Legal | CMS


project – by way of parent company guarantee, bonding or letters of credit. The basis for this should be clearly set out. Should this be on the basis of underlying subcontracts, proportional interests in the project, or some other basis?


Conflicts of interest. The parties to a joint-venture are likely to have


differing interests, and they will inevitably be conflicts arising between them. The agreement should regulate how conflicts are to be addressed – perhaps through set-aside provisions (under which a representative would not be involved in decision-making). The agreement should also deal with how disputes arising between the parties might be resolved (typically through escalation to higher tiers of management).


Exit events and exclusivity. The agreement should set out the basis


on which parties can “exit” the venture, potentially with some


‘Tax and liability considerations will be key, and the form of co-operation may change over the life of a project.’


form of buyout mechanism. The agreement would also typically contain exclusivity arrangements, under which the parties agree to work together on an exclusive basis in relation to the project.


Termination rights. The agreement should regulate how it might be


terminated (or how a party might be required to leave the joint-venture), through a number of termination offence and events of default. For example, the insolvency of a party


would usually give rise to the ability of the other parties to require the insolvent party to leave the project (in some cases with some form of payment, though this will depend upon the nature of the project). The identity, and ownership, of parties may be a key aspect – in which case, change of control over the parties would need to be regulated (again, potentially giving rise to an exit requirement).


Governing law, and dispute resolution. Whilst English law is often used to


govern the documentation for large international projects, there may be aspects of a project which need to be governed by local law (such as the constitutional arrangements for local companies). Typically disputes would be dealt with by way of arbitration, using an international arbitration forum. Most large-scale international


projects will last over a number of years, and it is key to ensure that the contracts that govern how the project is to be managed have been properly thought out, and contain adequate protections for the life of the project. It is often simpler to develop these types of contracts on the basis of reasonably detailed heads of terms/term sheet, before proceeding with the long form documentation. However, it is also important to recognise that a joint venture agreement is unlikely to deal with all possible issues that may arise over the life of a project, and to retain some flexibility in implementing the project over its lifetime, and adapting the agreements to actual circumstances


GO .


Bill Carr is a partner in the corporate team at CMS in London, and has extensive experience of advising clients on joint ventures


and shareholders arrangements, particularly in relation to


infrastructure and real estate projects. CMS has 2,800 legal and tax advisers in 56 offices around the world. The CMS Infrastructure and Projects Group comprises over 130 lawyers advising sponsors, lenders, sub-contractors and the public sector on projects and their financing in many jurisdictions around the world. Contact: bill.carr@cms-cmck.com Tel: 020 7367 2002


global-opportunity.co.uk ISSUE 01 | GLOBAL OPPORTUNITY 2014 55


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