bkp partners Martin Reinisch and Georg Fellner have obtained a favorable judgment by an Austrian Appellate Court for bkp client Spirits International (SPI Group) confirming the latter’s rights in the iconic Stolichnaya and Moskovskaya trademarks in Austria.

The favorable judgment has been rendered in a lengthy, complex court proceeding which is the Austrian part of a multi-jurisdictional dispute between our client and a Russian Federation state enterprise (FKP Soyuzplodoimport) regarding the ownership in these vodka trademarks. The proceeding has so far been pending for more than 13 years and might even still last a bit longer.

Background of the case

In the early nineties, the Russian state enterprise VVO Soyuzplodoimport which owned the trademarks STOLICHNAYA and MOSKOVSKAYA had been privatized. This privatization was for many years considered as valid by all those involved, including the Russian state, and had been fully implemented and “lived”. The private owners also made then considerable investments in the brands.

Only after that, the Russian Federation has since 1999/2000, when Mr. Putin came into power and ordered measures for renationalization, been trying to “reintegrate” the trademarks arguing that the privatizations had been allegedly illegal. The Russian courts have very soon rendered corresponding decisions regarding the trademarks in the Russian Federation, and also the Russian Trademark Office Rospatent has quickly complied with the respective request by the Russian Government to change the registrations in Russia.

However, outside of Russia, the courts and national trademark offices were not willing to “dance after Mr. Putin’s pipe”, and the court proceedings that had been initiated by FKP since the beginning of this millennium in many countries thus soon turned out – contrary to what the Russian state probably had expected – to be lengthy and difficult for FKP.

Austrian action filed in summer 2004

The Austrian court case was initiated in summer 2004 by FKP, with an action combined with a request for preliminary injunction. The court dealt with the latter before the main proceedings and rejected a preliminary injunction both in first and second instance by February 2005. FKP did not further appeal then before the Austrian Supreme Court.

In the subsequent main proceedings, the Austrian courts have in depth been dealing with the question of the privatization of the former trademark holder VVO Soyuzplodoimport in the early 1990’s and numerous legal issues around it. Over the years, the case has involved issues in many different fields of law of four different legal systems (Soviet, Russian, Dutch and Austrian law): Beside of course trademark law also numerous questions of Soviet and Russian privatization law, private international law, human rights law and public international law have been dealt with. In the course of the long proceedings the parties have submitted more than 20 (!) private expert legal opinions, and three court appointed experts for foreign law have issued their legal opinions.

Following a first instance judgment granting the claim, we obtained for our client in December 2014 a favorable second instance judgment by the Appellate Court of Linz, reversing the first instance and deciding – without having to examine whether the required steps of the privatization had been fulfilled – that the claimant was (in any case) not any more entitled to invoke the alleged invalidity of the privatization of VVO Soyuzplodoimport due to the expiration of the Russian limitation period. The Appellate Court thus rejected FKP’s claim.

Austrian Supreme Court referred back to second instance

Upon appeal by FKP Soyuzplodoimport, the Austrian Supreme Court confirmed in summer 2015 the second instance’s legal position that the Russian limitation period had expired; however, it referred the matter back to second instance for the latter to determine as to whether Dutch court decisions rendered in Dutch proceedings pending since 2003 regarding parallel Benelux trademarks, and pertaining in particular to the same preliminary question of the validity of the privatization, had to be recognized in the Austrian proceedings based on the European so-called “Brussels I Regulation”.

The judgment of the Austrian Appellate Court of February 2018

Consequently, over the last 2.5 years, the Austrian Appellate Court has dealt in detail:

• with Dutch procedural law, and has for this purpose appointed a court expert in this field who confirmed in particular that the Dutch interim judgments cannot per se have any binding effect on other proceedings;
• with Austrian procedural law, taking into consideration expert opinions submitted by the parties, and arriving at the conclusion that any Dutch decision rendered after the first instance in the Austrian proceedings from the outset cannot for this reason, if for no other, have any binding effect on the Austrian proceedings, either.

This is the first reason based on which the Appellate Court of Linz has decided now that the Dutch decisions, including those in a recent Dutch Appellate Court judgment of January 2018, must not be recognized in the Austrian proceedings, and have thus no binding effect on these proceedings.

It is important to note that in addition, the Austrian Appellate Court has rejected any recognition of the Dutch decisions for a second, completely separate reason. It held that:

• it does not consider the decisions of the Dutch Courts to be eligible for recognition and thus suitable for creating a binding effect as regards the question of the Russian statute of limitations, since the Dutch judgments have not been based on Russian limitation law, but have exclusively been based on the Dutch statute of limitations;
• it further expressly rejects the Dutch Courts’ approach that invoking an invalidity of the Russian privatization would not be subject to any limitation period;
• this approach used by the Dutch Courts ignores the fact that the privatization had for many years been considered by all persons involved, including the Russian State, as legal and had been fully implemented and “lived” as such, until the change of political power in Russia in 1999/2000 which ushered in efforts to “reintegrate” privatized former state property; and
• furthermore, the considerations by the Dutch Courts lack any actual substantive examination of the Russian statute of limitations; in contrast to the Dutch Courts’ approach, in the Austrian proceedings numerous and detailed court expert opinions on Russian (limitation) law had been rendered, whereby it has been established that not only actions for a declaratory judgment regarding the invalidity of a legal transaction (including privatization transactions), but also actions for the application of the consequences of such invalidity are subject to the Russian limitation period. Based on this, the Austrian Courts concluded that the Russian statute of limitation applies and has expired before FKP filed the Austrian claim; therefore the privatization must (in any case) be considered as valid.

For these reasons, there is no recognition of Dutch decisions in the Austrian proceedings. Consequently, the Appellate Court of Linz has now confirmed its previous view and has fully rejected FKP’s claims.

Although this judgment can still be appealed before the Austrian Supreme Court, it is a significant step in these lengthy proceedings. We are confident that it paves the way for a confirmation in third instance of the Austrian rights of SPI Group in the Stolichnaya and Moskovskaya trademarks.