Bid to halt tobacco smuggling case

Europe says cigarettes were smuggled by criminal gangs

By Europe business correspondent Patrick Bartlett

Japan Tobacco has filed a petition at the European Court of Justice to try to halt legal action in the United States alleging the company was involved in tobacco smuggling.

Japan Tobacco owns R J Reynolds, one of two cigarette manufacturers charged with defrauding the EU of billions of dollars in tobacco taxes.

Tobacco taxes in Europe are very high

The Brussels-based European Commission is pressing the smuggling charges in a New York court under US anti-racketeering legislation.

R J Reynolds, along with the American firm, Phillip Morris, is accused of running an international smuggling operation in order to boost tobacco sales in the European Union, where cigarette duty rates are among the highest in the world.

The European Commission says the illegal trade is costing the EU almost $2bn a year in lost tax revenue.

Customs

Both accused companies have strenuously denied the charges.

Now Japan Tobacco has countered with its own petition, claiming the European Commission has no authority to take such action.

It argues that, since customs and VAT questions are the responsibility of individual EU countries, the Brussels Commission cannot seek damages on their behalf.

The company also contends that the US courts have no jurisdiction over a European tax matter.

Mafia

But Brussels alleges the smuggling operations were directed from the two companies' American bases.

It has brought the action under US anti-racketeering laws, which were passed to fight the country's mafia and other organised crime groups.

The European Commission alleges criminal organisations were supplied with billions of cigarettes and that smuggling operations were closely monitored by tobacco company employees.

The two firms say the claims are unsubstantiated and based on old evidence, which has never led to any conviction.