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Spain: Navigating the legal framework

A dispute over wine illustrates a number of peculiarities in Spain's legal framework, says Eleonora Carrillo of Jacobacci.

A question over wine clarifies Spanish laws Stokkete

Spain’s peculiar legal framework offers a complex national legal environment caused by the coexistence of central and local legislative powers, plus the integration of the Community law into the country’s own laws, which often gives rise to legal solutions based on conflicting interests and different legal grounds.  For example, in the protection of designations of origin for wines, two developments involved significant conflicts in Spain. The first was based in case law and concerns important clarifications, while the second is the latest evolution of a new legislative measure aimed at implementing the applicable Community Regulations for this sector.

The preliminary step is found in the decision of March 5, 2012 of the Third Board of the Spanish Supreme Court, ruling on Cassation Appeal No. 1280/2009 started by the Catalonian Government (Generalitat of Catalonia, “Generalitat”) and the Regulatory Council of Penedés (Consejo Regulador, the local entity responsible for the Penedés wine Protected Designation of Origin), against the decision issued on January 20, 2009 by the Fifth Section of the Contentious-Administrative Board of the High Court of Justice of Catalonia in Appeal proceedings No. 374/2006, which annulled the approval of the Penedés Regulations by the Generalitat.

Clarification on sphere of action

In this case, the Supreme Court had to deal with incongruent issues between the legislative power of the Central State and the one assigned to Autonomous Communities, which required clarification about the extent and scope of the respective spheres of action, as far as trademark law is concerned.

The assessment of the nullity of the contested Regulations was associated to a possible over-reach of the legislative power of the Autonomous Community in its approval process, due to the introduction, in said Regulations, of additional “specific trademarks” as a compulsory condition for those market players who intended to use its own company names, commercial names or trademarks for wines originating from any territory other than Penedés, in order to enjoy the protection of this designation of origin for their goods.

Accordingly, wine companies would therefore not be allowed to use the same trademark for both wines produced in Penedés and products originating from a different territory. In this regard, the Supreme Court had to determine if an Autonomous Community is empowered to establish conditions limiting the use of trademarks, without breaching Article 149 of the Spanish Constitution, which preserves the legislative power on trademark law exclusively to the Central State.

The findings of the Court led to confirmation that the contested Regulations were null, not only because they were in contrast with the Constitution, but also since they imposed limitations on the use of trademarks not supported either by the Spanish Trademark Act 17/2001 (Ley de Marcas of December 7, 2001, “Trademark Act”), nor by the Spanish Wine Act 24/2003 (Ley de la Viña y el Vino of July 10, 2013, “Wine Act”), both of them not assigning any legislative capacity on trademark law to Autonomous Communities either.

Besides, the Trademark Act does not provide any exception or restriction on the use of trademarks in this kind of cases (use for goods having different territorial origin), while Article 18 of the Wine Act – which regulates the national system for the protection of the origin and quality of wines in Spain – does not include any possibility of requiring “specific trademarks” by preventing trademark owners from using “common” trademarks for wines corresponding to different designations of origin.

In support of its appeal, the Generalitat asserted that approving the contested Regulations did not indeed constitute, as pointed out, any exercise of legislative powers on trademark law, but rather the mere exercise of the exclusive activities of management and protection of designations of origin, always assigned to Autonomous Communities. The objectives of requiring the adoption of specific trademarks in the described situations was simply to guarantee that market players would differentiate, in a sufficiently clear way, wines protected by the Penedés Designation of Origin from goods of other territories, in the event of use of the trademark for both kinds of goods. As a result, a remarkable limitation on the use of trademarks would, however, be imposed, having no counterpart or supportive legal ground on either the Constitution and cited national Acts, or even on the local wine normative of the concerned Autonomous Community, Catalonia (15/2002 Act of June 27, 2002, “Ordenación Vitivinicola de Cataluña”).

Specifically, pursuant to Article 18 in conjunction with other relevant provisions of the Wine Act, and in virtue of the European normative (namely, Community Regulations 1493/1999 of May 17, 1999), the Supreme Court acknowledged that, while no limitation to the simultaneous use of a trademark for wines from different geographic origins can be inferred, in order to admit such use, the Wine Act implies the need of including additional elements in the labels and trade dress of the products, to clearly inform consumers on the geographic origin and characteristics of the wines concerned. In other words, while the Wine Act allows the same trademark to be simultaneously used for wines having different geographical origin, the conditions on that use are given by the applicable trademark law, exclusively assigned to the Central State and binding for the Autonomous Communities. Consequently, in the present case, the Supreme Court ruling confirmed that the approval of the Penedés Regulations by the Generalitat must be declared null.

No power to restrict

In the light of this decision, it has been acknowledged that Autonomous Communities in Spain are not empowered to set any restriction on the use of trademarks, including the obligation of using additional “specific marks” for the event of trademarks used in connection with goods of more than one territorial origin. Accordingly, wine producers in Spain can now legitimately use the same trademark for goods of different regions or protected wine territories, provided that they comply with the conditions clarified by the Supreme Court, namely, that the designation and trade dress of the products are appropriately clear in identifying the corresponding designation of origin, preventing consumers from any confusion risks due to erroneous interpretations about the real territorial origin of the goods.

