EU Files Another Smuggling Suit against US Tobacco Cos.

By Patrick Goodenough | July 7, 2008 | 8:09 PM EDT

London ( - Less than a month after a New York court threw out a similar case, the European Union has filed another lawsuit against two U.S. tobacco giants, accusing them of smuggling cigarettes to Europe.

Thousands of container-loads of contraband cigarettes are believed smuggled into the EU each year from third countries.

The EU's executive body, the European Commission (EC), holds R.J. Reynolds and Philip Morris responsible. It is claiming damages for billions of dollars in tax revenue that allegedly has been lost to smuggling, and it also wants a court ruling to force a change of policy to prevent the problem from continuing.

The two companies insist they sell only to legitimate dealers.

On July 17, an earlier case was dismissed by a New York district judge who ruled that individual states, not the EU itself, were affected by smuggling. Judge Nicholas Garaufis also refused to allow individual countries to become joint plaintiffs in proceedings that were already underway.

To avoid a repeat of that argument, ten of the EU's 15 member states are taking part in the new lawsuit, together with the EC itself.

The UK government is not one of them. Britain's concerns relate to the smuggling into the country of British cigarettes, rather than American brands.

In a statement, the EC expressed optimism that the new case would succeed.

"The ruling delivered by the U.S. court on July 17 2001 contains many positive aspects, which have encouraged us to pursue our legal case against cigarette smuggling," said EU budget commissioner, Michele Schreyer.

"Protecting the financial interests of the European Union and fighting fraud remains a top priority" for the EC, she said.

The EC has declined to comment further or elaborate on its case. In its earlier case, it accused the two firms of involvement in "a pattern of racketeering activity, including but not limited to money laundering, wire fraud, mail fraud," among other things.

Patrick Goodenough
Patrick Goodenough
Spencer Journalism Fellow