Philip Morris is to pay over €1 billion over 12 years to finance the fight against contraband cigarettes and settle legal disputes with the EU over smuggling charges, it said today.
The European Union executive has waged a long-running lawsuit in US courts and has accused the world's largest cigarette maker, along with rival R.J. Reynolds, of colluding in smuggling cigarettes to evade EU customs and taxes.
"This co-operation agreement represents a major step forward against the common enemy of counterfeit and contraband cigarettes," Mr Andre Calantzopoulos, President and CEO of Philip Morris International, said in a statement.
The outline of an accord between the EU and the maker of Marlboro, L&M and Chesterfield brands was first aired in April.
"The payments could, subject to several variable factors, total approximately $1.25 billion over 12 years, and would be payable over those years in varying amounts," it said.
European Budget Commissioner Ms Michaele Schreyer, also in charge of fighting fraud, hailed the agreement.
"This agreement represents a major step forward in the battle against contraband and counterfeit cigarettes," Ms Schreyer said in a statement.
As EU states raise taxes on cigarettes to deter smoking, smuggling and the production of fake cigarettes is estimated to cost hundreds of millions of euros in lost revenues for governments.