EXHIBIT 10.01
ANTI-CONTRABAND AND ANTI-COUNTERFEIT AGREEMENT AND GENERAL
RELEASE
dated as of
July 9, 2004
among
PHILIP MORRIS INTERNATIONAL INC.,
PHILIP MORRIS PRODUCTS INC.,
PHILIP MORRIS DUTY FREE INC., and
PHILIP MORRIS WORLD TRADE SARL
THE EUROPEAN COMMUNITY
REPRESENTED BY THE EUROPEAN COMMISSION
AND
EACH MEMBER STATE LISTED ON
THE
SIGNATURE PAGES HERETO
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ARTICLE 1
DEFINITIONS
Section 1.01.
Definitions..................................................3
ARTICLE 2
PHILIP MORRIS INTERNATIONAL'S SALES AND DISTRIBUTION PRACTICES
Section 2.01. EC Compliance
Procedures....................................11
Section 2.02. Certification of Compliance with
EC
Compliance Protocols......................................11
ARTICLE 3
ANTI-CONTRABAND AND ANTI-COUNTERFEIT INITIATIVES
Section 3.01. Anti-Contraband and
Anti-Counterfeit Initiatives............13
Section 3.02. Support for Anti-Contraband
and
Anti-Counterfeit Initiatives..............................13
ARTICLE 4
ANTI-CONTRABAND AND ANTI-COUNTERFEIT COOPERATION
Section 4.01. Contraband and Counterfeit
Seizures.........................14
ARTICLE 5
TRACKING AND TRACING
Section 5.01. Tracking and Tracing
Protocols..............................22
Section 5.02. Certification of Compliance with
Tracking
and Tracing Protocols.....................................23
ARTICLE 6
REVIEW OF AGREEMENT
Section 6.01. Annual
Meetings.............................................23
ARTICLE 7
FULFILLMENT OF OBLIGATIONS AND OBJECTIVES
Section 7.01. Promotion of Public
Policy..................................23
Section 7.02. Respect for
Obligations.....................................23
Section 7.03. Agreement Consistent with EC and
Applicable National Laws...24
Section 7.04. The Parties'
Intentions.....................................24
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.01. Mutual
Representations......................................24
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ARTICLE 9
RELEASE AND DISMISSAL OF CLAIMS
Section 9.01.
Release.....................................................25
Section 9.02. Dismissal Of
Claims.........................................26
ARTICLE 10
SETOFF
Section 10.01. Right of
Setoff............................................26
Section 10.02. No Other
Effect............................................29
ARTICLE 11
TERMINATION
Section 11.01.
Termination................................................30
Section 11.02. Subsequent
Agreement.......................................31
ARTICLE 12
DISPUTE RESOLUTION
Section 12.01. The Role of the European Court of
First Instance
and the European Court of Justice........................31
Section 12.02. Dispute Resolution for Claims
Brought
Under the Terms of the Agreement.........................34
ARTICLE 13
MISCELLANEOUS
Section 13.01 .
Notices...................................................35
Section 13.02 .
Waivers...................................................35
Section 13.03 .
Expenses..................................................35
Section 13.04 . Nature of
Payments........................................35
Section 13.05 . Successors and
Assigns....................................35
Section 13.06 . Legality and
Severability.................................36
Section 13.07 . Counterparts; Effectiveness; Third
Party
Beneficiaries...........................................36
Section 13.08 . Entire
Agreement..........................................36
Section 13.09 .
Captions..................................................37
Section 13.10 . Designated EC
Representative..............................37
Section 13.11 .
Amendments................................................37
Section 13.12 .
Authorship................................................37
Section 13.13 . Use of Information Provided by
Philip Morris
International...........................................37
Section 13.14 . Equal Treatment
Provision.................................37
Section 13.15 . Additional Participating Member
States....................38
Section 13.16 . Use of the
Agreement......................................38
ii
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Attachments, Exhibits & Schedules
Appendix A
Fiscal Compliance Policy
Appendix B
EC Compliance Protocols
Appendix C
Philip Morris International's Monetary Contributions
Appendix D
Tracking and Tracing Protocols
Appendix E
Schedule of Applicable Taxes and Duties
Appendix F
Factors for Establishing Counterfeit Philip Morris Cigarettes
Appendix G
List of Designated States
Appendix H
Form of Dismissals
Appendix I
List of Philip Morris Trademarks
Appendix J
List of Arbitrators
Appendix K
Amendments to the Baseline Amount and Article 4
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ANTI-CONTRABAND AND ANTI-COUNTERFEIT
AGREEMENT AND GENERAL RELEASE
This
Anti-Contraband and Anti-Counterfeit Agreement and General
Release
dated as of July 9, 2004, (this
"Agreement") is made by and among the European
Community (the "EC") represented by the
European Commission, the Member States
of the EC that have executed a copy of this
Agreement and become parties hereto
(the "Participating Member States", and
together with the EC, "the Relevant
Administrations") and Philip Morris
International Inc., Philip Morris Products
Inc., Philip Morris Duty Free Inc. and
Philip Morris World Trade SARL
(collectively with the Relevant
Administrations, "the Parties").
W I T N E S S E T H :
(1) WHEREAS, the
smuggling of Cigarettes, both authentic and counterfeit,
results in great economic loss and causes
other various harms to the Relevant
Administrations;
(2) WHEREAS, the
Relevant Administrations are fully committed to combat the
illegal introduction of both authentic and
counterfeit Cigarettes into the
Territory of the Member States;
(3) WHEREAS,
Philip Morris International is committed to take commercially
reasonable steps as a manufacturer of
Cigarettes to promote the Parties' joint
objective that Philip Morris Cigarettes be
sold, distributed, stored, and
shipped in accordance with all applicable
fiscal and legal requirements, and, in
particular, sold at retail in accordance
with all applicable tax and duty laws
in the intended retail market;
(4) WHEREAS,
while the smuggling of certain authentic brands of Cigarettes
other than Philip Morris brands continues
in significant quantities, for the
last few years the incidence of bulk
quantities of Contraband Philip Morris
Cigarettes in the Member States has been
greatly reduced, and during the same
time period, there has been an increase in
Cigarette counterfeiting activity
such that currently, there is a growing
threat to the Relevant Administrations'
finances from the illegal importation and
introduction of Counterfeit Philip
Morris Cigarettes;
(5) WHEREAS, the
Member States and Philip Morris International have a
mutual interest in (1) eliminating the
illegal importation, distribution and
sale of Cigarettes and any related illegal
activity, (2) ensuring the collection
of applicable taxes and duties on
Cigarettes sold or distributed in the
Territory of the Member States, including,
without limitation, those that will
be remitted wholly or in part to the EC by
the Member States, (3) protecting
lawful competition in the sale of
Cigarettes, (4) protecting the Trademark
rights of legitimate Cigarette
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manufacturers, and (5) preventing citizens
of the Member States from being
misled about the source and quality of the
Cigarettes they purchase; and whereas
the EC has an interest in the foregoing
insofar as they affect the interests of
the EC and the achievement of the EC's
objectives;
(6) WHEREAS, by
virtue of Article 3 and Article 23 of the EC Treaty, the EC
is competent for matters relating to
customs duties on the import and export of
goods in Member States, and by virtue of
Part 5, Title II of the EC Treaty, the
European Commission is obligated to ensure
the orderly collection of the EC's
own resources;
(7) WHEREAS,
combating fraud and other illegal activities affecting the
financial interests of the EC, including
those resulting from the illegal
Cigarette trade within the Territory of the
Member States, is an obligation of
the EC and Member States under Article 280
of the EC Treaty;
(8) WHEREAS,
pursuant to Article 10 of the EC Treaty, the Member States
shall take all appropriate measures,
whether general or particular, to ensure
fulfillment of the obligations arising out
of the EC Treaty or resulting from
action taken by the institutions of the EC
and shall facilitate achievement of
the objectives of the EC's tasks;
(9) WHEREAS, the
EC and Member States, each within their respective
competences and subject to budgetary
constraints, intend to continue and improve
their efforts to combat the smuggling of
authentic and Counterfeit Cigarettes
and the illegal importation and
introduction of said Cigarettes into the
Territory of the Member States;
(10) WHEREAS, it
is in the best interest of Philip Morris International for
there to be an end to the illegal
importation of Contraband and Counterfeit
Cigarettes into the Territory of the Member
States and the counterfeiting of
Philip Morris Cigarettes;
(11) WHEREAS,
Philip Morris International agrees to provide all reasonable
assistance, both direct and indirect, as
set forth herein, to the EC and the
Member States in the fight against
Contraband and Counterfeit Cigarettes,
including in part, monetary payments;
(12) WHEREAS,
the EC and certain Member States commenced a civil action in
the United States District Court for the
Eastern District of New York, entitled
European Community, et al. v. RJR Nabisco,
et al., under Civil Action No.
01-CV-5188 (NGG), asserting various claims
for damages, costs and equitable
relief, based in part on alleged sales of
Philip Morris Cigarettes in the
Territory of the Member States in violation
of applicable laws (such action, the
"Civil Action");
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(13) WHEREAS, the
Civil Action has been dismissed by the United States
District Court (as to some of the claims
with prejudice and as to others without
prejudice) and is currently the subject of
an appeal (such appeal, together with
the Civil Action, the "Litigation");
(14) WHEREAS,
pursuant to the mutual rights and obligations in this
Agreement, the Parties agree that it is in
the public interest, will further
advance their objectives, and will
facilitate the achievement of their goals to
swiftly resolve, finally and fully, in an
amicable and cooperative manner
without any admission of liability, all
matters between the Parties that relate
to the alleged conduct, acts or omissions
that were asserted or could have been
asserted in the Litigation and any alleged
Losses (as hereinafter defined)
caused by such conduct, acts, or
omissions;
(15) WHEREAS,
the Parties acknowledge and agree to take all appropriate
measures (1) to ensure fulfillment of their
obligations under this Agreement,
(2) to facilitate the achievement of the
objectives of the Agreement, and (3) to
abstain from any measures that could
jeopardize the attainment of the objectives
of this Agreement;
NOW, THEREFORE,
in consideration of the mutual obligations described
herein, the sufficiency of which is hereby
acknowledged, the Parties, acting by
and through their authorized agents, hereby
memorialize and agree as follows:
Article 1
DEFINITIONS
Section 1.01.
Definitions.
The following
terms, as used herein, have the following meanings:
"Affiliate"
means, with respect to any Person, any other legally related
Person directly controlling, controlled by,
or under common control with, such
other Person. For purposes of this
definition, "control", when used with respect
to any Person, means the power to choose
the Board of Directors and/or establish
the policies of such Person, whether
through the ownership of voting securities
or contract, and the terms "controlling"
and "controlled" have meanings
correlative to the foregoing.
"Agreement"
shall have the meaning ascribed to it in the preamble of this
Agreement.
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"Anti-Contraband
and Anti-Counterfeit Initiatives" shall have the meaning
ascribed to it in Section 3.01 of this
Agreement.
"Applicant"
shall have the meaning ascribed to it in the EC Compliance
Protocols, attached as Appendix B to this
Agreement.
"Approved
Contractor" means a Contractor approved by Philip Morris
International in accordance with the EC
Compliance Protocols, attached as
Appendix B to this Agreement.
"Arbitrator(s)"
shall have the meaning ascribed to it in Section 12.02(a)
of this Agreement.
