Category: Litigation

Government accused
The biggest manufacturer of ‘Native cigarettes’ in Canada is suing the federal government for $3 billion for failing to stop the proliferation of contraband tobacco producers, according to a story by Mark Bonokoski for the Toronto Sun.
The lawsuit, filed in the Ontario Court of Appeal at the end of June by Grand River Enterprises’ (GRE) Jerry Montour and three other principals in the company, accuses the Attorney General of Canada of ‘malfeasance in public office, negligence, breach of fiduciary duty, and breach of aboriginal rights’.
The foursome, all status Indians, is seeking $1.5 billion in damages for revenues allegedly lost to about 50 unlicensed and therefore illicit cigarette manufacturers in the province competing with their brands, and another $1.5 billion for the government’s failure to close them down.
The federal authorities have yet to file a statement of defence.
The lawsuit is based on two theories of liability – the ‘forced incorporation’ of GRE, and the ‘failure’ of the federal government to ‘enforce’ its agreement to come down hard on First Nation cigarette companies manufacturing products without a licence.
Bonokoski said that a raid by the RCMP on GRE in the mid-1990s resulted in GRE agreeing to pay federal excise taxes to avoid being shut down, while, for their part, the federal authorities promised to ‘intensify enforcement against contraband to level the playing field between GRE and other on-reserve tobacco manufacturers’.
GRE argues in the court document that the federal government, namely through the Attorney General’s office, has failed to implement or administer what has been cited as the 1994 Anti-Smuggling Initiative and, as a result of not enforcing laws against the production of contraband cigarettes by other First Nation profiteers, has caused Montour and company to incur substantial losses.
Bonokoski’s piece is at: http://www.torontosun.com/2017/07/15/first-nations-cigarette-maker-suing-the-feds-for-billions.
July 17, 2017
Non-disclosure “absurd”
Part of a recent ruling by the Permanent Court of Arbitration has exposed the unacceptable nature of the international tribunal system’s Investor-State Dispute Settlement (ISDS) provision, according to story in Scoop, relayed by the TMA and quoting a trade and investment expert.
As was reported here yesterday, the Court on the weekend made public a heavily redacted ruling ordering Philip Morris Asia (PMA) to pay the Australian government an undisclosed sum in legal costs relating to its failed case against the country’s plain [standardized] packaging law.
While generally welcoming the court’s decision, the Australian Fair Trade and Investment Network (AFTINET) convener Dr. Patricia Ranald said that it was “absurd and unacceptable” for the tribunal not to disclose the amount of the costs – something the Australian public had a right to know.
This non-disclosure “exposes the unacceptable nature of the international tribunal system known as Investor-Disputes (ISDS), which enables global corporations to bypass national courts and sue governments in international tribunals over public health and other public interest laws”, she was quoted as saying.
ISDS tribunals lacked the proper legal safeguards present in national court systems, having no independent judiciary, precedents or appeals, while enjoying wide discretion, she said.
AFTINET, which is a network of community groups, has called on the government to release the costs of the PM case immediately, and to oppose the inclusion of ISDS in all trade agreements.
Although the amount of the award has not been made public, there has been speculation that it is about $50 million (US$38 million), plus a percentage of the arbitration costs.
PMA reportedly argued that Australia’s claim for costs was ‘excessive’ given that its legal team ‘consisted primarily of public servants’, and that it was well above what was claimed by Canada (US$4.5 million) and the US (US$3 million) in similar investment disputes.
The Australian government said its claim, which included the cost of its own lawyers, outside counsel, expert reports and witnesses, plus travel and accommodation, was justified, and the court agreed. The court found that the Tribunal ‘does not consider that any of these costs claimed by the respondent were unreasonable and should not have been incurred’.
July 12, 2017
PM to pay for PP challenge
In a heavily redacted ruling that was issued in March but made public on the weekend, the Permanent Court of Arbitration has directed Philip Morris Asia (PMA) to pay the Australian federal government an undisclosed sum in legal costs, according to a story in WA Today relayed by the TMA.
In December 2015, the Court dismissed PMA’s lawsuit challenging Australia’s ‘plain’ [standardized] packaging law, labeling it an ‘abuse of rights’.
The story said that ‘some sources’ believed the award against PMA could be as high as A$50 million (US$38 million), plus a percentage of the arbitration costs.
The company reportedly argued that Australia’s claim for costs was ‘excessive’ given that its legal team ‘consisted primarily of public servants’, and that it was well above what was claimed by Canada (US$4.5 million) and the US (US$3 million) in similar investment disputes.
