R.J. Reynolds, Philip Morris Lose EU Court Battle
Luxembourg, Jan. 15 (Bloomberg) -- R.J. Reynolds Tobacco Holdings Inc., Philip Morris Cos. and Japan Tobacco Inc. lost a round in their legal battle against European charges of money laundering and tobacco smuggling.
The European Union's second-highest court denied the cigarette makers' challenge of the European Commission's right to bring a series of lawsuits against them in U.S. courts.
The commission, the 15-nation EU's central regulator, accuses the tobacco companies of evading customs duties, fees and taxes, saying cigarette smuggling costs European governments 2 billion euros ($2.1 billion) a year.
``These cigarette manufacturers cannot prevent the community from continuing the legal proceedings brought by it before courts in the U.S.,'' the court said in a statement. ``It will be for the U.S. courts to determine the outcome of the proceedings.''
A U.S. district court in Brooklyn, New York, threw out the EU's first civil case, saying the commission had not itself been injured. The commission, joined by 10 EU nations, filed a second case that was also dismissed in the U.S. The commission has asked a U.S. appeals court to reverse that dismissal.
In October, the commission filed a separate civil suit alleging that R.J. Reynolds helped organized crime to launder money. The suit claims the maker of Camel and Winston failed to prevent organized crime in Russia, Italy and Colombia from using cigarette purchases to launder proceeds from narcotics and weapons trafficking.
More Lawsuits Possible
The commission will decide this year whether to file similar complaints against Philip Morris and Japan Tobacco, spokesman Joachim Gross said. He welcomed today's European court ruling.
``The decision supports the determination of the commission and its services, in particular the European Anti-Fraud Office, to combat cigarette fraud wherever it affects the financial interests of the community,'' Gross said.
Japan Tobacco and Philip Morris said they will appeal today's ruling.
``We regret the decision,'' said Japan Tobacco spokesman Guy Cote. ``Japan Tobacco believes the legality of the European Community's actions should be assessed by a community court and would like the opportunity to put its arguments to the court.''
Philip Morris said in a statement that the commission's decision ``to pursue an action in the U.s. courts was not only bad public policy, but also contrary to law. We are confident the European Court of Justice will agree that this type of claim is not appropriately brought in a U.S. court.''
In a statement, R.J. Reynolds said the decision doesn't change the fact that no RJR companies headquartered in the United States ``were involved in any of the activities alleged in those suits.'' The company said it expects the suit will eventually be dismissed by a U.S. court.
The European Court of First Instance said the companies have two months to file an appeal to the Court of Justice, the EU's supreme court. That appeal can only be based on points of law.