"Audit Order"
shall have the meaning ascribed to it in Section 2.02(d) of
this Agreement.
"Baseline
Amount" means 90 million Cigarettes, which is half of the total
combined Contraband Philip Morris
Cigarettes seized by the Member States who
were Member States on January 1, 2004,
during the calendar years ended December
31, 2001, and December 31, 2002, but does
not include seizures of less than five
Master Cases of Philip Morris Cigarettes.
The Baseline Amount may be amended
pursuant to Section 4.01(s) and (t) of this
Agreement.
"Blocked
Contractor" means a former Approved Contractor who is no longer
authorized by Philip Morris International
to conduct business relating to the
sale, distribution, storage, or shipment of
Philip Morris Cigarettes in or
through the Territory of the Member States
or any Designated State.
"Carton" or
"Bundle" or "Outer" means a package containing 10 Packs of
Cigarettes (approximately 200 Cigarettes
total) and includes all input materials
used in the assembly of such container such
as cardboard, plastic wrap and tear
tapes.
"Certification
of Compliance" shall have the meaning ascribed to it in
Section 2.02(a) of this Agreement.
"Cigarette"
means any product that contains tobacco and is intended to be
burned or heated under ordinary conditions
of use and includes, without
limitation, any "roll-your-own" tobacco
which, because of its appearance, type,
packaging, or labeling is suitable for use
and likely to be offered to, or
purchased by, consumers as tobacco for
making cigarettes. For the purposes of
this Agreement, 0.0325 ounces of
"roll-your-own" tobacco shall be considered the
equivalent of one individual Cigarette.
"Civil Action"
shall have the meaning ascribed to it in the recitals of
this Agreement.
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"Compliance
Order" shall have the meaning ascribed to it in Section 2.02(d)
of this Agreement.
"Contraband
Cigarettes" means Cigarettes that have been imported into,
distributed in, or sold in, the Territory
of a Member State, or were en route to
the Territory of a Member State for sale in
that Member State, in violation of
the applicable tax, duty or other fiscal
laws of that Member State or the EC,
but, for purposes of this Agreement, shall
exclude Counterfeit Cigarettes.
"Contraband
Philip Morris Cigarettes" means Philip Morris Cigarettes that
have been imported into, distributed in, or
sold in, the Territory of a Member
State, or were en route to the Territory of
a Member State for sale in that
Member State, in violation of the
applicable tax, duty or other fiscal laws of
that Member State or the EC, but, for
purposes of this Agreement, shall exclude
Counterfeit Philip Morris Cigarettes.
"Contractor"
means a First Purchaser or any warehouser, shipper or freight
forwarder engaged by Philip Morris
International in connection with the storage
or shipment of Philip Morris Cigarettes in
or through the Territory of the
Member States or a Designated State.
"Counterfeit
Cigarettes" means Cigarettes bearing a Trademark of a
Cigarette manufacturer that are
manufactured by a third party without the
consent of that Cigarette manufacturer, but
shall in no event include (i)
Cigarettes manufactured by the Trademark
holder or any affiliate thereof,
regardless of the actual or intended market
of distribution, (ii) Cigarettes
bearing a Trademark of a Cigarette
manufacturer using tobacco either produced by
or sold by that Cigarette manufacturer, or
(iii) Cigarettes bearing a Trademark
of a Cigarette manufacturer that are
packaged in genuine packaging of that
Cigarette Manufacturer, including genuine
cartons and packs of that Cigarette
manufacturer.
"Counterfeit
Philip Morris Cigarettes" means Cigarettes bearing a Philip
Morris Trademark that are manufactured by a
third party without the consent of
Philip Morris, but shall in no event
include (i) Cigarettes manufactured by
Philip Morris or any affiliate thereof,
regardless of the actual or intended
market of distribution, (ii) Cigarettes
bearing a Trademark of Philip Morris
using tobacco either produced by or sold by
Philip Morris, or (iii) Cigarettes
bearing a Trademark of Philip Morris that
are packaged in genuine Philip Morris
packaging, including genuine Philip Morris
cartons and packs.
"Designated
State" means any state listed in the Designated State List
attached as Appendix G, which may be
amended in accordance with the procedure
therein.
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"Due Diligence"
means a reasonable state-of-the-art investigation conducted
by Philip Morris International before the
commencement of a business
relationship with a Person relating to the
sale, distribution, storage, or
shipment of Philip Morris Cigarettes in or
through the Territory of the Member
States or any Designated State, as
described in the EC Compliance Protocols,
attached as Appendix B to this
Agreement.
"Due Diligence Information" shall
have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"EC" shall have
the meaning ascribed to it in the preamble of this
Agreement.
"EC Compliance
Protocols" shall have the meaning ascribed to it in Section
2.01 of this Agreement.
"EC Treaty"
shall have the meaning ascribed to it in Section 7.03 of this
Agreement.
"Execution Date"
means the later of (i) the date on which the signatures to
this Agreement of all the Relevant
Administrations who are Plaintiffs in the
Litigation have been delivered to Philip
Morris International; or (ii) the date
on which the signature to this Agreement of
Philip Morris International has been
delivered to the EC.
"Expiration
Date" means the 12th anniversary of the Execution Date.
"First
Purchaser" means any Person, other than an Affiliate of Philip
Morris International, to whom Philip Morris
International directly sells a
quantity of Philip Morris Cigarettes in
excess of 2,500 Master Cases annually
for sale, distribution or consumption
within or into the Territory of one or
more of the Member States or any Designated
State, and such Person's Affiliates.
"Fiscal
Compliance Coordinator" shall have the meaning ascribed to it
in
the EC Compliance Protocols, attached as
Appendix B to this Agreement.
"Fiscal
Compliance Policy" shall have the meaning ascribed to it in
Section
2.01 of this Agreement.
"Follow-up Due
Diligence" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"Future
Cooperation Agreement" shall have the meaning ascribed to it in
Section 13.14 of this Agreement.
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"Identification
Markings" means codes and markings on Philip Morris
Cigarette packaging placed on that
packaging by Philip Morris International or
its authorized agents, which correspond to
information regarding those
Cigarettes as set forth in the Tracking and
Tracing Protocols, attached as
Appendix D to this Agreement.
"Initial
Participating Member States" means the Participating Member
States
that have executed a copy of the Agreement
on or prior to the Execution Date.
"Intended Market
of Retail Sale" means the market which Philip Morris
International intends as the market of
either domestic retail or duty-free
retail sale for Philip Morris Cigarettes
when Philip Morris International sells
such Cigarettes to a First Purchaser.
"International
Compliance Policy" shall have the meaning ascribed to it in
the EC Compliance Protocols, attached as
Appendix B to this Agreement.
"Litigation"
shall have the meaning ascribed to it in recitals (12) and
(13) of this Agreement.
"Losses" means
the monetary and non-monetary losses and other injuries
alleged to have been sustained as a result
of the sale, distribution, storage,
or shipment of Contraband Philip Morris
Cigarettes before the Execution Date, or
for Subsequent Participating Member States,
their respective Signature Dates,
including any and all monetary and
non-monetary losses and injuries claimed or
described by the EC and the Member States
in paragraphs 39 through 40 of the
Complaint dated August 3, 2001, filed in
the Case entitled European Community,
et al. v. RJR Nabisco, et al., case number
01-CV-5188 (NGG) .
"Market of
Interest" shall have the meaning ascribed to it in Protocol 6
of
Appendix D to this Agreement.
"Master Case"
means a case containing 10,000 Cigarettes.
"Member States"
means States that are members of the European Union.
"Money
Laundering" means conduct in violation of 18 U.S.C. ss.ss. 1956
or
1957 or the comparable provisions under the
laws of the EC or the Member States.
"New Member
State" means any Member State which, having submitted to the
Council of the European Union an
application for membership of the European
Union and said application having been
granted and the State having acceded to
the Treaty on European Union, has joined
the European Union after January 1,
2004.
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"Non-Participating Member States" means the Member States that are
not a
Party to this Agreement.
"Notice of
Interest" shall have the meaning ascribed to it in Protocol 6
Appendix D to of this Agreement.
"OLAF" means the
Anti-Fraud Office of the European Commission or any
successor thereof.
"Pack" means a
small package containing approximately 20 cigarettes and
includes all input materials used in the
assembly of such container such as
cardboard, aluminum foil or metallized
papers, plastic wrappings, tax stamps,
and tear tapes.
"Participating
Member States" shall have the meaning ascribed to it in the
Preamble of this Agreement.
"Person" means
an individual, corporation, partnership, limited liability
company, association, trust or other entity
or organization, including a
government or political subdivision or an
agency or instrumentality thereof.
"Philip Morris
Cigarettes" means Cigarettes manufactured by Philip Morris
or any of its Affiliates that manufacture
Cigarettes, or Cigarettes manufactured
by licensees and bearing Philip Morris
Trademarks as set forth in Appendix I.
"Philip Morris"
means Altria Group, Inc., f/k/a Philip Morris Companies
Inc., and all of its current and former
Affiliates, direct and indirect
subsidiaries along with their direct and
indirect subsidiaries, and/or any
successors thereto, as well as all current
and former employees, directors,
officers, and servants, including outside
attorneys.
"Philip Morris
International" means Philip Morris International Inc. and
its controlled subsidiaries, including
without limitation Philip Morris Products
Inc., Philip Morris Duty Free Inc. and
Philip Morris World Trade SARL.
"Released
Claims" shall have the meaning ascribed to it in Section
9.01(b)
of this Agreement.
"Released
Persons" shall have the meaning ascribed to it in Section
9.01(a)
of this Agreement.
"Releasing
Persons" shall have the meaning ascribed to it in Section
9.01(a) of this Agreement.
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"Relevant
Administrations" shall have the meaning ascribed to it in the
Preamble of this Agreement.
"Relevant Law"
shall have the meaning ascribed to it in Section 13.06(a) of
this Agreement.
"Reporting
System" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"Representatives
of the Relevant Administrations" means OLAF or other
authorized representatives duly designated
by the Relevant Administrations.
"Request for
Termination" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"Retail Demand"
means the estimated demand for Philip Morris Cigarettes in
a particular market to be sold at retail in
that market in accordance with all
applicable tax, duty or other fiscal
laws.
"Sales Plan"
shall have the meaning ascribed to it in the EC Compliance
Protocols, attached as Appendix B to this
Agreement.
"seizure" means
a seizure from a single individual or entity (or in certain
specific instances, multiple individuals or
entities if shown to be acting in
concert with one another), in a single
location (or in certain specific
instances, multiple locations in close
proximity if shown to be part of the same
scheme), at a single point in time, (or in
certain specific instances, multiple
points in time in close proximity if shown
to be part of the same scheme).
"Signature Date"
means, for each Initial Participating Member State the
Execution Date and for each Subsequent
Participating Member State, the date on
which that Participating Member State
executed a copy of the Agreement.
"Sold by a Retailer" means (i) the
sale of Cigarettes by an authorized
retailer to a customer in which all
applicable Member State excise and VAT taxes
on the retail price in the location of sale
have been paid or accounted for in
the sale price, or (ii) sales to a customer
that has ordered 50 packs of
Cigarettes or less through the use of the
Internet or other means whereby the
seller is not in the physical presence of
the customer when the sale is made.
"Statement of
Non-Compliance" shall have the meaning ascribed to it in
Section 2.02(b) of this Agreement.
