Business

Thursday May 7, 2009

Chinese firm Goldstar suing Proton for alleged breach of trust

BY CELESTE FONG


HUMEN (China): A summons will be served on Proton Holdings Bhd to appear in a court in China for an alleged breach of contract case, regardless of the outcome of an arbitration case in Singapore, according to a lawyer representing the plaintiff, Goldstar Heavy Industrial Co Ltd.

Chinese company Goldstar is suing Proton for alleged breach of contract.

Both parties had referred the dispute to arbitration, according to Proton previously.

Goldstar lawyer Yan Baisong said the hearing on the dispute was held at the Singapore International Arbitration Centre last month.

“We are very confident (that we will win the case) based on the figures and documents we have provided to the arbitration court,” he told StarBiz in an interview recently.

Regardless of the verdict by the arbitration court in Singapore, Yan said the suit would still be heard in China.

“The judgment made by the arbitration court in Singapore has still to be referred to the Chinese People’s Court for final conclusion,” he said, adding that the case would be heard at the Dongguan Intermediate People’s Court.

Goldstar, Proton’s former joint-venture (JV) partner in China to manufacture cars, is seeking about one billion yuan (RM520mil) in compensation for alleged breach of contract.

Under the joint venture proposed in 2002, a plant was to be set up in Humen. But that venture failed to take off as Goldstar had failed to obtain a car manufacturing licence for the JV, which frustrated Proton’s plans to start manufacturing cars in China, according to a previous statement from the national carmaker.

“Goldstar has severely defaulted in its obligation to get the necessary licence to enable the JV to star manufacturing cars. Goldstar has failed to get the necessary manufacturing licence over a period of three years. By these reasons, Goldstar’s failure has frustrated Proton’s initiatives to get the JV to start producing cars in China,” Proton said in a statement last December.

Goldstar, in turn, alleged that Proton had breached an agreement not to form a JV with any other company.

Proton had subsequently signed on with Jianhua Youngman Automobile Manufacturing Co Ltd to sell Proton cars, rebranded as EuropeStar, in China.

“My client will sue Youngman too,” Yan said.

Proton had also said the Goldstar lawsuit contravened the agreed arbitration process and was in breach of the anti-suit injunction order obtained by Proton against Goldstar.

The national carmaker also alleged that Goldstar had delayed the proper process to terminate the JV between both companies.

Proton has declined to comment on the latest development.

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