Assessment of the European Union’s illicit trade
agreements with the four major Transnational
Tobacco Companies
Luk Joossens,1 Anna B Gilmore,2 Michal Stoklosa,3 Hana Ross4
1

Association of the European
Cancer Leagues & Tobacco
Control Expert, Foundation
Against Cancer, Brussels,
Belgium2
Department for Health,
University of Bath and UK
Centre for Tobacco andAlcohol Studies, Bath, UK
3
Economic and Health Policy
Research, American Cancer
Society, Atlanta, USA
4
University of Cape Town,
Cape Town, South Africa
Correspondence to
Dr Luk Joossens, Association ofEuropean Cancer Leagues,
Chaussée de Louvain 479,
Brussels B-1030, Belgium;
luk@europeancancerleagues.
org
Received 24 December 2014
Accepted 4 May 2015
Published Online First
28 May 2015

ABSTRACT
To address the illicit cigarette trade, the European Union(EU) has signed agreements with the four major
Transnational Tobacco Companies (TTCs) that involve
establishing extensive systems of cooperation. All
agreements foresee two types of payments: annual
payments (totalling US$ 1.9 billion over 20 years) andsupplementary seizure payments, equivalent to 100% of
the evaded taxes in the event of seizures of theirproducts. While limited by the fundamental lack oftransparency in this area, our analysis suggests thatthese agreements have served largely to secure the TTCs’interests and are threatening progress in tobacco control.
The seizure payments are paltry and a wholly inadequate
deterrent to TTC involvement in illicit trade. Despite theagreements, growing evidence indicates the TTCs remain
involved in the illicit trade or are at best failing to secure
their supply chains as required by the agreements. The
intention of the seizure-based payments to deter the
tobacco industry from further involvement in the illicit
cigarette trade has failed because the agreements
contain too many loopholes that provide TTCs with boththe incentive and opportunity to classify seized cigarettes
as counterfeit. In addition, the shifting nature ofcigarette smuggling from larger to smaller consignments
often results in seizures that are too small to qualify forthe payments. Consequently, the seizure payments
represent a tiny fraction of the revenue lost fromcigarette smuggling, between 2004 and 2012, 0.08%
of the estimated losses due to illicit cigarette trade in the
EU. Our evidence suggests the EU should end these
agreements.

INTRODUCTION

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To cite: Joossens L,
Gilmore AB, Stoklosa M,
et al. Tob Control
2016;25:254–260.
254

A key element of the European Union’s (EU) policy
to combat the illicit cigarette trade is its collaboration with the tobacco industry.1 The EU has
signed illicit trade agreements with the four major
Transnational Tobacco Companies (TTCs): in 2004
with Philip Morris (PM), which includes Philip
Morris International (PMI); in 2007 with Japan
Tobacco International ( JTI); and in 2010 with
British American Tobacco (BAT) and Imperial
Tobacco Limited (ITL).2–5 At least three of the four
agreements were signed to settle or avoid legal disputes between the companies and the EU in relation to involvement of those companies in cigarette
smuggling. All established extensive systems ofcooperation between the TTCs and the EU at atime when the broader regulatory trend was one of
exclusion.
Since the Agreement with PMI ends in July 2016,
negotiations to explore a possible extension are

currently underway.6 This article therefore aims to
inform those negotiations by examining the effectiveness of these agreements. It begins by outlining
the background to the agreements including thehistory of TTC involvement in the illicit cigarettetrade globally and in the EU, and the development
and nature of these agreements. The aim of thispaper is to critically assess the agreements and their
execution in the EU. We also discuss the implications of these agreements for tobacco control.

