How to Establish Jurisdiction in an International Joint Venture Agreement?
What is a Joint Venture?
A Joint Venture is an agreement between two companies to work on a specific project with the hopes of gaining a competitive advantage that could not otherwise be achieved separately.
Joint Ventures most commonly occur between companies located in different countries. International Joint Ventures allow companies to expand internationally without taking on the risks of building from the ground up or acquiring other companies. Companies who participate in Joint Ventures often benefit from the sharing of technology and resources.
A Joint Venture Agreement acts like a Partnership Agreement for single project. As such, it specifies each company’s responsibilities and how the gains/losses will be distributed.
How is an International Joint Venture Agreement formed?
The first thing to do when forming an International Joint Venture Agreement is to establish jurisdiction, or the entity that will settle any disputes that may arise.
The jurisdiction may be a court located in one of the two countries where the companies are based, an international court, or an international arbitrator. When choosing a jurisdiction, you have to be sure that the court has the ‘right to jurisdiction’.
For example, a court in country where neither company engages in business will not have the right to jurisdiction of the agreement. Most companies choose to designate jurisdiction to an international commercial arbitrator. Arbitration is a way to settle disputes outside of traditional courts.
The arbitrator is a mutual third party who makes a binding judgement in the case of a dispute. International Commercial Arbitration avoids litigation in national courts where laws vary from country to country.
Get started writing your International Joint Venture Agreement now with this free template.