The Joint Ventures 2023 guide features 15 jurisdictions and provides up-to-date legal guidance on JV vehicles, regulation, legal developments and market trends, term negotiation and agreement documentation, board structure, IP and ESG issues, and JV termination and asset distribution.
Last Updated: September 19, 2023
Joint Ventures: a Global Overview
The Chambers Joint Ventures guide is intended to provide the reader with a global overview of the current state of the laws and practice applying to joint ventures, comparing a number of jurisdictions across multiple continents. A joint venture is commercial arrangement between two or more persons (whether natural or juridical) and can take a variety of forms. The purpose of a joint venture could be virtually anything the participants decide and can exist in any sector or industry. For that reason, the laws applying to “joint ventures” in general are impossible to quantify exhaustively, and the reader is reminded of this fact, along with the necessity of robust, sector-specific legal advice at the outset of any project.
Whilst 2022–23 has been a tumultuous year, joint venture activity – though not immediately measurable in the way global M&A activity is – appears to have remained strong. PwC suggest that in the UK, the number of joint ventures has risen by 45% over the past decade and some 68% of companies are considering a JV. The benefits to the participants are clear. A JV provides access to resources, expertise, new markets and has the benefit of reducing costs and – potentially – liability if things go wrong.
In February 2022, Russia invaded Ukraine and, as a consequence, a package of sanctions was applied against Russian individuals and institutions by the United Kingdom, the European Union, the United States of America and others. This has rendered joint ventures with Russian entities extremely difficult, if not impossible to undertake, not least because many professional advisers have implemented a blanket ban on advising Russian businesses. More nuanced than simply entering into a joint venture with a Russian entity, participants need to be alive to Russian involvement in any aspect of the joint venture, from supplying a particular customer, working with a particular supplier or exploiting a particular asset.
Added to the economic shock caused by the Ukraine war, the UK and others have seen extremely high levels of inflation, reaching 11% in the UK in October 2022, a 41-year high. The USA averaged 8% for 2022 and, for the same year, the EU annual inflation rate reached 9.2%, more than quadrupling the 2.1% average of the year before. Whilst things appear to be stabilising and even reducing, the cost of money is far greater now than it was in the preceding years. The impact of this on joint venture activity is seen through companies being more cautious; preserving cash, thinking twice about deploying expensive capital and exercising enhanced caution in pursuing new, speculative or exploratory endeavours with others that a joint venture may have previously allowed them to take.
But as with all things, there is a different side to the story. Certain sectors remain buoyant and joint venture activity remains robust. The ESG agenda continues to gain momentum and businesses recognise the significant opportunities that this presents. We have seen joint ventures in bio fuels, hydrogen power and battery technology, which is testament to the resilience and buoyancy of this market in the face of wider challenges. Globally these sentiments are shared; China aims for carbon neutrality by 2060 and the European Union’s current target under the European Climate Law aims to reduce net greenhouse gas emissions by at least 55% by 2030 and (like the UK) it has legally committed to achieve carbon neutrality by 2050. The industries and technologies that will drive these aspirations are in their infancy with new developments to existing green tech being constantly made. Green or sustainable finance offers companies and investors the opportunity to invest in initiatives that will assist in the transition towards a low or zero-carbon economy; joint ventures, through the sharing of knowledge, technology and resources, will undoubtedly feature heavily on the road to this transition.