British American Tobacco vowed today to “vigorously defend itself” after Canada’s Supreme Court cleared the way for the company to be sued for costs of smoking-related illnesses.
BAT and other tobacco companies face claims totalling billions of pounds following the court’s decision to uphold legislation that lets the government in British Columbia seek damages to cover health costs dating back 50 years.
BAT’s subsidiary Imperial Tobacco Canada – unconnected to the company of the same name in the UK – said it would fight any lawsuit against it in British Columbia.
Don McCarty, general counsel of Imperial Tobacco Canada, added the company was “confident” of victory.
The British Columbia government claims the industry knew the risks of tobacco for years but failed to reveal them to the public.
It is seeking as much as €7bn compensation from firms including Imperial Tobacco Canada, Philip Morris, Rothmans and Benson & Hedges.
The tobacco groups disputed British Columbia’s right to pursue them, but the Supreme Court of Canada upheld the legislation.
If other Canadian provinces follow British Columbia’s lead, it could cost the companies hundreds of billions of dollars.
Imperial Tobacco Canada accused the British Columbia government of a “cash grab”.
Mr McCarty said: “This case is not about tobacco and it’s not about health - it’s about abuse of power and a grotesque cash grab by the government.
“This decision essentially means that it is open season on any industry that any government decides to take on for its own benefit.
“Industries such as fast food, alcohol, gaming and others are all now fair game for a statute of this kind.”
Mr McCarty said governments in Canada already collected more than €6.4bn a year in taxes from the tobacco industry. Since 1970, he said the figure was €92bn.
He added that the conduct of the government in the history of the tobacco industry should be also explored.
Barclays analyst David Liston said the Supreme Court decision was likely to produce negative sentiment towards BAT shares in the short term, but said BAT remained the favoured tobacco stock.