International Strategic Alliances: Is Your Partnership Protected?

Cross-border joint ventures carry distinct legal risks depending on how the parties structure governance, profit sharing, and exit rights, and a poorly structured alliance can create deadlock situations where neither party can make binding decisions. The governing law of the joint venture entity and the shareholders agreement provisions that allocate control rights determine how governance conflicts are resolved.

International joint venture and joint venture agreement counsel can advise on the specific cross-border partnership structure and develop the joint venture formation and governance strategy.

Technology transfer and cross-border IP licensing within an international strategic alliance require the parties to address ownership of improvements developed during the alliance, the scope of permitted sublicensing, territorial restrictions, and what happens to the licensed IP if the alliance terminates. US export control laws, including the Export Administration Regulations and the International Traffic in Arms Regulations, impose additional requirements on technology transfers to foreign parties.

Strategic alliances and MOUs and international contracts counsel can advise on the specific alliance structure and develop the international strategic alliance legal framework strategy.

Technology transfer and technology licensing and IP transactions counsel can advise on the specific technology transfer and IP ownership issues and develop the cross-border IP protection and licensing strategy.

A choice of law clause designates the country whose substantive law governs the alliance agreement, and a forum selection clause designates the court or arbitral body that will resolve disputes, and both provisions must be carefully drafted to ensure they are enforceable in every jurisdiction where enforcement might be sought. The United Nations Convention on Contracts for the International Sale of Goods applies by default to international sales transactions unless the parties expressly exclude it.

International business contracts and international trade contracts counsel can advise on the specific choice of law and forum selection provisions and develop the governing law and dispute resolution strategy.

Alliance agreements involving the sharing of proprietary technology, customer data, or employee information must address the applicable data protection laws of each jurisdiction, including the requirements of the EU General Data Protection Regulation for data transfers outside the European Economic Area. IP assignment and licensing provisions must clearly specify which party owns the background IP brought into the alliance, which party owns foreground IP developed during the alliance, and what rights each party retains after termination

Cross-border data protection and global data compliance counsel can advise on the specific IP rights and data transfer obligations and develop the cross-border data compliance strategy..

Foreign investment in many jurisdictions is subject to review and approval by government agencies that assess national security risk, and in the United States, the Committee on Foreign Investment in the United States can block or condition transactions. The Foreign Corrupt Practices Act prohibits US companies and their foreign subsidiaries from paying bribes to foreign government officials, and a local partner's corrupt conduct within a strategic alliance can expose the US partner to FCPA liability.

Foreign Corrupt Practices Act (FCPA) and foreign investment law counsel can advise on the specific foreign investment screening and FCPA compliance obligations and develop the anti-corruption compliance and FDI approval strategy.

US export control laws restrict the transfer of controlled technology to foreign parties without a license, and an international strategic alliance involving controlled technology must comply with the EAR, the ITAR, and applicable Commerce Control List classifications. OFAC sanctions prohibit US companies from conducting business with sanctioned countries, entities, and individuals, and an international strategic alliance must include screening procedures to ensure no party or beneficial owner is a sanctioned person.

Export control law and international sanctions and trade tariffs counsel can advise on the specific export control and sanctions obligations and develop the export compliance and sanctions risk strategy.

International commercial arbitration under the rules of the International Chamber of Commerce, the London Court of International Arbitration, or the American Arbitration Association provides a neutral forum for resolving disputes and produces an award enforceable in over 170 countries under the New York Convention. The arbitration clause in the alliance agreement should specify the rules, the seat, the number of arbitrators, the language, and the governing law.

International arbitration and international dispute resolution counsel can advise on the specific arbitration clause and dispute resolution options and develop the international arbitration and enforcement strategy.

International strategic alliances often give rise to transfer pricing obligations when the parties transact across borders, because tax authorities require intercompany transactions to be priced at arm's length to prevent artificial profit shifting. Sovereign immunity can affect the enforceability of dispute resolution clauses and arbitral awards against a foreign government party, and the United States Foreign Sovereign Immunities Act provides limited exceptions that must be analyzed before entering into an alliance with a state-owned entity.

Transfer pricing and international tax compliance counsel can advise on the specific tax exposure and sovereign risk issues and develop the cross-border tax structuring and sovereign risk strategy.