French food giant Groupe Danone SA, embroiled in a dispute with its Chinese partner Wahaha over their joint venture, has taken the matter to an arbitration body even as its negotiations with Zong Qinghou, Wahaha's founder, are ongoing.

As part of its legal action, Danone and its subsidiaries have put forward eight arbitration applications to the Arbitration Institute of the Stockholm Chamber of Commerce, claiming its Chinese partner violated a joint venture contract by illegally using the Wahaha brand name, the 21st Century Business Herald reported yesterday.

Danone demanded its Chinese partner stop "violating" the agreement reached when the joint venture was set up and pay the corresponding compensation, Yuen Po Kwong, a lawyer of Feshfields Bruckhaus Deringer, hired by Danone, was quoted as saying.

Danone and Wahaha set up five joint ventures in 1996 under an agreement that bars the latter from making products that compete with those produced by the ventures. The company can't use the Wahaha brand without Danone's consent, according to the agreement.

In a recent statement, Danone, holding 51 percent in the joint venture, said the Hangzhou Wahaha Group management took no action against the "illegal" businesses started by Zong, and formally launched the "related procedure".

The statement came after the French yoghurt maker sent a notification to Zong in April, threatening litigation procedures within 30 days.

According to the Herald report, seven of the arbitration applications targeted the Chinese company because of its "violation" of the non-compete terms.

One application targets Zong, general manager of the joint venture, because he "violated" the non-compete terms and confidentiality requirements, it quoted unidentified sources as saying.

Earlier this year, Zong told the media that his French partner made a bid to acquire its remaining assets for 4 billion yuan, drawing calls from the public to protect the domestic brand.

The Chinese company has forecast a stagnating sales growth of 3 percent for the joint venture in 2007, much lower than the 30 percent growth generated last year. That has prompted Danone to call for an immediate meeting of board members to discuss the joint venture's sales projections. But both declined to comment on the issue yesterday.

Danone also said on Wednesday that five containers of Evian mineral water had failed inspection by Chinese authorities because of an excessive amount of micro-organisms and would be shipped back to France.

(For more biz stories, please visit Industry Updates)