Background

In a case stretching back to 2004, the Federal Treasury Enterprise Sojuzplodoimport and the Federal Public Unitary Enterprise External Economic Union Sojuzplodoimport (referred to as FKP/FGUP) brought a cross-claim alleging that Spirits International B.V. (Spirits) stole two of their trade marks, including the STOLICHNAYA and MOSCOVSKAYA trade marks relating to vodka. In response, Spirits alleged that the trade marks had been previously owned by VVO (a Soviet Entity that Spirits alleged transformed into VAO) and that the trade marks were transferred from VAO to ZAO (another entity) in 1998, and then validly assigned to Spirits in 1999.

Pursuant to its defence of FKP/FGUP's ownership claims, Spirits sought discovery of a number of documents broadly grouped into six categories. In particular, Spirits sought documents that had been seized from ZAO's premises by Russian authorities in a number of raids conducted between 1999 and 2007.

It was held in the earlier proceeding of SPI Spirits (Cyprus) Ltd v Diageo Australia Ltd (No 2) [2006] FCA 931 that, although the Russian Federation was not a party to the cross claim, in reality it was the "true plaintiff in the proceeding". As such, the Russian Federation was required to provide discovery. FKP/FGUP made various attempts to contact the Russian Federation in relation to the discovery documents and only obtained a small proportion of the original documents that were seized. As a consequence, Spirits applied for a stay on the cross-claim brought by FKP/FGUP in the proceeding on the basis of the Russian Federation's failure to adequately comply with the order to give discovery.

Outcome and Reasoning

Justice Perram accepted that only a small portion of the relevant material was ever produced pursuant to the discovery application. His Honour also held that the Russian Federation had failed to make sufficient inquiries to find these documents (which seemed to have last been in their possession) and provided no proper explanation as to how it was approaching this task.

His Honour noted that had this been an "ordinary case", where the party not complying with proper discovery was not a sovereign state, he would "not have had any hesitation" in ordering a stay because permitting the proceeding to continue in those circumstances would be an abuse of process. However, as a sovereign state was involved, caution was required as a matter of comity. Even with these complexities in mind, his Honour wished to ensure that the proceedings were run fairly and could see "no other way" of ensuring this other than to order a stay on the cross-claim.

Implication

Though the circumstances of the case were "vanishingly rare", this case demonstrates the Court's overarching concern to ensure a fair proceeding and provides an example of where a stay is appropriate. Despite the "gravity" of ordering a stay and the involvement of a foreign state, such an order was necessary to ensure a fair proceeding and avoid an abuse of process.