Oct. 17 (Bloomberg) -- British Columbia risks bankrupting Canadian tobacco companies with a lawsuit that seeks to recover billions of dollars paid to treat smokers, the chief executive officer of Imperial Tobacco Canada said.

``I don't believe for one minute that any smoker will give up smoking just because Imperial Tobacco Canada closes its doors,'' Benjamin Kemball told reporters today after a speech in Toronto. ``The clear beneficiary of that would be the illegal and unregulated tobacco industry.''

A law passed in 2000 allows British Columbia's government to collect damages if it can show that tobacco companies breached an obligation to the province's citizens by failing to inform them of the risks of smoking. Tobacco companies lost a bid to strike down the law in Canada's Supreme Court last year.

Similar legislation has been passed by the provinces Manitoba, New Brunswick, Nova Scotia, and Newfoundland and Labrador. British Columbia has pursued the case for eight years at a cost of C$20 million ($17.5 million), Kemball said.

``We estimate that it will take anything up to 10 years, or more, for any litigation to be resolved,'' he said. ``And I'm very confident that we will win in the end.''

British Columbia government officials weren't immediately available to comment.

U.S. Settlement

Tobacco companies have proven they can afford large penalties, including a $206 billion settlement reached in 1998 with 46 U.S. state attorneys, Rob Cunningham, a policy analyst with the Canadian Cancer Society, said in a telephone interview.

``You would not have illegal suppliers stepping in'' if the companies were forced into bankruptcy, Cunningham said. ``You would have different, legal suppliers.''

Imperial Tobacco, a unit of British American Tobacco Plc, makes du Maurier and Players, Canada's two best-selling cigarette brands. The company is a defendant in the case with JTI-MacDonald, a unit of Japan Tobacco Inc., and Rothmans Inc.

Imperial Tobacco says it has 46 percent of Canada's cigarette market, twice the share of No. 2 Rothmans, Benson & Hedges, a unit of Toronto-based Rothmans. Illegal cigarette producers account for 16.5 percent of sales, ahead of JTI- McDonald's less than 13 percent share, Imperial Tobacco says.

Higher taxes are encouraging Canada's 5 million smokers to turn to illicit producers, Kemball said. In Ontario, illegal cigarettes sell for about C$20 for a carton of 200, about a third the price of legal ones.

``Governments are now losing C$1 billion a year in tobacco revenues to this illicit trade,'' Kemball said. ``The numbers will keep growing until the problem is addressed.''

The case is British Columbia v. Imperial Tobacco Canada Ltd., Court of Appeals for British Columbia (Vancouver) CA030975.

To contact the reporter on this story: Joe Schneider in Ottawa at jschneider5@bloomberg.net.

Last Updated: October 17, 2006 16:52 EDT