While German group VW has long wanted to revive a deal that was once a major strategic coup for Europe's largest carmaker, its hopes have dimmed rapidly with Suzuki repeatedly saying the two must go their separate ways. 

Suzuki said on Friday VW should release its shares to it or to a third party, adding it would seek arbitration if VW did not comply. It said it would buy back the shares by Nov. 16, 2012.

Yasuhito Harayama, Suzuki's executive vice president in charge of the alliance from its side, said arbitration took time and the company could wait. 

"Once the paperwork is filed and the process begins, we are prepared for it to take potentially as long as 1-1/2 to 2 years to come to completion," Harayama told reporters in Tokyo. 

VW paid 1.7 billion euros ($2.3 billion) in January 2009 for its stake in Suzuki, a specialist in building small cars for emerging markets profitably, in a deal supposed to give VW a strong foothold in the growing Indian market and Suzuki access to fuel-saving technologies. 

No benefits ever resulted, and the alliance morphed into bitter mud-slinging in September when VW said Suzuki had broken their contract by deciding to procure diesel engines from Fiat.

Suzuki replied that its reputation was being damaged by VW, adding the deal a "ball and chain" for its management.

On Friday, VW said Suzuki did not have a legal leg to stand on, and reaffirmed its intention to keep its stake in Suzuki.

"Volkswagen categorically repudiates any allegation that we have in any way breached or failed to comply with the spirit of the cooperation agreement and rejects any termination of the agreement," it said. 

Timo Holzborn, a corporate lawyer at Munich firm Heisse Kursawe Eversheds, said an exact arbitration procedure was typically agreed in advance of signing a contract and something privy only to the two parties. 

"Because there is only one level of jurisdiction, arbitration is typically favored since rulings are handed down often much faster than a national court and are just as binding," Holzborn said.