In April this year the UK finally joined the other 26 EU members as a signatory to the 2004 AntiContraband and AntiCounterfeit Agreement with Philip Morris International and a similar cooperation agreement reached with Japan Tobacco International in 2007.

In April this year the UK finally joined the other 26 EU members as a signatory to the 2004 AntiContraband and AntiCounterfeit Agreement with Philip Morris International and a similar cooperation agreement reached with Japan Tobacco International in 2007.

The agreement with Philip Morris was made to settle a long-running legal dispute with the EU over its alleged complicity in tobacco smug-
gling. Both its provisions and those of the subsequent JTI agreement oblige the two companies to take effective action to control the illicit trade in their products, with penalties if they fail to do so.

There were originally ten signatories among EU countries to the agreement, with a further 16 signing up by 2007. Why the UK stood out for so long is a matter of debate, particularly given the scale of contraband cigarettes in the country which are estimated by HMRC
(Her Majesty’s Revenue & Customs) to cost the government nearly £3 billion in lost revenues.

One reason given is that since Philip Morris has only a small market share in the UK, its agreement was not relevant (although this argument does not hold for the agreement with JTI, owners of Gallaher, the UK’s second large tobacco company with a market share
of nearly 40%.).

Another is that the government already had voluntary agreements (Memoranda of Understanding) in place with the major tobacco companies in the UK – BAT, Imperial Tobacco and Gallaher, which are designed to reduce smuggling. Unlike the EU- Philip Morris and JTI agreements, however, these were not legally binding, but this was overcome by one of the provisions of the Finance Act of 2006 which was designed to complement the MOUs, applying the same strictures and conditions to all tobacco manufacturers and penalising companies that fail to take appropriate steps to counter smuggling.

These considerations notwithstanding, the UK has now opted in, a move that has been welcomed by the European Commission. Its Vice President Siim Kallas commented that: ‘this united front by the Community and all the member states shows how seriously we take the fight against illicit tobacco products. It is a strong signal to other companies that such legally binding arrangements are an essential tool to
strengthen our action in this area.’