Fonterra, Danone to fight behind closed door

French food giant Danone. Photo / Getty Images

Fonterra will be spared having its multimillion-dollar fight with French food giant Danone spilling back into the public arena this year.

The dairy co-op will also likely avoid having to make any payout during the year to the Paris-based company, which wants damages expected to exceed 630 million euro ($980 million) in the wake of Fonterra's 2013 botulism scare.

The High Court battle between Fonterra and Danone, which alleged the New Zealand company breached the Fair Trading Act and made negligent misstatements, was one of 2014's most hotly anticipated corporate scraps after it was launched last January.

However, by November the fight had all but simmered down.

That was when the Court of Appeal denied Danone's bid to keep the dispute live in this country while both parties headed to arbitration in Singapore.

Instead of allowing both processes to progress in tandem, the appellate court kept a stay of proceedings on the New Zealand case, meaning the arbitration is to happen first.

One of Fonterra's arguments when it successfully applied to put the New Zealand action on hold was that the local proceedings were a "contrivance" that sought to embarrass the dairy co-op.

And if anything emerges during arbitration that could rattle Fonterra, the public is unlikely to hear about it - the confidentiality of the process is what makes it attractive to those who could otherwise be fighting in open court.

The preparation for arbitration is similar to a court dispute, with the parties exchanging documents and evidence in the lead up to the hearing, says Fonterra Group general counsel Andrew Cordner.

The three-week arbitration hearing - not due to take place until February next year - will be much like a trial, Cordner says, except it will happen in private.

Neither side was willing to even disclose who had been appointed as arbitrator to decide the dispute.

An issue that will be centre in the arbitration is whether Fonterra's liability is limited to the A$30 million ($32 million) detailed in the supply agreement.

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

"Any cost to Danone as a result of the delay in the High Court proceeding will be able to be met by an appropriate order for interest in the event that the claim for damages is ultimately successful," the Court of Appeal said in November.