Ministry of Finance proposes controversial changes to customs regulations

Estonia

On October 17 2014 the Ministry of Finance - the governmental body which administrates and supervises customs regulations and activities - published an initial draft law to amend the Estonian customs regulation. Among other things, the proposed changes will have an impact on how Customs deal with counterfeit goods in Estonia.

The initiative is related to the need to adjust the local regulations following the coming into force of the EU Customs Regulation (608/2013), as well as the need to reflect recent court cases involving administrative infringement procedures led by Estonian Customs.  

Ever since Estonian Customs started carrying out anti-counterfeiting activities in the late 1990s, the customs authorities have been managing the initial intervention, as well as the ensuing proceedings under administrative, misdemeanour or even criminal regulations. This means that, under the local regulations currently in force, IP rights holders need only provide Customs with a written declaration confirming that the suspended goods are counterfeit. The customs authorities then prosecute the case further until the destruction of the goods and, depending on the circumstances of the case, may also impose financial penalties on the importer.

The functioning of the current system and the role of the customs authorities in IP infringement cases was recently evaluated by the Court of Justice of the European Union (ECJ) in Sintax (Case C-583/12), in which the ECJ found that Customs may initiate and conduct proceedings to determine whether an IP right has been infringed.

The decision in Sintax was in response to a reference for a preliminary ruling by the Estonian Supreme Court. Following the ECJ’ decision, the Supreme Court ruled in the underlying case that, although the customs authorities had the power to conduct the proceedings, they had infringed the importer’s rights in the administrative proceedings by not hearing the importer’s position and by conducting the proceedings with an unreasonable delay. This delay resulted in the (cosmetic) products expiring and having to be destroyed before the issue of infringement was decided.

This case confirmed the legality of the customs administrative proceedings, but also highlighted the problems associated with such proceedings - especially the customs authorities’ inability to process cases. One of the reasons for this failure is a lack of resources, as the customs authorities were downsized during the economic crisis but were never reinstated.

Following the decisions in Philips/Nokia (Joined Cases C-446/09 and C-495/09), Estonia ended interventions against transit goods and the number of customs interventions went down (during the first three quarters of 2014, there has been 123 interventions involving 208 incidents and 58,758 items of suspected counterfeit  goods). Nevertheless, the customs authorities have difficulties both managing customs applications and conducting infringement proceedings.

Therefore, at the initiative of the Tax and Customs Office, the Ministry of Finance has proposed that the customs authorities should stop conducting administrative infringement proceedings, except in cases involving small consignments where proceedings are necessary under Article 26 (9) of Regulation 608/2013.

Therefore, in matters involving more than three items or where goods have not been delivered via post or courier, the IP rights holder would have to initiate general civil court proceedings, during which the customs authorities cannot destroy the infringing goods under the procedure set by Regulation 608/2013. It is believed that IP rights holders would become more passive in defending their rights in Estonia and, therefore, the Estonian Patent and Trademark Attorneys’ Association has spoken against the change and encouraged the customs authorities to put more resources towards the fight against counterfeiting.  

The draft law still has to pass some formalities, be approved by the government and be enacted by Parliament.

Almar Sehver, AAA Legal Services, Tallinn

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