As US-Cuba cold war thaws, rum wars set to heat up

In Graham Greene’s Our Man in Havana, the Havana Club is the home of the iconic Cuban rum of the same name; a small bar on the second floor, with the windows facing the cathedral where the body of Christopher Columbus had once lain.

It is here that Greene’s anti-hero Wormold drinks and plays chess with his contact, the chief of police. “They had met at the Havana Club,” Greene wrote. “At the Havana Club, which was not a club at all and was owned by Bacardi’s rival, all rum-drinks were free.”

The novel was published the year before the revolution that swept the Castro regime to power, and two years before the US imposed an embargo on Cuba that has meant not a drop of Cuban Havana Club has legally arrived on American soil for 50 years.

But the passage is oddly foreshadowing. In America, if you were to order Havana Club today, you would find yourself drinking a spirit distilled not in Cuba but in Puerto Rico – and by Bacardi, the rival to which Greene referred.

In fact, for the past 20 years, the iconic Cuban rum has been at the centre of an intense corporate drama – a tussle which has drawn in not just the Castro regime, but the US Congress, the World Trade Organisation and the European Union too. There is currently a lull in that conflict, but now, thanks to the thawing of tensions between the two countries announced by their respective presidents this week, it may be about to re-ignite.

Since the beginning of the US embargo, it has been illegal to import Cuban rum into the US. But you can still drink Havana Club, made in the same way as the stuff Wormold drank and branded in almost the same way. Since 2006 it has been made in Puerto Rico and shipped to the American mainland, while the rest of the world buys identically made and practically identically labelled rum from Cuba.

This is an uneasy truce, a state of legal cold war that has been reached after a vicious legal tussle over nearly two decades between two alcohol giants, one French and allied with the Cuban government – Pernod Ricard – the other based in the US.

The story begins with Jose Arechabala, a Spanish émigré who founded the Havana Club distillery in Cardenas, Cuba, in 1934. After the revolution in 1959, his company was nationalised by the Castro regime, and a member of the Arechabala family was imprisoned. The rest, including Jose, fled to Spain.

In Cuba, the nationalised company continued to produce Havana Club rum. In the early 1990s, it entered a partnership with another giant of the spirits world, the $9bn behemoth French alcohol conglomerate Pernod Ricard (owners of Absolut vodka, Glenlivet whisky and a number of other popular brands). They went 50/50 on the rum distillery with the Cuban government’s national export company, Cubaexport, in 1994, and started snapping up world trademarks at an aggressive pace (they now hold the trademark in over 120 countries).

In 1973, the Arechabala family let their claim to the US trademark lapse. But in 1994, they entered into an alliance with Bacardi – another Cuban company that fled after the revolution which has grown into a $5bn corporation that, in addition to its namesake rum and its spin-offs, owns Grey Goose vodka, Bombay Sapphire gin and Martini vermouth, among many other brands – to license the recipe for the rum in the US.

Because of the embargo, Pernod could not sell the rum – which it was making in Cuba – in the US. Bacardi wanted to get in on the action.

At first the US Patent and Trademark Office allowed Pernod to apply for the US trademark for the rum. But Bacardi had its eyes on it, and in 1995 it began producing a test run of its own rum under the Havana Club label in the Bahamas.

Pernod Ricard sued, kicking off a fierce legal battle which quickly escalated into the realm of politics and diplomacy. In 1997 the Arechabala family sold the recipe and its claim to the brand to Bacardi. In 1998, before the courts had a chance to rule on the trademark question – and after vigorous lobbying by Bacardi – the US Congress slipped a little bit of language on the subject into a much broader appropriations bill.

This legislative end-around, which quickly became known as the “Bacardi bill”, made it illegal for the part-Cuban-owned company to renew its US trademark once it expired by preventing the recognition of any rights for trademarks confiscated by a government without compensation.

Things got nasty. “The United States must prevent the Bacardi company from stealing the Havana Club rum brand name. Its government should not be interested – and I want to state this clearly here – in a conflict of trademarks and patents with Cuba,” Cuba’s minister of foreign affairs said in a speech to the UN general assembly in 2003.

Despite the embargo, Cuba and the US had until that point largely respected each others’ trademark rights. Coca-Cola is trademarked in Cuba, so while the embargo banned it from being shipped, it is protected from copycat companies should the embargo be lifted.

Astonished by the Bacardi bill, Pernod Ricard complained to the European Union, which complained to the World Trade Organisation, which – reluctantly, and eventually – ruled that the US had the power to make its own rules on the application of trademarks.

Still, until 2006 Pernod Ricard and CubaExports held the US trademark, though it didn’t do them much good, as they couldn’t export a single bottle to the US because of the embargo. But in 2006, when the trademark ran out, the Bacardi bill prevented them from renewing it. As soon as the trademark ran out, Bacardi started manufacturing Havana Club rum in Puerto Rico for the US market. Eight days later, Pernod Ricard sued them again.

The battle finally settled to an uneasy truce in 2012, when the US supreme court declined to hear Pernod Ricard’s last appeal. After a 17-year battle, Bacardi had snatched the US trademark.

Now, Pernod Ricard has registered an alternative name for its Cuban-brewed Havana Club: “Havanista”, which Olivier Cavil, a spokesperson for Pernod Ricard, told the Guardian was ready to start shipping in “thousands of crates” into the US whenever – if ever – the embargo is lifted by Congress.

The executive measures announced by Obama on Wednesday stated that licensed US travellers would be “authorized to import $400 worth of goods from Cuba, of which no more than $100 can consist of tobacco products and alcohol combined”, and that the administration aims to “empower the nascent Cuban private sector”.

“They will become our first ambassadors,” said Cavil, “because they will bring back the national symbol of Cuban rum, which is of course Havana Club” – which of course is the Pernod Ricard rum, distilled in Cuba.

At the moment, in public at least, both sides are treading very carefully. Bacardi gave a wary statement to the Guardian which said: “Bacardi is proud of its Cuban roots. We have the utmost respect and sympathy for the Cuban people with whom we share a common heritage.”

“Regarding the diplomatic actions today, we will need to wait and see what the impacts are,” it continued.

Unofficially – though for the moment it has no legal avenues left to pursue – Pernod Ricard and CubaExport still dispute Bacardi’s claim to the US trademark.

But if the embargo is lifted, the cold war over rum may turn hot once more.

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