Wednesday

18th Jul 2018

Investigation

EU sleuths ignore special powers on tobacco smuggling

  • In most years, tobacco giant PMI received no requests for information from the EU's anti-fraud agency. (Photo: ec.europa.eu)

The EU's anti-fraud agency has, in the past 11 years, made little use of the investigative instruments it gained under an EU agreement with Philip Morris International.

Documents uncovered via a freedom of information request by EUobserver show that in most years, the tobacco company did not receive any request for information from Olaf, as the anti-fraud agency is known.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 18 year's of archives. 30 days free trial.

... our join as a group

  • Warehouse inspection in Portugal in 2003, before the agreement with PMI went into force (Photo: European Commission)

The Anti-Contraband and Anti-Counterfeit Agreement between the EU, its member states, and Philip Morris International (PMI) was signed in July 2004. It will expire next year, and the commission is currently evaluating its impact, to help assess whether to renew it or not.

The deal, which also included the transfer of several hundred million euros to the EU and its members, gave Olaf the power to request information that could help it investigate cigarette smuggling and counterfeiting.

For instance, PMI agreed to “encourage its employees and/or agents to make themselves available to Olaf for interviews and for the purposes of giving sworn statements, as reasonably requested and required by Olaf."

However, according to the annual reports which PMI was obliged to send to the EU about its compliance with the agreement, the tobacco company has never received such a request from Olaf.

The agreement also said that PMI should inform Olaf, when it requested this, of how much cigarettes PMI held in tax and customs warehouses. PMI's reports noted that Olaf never did so.

EUobserver has received access to the 11 yearly reports that PMI has written, the first one published on 11 July 2005, the most recent one published 3 July 2015.

Approved Contractors

PMI promised in the agreement to conduct business only with so-called Approved Contractors, and to make sure that these third parties are also “able and committed to honour the objectives and practices” of the agreement, which aimed to reduce cigarette smuggling.

The agreement made an end to a legal fight between the EU and PMI, which had been accused of involvement in cigarette smuggling and thereby evading taxes.

The deal requires that PMI makes sure that if it sells cigarettes to another company, this company does not buy quantities much larger than the demand of its potential buyers (to make sure it doesn't sell them in another country where the price of cigarettes is higher).

PMI is required to keep a list of all its approved contractors, and update it every six months. In the annual reports, it said it does.

But according to the same reports, Olaf only requested for the list once, on 16 August 2012, which means it officially has only a limited snapshot of the companies that PMI has worked with.

Olaf has apparently never requested the sales volumes of the approved contractors, or the due diligence reports which PMI is required to perform on its business partners.

Also, PMI reported in 2015 that “to date it has not received any formal request” to encourage its purchasers “to cooperate with the relevant administrations [i.e. Olaf] for the purposes of investigating cigarette smuggling and/or the laundering of proceeds arising out of the illegal trade in cigarettes”.

There were two additional instances when Olaf sent PMI a “request for information,” on 31 January 2014, and 25 February 2015, but the documents do not specify what these requests encompassed.

Another unused part of the EU-PMI deal is protocol 4 from annex B.

This protocol states that if Olaf can prove one of PMI's contractors was "unlawfully or knowingly engaged in the sale, distribution, storage, or shipment of Contraband Cigarettes or any related Money Laundering", PMI had to terminate its business relationship with that company.

According to PMI's annual reports, the multinational "has not had occasion to terminate business relations with Approved Contractors in accordance with Protocol 4.01 or Protocol 4.02."

Olaf was asked for a comment on Monday (23 November), but while its press office had said it would provide answers by Monday (30 November), it had not responded by Wednesday morning.

This is part two in a series about the EU's agreement with tobacco company PMI.

Part one: Will EU renew $1.25bn deal with tobacco firm PMI?.

Part three: Scant evidence EU tobacco deal curbed smuggling

Part four: How did the EU spend its €110 million in tobacco money?

EU smoke & mirrors

EUobserver reporter Nikolaj Nielsen sheds new light on the Dalli lobbying scandal, which, by Barroso's own admission, threatened to bring down the EU executive, but which is not over yet.

EU needs more time to assess €1 billion tobacco deal

The commission was expected to publish by the end of 2015 its report on the deal, which will expire in July and which has made the EU, member states and tobacco company PMI allies in the fight against cigarette smuggling.

How did EU spend its €110mn of tobacco money?

The European Union and its member states have so far received at least €1.4 billion from four tobacco giants as a result of anti-smuggling cooperation agreements. How have they spent that money?

Investigation

How Romania became an EU workers' rights 'guinea pig'

"We are paid as if we were a country of unqualified workers". Union leaders and labour rights experts reveal, in figures, the catastrophic consequences of the laws that have turned Romania into the country of the working poor.

Investigation

The mysterious German behind Orban's Russian deals

Klaus Mangold, a German businessman with good connections in Russia, and who provided a jet for Commission vice-president Guenther Oettinger, played a crucial role in Hungary's controversial Paks nuclear deal with Russia, Direkt36's investigation has found.

Stakeholders' Highlights

  1. IPHRCivil society asks PACE to appoint Rapporteur to probe issue of political prisoners in Azerbaijan
  2. ACCASocial Mobility – How Can We Increase Opportunities Through Training and Education?
  3. Nordic Council of MinistersEnergy Solutions for a Greener Tomorrow
  4. UNICEFWhat Kind of Europe Do Children Want? Unicef & Eurochild Launch Survey on the Europe Kids Want
  5. Nordic Council of MinistersNordic Countries Take a Stand for Climate-Smart Energy Solutions
  6. Mission of China to the EUChina: Work Together for a Better Globalisation
  7. Nordic Council of MinistersNordics Could Be First Carbon-Negative Region in World
  8. European Federation of Allergy and AirwaysLife Is Possible for Patients with Severe Asthma
  9. PKEE - Polish Energy AssociationCommon-Sense Approach Needed for EU Energy Reform
  10. Nordic Council of MinistersNordic Region to Lead in Developing and Rolling Out 5G Network
  11. Mission of China to the EUChina-EU Economic and Trade Relations Enjoy a Bright Future
  12. ACCAEmpowering Businesses to Engage with Sustainable Finance and the SDGs

Stakeholders' Highlights

  1. Nordic Council of MinistersCooperation in Nordic Electricity Market Considered World Class Model
  2. FIFAGreen Stadiums at the 2018 Fifa World Cup
  3. Mission of China to the EUChina and EU Work Together to Promote Sustainable Development
  4. Counter BalanceEuropean Ombudsman Requests More Lending Transparency from European Investment Bank
  5. FIFARecycling at the FIFA World Cup in Russia
  6. Nordic Council of MinistersOECD Report: Gender Equality Boosts GDP Growth in Nordic Region
  7. Centre Maurits Coppieters“Peace and Reconciliation Is a Process That Takes Decades” Dr. Anthony Soares on #Brexit and Northern Ireland
  8. Mission of China to the EUMEPs Positive on China’s New Measures of Opening Up
  9. Macedonian Human Rights MovementOld White Men are Destroying Macedonia by Romanticizing Greece
  10. Counter BalanceControversial EIB-Backed Project Under Fire at European Parliament
  11. Nordic Council of MinistersIncome Inequality Increasing in Nordic Countries
  12. European Jewish CongressEU Leaders to Cease Contact with Mahmoud Abbas Until He Apologizes for Antisemitic Comments

Join EUobserver

Support quality EU news

Join us