Tiffany & Co. will be forced to pay as much as 449.5 million dollars in compensation to Swatch Group, as the arbitrage committee in Netherlands ruled. The penalty refers to the broken agreement of cooperation between the two companies. The ruling will cause serious blow to Tiffany since the amount exceeds its annual earnings.
This decision is the final chapter in the partnership of two renowned brands which was initially pompously announced by both the Swiss watchmaking firm and the US luxury goods retailer. The initial reports about the collaboration between Swatch and Tiffany came out in 2007. As they agreed, Swatch was supposed to start producing timepieces which would bear the Tiffany brand’s logo. It was initially conceived as a two decades long cooperation and new Tiffany watches were to be sold not only in its own global network of boutiques, but also in shops of other luxury retailers. However, this partnership actually went sour before it even kicked off and these timepieces have never seen the light of day.
After it became clear the things will not go on as planned, Swatch Group decided to file a lawsuit against Tiffany $ Co. in 2011. The lawsuit was filed in the authorized court in Netherlands where the joint venture was supposed to be based. As the legal team of the watchmaking company stated, Tiffany was deliberately trying to delay and cancel the inception of the production of new watches. As the compensation, Swatch Group demanded around $4.244 billion. The other side naturally claimed otherwise and Tiffany decided to make a counter-suit saying that it was the side that was actually owed around $603.5 million.
As the arbitrage finally concluded last Saturday, the Tiffany’s lawsuit was dropped as unfounded and the luxury goods seller was ordered to pay as much as $449.5 million to Swatch Group as compensation. The amount exceeds Tiffany’s earning for the last year and it has seriously shaken the famous US brand. After the decision of the three member arbitrage committee in Netherlands, Tiffany’s Chairman Michael Kowalski expressed his utter disappointment. “We were shocked. We firmly believe that the panel ruling is not supported by the facts of this case,” said Mr. Kowalski to the present media and added that the brand’s legal team is considering the company’s options for the following course of actions.