In a major blow to tobacco companies, the Supreme Court of Canada has ruled that the British Columbia government can sue cigarette companies for the cost of treating smoking-related illnesses.

The 9-0 judgment upholds provincial legislation that allows the government to seek damages to cover public health care costs dating back 50 years, and future costs for illness linked to tobacco.

The B.C. government can now sue cigarette companies for public health care costs from treating smoking-related illnesses. (Getty Images)

The law further makes it easier to prove a link between smoking and disease.

With as much as $10 billion at stake in B.C. alone, the tobacco companies see the ruling as a major setback. It is widely expected that the other provinces will follow suit, potentially costing firms hundreds of billions in settlements. Newfoundland has already passed a similar act which was waiting for the Supreme Court decision.

B.C. filed suit last year against three major Canadian manufacturers, Imperial Tobacco, JTI-Macdonald and Rothmans, Benson and Hedges. Also named in the suit were the Canadian Tobacco Manufacturers' Council and nine foreign firms, including such industry heavyweights as British American Tobacco and Philip Morris.

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The suit was put on hold, however, after the companies claimed that that the B.C. legislature was improperly trying to impose provincial law on matters that fell outside its jurisdiction. They further argued that the special rules of evidence laid out by the legislation violated judicial independence and the fundamental rule of law.

"The new rules are not necessarily unfair," Justice John Major wrote for the court. "Indeed, tobacco manufacturers sued pursuant to the (British Columbian) act will receive a fair civil trial..."

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The government maintained the legislation was a legitimate effort to hold the industry to account for decades of misleading advertising and other actions that contributed to the spread of smoking as a health hazard.

The B.C. initiative was modelled on similar lawsuits launched by many American states against tobacco manufacturers in the 1990s. Tobacco firms eventually agreed to pay $245 billion US over 25 years to defray health costs for treating smoking-related illnesses.

Nobody knows how high similar claims could go in Canada, but the Health Department estimates that it costs $4 billion annually to treat tobacco-related illness.

There are concerns that some of the companies may be driven into bankruptcy by the decision. The tobacco companies have dismissed such concerns, saying that the British Columbia lawsuit could take many years to make its way through the courts as every calculation of how much they owe is challenged.