How the proposed deal between provinces, smokers and tobacco companies would work

Mohamed

October 18, 2024

A plan for Canada’s three biggest tobacco companies to pay out $32.5 billion to provinces, territories and smokers is now in the works, but some hurdles remain before any money starts flowing.

Here are some key facts about the tobacco compensation deal, as explained Friday by lawyers and officials representing the companies, the provinces and smoking-cessation advocates.

How would compensation payments break down?

If approved, the deal will see the three firms — Imperial Tobacco Canada Ltd., JTI-Macdonald Corp. and Rothmans, Benson & Hedges — pay the following:

$24.7 billion to the provinces and territories, with $12.5 billion of that paid up front, as soon as early 2025, and the remainder over the five years that follow, in annual instalments.

$6.6 billion to individuals who experienced defined smoking-related diseases, or their survivors.

$1 billion to a new national foundation for research into cancer and other smoking-related diseases.

I’m a smoker. Can I receive compensation?

Of the $6.6 billion proposed for individuals, $4.1 billion would settle class-action lawsuits dating back to the 1990s involving nearly 100,000 Quebec smokers. The remaining $2.5 billion is for people in the rest of Canada who were diagnosed with lung cancer and other smoking-related diseases between 2015 and 2019.

WATCH | Canadian Cancer Society rep on the proposed deal:

Proposed tobacco deal ‘inadequate,’ Canadian Cancer Society analyst says

Rob Cunningham, a senior policy analyst with the Canadian Cancer Society, says his organization approves of the supports for individuals outlined in the proposed deal — but he said the settlement needs to do more to reduce smoking.

How big a hit will this be to tobacco companies?

The compensation amounts to about 85 per cent of tobacco company profits over the past five years and the five years to come, a lawyer for the provinces told an online news briefing on Friday.

Eric Gagnon, Imperial Tobacco Canada’s vice-president of corporate and regulatory affairs, says the companies have set aside about $14.5 billion to cover the up-front payments proposed in the plan.

“It is a plan that has taken into consideration the capacity of the industry to pay,” Gagnon said in an interview with CBC News.

“The majority of the profits linked to the sale of tobacco products would be then used to finalize the settlement and the payments over a period of time.”

The tobacco industry had faced lawsuits by provinces and individuals seeking claims of around $600 billion, he said.

“There’s no industry that can pay that amount of money.”

Canada’s tobacco industry had faced lawsuits by provinces and individuals seeking total claims in the range of $600 billion, far more than the $32.5 billion to be paid out under the plan proposed by a court-appointed mediator. (Health Canada)

Will the payments fully cover health care costs of tobacco?

Lawyers for the provinces acknowledge that the proposed payments will not fully cover the cost of providing treatment for tobacco-related illnesses. For example, Ontario alone estimates the total direct and indirect health-care costs of smoking at $7 billion per year.

Cynthia Callard, executive director of the lobby group Physicians for a Smoke-Free Canada, says the proposed financial arrangement “depends on future sales to smokers in order to pay the provincial governments, and that perpetuates the industry instead of getting rid of it.”

Will the deal change how tobacco companies do business?

If approved, the plan will mean “a full and final settlement” of ongoing tobacco lawsuits in Canada and discharge the companies from any liability for those claims.

Rob Cunningham, senior policy analyst for the Canadian Cancer Society, says the proposal does not go far enough. He’s calling on the provinces to make changes before it’s approved.

“This proposed settlement contains nothing to actually reduce smoking,” Cunningham said Friday in an interview with CBC News Network.

How did the proposed deal come about?

In March 2019, shortly after Quebec’s top court upheld a landmark decision ordering $15 billion in class-action payouts to smokers, the three tobacco companies sought and obtained creditor protection in an Ontario court. That kicked off a process that led to a court-appointed mediator proposing the compensation plan that was posted Thursday evening.

A lawyer for the provinces described the release of the plan as “a significant step in coming to a resolution,” but noted that a few steps remain before the deal can be implemented.

What happens next?

A hearing is scheduled for Oct. 31, when the court overseeing the creditor protection case will be asked to issue a procedural order for the claimants to vote on the compensation plan. The current timeline would be for that vote to happen by Dec. 12.

If at least half of the claimants representing at least two-thirds of the value of the compensation vote in favour of the plan, the next step would be a court hearing for final approval, likely in early 2025.

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