April 21, 2017 5:30 am JST

Toshiba-Western Digital row may land in court, arbitration

Breach claim citing joint ventures could block Toshiba Memory sale

NATSUKO SEGAWA, Nikkei senior staff writer

TOKYO -- Western Digital's claim that Toshiba's planned sale of its memory unit would violate joint venture agreements raises the specter of an international legal battle that could disrupt the Japanese company's efforts to expedite the deal.

The American hard-drive maker seeks exclusive negotiating rights for Toshiba Memory on the grounds that contracts with Toshiba forbid the transfer of shares in their joint memory production ventures to a third party without the other partner's consent. The contracts are binding under California law, and Western Digital could take the Japanese conglomerate to court alleging a breach.

Even if Toshiba does grant Western Digital exclusive negotiating rights, the Japanese company still could consider seeking another buyer if it is unsatisfied with the U.S. partner's offer. If so, Western Digital may try to use the joint venture contracts to block a sale.

Experts on cross-border business disputes say the American company probably would begin by requesting injunctions from foreign and domestic courts to stop Toshiba from selling Toshiba Memory shares. Disagreements over compensation or other issues would be settled via arbitration in San Francisco based on International Chamber of Commerce rules, as stipulated in the contracts.

Joint venture contracts typically contain clauses barring the parties from selling shares at will, though exceptions often are carved out. Western Digital's claim likely will hinge partly on whether this situation constitutes such an exception.

An alliance between Suzuki Motor and Volkswagen was dissolved through international arbitration, with the case finally settled in 2016 after more than four years. But some experts think concerns that a protracted dispute could hinder Toshiba's efforts to get back on its feet will encourage cooperation toward a quicker resolution.

Toshiba Corp.

Japan

Market(Ticker): TKS(6502)
Sector:
Industry:
Consumer Durables
Electronics/Appliances
Market cap(USD): 10,537M
Shares: 4,237.6M

Suzuki Motor Corp.

Japan

Market(Ticker): TKS(7269)
Sector:
Industry:
Consumer Durables
Motor Vehicles
Market cap(USD): 23,498.5M
Shares: 491M

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