IP/06/1314

Brussels, 5 October 2006

Payments by Philip Morris International, inc. Under the Anti-Contraband and Anti-Counterfeit Agreement: the European community and 10 Member States agree the distribution of approximately 1 billion USD

Under the Anti-Contraband and Anti-Counterfeit Agreement (the “Agreement”) entered into on 9 July 2004 between PMI, the European Community (EC) and ten Member States (Belgium, Finland, France, Germany, Greece, Italy, Luxembourg, the Netherlands, Portugal and Spain) to combat the illicit trade of cigarettes, PMI agreed to pay approximately US $1 billion to the EC and the ten Member States over a period of twelve years. The ten Member States and the European Commission, on behalf of the EC, have now confirmed their arrangement for the distribution of these payments. This arrangement came into effect following confirmation by Vice-President Kallas to the Finance Ministers of the ten Member States which, along with the EC, were the original parties to the agreement with PMI. It applies to the payments already received from PMI since 2004, and to the future annual payments that will be paid through 2016.

Vice-President Kallas, the Commissioner in charge of the fight against fraud, welcomed this arrangement: “The fight against the illicit trade of cigarettes is very necessary in view of the major increase of counterfeit cigarettes; the agreement entered into in 2004 with PMI has shown to be greatly effective. The very large number of Member States that have signed the Agreement to date (24) and the successful arrangement on the distribution of the payments, serve as a strong basis for using the Agreement as a model for similar agreements with other cigarette manufacturers, which the European Commission strongly urges.”

The plan which was agreed for the distribution of the payments among the 10 Member States and the Community is based on a formula which involves a number of factors, including the amount of taxes and duties on cigarettes in each of the 10 Member States. Moreover, the amount allocated to the Community budget is equal to 9.70% of the total amount received from PMI, which corresponds to the Community share of customs duties and VAT accruing to the EU budget as revenue.

The percentage of funds distributed to each of the parties is as follows:

To date, US$ 325,000,000 have been paid by PMI.

The Commission has also proposed to increase the financial envelope of the Hercule Programme to combat fraud by 44 million EUR for the period 2007-2013, which could finance training actions and the purchase of equipment in order to prevent the smuggling of cigarettes.

Sources: IP/04/882