JV Partnership Arrangement
We offer tailored solutions and expert guidance to help businesses form successful joint venture partnerships, navigate legal and regulatory requirements, and optimize their strategic and financial objectives.
In cases where a bidder firm is unable to meet the participation requirements on its own, the firm may require a joint venture partnership with another firm that meets the qualification criteria in order to participate in the tender.
Joint ventures with local firms in infrastructure investments financed for developing countries gain extra points in bid evaluation.
It has been observed that in tenders that include design and engineering activities, bidding firms that intend to undertake the contractorship may also seek a joint venture partner for design and engineering services.
Another reason for forming a joint venture is the inability of the bidding firm to meet the financial criteria. In tenders where financial adequacy criteria can be met by forming a joint venture, multiple bidders come together to form a joint venture and submit a joint bid for the tender.
Another reason for forming a joint venture is the failure of the currency conversion of the experience certificates required by the specifications to meet the required qualifications in the currency rate demanded by the country where the tender is held. Especially in projects tendered in Euro and USD currency, the minimum values demanded in the completion certificates to be submitted by the bidders to the procurement authority as experience certificates are unfortunately requested in Euro or USD currency, which creates a disadvantage for companies in countries with low national currencies.
The benefits of a local partner in a foreign country are not limited to just the bidding stage. A local partner can also demonstrate good management practices as a direct party in supply chain disruptions, customs issues, and disputes with the procurement authority. We advise most of our clients that an honest and financially strong joint venture partner can provide an advantage in the initial bidding process.
It is not obligatory for the local partner to be a joint venture partner. They can also perform their duties as a subcontractor and leverage disadvantages to their advantage. Therefore, each tender and bidder firm must be individually examined and evaluated.
What are the causes of disputes in JOINT VENTURE partnerships?
Disagreements in joint venture partnerships may arise due to the following reasons:
Differences in job sharing: Joint venture partners may disagree on how the work will be done, who will take on what responsibilities, and how the work will be divided.
Financial issues: Joint venture partners may have differing opinions on financial matters, such as disagreements over how the budget allocated for the project will be used.
Management and decision-making: Joint venture partners may have differing views on project management and decision-making, which can lead to disputes.
Performance and work quality: Joint venture partners may disagree on the quality or performance of the work. For example, one partner may believe that the other partner is not doing a good enough job.
Contractual provisions: Joint venture partners may disagree on the terms and conditions set forth in the contract, leading to disputes.
In joint venture agreements, there may be the possibility of the parties being of different nationalities, as well as the procurement authority being from a third country. In this case, multiple legal systems come into play, and it is crucial to anticipate any potential disputes before the joint venture agreement is signed, and to prepare the joint venture agreement in a professional manner accordingly. It is important to be knowledgeable about the tax obligations and regulations in the country where the work will be done, the responsibilities assigned to the joint venture partners in the bidding specifications for the work assignment, the circumstances in which the joint venture can be dissolved in accordance with the legislation of the country where the work will be done, the circumstances under which the small or large partner can leave the joint venture according to the specifications, the execution and seizure procedures in the country where the work will be done, the bank guarantee risks, the procedure for invoicing and commercial receivables, the conditions under which the partner who will bring construction materials and equipment can be restricted in taking back these materials and equipment to their own country, the joint venture partners' responsibilities towards the procurement authority and the state where the work will be done regarding worker receivables and social security premiums, whether worker receivables have priority status, and knowledge about bilateral tax agreements, tax advantages, customs advantages, and exemptions.
The process of liquidating a joint venture begins upon completion of the work for which the tender was won, and the liquidation process and the calculation of partner rights and obligations are carried out according to the legislation of the country in question. In joint ventures, it is common for the foreign partner who provides the guarantee letter to face difficulties when attempting to reclaim the letter, particularly if the partner who provided the guarantee is not the local partner. This can be due to factors such as malicious labor creditors or third parties preventing the return of the guarantee letter, high litigation costs, and inadequate banking regulations, leading to the abandonment of the guarantee letter. To avoid such risks, it is crucial to anticipate all potential issues and establish clear rights and obligations for all parties from the outset when drafting a successful joint venture agreement.
QANAQ also provides independent management consulting services to ensure fair and transparent joint venture management as part of the joint venture partnership created by its clients. To learn about the countries where we provide services and to get detailed information about our services, please contact us.
Foreign companies providing services or supplying goods as subcontractors for a joint venture should seek professional consulting services during the stage of signing a subcontractor agreement in order to collect their receivables and avoid suffering damages during the liquidation process of the joint venture.
Furthermore, it is important to identify and clearly specify all risks in advance in order to prevent disputes.