Philip Morris, RJR Contest Authority of European Suit

Philip Morris Cos. and R.J. Reynolds Tobacco Holdings Inc. asked a European court to declare that the European Commission lacked authority to file a lawsuit in U.S. courts alleging the company smuggled cigarettes into the European Union.

The commission’s suit, seeking unspecified financial damages, was filed Nov. 6 by in U.S. District Court in Brooklyn, N.Y. It accused Philip Morris and R.J. Reynolds of depriving the EU of customs duties in a smuggling operation that began in the late 1970s.

The commission, the EU’s executive agency, had no right to file the suit and usurped the powers of the bloc’s 15 national governments in doing so, Philip Morris said.

“We will continue to vigorously contest in the United States the action brought in that jurisdiction,” the statement said. “However, we believe that the European judicial authorities must examine the critical question of whether the commission has the legal authority to assess and recover customs duties and taxes that are matters reserved to the member states.”

Philip Morris asked the European Court of First Instance to rule that the commission lacked the authority to file the suit. The court is the appeals division of the European Court of Justice, the EU’s highest court.

R.J. Reynolds spokesman Seth Moskowitz said his company used similar arguments.

Tobacco smuggling costs EU countries $1.7 billion in lost tax revenue annually, the commission said in July. The EU is also fighting tobacco smuggling with stiffer border controls and increased customs cooperation.