[Intl-tobacco] Reynolds, BAT Win Second Dismissal of Cigarette Smuggling Case

[Robert Weissman]

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Reynolds, BAT Win Second Dismissal of Cigarette Smuggling Case

Sept. 13 (Bloomberg) -- An appeals court for a second time dismissed
lawsuits that accused Reynolds American Inc. and British American
Tobacco Plc of smuggling cigarettes to avoid paying taxes and customs
duties.

The ruling by the 2nd U.S. Court of Appeals in New York rejected
separate lawsuits by the European Union and by 25 departments of the
nation of Colombia, which are equivalent to U.S. states. The European
Union sued R.J. Reynolds, a unit of Reynolds American. The Colombian
suit names British American, the world's second-largest cigarette maker.

The court first dismissed the suits last year, only to have the U.S.
Supreme Court ask it reconsider. Today, the appeals court again cited
the so-called revenue rule, a U.S. legal principle that bars suits by
foreign governments seeking to collect unpaid taxes.

``When a foreign nation appears as a plaintiff in our courts seeking
enforcement of its revenue laws, the judiciary risks being drawn into
issues and disputes of foreign relations policy that are assigned to --
and better handled by -- the political branches of government,'' the
court wrote.

The EU and 10 of its member states accused R.J. Reynolds of operating a
global scheme to illegally import cigarettes into Europe using drug
traffickers around the world. The company allegedly set up special
accounts in Panama and Switzerland to launder the proceeds.

The Colombian complaint says tobacco companies, particularly BAT and its
former Brown & Williamson unit, ran a similar system to sneak cigarettes
into that country. BAT last year sold Brown & Williamson to Reynolds
American Inc., the North Carolina-based parent of the second-largest
U.S. cigarette company.

Altria Group Inc.'s Philip Morris International last year agreed to pay
about $1.25 billion over 12 years to settle European Union charges that
the company aided smuggling.

The Reynolds case is European Community v. RJR Nabisco, 02- 7325, Second
Circuit Court of Appeals.


To contact the reporter on this story:
David Glovin in New York at  dglovin@bloomberg.net.


Last Updated: September 13, 2005 17:47 EDT

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