McDonald's ordered to pay $28 million

Date AddedOctober 02, 2009 07:33:28 AM

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El Salvador's Supreme Court has upheld an order requiring fast food chain McDonald's to pay $US24 million ($28 million) in damages to a franchise owner who says his contract was unfairly terminated.

The court "confirmed what the second civil court ordered in December 2005", a Supreme Court source said.

The ruling favours former McDonald's franchise owner Roberto Bukele, who first filed a suit against the US fast food giant in 1996, after the company terminated its franchise agreement with him.

McDonald's accused Bukele of failing to follow its quality criteria - an accusation he denied - and in 2005, a court ordered the company to pay the former franchisee $US23.9 million ($A27.95 million) in compensation.

Bukele hailed the Supreme Court's ruling in a statement on Tuesday.

"The Salvadorian 'David' has once again defeated the giant 'Goliath' - that is the message that should be taken away by foreign companies that think they can come here and violate and trample on our laws," Bukele said.

According to Bukele, the "unilateral" suspension of his franchise agreement with McDonald's caused his company Servipronto around $US48 million ($56 million) in losses and forced him to fire some 300 employees.

A lawyer for McDonald's, which brought the case before the Supreme Court hoping to have the fine overturned, said the company would likely challenge the ruling before the constitutional section of the Supreme Court.

"The principle of legal security that is written in the Constitution has been violated," Carlos Castillo said.

McDonald's has been in the courts a lot lately. One case was in Malaysia where they tried to shut down an Indian curry restaurant for bearing the name McCurry. Another case is about McDonald's stealing the advertising catch phrase of another hamburger restaurant called Lion' Tap