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European Court Ruling is Setback for Tobacco Companies - 2003-01-15

A European Union court has rejected a move by American and Japanese tobacco companies who have been trying to halt EU legal action over alleged cigarette smuggling. The case involves claims of hundreds of million dollars in lost revenues.

The Court of First Instance in Luxembourg rejected requests by Phillip Morris, R.J. Reynolds and Japan Tobacco.

The court said the cigarette makers cannot prevent the European Union from continuing legal proceedings.

The European Commission has filed several lawsuits against the companies in a U.S. district court since 2000. The Commission accused the tobacco firms of intentionally oversupplying countries in eastern Europe so the surplus can be smuggled into the 15-nation European Union.

An American court threw out the initial lawsuit, saying the Commission did not have the standing to sue because it was not directly hurt by the tobacco firms' alleged actions. Two other suits were dismissed on grounds that U.S. courts do not enforce foreign tax laws. The Commission is appealing.

The Commission says tobacco smuggling costs EU countries several hundred million dollars in customs and tax revenues annually.

The tobacco firms deny allegations of smuggling and have two months to appeal their case to the EU's highest court, the European Court of Justice.