GROUND FLOOR/Sheila O'Flanagan: It's best to nail my colours to the mast and say that, despite the fact that it will be difficult to implement, I am an enthusiastic supporter of Minister for Health Mr Martin's proposal to ban smoking in pubs.

I know the whole cultural thing of pints and fags is difficult to separate but, having arrived home the other night reeking of other people's smoke, red-eyed and rummaging for my asthma inhaler, I have to be on his side.

I totally understand the opposition of the bar trade to the ban - they cannot possibly imagine that punters who normally smoke will linger over their drinks without the weed in their hands and they're undoubtedly concerned that their premises will be filled instead with smoke-hating vegetarians who'll sip lime cordial and talk about the delights of dandelions in the meadows. (Although, given the mark-up on non-alcoholic drink, I wonder how bad a thing that might be.)

I'm amused by the very Irish suggestion of keeping a third of the place as a smoking area, as though the smoke can be in some way contained, but I have a feeling that the Minister might yet buckle under the pressure and we'll be left with an unenforceable law instead of a merely difficult one.

The tobacco industry has long been under the cosh and Mr Martin isn't the only one taking a pop at it. Politicians in many countries are introducing laws banning smoking in public places; there have been numerous litigation attempts by smokers who blame tobacco manufacturers for their health problems and investors in the industry are feeling the pinch.

Last week Standard & Poor's announced that if tobacco giant Philip Morris can't resolve it's appeal in the Illinois Price class-action case it might be forced into bankruptcy.

An award of $10.1 billion (€9.4 million) was made against the company in the case, which was taken by more than a million Illinois smokers. The presiding judge ruled on March 21st that the smokers had been deceived into thinking that "light" cigarettes were safer than full flavour ones.

Philip Morris was given a month to post a $12 billion bond before it can lodge an appeal. Even with the kind of money the industry makes every year, $12 billion is a lot of cash. The company has said the amount of the bond is "bankrupting" and vice-president Mr William S Ohlemeyer asserts that bonding sources do not think Philip Morris can obtain a surety bond greater than $1.5 billion.

The company is trying to get the amount reduced to $1.2 billion, in order, it says, to allow the appeal to proceed in an orderly fashion. Philip Morris has also petitioned Cook County Circuit Court to stop any efforts by Illinois to collect $3 billion in punitive damages that was included in the $10.1 billion award.

The tobacco industry in the US operates under a backdrop of constant litigation but there were signs that investors have lost patience with it following the S&P announcement. Share prices in Altria - Philip Morris's parent that also owns Kraft, Suchard and Nabisco - have dropped about 20 per cent since the ruling and corporate bond spreads have screamed out to levels that led some traders to describe them as junk.

But it's not only Altria or Philip Morris bonds that have been hammered; there are about $18 billion outstanding municipal bonds, which have also fallen sharply, issued by states that are backed by future tobacco industry payments.

Municipalities issued this type of bond because tobacco manufacturers agreed to pay $206 billion over 25 years to settle a number of state lawsuits under the Master Settlement Agreement of 1998.

The states, which needed to borrow money more immediately, used the stream of income due from the tobacco firms to back the bonds, but now Philip Morris has warned that it may not be able to make a $2.6 million payment, due early next week, which has caused everyone to re-rate their holdings of municipal paper.

This has led to a surreal environment in which the states, formerly implacably opposed to the tobacco companies, are looking at filing a motion on behalf of Philip Morris to get the bond amount reduced.

Indeed, New York City Mayor Mr Mike Bloomberg, no slouch in the banning of public smoking stakes, has warned the city could lose up to $300 million a year in payments owed by Philip Morris.

In fact, New York City had planned to sell another $1.6 billion of tobacco-backed bonds in the next two years, while the states of Virginia and California have cancelled or delayed bond sales scheduled for this month.

Many investors liked tobacco stocks because they knew that there was a constant demand for the product and, despite setbacks every time a lawsuit hits the headlines, they've generally stuck with them.

But now analysts are suggesting that the risk of litigation in the US is simply too great and they're advising a switch out of US tobacco paper. But, as yet, not out of the industry generally - merely to UK or European companies where the chances of massive awards is so much less. At least for the moment.

So you don't have to be a smoker to have a health scare about tobacco companies. And despite the litigation, it's still a flourishing industry. But not one that'll find its way into my portfolio. Ever.