$980m Fonterra - Danone botulism case kicks off

Danone's Nutricia subsidiary recalled 67,000 cans of its Karicare baby formula, leaving empty spaces on supermarket shelves. Photo / APN

Fonterra's multi-million dollar stoush with French food giant Danone is due to start behind closed doors in Singapore next week - two and a half years after the botulism botch-up which sparked the feud.

The Herald understands New Zealand lawyers are heading over to Asia for the three-week arbitration, which is likely the last loose-end from the 2013 botulism scare.

Fonterra, in August of that year, said products used in infant formula and sports drinks may contain botulism.

The news made headlines around the world but later turned out to be a false alarm.

In the wash up, Danone cancelled supply agreements with Fonterra and launched a $1 billion lawsuit against the dairy co-op.

Danone alleged the Fonterra breached the Fair Trading Act and wanted damages expected to exceed €630 million ($980 million).

But that High Court action was parked at Fonterra's request so that this month's arbitration could happen first.

Arbitration is similar to a civil court contest, however its confidential nature is attractive to parties who don't want a dispute aired in public.

A likely issue in the arbitration is whether Fonterra's liability is limited to the A$30 million ($32 million) detailed in its supply agreement.

This is significantly less than what Danone was claiming in the parked High Court action, which could still go ahead if necessary once the arbitration wraps up.

Fonterra last week confirmed the arbitration was still happening this month but declined to comment further.