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. Last Updated: 07/27/2016

Vodka Vendetta Spills Into Germany

For MTA German ad for Moskovskaya vodka
A vodka vendetta over the rights to the best-known brands of Russia's national spirit has spilled over to Germany.

A German court has issued an injunction banning sales of Stolichnaya, Moskovskaya and several other trademarks whose international rights are owned by fugitive Russian vodka magnate Yury Shefler's SPI Group.

A spokeswoman for the Hamburg district court said by telephone Friday that the injunction forbidding sales by Simex, SPI's distributor in Germany, was issued by the court's trade chamber after upholding a complaint filed by Dovgan GmbH, a Hamburg-based importer of Russian food and drink products.

Dovgan, founded in 1998 by friends of flamboyant Moscow entrepreneur Vladimir Dovgan to sell his eponymous products abroad, filed the suit because SPI's brands are labeled "genuine Russian vodka" and "imported from Russia" but are actually produced in Latvia, the spokeswoman said.

The injunction, which has been appealed, bars Simex from selling or marketing the brands in Germany, which accounts for about 10 percent of SPI's annual global sales of nearly $700 million. Moskovskaya sells much better in Germany than international favorite Stolichnaya.

SPI says that it has no doubt who is behind the suit -- Soyuzplodoimport, formerly the Soviet Union's food and drink import-export agency.

"Only Interfax reported the story, which means that the interest came from here -- it is our friend Mr. Loginov," SPI spokesman Sergei Boguslavsky said, referring to Soyuzplodoimport head Vladimir Loginov.

Soyuzplodoimport spokeswoman Natalya Ilina denied her company played a role in initiating the case, or of even having ever heard of a company called Dovgan GmbH.

She did say, however, that the German court's ruling was not a surprise, since "Russian vodka cannot be produced outside Russia."

Loginov claimed this summer that Shefler threatened to have him killed, and the Prosecutor General's Office has wanted to question the tycoon ever since. Shefler, who reportedly owns homes in several European countries, has denied the charge and said he has no intention of returning to Russia.

Loginov, a former deputy Agriculture Minister, has spearheaded the legal battle to regain the domestic trademark rights from Shefler, who essentially sold them to himself in 1997. That year, while the head of Soyuzplodoimport, Shefler created a similarly named company, Soyuzplodimport, which paid $300,000 to Soyuzplodoimport for the domestic and international rights to more than 40 trademarks, including Stolichnaya and Moskovskaya.

Since then, Loginov has resurrected the old Soyuzplodoimport and managed to regain the domestic rights to the trademarks through the courts and has now turned his attention to regaining the international rights.

Dovgan GmbH founder Andrei Kovalyov acknowledged in a telephone interview from Hamburg that his company is in distribution talks with Soyuzplodoimport, but he insisted that he is not working for Loginov. He would neither deny nor confirm that his company initiated the case in Germany.

"We want to protect Russian manufacturers of vodka. Especially those included in our assortment, of course," Kovalyov said.

After the Russian economy imploded in 1998, the Dovgan food and beverage empire collapsed and today only accounts for a fraction of the 90 Russian and Ukrainian products -- from Crimean wines to Altai honey – that Dovgan GmbH distributes in Germany, Austria and Switzerland.

The company exports about 350,000 liters of Russian vodka per year -- all of it from Ost-Alko's plant in the Moscow region.

Although Loginov's Soyuzplodoimport last week awarded Ost-Alko a license to produce up to 880,000 decaliters of Stolichnaya and Moskovskaya, Kovalyov laughed at the suggestion that his company would start importing Ost-Alko's version of the vodkas.

"If we did it would be impounded and destroyed at the border," he said.

Kovalyov said his company has no quarrel over the rights to the trademarks, which he said rightfully belong to SPI and its various distributors. But the present situation whereby the Russian government owns the trademarks in Russia while SPI holds the rights overseas -- either directly or through allied distributors -- is no good for anyone, Kovalyov said.

"This is a legal cataclysm," he said. "Foreign trademark owners don't have the opportunity to receive vodka from Russia and Russia doesn't have the right to export its vodka," he said. "It's a bad situation -- legally and commercially."

SPI produced its brands in Kaliningrad until earlier this year, when Russian customs officials impounded $40 million worth of its vodka, prompting the company to move production to its distillery in Riga, Latvia. SPI claims that it can still call its vodka Russian, however, since it uses spirits imported from Russia.

In a recent interview, Shefler said he was unconcerned that Soyuzplodoimport might attempt to lure Simex or other distributors away from SPI.

"Let Loginov try to offer them better conditions if he can," he said.

He also said the issue of labeling had been carefully studied by SPI's lawyers and that it conforms to legislation in each of the countries the company does business in.

Simex said that it had heard nothing about the court ruling and that deliveries were going ahead normally.

"We don't know about this and none of our goods are being stopped," Simex spokesman Jurgen Gockel said.

Christina Werthner, a spokeswoman for German retail giant Spar, had the same reaction. "All I can say is this is the first time I have heard anything about it," she said.

Christoph Schumann, a partner with law firm Harmsen and Uterscher, which Interfax said is representing the plaintiff in the case, said he was not allowed to comment. "According to German law, we are not authorized to give any information with regard to this case," he said by telephone from the firm's Hamburg office.

The Hamburg court is scheduled to hear the appeal on Oct. 29.

Staff writer Robin Munro contributed to this report.