THE HISTORY OF THE TOBACCO INDUSTRY’S
INVOLVEMENT IN THE ILLICIT TOBACCO TRADE
Tobacco companies make their proﬁts when theysell to traders, regardless of whether the cigarettes
are then sold legally or illegally.7 8 Evidence of thedirect and indirect involvement of the tobacco
industry in cigarette smuggling is well documented—in internal documents that TTCs were forced torelease in the course of litigation,9–14 their own
admission15 and court judgements.16 Since 1997,
there have been several ofﬁcial investigations andsubsequent court cases in different parts of theworld (Hong Kong, Canada, Colombia) that haveaccused the industry of supplying the smuggled
cigarettes or at least of being aware of the illegal
destination of their products.17–22
In the 1990s, American cigarette brands were a key
element of the contraband trade in the EU.23 24 An
EU investigation on smuggling activities started in
1998. It culminated on 3 November 2000, when theEU ﬁled a lawsuit in the US District Court in
New York, against PM, RJ Reynolds and Japan
Tobacco, which had by then acquired the international division of RJ Reynolds, alleging that these
tobacco companies were guilty, in effect, of controlling entire smuggling operations and accusing thecompanies of “an ongoing global scheme to smuggle
cigarettes, launder the proceeds of narcotics trafﬁcking, obstruct government oversight of the tobacco
industry, ﬁx prices, bribe foreign public ofﬁcials andconduct illegal trade with terrorist groups and state
sponsors of terrorism”.25 In 2000 and 2001, 10 EU
countries, led by Italy, joined the lawsuit.26
Additional allegations were ﬁled by the EU andten EU governments against RJ Reynolds in thesame court in October 2002 on the company’s
engagement in organised crime, money launderingand narcotics trafﬁcking and in transactions thatﬁnanced both the Iraqi regime under Saddam
Hussein and terrorist groups.27 28 While thissecond lawsuit against RJ Reynolds is stillongoing,29 PM and JTI settled their smuggling disputes with the EU in 2004 and 2007, respectively.4

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AGREEMENTS WITH THE FOUR MAJOR TOBACCO
COMPANIES
In parallel with the legal proceedings, conﬁdential discussions
began in late 2001 between the European Commission and PM
on a possible agreement to cooperate in combating illicit cigarettes.4 In 2004, the EU and 10 Member States dropped the caseagainst PM in exchange for an enforceable and legally binding
agreement. A similar agreement settling a legal dispute was concluded with JTI in December 2007. Two additional agreements
were signed with BAT in July 2010, and ITL in September
2010. An overview of the main characteristics of the four agreements is presented in table 1.
Although the agreements with BAT and ITL were not part ofa legal settlement, ITL’s agreement releases the company fromfuture liability for smuggling, and it is possible that the BAT
agreement may serve the same purpose. Alongside the main
agreement, ITL signed a parallel agreement (called Mutual
Cessation Agreement) that “absolutely, unconditionally andirrevocably fully release and discharge ITL Group Companies
and their successors, Agents and Assigns from any and all EU
Claims”.5 A press release from Her Majesty’s Revenue andCustoms in the UK suggests the BAT agreement has a similarclause noting that “the manufacturers (BAT) are released fromany civil claims arising out of past conduct relating to illicit
trade”.30 However, this information is not part of the publicly
available BAT-EU agreement.5 Three of the four agreements(except with PM) also give TTCs the right to terminate themonetary payments if the agreements fail to meet their “reasonable expectations” of beneﬁt.5
The four agreements foresee two types of payments to theEuropean Commission and the Member States: annual ﬁxed
payments (see table 1) and supplementary seizure-based payments (see table 2). The ﬁxed payments total 1.9 billion US
dollars paid in annuities from 2004 to 2030. PM pays theEuropean Commission and Member States and its lawyers atotal of $1.250 billion in annual payments ( payment of $1
billion over 12 years and $250 million legal fees). JTI’s total ofannual payments are $400 million over 15 years, BAT’s total ofannual payments are $200 million over 20 years, and ITL’s
annual payments are $300 million over 20 years. These payments are generally considered compensation for the losses
incurred through the TTC’s smuggling activities. For instance,
Italy—a prominent victim of PM smuggling activities—received
the largest proportion (28.62% of the 1 billion paid by PM).31
In addition to the annual payments outlined above, a key
feature of the agreements is the speciﬁcation of seizure payments
if TTCs fail to control their supply of cigarettes to the illegal
market. The companies agreed to make payments equivalent to100% of the evaded taxes in the event of any seizures of theirgenuine products above 50.000 cigarettes in the EU countries
that were party to the Agreement. If seizures of their genuine
products in the Member States during a year exceed the baseline

