A London court ruled on 24 May 2023 that Spain can’t use state immunity nor EU law to avoid paying a €120 million ICSID arbitration award (the Antin award) for cutting back its economic incentives for renewable energy projects.

The investors, Infrastructure Services Luxembourg SÀRL and Energia Termosolar BV, argued that Spain was bound by its arbitration clause as a signatory to the Energy Charter Treaty Spain was seeking to set aside a January order that registered the arbitral award in England.

Spain’s challenge to the recognition of the Antin award by English Courts was based on grounds of sovereign immunity and European Union case law (mainly, the Achmea and the Komstroy cases).

In the wake of the Court of Justice of the European Union (CJEU) rulings in the mentioned cases, the judgment clarifies, from the point of view of English law, a protracted international legal argument regarding the legality of intra-EU arbitration awards. The London High Court ruled that those cases had no bearing on the Antin ICSID award’s ability to be enforced in England.

In addition, the combined effect of Article 54 of the ICSID convention and Section 2(2) of the State Immunity Act 1978 has also been decided for the first time in an English court to constitute a submission by a signatory state to the jurisdiction for the registration of ICSID awards in England.

English practitioners are now be able to shamelessly promote England as an enforcement-friendly jurisdiction for international arbitral awards involving non other than EU parties…

It’s no surprise that the judgment has been very well-received by practitioners of international arbitration and enforcement specialists throughout the common law world.

At the end of the day, this is not a matter of Spanish national pride because the mess was created by the CJEU. Its legal doctrines simply do not stick together as a matter of international law. And so says no less than a High Court in London.

The CJEU is a dogmatic giant with feet of clay. Its brilliant jurisprudence is rendered ineffective as soon as it crosses the borders of the EU. This is a matter of concern that undermines the credibility of the whole EU legal system. It is something that should lead to reflection by judges and policy-makers.

Usually, when a door closes, a window opens. And that window is being opened by common law jurisdictions. In the case of investors in renewable energies, these jurisdictions are not just England, but also the USA, Australia and even the BVI. These are offering legal shelter to EU investors, who have to flee their own home, unprotected by the “community of law” that the European Union falsely claims to be.

Or what did the CJEU think? Not everything had to be bad about Brexit, after all!

Congratulations to my good friend Nick Cherryman for obtaining this landmark victory.

When it comes to wine fraud, what often springs to mind are characters such as Rudy Kurniawan, who produce counterfeit versions of prestigious wines. As the perpetrator in one of the most high-profile wine fraud cases in history, Kurniawan was deported from the US earlier this year after being convicted in 2013 of conning wealthy wine collectors out of millions of dollars. However, many fraudsters also exist within the wine industry itself. In this article, we explore some of the key factors behind an apparent rising tide of wine fraud, with a particular focus on Spain. This type of fraud is not surprising because France, Italy and Spain concentrate between half and two-thirds of the world’s wine production. In doing so, we consider the future of the industry and some examples of institutional initiatives designed combat this type of criminality.

Rotten on the Inside

Interestingly, there’s a concentration of wine fraud activity in areas with ‘ Protected Designation of Origin’ or ‘DOP’ status. This means where regulatory bodies have been created to certify the quality of these valuable wines and protect their producers. Some wine industry insiders have been discovered breaking various rules surrounding production techniques, the surpassing of quotas, and mislabelling of wines.

What we want to consider here is whether the over-regulation of wine, particularly in those areas controlled by DOPs, has contributed to an increase in fraudulent activity. Currently, the European Commission estimates the economic impact of such crimes to be €1.3 billion a year, which is 3.3% of total annual wine sales) across the region. Therefore, let’s consider here some of the DOP rules that may have inadvertently resulted in the incentivization of deception for producers and various other wine professionals.

What Makes a DOP-Certified Wine?

According to DOP criteria, certain aspects of wine production must meet controls set by the regulators for their respective origin areas. These include the types of grapes that can be used, the geographical area, the quantity of wine that can be produced (production quotas), requirements around growing and production techniques, laboratory analysis of the wines, and blind tastings by experts.

Should a wine pass on all these fronts then it can, in theory, be verified and certified with a stamp of identification from the DOP. These usually take the form of a small label on the back of the wine bottle that is printed using banknote techniques. This translates to value in the premium certain markets are willing to pay for regulated wines as a hallmark of quality, specially internationally. These premiums come on top of the price control implicitly derived from production quotas that regulation imposes on wine manufacturers. Therefore, DOP-certifications not only benefits
consumers (ensuring a certain degree of quality), but also producers, ensuring there won’t be price fluctuations due to excess production. On the other hand, production quotas become problematic when they are exceeded, forcing producers to find “other ways” to sell their product, thus leading to sometimes irregular behaviours that, in most cases, can be considered fraudulent.

A Focus on Spain

Spain makes an interesting case study when it comes to wine fraud as Spanish wine is among the most falsified in Europe. In fact, Rioja, as the most valuable wine of Spanish origin and with approximately 300 millions of litres sold annually, is said to be the most imitated variety of wine across the continent. This has led to many bottles of wine being sold as Rioja in restaurants, stores, and online when they are not the real deal.

Labelling Fraud

In 2016, an investigation by the Spanish Guardia Civil uncovered fraud on a global scale, where Rioja, that was not in fact Rioja, was mislabelled and sold nationally and internationally. The fake wines bearing the brands La Bella Fernanda and 6 Sombreros were available to buy in Spain, Canada, and the United States, with prices ranging between 13.50 and 32.95 euros per bottle.

