Suzuki starts arbitration procedure against Volkswagen

Suzuki SX4 Sport
Image caption Suzuki was accused of breaching the contract after it signed a deal with Fiat for supply of diesel engines

Suzuki Motors has initiated arbitration proceedings against Volkswagen in a bid to buy back its shares from the German carmaker.

Volkswagen bought a 19.9% stake in Suzuki in 2009, but relations between the two have since deteriorated.

Suzuki ended its partnership with VW in September, after the latter accused it of breaking terms of their agreement.

The German firm has said Suzuki has "no legal foundation" to force it to sell its shares.

"Suzuki Motor Corporation is today commencing arbitration proceedings in London with the ICC International Court of Arbitration, in order to compel Volkswagen AG to dispose of its Suzuki shares to Suzuki or Suzuki's designated third party," the Japanese carmaker said in a statement.

'Lack of response'

The partnership between Suzuki and Volkswagen was expected to be a win-win situation for both the carmakers.

Volkswagen had hoped that it would provide a way for it to gain access to the fast-growing Indian car market, through Suzuki's prominent position in the country.

The companies had also planned to co-operate on developing technology. However, despite all the plans no projects were launched even after two years of the deal being signed.

The breaking point came after Suzuki decided to buy diesel engines from Fiat for its cars built in Hungary, a move that Volkswagen said was a breach of contract.

At the same time, Suzuki accused Volkswagen of refusing to share advanced technologies with it.

That led to Suzuki announcing an end to the partnership. The Japanese carmaker has since sought to buy back its shares.

"The arbitration proceedings follow Suzuki's termination of its alliance with Volkswagen AG on 18 November 2011, and Volkswagen AG's lack of response to Suzuki's requests for the disposition of its shares," Suzuki said.

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