A business decision to restore stability
In November 1998 the major US tobacco companies, including our then-operating subsidiary Brown & Williamson, signed a Master Settlement Agreement with 46 US State Attorneys-General.
This agreement gave the 46 states some $200 billion over 25 years and settled lawsuits for reimbursement of Medicaid costs for treating sick smokers. It also included marketing restrictions that were similar to those already in place in other markets.
The Master Settlement was not the result of a trial defeat, but was a business decision taken in the light of the peculiarities of the US legal, regulatory and political system. It is not by any means a potential 'template' for other countries.
Several features of the US legal system made settlement of the States' reimbursement cases a reasonable solution from a business standpoint. Potential damage awards could have had a significant impact on the companies' stock prices and it could have been difficult or even impossible to post bonds for unpredictable sums to 'stay' judgements during an appeals process that could have taken years.
The Master Settlement Agreement restored stability and financial certainty, allowing the companies to concentrate on their business.
In the US, excise tax on the product was amongst the lowest in the world. The funds payable to the states are not unlike an additional tobacco excise tax, spread over 25 years on a per-pack basis and financed through future sales.