Chiquita Brands International, Inc. (NYSE: CQB) announced yesterday that it has filed a lawsuit in the Court of First Instance of the European Court of Justice claiming damages from the European Commission for not carrying out the European Union’s commitment to reform its banana import regime to comply with 1997 World Trade Organization rulings. The Commission amended the banana regime in January 1999 in response to the EU’s mandate of WTO compliance. However, a WTO panel ruled in April 1999 that these amendments actually perpetuated the WTO incompatibility of the original banana import regime.
The lawsuit seeks Euro 564 million (approximately $525 million) for damages inflicted on Chiquita by the amended regime during the two years since its January 1999 inception. The suit also reserves the right to claim future damages based on the continuing illegality of the regime, including harm the Company will suffer if the Commission carries out its stated intention to implement a “first come, first served” system that is widely viewed as WTO incompatible.
Steven G. Warshaw, President and Chief Operating Officer of Chiquita Brands International, said, “The lawsuit we have initiated today is part of our continuing effort to bring about reform to the illegal EU banana import regime. While we continue to hope that a lasting, WTO-compatible regime will be achieved through a negotiated settlement, the lack of results thus far despite the efforts of the interested countries, as well as the Commission’s intention to implement yet another WTO-incompatible regime, leave us no choice at this stage but to pursue other legitimate avenues for obtaining relief.”
Referring to Chiquita’s announcement last week of a financial restructuring initiative, Mr. Warshaw added, “While we hope the Court will consider our suit in an expedited manner, litigation is a protracted process and it is unlikely that a ruling would come until after the restructuring has been completed.”
Chiquita said that there are two strong legal bases for the suit. First, the European Commission has not properly implemented the 1997 World Trade Organization rulings, in violation of the European Union’s decision to abide by those rulings. Second, the Commission’s actions breach fundamental rights and general principles of European Union law, such as non-discrimination and the freedom to pursue a trade or business. The Company noted that the difference between the damage amount claimed in this lawsuit and the approximately $200 million of annual damages that the WTO previously determined to have been suffered by Chiquita due to the banana import regime is attributable to the different methodologies for damage calculation followed by the two forums.
Chiquita pointed out that at least four other suits are already pending against the Commission in the Court of First Instance that seek damages arising out of the WTO inconsistency of the 1999 amendments to the EU banana import regime. These suits were brought by European firms in the banana trade.
Warshaw concluded, “We remain hopeful that the EU will bring its regime into WTO conformity so as to stop the harm to companies on both sides of the Atlantic and restore international confidence in the WTO dispute resolution process.”
Chiquita is a leading international marketer, producer and distributor of quality fresh fruits and vegetables and processed foods.
This press release contains certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Act of 1995. These statements are subject to a number of assumptions, risks and uncertainties, including product pricing, costs to purchase or grow (and availability of) fresh produce and other raw materials, currency exchange rate fluctuations, natural disasters and unusual weather conditions, operating efficiencies, labor relations, ability to reach agreement with holders of Chiquita’s parent company debt regarding a restructuring, ability to obtain and complete bank and other financings when and as needed, actions of governmental bodies, and other market and competitive conditions, many of which are beyond the control of Chiquita. Actual results or developments may differ materially from the expectations expressed or implied in the forward- looking statements.
