BAT faces legal barrage after Brazil blow

British American Tobacco could face a deluge of damages claims in Brazil after a judge ruled against the cigarette giant in a class action lawsuit.

The Sao Paulo court has found in favour of the Association for the Defence of the Health of Smokers, which first launched the case nearly nine years ago. It was suing both Souza Cruz, BAT's Brazilian operation, and Philip Morris, the US owner of Marlboro. Souza Cruz, which is appealing against the ruling, has by far the biggest market share with 77 per cent.

The judge said the two companies should compensate people who sustained any damage resulting from the consumption of cigarettes and the lack of information about addiction. He did not establish an amount.

The lawsuit claimed cigarette advertising was misleading and the judge also ruled that the manufacturers had 60 days to change their packs. He said they must ensure packs carried more information, including the chemical composition of cigarettes and the "risk or harmfulness of the product".

However, a BAT spokesman countered that this was not the manufacturer's responsibility and that the company had always obeyed government guidelines on pack warnings.

He also played down the significance of the ruling: "Is it a threat? No. Even after eight and half years, it's still early days." He added that of the 377 cases brought against tobacco firms in Brazil since 1995, the manufacturers had lost only eight. "It's a minority and we would hope to win on appeal."

It is currently not clear how much money BAT would have to pay out in compensation if it lost its appeal, as the number of plaintiffs within the lawsuit has not been verified.

Tobacco litigation has blighted cigarette companies over recent years, particularly in the US. Smokers, many of whom have contracted smoking-related diseases such as lung cancer, have claimed that the manufacturers did not warn them of the dangers of smoking.

In some cases, the companies have also been accused of deliberately withholding evidence about the dangers. US courts have awarded billions of dollars in compensation, though the manufacturers continue to appeal.

BAT, with a market value of £16.9bn, sells more than 300 brands worldwide including Benson & Hedges, Lucky Strike and Kent. Full-year results from the company, due out later this week, are expected to show an increase in cigarette volumes and a 3.6 per cent rise in operating profits to £2.78bn.