UK Joint Ventures: Sanctions And Corruption Risks

Expansion into new and emerging markets is a continuing trend for companies across many industry sectors. In a number of jurisdictions, local law restricts foreign companies from establishing wholly owned subsidiaries — this is particularly true in regulated industries such as mining, banking, pharmaceuticals or telecommunications. Establishing a joint venture (JV) with a local partner is therefore a common form of entry into the market. Even if local law allows for free entry into the market, JVs can still be an attractive strategic or economic option in terms of drawing upon local expertise, skills and contacts and sharing risks, costs and resources.

While the attraction of JVs is clear, their creation and ongoing operation can present a number of issues for in-house legal teams and compliance officers. This article will consider the importance of managing the regulatory and reputational risks that can arise from operating a JV with a sanctioned partner (or a partner that becomes sanctioned), or with a JV partner who engages in corrupt practices. It will consider how to best identify sanctions and corruption risks and provide some recommendations as to action you should be taking to manage these risks — both at the outset of the creation of a new JV and as its commercial activities continue.