(Yicai Global) March 12 -- Ningbo Lehui International Engineering Equipment has filed for arbitration in Bonn, claiming EUR9.5 million (USD10.7 million) in losses and compensation from two German firms for allegedly making fraudulent statements in their sale of a dairy packaging unit which has since gone bust.

Lehui's lawyers have submitted their application to the Deutsche Institution für Schiedsgerichtsbarkeit, an impartial adjudicator whose decision will be final and binding, the Ningbo-based maker of food and drink packaging equipment said yesterday.

Arbitration is a way to resolve disagreements outside the courts and is often used to settle commercial disputes.

High-tech solution provider Max Automation and automated equipment producer NSM Magnettechnik are accused of misleading Lehui by giving several false statements that concealed significant facts and economic indicators about their subsidiary Finnah Packtec's underlying assets.

Lehui paid EUR4 million (USD4.5 million) to Dusseldorf-based Max and Olfen-based NSM in January 2018 to take over Finnah. Lehui then injected a further EUR5.5 million into the high speed and aseptic packaging equipment maker.

The dispute centers around the alleged failure of the two German parties to disclose that there was significant risk in the supply contract for filling machines signed between Finnah and Canadian firm Geosaf, Lehui said late last year.

When the end-users of these products wanted to terminate the contract at the end of 2018, for reasons not stated, and return the products, it triggered a series of economic disputes and lawsuits that eventually destroyed the Ahaus-based company.

Finnah filed for bankruptcy a year later and the fallout caused Lehui's 2019 net profit to drop by between CNY50 million (USD7.2 million) and CNY70 million, the company said at the time.

Lehui, which had been buoyed yesterday on a successful bid to supply brewing gear to Heinken's Brazilian subsidiary, saw its share price [SHA:603076] close down 3.6 percent today at CNY21.50 (USD3.10).

Editor: Kim Taylor