The dispute between the French Group Danone and China-based joint venture Wahaha Group which is already continuing for one-and-a-half year long has finished with Danone paying 570 million yuan to the Chinese company, and its high-profile legal actions worldwide have been questioned by shareholders.
In June 2007, Danone filed a complaint against the BVI company Ever Maple Trading Ltd., which, by its words, has the controlling stock of Hangzhou Hongsheng Beverage Co Ltd. – the parent company of Danone’s joint venture partner, Hangzhou Wahaha Food and Beverage Sales Co. Later on, the counter-claim of the Chinese Group has followed, which sued Danone for conducting its business illegally.
In November 2007, the High Court of the BVI brought several BVI firms registered under Wahaha Group into receivership, and froze their assets until further decision. An international auditing firm KPMG, which had been appointed the receiver of each of the BVI companies, became also involved in the dispute between the companies. One month later, Danone filed the case against the parent of the BVI company in Samoa, again applying for appointment of KPMG as the receiver. Danone alleged that the non-joint ventures impaired its interests, while Wahaha claimed the ventures have nothing to do with Danone.
Now, Wahaha sent a petition to the court, accusing KPMG of violating Chinese laws, and affecting its normal production and operation for which the company asked for compensation and a public apology from the auditing firm. KPMG is said to have violated China’s judicial sovereignty by sending BVI and Samoa court orders, because foreign institutions and individuals are not allowed to deliver documents and conduct investigations in China without permission from relevant Chinese authorities.
Also, according to the laws of BVI and Samoa, a company shall not be ordered to be taken over unless its property is really threatened, and it is suspected of non-normal operation. Danone, however, is still normally operating investment company, as well as the non-joint ventures of Wahaha invested by Danone. British Virgin Islands is the most popular offshore jurisdiction in the world, but it has only one judge. It can be said that Danone cheated the BVI court when applying for arbitration in the event that the BVI company was absent, according to a source at the BVI company.