The row over Diageos move to the US Virgin Islands goes on

The row over Diageo's move to the US Virgin Islands goes on

Diageo has dismissed claims made by Distelleria Serralles that the drinks giant has breached its contract with the Puerto Rico-based rum producer.

In a filing to the US District Court for the district of Puerto Rico last week, Serralles (DSI) has claimed around US$5m in damages for the alleged breach. Serralles, which had produced Captain Morgan rum for Diageo's division in the US for “more than 25 years”, has claimed that the company “seeks to sell DSI’s rum outside the US so that it can substitute Virgin Islands rum for DSI’s”.

Such a move is prohibited under terms of the agreement between the two firms, DSI claims, although Diageo disputes this.

Diageo's decision four years ago to shift production of rum from Puerto Rico to the US Virgin Islands has drawn consternation from Puerto Rican producers, who claim that Diageo has made the move purely to benefit from tax breaks promised by the authorities on the US Virgin Islands.

However, Diageo has dismissed DSI's lawsuit. On Friday (5 October), the company said: “Diageo has honoured all of its contractual obligations with Distelleria Serralles and properly exited from the supply contract in Puerto Rico. Any assertions to the contrary are baseless.

“Once all relevant facts are disclosed, it will be clear that this case is without merit and Diageo acted appropriately.”

A spokesperson for the company confirmed to just-drinks that it would be contesting the lawsuit.