Can the Appellations of Origin Be Negotiable?

About the Controversy Peru Vs Chile, Regarding the Appellation "pisco"

Introduction

Perhaps many are not aware about the international legal conflict between the Republics of Peru and Chile for the Appellation of Origin (A.O.) Pisco. Pisco is liquor made from certain grapes that are harvested in the valleys of the southern coast of Peru. Its distillation relies upon traditional equipment made of copper or tin and requires a minimum rest of 3 months. The grapes and their manufacturing process give the final product specific physical characteristics and a very particular flavour.

There is documentation that confirms the production of Pisco in the valleys of the southern coast of Peru since the end of the 16th century, which is related to the geographical space where it is produced and the grapes that are used as part of the drink. However, Chile included “Pisco” as an A.O. from his country in an Agreement signed in 2002 with the European Community, supporting this claim in the existence of the town of “Pisco Elqui” in their territory, town that was originally called “La Greda”. Currently, the European Community grants the denomination to both countries, after an agreement signed with Peru in 2015.

From the moment Chile stated that they had a right over the A.O. “Pisco”, an international conflict raised for the use of such denomination. In this conflict, Peru claims an exclusive right to use the denomination for historical reasons, as well as for the geographical area that gives the drink its name, linked to Pisco river valley and other valleys nearby, all located in the southern coast of Peru, and for the traditional procedure of elaboration of the product. In contrast, Chile accepts that Peru can use the A.O. "Pisco", but argues that both countries have the same right to use it, sustaining that such denomination is a common term to designate the grape liqueurs produced in both countries. As we can see, Peru alleges an exclusive right to use the abovementioned A.O., and Chile a shared A.O.

The analysis we propose in this article originates precisely in a communication sent by the Government of Chile to the Government of Peru, offering an agreement to share the D.O. "Pisco". Is this legitimate? Is it possible?

Case analysis

The A.O. are regulated under the Lisbon Agreement, which Peru has subscribed and Chile has not. Article 2 of such document qualifies an A.O. as the geographical denomination of a country, region, or locality, which serves to designate a product originating therein, and whose quality or characteristics are due exclusively or essentially to the geographical environment, including natural and human factors. In addition, Lisbon Agreement qualifies as country of origin to the nation, or to the region or locality situated in a nation whose name constitutes the appellation that has given notoriety to the product.

According to such description, we can establish that an A.O. is not a mere intellectual or industrial property that can be shared between two or more countries, or between two or more regions or geographic circumscriptions, nor can it be licensed or settled between countries, or between several regions of the same country based on covenants, agreements, treaties or arrangements, but it is a term that identifies a specific geographical region, or the country where that region is located, whose name gives notoriety to the product for natural and human factors. For this reason the word "origin" is emphasized, because the A.O. is not about a brand, but an origin, a geographical space and the products linked to it.

Let’s think about "Champagne", a product originated in the Champagne region in France. Many other countries produce sparkling wines, but the one called "Champagne" is only produced in a certain region that gives the product its name and notoriety. The same happens with the cheese that is produced in certain areas of Italy that have the A.O. "Parmigiano Reggiano". If the A.O. loses its link with the "origin" or source, we would be nullifying its protection and turning it into a mere brand. In contrast, the scope of protection of an A.O. is not only the denomination, but its link with the geographical circumscription or space that gives it the name and notoriety.

But the need to protect a unique A.O., coming from a certain geographical space is not only important to protect an origin, it also has an effect in the market, because the A.O. directs and informs the consumer, who may feel cheated or confused if a geographical circumscription settles or negotiates the certification of origin with third parties outside their region or locality.

Let us use as an example the wine that is produced in La Rioja of Spain, whose origin has generated a conflict with the valley of the same name located in Argentina. Let's imagine that Spain decides to share or negotiate the A.O. "La Rioja", so the wines produced in Argentina also use it. This agreement could lead to confusion or mistake on consumers, for whom the A.O. "La Rioja" placed in the packaging of a product, automatically gives them the idea the product is exclusively from the geographical circumscription located in Spain, choosing it based on that origin and not on another. This same consumer will later see his expectations deceived if he discovers that he has acquired an Argentinian wine, instead of a Spanish one.

This does not mean that one wine is better than another, is only about the value and importance a consumer can give to a certain origin. The A.O. grants a surname to the final product, associated to a geographical circumscription and to the notoriety that such a place gives to the product. If we diminish the protection granted by the A.O., we will only be protecting a denomination but not an origin. As a result, the product would be worth only for its brand among a sort of other products of the same characteristics, in the same way that Rum distinguishes a group of cane spirits from different parts of the world, or Vodka distilled liquor from a majority of grains or potatoes.

Conclusion

In our opinion, it is neither legitimate nor possible to share an A.O., either through a treaty, agreement, license or arrangement, as the purpose of the protection is to emphasize an origin and such purpose can be nullified if the appellation could arranged or settled. Furthermore, any arrangement that is intended to extend the A.O. to products that are not part of the geographical circumscription that gives notoriety to the product, can mislead or confuse consumers who rely on such origin to make a buying decision, disturbing the normal development of the market, as well as the supply and demand of such products.

Lima, March 21, 2019.

For any additional questions or concerns about the article, do not hesitate to contact Llona & Bustamante Law Firm.

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