EU Anti-fraud Official Backs Tobacco Agreements

Source from:  Politico 03/22/2016

The EU's anti-fraud office has stepped up its unofficial support for keeping the EU's controversial anti-smuggling agreements with tobacco companies, just weeks before the European Commission is expected to announce a decision on the matter.

Margarete Hofmann, policy director of the EU anti-fraud office, known as OLAF, last week sent political advisers in the European Parliament a briefing paper in an email obtained by POLITICO, saying the agreements are the "best instruments" to combat cigarette smuggling.

While the paper, which was produced and vetted by the European Commission, does not unambiguously call for the agreements to be maintained, it puts forward several strong arguments in favor of the deals.

Hofmann sent the document to parliamentary aides just days before MEPs voted on a non-binding resolution opposing renewal, suggesting OLAF is broadening its unofficial support for the pacts, which was first reported by POLITICO in December.

Senior OLAF officials working on the operational side of the anti-fraud office's anti-smuggling efforts have already indicated they would like the agreements - which they are familiar with - to remain in place. Hofmann's email suggests the policy wing of OLAF is also on board.

Referring to the anti-smuggling agreement with tobacco company Philip Morris, the document Hofmann sent to political advisers in Parliament on March 7 says that "without the agreement, there would be no control at all" until replacement measures under the EU's 2014 tobacco reforms come into effect.

The document also hits back at what it describes as a misinformed claim by the tobacco agreements' critics that the deals were akin to "putting the fox in charge of the hen house."

"That would assume we have a hen house - we don't," the document reads, before warning that a failure to renew the deal would hurt law-enforcement agencies' short-term anti-smuggling capability.

The document was approved by the cabinet of Vice President Kristalina Georgieva, who is responsible for the tobacco agreement decision, raising questions about whether the commissioner is, as stated publicly, still undecided on whether to renew the Philip Morris deal.

As the EU agency responsible for enforcing anti-cigarette smuggling measures, OLAF's official position is that it will accept whatever the Commission decides when it reaches a decision on the Philip Morris agreement in coming weeks.

The four tobacco agreements now in place are legally binding, enforceable anti-fraud deals involving EU and national counterfeit investigators. They include annual payments to the EU by the big four tobacco companies, which estimates put at $1.9 billion (€1.7 billion) over 20 years.

The Commission argues the deals are not a partnership but a means by which the EU can control the big four tobacco companies and force them to share information to combat the smuggling of genuine cigarettes and the production of counterfeit tobacco products.

The Commission defended Hofmann's decision to send the document ahead of Parliament's March 9 vote on a non-binding resolution, which has no direct impact on the Commission's decision. MEPs supported the resolution urging the EU to end the agreements by 414 votes to 214.

"The purpose of the document was to inform, not to argue in favor of one position or another," a Commission spokesman said.

Long-term strategies

Hofmann's involvement has angered anti-tobacco campaigners, who fear support for the agreements from within EU institutions could have a broader impact on how the EU's sweeping 2014 tobacco reforms will be implemented.

The Smoke Free Partnership, an NGO, said a renewal of the agreements could put tobacco companies in an advantageous lobbying position as the Commission maps out important decisions affecting the industry - particularly on the choice of "track and trace" technology demanded by the new legislation.

The big four tobacco companies have been lobbying the Commission hard for it to adopt the industry's in-house "track and trace" packaging technology, Codentify, which OLAF investigators are familiar with.

However, the World Health Organization has warned the Commission that the EU tobacco agreements, along with the adoption of technology developed by the tobacco industry, could be at odds with the EU's commitments under an international protocol to fight the illicit trade of tobacco.

The director of Smoke Free Partnership, Florence Berteletti, said that when the 2014 legislative reforms become effective in three years' time, the EU will have "legislative tools that address illicit trade of tobacco products" that did not exist 12 years ago, when the Philip Morris deal was signed.

"We can work with these facts and have OLAF do its job, or we can pretend that the EU needs contracts with the tobacco industry to keep it on the right side of the law," Berteletti said.

The European Ombudsman, Emily O'Reilly, is finalizing her investigation on the relationship between Commission officials and tobacco companies, but has already expressed concern about the lack of transparency in the Commission's dealings with the industry. Enditem