The agreement was reached by BAT's Canadian subsidiary Imperial Tobacco Canada in a litigation case which started in 2006 and related to issues dating back to 1986 and 1987.

"Today's agreement in principle of the dividend claims and the asbestos related liabilities, brings this long running litigation to an end," BAT said in a statement on Friday.

"Under the terms of the proposed settlement, Imperial Tobacco will obtain protection from current and potential future Flintkote related asbestos liability claims in the United States."

(Reporting by Sarah Young; editing by James Davey)