March 3 - Danone should continue claims against its former Chinese partner Hangzhou Wahaha Group for control of the multi-billion dollar drinks brand in China, a US judge has ruled.
California Superior Judge Carl West said the US state had no legal jurisdiction in the French dairy giant’s legal battle with Ever Maple Trading Ltd and Hangzhou Hongsheng Beverage Co. The appropriate setting for resolving the legal dispute is China, said the court in a ruling filed on February 27.
While the judge refused to dismiss Danone’s claims against the wife and daughter of Wahaha Chairman Zong Qinghou, he said: “China qualifies as a ‘suitable’ alternative forum, notwithstanding a number of glaring disparities between the Chinese Communist party system and the American judicial system.”
Judge West also ordered both sides to report every six months on the status of the case in China and reserved the right to let the claims against the two individuals go ahead in the US state if China proved to be an unsuitable forum.
Danone has so far failed to win a single case across seven nations in its lawsuit to gain control of the Chinese brand.
Michael Chu, a Shanghai-based spokesman for Danone at Ogilvy Group, said: “The ruling is procedural in nature and does not address the merits of Danone’s claims against the defendants.”
China was the third largest market for Danone before the disagreement broke out with Wahaha in 2007 – nine years after the companies had established a joint venture to manufacture bottled water, teas and juices in the country.
Danone launched its legal action against Hangzhou Hongsheng Beverage Ltd. and Ever Maple Trading Ltd amid allegations the pair were involved in “unlawfully” producing and selling Wahaha beverages outside the agreement established by the venture. As part of the original arrangement Wahaha was to have transferred ownership of its trademark to the joint venture. But the Chinese company said this move was blocked by the Government in China and therefore it retained the right to the trademark.
Wahaha has already won an earlier ruling in China and the Arbitration Institute of the Stockholm Chamber of Commerce is currently reviewing the matter.
Danone’s Asian sales plummeted by almost a third to EUR1.54 billion ($1.94 billion) in 2007 after the company stopped including sales from its Wahaha venture starting in the second half of the year.