Table 2 Cigarette seizure payments in the EU as a result ofagreements with four major tobacco companies
Year

Seizure payments (EURO)

2006
2007
2008
2009
2010
2011
2012
2006–201220 289 472
10 342 796
6 922 838
11 178 975
7 754 716
10 098 035
4 141 791
70 728 624

Source: Anna Gilmore—documents obtained via access to documents legislation.38
EU, European Union.

amounts deﬁned in the Agreements (originally set at 90 million
cigarettes in the PM agreement, 90 million cigarettes in the JTI
and ITL agreements and 150 million cigarettes in the BAT agreement), the tobacco companies must pay 500% of the evaded
duties and taxes.5 Although these baseline amounts have not yet
been reached, the PMI baseline was raised from 90 million
cigarettes to 450 million in 2011,32 substantially reducing the
likelihood of PMI, spun off from PM in 2008, ever paying the
500% penalty.
Some countries earmark the payments to ﬁght illicit cigarettetrade, while others direct the funds to the general budget.2 Allagreements also required TTCs to secure the supply chain
through a range of measures, including product marking andtracking and tracing provisions. The agreements are enforceable,
but all arbitral proceedings are kept conﬁdential.5

ASSESSMENT OF THE AGREEMENTS
Full evaluation of the agreements is almost impossible, as there
are no independent publicly available data on the origins andbrands of illicit tobacco products and the size of the illicit
market in the EU (personal communication, Corneliu
Hoedlmayr, International Relations Ofﬁcer, OLAF, 6 May
2014). The only publicly available data on the EU illicit cigarettetrade over time are data produced by KPMG for the tobacco
industry.33 The KPMG data have been reviewed elsewhere andalthough the underlying methodology was commended, signiﬁcant concerns were raised about the accuracy of the data andthe extent to which they serve the TTCs’ interests.34 Relying on
industry data is therefore highly problematic. We, therefore,
limit our analysis to examining the agreements and their possible impact on tobacco control, and thus on public health.

FINDINGS
Lack of transparency
A key concern is the lack of transparency surrounding the negotiations for, and ongoing management of, the agreements andTable 1 Characteristics of the agreements between the TTC’s and the EU
Company

Total of annual
payments US$

Date of signature

End

Settlement and/or
discharge of legal claims

Renewal clause

Termination clause

PM
JTI
BAT
ITL

1 billion
400 million
200 million
300 million

9/7/2004
14/12/2007
15/7/2010
27/9/2010

9/7/2016
14/12/2022
15/7/2030
27/9/2030

Yes
Yes
Unknown (see text)
Yes

Yes
No
Yes
Yes

No
Yes
Yes
Yes

Source: OLAF.5
BAT, British American Tobacco; EU, European Union; JTI, Japan Tobacco International; ITL, Imperial Tobacco Limited; PM, Philip Morris; TTC, Transnational Tobacco Companies.

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illicit trade more generally. Also, parts of the agreements are notpublic. For example, parts of the publically available text of theagreement with ILT have been “omitted due to a request for
conﬁdential treatment”.35 Access to document requests revealthat the correspondence between the European Anti-Fraud
Ofﬁce (OLAF) and the four tobacco manufacturers amounts totens of thousands of documents, and that OLAF has attended
numerous meetings with PMI, JTI, BAT and ITL as part of theagreements.36 Yet, not only is there no comprehensive list ofthese documents,36 but requests for these documents, andrelated information through parliamentary questions and accessto documents requests, are often refused on the basis of conﬁdentiality.36–38 For example, a parliamentary question could not
obtain information on the seizure payments for one of theimportant contraband brands, Classic, an ITL brand,39 which
was in 2008 the third most seized cigarette brand in the EU.40
The European Commission stated that no information could be
provided due to “the rules governing the treatment of conﬁdential information (…)”.39 A freedom of information request on
the PMI tracking and tracing system, Codentify, revealed thatbetween January 2008 and November 2011, there were 17
documents of correspondence between OLAF and PMI on thissubject. Ten documents were not made public because their disclosure could harm the interests of the Commission during the
FCTC negotiations, and “OLAF’s relations with companies
potentially involved in the possible implementation of tracking
and tracing systems”.37 It remains unclear how the release of
documents in 2012 could harm the Commission’s negotiating
position as the consensus on tracking and tracing systems
through the WHO FCTC’s Illicit Trade Protocol was reached in
March 2010.41 Further, this consensus was that the control of
tracking and tracing should remain under control of governments and not be delegated to the tobacco industry (§2 and §10of the article 8 of the Illicit trade Protocol), raising serious concerns about the Commission’s response.42

