C-681/13: How To Pay Damages For An Entirely Lawful Customs Seizure
The IPKat Passionate about IP! Since June 2003 the IPKat has covered copyright, patent, trade mark, designs, info-tech and confidentiality issues from a mainly UK and European perspective. Read, post comments and participate! The team is Eleonora Rosati, Annsley Merelle Ward and Merpel. E-mail the Kats here! The team is joined by GuestKats Söğüt Atilla, Oliver Fairhurst, Claire Gregg, Georgia Jenkins and Marcel Pemsel. SpecialKats: Verónica Rodríguez Arguijo (TechieKat), Rose Hughes (PatKat) and Jocelyn Bosse (Book Review Editor). InternKats: Wissam Bentazar, Simone Lorenzi and Kliment Markov. Home Home / Brussels 1 Regulation / Bulgaria / Enforcement Directive / enforcement of foreign orders / recognition / Trade Mark Directive / C-681/13: How to pay damages for an entirely lawful customs seizure C-681/13: How to pay damages for an entirely lawful customs seizure - Brussels 1 Regulation, Bulgaria, Enforcement Directive, enforcement of foreign orders, recognition, Trade Mark Directive The beginning of the story that forms the basis for the preliminary ruling of the CJEU in Diageo Brands BV v. Simiramida-04 EOOD (C-681/13) is wonderful news for the trade mark owner: at the request of Diageo, a shipment of 12,096 bottles of Johnnie Walker whisky placed on the market outside of the European Economic Area (EEA) was seized when imported from Georgia into the port of Varna, Bulgaria. 
However, things went south from there. Upon appeal by the importer, Simiramida, the order was lifted. Appeals by Diageo against this decision were dismissed. In April 2009, roughly a year after the seizure in March 2008, the seized goods were finally released. Diageo brought substantive proceedings for trade mark infringement against Simiramida and was in for the next bad surprise: the City Court of Sofia dismissed the action, holding that Diageo's trade mark rights were exhausted - although the goods had been placed on the market outside of the EEA with Diageo's consent. The City Court felt bound by an "interpretative decision" of the Bulgarian Supreme Court on the issue. Diageo did not appeal the decision, probably hoping the nightmare was over. Yet it wasn't. Now it was Simiramida's turn to go on the offensive. It sued Diageo BV in the Netherlands for damages stemming from the seizure, for a sum "exceeding EUR 10 million" (in case you wonder - that is EUR 826 per seized bottle). Smiramida argued that the Sofia City Court had held that the seizure was unlawful, and it was therefore entitled to damages. Diageo countered that the Sofia City Court was out of its mind, or rather, that its decision was manifestly contrary to EU law, and should not be recognised in the Netherlands. While the first instance court followed Diageo, the second instance court ruled that the Bulgarian decision had to be recognised. The third instance court, the Hoge Raad, felt compelled to request a preliminary ruling from the CJEU (see Class 46 post on the referral). 
Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation) is based on the principle of mutual trust in the administration of justice in the European Union. Such trust requires, inter alia, that judicial decisions delivered in one Member State should be recognised automatically in another Member State. Art. 36 of Brussels I states that "Under no circumstances may a foreign judgment be reviewed as to its substance". Exceptionally, recognition may be refused "if such recognition is manifestly contrary to public policy in the Member State in which recognition is sought" (art. 34(1) Brussels I). The Hoge Raad wondered whether it was contrary to public policy to recognise a decision of the court of the Member State of origin which is manifestly contrary to EU law, and that fact has been recognised by that court (apparently, the Sofia City Court saw the error of the Supreme Court, but felt bound by its decision for procedural reasons). The CJEU answered in the negative. A mere misapplication of the law, whether national law or EU law, was insufficient to refuse recognition. Refusal was only possible when the recognition would infringe a fundamental principle. "In order for the prohibition of any review of the substance of a judgment of another Member State to be observed, the infringement would have to constitute a manifest breach of a rule of law regarded as essential in the legal order of the State in which recognition is sought or of a right recognised as being fundamental within that legal order" (para. 44). The rules on the exhaustion of trade mark rights, to put it bluntly, do not amount to such fundamental and essential rules of law. To add insult to injury, the CJEU also reminded Diageo that in order to rely on art. 34(1) Brussels I Regulation, it would have had to avail themself of all the legal remedies available in Bulgaria with a view to preventing such a breach before it occurs, save where specific circumstances make it too difficult, or impossible. The mere fact that an appeal was most likely going to be unsuccessful - a view shared by the Dutch court - was insufficient. If you think it can't get worse for Diageo, stay tuned. Simiramida also argued that it was entitled to compensation for legal costs as a "successful party" in the sense of art. 14 Enforcement Directive for its action against Diageo in the Netherlands. The CJEU held that indeed, the Enforcement Directive was applicable. The main action by Diageo that had started it all was clearly within the scope of the Enforcement Directive. The fact that the assessment of the justified or unjustified nature of the seizure raised the question of the recognition of a judgment given in another Member State was irrelevant. Such a question was ancillary in nature and did not alter the subject-matter of the dispute. So there you have it. Diageo will probably end up paying damages for an action - the seizure of a shipment of trade marked goods placed on the market outside of the European Economic Area into the EEA - which is entirely lawful, as anybody can see that can read art. 7(1) Trade Mark Directive (although something tells me that it will be considerably less than "over 10 mio EUR". The most expensive Johnnie Walker labeled whisky seems to be, btw, the "Diamond Jubilee" edition in celebration of the 60th anniversary of Her Majesty The Queen's accession to the throne, a blend of scotch whiskies distilled in 1952. It is rumored to go for EUR 200,000 per bottle. 12,096 bottles of this would be valued at over two billion Euros - except there were only 60 bottles of it ever made, and if 12,096 bottles had been made, not one of them would sell for EUR 200,000). C-681/13: How to pay damages for an entirely lawful customs seizure 