"Subsequent
Participating Member States" means the Participating Member
States that have executed a copy of the
Agreement after the Execution Date.
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"Subsequent
Purchaser" means any Person and such Person's Affiliates, other
than an Affiliate of Philip Morris, who
acquires more than 1,000 Master Cases of
Philip Morris Cigarettes annually from
sources other than Philip Morris
International.
"Sufficient
Evidence" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"Supplemental
Payments" means the payments by Philip Morris International
that are to be made, without regard to
fault, in accordance with Section 4.01(f)
and 4.01(g) of this Agreement, to
compensate the Relevant Administrations for
their lost taxes and duties and other
costs, as well as to provide a source of
additional funding for anti-contraband
enforcement, in the event of a seizure of
Contraband Philip Morris Cigarettes.
"Territory of
the Member States" means the customs territory of the EC, as
defined in Article 3 of Council Regulation
(EEC) No. 2913/92 establishing the
Community Customs Code, including, for the
avoidance of doubt, the free zones,
free ports and duty-free areas physically
situated therein as well as the Aland
Islands.
"Territory of a
Non-Participating Member State" means the territory of a
Non-Participating Member State, as defined
in Article 3 of Council Regulation
(EEC) No. 2913/92 establishing the
Community Customs Code, including, for the
avoidance of doubt, the free zones, free
ports and duty-free areas physically
situated therein.
"Territory of a
Participating Member State" means the territory of a
Participating Member State, as defined in
Article 3 of Council Regulation (EEC)
No. 2913/92 establishing the Community
Customs Code, including, for the
avoidance of doubt, the free zones, free
ports and duty-free areas physically
situated therein, as well as the Aland
Islands.
"Tracking and
Tracing Protocols" shall have the meaning ascribed to it in
Section 5.01 of this Agreement, and are
attached as Appendix D to this
Agreement.
"Termination
Order" shall have the meaning ascribed to it in the EC
Compliance Protocols, attached as Appendix
B to this Agreement.
"Trademark"
means a brand name (alone or in conjunction with any other
word), logo, symbol, or any other indicia
of product identification.
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"Vice President
for Compliance Systems" shall have the meaning ascribed to
it in the EC Compliance Protocols, attached
as Appendix B to this Agreement.
"World Wide Duty
Free" means the worldwide market in which Philip Morris
Cigarettes are sold by Philip Morris
International for resale to retail
consumers entitled to purchase free of
domestic taxation.
Article 2
PHILIP MORRIS INTERNATIONAL'S SALES AND DISTRIBUTION PRACTICES
Section 2.01. EC
Compliance Procedures.
Philip Morris
International has already undertaken as a matter of company
policy to comply with the principles set
forth in the Philip Morris Companies
Inc. Policy Statement on Compliance with
Fiscal, Trade and Anti-Money Laundering
Laws dated September 13, 1999 (the "Fiscal
Compliance Policy"), a copy of which
is attached as Appendix A to this
Agreement. In addition to the provisions in
Appendix A, Philip Morris International
agrees to adopt, implement, and be bound
by protocols, approved with the EC,
regarding the sale, distribution, storage,
and shipment of Philip Morris Cigarettes in
and through the Territory of the
Member States or any Designated State (the
"EC Compliance Protocols"), which are
attached as Appendix B to this
Agreement.
Section 2.02.
Certification of Compliance with EC Compliance Protocols.
(a) Each year,
on the anniversary of the Execution Date, Philip Morris
International shall provide the Relevant
Administrations with a report, signed
by the Vice President for Compliance
Systems, describing Philip Morris
International's fulfillment of the
requirements of (i) the EC Compliance
Protocols, which are set forth in Appendix
B of this Agreement, and (ii) the
Tracking and Tracing Protocols, which are
set forth in Article 5 and Appendix D
of this Agreement (the "Certification of
Compliance").
(b) If, after
receipt of any Certification of Compliance, OLAF reasonably
concludes that Philip Morris International
is failing to perform its obligations
under the EC Compliance Protocols or the
Tracking and Tracing Protocols, it may,
but by no later than 60 days after OLAF has
received the Certification of
Compliance, provide Philip Morris
International with a statement clearly
describing the areas where OLAF reasonably
believes that Philip Morris
International is failing to perform its
obligations under the EC Compliance
Protocols or the Tracking and Tracing
Protocols, OLAF's reasons for that belief,
and what measures OLAF believes Philip
Morris International must take in order
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to perform its obligations under the EC
Compliance Protocols (the "Statement of
Non-Compliance").
(c) OLAF may
also provide Philip Morris International with a Statement of
Non-Compliance at any other time it
reasonably believes that Philip Morris
International is significantly failing to
adhere to the EC Compliance Protocols
or the Tracking and Tracing Protocols and
such failure could likely result in a
significant increase in the volume of
Contraband Philip Morris Cigarettes.
(d) Within 30
days of receiving a Statement of Non-Compliance, under
subsections (b) or (c) above, Philip Morris
International must provide OLAF with
a written response. Thereafter, authorized
representatives of Philip Morris
International and the European Commission
shall meet and confer and attempt to
resolve in good faith any dispute relating
to the Statement of Non-Compliance.
If the dispute has not been resolved within
60 days of Philip Morris
International receiving a Statement of
Non-Compliance, the European Commission
may bring the dispute before the Arbitrator
in accordance with Section 12.02 of
this Agreement and may seek an order from
the Arbitrator requiring Philip Morris
International to bring itself into
compliance with the EC Compliance Protocols
or the Tracking and Tracing Protocols, as
the case may be, (a "Compliance
Order") and/or an order requiring Philip
Morris International to permit OLAF to
conduct an audit of Philip Morris
International in order to determine what
Compliance Orders may be required (an
"Audit Order").
(e) An Audit
Order issued under this Section shall specifically require
Philip Morris International to do the
following and only the following:
(i) if OLAF seeks entry into premises, allow OLAF entry to any of
its
business
premises or business premises of its Affiliates, for the sole
purpose of
observing business operations, provided that OLAF provides
Philip Morris
International with reasonable notice of where and when it
seeks to do so;
and
(ii) if OLAF seeks to review documents, Philip Morris
International
shall provide
OLAF with specified business records created after the
Execution Date,
that OLAF reasonably believes will assist in its
anti-contraband
and anti-counterfeit efforts.
(f) In any
proceeding brought under Section 2.02(d), the Arbitrator may
issue a Compliance Order or an Audit Order
to Philip Morris International only
when it has been proven by the greater
weight of the evidence that (i) Philip
Morris International has materially failed
to adhere to the EC Compliance
Protocols and/or the Tracking and Tracing
Protocols, (ii) such failure was
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identified by OLAF in its Statement of
Non-Compliance, and (iii) such failure
has not been adequately remedied by the
time of the arbitration hearing.
Article 3
ANTI-CONTRABAND AND ANTI-COUNTERFEIT INITIATIVES
Section 3.01.
Anti-Contraband and Anti-Counterfeit Initiatives.
(a) It is the
policy of the EC and the Member States to vigorously combat
the introduction, sale and distribution of
Contraband Cigarettes and Counterfeit
Cigarettes within or through the Territory
of the Member States. Subject to
budgetary constraints, the EC intends to
intensify efforts to curb the
introduction, sale and distribution of
Contraband Cigarettes and Counterfeit
Cigarettes; apply appropriate equipment for
monitoring and tracking the
introduction, sale, distribution, storage,
and shipment of Contraband Cigarettes
and Counterfeit Cigarettes; and continue to
train law-enforcement personnel in
how best to detect and seize Contraband
Cigarettes and Counterfeit Cigarettes.
Section 3.02.
Support for Anti-Contraband and Anti-Counterfeit
Initiatives.
(a) Recognizing
that it is in the best interest of Philip Morris
International for there to be an end to the
illegal importation and introduction
of Contraband Cigarettes and Counterfeit
Cigarettes into the Territory of the
Member States and an end to the
counterfeiting of Philip Morris Cigarettes,
Philip Morris International agrees to
provide reasonable assistance, both direct
and indirect, to the EC and the Member
States in the fight against Contraband
Cigarettes and Counterfeit Cigarettes, as
set forth in Section 4.01, Appendix B,
Appendix C, and Appendix D. The monetary
payments under this Agreement may serve
as a source of additional funding for
anti-contraband and anti-counterfeit
initiatives.
(b) Subject to
Article 10 of this Agreement, for any dispute relating to a
payment that has been or will be provided
by Philip Morris International in
accordance with this Section 3.02 or
Appendix C (Philip Morris International's
Monetary Contributions), the Parties
involved in the dispute shall meet and
confer in an attempt to resolve the dispute
in good faith. If the dispute has
not been resolved within 60 days of a Party
receiving formal notice of such a
dispute, any Party involved in the dispute
may refer the dispute to the
Arbitrator(s) in accordance with Section
12.02 of this Agreement.
13
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Article 4
ANTI-CONTRABAND AND ANTI-COUNTERFEIT COOPERATION
Section 4.01 .
Contraband and Counterfeit Seizures.
Subject to the
limitations in subsections (k)-(u) below, for seizures of
Cigarettes bearing Philip Morris Trademarks
by the Member States after the
Execution Date, the Parties agree to the
following procedures:
(a) Within 30
days after notification to OLAF of a seizure by a Member
State of five Master Cases or more of
Cigarettes bearing Philip Morris
Trademarks, OLAF may provide Philip Morris
International with a notice of
seizure, which shall include:
(i) the date, time and location of the seizure;
(ii) the brand of seized Cigarettes indicated on the packaging and,
if
available, any
indication of the Intended Market of Retail Sale;
(iii) the quantity of seized Cigarettes;
(iv) any Identification Markings that appear on the Master Cases
or
cartons of the
seized Cigarettes; and
(v) as to seizures made by the Member States outside the Territory
of
the Member
States, the basis of the seizing Member State's belief that the
Cigarettes
seized were destined for introduction into the Territory of the
Member
States.
(b) Philip
Morris International shall be permitted to inspect the seized
Cigarettes in the condition they were in at
the time of seizure within 30 days
after transmittal of the notice of seizure
described in subsection (a) above,
and to select random samples of the seized
Cigarettes for examination. The
seizing authority may also select samples
which Philip Morris International must
examine.
(c) Within 30
days after the inspection of the seized Cigarettes described
in subsection (b) above, Philip Morris
International shall provide a written
response to OLAF stating whether the
Cigarettes are Philip Morris Cigarettes or
Counterfeit Philip Morris Cigarettes.
(d) Subject to
the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a)
above has been delivered reasonably in
accordance with the requirements of
subsection (a) above, if the Cigarettes are
determined by Philip Morris International
to be Counterfeit Philip Morris
Cigarettes, its response shall include
documentation and examination results
demonstrating that conclusion. The
determination as to whether Cigarettes are
14
<PAGE>
Counterfeit Philip Morris Cigarettes or
Philip Morris Cigarettes shall involve a
consideration of the factors set forth in
Appendix F to this Agreement, which
shall be amended by agreement between the
Parties as new technologies and
techniques are developed.