The Australian government said its claim, which included the cost of its own lawyers, outside counsel, expert reports and witnesses, plus travel and accommodation, was justified, and the court agreed. The court found that the Tribunal ‘does not consider that any of these costs claimed by the respondent were unreasonable and should not have been incurred’.
July 11, 2017
Prosecutions sought
In a letter sent on June 20 to Israel’s Attorney General Avichai Mandelblit, members of the Knesset Yehudah Glick and Yoel Hasson called for the criminal prosecution of cigarette companies, according to a story in the Jerusalem Post relayed by the TMA.
The politicians argued that cigarette companies were continuing to produce and market cigarettes in the country, even though they ‘have known for decades that their products have caused and cause an unthinkable number of fatalities’.
Tobacco use in Israel had increased by 13 percent in one year, driven by low taxes on roll-your-own tobacco and vigorous marketing of smokeless and other tobacco products, the politicians said.
Tobacco use was responsible for more than 8,000 deaths in the country every year.
The companies’ actions were “actually an attack on Israeli residents” and “[o]ur purpose is to prevent the destructive consequences of this attack,” they said.
June 23, 2017
Shareholders go to court
In a petition filed in a North Carolina US Federal court, Reynolds American Inc. shareholders have alleged the company and its directors are withholding important information regarding the company’s proposed acquisition by British American Tobacco, according to a Law360 story relayed by the TMA.
The shareholders said a proxy statement related to the proposed deal did not contain material information related to RAI’s financial projections and analyses of the proposed merger by its financial advisers Goldman Sachs.
In a note posted on its website on June 14, RAI announced a special meeting of shareholders to approve the terms of its takeover by BAT and related payments to RAI’s executives.
The meeting is due to be held on July 19 in Winston-Salem, North Carolina.
‘Subject to the satisfaction or waiver of the conditions as set out in the merger agreement, including approval by shareholders of both BAT and RAI, it is currently expected that the proposed transaction will close on or about July 25, 2017,’ the note said.
June 21, 2017
Smokers not appreciated
In an opinion piece in the Gaston (North Carolina, US) Gazette, Lewis Guignard makes the point that nobody thanks the often-impoverished smokers who provide, through the cigarette taxes they pay, additional funds for social projects.
The trigger for his piece seems to have been an announcement that the Golden Leaf Foundation (GLF) was to give $634,000 to support an education budget.
Guignard said that, established in 1999 after the infamous tobacco lawsuits, the GLF distributed money given to the state by various tobacco companies as part of the tobacco companies’ settlement of various lawsuits.
Guignard questions the premise on which the lawsuits were brought by state attorneys general and the fact that smokers were not represented during the lawsuits.
He questions, too, where the money from the lawsuits went and goes.
And finally, he asks who thanks the smokers.
‘So it may be the Golden Leaf Foundation is handing money to these local schools,’ he wrote. ‘But the money comes indirectly from the poor, local cigarette smokers, and who is telling them thank you?’
Guignard’s piece is at: http://www.gastongazette.com/opinion/20170610/my-turn-we-ought-to-thank-smokers.
June 12, 2017
Suit over ‘cessation fee’
Oklahoma’s Attorney General Mike Hunter has said he will defend the state after two major tobacco companies and other interested parties filed a lawsuit challenging the constitutionality of a tobacco cessation fee, according to a story by Heide Brandes for the Red Dirt Report.
Philip Morris USA and RJ Reynolds filed suit with the Oklahoma Supreme Court over a bill that was signed into law in May.
Senate Bill 845 imposes a fee of $1.50 per pack of cigarettes, to be paid for by wholesalers.
The fee is scheduled to go into effect in August.
Lawmakers approved the fee as a revenue-raising measure to help fill Oklahoma’s nearly $900 million budget hole and as a way of reducing tobacco smoking.
The fee is designed to help fund health initiatives in Oklahoma.
The suit claims that the bill is not a cessation fee and is instead a strictly revenue-raising bill. According to the lawsuit, all revenue-raising bills must originate in the Oklahoma House of Representatives, be passed before the last five days of a session and be approved by a three-quarters supermajority of House members.
June 12, 2017
New rules needed
The decision by New Zealand’s Ministry of Health to take action against Philip Morris New Zealand (PMNZ) over the sale of its smoke-free heated tobacco product demonstrated the urgent need for comprehensive reform so that smokers could switch from cigarettes to smoke-free alternatives including heated tobacco products, according to a PM press release published by scoop.co.nz.