Reviewed by Mark Schweizer on Thursday, August 20, 2015 Rating: Do you want to reuse the IPKat content? Please refer to our 'Policies' section. If you have any queries or requests for permission, please get in touch with the IPKat team. Print this post Share This: Facebook Twitter Linkedin Whatsapp Trade Mark Directive 
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However, things went south from there. Upon appeal by the importer, Simiramida, the order was lifted. Appeals by Diageo against this decision were dismissed. In April 2009, roughly a year after the seizure in March 2008, the seized goods were finally released. Diageo brought substantive proceedings for trade mark infringement against Simiramida and was in for the next bad surprise: the City Court of Sofia dismissed the action, holding that Diageo's trade mark rights were exhausted - although the goods had been placed on the market outside of the EEA with Diageo's consent. The City Court felt bound by an "interpretative decision" of the Bulgarian Supreme Court on the issue. Diageo did not appeal the decision, probably hoping the nightmare was over. Yet it wasn't. Now it was Simiramida's turn to go on the offensive. It sued Diageo BV in the Netherlands for damages stemming from the seizure, for a sum "exceeding EUR 10 million" (in case you wonder - that is EUR 826 per seized bottle). Smiramida argued that the Sofia City Court had held that the seizure was unlawful, and it was therefore entitled to damages. Diageo countered that the Sofia City Court was out of its mind, or rather, that its decision was manifestly contrary to EU law, and should not be recognised in the Netherlands. While the first instance court followed Diageo, the second instance court ruled that the Bulgarian decision had to be recognised. The third instance court, the Hoge Raad, felt compelled to request a preliminary ruling from the CJEU (see Class 46 post on the referral). Council Regulation 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation) is based on the principle of mutual trust in the administration of justice in the European Union. Such trust requires, inter alia, that judicial decisions delivered in one Member State should be recognised automatically in another Member State. Art. 36 of Brussels I states that "Under no circumstances may a foreign judgment be reviewed as to its substance". Exceptionally, recognition may be refused "if such recognition is manifestly contrary to public policy in the Member State in which recognition is sought" (art. 34(1) Brussels I). The Hoge Raad wondered whether it was contrary to public policy to recognise a decision of the court of the Member State of origin which is manifestly contrary to EU law, and that fact has been recognised by that court (apparently, the Sofia City Court saw the error of the Supreme Court, but felt bound by its decision for procedural reasons). The CJEU answered in the negative. A mere misapplication of the law, whether national law or EU law, was insufficient to refuse recognition. Refusal was only possible when the recognition would infringe a fundamental principle. "In order for the prohibition of any review of the substance of a judgment of another Member State to be observed, the infringement would have to constitute a manifest breach of a rule of law regarded as essential in the legal order of the State in which recognition is sought or of a right recognised as being fundamental within that legal order" (para. 44). The rules on the exhaustion of trade mark rights, to put it bluntly, do not amount to such fundamental and essential rules of law. To add insult to injury, the CJEU also reminded Diageo that in order to rely on art. 34(1) Brussels I Regulation, it would have had to avail themself of all the legal remedies available in Bulgaria with a view to preventing such a breach before it occurs, save where specific circumstances make it too difficult, or impossible. The mere fact that an appeal was most likely going to be unsuccessful - a view shared by the Dutch court - was insufficient. If you think it can't get worse for Diageo, stay tuned. Simiramida also argued that it was entitled to compensation for legal costs as a "successful party" in the sense of art. 14 Enforcement Directive for its action against Diageo in the Netherlands. The CJEU held that indeed, the Enforcement Directive was applicable. The main action by Diageo that had started it all was clearly within the scope of the Enforcement Directive. The fact that the assessment of the justified or unjustified nature of the seizure raised the question of the recognition of a judgment given in another Member State was irrelevant. Such a question was ancillary in nature and did not alter the subject-matter of the dispute. So there you have it. Diageo will probably end up paying damages for an action - the seizure of a shipment of trade marked goods placed on the market outside of the European Economic Area into the EEA - which is entirely lawful, as anybody can see that can read art. 7(1) Trade Mark Directive (although something tells me that it will be considerably less than "over 10 mio EUR". The most expensive Johnnie Walker labeled whisky seems to be, btw, the "Diamond Jubilee" edition in celebration of the 60th anniversary of Her Majesty The Queen's accession to the throne, a blend of scotch whiskies distilled in 1952. It is rumored to go for EUR 200,000 per bottle. 12,096 bottles of this would be valued at over two billion Euros - except there were only 60 bottles of it ever made, and if 12,096 bottles had been made, not one of them would sell for EUR 200,000). C-681/13: How to pay damages for an entirely lawful customs seizure Reviewed by Mark Schweizer on Thursday, August 20, 2015 Rating: Do you want to reuse the IPKat content? Please refer to our 'Policies' section. If you have any queries or requests for permission, please get in touch with the IPKat team. Print this post Share This: Facebook Twitter Linkedin Whatsapp Trade Mark Directive 7 comments:
AnonymousThursday, 20 August 2015 at 11:41:00 GMT+1Have they all gone mad? It is clear that there is a difference between justice and a judgement, but this story defies any common sense.Dear judges, please come back on earth!
