Some of JT’s subsidiaries are defendants in lawsuits filed by plaintiffs seeking damages for harm allegedly caused by smoking, the marketing of tobacco or exposure to tobacco smoke. There are lawsuits involving smoking and health-related cases pending in which some of JT’s subsidiaries are named as defendants or for which JT may have certain indemnity obligations pursuant to the agreement for JT’s acquisition of RJR Nabisco Inc.’s non-U.S. tobacco business. In addition, JT and/or some of its subsidiaries are also defendants in cases other than the smoking and health-related cases.

In the past, numerous large-scale smoking and health-related cases have been brought against tobacco product manufacturers in the U.S. While the number of such lawsuits has declined in recent years, we recognize that the litigation risk remains in the U.S. due to the availability juries sympathetic to plaintiffs, punitive damages and contingency fees. Companies within the Vector Group, which were acquired in 2024 are defendants in multiple smoking and health-related cases in the U.S.

Please see the “Contingent Liabilities” note in our Consolidated Financial Statements’ “Contingencies” for major lawsuits to which some of JT’s subsidiaries or indemnitees are named as defendants.

The JT Group is unable to predict the outcome of currently pending or future lawsuits. A decision unfavorable to companies within the JT Group and payment of a substantial amount of monetary compensation could materially affect the JT Group’s financial performance. Moreover, regardless of the results of these lawsuits, critical media coverage may reduce social tolerance of smoking, strengthen public regulations and prompt the filing similar lawsuits against companies within the JT Group, forcing it to bear litigation costs and materially affecting its business performance. Apart from smoking and health-related cases, the JT Group also may become the defendant in further litigation. Should any problems arise as to the quality of the Group’s products, this may lead to claims. Such litigation cases could negatively affect the Group’s business performance or the manufacture, sale and import and export of its products, should the outcome of any such claims prove unfavorable.

Canadian litigation

There were 10 health care cost recovery cases in Canada against JTI-Macdonald Corp. (hereinafter referred to as “JTI-Mac”), our Canadian subsidiary and JT’s indemnitees (RJR Nabisco Inc.’s affiliates), brought by Canadian provinces. In addition, there were 8 class actions in Canada where plaintiffs were seeking damages for harm allegedly caused by smoking of cigarettes.

In 2019, the Quebec Court of Appeal dismissed an appeal of an adverse judgment in two class action lawsuits related to smoking and health against JTI-Mac and its competitors and co-defendants, Rothmans, Benson & Hedges Inc. (hereinafter referred to as “RBH”), and Imperial Tobacco Canada Limited (hereinafter referred to as “ITC”), (hereinafter collectively referred to as the “Tobacco Companies”).

In 2019, JTI-Mac applied to the Ontario Superior Court for protection under the Companies’ Creditors Arrangement Act (hereinafter referred to as the “CCAA”), which was approved. RBH and ITC also sought and received protection under the CCAA in March 2019. As a result, all legal proceedings and enforcement of judgments in Canada to which the Tobacco Companies were the parties were stayed, and the Tobacco Companies were able to preserve their assets and continue their businesses.

Subsequently, the Tobacco Companies participated in a court-ordered mediation process with representatives of multiple claimants, including the Quebec class action plaintiffs and all provincial and territorial governments (hereinafter collectively referred to as the “Claimants”), in an attempt to reach a final resolution of all pending litigation.

On March 6, 2025, the Ontario Superior Court approved a CCAA Plan of Compromise and Arrangement for JTI-Mac. Similar plans were also approved in relation to ITC and RBH. Pursuant to the approved plans, the Tobacco Companies will pay a total of 32.5 billion Canadian dollars in the aggregate (approximately 3.56 trillion yen) to the Claimants.

This settlement will bring an end to all smoking and health-related cases pending against JTI-Mac. In addition, any potential claims against JTI-Mac and its affiliates for damages related to manufactured tobacco products based on past or current activity will be barred.