2001/97/EC: Commission Decision of 23 January 2001 terminating the examination procedure concerning measures affecting the trade of cognac in Brazil (notified under document number C(2001) 129)
Date: 2001-01-23
Institutions: European Commission
Subjects: Brazil, designation of origin, international trade, restriction on competition, spirits, tax system

6.2.2001

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Official Journal of the European Communities

L 35/53

terminating the examination procedure concerning measures affecting the trade of cognac in Brazil

COMMISSION DECISION

of 23 January 2001

(notified under document number C(2001) 129)

(2001/97/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community,

Having regard to Council Regulation (EC) No 3286/94 of 22
December 1994 laying down Community procedures in the
field of the common commercial policy in order to ensure the
exercise of the Community's rights under international trade
rules, in particular those established under the auspices of the
World Trade Organisation (1), as amended by Regulation (EC)
No 356/95 (2), and in particular Articles 11(1) thereof,

After consulting the Advisory Committee,

Whereas:

A. PROCEDURAL BACKGROUND

(1)

(2)

On 17 February 1997 the Bureau national interprofes-
sionnel du cognac (hereinafter BNIC) lodged a complaint
under Article 4 of Council Regulation (EC) No 3286/94
(hereinafter ‘the Regulation’) on behalf of those of its
members which export to Brazil or wish to do so.

The complainant alleged that Community sales of
cognac in Brazil were hindered by three obstacles to
trade within the meaning of Article 2(1) of the Regula-
‘a practice adopted or maintained by a third
tion, i.e.
country and in respect of which international trade rules
establish a right of action’. The alleged obstacles to trade
were the following.

(i) Lack of protection of

indications:

the cognac appellation of
origin (AOC) and discrimination vis-à-vis other
foreign and local geographical
the
complainant alleged that
the Brazilian legislation
allowed Brazilian brandy and other types of spirits
to be called cognac or conhaque, these being the
terms officially and commercially used to define
such spirits, regardless of their geographical origin.
It was claimed that this practice was in breach of
several provisions of the WTO Agreement in trade
related aspects of intellectual property rights (TRIPs);
ot the Paris Convention for the Protection of Indus-

trial Property (Paris Convention); of
the Madrid
Agreement for the Repression of False or Deceptive
Indications of Source of Goods (Madrid Agreement)
as well as of the 1992 Framework Cooperation
Agreement between the Community and Brazil
(Framework Agreement).

procedure

registration

(ii) Excessive administrative requirements for import:
the complainant claimed that the requirements for
the marketing of cognac in Brazil, such as the
cumbersome
the
compulsory visit of a Brazilian agronomist to the
production site in France at the exporter's expense
are largely excessive and unique so as to constitute a
disguised restriction to trade. It was claimed that
these measures violate Articles III and VIII of GATT
1994 and to Articles 1 and 2 of the WTO Agree-
ment on the Application of Sanitary and Phytosani-
tary Measures (SPS).

and

(iii) Discriminatory taxation: BNIC complained that the
rate of
tax on industrial products discriminates
against Cognac vis-à-vis locally produced spirits. It
was alleged that cognac is ex officio classified in the
most heavily taxed category, while local spirits are
never classified in that category. According to the
complainant, this would be a breach of Article III.1
and III.2 of GATT 1994.

The complainant also claimed that these practices were
causing adverse trade effects within the meaning of
Article 2(4) of the Regulation and that they were in
danger of being more adversely affected in the near
future, as they blocked the access of cognac to the
Brazilian market, which represent an important export
market
to an industry which is substantially export
oriented.

The Commission decided therefore, after consultation of
the Advisory Committee established by the Regulation,
that there was sufficient evidence to justify initiating an
examination procedure for the purpose of considering
the legal and factual issues involved. Consequently, an
examination procedure was initiated on 2 April 1997 (3).

(3)

(4)

(1) OJ L 349, 31.12.1994, p. 71.
(2) OJ L 41, 23.2.1995, p. 3.

(3) OJ C 103, 2.4.1997, p. 3.

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6.2.2001

(5)

(6)

(7)

(8)

(9)

(10)

B. THE FINDINGS OF THE EXAMINATION PROCEDURE

the cognac AOC,

On the lack of protection of
the
investigation confirmed the complainant's allegation that
the cognac AOC was not protected and that the term
conhaque was used to define locally produced spirits.
According to the Brazilian laws regulating the market of
alcoholic drinks (1), the term defines two kind of spirits,
very different from each other: vine spirits or brandy
(called conhaque or conhaque fino according to the length
the ageing process) and sugar cane spirits with
of
different
flavourings (conhaque de… according to the
flavour added).