(e) Subject to
the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a)
above has been delivered reasonably in
accordance with the requirements of
subsection (a) above, if the seized
Cigarettes are Contraband Philip Morris
Cigarettes manufactured after January 1,
2004, Philip Morris International's
response shall include as much information
as is available to it concerning:
(i) the place of manufacture of the seized Cigarettes;
(ii) the date of manufacture of the seized Cigarettes;
(iii) the country of intended destination for the seized
Cigarettes;
(iv) any intervening warehousing and shipping;
(v) the identity of the First Purchaser of the seized
Cigarettes;
(vi) the identity of any known Subsequent Purchaser of the
seized
Cigarettes;
(vii) invoices to the First Purchaser that relate to the seized
Cigarettes;
and
(viii) payment records from the First Purchaser for any
Cigarettes
seized.
(f) Subject to
the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a)
above has been delivered reasonably in
accordance with the requirements of
subsection (a) above, for seizures of
Contraband Philip Morris Cigarettes by an
Initial Participating Member State
after the Execution Date or by a Subsequent
Participating Member State after its
Signature Date, the response of Philip
Morris International shall also include a
Supplemental Payment calculated as
follows:
(i) Philip Morris International shall make a Supplemental Payment
to
compensate the EC and
the Participating Member State by which the
Cigarettes were
seized for their lost taxes and duties and other costs, in
an amount equal
to 100% of the taxes and duties that would have been
assessed had the
seized Contraband Philip Morris Cigarettes been legally
distributed for
retail sale in the Participating Member State by
15
<PAGE>
which the
Cigarettes were seized as set forth in Appendix E, which shall
be
updated by the
Relevant Administrations upon notice to Philip Morris
International as
applicable taxes and duties change, less any amount of
taxes and duties
already paid to the EC or any Member State(s) in relation
to those
Contraband Philip Morris Cigarettes; and
(ii) If the Contraband Philip Morris Cigarettes seized, when added
to
the number of
Contraband Philip Morris Cigarettes already seized in the
same calendar
year in the Member States that were Member States on January
1, 2004, results
in a total number that exceeds the Baseline Amount, Philip
Morris
International's Supplemental Payment shall include an
additional
amount equal to
four times the amount under subsection (f)(i), which shall
compensate the
EC and the Participating Member State by which the
Cigarettes were
seized for any costs not compensated by the amount under
subsection
(f)(i) and which may provide the EC and the Participating
Member
State by which
the Cigarettes were seized with a source of additional
funding for
anti-contraband and anti-counterfeit efforts.
(g) Subject to
the limitations in subsections (k)-(u) below, where notice
of seizure described in subsection (a)
above has been delivered reasonably in
accordance with the requirements of
subsection (a) above, for seizures of
Contraband Philip Morris Cigarettes after
the Execution Date by a
Non-Participating Member State, the
response of Philip Morris International
shall also include a Supplemental Payment
calculated as follows:
(i) Philip Morris International shall make a Supplemental Payment
to
compensate the
EC for any lost taxes and duties and other costs, in an
amount equal to
100% of the taxes and duties that would have been remitted
to the EC in
respect of such seized Contraband Philip Morris Cigarettes had
such Cigarettes
been legally distributed for retail sale in the
Non-Participating Member State by which the Cigarettes were seized
as set
forth in
Appendix E, less the EC's share of any amount of taxes and
duties
already paid to
the EC or any Member State(s) in relation to those
Contraband
Philip Morris Cigarettes, and
(ii) If the Contraband Philip Morris Cigarettes seized, when added
to
the number of
Contraband Philip Morris Cigarettes already seized in the
same calendar
year in the Member States that were Member States on January
1, 2004, results
in a total number that exceeds the Baseline Amount, Philip
Morris
International's Supplemental Payment shall include an
additional
amount equal to
four times the amount under subsection (g)(i), which shall
compensate the
EC for any costs not compensated by the amount under
subsection
(g)(i) and which may
16
<PAGE>
provide the EC
with a source of additional funding for anti-contraband and
anti-counterfeit
efforts.
(h) For the
Supplemental Payments to be made pursuant to subsections (f)
and (g) above, it shall not be incumbent on
the Relevant Administrations to
establish fault on the part of Philip
Morris International and such payments, if
due, shall be made even though Philip
Morris International shall have complied
in all respects with its obligations under
this Agreement relating to
anti-contraband efforts and
initiatives.
(i) The Parties
recognize and understand that the mere fact of seizure of
Contraband Philip Morris Cigarettes at any
point in the distribution chain does
not, in and of itself, automatically
implicate Philip Morris International, or
the First Purchaser to whom the seized
Philip Morris Cigarettes were originally
sold, as a violator of any applicable tax
or duty laws.
(j) OLAF or any
Participating Member State may sample and test seized
Cigarettes at any time. If OLAF disputes
the determination made by Philip Morris
International as to whether the seized
goods are Counterfeit Philip Morris
Cigarettes or Contraband Philip Morris
Cigarettes, OLAF shall reply in writing
to Philip Morris International detailing
the basis for the dispute within 60
days after receiving the response referred
to in Section 4.01(c), and thereafter
Philip Morris International and OLAF shall
meet and confer and attempt to
resolve the dispute in good faith. If the
dispute cannot be resolved within 30
days of Philip Morris International
receiving OLAF's reply, the samples in
dispute shall be submitted to an
independent laboratory or facility for
examination to determine whether the
Cigarettes are Counterfeit Philip Morris
Cigarettes or Contraband Philip Morris
Cigarettes in accordance with the factors
set forth in Appendix F to this Agreement.
The determination of the selected
independent laboratory or facility as to
whether the Cigarettes are Contraband
Philip Morris Cigarettes or Counterfeit
Philip Morris Cigarettes shall be final
and binding on the Parties. The costs of
the laboratory or facility's services
shall be paid by the non-prevailing Party.
The independent laboratory or
facility shall be designated by mutual
agreement of the Parties on the Execution
Date. If a dispute arises with respect to
the selection of the independent
laboratory or facility, such dispute shall
be settled by the Arbitrator in
accordance with Section 12.02 of the
Agreement.
(k) Notwithstanding any other
provision in this Section 4.01 to the
contrary, Philip Morris International shall
have no obligation to make
Supplemental Payments pursuant to
subsections (f) and (g) above, and Contraband
Philip Morris Cigarettes shall not be
included in the calculations to determine
the amount of any Supplemental Payment
described in subsections (f) and (g)
above, where:
17
<PAGE>
(i) the notice of seizure described in subsection (a) above has
not
been delivered
reasonably in accordance with the requirements of subsection
(a) above;
(ii) Philip Morris International has not been permitted to inspect
the
seized
Cigarettes in substantial accordance with the requirements of
subsection (b)
above, or the seizing authority has determined that the
seized
Cigarettes are not Contraband Philip Morris Cigarettes as
evidenced
by the release
of the seized Cigarettes;
(iii) the total volume of Contraband Philip Morris Cigarettes
seized
in the
particular seizure was less than five Master Cases of
cigarettes
after exclusion
of any amount excluded by the seizing authority or a court
pursuant to
Article 8 of Directive 92/12 by virtue of having been acquired
in another
Member State for "own use" and transported by the purchaser;
(iv) the Contraband Philip Morris Cigarettes were manufactured
prior
to January 1,
2004;
(v) the Contraband Philip Morris Cigarettes were stolen by a
third
party and Philip
Morris International can reasonably demonstrate that such
theft has
occurred;
(vi) the Contraband Philip Morris Cigarettes were seized by a
Member
State outside of
the Territory of the Member States and the greater weight
of the evidence
demonstrates that the Cigarettes seized were not destined
for introduction
into the Territory of the Member States; or
(vii) the Contraband Philip Morris Cigarettes were seized by a
Member
State and Philip Morris
International can reasonably demonstrate that such
Contraband
Philip Morris Cigarettes were sold, distributed, stored, and
shipped in
accordance with all applicable fiscal and legal requirements of
the EC and a
Member State, or were Sold by a Retailer.
(l) For any
dispute relating to (i) application of the provisions in
subsection (k) above, (ii) the amount, if
any, of a payment to be made under
subsections (f) and (g) above, or (iii) the
determination of the appropriate
Member State by which the Cigarettes were
seized, the Parties involved in the
dispute shall meet and confer in an attempt
to resolve the dispute in good
faith. If the dispute has not been resolved
within 60 days of a Party receiving
formal notice of such a dispute, any Party
involved in the dispute may refer the
dispute to the Arbitrator for settlement in
accordance with the provisions of
Section 12.02 of this Agreement.
18
<PAGE>
(m) If a Member
State or the EC accepts a Supplemental Payment in regard to
a particular seizure of Philip Morris
Cigarettes and later collects duties or
taxes or the monetary equivalent from
Philip Morris in regard to that particular
seizure, the Member State or the EC shall
promptly refund to Philip Morris
International the amount of the
Supplemental Payment that had been paid equal to
the duty and taxes or the monetary
equivalent collected or paid as well as any
corresponding portion of the amounts, if
any, paid under subsections (f)(ii) or
(g)(ii).
(n) If a Member
State or the EC accepts a Supplemental Payment in regard to
a particular seizure of Philip Morris
Cigarettes and it is later found that
duties and taxes or the monetary equivalent
had already been paid with regard to
that particular seizure, the Member State
or the EC shall promptly refund to
Philip Morris International the amount of
the Supplemental Payment that had been
paid equal to the duty and taxes or the
monetary equivalent collected or paid as
well as any corresponding portion of the
amounts paid, if any, under subsections
(f)(ii) or (g)(ii).
(o)
Notwithstanding any other provision in this Agreement, other
than
subsections (p), (t), and (u) below, for
seizures of Contraband Philip Morris
Cigarettes in a New Member State,
(i) in the first year following that New Member State's accession
to
the European
Union, no Supplemental Payment shall be payable by Philip
Morris
International and any such seizures shall not be counted against
the
Baseline Amount
for the purpose of any other calculation under subsections
(f) or (g)
above.
(ii) Notwithstanding subsections (iii) and (iv) below, after
adjustment of
the Baseline Amount in accordance with subsection (s) below,
Supplemental
Payments shall be payable by Philip Morris International under
subsections
(f)(i), and/or (f)(ii) in the case of a Subsequent
Participating
Member State as applicable, or, (g)(i), and/or (g)(ii) in the
case of a
Non-Participating Member State as applicable, and such seizures
shall be counted
against the Baseline Amount for the purpose of any other
calculation
under subsections (f) or (g) above, beginning in the year
following the
year in which the incidence of Contraband Cigarettes and
Counterfeit
Cigarettes in that New Member State is determined to be less
than 2% of the
total market for Cigarettes in that New Member State.
(iii) in each of the second, third, fourth and fifth years
following
that New Member
State's accession to the European Union, in the event that
a New Member
State does not satisfy subsection (ii) above, a Supplemental
Payment shall be
payable by Philip Morris International
19
<PAGE>
only under
subsections (f)(i) in the case of a Subsequent Participating
Member State as
applicable and/or (g)(i) in the case of a Non-Participating
Member State as
applicable, and only if in that year:
(A)
the incidence of Contraband Cigarettes and Counterfeit
Cigarettes in that New Member State is determined to be:
(1) 12% or less (for the second year following accession);
(2) 10% or less (for the third year following accession);
(3) 7% or less (for the fourth year following accession);
(4) 5% or less (for the fifth year following accession);
of the total market for Cigarettes in that New Member State; or
(B) the incidence of Contraband Cigarettes and Counterfeit
Cigarettes in that New Member State is determined to be more than
the
thresholds set forth in subsection (A) above, but the incidence
of
Contraband Philip Morris Cigarettes divided by the total incidence
of
Contraband Cigarettes and Counterfeit Cigarettes in that New
Member
State, expressed as a percentage, is greater than 70% of (x) the
total
tax-paid retail sales of Philip Morris Cigarettes divided by (y)
the
total tax-paid retail Cigarette sales in that New Member State,
expressed as a percentage.
