European Court Rules EU May Pursue Tobacco Suit
A European appeals court said European countries shouldn't be prevented from suing cigarette makers in the U.S. to try to recover tax revenue lost to smugglers, though it seems unlikely the case will make it to trial.
R.J. Reynolds Tobacco Holdings Inc., Philip Morris Co. and Japan Tobacco Inc. had asked the Court of First Instance in Luxembourg to force the countries to withdraw U.S. lawsuits they filed against the three companies. The court refused, saying the 10 countries, represented by the European Union's head office, the European Commission, have the right to sue in any jurisdiction.
The U.S. Supreme Court in November said Canada couldn't continue with a $1 billion (â‚¬946.2 million) suit in the U.S. filed against R.J. Reynolds, in which Canada accused the firm of smuggling cigarettes into the country through an Indian reservation. The court said a foreign country can't use U.S. courts to recover lost taxes.
The EU has complained for years that the world's biggest tobacco companies participate in schemes to smuggle cigarettes from non-EU members and help merchants evade value-added taxes and customs duties. The EU says cigarette makers intentionally oversupply countries in Eastern Europe, so that the surplus can be smuggled into the 15-nation EU.
The commission sued three years ago, asking the U.S. federal court in New York to force the companies to pay damages for billions of dollars in lost tax revenue. The court dismissed the case, saying since the commission itself hadn't been harmed, it couldn't sue for damages.
The cigarette makers say they will appeal the court's ruling. Seth Moscovitz, a spokesman in Brussels for R.J. Reynolds, called the EU's charges against the industry "absurd."