In March 2024, three of the world’s largest tobacco companies reached a landmark settlement with Canadian governments and individual claimants, agreeing to pay CAD$32.5 billion to resolve decades of litigation over smoking related harms. Canada is now only the second jurisdiction, after the United States, to secure large scale compensation from tobacco manufacturers for health care costs and consumer damages. This analysis examines the legal background of the settlement, its economic framework, the role of the Companies’ Creditors Agreement Act (CCAA), and its broader implications for public health, litigation strategy, and international tobacco liability.

Legal Framework of the Settlement

Litigations against Canadian tobacco manufacturers began in the 1990s, led by individual smokers alleging that companies misrepresented the health risks of smoking. Over time, litigation expanded to provincial and territorial governments seeking reimbursements for health-care costs (HCCR) under recovery legislation. Class actions, including a CAD$13.7 billion judgement in Quebec, along with Tobacco growers asserting damages through uncertified actions. By 2019, the scale and complexity of claims required the initiation of CCAA proceedings, allowing Imperial Tobacco, Rothmans Benson & Hedges (RBH), and JTI-Macdonald to restructure under court supervision while negotiating a global settlement. The Honourable Warren K. Winkler, K.C., was appointed mediator to coordinate these efforts.

Parties to the CCAA Proceedings

1. Imperial Tobacco Canada Limited and Imperial Tobacco Company Limited
2. Rothmans, Benson & Hedges Inc. (RBH), subsidiary of Philip Morris International
3. JTI-Macdonald Corp. (JTIM)

The settlement encompassed claims advanced by multiple categories of plaintiffs, including:

1. Provincial and Territorial Governments – seeking recovery of smoking-related health-care costs pursuant to health care cost recovery legislation.
2. Quebec Class Action Plaintiffs – holders of a CAD $13.7 billion judgment against Imperial, RBH, and JTIM.
3. Pan-Canadian Claimants (PCC) – alleging industry-wide misrepresentation, negligence, and product liability relating to tobacco design, production, and marketing.
4. Knight Class Action Plaintiffs – a certified class in British Columbia against Imperial alone.
5. Tobacco Producers – including the Ontario Flue-Cured Tobacco Growers’ Marketing Board and individual growers with uncertified claims.

Purpose of the CCAA Plans

1. Fully and finally settle all Tobacco Claims;
2. Resolve pending litigation in Canada and release affiliated entities;
3. Distribute the Global Settlement Account of CAD $32.5billion;
4. Restructure RBH, transfer “alternative products” businesses to new corporate entities;
5. Allow the companies to exist insolvency proceedings and continue Canadian operations.

Economic Structure of the Settlement

1. Upfront Contributions – cash based on liquidity, net of reverses.
2. Annual Contributions – a percentage of after-tax Canadian cigarette income, starting at 85% and declining to 70% in five-year intervals.
3. Reserved Amounts – allocations from tax refunds, carry-backs, or other deferred tax benefits.

Payments are expected to continue over 20-40 years, with Canadian governments slated to receive CAD $18.5 billion, and individual smokers and families eligible for CAD$4.5 billion.

On October 5, 2023, after the tobacco companies failed to independently propose viable arrangements, the court directed monitors and mediators to finalize a comprehensive settlement plan. On approval, Ontario Superior Court Chief Justice Geoffrey Morawetz issued a detailed decision affirming the settlement plan. The settlement preserves the ability of Imperial, RBH, and JTIM to continue Canadian operations while channeling a large portion of future income streams to creditors and claimants. Legal releases were vigorously negotiated to protect corporate value and maintain business continuity. This outcome positions Canada as a global leader in holding tobacco corporations accountable and will be closely monitored by lawyers and regulators in other jurisdictions contemplating similar litigation strategies.

The Canadian tobacco settlement represents a watershed moment in public health litigation. By compelling three multinational corporations to commit over CAD $32.5 billion toward compensating governments and individuals, the settlement establishes both accountability for historical harms and a framework for ongoing financial responsibility tied directly to tobacco sales. While the agreement secures long-term compensation its efficacy in reducing smoking prevalence and preventing future harm remains an open question.

CITATION: Imperial Tobacco Canada Limited, 2025 ONSC 1358