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View Full Version : International Joint Venture Agreements - What's Kosher and What's Not?



Rivers Corbett
11-04-2008, 12:09 AM
For decades of secret trade tailoring, business firms in the global economy finally collaborated to provide an international model. 10 years ago, the ITC or the International Trade Center conducted a global survey on trade contracts. Responses from TPO's or Trade Promotion Organizations were initially relatively small but later had satisfying results. The dilemma of having no ideal model for international joint venture agreements and the irreconcilable diverse backgrounds of international lawyers had come to an end.

In 2002, some 55 specialists from 45 countries, representing all legal cultures agreed to have a couple of models on international joint venture agreements. Interestingly, they have agreed to help the international business community concentrating on small business enterprises or SME's in small emerging economies. Generally, it provides two options, that is – short term activity for a single project or a long term business relationship between partners for multifarious projects.

Both vary in goals and objectives. The first can be a creation of a new company, the second, the incorporation of two or more companies without the need of creating a new company. To say it more concrete, these are as follows:

1. Incorporated joint venture contract - this model intends to create a new company in a specific country. In this variation, the model allow two or more companies to collaborate and carry out a common activity requiring legal instruments such as by-laws, articles of incorporation, and shareholder's agreement.
2. Contractual joint venture contract – this model does not require the creation of a new company. Thus, a legal new entity is not created. This applies to industries like transportation, hotel and tourism and, the prospecting and developing of natural resources.

These models fairly address the important needs of small and big business firms. This includes the initial and additional contributions of the parties, management, a legal department for the joint venture, liabilities of the partners (internal and external), sharing of resources, profits, potential risks and loses, a deadlock resolution to all possible conflicts, exclusion of a partner, dispute resolution, acquisition, transfer and loss of partnership status, and the termination of contract of the joint venture agreement.

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Rivers Corbett
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