French food and dairy giant Danone Groupe SA and its Chinese partner Wahaha Group have started arbitration in Stockholm to decide the ownership of the well-known Wahaha brand.

The hearing, launched by the Arbitration Institute of the Stockholm Chamber of Commerce, is likely to close a 20-month legal wrangle concerning control of the trademark, which is used on bottled water, juices and tea.

A spokesman for Danone said the arbitration was launched on Monday, but unsettled lawsuits remain between the once-model business partners in different courts.

Danone, which ignited the battle by accusing the Hangzhou-based company of setting up independent companies and selling products identical to those sold by the joint ventures, has lost about a dozen of the lawsuits under various Chinese and foreign jurisdictions.

A major setback is a ruling made by the Hangzhou Intermediate People's Court last August in favor of Wahaha's right to its trademark, estimated to be worth at least US$2.4 billion, more than 160 times its value when Danone partnered with Wahaha, now China's largest beverage maker, in 1996.

Wahaha spokesman Shan Qining said yesterday that "all citizens and companies in China must respect law" and declined to comment further.

The decision by Hangzhou authorities is expected to have a positive impact on the arbitration in Sweden. Lawyers from firms including Freshfields Bruckhaus Deringer representing Danone and King & Wood for Wahaha will attend the closed-door hearing, which might take weeks.

The pair had agreed to take any disagreement to Stockholm when they founded the joint venture, in which the French company owns 51 percent.

They failed to reach an agreement in peaceful talks that started in December as Wahaha's billionaire Chairman Zong Qinghou rejected a cooperation plan put forward by Danone.

The French firm proposed that the two companies merge all their businesses to form a new company that would eventually be listed on the A-share market in China. Danone and Wahaha would each hold 40 percent of shares in the new company, leaving the remaining 20 percent as public shares.

(China Daily January 7, 2009)