JTI-MacDonald Corp rejects CAD 32.5B arbitration proposal

Japan Tobacco International's Canadian subsidiary, JTI-Macdonald Corp, has rejected an arbitration proposal worth 32.5 billion Canadian dollars (23.3 billion U.S. dollars), according to an October 31 Barrons report.

The arbitration proposal is aimed at resolving legal disputes stemming from the harm caused by cigarettes, but the company has expressed dissatisfaction and rejected the proposal. Currently, the company is still engaged in complex legal negotiations with provincial governments and smokers.

In documents filed with the Ontario Superior Court of Justice before the hearing, the company stated that it is unable to support the agreement due to "key unresolved issues." These issues include the settlement amount and how payments will be distributed among multinational companies.

The company stated in court documents that, "This agreement may introduce significant commercial uncertainty and ambiguity in the settlement application of the Canadian tobacco industry. Therefore, JTI-Macdonald and its tobacco company group will not support the current form of the arbitration plan."

According to the terms of the agreement, several tobacco companies will pay a total of $32.5 billion Canadian dollars (US$23.3 billion) to settle litigation in Canada.

These companies include Philip Morris International (PMI) Canada subsidiary, British American Tobacco (BAT) Canada subsidiary, Imperial Tobacco Canada subsidiary (IMB), and Japan Tobacco International (JTI).

The arbitration announced on October 17 will put an end to all claims related to the manufacturing, marketing, selling, using, or handling of tobacco products by these companies. Class action lawsuits against these companies and legal efforts by Canadian provinces to recover medical costs will also be dismissed.

The case began in June 2015 when the Quebec Superior Court ordered these three manufacturers to pay billions of dollars in compensation to thousands of Quebec tobacco victims, including smokers or former smokers suffering from emphysema, lung cancer, or throat cancer. In 2019, the ruling was upheld on appeal, prompting the companies to seek creditor protection. Subsequently, a court in Ontario suspended legal proceedings as parties sought to negotiate a settlement.

On Thursday, the Ontario Superior Court extended the stay of proceedings until January 31, 2025.