The Ministry of Health has filed a complaint in the Wellington District Court against PMNZ over the importation and sale of the company’s Heets tobacco sticks, which are the consumable part of its IQOS heat-not-burn product, according to a stuff.co.nz story relayed by the TMA. The ministry considers Heets to comprise tobacco products designed for oral use other than for smoking, which are prohibited under the Smoke-Free Environments Act 1990. A hearing in the case has been set for June 2.
The general manager of PMNZ Jason Erickson said the company had firmly believed it would be helping to advance the government’s goal of securing a smoke free New Zealand when it introduced its smoke-free product IQOS to New Zealand last year.
PMNZ launched the IQOS device and Heets tobacco sticks in New Zealand in December 2016 as part of the company’s stated global commitment to replacing conventional cigarettes with smoke-free alternatives.
Erickson said the company was confident that the sale of IQOS and Heets fully complied with the Smoke-Free Environments Act (1990) and other relevant legislation in New Zealand.
“The section of the law referenced by the ministry in its action against Philip Morris was originally put in place in the 1990s to address American-style chewing tobacco,” Erickson said.
“We stand behind IQOS and Heets. But it’s clear that old 20th century laws are not sufficient to address new 21st century technologies that New Zealand smokers are embracing as they move away from combustible cigarettes.”
The New Zealand Government announced in March that it would legalise the sale and supply of nicotine electronic cigarettes and e-liquid, and establish a pathway to enable emerging tobacco and nicotine-delivery products to be sold lawfully as consumer products.
“We support New Zealand’s Smoke-free 2025 goal,” Erickson said. “Philip Morris looks forward to working with government to ensure IQOS and Heets are fully understood in the context of the regulations being developed for e-cigarettes and emerging tobacco and nicotine-delivery products.”
The PM press note said that IQOS was available in in more than 20 countries, including the UK, Japan, Italy and Switzerland. Globally, more than two million smokers had switched to IQOS and the company had plans to expand to key cities in 30 countries by the end of 2017.
May 22, 2017
Mighty in talks over future
The LT Group and British American Tobacco are reportedly in talks with the Wongchuking family about the acquisition of the Bulacan-based cigarette maker Mighty Corp, according to a story in the Philippine Star relayed by the TMA.
Some industry observers believe that such an acquisition could bail out Mighty from a 36.5 billion-peso (US$734.2 million) tax evasion lawsuit.
Previous reports claimed that other tobacco firms, including Associated Anglo-American Tobacco and Japan Tobacco Inc, had expressed interest in acquiring Mighty.
An unnamed source said Mighty was looking to sell only its assets, such as machinery and other equipment, while retaining its sprawling nine-hectare property in Bulacan, which it could lease to tenants.
A final decision is expected in June.
The company has not been able to import raw materials since a Board-of-Customs order on March 14 and it is now said to be relying on its inventory, which running down.
Meanwhile, a number of retailers are said to have stopped selling the company’s products.
The Philippine Amalgamated Supermarkets Association was quoted as saying that some retailers had begun taking Mighty products from their shelves amid concerns that they could be cited for selling cigarette packs carrying counterfeit or fake tax stamps, should the allegations against Mighty be proven.
May 16, 2017
WTO upholds plain packs
Australia’s standardized tobacco packaging law has been upheld by the World Trade Organization after a five-year legal battle, according to a story by Tom Miles and Martinne Geller for Reuters.
The Reuters story cited a Bloomberg news report that, in turn, cited ‘two people familiar with the situation’.
Although the WTO’s ruling is not expected to be made public until July, a ‘confidential draft’ said Australia’s laws were a legitimate public health measure, Bloomberg was said to have reported.
A spokeswoman for British American declined to comment on the ruling until it was made public, but suggested the complainants would keep fighting.
“As there is a high likelihood of an appeal by some or all of the parties, it’s important to note that this panel report is not the final word on whether plain packaging is consistent with international law,” she said.
A spokeswoman for Japan Tobacco also declined to comment on the ruling, but said the fact that the draft had been leaked was disconcerting and a breach of WTO rules.
“Such breaches completely undermine the integrity of the process, which has not yet run its full course,” she said.
The Reuters story said that the plodding pace of WTO decision-making prompted Australia, which had the backing of the World Health Organization, to complain that its challengers were deliberately stalling the proceedings, producing a ‘regulatory chilling’ effect on other countries wishing to follow its example.
Nevertheless, such a ruling from the WTO is likely to be interpreted as giving a green light for other countries to introduce similar laws in respect of tobacco products.
It could have implications also for other products deemed to cause health problems, such as alcohol, junk food and sugary drinks.
May 5, 2017