DID THE EU MAKE A FOOL’S BARGAIN WITH THE TOBACCO INDUSTRY? – PART 3

European politicians and organisations have raised heavy critic against the close relationship between lawmakers and the tobacco industry and the secrecy surrounding the controversial deals signed with tobacco companies. Now they call on the EU Commission not to prolong the deal with Philip Morris International which is about to expire.

As previously reported by Euranet Plus, the smuggling of cigarettes hasn’t declined in the EU despite the deals made with the tobacco industry. Nor does the money received by the companies match the enormous losses of tax and duties due to illicit trade.

Nevertheless, the lack of results in the fight against smuggling is not even the main source of critique against the European agreements. It is what is described as a close relationship between European lawmakers and the tobacco industry and lack of transparency.

Ingeborg Grässle, chair of the Budgetary Control Committee in the European Parliament, says she and others have been fighting for years to have access to documents related to the agreements.

“You know when somebody pays a billion euros you wonder why should somebody do that? What are their interests? But these letters, where the tobacco industry lays down their interest, are not public. The minutes of the annual meetings between the tobacco industry and OLAF and the members states and law enforcements authorities in the member states are not public,” Grässle said in a interview with Euranet Plus.

No true democracy

After persistent requests, members of European Parliament (MEPs) like Grässle did get access to documents that they had asked for. But even so, many still complain that it’s not enough. The papers are only available in a specific reading room in the Parliament where members can’t enter with any recording device nor pen and paper.

And even if they could remember everything they read, one would still need to be a specialist lawyer to understand what the documents really mean, according to one MEP.

José Bové, loud and franck French member for the Greens in the European Parliament, argues that this is not real transparency or true democracy. He thinks the deals have been made in a dirty way.

“When you know that the same guy who negotiated in 2004 this agreement, Michel Petite, who was at the top office of the lawyers in the European Commission, is now working working for PMI [Philip Morris International] in private lawyers cabinet,” Bové said.

Bové raised the delicate case of Michel Petite, who was Director General of the Legal Service of the European Commission when the deal with PMI was signed in 2004.

In 2007 he left the Commission to work for the lawyer firm Clifford Chance who represented PMI. The year after Petite received the “Worst EU Lobbying Award” by a group of NGOs working for more transparency. Still, the year after, he was appointed as head of the Commission’s ethical committee, which is responsible for looking into conflict of interests of the Commissioners.

Asked by the European Parliament if the Commission “contracted Clifford Chance or any associate since 2004”, the European executive explained that “between 2010 and 2012 the Commission concluded three contracts with Clifford Chance in view of receiving legal advice on the preparation of legal documents related to the financial crisis and financial assistance to Greece.”

Grässle describes the agreements with the tobacco industry as door openers to EU politicians for the companies. Therefore, she urges the Commission not to renew the deal with Philip Morris International, which will expire in 2016.

A new tobacco deal?

The Budget Commissioner, Kristalina Georgieva, who is currently responsible for the agreements, has said that PMI “seems interested” in signing a new deal.

In a written statement to Euranet Plus, the company writes: “Over the past ten years, the landmark Cooperation Agreement between Philip Morris International, the EU Commission and Member States has been an important part of advancing the fight against illegal tobacco trade in the EU. We remain committed to helping eliminate this complex, costly and constantly evolving problem….”.

There has been “exploratory talks” between PMI and OLAF, the EU’s anti-fraud office, but Commissioner Georgieva is clear that this does not mean that the agreement will be renewed.

“There are no ongoing negotiations. None. There have been, as per the agreement, exploratory talks. These are required by the agreement with Philip Morris International, two years before exploration, we need to look into the potential for prolongation,” Georgieva explained.

Before any decision can be made, the Commission will present an assessment on the agreement with PMI. The publication of this assessment has been postponed, but it should be presented shortly.

Alternative tools to fight smuggling

Since the agreements were signed with the tobacco industry, the EU has adopted an Tobacco Products Directive which regulates the production, presentation and sale of tobacco products within the EU.

At the same time, the World Health Organisation, WHO, has put forward an international agreement to fight tobacco smuggling – the Framework Convention on Tobacco Control (FCTC).

Critics who wants to put an end to the deals with the tobacco companies point at the new EU regulation and the WHO Convention and say that these could be used to fight illicit trade in tobacco in better way independently from the industry.

“We have the Tobacco Product Directive. And part of the Tobacco Product Directive with an article on traceability. So we have to implement this traceability system for the EU. And secondly, we have an international treaty, called the protocol to eliminate illicit trade by the World Health Organisation. And together with the Tobacco Product Directive we have two international instruments to control cigarette smuggling”, Luk Jossens at Smoke Free Partnership argued.

The Budget Commissioner has also talked about the WHO Convention in a debate with the European Parliament. The Commission has proposed that the EU and its member states fully join the FCTC.

But Georgieva has also pointed at limits with both the EU regulation and the convention.

The EU Directive can naturally only be imposed in the EU and thus has clear limitations when it comes to fighting smuggling originating from outside the EU. And the WHO Convention has not yet been signed by the necessary number of nations. Far from it. Only a handful of countries have signed and 40 participants are needed for it to enter into force.

Counterfeit cigarettes confiscated by OLAF partners / ec.europa.eu

Counterfeit cigarettes confiscated by OLAF partners in Latvia

A difficult decision on a ‘complex issue’

EU officials that Euranet Plus talked to described the agreement with PMI and the other tobacco companies as “complex”. The reality is not as black and white as criticising politicians and organisations describe. The overall picture is grey, they say.

As recently reported by Euranet Plus, smuggling of cigarettes of both genuine and counterfeit products included in the agreements have decreased in Europe. And there is no immediate workable alternative to the deals as the WHO Convention still lacks signatures and the EU rules are limited to Europe.

At the same time it is clear that the money received from the companies is little compared to the tax revenues lost due to illicit trade. Partly because the trade on the black market hasn’t decreased, notably despite the deals with the major players in the industry. A whole new market for, potentially more dangerous cigarettes, so called cheap whites, has arisen.

Previous accusations and court procedures also show that it is equally difficult to divide companies within the tobacco industry in good guys and bad guys, or legitimate businesses and criminal activities. There the borders were also grey as the major companies were said to be organising the smuggling themselves.

Has this changed with the agreements signed with the EU and member states? An ongoing investigation within OLAF, the EU’s anti fraud office, may suggest that the answer is no. The investigation concerns smuggling accusations against Japan Tobacco International, one of the four companies that the EU and the member states signed contracts with.

Though, very little is known about the accusations.OLAF can only confirm that there is an investigation. Everything else is secret.

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