Danone and Wahaha agree legal ceasefire in attempt to end feud

  • The dispute has drawn widespread attention as an example of the risks inherent in Sino-foreign joint ventures
Danone, the French food group, and Wahaha Group of China have agreed to a legal ceasefire and return to "peace talks" for the resolution of one of the most high-profile disputes between a foreign company and a Chinese partner.

The two had exchanged accusations and lawsuits for many months, with the French company accusing its Chinese partner of setting up copycat operations outside the ventures selling soft drinks and other products under the Wahaha brand. Mr Zong Qinghou, Wahaha's founder, has not denied the existence of the parallel network, but says Danone reneged on their agreement by acquiring rival businesses in China.

The standoff was discussed at the highest political levels last month during a visit by French President Nicolas Sarkozy to China and raised during a dinner hosted by President Hu Jintao. Danone chairman Franck Riboud also attended the dinner.

"Both parties agree to temporarily suspend all lawsuits and arbitrations, stop all aggressive and hostile statements, and create a friendly environment for peace talks," the companies said in a joint statement.

News of the effort to resolve the dispute over the joint venture with Wahaha, China's leading mineral water brand, helped send Danone's shares up 4.66 per cent at the end of last week.

The dispute has drawn widespread attention as an example of the risks inherent in Sino-foreign joint ventures, but Danone recently offered a truce by suspending legal action in China after top French and Chinese leaders said they favoured an amicable resolution.

"Both parties will work together to further develop all entities operating under the Wahaha brands and contribute to develop the Sino-French friendship," the two companies said in their announcement.

They gave no indication about how the dispute might be settled.

Danone executives have become increasingly worried that even if they win an international arbitration process about the case, they would not be able to enforce the ruling in China because of parallel judgments in Chinese courts.

By Mure Dickie in Beijing

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