In a landmark decision made public on 25 July, the Court of Appeals at The Hague ruled that the rights to the world famous vodka brands “Stolichnaya” and “Moskovskaya” belong to the Russian Federation.
The legal battle between the Russian Federation and Spirits, the Dutch company owned by Russian oligarch Yuri Shefler, has been on-going for some 10 years. Mr. Shefler is accused of having illegally obtained the rights in the leading vodka brands “Stolichnaya” and “Moskovskaya” in the turbulent years following the demise of the USSR. In its judgement, the Court of Appeals has now confirmed that Shefler did not operate in good faith in obtaining these valuable vodka trademarks. According to the Court of Appeals, Spirits is not the rightful owner of the “Stolichnaya” and “Moskovskaya” trademarks. The rights to these world-leading vodka brands belong to the Russian Federation.
Spirits has been licensing the sale of “Stolichnaya” and “Moskovskaya” vodka worldwide since the mid 1990’s. Spirits argued that it had rightfully acquired the trademarks from the Russian State company which originally owned the trademark registrations after the company had been "privatised". The Court ruled that no valid privatisation of the State company had taken place and that the marks thus remained with the Russian State.
According to the Court, Spirits and its director, Yuri Shefler, knew or should have known about this. In addition, the documents available on the alleged "privatisation" should have cast doubts on its validity. Furthermore, the alleged privatisation took place in the "chaotic" period when the USSR fell apart and many State assets were illegally sold off. Moreover, according to the Court, the purchase price for the worldwide portfolio of trademarks was much lower than the actual value of the trademarks. Mr. Shefler and Spirits therefore acted in bad faith when acquiring the trademarks. As the trademarks have remained with the Russian Federation, it is entitled to prohibit the sale of “Stolichnaya” and ”Moskovskaya” vodka by Spirits.
Finally, the Court ruled that Spirits is not allowed to use the words "Russian Vodka" or "Made in Russia" on its bottles. According to the Court, such designations are misleading as the product is not produced by Spirits in Russia.
The decision of the The Hague appeals court can not be challenged on the merits. Spirits may appeal to the Supreme Court, which only has limited possibilities to review the case. The decision has worldwide effect as important issues of Russian law have been resolved by the court. Also, the Court ultimately held that Dutch law is applicable to the purchase of the trademarks by Spirits.