ReplyDeleteReplies- Reply
- AnonymousThursday, 20 August 2015 at 13:29:00 GMT+1
Can Diageo now sue the Bulgarian courts for compensation?
ReplyDeleteReplies- Reply
- AnonymousThursday, 20 August 2015 at 14:04:00 GMT+1
In agreement with Anonymous at 11:41 - they do appear to have gone mad...
ReplyDeleteReplies- Reply
- AnonymousThursday, 20 August 2015 at 22:36:00 GMT+1
I'm afraid I disagree with your title. The way the legal system works is that it is the courts that decide what is and is not lawful. *You* may think the seizure was lawful but the relevant court has said not. And once the court has said that D unlawfully interfered in S's business, D owes S compensation for this, both for being without its booze and for being dragged into court cases which it (S) won. You can't turn round and say "but that doesn't count, it was clearly wrong" if the law is that that court's word is final.
ReplyDeleteReplies- Reply
- Gino van RoeyenFriday, 21 August 2015 at 11:00:00 GMT+1
See also my 'Current Intelligence' article ‘Johnny Walker’, a case referred to CJEU by the Dutch Hoge Raad: recognition in the Netherlands of a Bulgarian EU trade mark law error and international exhaustion, Journal of Intellectual Property Law & Practice (2014) 9 (6): 452-455. This case clearly proves that what is right can be wrong and what is wrong can be wright.
ReplyDeleteReplies- Reply
- AnonymousMonday, 24 August 2015 at 16:49:00 GMT+1
Some random points for the sake of balance. - Whether whiskey was actually 'imported' into BG is a disputed fact.- The Sofia court - rightly or wrongly - deferred to binding 'Interpretative decisions' of the Bulgarian supreme court. - These decisions have been the subject of an infringement examination (decision, par 55). "The Commission added that, following that examination, it concluded that those two decisions were consistent with EU law and terminated that infringement procedure."- An alternative view in light of this, is that the Dutch Supreme court is trying to waylay EU law, and is seeking an escape for giant Diageo on a far fetched ground: namely, that the Sofia court of first instance should have referred the case to the CJEU for preliminary questions, but didn't.
ReplyDeleteReplies- Reply
Mark SchweizerMonday, 24 August 2015 at 17:47:00 GMT+1@ Anonymous of Thursday, 20 August 2015 at 22:36:00 BST:I believe that theory - that the judgment makes law - has been discarded a while ago in Civil law systems. There can be judgments that are wrong, and an unlawful act stays and unlawful act, even if a court, erroneously, holds that it is a lawful act. This becomes murky in areas where the law is not clear, admittely, but it seems preferable to the theory that the court makes the law (division of power, anybody?). It is another question whether other courts should be bound by an erroneous decision, and there are good arguments that they should be, unless the erroneous decision is contrary to some very fundamental principle.@ Anonymous of Monday, 24 August 2015 at 16:49:00 BST: yes, the Sofia City Court agreed that Diageo's view was correct, but felt bound by the Supreme Court's decision. I tried to point this out in the post, sorry if it was not clear enough.
ReplyDeleteReplies- Reply
Anonymous
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Case-law - CURIA - List Of Results
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EUPillar C-681/13 Diageo Brands BV V Simiramida-04 EOOD (First ...
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Judgment C-681/13 Diageo Brands 16 Jul 2015
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Diageo Brands BV V Simiramida-04 EOOD (C-681/13) EU:C:2015 ...
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ECJ Ruling On Public Policy Defence To Enforcement In Article 34 Of ...
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CJEU Decision Demonstrates High Hurdle For Resisting Recognition Or ...
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EC Courts Duty To Recognise “Wrong” Civil Or Commercial Judgments
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[PDF] Recognition Of Foreign Judgments Under The Brussels Regime
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C-681/13 Diageo Brands | Expertisecentrum Europees Recht
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Judicial Cooperation In Civil Matters (Part III) - Fundamental Rights ...
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Recognition Of Decisions Of Member States: Threshold Public Order ...
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ECJ Rules On Extent Of Costs Provision In IP Enforcement Directive
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Rechtsprechung EuGH, 16.07.2015 - C-681/13 - Dejure . Org
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Enforcement Of Foreign Judgments Laws And Regulations 2022