(iv) from the sixth year following a New Member State's accession
to
the European
Union, Supplemental Payments shall be payable by Philip Morris
International
and any such seizures shall be counted against the Baseline
Amount for the
purpose of any other calculation under subsections (f) or
(g) above, only
if the incidence of Contraband Cigarettes and Counterfeit
Cigarettes as a
percentage of the total market for Cigarettes in that New
Member State has
been determined to be less than or equal to the incidence
of Contraband
and Counterfeit Cigarettes in the Initial Participating
Member States as
a percentage of the total market for Cigarettes in the
Initial
Participating Member States, in the fifth year following the
New
Member State's
accession as determined pursuant to subsection (q).
20
<PAGE>
(p) In addition
to the limitations on Supplemental Payments set forth in
subsection (o) above, for the first five
years following a New Member State's
accession to European Union, if Contraband
Philip Morris Cigarettes are seized
in a New Member State and the amount of
those Contraband Philip Morris
Cigarettes when added to the number of
Contraband Philip Morris Cigarettes
already seized in the same calendar year in
all the New Member States that
joined the European Union in the same year
as the seizing New Member State,
results in a total number that exceeds the
Baseline Amount as of January 1,
2004, Philip Morris International shall
have no obligation to make Supplemental
Payments for that seizure. In relation to
any New Member State that joins the
European Union after January 1, 2007, the
Parties shall agree on a method for
determining how this subsection (p) shall
operate.
(q) For the
purposes of subsections (o) and (p) above, the incidence of
Contraband Cigarettes and Counterfeit
Cigarettes in any New Member State and in
the Initial Participating Member States in
accordance with subsection (o)(iv)
above shall be determined by a methodology
agreed to by the Parties.
(r) If a Member
State or any subdivision thereof sells or resells, or
authorizes the sale or resale of, seized
Contraband Philip Morris Cigarettes no
Supplemental Payment is due in relation to
such Cigarettes and, if paid, any
such Supplemental Payment shall be
refunded.
(s) If a New
Member State, upon or after accession to the European Union,
joins the Agreement and becomes eligible
for Supplemental Payments under
subsection (f)(ii), Philip Morris
International and the European Commission
shall, with regard to the factors set forth
in Appendix K, meet and confer as to
when and how the Baseline Amount shall be
amended or recalculated. If no
agreement is reached, the Arbitrator,
pursuant to Section 12.02 of this
Agreement, shall determine the appropriate
amendment to, or recalculation of,
the Baseline Amount, with due regard to the
factors set forth in Appendix K. No
payments shall be made under subsection
(f)(ii), however, until an amended
Baseline Amount shall have been
established.
(t) If at any
time, a Party asserts that there is a serious persisting
problem concerning Contraband Cigarettes or
Counterfeit Cigarettes entering into
a New Member State, which could bring about
serious imbalances in the
application of the Agreement, Philip Morris
International and the EC shall meet
and discuss as soon as reasonably possible
any appropriate measures to ensure
the continued functioning of the Agreement,
including, if necessary, amendment
or suspension of Philip Morris
International's obligations under Article 4 as to
that New Member State. If no agreement is
reached, the Arbitrator, pursuant to
Section 12.02 of this Agreement, shall
determine the appropriate amendment or
relief, with due regard to the factors set
forth in Appendix K.
21
<PAGE>
(u) If at any
time, a Party asserts that there is a serious persisting
problem concerning seizures of Contraband
Philip Morris Cigarettes in a
Participating Member State who was a Member
State on January 1, 2004, which
could bring about serious imbalances in the
application of the Agreement, Philip
Morris International and the European
Community shall meet and discuss as soon
as reasonably possible any appropriate
measures to insure the continuing
functioning of the Agreement, including, if
necessary, amendment of Philip
Morris International's obligations under
Article 4 as to that Member State. If
no agreement is reached, the Arbitrator,
pursuant to Section 12.02 of this
Agreement, shall determine the appropriate
amendment or relief, with due regard
to the factors set forth in Appendix K.
For purposes of
this Section, it shall be presumed that a serious
persisting problem exists if Philip Morris
International can reasonably
demonstrate that:
(i) For a substantial period of time, seizures in a Member
State
significantly
exceed the seizures by that Member State in 2003 so as to
materially
deviate from the expectations of the Parties, and
(ii) More than fifty percent of the seized Cigarettes for which
Supplemental
Payments are made are Cigarettes which were sold at retail and
the applicable
taxes on the retail price of the Cigarettes were paid in
either a New
Member State of the European Community or a non-Member State
outside the
European Community.
If the increase in the incidence of
Contraband Philip Morris Cigarettes in the
aforesaid Member State is substantially
attributable to a failure on the part of
Philip Morris International to adhere to
the terms of this Agreement, and/or its
failure to sell Cigarettes into a market
consistent with legitimate Retail
Demand in that market, amendment of Article
4 obligations is not appropriate.
Article 5
TRACKING AND TRACING
Section 5.01.
Tracking and Tracing Protocols.
Consistent with
its Fiscal Compliance Policy and applicable packaging laws,
Philip Morris International agrees to
adopt, implement, maintain and be bound by
the commercially reasonable practices and
procedures with respect to the
tracking and tracing of shipments of Philip
Morris Cigarettes after the
Execution Date as set forth in the
"Tracking and Tracing Protocols" attached as
Appendix D.
22
<PAGE>
Section 5.02.
Certification of Compliance with Tracking and Tracing
Protocols.
(a) Each year,
on the anniversary of the Execution Date, Philip Morris
International shall provide the Relevant
Administrations with a report, signed
by the Vice President for Compliance
Systems, describing Philip Morris
International's compliance with the
requirements of the Tracking and Tracing
Protocols. Such certification shall be part
of the annual Certification of
Compliance and shall be governed by the
procedures set forth in Section 2.02 of
this Agreement.
Article 6
REVIEW OF AGREEMENT
Section 6.01.
Annual Meetings.
At least once
per year, the authorized representatives of Philip Morris
International and the European Commission
shall meet to confer and assess the
functioning of the Agreement and its
Protocols. At that meeting, Philip Morris
International and the European Commission
may each present any suggestions they
may have to improve the functioning of the
Agreement. Subject to Relevant Law,
the European Commission and Philip Morris
International may communicate to each
other concerns relating to any Party's
activities in connection with their
commitments and obligations under the
Agreement.
Article 7
FULFILLMENT OF OBLIGATIONS AND OBJECTIVES
Section 7.01.
Promotion of Public Policy.
The Parties to
this Agreement hereby acknowledge and agree that this
Agreement is designed to provide meaningful
assistance to the Participating
Member States and the EC in curtailing the
smuggling and illegal distribution of
Cigarettes into and within the Territory of
the Member States.
Section 7.02.
Respect for Obligations.
The Parties
hereby acknowledge and agree to take all appropriate measures:
(1) to ensure fulfillment of their
obligations under this Agreement, (2) to
facilitate the achievement of the
objectives of the Agreement, and (3) to
abstain from any measures that would
jeopardize the attainment of the objectives
of this Agreement.
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<PAGE>
Section 7.03.
Agreement Consistent with EC and Applicable National Laws.
The Parties to
this Agreement hereby acknowledge and agree that compliance
with the terms of this Agreement is
consistent with EC and applicable national
laws, and with the provisions of the Treaty
Establishing the European Community
(the "EC Treaty"), and will contribute to
achieving the objectives of the EC
Treaty.
Section 7.04.
The Parties' Intentions.
The mutual
intention of the Parties is that this Agreement will swiftly,
finally and fully resolve in an amicable
and cooperative manner, without any
admission of liability, all matters in
which or in respect of which the
following persons seek or might seek
redress for alleged Losses: (i) the
Parties; (ii) the political subdivisions of
the Participating Member States;
(iii) instrumentalities and agencies of (i)
and (ii); and (iv) successors and
assignees of all of the foregoing
(collectively "Resolved Matters"). The
Parties' mutual intention is that all
Parties and Released Persons be relieved
of the threat of claims, actions, suits,
assessments, or proceedings in any
forum against them that seeks redress for
any Resolved Matters.
Article 8
REPRESENTATIONS AND WARRANTIES
Section 8.01.
Mutual Representations.
(a) Each of the
Relevant Administrations hereby represents and warrants to
Philip Morris International, and Philip
Morris International hereby represents
and warrants to each of the Relevant
Administrations that:
(i) the execution, delivery and performance of this Agreement by
such
Party is within
its governmental or corporate powers, as the case may be,
and has been
duly authorized by all necessary action on its part;
(ii) the Person executing this Agreement on behalf of such Party
has
the full right
and authority to do so; and
(iii) this Agreement constitutes a valid and binding agreement of
such
Party,
enforceable in accordance with its terms.
24
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Article 9
RELEASE AND DISMISSAL OF CLAIMS
Section 9.01 .
Release.
(a) The
provisions of Sections 9.01(a), (b), and (c) shall inure to the
benefit of Philip Morris (the "Released
Persons") and, consistent with Relevant
Law, be binding upon each of (i) the
Relevant Administrations; (ii) their
respective political subdivisions; (iii)
instrumentalities and agencies of (i)
and (ii); and (iv) successors and assignees
of all of the foregoing
(collectively, the "Releasing Persons").
The release provided for in this
Section 9.01 shall cover companies acquired
by or merged into Philip Morris
subsequent to the Execution Date, but only
if the company's aggregate EC market
share was not in excess of 2% in 2002.
(b) On the
Signature Date of the Agreement for each Releasing Person, such
Releasing Person agrees to and shall,
without any further action on the part of
such Releasing Person, absolutely and
unconditionally fully release and forever
discharge the Released Persons, to the
fullest extent permitted by law, from any
and all civil claims, charges, demands,
damages, subpoenas, discovery requests,
actions, suits, causes of action,
liabilities, costs, expenses and attorneys'
fees, including without limitation, all
civil claims that may be allowable to
the Releasing Persons within criminal
proceedings in the form of restitution,
disgorgement, forfeiture, punitive damages,
or otherwise, for conduct prior to
the Signature Date wherever arising and of
whatever nature, whether known or
unknown, suspected or unsuspected, accrued
or unaccrued, asserted or unasserted,
foreseen or unforeseen, with respect to,
that result from, arise out of, or
relate to the allegations, or the alleged
acts (or omissions) forming the basis
of the allegations, that were raised or
asserted, or could have been raised or
asserted, in the Litigation (collectively,
the "Released Claims"), regardless of
the legal theory or purported basis of
legal duty or liability on which such
Released Claims are, or could be, raised or
asserted.
(c) The
provisions of Sections 9.01(a), (b), and (c) (as well as the
other
provisions of this Agreement) are a result
of a compromise of disputed claims
and defenses, and Released Persons shall
not be deemed to have admitted any of
the allegations asserted in the
Litigation.
