Lawsuit turns screw on Imps' arm

IMPERIAL Tobacco is facing a ground-breaking lawsuit on smoking related illness in Germany, the country's first such challenge to a cigarette company.

Tobacco groups fear that if a court awards damages against Imps' Reemtsma business, it could open the door to a flood of lawsuits against the industry.

The plaintiff, 55-year-old Wolfgang Heine, claims chain smoking caused heart problems that ultimately led to two expensive bypass operations. Heine wants Reemtsma to pay, saying the company failed to inform him of the dangers of smoking in the 1980s.

A court in the state of North-Rhine Westphalia has agreed to hear the lawsuit in November. Heine's initial claim is for e400,000 (£280,000).

So far, Germany's tobacco industry has been sheltered from lawsuits such as those that have rocked companies in the US. With close to 18m smokers who spend an estimated e21bn yearly to support their habit, the stakes would be enormous if there were a wave of litigation.

The first lawsuit by a lung-cancer victim in America proved the tip of an iceberg. US tobacco companies have since been hit hard by an avalanche of complaints by sick smokers hoping to recoup billions of dollars worth of medical bills.

The Heine lawsuit also comes at a tough time for Reemtsma. The company is still reeling from Customs raids earlier this year sparked over suspicions of a massive tax fraud centring on smuggled cigarettes to pre-war Iraq.

Last week Imps, which makes West, Davidoff, Lambert & Butler and Embassy cigarettes, suspended seven employees and accepted the resignation of two directors over the probe into Reemtsma.

It said seven employees, facing allegations of aiding and abetting the organised smuggling of Reemtsma cigarettes, money laundering, assisting a criminal association and breaching United Nations sanctions on the import of goods into Iraq, had been suspended on full pay.

Imperial said the investigation related to alleged activities that took place before it bought Reemtsma. It bought the business early in 2002 in a e5.8bn takeover.

The Hamburg state prosecutor's office said it suspected untaxed cigarettes had been exported and then smuggled back into Germany. Officials also suspected that about 17m cigarettes worth roughly $270,000 (£162,000) were smuggled illegally into Iraq in 2000, breaking international embargoes.