Wahaha v. Danone: My Arbitration is Better Than Yours (II)

Remember that Danone joined Wahaha’s chief Zong Qinghou personally as a defendant in the Stockholm arbitration (in May 2007)?

Remember that Wahaha filed for arbitration in Hangzhou Arbitration Commission in June 2007?

Have you been wandering how exactly Zong Qinghou can file a parallel arbitration in China while the original joint venture contract between Wahaha and Danone designated Stockholm as the venue for mandatory arbitration?

Apparently, Zong Qinghou, through the Chinese media, is shedding some light on his lawyer’s strategies behind this legal maneuver. His legal team points out a possibly lethal defense to Danone’s Stockholm arbitration against Zong personally.

As most American lawyers know, the first line of defense is through procedural challenge: jurisdiction or venue. And that is exactly what Zong’s lawyers are doing. They claim that the alleged breach of non-compete and non-disclosure agreements by Mr. Zong falls within the purview of the Chinese labor law, not commercial law since Mr. Zong was in a employment relationship with the Wahaha-Donone joint venture.

They further claim that the Chinese Labor law controls when labor disputes between parties within the boundaries of the P.R.China. See Article 2:

This Law applies to all enterprises and individual economic organizations (hereinafter referred to as employing units) within the boundary of the People's Republic of China and laborers who form a labor relationship therewith.

Upon establishing the proper law to be applied in the dispute between Danone and Zong personally, Zong’s lawyers employed their sharp weapon—arbitration arising under a labor dispute should be inside China pursuant to Article 79:

Where a labor dispute takes place, the parties involved may apply to the labor dispute mediation committee of their unit for mediation; if the mediation fails and one of the parties requests for arbitration, that party may apply to the labor dispute arbitration committee for arbitration. Either party may also directly apply to the labor dispute arbitration committee for arbitration. If one of the parties is not satisfied with the adjudication of arbitration, the party may bring the case to a people's court.

How about that?! Stockholm arbitration suddenly sounds irrelevant with respect to claims against Zong personally.

So what is Danone’s response to that? They countered, according to the report (Chinese only), that the non-compete and non-disclosure agreements were supported by nifty consideration and they should be enforceable. (note: this really makes no sense. Maybe the reporter did not understand Danone’s argument. Let’s assume that Danone did not respond.)

What are its possible responses?
--get around the employment relationship argument
--argue that Zong’s role in the joint venture was multi-faceted and being an employee was a minor part (weak)
--argue that even if the labor law applies, the parties’ original intent was to arbitrate all disputes in Stockholm

Anything else, folks?