country.

Main photo: British American Tobacco Australia chief executive David Crow (Getty images)