Canada: Uncertainty over historic $32.5 billion deal amid manufacturer opposition

The proposed C$32.5 billion settlement to end decades of litigation with Canada’s largest tobacco companies has suffered a major setback, with Rothmans, Benson & Hedges (RBH) publicly opposing the plan just as court hearings were about to begin. The reversal introduces new uncertainty into one of the country’s most complex legal and financial negotiations.[1].

The settlement, approved by creditors, was designed to provide financial redress for the damage caused by tobacco-related diseases. Under its terms, more than $24 billion would be allocated to the provinces and territories over two decades, $4 billion would go to Quebec class action plaintiffs, $2.5 billion would compensate smokers affected outside Quebec, and more than $1 billion would fund a public health foundation dedicated to reducing tobacco-related diseases.

Division among affected tobacco manufacturers

JTI-Macdonald Corp. opposed the deal in October 2024 during initial negotiations, arguing that the financial burden was excessive. At the time, Rothmans, Benson & Hedges (RBH) remained silent, suggesting that the manufacturer would honor the agreement. However, when hearings began on Wednesday, January 29, RBH unexpectedly rejected the deal, arguing that it was disproportionately punitive and threatened the company’s long-term viability.

Imperial Tobacco Canada Ltd., the third company involved, continues to support the deal. The division within the industry raises questions about whether the proposal can move forward in its current form or whether further negotiations will be necessary. If the settlement is rejected, it could lead to further delays in compensation for those affected.

The origins of this settlement date back to a landmark decision in Quebec, where the courts found that tobacco manufacturers had deliberately misled consumers about the health risks of smoking. The companies were ordered to pay approximately CAD 15 billion to plaintiffs in two class actions. The tobacco companies then used the legal mechanism allowing them to seek protection from their creditors in 2019. This led to years of negotiations, culminating in the current settlement proposal that goes beyond the Quebec action.

A missed opportunity for public health?

Despite the magnitude of the deal, it had been criticized by health organizations. The Canadian Cancer Society, as a social stakeholder in the deal, had advocated for the inclusion of strong tobacco reduction measures. "This regulation represents a rare opportunity to implement strong tobacco control policies," said Rob Cunningham, legal counsel for the Canadian Cancer Society.

Other health organizations have also expressed concern that the deal prioritizes financial compensation over long-term public health benefits. With funds tied to future tobacco sales, critics say governments could become financially dependent on continued smoking rather than actively working to reduce it.

As the hearings proceed, government officials, legal experts and public health advocates will present their arguments. The court's final decision will not only determine the financial impact on tobacco companies, but could also set a precedent for corporate liability in health-related litigation.

AE

[1] Jean-Philippe Nadeau, Tobacco industry: Smoke on the horizon at hearing on bailout approval, Radio Canada, published January 28, 2025, consulted January 29, 2025