Bacardi/Pernod rum battle set to send shock waves around trading world
The on-going Pernod-Ricard and Bacardi-Martini Havana Club dispute at the World Trade Organisation (WTO) centres on a row over the ownership of a rum trademark, but its political and legal implications are far wider and could affect global diplomacy and trade law.
The slowness of the European Union to launch a formal dispute proceeding at the WTO is perhaps a sign that Brussels realises that in fighting the case it is playing with fire.
Victory for the EU could set the WTO against the powerful anti-Cuban lobby in the US, a right-wing populist movement that is linked to Republicans who oppose the influence of international organisations on US policy.
One-world-government critics in Washington were riled at the technical, although important, defeat at the WTO over American foreign trade corporations. However, an order from Geneva that the US should respect trademarks appropriated by the Cuban government after the 1959 revolution would send tempers into the stratosphere.
The reason is that the case would set a precedent. Havana Club was not the only trademark nationalised by the Castro government, which was subsequently used in America by an exiled former owner.
"If the WTO gives Pernod-Ricard the green light to use a nationalised trademark, EU companies may go shopping in Havana for Cuban brands that are used in the US," said a diplomat close to the negotiations.
A pro-EU ruling might also re-start the debate over the so-called Helms-Burton Act, which allows the US to punish foreign firms who trade with Cuba. The law is on the US statute book, however, the section, which allows the penalisation of foreign firms, is currently suspended by the President, although not vetoed.
The EU went to the brink of launching a full disputes hearing over the case, but pulled back. Victory in the Havana Club case might encourage Brussels to fight any American anti-Cuban laws that affect third countries.
The dispute could also influence the interpretation of the World Intellectual Property Organisation's Paris Convention on trademarks, because it asks important legal questions. The treaty demands that signatories recognise trademarks in each other's countries, so long as they were registered legally.
The problem here is that both the US and Cuban versions of Havana Club were registered properly. So a disputes hearing would have to consider whether a trademark's legitimacy could lapse because of non-use, as with the Cuban mark, allowing a new identical mark to be listed elsewhere.
There is also the question of whether a trademark is invalidated when a government expropriates it.
As if to underline the growing mesh of international law, another WTO case, involving Nicaragua and Honduras might have a serious affect on the Pernod/Bacardi dispute.
Nicaragua has raised punishing tariffs against Honduran exports, because its neighbour has claimed coastal waters that Managua says are Nicaraguan.
The national security principle has been invoked at the WTO by Nicaragua, which claims it has the right to do whatever it wants in trade policy to protect its territorial integrity.
If the disputes panel rules against Nicaragua, it will set a precedent saying that governments must obey certain rules when using trade policy to boost national security.
The limits this would place on national sovereignty would be made starkly clear to Washington, undermining any plans it might have to claim that its anti-Cuban trade policies are justified by security threats to the US. And, it might just make a new Republican President lose his temper with the WTO.
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