Danone Extends Branch

French group Danone has offered to defer its lawsuits against Chinese soft drink company Wahaha if it agrees to talks on securing the future of the two firms' joint venture, the Financial Times reported. Emmanuel Faber, Danone's Asia president, said six lawsuits had already been suspended. The move comes amid concerns within Danone that even if the company does emerge successful from the international arbitration process, it won't be able to enforce the decision in China, as local courts reach different judgments. There are also signs that China's stance on the case could be hardening after a trade union claiming to represent workers at the joint venture won an injunction freezing some of the company's assets in Shandong province. Relations between Danone and Wahaha founder Zong Qinghou broke down following accusations that Zong was setting up new operations in competition with the joint venture.

Those "accusations" were correct. I don't believe there was any denial. The dispute was whether the competing business was a violation of the JV agreement.

Danone is getting killed on this one. It is correct in its expectation that foreign lawsuits will not be enforced here. Enforcement is one of the main "challenges" companies face in China. Better not to get in a lawsuit because the judgment will not be enforced whether it is a foreign judgment or a domestic one. The olive branch Danone is extending is actually a white French flag. It has lost and is now in salvage mode.

I'm with the French on this one. The Wahaha Group is a bunch of thieves operating under the umbrella of the Chinese government.