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Commission welcomes US Court decision to allow the EU to proceed with the case against Reynolds American on tobacco smuggling

European Commission - IP/14/476   24/04/2014

Other available languages: FR DE

European Commission

Press release

Brussels, 24 April 2014

Commission welcomes US Court decision to allow the EU to proceed with the case against Reynolds American on tobacco smuggling

The Commission welcomes the decision yesterday by the US Court of Appeals for the Second Circuit in New York City to allow the European Union and 26 Member States to proceed with their civil claims against Reynolds American Inc. (“RJR”) in relation to the illicit trade in cigarettes. Tobacco smuggling is estimated to cost public budgets around €10 billion a year in the EU alone, undermines health policies, and helps to fund even more sinister crimes. The civil litigation against RJR is part of the EU’s continuous efforts to fight the illicit tobacco trade.

EU anti-fraud Commissioner, Algirdas Šemeta, said: "I warmly welcome this decision by the US court. It is an important step forward for the EU in its quest to combat the illicit tobacco trade, and protect its citizens and its financial interests."

Civil Claims in the U.S. Courts

In 2002, the European Union commenced a civil action in the United States District Court (the federal court of first instance) against RJR. The EU and Member States explained to the U.S. Court of Appeals for the Second Circuit: “The main objective of this action is to obtain enforceable equitable relief that will enjoin the scheme, and compel RJR to adopt the same standards of corporate conduct already embraced by other large multinational tobacco companies” through “cooperation agreements with the EU and all of its Member States.”

In 2011, the U.S. District Court dismissed the EU’s and Member States’ claims against RJR on technical grounds without addressing the merits of the allegations. The EU and Member States filed an appeal of the dismissal, and the appeal was heard by a three-judge panel of the U.S. Court of Appeals for the Second Circuit (Hall, Sack, Leval, JJ.) in New York City, on 24 February 2012.

Yesterday’s Decision of the Second Circuit

Yesterday, the U.S. Court of Appeals for the Second Circuit, in a comprehensive and scholarly opinion written by Circuit Judge Pierre N. Leval, sustained the EU’s and Member States’ civil claims under the Racketeer Influenced and Corrupt Organizations (RICO) statute and held that RICO provides a legal basis for the claims, which allege sufficiently important domestic activity by RJR in the United States to come within RICO’s coverage. The U.S. Court of Appeals also ruled that that the EU and Member States may bring state-law claims under the principle of diversity jurisdiction on the ground that the EU meets the relevant standards of the Foreign Sovereign Immunities Act. On these grounds, the judgment of the United States District Court was vacated, and the case was remanded to the U.S. District Court for further proceedings1.

Background

RJR is the only major multinational tobacco manufacturer that has not entered into a cooperation agreement with the EU and Member States. The EU and Member States have already concluded cooperation agreements with Philip Morris International (2004), Japan Tobacco International (2007), British American Tobacco and Imperial Tobacco Limited (both 2010).

Contacts :

Emer Traynor (+32 2 292 15 48)

Franck Arrii (+32 2 297 22 21)

For the public: Europe Direct by phone 00 800 6 7 8 9 10 11 or by e­mail


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