Tiffany & Co. (NYSE:TIF) has been ordered to pay £274 million ($448 million) to the Swatch Group Ltd. (SWX:UHRN) (OTCMKTS:SWGAY). A Netherlands-based arbitration panel ruled today that Tiffany had violated the joint venture contract between the two companies. The decision requires Tiffany & Co. to pay a $448 million fine as well as cover Swatch’s nine million dollars worth of legal fees.
Tiffany & Co. statement
“We were shocked and extremely disappointed with the decision of the majority of the arbitral panel,” said Tiffany CEO Michael Kowalski in a prepared statement.
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The statement went on to say the court decision would not negatively impact its ability to realize any of its existing business plans and that it planned to review its legal options.
Failed joint venture
Tiffany & Co. (NYSE:TIF) and Swatch Group Ltd. (SWX:UHRN) (OTCMKTS:SWGAY), which is the world’s biggest watchmaker, formed a joint venture in the Netherlands in 2007 to make a line of watches together under the Tiffany brand. The legal dispute started in 2011 when Swatch unilaterally cancelled the joint venture, claiming contractual violations. A suit by Swatch and a counter-suit by Tiffany quickly followed.
In the initial court filings, the Swatch Group Ltd. (SWX:UHRN) (OTCMKTS:SWGAY) claimed that Tiffany & Co. (NYSE:TIF) had been intentionally delaying the venture, called Tiffany Watch Co. They apparently had sufficient evidence to convince the majority of the arbitration panel they were right.
Swatch request for damages
It should be noted that Swatch Group Ltd. (SWX:UHRN) (OTCMKTS:SWGAY) requested $4.1 billion in damages in the initial suit, so they only actually received around one-tenth of the amount they requested.
Shares of the Swatch Group Ltd. (SWX:UHRN) (OTCMKTS:SWGAY) closed today at 99.80, up .75 Swiss francs.
Apparently most investors anticipated Tiffany losing the suit, as shares of Tiffany & Co. (NYSE:TIF) were up three cents to $90.65 as of 11:50 EST Monday.