By Wang Zhenghua (China Daily)
Updated: 2007-12-11 09:36

A Chinese arbitration body has ruled in favor of local beverage producer Wahaha Group in its legal wrangle with estranged partner Danone Groupe SA.

Yesterday's ruling by the Hangzhou Arbitration Commission found that the agreement to transfer the Wahaha brand to its joint ventures with Danone, a focus of their high-profile row, has terminated.

A Wahaha production line in Hangzhou, Zhejiang Province. [China Daily]

The commission also said Danone's demand for Wahaha Group to abide by the brand transfer agreement had exceeded the lawsuit's time limit.

Danone said it was "shocked" by yesterday's ruling, which it claimed was made "after Wahaha's major evidence to the arbitration body was overruled by the facts". Wahaha Group was not available for comment yesterday.

The two sides are still waiting for the results of arbitration proceedings in Stockholm and a lawsuit in Los Angeles. The French company has accused Wahaha Group of breach of contract by using the Wahaha brand on products sold outside their joint ventures, which are 51 percent controlled by the French food company.

The dispute between Wahaha and Danone first came to light in April, when Wahaha Group chairman Zong Qinghou accused Danone of hostile takeovers that would result in Wahaha losing control of its own brand.

As the dispute escalated, Danone initiated an arbitration case in Sweden and a lawsuit in the US. In June, Wahaha filed an arbitration claim in Hangzhou, Zhejiang Province, seeking to terminate the trademark-transfer agreement, claiming it never formally or legally transferred the trademark from Wahaha Group.

Danone filed a counterclaim with the Hangzhou commission, rejecting Wahaha's statement and demanding its Chinese partner abide by the trademark-transfer agreement.

"Ignoring the basic facts, the arbitration commission made the wrong decision that the transfer agreement has terminated," Danone said in a statement yesterday.

The French company also objected to the arbitrator's decision that its demand for Wahaha to continue to abide by the agreement had exceeded the time limit. Danone said it only discovered in June that Wahaha wanted to terminate the agreement.

A court in the Guangxi Zhuang Autonomous Region has also ruled in favor of Wahaha Group over its claim that Danone's senior executives held positions at a number of rival Chinese firms.