Panel rejects Danone request for steps vs Wahaha

SHANGHAI, July 14 (Reuters) - An arbitration panel in Stockholm has rejected Groupe Danone SA's (DANO.PA) request for interim measures to restrict expansion moves by its estranged Chinese venture partner Wahaha Group, the companies said.

The ruling was the second legal setback for French food giant Danone in two weeks in its prolonged battle over ownership of the Wahaha trademark, a leading soft drink brand in China.

The tribunal of the Arbitration Institute of the Stockholm Chamber of Commerce on Friday turned down Danone's request to prevent Wahaha from forming new companies outside of their joint ventures and from increasing the production capacity of other units making products under the Wahaha brand, Wahaha said in a statement late on Sunday.

Danone has accused Wahaha of setting up parallel businesses outside their ventures that illegally sell Wahaha-branded products and in May 2007 filed for arbitration in Stockholm against Wahaha and its founder Zong Qinghou. It requested the interim measures in October.

The arbitration panel has yet to render a final decision on the disputes covered in the original filing.

Danone said in a statement on Monday that the panel's rejection of the request for interim measures reflected its desire not to make any judgments in the case before it reaches a final decision.

Last week, Danone said it filed an appeal against a Chinese arbitration panel's ruling in favour of Wahaha.

Tensions between the two parties have resurfaced after attempts at peaceful reconciliation failed. In December, Danone and Wahaha agreed to cease all lawsuits and to enter talks to resolve their disputes.

In May, French daily newspaper Les Echos reported that Danone had decided to call off its commercial relationship with Wahaha and was looking for an "honourable" way out of the partnership. (Reporting by Samuel Shen; Editing by Edmund Klamann)