(d) On the
Execution Date of the Agreement, each Released Person agrees to
and shall, without any further action on
the part of such Released Person,
absolutely and unconditionally fully
release and forever discharge the Releasing
Persons and their attorneys, to the fullest
extent permitted by law, from any
and all civil claims, charges, demands,
actions, suits, causes of action,
liabilities, costs, expenses, fees, and
attorneys' fees, including without
limitation, all civil claims for
compensation or monetary damages sought in
civil
25
<PAGE>
proceedings in the form of restitution,
disgorgement, forfeiture, punitive
damages, or otherwise for conduct prior to
the Execution Date wherever arising
and of whatever nature, whether known or
unknown, suspected or unsuspected,
accrued or unaccrued, asserted or
unasserted, foreseen or unforeseen, that
result from, arise out of or relate to the
Litigation, regardless of the legal
theory or purported basis of legal duty or
liability on which such claims are,
or could be, asserted.
Section 9.02.
Dismissal Of Claims.
The Parties
shall promptly seek and obtain dismissal with prejudice and
without costs of all pending actions and/or
appeals, as they relate to Philip
Morris, and to the extent that they are
related to the matters at issue in the
Litigation, including any proceeding by
Philip Morris International before the
European Court of First Instance or the
European Court of Justice. The Parties
shall jointly submit a form of a
Stipulation of Dismissal with Prejudice and
without costs to the relevant court or
courts which will be substantially in the
form annexed as Appendix H to this
Agreement.
Article 10
SETOFF
Section 10.01.
Right of Setoff
(a) In addition
to its rights and obligations under Article 7 and the
releases set forth in Article 9 of this
Agreement, Philip Morris International
shall have the right to set off against any
and all amounts otherwise due and
payable to the Relevant Administrations
under this Agreement, the amount of any
damage, loss, liability, tax, custom duty,
expense or non-criminal penalty
actually incurred, payable or suffered by
Philip Morris with respect to,
resulting from, or arising out of, actions,
suits, or proceedings, other than
the Litigation (whether civil proceedings,
administrative proceedings, tax
proceedings, or civil claims made within
criminal proceedings) brought against
Philip Morris by (i) the EC, (ii) any
Member State, (iii) the political
subdivisions of any Member State; (iv)
instrumentalities and agencies of (i),
(ii), and (iii); and (v) successors and
assignees of all of the foregoing, which
seek redress as a result of the sale,
distribution, storage, or shipment of
Contraband Philip Morris Cigarettes before
the Execution Date or, for Subsequent
Participating Member States, their
respective Signature Dates.
(b) Upon any
Party learning of (i) the existence of any actual claim,
action, suit, or proceeding, or (ii) any
threatened claim that would require
disclosure under Financial Accounting
Standard Board Statement No. 5, that may
result in Philip Morris International
having a right to setoff under this
Section
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<PAGE>
10.01, that Party shall provide each other
Party, to the fullest extent
permitted by law, with prompt notice of the
existence of such claim, action,
suit, or proceeding.
(c) Upon
learning of the existence of (i) any actual claim, action,
suit,
or proceeding, or (ii) any threatened claim
that would require disclosure under
Financial Accounting Standard Board
Statement No. 5, that may result in Philip
Morris International having a right to
setoff under this Section 10.01, Philip
Morris International may, upon giving the
EC 30 days notice, begin paying any
funds which are due to the Relevant
Administrations under this Agreement into an
interest-bearing escrow account, up to the
amount claimed, or if no specific
amount is claimed, the amount at issue, in
such actions or proceedings, rather
than paying such funds directly to the
Relevant Administrations. Payment of
funds into escrow by Philip Morris
International pursuant to this subsection (c)
above shall not be deemed a breach of this
Agreement.
(d) In each
instance where Philip Morris International pays funds into
escrow as set forth in Section 10.01(c),
Philip Morris International and the EC
shall make a good faith effort to agree as
to whether utilization of the escrow
account provided for in subsection (c)
above is appropriate. If they have not
agreed within 60 days after notice was
provided pursuant to subsection (b)
above, the EC shall have the right to make
application to the Arbitrator(s), as
described below in Section 12.02, to
challenge the applicability of subsection
(c) above. In order for such a challenge to
be upheld by the Arbitrator(s), the
EC must demonstrate that Philip Morris
International does not have a reasonable
basis to support its belief that it is
incurring, or may incur, damage, loss,
liability or expense that may be eligible
for setoff pursuant to subsection (a)
above. If the Arbitrator(s) determines that
Philip Morris International does not
have a reasonable basis to place the
aforesaid funds into the escrow account,
the Arbitrator(s) shall order that such
funds together with accrued interest be
released from the escrow account within 30
days and paid to the Relevant
Administrations pursuant to this
Agreement.
(e) Before
exercising any right to setoff pursuant to subsection (a) above
either by ceasing to make payments due to
the Relevant Administrations or by
claiming amounts held in escrow, Philip
Morris International shall provide at
least 30 days notice to the European
Commission of its intention to do so. Upon
receipt of such notice, Philip Morris
International and the European Commission
shall immediately make a good faith effort
to agree as to whether setoff is
appropriate and, if so, what the amount of
the setoff should be. If Philip
Morris International and the European
Commission have not agreed within 60 days
of notice being received by the European
Commission, either Party may make an
application to the Arbitrator in accordance
with Section 12.02 to determine
whether a right of setoff exists pursuant
to this Section 10.01. In order to
establish any right of setoff, Philip
Morris International must demonstrate by
the greater weight of the evidence that (i)
Philip Morris has incurred or
suffered
27
<PAGE>
damage, loss, liability or expense that is
eligible for setoff pursuant
to subsection (a) above; and (ii) the
amount so incurred or suffered. This
subsection (e) does not in any way affect
the rights of Philip Morris
International to pay funds into escrow in
accordance with subsection (c) above.
Upon a ruling by the Arbitrator(s) that
Philip Morris International has failed
to establish a right of setoff, all funds
owed to the Relevant Administrations
under the terms of the Agreement that were
the subject of dispute together with
accrued interest, shall promptly be paid
over to the Relevant Administrations.
Upon a ruling by the Arbitrator(s) that
Philip Morris International has
established a right of setoff, Philip
Morris International shall be entitled to
recover such funds from escrow and/or set
off against future payments in
accordance with the Arbitrator's(s')
ruling.
(f) Claims in
Excess of Amount Available for Setoff. If a claim, action,
suit, proceeding, assessment or demand has
been made that would, if successful,
entitle Philip Morris International to
exercise its right to setoff under
Article 10 and either (1) the amount of the
claim, action, suit, proceeding,
assessment or demand is likely to exceed
the total amount available for setoff
or escrow under Article 10, or (2) the
claim, action, suit, proceeding,
assessment or demand has been brought
within two years of the Execution Date and
the amount of the claim, action, suit,
proceeding, assessment or demand is
likely to exceed (euro) 200 million; and,
despite the good-faith and expeditious
efforts of Philip Morris to defeat the
claim action, suit, proceeding,
assessment or demand, including invoking
the releases provided for by this
Agreement if applicable:
(i) the claim action, suit, proceeding, assessment or demand has
not
been dismissed,
withdrawn, or reduced below the applicable threshold in (1)
or (2) above,
within one year after the court or tribunal has received full
and complete
arguments from the parties to the dispute as to whether the
claim, action,
suit, proceeding, assessment or demand should be dismissed
because its
assertion contravenes the provisions of this Agreement or
otherwise,
or
(ii) the claim, action, suit, proceeding, assessment or demand
has
been sustained
by the court or tribunal after considering arguments by
Philip Morris
International that the claim, action, suit, proceeding,
assessment or
demand should be dismissed because its assertion contravenes
the provisions of this
Agreement or otherwise, and
(iii) Philip Morris can demonstrate that, as a result of the
ongoing
claim, burdens
have been imposed on it or it is otherwise prejudiced by
virtue of such
claim.
then (A) as to any such claim, action, suit, proceeding,
assessment or demand that is within the scope of Article 9,
Philip
28
<PAGE>
Morris International shall be discharged of its obligations to pay
any
amounts payable (i) under Appendix C to the Member State that
brought
the action, suit, proceeding, assessment or demand, (ii) under
Article
4 of this Agreement to that Member State, and (iii) to the EC for
its
share of any Supplemental Payment for seizures by that Member
State.
In the event that the aforesaid claim, action, suit,
proceeding,
assessment, or demand is eventually dismissed or otherwise
resolved
for an amount below the applicable threshold set forth in (1) and
(2)
above, Philip Morris International's obligations to the Member
State
under Appendix C and to the Member State and the EC under Article
4
shall resume prospectively; and
(B) as to any such claim, action, suit, proceeding, assessment
or
demand that is not within the scope of Article 9, Philip Morris
International shall be discharged of its obligations to pay (i) 50%
of
the amounts payable to all the Relevant Administrations under
Appendix
C, (ii) amounts payable under Article 4 of the Agreement to the
Member
State that brought the claim, action, suit, proceeding, assessment
or
demand, as well that Member State's share of any payments
payable
under Appendix C of this Agreement; and (iii) amounts payable to
the
EC for its share of any Supplemental Payments for any seizures by
that
Member State. In the event that the aforesaid claim, action,
suit,
proceeding, assessment or demand is eventually dismissed or
otherwise
resolved for an amount below the applicable threshold set forth in
(1)
and (2) above, Philip Morris International's obligations to the
Relevant Administrations under Appendix C and to the Member State
and
the EC under Article 4 shall resume prospectively.
(iv) For the purposes of subsections (A) and (B) above, the
term
"Member State"
that brought the action, suit, proceeding, assessment or
demand shall
include (i) the Member State; (ii) the political subdivisions
of that Member
State; (iii) instrumentalities or agencies of (i) or (ii);
and (iv)
successors and assignees of all of the foregoing.
Section 10.02. No Other Effect.
Subject to
Article 11, nothing in this article shall reduce or otherwise
affect the other duties of Released Persons
to any Releasing Person or the
requirements of Relevant Law, nor shall it
reduce or otherwise affect the duty
of the participating Released Person's
obligations under this Agreement, which
shall continue in full force and effect
during and after any dispute resolution
proceedings.
29
<PAGE>
Article 11
TERMINATION
Section 11.01.
Termination.
(a) This
Agreement shall terminate upon the Expiration Date unless
terminated earlier by subsections (b)
through (g) of this Section.
(b) The Parties
agree that pursuant to this Agreement each Party and all
Released Persons shall have adequate
remedies to protect them against any claims
or demands which are (i) asserted against
them in contravention of Article 9, or
(ii) subject to setoff under the provisions
of Article 10. Accordingly, a Party
shall have the right to terminate this
Agreement if, despite their good-faith
efforts, the Parties are unable to agree
upon substitute provisions,
adjustments, or modifications to the
Agreement so as to restore those remedies.
A Party shall have the right to terminate
this Agreement under the circumstances
and in the manner set forth in subsections
(c) through (g), inclusive, below.
