This evening a proposed settlement to resolve the many Canadian tobacco lawsuits was made public. The 1437 page draft agreement can be downloaded here.
The litigation efforts behind this effort have spanned a generation. The first provincial lawsuit was filed by British Columbia in November 1998 and resubmitted in January 2001). During this time, tobacco companies continued to sell cigarettes, governments continued to collect taxes, and smokers continued to die.
Over the past 66 months, there has been complete secrecy by the provincial governments in their handling of negotiations with tobacco companies. With the proposed settlement now made public, there is an opportunity for legislators and the public to engage in an assessment of the proposal and to offer guidance to government with respect to the next steps in this process.
In evaluating the proposal, Canadians might consider the following questions:
- Will this settlement change the behaviour of the tobacco companies?
- Does this settlement provide justice to smokers?
- Are there important and relevant issues which are not resolved by this settlement?
Included in the plan
In brief, the plan proposes that the companies will pay a total of $32.5 billion, of which the amount that has been held in reserve during the insolvency process (about $12.5 billion) will be available after the agreement is approved by court. $20 billion will be provided to provincial governments in deferred payments.
* $24.8 billion will be paid to the provinces, including a deferred payment of about $18 billion. This will settle the claims of over $500 billion filed by the provinces since 2001. Unlike the U.S. agreements, these payments will be made as a percentage of revenue from tobacco sales, starting with a remittance of 85% of net after tax income from tobacco sales. (The companies will keep all of their revenue from vaping or other products).
* $6.75 billion will be paid to some smokers who have suffered from lung cancer, throat cancer or emphysema. Of this, $4.25 billion will be paid to smokers in Quebec whose claim was upheld by the Quebec courts following a class action suit. $2.5 billion will be paid to injured smokers in other parts of Canada, even though there were no lawsuits resolved for these cases. Up to $100,000 will be paid to each Quebec victim, and up to $60,000 to each victim in other parts of Canada. Money for these payments will be made available soon after the agreement is approved by court.
* $1 billion will be used to establish a foundation focused on activities to support victims who do not direct compensation. $131 million from the Quebec Class Action will be directed to this fund. These payments will not be deferred.
* Lesser amounts to additional claimants (tobacco farmers, the "Knight" class action", etc).
Not included in the plan
This agreement contains no admission of liability on the part of the companies. Nor does it include any concessions or undertakings by the industry with respect to the way they market tobacco, nicotine or other products.
The next steps
Because this settlement is being negotiated through Canada's insolvency laws, the settlement is not final until the provincial government, class action and other "creditors" of the three companies vote to approve it. That vote is scheduled for December 12, 2024. Court hearings to formally approve the agreement would be held at a later date.
A claims procedure has been established for injured Quebec smokers, who can submit their claim through the following portal: www.recourstabac.com
Financial Context:
Over the period of these lawsuits:
- 784,000 Canadians have died as a result of tobacco use.
Under the settlement the companies will pay just over $40,000 for each Canadian killed by their products in the last 24 years. - Canadian governments have collected $166.6 billion in tobacco taxes ($98.7 billion by provincial and $68.9 by the federal government.)
Under the settlement, the companies will pay the equivalent of a 20% increase in the tobacco taxes they collected from smokers over the past 24 years. - Over 666 billion cigarettes (33 billion standard packages) have been legally sold
Under the agreement, the companies will pay the equivalent of $1 for each package of cigarettes sold over the past 24 years. - Industry revenue from cigarette sales has exceeded $72 billion.
Under the agreement, the companies will pay about 40% of their cigarette revenue over the past 24 years.