In this respect, the Supreme Court also identified that the entities in charge of supervising the compliance of these conditions were the local Regulatory Councils (Consejos Reguladores), namely, the local entities responsible of the administrative management of designations of origin and geographical indications of the corresponding territories.

Further to this decision which, in addition to clarifying the possible limitations affecting the use of trademarks in connection with wine designations of origin, also called into question the role of Autonomous Communities in this sector, a further important legislative step was taken by the Spanish Government in 2013. Specifically, a Draft Act on Wine Designations of Origin and Geographical Indicators (“Draft Act”) has been issued by the Ministry of Agriculture, Food and Environment (“Ministry”). The main objectives of which are to comply with the requirements of the Community regulations in relation to European Protected Denominations of Origin and Geographical Indications (DOP and IGP, respectively), binding for all Member States.

Fair competition

Significant amendments proposed in the Draft Act derive from the need to establish fair competition rules between market players and an appropriate protection to consumers’ rights to accurate information, through the introduction of specific regulatory controls on the commercialization of DOP and IGP goods. This framework will be in line with the Community system of regulatory controls on feed and food products (Regulations No. 882/2004) and comply with the obligation for all Member States to designate a national competent authority responsible for the official controls established by Article 118-O of Community Regulations Nº 1234/2007. These Community regulations explicitly request competent authorities of Member States to apply all measures relating to the official control of the goods, especially with respect to the verifications on the compliance of the compulsory conditions imposed to market players for the commercialization of the DOP and IGP.

In this context, the Draft Act incorporates the principles clarified by the Supreme Court in the above commented decision, specifically setting out that trademarks, commercial names or company names which include, totally or partially, any geographic name corresponding to a DOP/IGP shall be only used for goods enjoying this level of protection, and that market players shall introduce, in the labels of such goods, elements sufficient to clearly differentiate their designation and level of protection, in order to avoid any confusion or erroneous interpretations by consumers concerning the territorial origin of the products.

Official controls

The most debatable amendments, however,refer to the implementation of the measures proposed by the Draft Act to comply with the Community regulations in the matter of official controls. Indeed, a new legal framework in Spain should be introduced, involving derogation of the current system and offering a one and only new legal regime for the “local managing entities”, corresponding to those Regulatory Councils of DOP and IGP which territorial area covers more than one Autonomous Community. The Draft Act defines the extent of the powers assigned to these local managing entities and sets forth new rules for the relationship and coordination between them and the Central State. As a matter of fact, the affected Regulatory Councils in relation to wines are those for Rioja, Cava and Jumilla DOPs and Ribera del Queiles IGP.

According to the new system, the official control on the compliance of the compulsory requirements for the commercialization of the aforesaid DOP and IGP is expressly attributed to the Ministry. The exercise of the official control duties (inspections and fines) shall be carried out by the “Agencia de Información y Control Alimentarios”, AICA (Agency for Food Information and Control), an autonomous entity in the central administrative system, which will also supervise the internal control activities conducted by the local managing entities on the compliance of the compulsory conditions by companies (wineries and wine distributors). However, it is provided the possibility of delegating some public powers to the local managing entities in order to carry out specific tasks relating to the official controls, by acting as certification organisms.

To this purpose, local managing entities, under determined conditions, has the possibility of acquiring a new different legal form, asking conversion into public corporations, enabling them to carry out some delegated public powers. In this respect, a relevant innovative development is that formal reports issued by local managing entities which would have been converted into public corporations will be acceptable as petitions for starting sanction proceedings and will be considered as public evidence documents.

Independent legal entities

Regarding their structure, the managing local entities shall be independent legal entities and have a governing body where all the economic interests involved in the production of the goods shall participate. As far as their activities are concerned, the Draft Act intends to assign an enhanced role to local managing entities, by regulating their activities and establishing an active cooperation with the Central authorities, in order to reach an efficient coordination between all national administrations involved in the protection of DOPs and IGPs. Pursuant to the new system, the managing local entities shall be authorized by the Ministry, leading to a significant change from the current situation in Spain, where no intervention by central authorities takes place.

In September, 2013, the Draft Act was subject to official discussion by national authorities and the resulting document was submitted to the European Commission, where it is presently under review. Meanwhile, divergent perspectives are arising in Spain given, on the one hand, by the efforts of Spain to comply with the Community regulations and, on the other hand, by the local interests of Regulatory Councils directly affected by the Draft Act. In particular, the assignment of the official controls to a Central Authority, in line with the requirements of the Community Regulations, leads to a controversial separation of powers traditionally associated to Regulatory Councils and which would now be split.

Concerns

Indeed, while the management powers on DOPs and IGPs are assigned to Regulatory Councils, some concerns still remain among local entities from the feeling of being deprived of their regulatory control powers, expressly conferred to the central authority, although the Draft Act attempts offering an acceptable participation of Regulatory Councils through delegation mechanisms. Moreover, it cannot be excluded that further amendments are introduced in later versions of the analyzed Draft Act in order to dissipate, as much as possible, any objection.
 

Posted by:

Eleonora
Carrillo

09 May 2014

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