(c) A Party
shall have the right to terminate this Agreement if:
(i) A claim, action, suit, proceeding, assessment or demand
that
would, if
successful, entitle Philip Morris International to exercise its
right to setoff
under Article 10 has been made by a Participating Member
State in which
the sales of Philip Morris Cigarettes are equivalent to or
are more than 10
percent of the Philip Morris Cigarettes sold in the
Territory of the
Member States as of January 1, 2004, and a court in that
Participating
Member State, or the European Court of Justice, has issued a
final and
unappealable judgment that invalidates or renders unenforceable
a
material
provision of Article 9 or Article 10, or there is a
legislative,
executive or
administrative action with the same effect in that
Participating
Member State; or
(ii) Claims, actions, suits, proceedings, assessments or demands
that
would, if
successful, entitle Philip Morris International to exercise its
right to setoff
under Article 10 have been made by Participating Member
States in which
collectively the sales of Philip Morris Cigarettes are
equivalent to or
are more than 10 percent of the Philip Morris Cigarettes
sold in the
Territory of the Member States as of January 1, 2004, and the
European Court
of Justice has, or courts in those Participating Member
States have,
issued final and unappealable judgments that invalidate or
render
unenforceable a material provision of Article 9 or Article 10,
or
there are
legislative, executive, or administrative actions with the same
effect in those
Participating Member States.
30
<PAGE>
(d) For the
purposes of subsection (c) above, the term "Participating
Member State" shall include (i) the
Participating Member State; (ii) the
political subdivisions of that
Participating Member State; (iii)
instrumentalities or agencies of (i) or
(ii); and (iv) successors and assignees
of all of the foregoing.
(e) A Party that
seeks to terminate the Agreement must first submit a
notice of termination to the other Parties,
setting out the basis for
termination. Such termination shall become
effective 120 days from receipt of
notice unless another Party challenges the
notice of termination pursuant to
Section 12.02 of this Agreement.
(f) In the event
that an arbitration proceeding is invoked pursuant to
subsection (e) above, if the Arbitrator(s)
determines that there is a basis for
termination, the Agreement shall terminate
in its entirety unless the
precipitating cause of the termination is
clearly confined in its application to
a particular Member State or particular
Member States, in which case, the
Arbitrator(s) shall determine the scope of
the termination in the absence of an
agreement by the remaining Parties.
(g) If the
Agreement is terminated before the Expiration Date in
accordance
with the provisions set forth above in
subsection (c), a new agreement shall
take its place without any further action
being necessary by the Parties, such
agreement remaining in effect until the
Expiration Date, consisting of (1) the
Parties' rights and obligations under
Articles 7, 9 and 12 of this Agreement,
(2) the Parties' rights and obligations in
effect on the date of termination of
the Agreement under Article 2 and Appendix
B of this Agreement, and (3) the
Parties' rights and obligations in effect
on the date of termination of the
Agreement under Article 5 and Appendix D of
this Agreement. All other provisions
of the Agreement shall be terminated.
Section 11.02.
Subsequent Agreement.
It is the
intention of the Parties, if feasible, to extend the duration
of
this Agreement beyond the Expiration Date.
Accordingly, beginning no later than
two years prior to the Expiration Date, if
this Agreement has not been
terminated earlier in accordance with its
terms, the representatives of the
Parties shall meet and attempt in good
faith to reach another agreement between
the Parties covering the same subject
matter addressed herein.
Article 12
DISPUTE RESOLUTION
Section 12.01.
The Role of the European Court of First Instance and the
European Court of Justice.
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<PAGE>
(a) Arbitration
Clause for Articles 7 and 9. In the absence of prior
agreement, any claim, action, suit,
proceeding or dispute between the Parties,
between a Party and a Released Person or a
Releasing Person, or between a
Released Person and a Releasing Person,
arising out of or relating to any
breach, clarification or enforcement of
Article 7 or 9 of this Agreement
relating to the sale, distribution, storage
or shipment of Contraband Cigarettes
before the Execution Date or, for
Subsequent Participating Member States, their
respective Signature Dates, shall be
brought exclusively before the European
Court of First Instance pursuant to Article
238 of the EC Treaty. Each of the
Parties hereby agrees, on its behalf and on
behalf of the Released Persons or
the Releasing Persons (as the case may be),
that this Section 12.01 constitutes
and is intended to be an arbitration clause
for the purposes of Article 238 of
the EC Treaty, and irrevocably consents to
the jurisdiction of the European
Court of First Instance in relation to any
such dispute, and irrevocably waives,
to the fullest extent permitted by law, any
objection that it may now or
hereafter have to the reference of such
dispute to the European Court of First
Instance or that any such dispute has been
brought in an inconvenient forum.
Process in any proceeding brought before
the European Court of First Instance
pursuant to Article 238 of the EC Treaty
may be served on any Party anywhere in
the world, whether within or without the
jurisdiction of the European Court of
First Instance. The applicable law to
interpret this Agreement shall be the law
of the State of New York, without giving
effect to choice of law or conflict of
law doctrine. The European Court of First
Instance shall in its determination of
any dispute concerning this Agreement, have
regard to, inter alia, its own case
law, and that of the European Court of
Justice, on the interpretation of the EC
Treaty and EC Law.
(b) Referral of
matters to the European Court of First Instance or the
European Court of Justice. In the event
that a claim, suit, action, assessment,
proceeding or demand (in this Section
12.01(b) hereinafter, "claim") is brought
against Philip Morris relating to the sale,
distribution, storage, or shipment
of Contraband Cigarettes before the
Execution Date before any court or tribunal
of the Member States (including the courts
and tribunals of political
subdivisions of the Member States) the
Parties agree to follow the following
procedures:
(i) the European Commission may be given notice of the claim by
Philip
Morris
International;
(ii) As soon as reasonably possible after receiving notice of
the
claim, the
European Commission agrees to: (a) consider whether the claim
is
within the scope
of the Arbitration clause of Section 12.01(a) of this
Agreement; (b)
if it considers this to be the case, prepare a statement of
position in
admissible form that the claim concerns, in whole or in part, a
matter covered
by and subject to this Agreement and to the Arbitration
clause in
Section 12.01(a) and that the Agreement provides that disputes
regarding the
application of Articles 7 and 9 of this Agreement to such
32
<PAGE>
claims should be
brought exclusively before the Court of First Instance
pursuant to
Article 238 of the EC Treaty, the Agreement provides that if
such claims are
brought before any court or tribunal of the Member States
(including a
court or tribunal of the political subdivisions of the Member
States), such
proceeding should be suspended and referred or transferred to
the European
Court of First Instance pursuant to Article 238 of the EC
Treaty, and the
Agreement provides that to the extent that any Party is
prevented from
so transferring, all questions concerning the interpretation
of any provision
of Community Law that is necessary to enable such court to
give judgment,
be referred to the European Court of Justice under Article
234 of the EC
Treaty and (c) provide said statement of position to all
relevant Parties
for use by any Party in a motion filed pursuant to Section
12.01(a) and,
submit it to the competent authority of the Relevant Member
State with a
request that it be submitted to the appropriate court;
(iii) If the European Commission concludes that a claim, is not
a
matter covered
by and subject to this Agreement or is not one to which the
Arbitration
clause of Section 12.01(a) applies, and any Party disagrees
with that
conclusion, or the European Commission does not render the
aforesaid
statement of position within sixty (60) days of the notice set
forth herein,
any Party may demand Arbitration pursuant to Section 12.02 of
this Agreement.
If the Arbitrators rule that the claim is within the scope
of the
Arbitration clause of Section 12.01(a), the European Commission
agrees to (a)
prepare a statement in admissible form that states that (i)
the
Arbitrator(s) have ruled that the claim is within the scope of
the
Arbitration
clause of Section 12.01(a) of this Agreement, and (ii) the
Agreement
provides that disputes regarding the application of Articles 7
and 9 of this
Agreement to such claims should be brought exclusively before
the Court of
First Instance pursuant to Article 238 of the EC Treaty, the
Agreement
provides that if such disputes are brought before any court or
tribunal of the
Member States (including a court or tribunal of the
political
subdivisions of the Member States), such proceeding should be
suspended and
referred or transferred to the European Court of First
Instance
pursuant to Article 238 of the EC Treaty, and the Agreement
provides that to
the extent that any Party is prevented from so
transferring,
all questions concerning the interpretation of any provision
of Community Law
that is necessary to enable such court to give judgment,
be referred to
the European Court of Justice under Article 234 of the EC
Treaty, and (b)
provide said statement to all relevant Parties for use by
any Party in a
motion filed pursuant to Section 12.01(a) and, submit it to
the competent
authority of the Relevant Member State with a request that it
be submitted to
the appropriate court;
(iv) Subject to Relevant Law, the Participating Member States, as
well
as their
political subdivisions, instrumentalities, agencies,
33
<PAGE>
successors and
assigns, agree that they will not oppose a motion filed
pursuant to
Section 12.01(a).
Section 12.02. Dispute Resolution for Claims Brought Under the
Terms
of the
Agreement.
(a) Arbitration Clause. Subject to Section 12.01, any dispute
between
the Parties
arising out of or relating to this Agreement or any breach,
clarification or
enforcement of any provision of this Agreement or any
conduct
contemplated herein shall be brought exclusively before, and
decided pursuant
to the UNCITRAL Rules by the arbitrator who is at the top
of the list
attached to this Agreement as Appendix J (the "Arbitrator"). If
the Arbitrator
is unable to hear the Parties' dispute within 60 days of
reference, upon
demand by any Party to the dispute, the
next-highest-listed-arbitrator in Appendix J shall be deemed to be
the
Arbitrator for
the purposes of that dispute. Should the Arbitrator be
permanently
unable to hear the Parties' disputes, the next-highest-listed
arbitrator in
Appendix J shall be deemed to be the Arbitrator for the
purposes of the
Agreement. The Parties may add to, remove from, or reorder
the list of
arbitrators in Appendix J at any time by mutual agreement in
writing.
(b) The arbitration proceedings shall be conducted in the
English
language in
Brussels, unless otherwise agreed by the Parties to the
dispute.
Consistent with Relevant Law, and any applicable law governing
Philip Morris'
disclosure obligations the arbitration proceedings shall be
confidential to
the extent possible, and the Parties shall not disclose the
nature or scope
of the proceedings, or any information obtained in or
arising out of
the proceedings, to any third party. No amicus curiae or
"friend of the
court" briefs may be filed in the proceedings. The
Arbitrator(s)
shall provide the rules of the proceedings and shall issue a
written opinion
stating the reasons for the relief granted. The arbitration
proceedings, and
the enforcement of any arbitral order or award, or an
action to compel
arbitration, shall be governed by the substantive laws of
the State of New
York without regard to choice of law doctrine. The Parties
agree that the
orders, decisions, and awards of the Arbitrator(s) shall be
exclusively
enforceable in the New York State Supreme Court (New York
County), and any
action to compel arbitration shall be commenced in New
York State
Supreme Court (New York County). The Party seeking to compel
arbitration, or
to enforce the orders, decisions, and awards of the
Arbitrator(s),
shall, at the time of the commencement of the action or
proceeding,
request assignment of the action or proceeding to the
Commercial
Division, Supreme Court of the State of New York (New York
County). The
final judgment of the New York State Supreme Court may be
enforced by any
Party in any court possessing personal and subject matter
jurisdiction.
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<PAGE>
(c) Notwithstanding the foregoing, for any dispute between the
Parties
involving
Article 3, Section 4.01(t) and (u), Article 11, Section
12.01(b),
and any dispute
involving Article 10 where the amount in dispute exceeds 20
percent of the
"Base Payment" in Appendix C, any Party shall, upon request,
have the right
to have the dispute settled by a three-person arbitration
panel with the
Arbitrator acting as chairperson and one arbitrator to be
selected by the
Philip Morris International Party or Parties to the dispute
and one
arbitrator to be selected by the Relevant Administration Party
or
Parties to the
dispute.
Article 13
MISCELLANEOUS
Section 13.01.
