BRUSSELS: The European Commission confirmed yesterday that it has been negotiating with the tobacco company Philip Morris International over measures to stop cigarette smuggling and counterfeiting.
While the Budget Commissioner, Ms Michaele Schreyer, refused to confirm that Philip Morris had offered to pay $1 billion to the EU budget, she said the agreement envisaged "substantial payments over a number of years".
Ms Schreyer said she hoped the agreement would be finalised and signed "in a very short time".
The negotiations, which the Commission said had been going on for several months, follow a series of lawsuits brought by the Commission against US tobacco companies in an attempt to claim lost tax and customs revenue.
In 2000, the Commission launched a civil suit in New York against Philip Morris International and a rival cigarette company, R.J. Reynolds, accusing them of complicity in smuggling and money-laundering. In January this year, the court of appeal upheld the decision of a lower court dismissing the smuggling part of the complaint on the grounds that a US court could not recover taxes due to another country. But the ruling left open the possibility of claims over money-laundering.
At an earlier stage, the court had rejected the Commission's case on the technical grounds that the EU's revenue had not suffered from the alleged smuggling because any shortfall was made up by the member-states.
Afterwards, 10 EU states joined as parties to the action. Ireland, Britain, Austria, Sweden and Denmark did not.
In October 2002, the commission and the 10 states launched a separate money-laundering complaint against R.J. Reynolds.
At the time, R.J. Reynolds responded dismissively, saying: "We operate our businesses in a legal, responsible manner. Any allegations that we were involved in or aware of money laundering, conspiracy or any other illegal activities are completely absurd."
But news of an imminent agreement with Philip Morris would seem to justify the Commission's pressure, in that it acknowledges there is a problem with illegal trade in both counterfeit and genuine cigarettes.
Philip Morris would not be admitting any guilt. A Commission statement said yesterday: "These payments . . . are not and should not be viewed as fines or recoveries. The funds could be made available to pay for anti-contraband and anti-counterfeit measures." Ms Schreyer said the draft agreement "would resolve all disputes".