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COMMENTARY: Compensation for smokers less crucial than consumption targets on Big Tobacco

- Reuters


Over the past two decades, each of Canada’s provincial governments has filed lawsuits against tobacco companies to recover the costs of treating smoking-related diseases, with the total claims amounting to well over $500 billion. 

At the same time, two Quebec-based class-action lawsuits representing tobacco victims made their way through the courts, up until March 1 of 2019, when the Quebec Court of Appeal ordered Canadian tobacco manufacturers to pay $13 billion to smokers suffering from tobacco-caused cancer and emphysema.

In response to this ruling, Canadian tobacco companies applied for bankruptcy protection under the Companies’ Creditors Arrangement Act (CCAA). A few days later, on March 8, 2019, an Ontario court agreed and suspended all legal actions them, ordering all creditors to engage in secret closed-door settlement negotiations with industry lawyers … with the goal of maintaining the “viability” of the tobacco industry. Tobacco companies can carry on “business as usual” while Quebec class-action victims continue to wait for a resolution of the case they’ve been fighting over 20 years and won in 2019.

Unfortunately, provincial governments have so far not applied the standards of transparency and consultation that are routinely applied to much less significant issues. They have all agreed to the secretive process and none have consulted civil society on how to resolve these cases. And while they have repeatedly referred to monetary objectives, not one has articulated any public health goals.

Indeed, all provinces other than Ontario and Quebec have outsourced their cases to private sector law firms working on a contingency-fee basis. These lawyers have no incentive to negotiate health outcomes and every incentive to maximize a financial one and to do it as quickly as possible since they bear the burden of ongoing legal fees.

Yet despite the instructions of the Ontario court, settlement negotiations are not mandatory, and provinces have the power to control or to stop the insolvency process. And since any resolution requires the consent of “a majority in number representing two-thirds in value of the creditors,” Ontario and Quebec together have a veto on any resolution.

At the very least, the provinces should reject any settlement that perpetuates the tobacco industry or spreads financial compensation over several years, as did earlier Canadian and American suits, including Canadian contraband settlements and the U.S. Master Settlement Agreement.

This time, Big Tobacco should not come out of this process with the continued capacity to profit from the sale of its deadly products.

Earlier this month, the Ontario Court granted tobacco companies a fifth extension of this protection order, this time until the end of March 2021. During the course of the hearing, manufacturers provided data showing that their kitty contains barely one hundredth of the total claims ($5.2 billion). It is now clearer than ever that any monetary settlement will represent only a tiny fraction of the amounts owed to victims ($13 billion) or sought by the provinces ($500 billion).

A much better outcome would be for provinces to obtain a health outcome, like an enforceable timetable for the rapid phase-out of combustible cigarettes such as the federal target smoking rate of five per cent by 2035. Companies would be required to meet annual milestones for tobacco use reduction and failure to meet them would carry significant and dissuasive court-imposed penalties.

Indeed, a new study prepared by health economics experts H. Krueger & Associates Inc. has shown that reaching this target would lead to savings of $26.1 billion in direct and indirect costs for Ontario and $22.2 billion for Quebec — amounts that are massively greater than any remotely realistic monetary settlement. These savings would also be accompanied by 990,000 fewer smokers in Ontario and 640,000 fewer smokers in Quebec, preventing untold amounts of disease and deaths and freeing up untold numbers of hospital beds.

Critical decisions are on the table. How the provinces will decide to resolve these lawsuits is one of the most important public policy issues of the 21st century. It would be a historic shame if provinces were to miss this once-in-a-lifetime opportunity to significantly and permanently change the foundation and predatory business practices of Big Tobacco.

Neil Collishaw is director of research, Physicians for a Smoke-Free Canada. Flory Doucas is co-director, Quebec Coalition for Tobacco Control.

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