Inadequate deterrent
The seizure-based payments are the agreements’ main mechanism
for deterring the TTCs from further involvement in the illicit cigarette trade by punishing them each time there is a large seizureof their cigarettes. This should also allow EU Member States torecover the taxes lost. Cigarettes are highly taxed products and
OLAF estimates that, on average, a container with 10 million
cigarettes represents 2 million EURO of lost tax revenue.43
Information on seizure payments is not made public but was
obtained via access to documents legislation (table 2).38 In the
period 2004–2012, a total of €70,728,624 (around US$ 100
million) in seizure payments was made by PMI, JTI and ITL, or,on average, €8.3 million annually. BAT has made no seizure payments to date.38 In 2012, only €4.1 million was paid in seizure
payments.38 This means that the seizure payments were madefor approximately 20 million seized cigarettes,43 just 0.5% of
the 3.8 billion cigarettes seized in the EU in 2012.2
These payments represent a tiny fraction of the revenue lostfrom cigarette smuggling. Based on seizure data in the period
2005–2011, OLAF estimates the ﬁnancial losses due to illicit
cigarette trade at €10 billion annually in the EU.1 The €8.3
million average annual seizure payments are only 0.08% of
those estimated losses.
There are two main reasons these seizure payments are sosmall. First, only large seizures qualify for payments, and since
the agreements were reached, the modus operandi of cigarette
smuggling in Europe has changed. While very large consignments of illicit cigarettes dominated at the time when the256

agreements were negotiated, most illicit cigarette seizures now
consist of substantially smaller consignments. This trend has
been conﬁrmed by the World Customs Organization in its 2013
illicit trade report.44 In Poland, the country with the highest
level of cigarette seizures in the EU, the average seizure in 2011
was around 5200 cigarettes, and for certain brands, such as
BAT’s Viceroy, the average seizure amount was even lower:
1615 cigarettes.45 This means that the threshold of 50 000
cigarettes needed to recover taxes and duties lost has become
increasingly difﬁcult to meet. The shifting nature of illicit trade
has been even recognised by BAT when it agreed to a lower
qualifying threshold of 7500 cigarettes in its 1 August 2014agreement.46 However, this new threshold still remains higher
than, for instance, the average seizure in Poland, and is therefore
not likely to be effective.
Second, payments only apply to genuine TTC cigarettes andnot counterfeits, and yet customs ofﬁcials rely on the industry
to determine whether cigarettes are counterfeit (not eligible forseizure-based payments) or genuine (eligible for the payments).
This provides a motivation and opportunity for TTCs to claimthat the seized cigarettes are counterfeit. According to the agreements, the relevant manufacturer is entitled to examine theseized cigarettes, and send a report to OLAF. If the manufacturer concludes that the cigarettes are counterfeit, the reportmust contain documentation and examination results demonstrating that conclusion.4 If OLAF, or any participating Member
State, disagree with the conclusion that the seized cigarettes arecounterfeit, the matter is referred to an independent laboratory,
designated by mutual agreement of the parties, for ﬁnal determination.4 Since the ﬁrst agreement came into effect, until 31
October 2013, the seized cigarettes have never been analysed byan independent laboratory and all determination has instead
been based on examinations by the TTCs.47 During this period,
Member States submitted a total of 6,261 seizure notices (forseizures of more than 50 000 cigarettes) under the agreements.
Out of the total number of seized cigarettes, 3.2 billion (78%)
were claimed to be counterfeit cigarettes.47 Among seized cigarettes of PMI’s brands, PMI claimed that 92% of them werecounterfeit cigarettes in 2011.48 Yet this very high level ofcounterfeit cigarettes among seizures is inconsistent with theindustry’s own estimates of counterfeits on the illicit market.
PMI’s estimate for the illicit cigarette market globally is that
only 1% was counterfeit in 2012.49 For the EU market, a
PMI-commissioned study states that 16% of illicit PM cigarettes
consumed in the EU were counterfeit in 2011.48 Thus, theindustry-estimated prevalence of counterfeits among seizedcigarettes is almost six times higher than the prevalence of counterfeits among consumed cigarettes. This would imply that
seizure data are unrepresentative of the nature of the illicit
market. There are two potential reasons for this. One could bethat large seizures are more likely to contain counterfeit thangenuine TTC products (and therefore under-represent the realnature of the illicit market in Europe). The other is that TTCs
are classifying too many illicit cigarettes as counterfeit in large
seizures. Either way, it is clear that the seizure payments do not
reﬂect the size of the illicit market attributable to the TTCs’
genuine products.

