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Ruling Finds Volkswagen Fulfilled Agreement with Suzuki, Cooperation Deemed Terminated

  • Arbitral tribunal confirms Volkswagen met contractual obligations and finds that Suzuki has ordinary right to terminate agreement based on reasonable notice
  • Volkswagen to dispose of its 19.9 percent stake in Suzuki and expects positive effect on Company’s earnings and liquidity from transaction
  • Arbitrators also find that Suzuki breached its contractual obligations to Volkswagen under the agreement and that Volkswagen has right to claim damages

An arbitral tribunal in London has announced its ruling in the dispute between Suzuki Motor Corporation and Volkswagen Aktiengesellschaft. As a result, cooperation between the two parties is deemed terminated. The arbitrators confirmed that Volkswagen met its contractual obligations under the cooperation agreement and found that Suzuki has terminated the agreement upon reasonable notice. Volkswagen will therefore now dispose of its 19.9 percent stake in Suzuki and expects a positive effect on the Company’s earnings and liquidity from the transaction. The arbitral tribunal  also confirmed that Suzuki breached its contractual obligations to Volkswagen under the agreement and that Volkswagen has the right to claim damages.

“We welcome the clarity created by this ruling. The tribunal rejected Suzuki’s claims of breach and found that Volkswagen met its contractual obligations under the cooperation agreement. Nevertheless, the arbitrators found that termination of the cooperation agreement by Suzuki on reasonable notice was valid, and that Volkswagen must dispose of the shares purchased. This decision is based on the principle that a contract may be terminated upon reasonable notice. Volkswagen expects a positive effect on the Company’s earnings and liquidity through the sale of the Suzuki shares”, the Group said on Sunday.

Furthermore, the arbitration court confirmed that Suzuki committed an infringement of the agreement. Suzuki broke off an ongoing cooperation project at the end of 2010/beginning of 2011 and failed to give Volkswagen last-call rights for the delivery of diesel engines. Volkswagen reserves the right to claim damages against Suzuki.

In December 2009, Volkswagen and Suzuki agreed to cooperate on the joint development of innovative and eco-friendly budget cars and on expanding their presence in dynamic emerging automotive markets. At the same time as this strategic cooperation was agreed, Volkswagen purchased a 19.9 percent stake in Suzuki. In return, Suzuki purchased approx. 1.5 percent of the ordinary shares in Volkswagen Aktiengesellschaft. In November 2011, Suzuki initiated arbitration proceedings in London.

The post Ruling Finds Volkswagen Fulfilled Agreement with Suzuki, Cooperation Deemed Terminated appeared first on VWVortex.



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