Sunday

21st Apr 2019

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.

... or 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

EU Commission paying too much for iPhones and IT

EUobserver has obtained internal documents and emails from within the European Commission that outline questionable contracts with outside suppliers who appear to be overcharging for goods and services.

Stakeholders' Highlights

  1. Counter BalanceSign the petition to help reform the EU’s Bank
  2. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  3. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  4. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  5. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  6. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  7. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  8. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  9. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  10. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year
  11. Nordic Council of MinistersNordic commitment to driving global gender equality
  12. International Partnership for Human RightsMeet your defender: Rasul Jafarov leading human rights defender from Azerbaijan

Latest News

  1. Romania drafts EU code on NGO migrant rescues
  2. Bulgaria, Hungary, and Malta shamed on press unfreedom
  3. EU drafts $20bn US sanctions list in aviation dispute
  4. Brunei defends stoning to death of gay men in EU letter
  5. US Democrats side with Ireland on Brexit
  6. Wifi or 5G to connect EU cars? MEPs weigh in
  7. How Brexit may harm the new EU parliament
  8. EU parliament backs whistleblower law

Stakeholders' Highlights

  1. UNICEFUNICEF Hosts MEPs in Jordan Ahead of Brussels Conference on the Future of Syria
  2. Nordic Council of MinistersNordic talks on parental leave at the UN
  3. International Partnership for Human RightsTrial of Chechen prisoner of conscience and human rights activist Oyub Titiev continues.
  4. Nordic Council of MinistersNordic food policy inspires India to be a sustainable superpower
  5. Nordic Council of MinistersMilestone for Nordic-Baltic e-ID
  6. Counter BalanceEU bank urged to free itself from fossil fuels and take climate leadership
  7. Intercultural Dialogue PlatformRoundtable: Muslim Heresy and the Politics of Human Rights, Dr. Matthew J. Nelson
  8. Platform for Peace and JusticeTurkey suffering from the lack of the rule of law
  9. UNESDASoft Drinks Europe welcomes Tim Brett as its new president
  10. Nordic Council of MinistersNordic ministers take the lead in combatting climate change
  11. Counter BalanceEuropean Parliament takes incoherent steps on climate in future EU investments
  12. International Partnership For Human RightsKyrgyz authorities have to immediately release human rights defender Azimjon Askarov

Join EUobserver

Support quality EU news

Join us