Consequently, the alleged violations of the Framework
Agreement as well as of the Madrid Agreement to the
Paris Convention were confirmed. It should be noted
that, at the time the investigation was carried out, Brazil
was entitled, as a developing country according to
Article 65.2 of the TRIP Agreement, to delay the imple-
mentation of, inter alia, Articles 22 to 24 of the TRIP
Agreement until 1 January 2000. The compliance of the
measures under examination with these provisions was
therefore not examined at that stage.

the lack of protection
It was also confirmed that
misleads consumers, so damaging the brand image of
cognac; it therefore adversely affects trade of cognac in
favour of Brazilian producers of spirits using the same
name, cognac or conhaque.

excessive administrative

The
requirements and the
discriminatory taxation were confirmed by the invest-
igation, but they were not found to have a material
impact on the trade of cognac; it was therefore decided
not to pursue these issues.

C. DEVELOPMENTS AFTER THE

END OF

THE

INVESTIGATION

In view of the entry into force of the TRIPs obligation
on 1 January 2000, Brazil adopted Law No 9279 of 14
May 1996, known as Lei da propriedade industrial or LPI,
introduced a register of
which, among other things,
geographical

indications.

to LPI

and following bilateral

contacts
Pursuant
betweeen the Commission and the Brazilian authorities,
BNIC applied for registration of the cognac geographical
indication. The application was accepted and the cognac
indication was registered on 11 April
geographical
the
2000, after a delay due to the opposition of
Brazilian producers' association. The registration gave to
the French producers exclusive rights to the use of the
name cognac. Consequently, no registration of trade-

(1) Laws No 7678/88 and 8918/94.

marks containing the word cognac is allowed and
existing registered trademarks containing the word
cognac will expire within five years from registration.
Furthermore,
the term cognac cannot be used as a
generic name.

(11) As regards the term conhaque, it remains, according to
the Brazilian legislation on alcoholic drinks, a generic
name as it was at the time of the investigation, and only
as such it may be used, since, according to LPI, a generic
name
trademark. The
registered as
geographical
indication cognac will therefore have to
coexist with the use of the generic term conhaque.

cannot be

a

(12)

(13)

(14)

(15)

Since 1 January 2000, TRIPs has to be fully imple-
mented by Brazil. The Commission services have there-
fore analysed the compliance with TRIPs of the present
level of protection of the cognac AOC.

The analysis found that, being a geographical indication
concerning a product of the vine, the cognac AOC, is
covered by Article 23.1 TRIPs and as such has to be
protected. As explained in recital 10, the registration of
the cognac geographical indication entitles the A.O.C. to
full protection in Brazil, and is therefore in accordance
with Article 23.1.

It should be noted that the protection of Article 23.1
extends to translations of the original geographical indi-
cation;
it should therefore also cover the Portuguese
version of the word (conhaque). However, the use of the
term conhaque is likely to be covered by the exceptions
granted by Article 24.4 and 24.6 of the TRIPs Agree-
ment. It was therefore concluded that the present level
of protection accorded to the cognac AOC complies
with the relevant provisions of TRIPs.

The coexistence of the protected geographical indication
with the generic use of the Portuguese translation may
still create some difficulties to the French exporters.
However, the present Brazilian legal framework is likely
to create, over time, a clear distinction in consumers'
perception between cognac AOC and locally produced
conhaque. The scope for consumers' confusion should
therefore be substantially reduced, so creating a situation
of
fair competition on the Brazilian market and
removing the adverse trade effects caused by the lack of
protection.

(16) As explained in recital 6, the investigation had found
violations of the Paris Convention and of the Madrid
Agreement. However, as the new situation created by
the registration is expected to remove the unfair
competition and the adverse trade effects, the issue will
not be pursued further.

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D. CONCLUSION AND RECOMMENDATIONS

HAS DECIDED:

(17)

In view of the above analysis, it is considered that the
examination procedure has led to a satisfactory situation
with regard to the obstacles that faced the trade of
cognac in Brazil as alleged in the complaint lodged by
BNIC. The examination procedure should therefore be
terminated.

(18)

Further protection of the geographical indication cognac
against the generic name conhaque may be pursued, if
appropriate, by negotiation in particular under Article
24.1 of the TRIPS Agreement,

Sole Article

The examination procedure concerning measures imposed by
Brazil affecting the trade of cognac initiated on 2 April 1997 is
hereby terminated.

Done at Brussels, 23 January 2001.

For the Commission

Pascal LAMY

Member of the Commission