Sunday

5th Apr 2020

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 20 years of archives. 14-day free trial.

... or subscribe 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?

Investigation

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

The EU committee's great 'per diem' charade

Around 30 members of European Economic Social Committee, who live and work primarily in Brussels or nearby, have claimed €1.47m in a 'daily subsistence' allowance from European taxpayers to cover accommodation, food and local transport for meetings held in Brussels.

Investigation

How Apple lobbied EU to delay common smartphone charger

iPhones and Android products don't use the same charger. This is annoying for consumers and harmful for the environment. Old chargers produce more than 51,000 tons of electronic waste per year.

Stakeholders' Highlights

  1. UNESDAMaking Europe’s Economy Circular – the time is now
  2. Nordic Council of MinistersScottish parliament seeks closer collaboration with the Nordic Council
  3. UNESDAFrom Linear to Circular – check out UNESDA's new blog
  4. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  5. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  6. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms

Latest News

  1. EU's 'Irini' Libya mission: Europe's Operation Cassandra
  2. Slovak army deployed to quarantine Roma settlements
  3. Lockdown: EU officials lobbied via WhatsApp and Skype
  4. EU: Athens can handle Covid outbreak at Greek camp
  5. New push to kick Orban's party out of centre-right EPP
  6. EU launches €100bn worker support scheme
  7. Court: Three countries broke EU law on migrant relocation
  8. Journalism hit hard by corona crisis

Join EUobserver

Support quality EU news

Join us