TRADE-CUBA: Rum Trademark Dispute Awaits WTO Resolution

By Dalia Acosta Reprint | | Print |

Dalia Acosta

HAVANA, Dec 13 2001 (IPS) - Executives at Havana Club International are confident that the World Trade Organisation (WTO) will issue a definitive ruling in January on a legal dispute with the Bacardí company over the trademark of Cuba’s most famous rum.

“We now have a partial victory and are launching an appeal to achieve total victory. We will have the answer in January 2002, according to the WTO’s timelines,” said Alexandre Sirech, general director of the Cuban-French-owned Havana Club International (HCI), the exclusive distributor of Havana Club rum.

At the heart of the case the European Union brought before the WTO dispute settlement body – which met this week at its Geneva headquarters – is a United States law that prohibits the registration of trademarks that once belonged to Cubans now in exile, even if the trademarks have been abandoned.

The U.S. Congress passed the legislation in 1998 as part of the Omnibus Appropriations Act just weeks before a New York court was to issue a ruling on a lawsuit filed by HCI against Bacardí for its unauthorised use of the Cuban rum trademark.

Sirech pointed out that a report issued by the WTO dispute resolution panel in August had backed the EU in its criticisms of certain paragraphs in the U.S. law that prevent Cuba from protecting a registered trademark in U.S. courts.

However, the WTO report was not accepted as it was drawn up because the EU’s disagreement with the U.S. law does not only entail the two paragraphs, but the entire section referring to Cuba, which directly affects HCI, a company partially owned by parties in an EU member country: France.

The paragraphs that were not referenced by the WTO panel prevent the renewal of certain trademarks in the United States, though to remain in force, they must be renewed periodically. “If we cannot pay to renew the trademark, we will lose it,” said Sirech.

“In September 2001, the EU decided to file an appeal against the WTO report because it is the entire section of the law and not two paragraphs that violate international trade accords, signed by both the EU and the United States,” he said.

The row dates back to 1996 when Bacardí began to market rum in the United States that was produced in the Bahamas under the name Havana Club and sold as “genuine Cuban rum”.

HCI alleges that the original owners of the trademark – the José Arechabala family – did not maintain its registration after they left Cuba in 1960. The firm Cubaexport took advantage of the situation and, by 1976, had registered Havana Club in more than 80 countries, including the United States.

But in 1997 the company José Arechabala International was created, and transferred what it considered its rights over the Havana Club trademark to Bacardí.

Executives at HCI consider it happily ironic that Bacardí’s use of the Havana Club trademark without permission coincided with a surge in sales of the famous Cuban-made rum when HCI joined forces with France’s Pernod Ricard company.

In 1999, the Havana Club rum produced in Cuba was included on the list of “million-dollar” trademarks. In 2000, sales totalled 1.4 million boxes (12 bottles each), and this year are expected to reach 1.5 million boxes.

The principal market for the spirit is Europe, where 66 percent of the output was sold, followed by Cuba (25 percent), the Americas (eight percent) and the rest of the world (one percent). Within Latin America, the principal consumers of Havana Club are Mexico, Argentina and Chile.

According to HCI figures, the rise in Havana Club sales in the rum market has gone hand in hand with the expansion of tourism in Cuba. The more tourists that visit the Caribbean island from a given country, the greater the presence of the Cuban rum in that country.

Spain, in spite of its close links to the history of Cuban rum, has been surpassed by Italy in consumption of Havana Club. “Never before in the history of spirituous beverages has there been such an incredible takeoff in sales,” said Sirech.

A similar phenomenon occurred in Germany, where sales have jumped 44 percent, and the same dynamic is beginning to be seen in Britain, he added.

The HCI executives assert that Havana Club is the fastest growing alcoholic beverage in the world. The average yearly increase in sales from 1995 to 2000 was more than 26 percent. Meanwhile, Bacardí’s rum sales grew just over one percent.

The Cuban product’s growth is particularly significant given the fact that the socialist-run island has no market presence in the United States, the world’s leading market for rum – 55 percent supplied by Bacardí.

With regard to the impacts on sales resulting from the decline in tourism following the Sep 11 terror attacks in the United States, the HCI general director commented “a great trademark is not affected very much by situational variations.”

Pernod Ricard handles 45 million boxes of spirituous beverages and 17 million boxes of wine annually. The French partnership is the number-one distributor of these drinks in the euro zone, second in Asia and South America, and sixth in the United States.

Among its trademarks with million-dollar sales are Ricard (6.5 million boxes in 2000), Jacob’s Creek (4.5 million boxes), Chivas Regal (3.2), Seagram’s Gin (3.0), Larios (2.2), Pastis 51 (2.0), Montilla (1.8), Lodowa (1.8), Clan Campbell (1.6), Havana Club (1.4), Jameson (1.3) and Martell (1.2).