Billabong International Limited has today released an official statement to the ASX advising that it is subject to a civil claim in the Denpasar District Court in Indonesia by its former Indonesian licensee, CV Bali Balance (CVBB), alleging, among other matters, that the termination by Billabong of CVBB's licence to distribute products in Indonesia was invalid. While Billabong believes that it is highly unlikely that the civil claim will have any material adverse effect on its business or operations outside Indonesia or on the revenue, profitability or financial condition of the Billabong Group as a whole, Billabong is issuing this statement now to ensure that any media coverage that may result from the commencement of the civil claim is made with knowledge of Billabong's position on these matters. The background to this claim is that Billabong terminated the licence in 2005 relying on a right of termination in the agreement. Upon termination, the licence had approximately three years left until expiry. Although CVBB signed a deed acknowledging the validity of the termination at the time, it is disputing the validity of termination. Since the termination, Billabong has been conducting its business in Indonesia directly through its wholly owned subsidiary, PT Billabong Indonesia. Billabong's business in Indonesia represented approximately 0.7% of the Group's global sales in the 2008/09 financial year. Billabong believes on the basis of the legal advice it has received that there is absolutely no basis whatsoever for CVBB's civil claim. In Billabong's view, the civil claim is simply tactical litigation in Indonesia to attempt to influence the settlement discussions which are ongoing between Billabong and CVBB. The Billabong entities which are the subject of the civil claim are PT Billabong Indonesia, Billabong International Limited and GSM (Operations) Pty Ltd. PT Billabong Indonesia will defend these proceedings, including by disputing the jurisdiction of the Indonesian court regarding the termination of the licence agreement, which is governed by Queensland law and the parties have submitted to the jurisdiction of the Queensland courts, including proceedings already filed by Billabong in Australia. Billabong International Limited and GSM (Operations) Pty Ltd do not believe that the Indonesian courts have jurisdiction over them. Billabong notes that the civil claim includes a claim for compensation of US$53 million for specific loss which CVBB claims to have suffered from the alleged invalid termination (including matters such as alleged medical costs of CVBB principals), plus US$100 million for 'unspecified' damages arising out of the termination. This is despite the fact that the licence had approximately three years left until expiry and in the last full year of the licence under CVBB’s control it is understood that, based on royalties to be paid to Billabong, CVBB had annual sales of Billabong group product of only approximately A$13 million. There is no evidence to support the amount of compensation claimed. Indeed, given CVBB's operations and the remaining term of the licence, it is not possible that CVBB could have incurred any loss remotely like what it now claims, even if the termination was invalid (which Billabong denies). While this is the case, litigation is inherently uncertain and there is a possibility of some judgement in Indonesia coming out of the civil claim against Billabong. Any judgment obtained would be enforceable against the assets of Billabong in Indonesia, which are immaterial to the Billabong Group. CVBB would face hurdles in seeking to enforce any judgment which is given by the Indonesian Court against Billabong International Limited or GSM (Operations) Pty Ltd in Australia, not least of which because Indonesia is not recognised as a reciprocal country under the Foreign Judgments Act 1991. Billabong would strenuously resist any such enforcement action. 2 In addition to the civil claim, CVBB has taken a number of other actions in Indonesia which Billabong believes are designed to influence the settlement negotiations between the parties. A criminal charge was brought against a PT Billabong Indonesia employee on a complaint by CVBB relating to the use of in-store promotional tools allegedly owned by CVBB after the termination, and a claim was brought by CVBB against the Indonesian foreign investment authority, claiming that the grant of Billabong's investment approval and permanent licence to operate in Indonesia were wrongly issued. Although the lower courts have issued judgments against the employee and finding for CVBB on the foreign investment approval, the Administrative Court matter is currently subject to an appeal to the Indonesian Supreme Court and the criminal conviction will soon be subject to such an appeal. Billabong has provided the governments of Indonesia and Australia with regular updates on these matters.

By Press Release