The action, which is being brought by the European Commission and 10 European Union member states, has been dismissed by the tobacco firm.

"Any allegations that we were involved in, or aware of, money laundering, conspiracy or any other illegal activities are completely absurd," the company said, rejecting all accusations made.

The Commission is determined to win its fight against money-laundering, cigarette smuggling and connected serious cross-border crimes

EU commissioner Michaele Schreyer

"The main purpose of this complaint is to... stop the laundering by RJ Reynolds of the proceeds of illegal activities," the Commission said.

The main illegal activity in question is cigarette smuggling.

The Commission has for years accused tobacco companies of selling cigarettes to third countries in the knowledge that they are immediately smuggled to the European Union.

"The defendants have, at the highest corporate level, determined that it will be a part of their operating business plan to sell cigarettes to and through criminal organisations and to accept criminal proceeds in payment for cigarettes by secret and surreptitious means," said the lawsuit.

The Commission has previously tried to recoup tax revenues supposedly lost due to the sale of contraband cigarettes to European smokers.

It has done this by pursuing US tobacco firms, including RJ Reynolds, through the US courts.

Last winter, its action against RJR Philip Morris and Japan Tobacco was thrown out of court because foreign countries were prevented from suing in the United States for lost tax revenue.

Money matters

Since then, the European Commission has changed its tactics by instead bringing a "civil money-laundering action".

"The Commission is determined to win its fight against money-laundering, cigarette smuggling and connected serious cross-border crimes," said EU Budget Commissioner Michaele Schreyer.

"In addition, the complaint will provide the opportunity to seek compensation for economic and other losses the European Commission or the 10 member states have sustained in the past resulting from the defendant's money laundering activities.

"Protecting the financial interests of the European community and fighting against money-laundering and fraud remains a top priority for the European Commission," she said.

This is why the Commission is pursuing the tobacco firms through the civil courts, which have powers to make culprits pay, rather than the criminal courts which can only dish out punishment.

If the latest action against JR Reynolds were to succeed, further action against other tobacco companies would almost certainly follow.