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Puerto Rico rum distillery sues Diageo

Published:Sunday | October 7, 2012 | 12:00 AM
In this Friday, September 7, 2012 file photo, a variety of Puerto Rican rums sit at a bar in San Juan, Puerto Rico. Rum distillery Serralles is suing Diageo for US$5m, claiming breach of agreement. - AP

The rum war between Puerto Rico and the United States Virgin Islands is far from over. Puerto Rican distiller Serralles filed a federal lawsuit last Wednesday against Diageo North America, a subsidiary of the world's largest distiller, claiming more than US$5 million in damages.

Serralles accused Diageo of violating an agreement after the company moved production of Captain Morgan rum from Puerto Rico to the USVI in 2008.

Serralles said Diageo had promised to buy from the company one million additional gallons of rum to sell exclusively in the US in a move to protect against possible shortfalls at its plant in the US Virgin Islands.

Serralles accused Diageo of not paying for or accepting the remaining 900,830 gallons originally sought. Serralles also accused Diageo of planning to sell the rum produced in Puerto Rico to Europe, instead of the US, which would allow Puerto Rico to receive thousands of dollars in additional revenue.

Under a federal law, almost all of the money generated by rum goes to the treasuries of Puerto Rico and the USVI, which in turn share a portion of those revenues with producers as an incentive to do business in the territories.

Diageo's response

Diageo last Thursday issued a statement to The Associated Press saying the company has honoured all agreements with Serralles and that it properly exited from the supply contract in Puerto Rico.

"Any assertions to the contrary are baseless," the company said. "Once all relevant facts are disclosed, it will be clear that this case is without merit and Diageo acted appropriately."

Serralles is seeking a trial by jury and asked that Diageo be ordered to buy the remaining gallons of rum and sell it exclusively in the US.

- AP