19 February 2020
Cynthia Callard & Flory Doucas
Over the past two decades, each of Canada’s provincial governments has filed a lawsuit against tobacco companies to recover the costs of treating diseases caused by the companies’ wrongful behaviour.
Health organizations have long supported these efforts, recognizing that they can help achieve justice against corporate wrongdoing, can compensate taxpayers for health-care costs, and can expose the truth about unscrupulous industry behaviour. Most importantly, these lawsuits are seen as a way to protect future generations from the ravages of smoking by accelerating an end to this harmful trade.
These goals are now in peril. Last March, after a receiving a particularly harsh condemnation from the Quebec Court of Appeal and being ordered to pay $13 billion to injured smokers in that province, the companies sought protection under the Companies’ Creditors Arrangement Act (CCAA). They were able to abuse the insolvency system to suspend all lawsuits against them and to force the provinces and other claimants to enter into negotiations aimed at a “global settlement.”
The result is that instead of facing each other in open court, governments and tobacco companies are now locked in closed-door secret negotiations. Despite the fact that the outcome of these suits is arguably one of the most important public health developments of our time, governments are not applying the transparency that is routinely given to policy and regulatory decisions.
While the opacity of this process is a concern, the main vulnerability for public health is that none of the governments has indicated its intention to ensure that the companies do not walk away from these lawsuits with the continued ability to harm Canadians with their trade. The prospect of a negotiated deal which leaves the companies’ core activities unscathed is real, especially given the governments’ apparent priority for maximizing the revenue that they can extract from the companies.
The Canadian companies and their multinational owners are facing provincial claims in excess of $500 billion, but have only a few billion in assets to offer, as profits have long been distributed to shareholders as yearly dividend payment. The sad reality is that the Canadian tobacco companies and their foreign owners cannot pay even a fraction of the damage they have caused.
The only assets the companies can offer governments are future revenues from the millions (in Canada) and billions (worldwide) of addicted and future customers. To receive any significant compensation from these settlements, the provinces will have to agree to sustain the industry’s business model of addicting future generations of replacement smokers.
A settlement that is based on revenues from future tobacco sales will inevitably perpetuate the tobacco epidemic, not end it. Even a settlement that funds health promotion activities or prohibits certain corporate activities will not be able to compensate for the damage caused by incentivizing tobacco sales.
A more powerful and beneficial outcome from these lawsuits would for the provinces to insist on a mandatory and enforceable timetable for the rapid phase-out of combustible cigarettes, followed by a phase-out of non-licensed nicotine products. Aligning reductions in tobacco supply with ongoing public health efforts to reduce demand would drive us toward the federal objective of less than five per cent smoking prevalence by 2035.
Yes, this will require an end to the tobacco business as we know it. Yes, it will require governments to progressively wean themselves off of tobacco revenues. And yes, we should call on our governments to settle for no less.
Cynthia Callard is executive director of Physicians for a Smoke-Free Canada. Flory Doucas is co-director, Quebec Coalition for Tobacco Control.