Canada: Creditors approve proposed $32.5 billion settlement with tobacco makers

A proposed deal that would see three tobacco giants pay billions to provinces and territories, as well as Canadian smokers, was approved by the companies' creditors on Thursday, December 12. The proposed C$32.5 billion global settlement between JTI-Macdonald Corp., Rothmans, Benson & Hedges and Imperial Tobacco Canada Ltd. and their creditors was announced last October after five years of negotiations.

Before the plan can be implemented, it must get court approval. A hearing is scheduled for late January. JTI-Macdonald's lawyers had filed a motion to say their client did not approve the plan. They said their client could not accept it as is because of unresolved final issues. The manufacturer lost its application last week in a Toronto court.

Holding the tobacco industry accountable

The proposed deal provides $24 billion for the provinces and territories, $4 billion for tens of thousands of Quebec smokers and their heirs, and more than $2.5 billion for smokers in other provinces and territories. It also provides more than $1 billion for a foundation to help people affected by tobacco-related illnesses. In 2015, a Quebec court ordered the three companies to pay about $15 billion in two class action lawsuits. The lawsuits involved smokers in the province who became addicted to tobacco between 1950 and 1998, became dependent and developed smoking-related illnesses. In addition to these smokers, the lawsuits included the heirs of the deceased smokers.[1].

Four years later, that landmark decision was upheld by the province's Court of Appeal. The companies then filed for creditor protection in Ontario to negotiate a comprehensive settlement with their creditors.

This case is largely due to the reforms of the judicial system implemented in Quebec facilitating "access to justice" for consumers. For anti-tobacco experts, these reforms could contribute to greater implementation of one of the provisions of the WHO Framework Convention: Article 19 devoted to the responsibility of the tobacco industry. The involvement of the tobacco industry in legal actions constitutes a particularly effective reference method and is likely to provide lessons for other issues of general interest where the weight of categorical lobbies is major. The notion of legal responsibility is understood here in the sense of the polluter pays in a broad sense, whether for past or present damages.[2].

Historic agreement but insufficient for anti-smoking advocates

The Canadian Cancer Society, a party to the case, said it hopes the proposal will be amended before it is approved by the court in late January. Rob Cunningham, the organization's lawyer, said the plan should include smoking reduction measures and the release of confidential industry documents, similar to what was done in the United States decades ago. "This is a unique opportunity to better control the tobacco industry and reduce smoking. We will never have this chance again," he declared[3].

The foundation funded by the proposed deal is also expected to see its mandate expanded to include preventing tobacco-related diseases and public awareness efforts to help people quit smoking, said Manuel Arango, vice president of public affairs at Heart & Stroke.

Health associations also denounce the absence and silence of the federal government and the Ministry of Health during all the years of negotiations: "Any competent minister should know that disease prevention is the priority, since it is an approach that avoids suffering and death, in addition to health costs", they write in a joint statement[4].

For Flory Doucas, co-director of the Quebec Coalition for Tobacco Control, the amount of the agreement is far from sufficient to compensate for all the damages. The Canadian Cancer Society estimated the demands of the provinces and territories at more than $500 billion over the last 25 years, including $330 billion for the province of Ontario alone.

In addition, the agreement will terminate any other proceedings currently underway against the three companies involved. Under the terms of the agreement, the trio will also be able to escape the provisions of bankruptcy protection legislation and continue to operate their current business model.

©Generation Without Tobacco

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[1] Creditors approve proposed $32.5B deal with tobacco giants: lawyer, CTV News, published December 13, 2024, accessed the same day

[2] Tobacco-free generation, Canada: JTI-Macdonald Corp opposes proposed $32.5 billion settlement with provinces, published on November 8, 2024, consulted on December 13, 2024

[3] Creditors approved proposed $32.5 billion deal, La Presse, published on December 12, 2024, consulted on December 13, 2024

[4] Jean-Philippe Nadeau, Was public health sacrificed in the tobacco deal?, Radio Canada, published October 19, 2024, consulted December 13, 2024