Following the discovery during a routine inspection of a restaurant in Barcelona, the national guard was alerted to the fake Rioja. This resulted in the raiding of premises in the La Rioja region where they uncovered 50,000 fraudulent labels and 1,400 bottles of wine, along with thousands of corks, plastic toppers, and machinery. A DOP-affiliated wine producer from La Rioja and a wine distributor from Catalonia were detained on the grounds of selling wine as Rioja when it did not have the necessary certification label or security seal. Incredibly, they had been in business for 10 years prior to the investigation.

Where Did the Wine Come From?

The Guardia Civil hypothesized that the wine had either originated from excess production by the producer in question that was above the permitted DOP limit, or that the wine had perhaps come from outside the DOP area of Rioja. However, the regulatory board for Rioja (Consejo Regulador de la Denominación de Origen Calificada Rioja) claimed that despite the producer being one of those with DOP certification, this fraudulent DOP-branded wine had, according to their analyses, originated from another area. This meant that the fraud was outside the realm of their responsibility, and perhaps their interest.

The Dark Side of Production Quotas

Multiple such cases of labelling fraud have been seen in Spain, which could arguably be the result of production quotas imposed by DOP regulatory boards to control the price of their wine. Producers with a surplus of wine may attempt to distribute the excess bottles using fake or illegal labels instead of risking it being unsold or having to sell it for less than DOP value prices. They may also oversell their quotas in terms of the amount of wine actually sold, versus the amount that is declared to the DOP regulator.

An example of this is the ongoing case of wine fraud that arose in the DOP
Valdepeñas region in 2020. This investigation, currently with Spain’s national court, has seen major DOP-certified players accused of mislabelling their wine as Crianza, Reserva, or Gran Reserva, but without the necessary conditions for these vintage classifications being upheld. This classification of wines in reference to the time of maturation and ageing given to them in the winery is typical of Spain and, therefore, we will only find it in wines of Spanish origin.

It’s been said that part of the reason why they were able to take advantage of this is due to the generic labelling requirements of DOP Valdepeñas wines. What’s more, one of the defendants has accused another producer of infiltrating and influencing the region’s DOP activity via its Vice President. They complain that the Valdepeñas regulatory body is corrupt, is operating with a lack of transparency and management structure, and without proper safeguards in place.

A Private Club

Some wine producers are not able to benefit from DOP credentials, despite using the same grapes in the same regions as those who come under its protection. This means that if a regulatory board has registered the use of the place name on labelling then other producers in the region are not permitted to do so in their marketing.

Such opacity of toponymy was shown in the case of a small organic family winery in Catalonia, which was recently fined5 for putting the location of their winery on the label as they are not affiliated with the local DOP. Excluded producers have likened DOP regulators to private members clubs looking out for their own economic interests.

Where Does This Leave Consumers?

Buyers who are not aware of labelling standards are more vulnerable when it comes to their potential for purchasing fake DOP-certified wine. They may not know to check the back of the bottle or how to spot other signs that a wine is not genuine.

In general, DOP criteria in Spain dictates that wine must display the small label of certification on the back of the bottle, however, the producer or distributor can put whatever they like on the front label.

How Do You Solve a Problem Like the DOP?

So, to whom will it fall to counter this rising tide of Spanish wine fraud? It does
appear, as a result of recent action, that authorities are taking the issue increasingly seriously. Spain’s Guardia Civil has begun conducting training with three DOP – certified wine producers in the Tarragona area of Catalonia on how to combat wine fraud. The scheme was organized following commitments from the General Director of the Civil Guard and the President of the Spanish Conference of Wine Regulatory Councils.

There are multiple objectives of this collaboration. They range from increasing food safety through better prevention and investigation of illegal activities, improving the protection of consumers, and supporting the legitimate interests of companies in the wine sector – both nationally and internationally. Furthermore, the scheme hopes to restore lost credibility to the Protected Designation of Origin status and thus generate confidence from consumers that would enable further development in the Spanish agri-food sector.

DOP Fraud Across the Board

Of course, it’s not just wine that is vulnerable to this type of crime. Other valuable certified industries also see their fair share of dirty tricks. One example of this is the Great Canadian Maple Syrup Heist of 2011, which saw the Federation of Quebec Maple Syrup Producers accused of being involved in the theft of 3,000 tonnes of the region’s maple syrup that was being stored in their facility because of their desire to control the global supply and therefore the prices of their syrup.

Conclusion and Outlook

The bureaucracy, corruption, or inaction of certain regulatory bodies has hurt the integrity of Spanish DOP-certified wine, alongside other wines and other products around the world. Surely, we need to see a shakeup to ensure that the DOP stamp protects bo th the consumer and the producer going forward. This transformation to a transparent, fair, and functional framework, rather than a pervasive ‘old boy’ network, would enable the wine industry to thrive, for growers to be paid better, and for smaller producers to be valued without such reliance on big industry. The fresh training program underway in Catalonia seems at least to be a step in the right direction. Also, suppliers, collectors, wine investors, as well as international exporters, distributors and consumers (probably the most vulnerable subjects in the supply chain) should be made aware of the shortcomings of the current regulatory
framework and be given the proper instruments to combat such unacceptable behaviours, also through proper international cooperation channels.