The industry’s tracking and tracing system
Obliged by the agreements to implement a tracking and tracing
system, the TTCs developed their own system, named
Codentify. The effectiveness of this system has previously beenassessed. It has been found that the industry’s system does notmeet requirements outlined in Article 8 of the FCTC’s protocol

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on illicit trade,50 which deﬁnes that the tracking and tracing
system must be “controlled by the Party”.51 In addition, theindustry-managed tracking and tracing obligation has recently
lost its signiﬁcance due to an EU tracking and tracing systemestablished in Articles 15 and 16 of the Tobacco Products
Directive 2014/40/EU of 3 April 2014.52 The new Directive
introduces an EU-wide tracking and tracing system for the legal
supply chain, and visible and invisible security features (eg,holograms) that should facilitate law enforcement, and help
authorities and consumers detect illicit tobacco products.

Has TTC involvement in illicit cigarette trade declined orceased since the agreements between the EU and the TTCs
were reached?
The intention of the agreements was to crack down on smuggling and put in place what it called a “zero tolerance policy”
toward illicit shipments.53 Yet several reports indicate that the
TTC’s have remained involved in the trade since their deals
were reached. Investigative journalists obtained internal JTI
records from whistle-blowers indicating that the company
remained involved in the illicit trade and had been less thancompliant with the EU agreement.53 54 OLAF has been ofﬁciallyinvestigating this case since December 2011,55 but has yet tomake a public statement or come to a conclusion. Other sources
point to the TTC’s continued complicity in cigarette smuggling
to and through Bulgaria between 2000 and 2010, again, after
its agreement was reached.56 PMI data in 2011 indicate that
21% of all illicit cigarettes in the EU are PMI’s own genuine
brands.48 At best, this indicates PMI’s failure to secure its supply
chain as the agreement envisaged. Concerns have been raised
about the cigarette brand Classic, produced by Imperial
Tobacco, Ukraine, and one of the most seized cigarette brands
in the EU in 2008,40 particularly in light of evidence that the
TTCs have been over-producing cigarettes in Ukraine in theknowledge they would enter the illicit market.57 In 2014, BAT
was ﬁned £650 000 ($1 m; €820 k) by UK tax authorities foroversupplying its products to Belgium.58

What impact has the collaborative approach outlined in theagreements had on tobacco control more broadly?
A key element of the agreements is that they establish extensive
systems of cooperation between the manufacturers, the EU andMember States, an element of the agreements that TTCs haveheavily emphasised.59 60 It is noteworthy that the agreements
were reached at a time the TTCs were increasingly being
excluded from the policy arena via article 5.3 of the FCTC,
which was adopted in 2003 with Guidelines for Article 5.3
agreed in November 2008.61 Illicit tobacco provided a perfectopportunity for the TTCs, despite their inauspicious history, tosignal shared concerns with policy makers and convince authorities that they were acceptable partners in addressing a trade inwhich they had previously been complicit.62 The potential
danger of this collaborative approach threatening tobacco
control if norms of collaboration in illicit reached into otherareas of tobacco control has previously been raised.62 Thosethreats have been particularly apparent during the revision of
the EU Tobacco Products Directive.63 64 Michel Petite, theDirector-General of the European Commission’s legal service atthe time the ﬁrst two agreements were negotiated, who played a
key role in such efforts, now works for PMI in his new positionat legal ﬁrm Clifford Chance.63 The normalisation of relationships between the TTCs and EU public ofﬁcials is further illustrated by the nomination of Michel Petite as chair of the EU
Commission’s Ad hoc Ethical Committee in 2009 and 2012.65

