The long-awaited showdown between
Canadian governments and the tobacco industry is finally
on, after the Supreme Court upheld British Columbia's
right to sue manufacturers to recover health costs.
Few observers expect the tobacco
industry to escape without dropping several billion
dollars, even if other provinces don't follow suit,
which they almost certainly will. The Supreme Court
upheld the constitutionality of BC's 1998 Tobacco Damages
and Health Care Costs Recovery Act, which the cigarette
makers had argued went beyond the province's legal powers.
If the law is sound, the case for recovery of costs
is basically already accepted in principle by the highest
court in the land.
That doesn't mean Big Tobacco won't
fight tooth and nail. An industry known for mobilizing
armies of lawyers seems to be digging in for a legal
trench war, worried that Canada's actions could set
a precedent in other countries.
BIG
TOBACCO'S NIGHTMARE
Canada threatens the industry in some ways more than
even the United States, home of tobacco litigation.
The first lawsuit for recovery of healthcare costs was
launched by Florida 10 years ago. Other states soon
joined in, swarming the industry, forcing it to concede
defeat in a settlement that will cost it $289CDN billion
in payments to 46 states over 25 years.
But US states pay for only a fraction
of their citizens' healthcare. Private suits against
Big Tobacco are tricky to win. Individuals, with limited
legal resources, must prove that their illness was caused
by tobacco. The BC law has already removed that burden
of proof — it treats the causal link between tobacco
and chronic disease as established fact.
In Canada's public health system,
most of the spending on tobacco-related disease has
been government spending. So provincial governments
can potentially claim a lot more per citizen than US
states could.
In fact, the projected damages
from a final settlement in Canada are about three times
as high per capita as they were in the States. British
Columbia's likely claim will be about $9 billion, and
legal experts predict that, all told, the provinces
will get about $86 billion in damages. That's equal
to more than 100 years' profits for the tobacco industry
at current prices.
Don McCarty, vice-president legal
of Imperial Tobacco Canada Ltd, was remarkably candid
in comments to reporters after the court judgement.
Acknowledging that the industry's liability insurance
would only cover a tiny fraction of likely claims, he
said the high price of cigarettes in Canada left no
room for manoeuvre.
When the US settlement was reached
in 1997, "cigarettes were a buck a pack. So what they
did is increase the price of their product to pay for
the settlement over 25 years. We don't have that option,"
say Mr McCarty. "Our cigarettes are already nine bucks
a pop."
Almost all of that money goes straight
to the government in the form of taxes, he said. "They
want anywhere between $10-to-80 billion. After taxes,
the (big) three companies made maybe $500 million. Where
do they think we're going to get the money from?" The
industry paid $9 billion to Canadian governments in
taxes last year, he added. "They already have their
settlement."
THE
UGLY TRUTH
Health Canada estimates the total national expenditure
on treating tobacco-related diseases at $4 billion a
year. So our governments, far from being out of pocket
through smoking, have been making a tidy $5 billion-a-year
profit out of their citizens' bad habits. They simply
have no losses to recover.
After the Supreme Court ruling
federal Health Minister Ujjal Dosanjh denied the government
was exploiting tobacco. "I don't think that one views
these kinds of issues as cash cows," he said.
But he stressed that the federal
government has no intention of joining any lawsuits
against the industry. "That's not an issue that I have
given any thought to," he added. His department would
remain focussed on cessation, control and prevention,
he said.
THE
DEFENCE'S CASE
Since every province except PEI intervened in the recent
Supreme Court case, you can expect a no-holds-barred
fight from an industry which feels betrayed by its long-term
de-facto business partner.
"The risks associated with tobacco
have been well-known for decades," said Don McConty.
"What we knew, the government knew — people knew.
Our defence will be also that we're not the only ones
involved in the regulation of tobacco, the government
has been there."
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