British American Tobacco (BAT) said Friday a court-appointed Mediator and Monitor’s compromise arrangement, which had been filed in the Ontario Superior Court of Justice, had marked an important step towards a potential settlement.
In March 2019 Imperial Tobacco Canada (ITCAN), a subsidiary of BAT, obtained creditor protection under the Canadian Companies’ Creditors Arrangement Act (CCAA). Under a confidential court supervised mediation process ITCAN has been negotiating a possible settlement of all of its outstanding tobacco litigation in Canada, while continuing to run ITCAN’s business in the normal course.
“This has been a complex, confidential mediation and, like our Canadian colleagues, we are hopeful of a quick conclusion to this process and securing a Canadian settlement for the benefit of all stakeholders,” a BAT spokesperson said.
The claims primarily stem from two major class action lawsuits filed over 26 years ago. These involved allegations that tobacco companies misled consumers about the health risks of smoking and failed to adequately warn them of the dangers. In 2015 a Quebec court upheld a decision awarding around C$15 billion to smokers in the province, which impacted ITCAN and other tobacco companies.
ITCAN said it had been working in good faith under the direction of the Mediator to resolve all tobacco litigation in Canada. The plan resolved all Canadian tobacco litigation and provided a full and comprehensive release to Imperial, BAT and all related entities, for all tobacco claims, BAT said.
The settlement would be funded by cash on hand and cash generated from the future sale of tobacco products in Canada, while at the same time maximising recovery for the creditors, the statement said.
A Mediator and Monitor’s report noted that on August 1, 2024, a proposed Federal Bill in connection with amendments to the Tobacco and Vaping Products Act, stated that the Canadian government had opened a consultation process for a “tobacco cost recovery framework” that would introduce an annual charge applied to designated tobacco product manufacturers and importers.
The annual charge aimed to recover costs incurred by the Canadian government in relation to carrying out the purpose of the Tobacco and Vaping Products Act. The proposed annual charge would vary based on a manufacturer’s “tobacco product domestic market share”.
“It also allows the Canadian tobacco companies to continue operating as a going concern for the benefit of all stakeholders… We look forward to working towards a final agreement that is in the best interests of all stakeholders, including the claimants, and bringing this process to a successful conclusion,” the statement from BAT said.
CCAA is the Companies’ Creditors Arrangement Act, and it refers to the Canadian Federal Act that allows bankrupt corporations the opportunity to restructure their affairs. An organisation that files for court protection under CCAA continues to operate and maintain business that is ‘in the ordinary course’ of business.
FTI Consulting Canada is serving as the Court-appointed Monitor of ITCAN.
The Mediator and Monitor also said Imperial’s machinery installed at a third-party manufacturing facility owned by Bastos du Canada Limitée, was rendered inoperable by the flooding that impacted Montreal in August 2024. Imperial was assessing the timing and cost of repairs and was engaged in discussions with contract manufacturers to secure its supply of certain tobacco products until operations were resumed at Bastos.