The close relationship between OLAF and the TTCs, indicatedthrough the documents outlined above, raises questions, given
the concerns about OLAF’s role in the scandal surrounding theresignation of Health Commissioner John Dalli,66 67 the lack ofprogress of OLAF’s investigation into JTI’s alleged ongoing
involvement in illicit trade,55 and OLAF’s apparent willingness
to involve TTCs in the implementation of tracking and tracing
systems under the FCTC’s Illicit Trade Protocol, contrary to theprotocol itself.37
A further concern is that the TTCs appear to have used theagreements with the EU, which are heavily promoted on theirwebsites,68 69 to negotiate an increasing number of similar
agreements nationally and internationally.70 In 2011, PMI and
INTERPOL, the world’s largest police organisation, agreed on adeal in which PMI donated €15 million to fund a global initiative against illicit goods trafﬁcking,71 which would promote
PMI’s Codentify system.50

DISCUSSION
While limited by the fundamental lack of transparency in thisarea, our analysis suggests that the agreements have served
largely to secure the TTCs interests, reinforced cooperation
between the manufacturers, the EU and Member States, and arethreatening progress in tobacco control. The seizure payments
are paltry and are a wholly inadequate deterrent to TTC
involvement in illicit trade. The intention of the seizure-based
payments to deter the tobacco industry from further involvement in the illicit cigarette trade has failed because the agreements contain too many loopholes. The industry has both the
incentive and opportunity to classify seized cigarettes as counterfeit; and, despite the nature of cigarette smuggling having
changed from large to small consignments, seizure payments are
due only on large consignments. Further, even the tobacco
industry’s own data suggest that seizure data (which are based
only on large seizures) signiﬁcantly under-represent the proportion of genuine TTC brands in the illicit market. Consequently,
the payments provide no incentives to stop cigarette smuggling
and the recovered value of taxes is minimal.
Growing evidence indicates that, despite the agreements, theTTCs remain involved in the illicit trade or are, at best, failingto secure their supply chains as required by the agreements. The
agreements instead appear to be part of the TTCs’ strategy toestablish alliances and partnerships with authorities at thenational and international levels to position the tobacco industry
as part of the solution to the illicit tobacco trade. By establishingextensive yet opaque collaboration between the TTCs and theCommission, the agreements threaten tobacco control within
the EU. By enabling the industry to promote the agreements as
an effective model of collaboration, they are also threatening
tobacco control internationally. For this reason, many parties to
the FCTC were opposed to the inclusion of “legally binding
and enforceable agreements” in the text of the draft protocol
during the last round of the negotiations of the illicit trade
protocol in 2012.72
The agreements are also not in line with Article 5.3 of theWHO’s Framework Convention on Tobacco Control (FCTC),
which all 28 EU countries and the EU have ratiﬁed, requiringthat “in setting and implementing their public health policies
with respect to tobacco control, parties shall act to protect thesepolicies from commercial and other vested interests of thetobacco industry in accordance with national law”. The EU’s
contradictory approach to Article 5.3 and industry collaboration
is illustrated by its opinion, expressed at the Fifth and Sixth
Conference of the Parties to the FCTC in November 201273