Notices.
All notices,
requests and other communications to any Party hereunder shall
be in writing (including facsimile
transmission) and shall be given to the
Director of OLAF and the General Counsel of
Philip Morris International.
Section 13.02.
Waivers.
No provision of
this Agreement may be waived unless such waiver is in
writing and is signed by the Party against
whom the waiver is to be effective.
Section 13.03.
Expenses.
All costs and
expenses incurred in connection with this Agreement or the
Litigation shall be paid by the Party
incurring such cost or expense.
Section 13.04.
Nature of Payments.
The Parties
agree that no part of any of the payments made pursuant to this
Agreement is being paid as (or in
settlement of actual or potential claims for)
fines or penalties, civil or criminal, or
enhanced, multiple or punitive damage
awards. Nor does any part of such payments
represent the cost of a tangible or
intangible asset or other future
benefit.
Section 13.05.
Successors and Assigns.
Except as
provided for in Section 9.01(a) of this Agreement, the
provisions
of this Agreement, including the
obligations set forth herein, shall be binding
upon and inure to the benefit of the
Parties hereto and their respective
successors and assigns.
35
<PAGE>
Section 13.06.
Legality and Severability.
(a) All
obligations under this Agreement are subject to the relevant
laws,
statutes, ordinances, rules, regulations or
other provisions having the force or
effect of law of the EC and/or any Member
State, which are in effect in each
Member State as of its Signature Date, or
are enacted or amended by the EC or a
Member State after its Signature Date
("Relevant Law"), and without prejudice to
the rights of the Parties under Article 11,
the Parties agree that to the extent
that any obligation of any Party under this
Agreement would violate Relevant
Law, the Party shall be excused from
performing such obligation only to the
extent that performance would violate such
law and shall not incur any liability
as a result thereof.
(b) Without
prejudice to the rights of the Parties under Article 11, in the
event that any provision of this Agreement,
or the application thereof, becomes
or is declared by a court or tribunal of
competent jurisdiction to be illegal,
void or unenforceable, or there is a
legislative, executive or administrative
action with the same effect in a
Participating Member State, the remainder of
this Agreement shall continue in full force
and effect and the application of
such provision to other Persons or
circumstances shall be interpreted so as to
reasonably effectuate the intent of the
Parties hereto. The Parties further
agree to replace such void or unenforceable
provision of this Agreement with a
valid and enforceable provision that will
achieve, to the extent possible, the
intent and purpose of such void or
unenforceable provision.
Section 13.07.
Counterparts; Effectiveness; Third Party Beneficiaries.
This Agreement
may be signed in any number of counterparts, each of which
shall be an original, with the same effect
as if the signatures thereto and
hereto were upon the same instrument. This
Agreement shall become effective on
the Execution Date. No provision of this
Agreement is intended to confer upon
any Person other than the Parties and the
Persons identified in Article 9 any
rights or remedies hereunder.
Section 13.08.
Entire Agreement.
This Agreement,
including the Appendixes, constitutes the entire agreement
between the Parties with respect to the
subject matter hereof and supersedes all
prior drafts of this Agreement and any
prior understandings reached between the
Parties during negotiation of this
Agreement, whether oral or written.
Notwithstanding the foregoing, each of the
Parties may rely upon express
representations made in any letter from
another Party or their counsel provided
at or near the Execution Date or any
Signature Date relating to the Agreement.
36
<PAGE>
Section 13.09.
Captions.
The captions
herein are included for convenience of reference only and
shall be ignored in the construction or
interpretation hereof.
Section 13.10.
Designated EC Representative.
The EC hereby
appoints the Director of OLAF as its designated
representative for communications with
Philip Morris International relating to
the administration of this Agreement. The
designated representative is hereby
given authority by the EC to act on its
behalf for the purposes of this
Agreement, including without limitation,
giving and receiving notices and
inquiries, and reviewing and approving any
documentation or protocols required
to be reviewed or approved under this
Agreement.
Section 13.11.
Amendments.
Any provision of
this Agreement may be amended but only if such amendment
is in writing and is signed by each Party
to this Agreement.
Section 13.12.
Authorship.
No one Party or
group of Parties shall be considered to have been the
author of this Agreement.
Section 13.13.
Use of Information Provided by Philip Morris International.
Any information
provided to the Relevant Administrations or OLAF pursuant
to the Agreement shall be used only for the
purposes of promoting the Parties'
joint objective of combating Cigarette
smuggling, Cigarette counterfeiting and
any related Money Laundering. In no case
shall any such information be used or
provided to third parties for any other
purpose without prior written consent by
Philip Morris International, unless the
Relevant Administration is compelled to
disclose the information by judicial or
administrative process or by other
requirements of law.
Section 13.14.
Equal Treatment Provision.
If, at any time
during the operation of this Agreement, the EC enters into
an agreement with another Cigarette
manufacturer relating to the same
subject-matter as this Agreement ("Future
Cooperation Agreement") on terms
(after due consideration of relevant
differences in volume of Cigarettes or
other appropriate factors) more favorable
to such Cigarette manufacturer than
the terms of this Agreement, then Philip
Morris International may request of the
EC that it receive treatment under this
Agreement at least as relatively
favorable as the overall terms
37
<PAGE>
provided to the other Cigarette
manufacturer. The EC will act in good faith to
consider any such request and may grant
such a request if it is consistent with
the intent of this Agreement.
Section 13.15.
Additional Participating Member States.
Any Member State
may become a Participating Member State by executing a
copy of this Agreement in the appropriate
form and delivering a counterpart
thereof to Philip Morris International and
the other Parties thereto.
Section 13.16.
Use of the Agreement.
This Agreement
may be admitted into evidence, without the consent of the
Parties (i) in any proceeding for the
purposes of enforcing the terms hereof, or
(ii) if the contemplated use of said
document would not be contrary to the
intent of this Agreement, in support of any
claim or defense any Party may wish
to raise in any proceeding brought against
it. Otherwise, the Agreement may not
be admitted into evidence in any proceeding
without the consent of the Parties.
IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be
duly executed by their respective
authorized officers as of the day and year
first written above.
38
<PAGE>
Philip Morris International Inc.,
Philip Morris Products Inc.,
Philip Morris Duty Free Inc., and
Philip Morris World Trade SARL
By:
-------------------------------------
Andre Calantzopoulos
<PAGE>
European Community
The European Commission hereby executes
this Agreement on behalf of the European
Community and has the full right and
authority to do so;
The execution and performance of this
Agreement by the European Commission is
within its powers and has been duly
authorized by all necessary action on its
part;
This Agreement constitutes a valid and
binding Agreement of the European
Community and is enforceable in accordance
with its terms.
------------------------------
-----------------------------
Michel Petite
Franz-Hermann Bruner
Director General
Director
General
Legal Service
European Anti-Fraud Office
European Commission
European Commission
Date:
------------------------
<PAGE>
Kingdom of Belgium
The Minister of Finance of the Kingdom of
Belgium hereby executes this Agreement
on behalf of the Kingdom of Belgium and has
the full right and authority to do
so;
The execution and performance of this
Agreement by the Ministry of Finance
of the Kingdom of Belgium is within its
governmental powers and has been duly
authorised by all necessary action on its
part;
This Agreement constitutes a valid and
binding Agreement of the Kingdom of
Belgium and is enforceable in accordance
with its terms.
Minister of Finance of the
Kingdom of Belgium
--------------------------
Date:
-----------------------
<PAGE>
Republic of Finland
The Minister of Finance of the Republic of
Finland hereby executes this
Agreement on behalf of the Republic of
Finland and has the full right and
authority to do so;
The execution and performance of this
Agreement by the Ministry of Finance of
the Republic of Finland is within its
governmental powers and has been duly
authorised by all necessary action on its
part;
This Agreement constitutes a valid and
binding Agreement of the Republic of
Finland and is enforceable in accordance
with its terms.
Minister of Finance of the
Republic of Finland
---------------------------------
Date:
------------------------
<PAGE>
French Republic
The Ministry of the Economy, Finance and
Industry of the French Republic hereby
executes this Agreement on behalf of the
French Republic and has the full right
and authority to do so;
The execution and performance of this
Agreement by the Ministry of the Economy,
Finance and Industry of the French Republic
is within its governmental powers
and has been duly authorised by all
necessary action on its part;
This Agreement constitutes a valid and
binding Agreement of the French
Republic and is enforceable in accordance
with its terms.
On behalf of the
Minister of Economy,
Finance and Industry
of the French Republic
--------------------------------
Date:
-----------------------
<PAGE>
Federal Republic of Germany
The Ministry of Finance of the Federal
Republic of Germany hereby executes this
Agreement on behalf of the Federal Republic
of Germany and has the full right
and authority to do so;
The execution and performance of this
Agreement by the Ministry of Finance of
the Federal Republic of Germany is within
its governmental powers and has been
duly authorised by all necessary action on
its part.
This Agreement constitutes a valid and
binding Agreement of the Federal Republic
of Germany and is enforceable in accordance
with its terms.
On behalf of the Ministry of Finance
of the Federal Republic of Germany
----------------------------
Date:
----------------------
<PAGE>
Republic of Greece
The Minister of the Economy and Finance of
the Republic of Greece hereby
executes this Agreement on behalf of the
Republic of Greece and has the full
right and authority to do so;
The execution and performance of this
Agreement by the Ministry of the Economy
and Finance of the Republic of Greece is
within its governmental powers and has
been duly authorised by all necessary
action on its part;
This Agreement constitutes a valid and
binding Agreement of the Republic of
Greece and is enforceable in accordance
with its terms.
Minister of the Economy and Finance
for the Republic of Greece
----------------------------
Date:
----------------------
<PAGE>
Italian Republic
The Minister of Economy and Finance of the
Italian Republic hereby executes this
Agreement on behalf of the Italian Republic
and has the full right and authority
to do so;
The execution and performance of this
Agreement by the Ministry of Economy and
Finance of the Italian Republic is within
its governmental powers and has been
duly authorised by all necessary action on
its part;
This Agreement constitutes a valid and
binding Agreement of the Italian Republic
and is enforceable in accordance with its
terms.
Minister of Economy and Finance
of the Italian Republic
----------------------------------
Date:
----------------------
<PAGE>
Grand-Duchy of Luxembourg
The Minister of Finance of the Grand-Duchy
of Luxembourg hereby executes this
Agreement on behalf of the Grand-Duchy of
Luxembourg and has the full right and
authority to do so;
The execution and performance of this
Agreement by the Ministry of Finance of
the Grand-Duchy of Luxembourg, is within
its governmental and administrative
powers and has been duly authorised by all
necessary action on its part;
This Agreement constitutes a valid and
binding Agreement of the Grand-Duchy of
Luxembourg and is enforceable in accordance
with its terms.
Minister of Finance of the
Grand-Duchy of Luxembourg
--------------------------------
Date:
----------------------
<PAGE>
Kingdom of the Netherlands
The Minister of Finance of the Kingdom of
the Netherlands hereby executes this
Agreement on behalf of the Kingdom of the
Netherlands and has the full right and
authority to do so;
The execution and performance of this
Agreement by the Ministry of Finance of
the Kingdom of the Netherlands is within
its governmental powers and has been
duly authorised by all necessary action on
its part;
This Agreement constitutes a valid and
binding Agreement of the Kingdom of the
Netherlands and is enforceable in
accord
