BEIJING, Sept. 23 /Xinhua-PRNewswire/ -- Wahaha Group Co., Ltd., China’s leading beverage tycoon, announces that a court in Stockholm, Sweden will hear the case between the Company and the French food giant, Danone Group, next January following a series of disputes between the two companies that have lasted for over 18 months. Danone has engaged itself in numerous lawsuits against Wahaha of which it has suffered 12 defeats.
The cooperation between Danone and Wahaha started in 1996. That year, the French company Danone Group, Hong Kong Peregrine Investments Holdings Limited and Wahaha Group Co., Ltd. signed a cooperative agreement to set up five joint venture companies. Following the financial crisis in Asia, Hong Kong Peregrine went bankrupt and its 10% share was purchased by Danone, which then meant Danone held 51% of shares in the joint ventures and thus had control over them. At the beginning of the cooperation, Wahaha had also set up another five non-joint ventures, which manufactured products other than pure water, fruit milk and Ba Bao rice pudding.
On April 2007, Wahaha turned down Danone’s acquisition request of a 51% share in Wahaha’s non-joint ventures at a cost of RMB4 billion, seeing it as a hostile takeover. Though mediated by influential figures including the
now-French president, Nicolas Sarkozy, there was so much divergence that negotiations finally broke up. Afterwards, Danone filed more than 30 lawsuits accusing Wahaha of contract violations and illegal usage of the Wahaha trademark in countries including France, Italy, the U.S. and China.
On November 12, 2007, the People’s Intermediate Court of Guilin ruled in favor of Wahaha by declaring that the French director of Danone Group participated in unfair competition.
On December 10, 2007, Hangzhou Arbitration Commission ruled in favor of Wahaha, supporting the arbitration application of Wahaha and concluded that the Wahaha trademark belongs to Wahaha Group, directly terminating the Trademark Transfer Agreement between Danone and Wahaha.
On December 21, 2007, the People’s Intermediate Court of the 8th Agricultural Division of Xinjiang Production and Construction Infantry concluded the case lodged by Jinjia Investment Co., Ltd., which belongs to Danone Group (Danone Jinjia), in accusing Wahaha’s Chairman, Zong Qinghou of harming the interests of the company on December 11. The claim of the plaintiff was rejected and Danone Jinjia should pay the case acceptance fee of RMB24,656.
On June 25, 2008, the People’s Intermediate Court of Shenyang made its first judgment. The court confirmed that Qin Peng violated the
non-competition clause as a director and sentenced him to cease working in his role as director at Shenyang Wahaha. The court also requested him to hand his income of RMB200,000 to Shenyang Wahaha and to pay RMB200,000 in compensation as a result of any financial losses.
On July 11, 2008, the Arbitration Institute of the Stockholm Chamber of Commerce (AISCC) issued the 7th procedure order, on the case of Danone’s application for temporary measures. AISCC rejected Danone’s request of taking temporary measures on Wahaha.
On July 17, 2008, Wahaha Group received the judicial decision from the Trademark Office of the State Administration for Industry and Commerce People’s Republic of China (Trademark Office of China). It ruled that the Shuangwaiwai Trademark applied by Wahaha was allowed to be registered. It also dismissed objections against such register applications raised by Jinjia Investment Co., Ltd., a subsidiary of Danone Asia Pte Ltd.
On August 4, 2008, the People’s Intermediate Court of Hangzhou rejected the claim by Danone requesting that the arbitration result on the Wahaha trademark be withdrawn (meaning the final ruling of Hangzhou Arbitration Commission -- the Wahaha trademark belongs to Wahaha Group -- is effective).
On August 28, 2008, the court in Xinxiang, Henan province and the court in Shenyang, Liaoning province dismissed the allegation of unfair competition made by the French Danone Group against Zong Qinghou, Chairman of Wahaha Group.
Also, in August 2007, Danone filed lawsuits against the equipment supplier of Wahaha, Groupe Sidel Bottling Service Company, in local courts of Italy and France. Moreover, another equipment supplier of Wahaha, Procomac, was taken to an Italian court. However, all these three cases were ruled against Danone.
Danone and Wahaha to await arbitration result in Sweden
In addition to the above actions, Danone has filed lawsuits against foreign shareholders of Wahaha’s non-joint ventures in the local courts of both the British Virgin Islands and American Samoa. Danone requested to issue a freezing order and takeover order against these companies that have no relation with Danone. Yang Yongjun, a PRC lawyer, commented that by using vague wordage such as “hearsay”, “it is being concerned”, “it is being rumored”, Danone accused Wahaha of bringing huge loss to Danone and further stated that the foreign shareholders of Wahaha’s non-joint ventures had no actual business and severely disturbed its manufacturing and sales by using improper means.
The local courts directly issued the takeover order in the absence of Wahaha’s attorney and appointed KPMG, the agent of Danone, to take over the foreign shareholders of Wahaha’s non-joint ventures. After the ruling, KPMG called and sent letters to the related banks, accounting firms, administration for industry and commerce in China and companies set up by such foreign shareholders, requesting them to freeze the assets of the defendant and hand in company chops, accounts and files.
Yang Yongjun commented that under PRC law, KPMG has no takeover rights in China, nor had it the right to make bold in sending letters to banks and other institutions, requesting them to freeze corporate properties and take over company affairs, without permission of the Chinese government. In doing so, KPMG’s actions may be regarded as a form of infringement. KPMG is now involved in a case with an affected non-joint venture of Wahaha accusing KPMG of disturbing normal business and operations.
Moreover, Danone has taken the wife and daughter of Wahaha Group’s Chairman Zong Qinghou to a local US court, accusing them of co-plotting and planning a series of actions that illegally damage Danone’s interests, despite neither of them having anything to do in the disputes between the two companies. Danone wrote in their indictment that the daughter of Zong Qinghou, who was then a student in the US, “has spent at least four years plotting a considerate and extensive plan.” Shan Qining, the spokesman of Wahaha replied, “This indictment is rather funny because the daughter of Zong Qinghou was only a teenager when she arrived in the U.S. and that her overseas education arrangements were kind-heartedly assisted and arranged by Mr. Fan Yimou, Asia Pacific President of Danone. It was so facetious that Danone included this in its indictment.”
Qian Weiqing, the attorney of Wahaha from Dacheng law firm stated that though Danone has lodged more than 30 cases, they failed to provide solid evidence in relation to the cases. On the other hand, Wahaha provided enough powerful evidence that it had not violated any regulations. As shown in the audit reports and memos provided by PWC, an accounting firm appointed by Danone, during a series of related transactions, no fraud was committed by Wahaha and the interest of Danone has not been harmed.
Moreover, the existence of Wahaha’s non-joint ventures was made known to Danone at the beginning of their creation, so there was no concealment. Attorney Qian said that Wahaha’s winning in these cases was not unexpected, while Danone’s cases all over the world were made with familiar claims. Attorney Qian said that these cases may serve as examples for the following cases, which may put Wahaha in a more favorable position.
Both sides now await the arbitration result to be made by the Arbitration Institute of the Stockholm Chamber of Commerce, which is regarded as the most critical trial in the Danone-Wahaha feud. Wahaha has been positive towards the case. “We believe that the Arbitration Institute of the Stockholm Chamber of Commerce will surly respect the truth, the laws of China and the ruling of the Chinese courts and make a reasonable judgment,” said Yang Yongjun.
The Wahaha-Danone feud has been receiving much attention from local media in China. For reports concerning the disputes, please refer to http://english.people.com.cn/90001/90778/90857/90860/6503800.html
http://english.people.com.cn/90001/90778/90857/90860/6503796.html .