‘Johnny Walker’-case referred to CJEU by Dutch ‘Hoge Raad’: recognition in the Netherlands of a Bulgarian EU trade mark law error (application of international exhaustion)

With a decision of December 20, 2013 the Dutch Supreme Court, the Hoge Raad (Numann, Van Buchem-Spapens, Heisterkamp, Loth and Polak) referred questions of interpretation to the CJEU in a complicated and exceptional international trade mark matter between the Dutch based company Diageo Brands B.V. (Diageo) and the Bulgarian based company Simiramida. Diageo, owner of amongst others the well-known whiskey trade mark ‘Johnny Walker’, which is imported by Diageo in Bulgaria through a local exclusive distributor, had seized shipments of ‘Johnny Walker’ intended for Simiramida, arguing that these shipments infringed the ‘Johnny Walker’ trade mark of Diageo in Bulgaria, since Diageo had not permitted imports in Bulgaria of these shipments, originating from outside the European Economic Area (EER). 

Very shortly summarized the case concerns the recognition in the Netherlands of a decision in first instance (dated January 11, 2010) by a Bulgarian court in infringement proceedings on the merits between the parties, in which contrary to the European Trade Mark Directive (ETMD), it was held that – according to an earlier interpretative decision by the Bulgarian Supreme Court –  import of products in Bulgaria with permission of the trade mark owner, does not infringe trade mark rights in Bulgaria, if said goods are put on the market outside the EER. The Bulgarian Supreme Court had rejected on formal grounds an appeal by Diageo against a decision by the Court of Appeal in Sofia with which a previously by Diageo obtained seizure court permission was annulled. Accordingly the seizure was lifted. In the proceedings on the merits that Diageo instigated afterwards in Bulgaria the competent court decided that it needed to follow the decision of the Bulgarian Supreme Court and that accordingly Simiramida did not infringe Diageo’s trade mark rights in Bulgaria for Johnny Walker with the involved shipments.

The heart of the matter is that the ETMD only provides a so called European exhaustion which is an ‘acte eclairé’ (see for example the Silhoutte decision of the CJEU July 16, 1998, Case C-355/96 in which it was decided that Member States have to stick to the European exhaustion rule and may not deviate from it for example by introducing an international – worldwide – exhaustion rule). Simirida (nevertheless) wants to rely on the Bulgarian decision, because it started proceedings against Diageo in the Netherlands for damages (Simirida claims at least 10 million Euro, because of the seizure by Diageo of the involved Johnny Walker shipments in Bulgaria and the allegedly very intimidating summons by Diageo or its exclusive distributor of commercial relations of Simiramida).

Before the District Court in Amsterdam – where Simiramida has started the proceedings for damages – Diageo successfully argued that the decision of the Bulgarian court cannot be recognized in the Netherlands, because it is manifestly contrary to public policy in the Netherlands (art. 34 par. 1 Council Regulation (EC) No 44/2000 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters). The Court found that Simiramida had not denied this and that accordingly it was not an issue between the parties that in this exceptional situation in which recognition of the decision of the Bulgarian court would clash unacceptably with the Dutch legal order, which justifies application of art. 34 par. 1 of the Jurisdiction Regulation. According to the decision of the Dutch Supreme Court the District Court furthermore established ‘together with the parties’ that the Bulgarian Supreme Court was bound to send questions of interpretation to the CJEU. In this regard the District Court had referred to a dissenting opinion which formed part of the interpretative decision of the Bulgarian Supreme Court, which dissenting opinion implied contrariety of the Bulgarian Supreme Court’s decision with European law. By failing to refer a question of interpretation to the CJEU, notwithstanding the dissenting opinion, the Bulgarian Supreme Court has contravened the fundamental principle of sincere cooperation of the Community which forms part of Dutch public policy.

The appeal by Simiramida against this part of the decision was upheld by the Court of Appeal in Amsterdam. Whilst putting first that the interpretative decision of the Bulgarian Supreme Court is clearly a mistake, the Court of Appeal finds that the mistake concerns a question of interpretation which has already been answered by the CJEU and is therefore an ‘acte éclairé’. To emphasize that the Bulgarian Supreme Court failed to apply EU law properly, the Court of Appeal refers to the order of the CJEU in the case Canon Kabushiki Kaisha/IPN Bulgaria OOD (October 28, 2010, case C-499/09), concerning a case identical to the Diageo/Simiramida, in which a Bulgarian court referred a question of interpretation regarding art. 5 ETMD to the CJEU. In the Canon/IPN-case the CJEU refers to earlier case law in which it has already clarified said question. On this basis the Court of Appeal decides that the Bulgarian Supreme Court was not obliged to refer a question of interpretation regarding art. 5 ETMD to the CJEU. According to existing case law of the CJEU the Bulgarian Supreme Court should have known that its finding as laid down in the interpretative decision is wrong. That said decision came with a dissenting opinion does not make a difference for the Court of Appeal.

