A subsidiary of London-listed British American Tobacco revealed that it’s nearing a potential settlement in a multi-billion dollar lawsuit in Canada.
The suit stems from two class action lawsuits filed against tobacco distributors in Canada over 26 years ago, including against British American Tobacco’s Imperial Tobacco Canada (ITCAN).
The cases were filed to the Quebec Superior Court seeking over CA$20bn (£11.2bn) in compensatory and punitive damages to 100,000 Quebec victims of lung and throat cancer caused by cigarettes between 1950 and 1998.
It wasn’t until February 2005 that both class actions were granted certification.
The two cases proceeded to court, and a trial concluded in 2014. In a ruling the following year, the Quebec Superior Court ordered the country’s three major tobacco groups, ITCAN, Philip Morris and Japan Tobacco to pay CA$15.6bn (£8.2bn) in moral and punitive damages.
The distributors tried to appeal, but in 2019, the Quebec Court of Appeal upheld the ruling.
This groundbreaking ruling forced each of the major players in the Canadian tobacco industry to seek creditor protection under the Companies Creditors Arrangement Act (CCAA).
Today, London-listed British American Tobacco revealed it has obtained creditor protection and has since been negotiating a possible settlement of all of its outstanding tobacco litigation in Canada.
The company stated: “Today marks an important step towards a potential settlement. Since filing for CCAA protection in 2019, Imperial Tobacco Canada has been working in good faith under the direction of the mediator to resolve all tobacco litigation in Canada.”
The company explained that the plan resolves all Canadian tobacco litigation and provides a full and comprehensive release to all related entities for all tobacco claims.
“This settlement will be funded by the cash on hand and the cash generated from the future sale of tobacco products in Canada while at the same time maximising recovery for the creditors. It also allows the Canadian tobacco companies to continue operating as a going concern for the benefit of all stakeholders.”
A spokesperson for British American Tobacco added: “Today marks a positive step towards finding a resolution. This has been a complex, confidential mediation and, like our Canadian colleagues, we are hopeful of a quick conclusion to this process and securing a Canadian settlement for the benefit of all stakeholders.”
Panmure Liberum analyst Rae Maile said: “After 25 years we are finally close to an outcome for Canadian litigation which was spawned in the wake of the MSA in the US in 1998. Full details are not yet available, but the company has announced that it is supportive of the latest plan of arrangement which will resolve all outstanding litigation and release the company from all tobacco claims.
“This will be funded by “cash on hand and the cash generated from the future sale of tobacco products in Canada”. The tobacco companies in Canada (this will also apply to Philip Morris and Japan Tobacco) will continue to operate as going concerns “for the benefit of all stakeholders”. Presumably this means there will be a profit stream in future, but almost certainly at a lower level.”