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Danone says Fonterra ordered to pay 105 mln euros damages over food safety failure

Friday 1st December 2017

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Fonterra Cooperative Group has been ordered to pay 105 million euros in damages to Danone over "food safety failures" in 2013, following arbitration in Singapore.

In a statement, Danone said it "welcomes this arbitration decision as a guarantee that the lessons from the crisis will not be forgotten."

The French food giant sued Fonterra, seeking damages of up to 630 million euros, over the whey protein contamination in 2013. Fonterra had its shareholders' fund units and listed bonds halted from trading and has planned a media conference for 3pm in Auckland.

Danone said the arbitration "underscores the merit of its legal actions against Fonterra, including to champion the highest standards of food safety across the industry. In April 2014, Fonterra had already been fined by judgment of the Wellington District Court for having breached several provisions of the New Zealand food safety regulations."

It said food companies and their suppliers "can only work together through a solid relationship based on trust, transparency, and accountability. Danone will continue to build that relationship with its suppliers across the world." Danone ceased doing business with Fonterra in the wake of the dispute.

Danone launched arbitration proceedings in Singapore and a legal suit in the New Zealand High Court, estimating the cost of recalling the whey protein concentrate to be about 350 million euros. At the time, Fonterra said it expected any court action would show the Kiwi firm didn't have any liability in the contract, and it recognised a contingent liability of just $14 million over the recall. 

In 2014, New Zealand's Court of Appeal upheld an earlier decision that the Singapore arbitration proceedings should be the first avenue, as provided for in the contract, but refused to permanently stay the legal suit. 

In 2013, Fonterra quarantined several batches of whey protein concentrate amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria. The whey protein was ultimately cleared as a false alarm. Fonterra cut deals with seven of the eight customers affected. 

Danone's New Zealand subsidiary Danone Nutricia ended its supply contract with Fonterra after the botulism scare. Since then, it's sourced product from Synlait Milk and other manufacturers and bought two Kiwi dairy processing companies, Sutton Group and Gardians, with the latter providing access to milk supply from 18 farms owned by Grant Paterson of Dunedin.

(BusinessDesk)

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