On top of that it matters – so finds the Court of Appeal – that the interpretative decision was not reached in the proceedings which led to the decision of which recognition is sought. In these proceedings the involved court only applied the (wrong) interpretative decision of the Bulgarian Supreme Court. Wrong application of (European) law is – according to established case law of the CJEU – no ground for application of the public policy exception laid down in art. 34 par. 1 of the Jurisdiction Regulation.

The Court of Appeal also finds that the court in Sofia was not obliged to refer a question of interpretation to the CJEU, because this matter concerns an ‘acte éclairé’ . That this court felt an obligation to follow the lead of the interpretative decision of the Bulgarian Supreme Court, does not change this finding. The system for a preliminary ruling by the CJEU is only developed to obtain a uniform and binding interpretation about uncertainties in European rules, not to redress wrong decisions of other (higher) national judges.

The effect of the decision of the Court of Appeal would be that the decision of the Bulgarian court needs to be recognized in the Dutch proceedings on the merits regarding Simiramida’s claim for damages (probably with the effect that it has to be held that Simiramida did not infringe the involved trade mark rights of Diageo in Bulgaria and accordingly has acted unlawful against Simiramida). Diageo decided to attack the Court of Appeal’s findings in cassation before the Dutch Supreme Court.

In its decision of December 20, 2013 the Dutch Supreme Court elaborates a bit more on the interpretative decision of the Bulgarian Supreme Court. The Dutch Supreme Court finds that said decision obviously contravenes Community law and that the Bulgarian Supreme Court and court in Sofia have recognized this. In three dissenting opinions to the decision of the Bulgarian Supreme Court there is a reference to established case law with which the majority opinion contravenes. That this must be recognized by the Bulgarian Supreme Court is also supported by a later decision of the Bulgarian Supreme Court dated April 26, 2012, with a dissenting opinion of its President and five justices, confirmed its decision of June 15, 2009 in a new interpretative decision, notwithstanding the Canon/IPN decision of the CJEU and a letter dated December 21, 2010 from the European Commission to the Association des Industries de Marque in which the Commission states that the Bulgarian judges are not allowed to follow the interpretative decision of June 15, 2009.

The Dutch Supreme Court furthermore considers that although the wrong application of Community law may lead to liability of the Bulgarian State (see the Francovich case, CJEU November 19, 1991, case C-6/90), recognition of the decision of the Bulgarian court, may result in an order for Diageo by the Dutch court in the proceedings on the merits to pay an  amount of damages of at least ten million Euros. Such a course of events puts serious pressure on the sincere cooperation of the Community and appears hardly to reconcile with the legal order in the European Union. In that case Diageo would not only be deprived of enforcing its trade mark right in Bulgaria, but Diageo should also tolerate that she is ordered in the Netherlands to pay damages to Simiramida, whilst said party has infringed Diageo’s trade mark right in Bulgaria and Diageo taken legal action against said infringement.

Although it is established case law of the CJEU that a so called revision au fond – an investigation whether the law has been applied well – is not allowed to refuse recognition of a decision according to the Jurisdiction Regulation, the Dutch Supreme Court nevertheless sees ground to refer a question of interpretation to the CJEU regarding the application of art. 34 par. 1 of the Jurisdiction Regulation in this particular case.

The Dutch Supreme Court also sees ground to ask the CJEU about the effect of the application of art. 34 par. 1 of the Jurisdiction Regulation if the decision for which recognition is invoked is not appealed (Diageo had decided not to appeal against the decision of the Court in Sofia in which it established to be bound by the interpretative decision of the Bulgarian Supreme Court). Within the framework of this question the Supreme Court also wants to know from the CJEU whether it matters if it is to be expected that an appeal would have been useless. The Supreme Court refers to Salah Sheekh/Netherlands, a decision of the European Court of Human Rights (January 11, 2007, 1948/04) in which the European Court has decided that there is not an omission to use all national remedies, if an applicant can demonstrate that a remedy available to him, which was however not used, was doomed to fail.

Last but not least the Dutch Supreme Court also referred a question of interpretation regarding art. 14 of the Enforcement Directive (2004/48/EG) to the CJEU. Art. 14 forms the basis for art. 1019h Dutch Civil Procedure Code (DCPC) according to which (full) compensation of procedural costs can be claimed if these costs are reasonable and proportional. Diageo argued that she can claim such full compensation of costs, since the defense in the Dutch proceedings on the merits results directly from the enforcement in Bulgaria of the Johnny Walker trade marks through the seizure on the shipments imported by Simiramida. Simiramida however cannot claim full compensation of costs, according to Diageo, since these costs are not related to any enforcement by Simiramida of an own intellectual property right. Simiramida has defended that art. 1019h DCPC is not applicable, since this case concerns a claim for damages relating to the unlawful seizure and unlawful summons by Diageo. This case has therefore not a strong link with the enforcement of an intellectual property right. Alternatively Simiramida has held that both parties can claim full compensation of costs, be it that Simiramida can only claim costs which relate to the trade mark aspects.