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and October 2014,74 that INTERPOL should not to be granted
an observer status since it received funding from the tobacco
industry. Yet a similar relationship exists between the EU andthe tobacco industry: with no linked legal action to prompt adeal, the EU accepted $500 million (€400 million) from BAT
and ITL, 26 times larger than PMI’s donation to INTERPOL.
In three of the four agreements, the tobacco companies havethe right to terminate the monetary payments if there are signiﬁcant failures of their “reasonable expectations” as to their beneﬁts under the agreements.3 No deﬁnition of “reasonable
expectations” is given publicly and an independent legal
opinion notes that “because these expectations are to be assessedby reference to documents, correspondence and agreements
which are not publicly available, the breadth of the circumstances in which the EU and Member States might risk termination by the companies cannot be determined.”3 We believe that
there are signiﬁcant failures of “reasonable expectations” of the
public health community with respect to these agreements.
The tracking and tracing obligations in the agreements losttheir signiﬁcance when the EU adopted its Tobacco Products
Directive 2014/40/EU, with an EU-wide tracking and tracing
system foreseen in Articles 15 and 16.
The EU has already begun its negotiations with PMI to possibly extend its 2004 agreement, while at the same time PMI ischallenging the 2014 Tobacco Products Directive in the EU
Court of Justice.75 We conclude that the agreements have little
or no added value and conﬂict with the article 5.3 of the WHO
FCTC. The EU was correct when it expressed a disapproval
about the relationship between INTERPOL and PMI and conﬁrmed publicly that “the interests of the tobacco industry are
fundamentally opposed to public health”.73 It should apply thesame standard to its own deal with TTCs. Our evidence suggests
the EU should not extend its agreement with PMI and, if legallypossible, should end the agreements with the other three
tobacco companies.

Contributors The nature and content of the paper were discussed at the outset by
all the authors. LJ was the project leader and wrote the ﬁrst draft. All co-authors
provided substantive input on the ﬁrst draft. ABG and MS provided data obtained
via freedom of information requests. ABG wrote sections of and ABG and MS edited
the paper.
Funding LJ, MS and HR received funding from the European Parliament, Services
Order Nr: IP/D/CONT/IC/2013-175. ABG is supported by Grant Number
RO1CA160695 from the US National Cancer Institute. ABG is a member of the UK
Centre for Tobacco and Alcohol Studies (UKCTAS), a UK Centre for Public Health
Excellence. Funding to UKCTAS from the British Heart Foundation, Cancer Research
UK, the Economic and Social Research Council, the Medical Research Council andthe National Institute of Health Research, under the auspices of the UK ClinicalResearch Collaboration, is gratefully acknowledged. The content is solely the
responsibility of the authors and does not necessarily represent the ofﬁcial views of
their institutions, including the National Cancer Institute. Funders had no role instudy design and the collection, analysis, and interpretation of data and the writingof the article and the decision to submit it for publication.
Competing interests None declared.
Provenance and peer review Not commissioned; externally peer reviewed.
Open Access This is an Open Access article distributed in accordance with theterms of the Creative Commons Attribution (CC BY 4.0) license, which permits
others to distribute, remix, adapt and build upon this work, for commercial use,
provided the original work is properly cited. See: http://creativecommons.org/
licenses/by/4.0/

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1

2

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What this paper adds
5

▸ The involvement of the tobacco industry in cigarette
smuggling, both direct and indirect, has been well
documented. Governments have addressed this type of tax
evasion in different ways, including by signing agreementswith the tobacco industry to control their supply chain. The
best known example of such arrangements is between thefour major Transnational Tobacco Companies (TTCs) and theEuropean Union (EU). However, there is no comprehensive
assessment of the impact of such agreements in thescientiﬁc literature, while the tobacco industry continues topromote such agreements globally.
▸ We used multiple sources to evaluate the agreements
between the EU Commission, EU Member States and major
tobacco companies. Despite the lack of data and the secrecy
surrounding these contracts, the evidence suggests that they
are ineffective. Seizure payments, for instance, provide no
incentive for the TTCs to end their involvement in cigarette
smuggling because the agreements contain too manyloopholes and the recovered value of taxes is minimalcompared to the ﬁnancial losses due to illicit cigarette trade.

6

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Acknowledgements The authors thank John Daniel, Francis Thompson andWendy Yared for their editing comments.
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