Parallel imports sneak into Russia through procedural loophole

In June 2016 a new law was introduced to require a prospective plaintiff in a commercial dispute to send a pre-litigation demand letter to the prospective defendant at least 30 days before filing the action. The purpose of the new law is to minimise unnecessary litigation in cases where the dispute can be easily resolved. In the first six months since the law was passed, a few unforeseen procedural conundrums have arisen – including one involving parallel imports.

Under the Civil Code, Russia is a national exhaustion of rights jurisdiction and, through the Eurasian Economic Union, is now part of a regional customs union. In this context, Russia is more specifically a regional exhaustion of rights country along with Belarus, Kazakhstan, Armenia and Kyrgyzstan. Under the Civil Code, only the brand owner or parties authorised by the brand owner have the right to introduce branded goods into commerce in Russia. The unauthorised import into Russia of goods legally acquired elsewhere is a form of trademark infringement.

Until recently, parallel imported goods were often held up at the border by customs officials in cases where the brand owner’s registered trademarks were recorded with Customs. While customs officials did not seize parallel imports, they did detain them for at least 10 days – which was enough time for the brand owner to file an infringement action and request a preliminary injunction in the Commercial Court. In this way, the goods never made their way onto the market.

With the new 30-day pre-litigation rule, it is no longer possible to freeze parallel imports at the border because customs officials will hold the goods only for 10 days. Pre-action preliminary injunctions are for a maximum of 15 days. Assuming that a demand letter is issued on the first day, the goods are detained for 10 days by Customs and a pre-action preliminary injunction is sought on the 10th day following seizure, the goods can be detained for a total of only 25 days. This leaves five more days before an action can be instituted. Therefore, the goods are released into commerce on the 26th day, leaving monetary damages as the only practical remedy.

This parallel import loophole, and other procedural challenges created by the new 30-day pre-litigation demand letter rule, were submitted for review to the Supreme Court in December 2016. The Supreme Court is empowered to issue practice note clarifications and directives regarding such problems, which are binding on all lower courts. The directive is not expected before April 2017.

This is an Insight article, written by a selected partner as part of IAM's co-published content. Read more on Insight

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