unched High Court proceedings against Fonterra in New Zealand as well as arbitration proceedings in Singapore due to alleged recall costs of 350 million euros, and damage to the reputation of its infant formula company, Nutricia.Fonterra has requested that the High Court case be put on hold until the arbitration proceedings are completed, stating that issues between parties should be determined in Singapore under the terms of the supply agreement with remaining issues sorted out by the courts, the New Zealand Herald reports.
The Queen's Counsel representing Fonterra, Alan Galbraith said that the supply agreement between the two companies specified that there was a A$10 million cap on specific claims which either party could bring against each other with a total cap of A$30 million for all claims. The agreement also specified a process for resolving disputes including arbitration.
According to Galbraith, the reason that the cap was in place was to protect the New Zealand dairy processor from losses which are disproportionate to the benefits of entering the contract.
In August last year Fonterra issued a warning that the whey protein in its baby formula products and sports drinks may contain a bacterium that can cause botulism.
Thirty-eight tonnes of the whey protein concentrate, manufactured at Fonterra’s Hautapu plant in May 2012, was believed to have been contaminated by an unsanitary pipe, and the scandal resulted in the resignation of managing director, Gary Romano, as well as two senior managers being place on leave.
