National law supersedes EU law for counterfeit goods in transit

In Montres Rolex SA v X, the European Court of Justice (ECJ) has ruled that if a national court finds that national trademark law does not prohibit the transit of counterfeit goods, it cannot impose criminal penalties on such conduct pursuant to EU law, even if the national rules are contrary to EU law.

Upon discovering that counterfeit ROLEX watches were being transited through Austria from Poland to Italy, Montres Rolex SA requested the Eisenstadt Regional Court to open a judicial investigation against the unidentified transporters for trademark infringement. Tommy Hilfiger Licensing Inc, La Chemise Lacoste SA, Guccio Gucci SpA and The Gap Inc also requested the opening of an investigation. Lacoste later withdrew its action.

The Eisenstadt Regional Court found the following:

• It is only possible to institute a judicial investigation under Paragraph 84(1) of the Austrian Criminal Code if the conduct constitutes a criminal offence.
  
  
• Article 7(1) of the European Convention on Human Rights prohibits the punishment of acts that, at the time of their commission, were not illegal under national or international law.

• The Austrian Trademark Law provides that it is the import and export of counterfeit goods that constitutes illegal use of a trademark, not their mere transit across the national territory. Austrian criminal law also draws a clear distinction between the concepts of import and export, and the transit of goods.
  
  
• In The Polo/Lauren Company LP v PT Dwidua Langgeng Pratama International Freight Forwarders, the ECJ held that Regulation 3295/94 on measures to prohibit the release of counterfeit goods also applies to the mere transit of goods.

However, since this ECJ judgment was given in a civil case, the Eisenstadt Regional Court was uncertain whether the same reasoning was applicable under criminal law when no criminal offence has been committed under national law. Therefore, it referred the case to the ECJ for a preliminary ruling.

The ECJ reaffirmed its statement in the Polo/Lauren Case that the Community Regulation on Counterfeiting also applies where counterfeit goods are only in transit and temporarily detained in a member state by the customs authorities. However, the ECJ pointed out the following:

• It cannot rule on the interpretation of national law: it is within the power of the Eisenstadt Regional Court to decide whether Austrian trademark law prohibits the mere transit of counterfeit goods in accordance with the provisions of Articles 2 and 11 of the regulation.
  
  
• The ECJ established as settled case law the principle that national law must be interpreted within the limits set by EU law - in other words within the limit of Articles 2 and 11 of the regulation as set by the Polo/Lauren Case.
  
  
• When EU law is directly applicable to criminal law, such application is limited under the principles of legal certainty and non-retroactivity. Consequently, "a directive [or regulation] cannot [...] have the effect of determining or aggravating the liability in criminal law of persons who act in contravention of the provisions of that directive [or regulation]" (see in particular Pretore di Salò, Arcaro and X).

The ECJ therefore concluded that if the Eisenstadt Regional Court decided that national trademark law does not prohibit the transit of counterfeit goods, "the principle of non-retroactivity of penalties [...] would prohibit the imposition of criminal penalties for such conduct, even if the national rule were contrary to [EU] law".

Giovanni Visintini, Field Fisher Waterhouse, London