Article 2845

3 April 2019 · Carmel Rickard

Two African cigarette companies have been slugging it out in court for years, trying to gain advantage in the lucrative smoking markets of Uganda, Kenya, South Sudan and elsewhere. Both Leaf Tobacco and Mastermind Tobacco want to work the problem of access to South Sudan for their own benefit. Most recently Leaf Tobacco has sued Uganda’s revenue authority, saying it is complicit in allowing the smuggling of cigarettes, and that the Ugandan revenue authority ought to obey the orders of a court in South Sudan. So, what would the high court’s commercial division in Kampala have to say about such an argument?

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Health authorities in Uganda may be trying to persuade the public to stop smoking. But the tobacco companies are fighting back, trying to squeeze every advantage they can out of the reducing market.

This week the commercial division of the high court in Kampala had to decide a peculiar skirmish in this battle. Judge David Wangutusi had before him Leaf Tobacco on the one side as plaintiff, and on the other, an unlikely combination of defendants: the commissioner of customs of the Uganda Revenue Authority, together with Mastermind Tobacco, a Kenya-based company with a Ugandan subsidiary.

This particular dispute goes back almost two decades to a case on trademark infringement. Though Mastermind initially had the trademark for the popular Supermatch cigarettes, the registered proprietors of Supermatch, Burundi Tobacco Company (BTC), withdrew it from Mastermind and awarded it to Leaf instead.

According to BTC this was because Mastermind were producing poor quality cigarettes. At the time, BTC also accused Mastermind of involving Supermatch in some form of tax evasion.

In their latest fight, Leaf Tobacco wanted the court to declare that it was illegal for Uganda’s commissioner of customs to allowed Leaf’s Supermatch cigarettes, destined for South Sudan, to be imported to or through Uganda.

Both the commissioner and Mastermind objected. The revenue authority said that its duty was to administer a customs’ service and prevent smuggling, but that this duty “did not include the prevention of unfair trade practice” – a reference to the ongoing dispute between the two companies.

The commissioner referred to the “legal battle” between Leaf and Mastermind, and that the courts had issued an injunction stopping Mastermind from using the Supermatch trademark in Southern Sudan.

There was a legal requirement under the UN Convention on transit trade that goods from Kenya should be allowed to cross Uganda. This meant the revenue authority was obliged to “escort” the cigarettes for which Mastermind had a Sudanese import licence, and ensure that they ended up with the customs officials of South Sudan. No official communication from the government of South Sudan had been received to the contrary by Uganda’s revenue officials.

The revenue authorities also strongly denied that they were involved in smuggling in any way.

According to Mastermind, there was a trademark dispute between itself and Leaf that should best be resolved by the law courts of South Sudan. Leaf’s position was that since there was a court order in South Sudan against Mastermind bringing in its own Supermatch brand, Ugandan customs officials ought not to do anything to help this happen – like escorting Supermatch cigarettes through Uganda – as this amounted to assisting Mastermind smuggle the goods over the border.

But Leaf’s witness said some of the cigarettes destined for South Sudan were “dumped in transit and remained in Uganda”. This is a long-standing aspect of the dispute between them – in Leaf’s view Supermatch is being illegally brought into Uganda, apparently destined for South Sudan, but actually with the intention that the cigarettes stay on in Uganda to be sold there.

Leaf effectively wanted to have the judgment and orders of the Supreme Court of South Sudan enforced in Uganda and to insist that the Uganda revenue authorities would implement these orders, said Judge Wangutusi. “In my view that is not how foreign judgments are enforced,” said the court. Until they were registered in Uganda through court mechanisms such judgments could not be enforced.

The judge added that the control point was at the border where South Sudan customs officials should decide what goods were allowed to enter the country. As far as Ugandan officials were concerned, the best they could do was to hand the goods over to the South Sudan customs. In his view, all the evidence showed that Uganda’s revenue authority had been a “vigilant and willing fighter against smuggling” and they were not liable in any form.

Carmel Rickard

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