Section 2

Building Your Foundation

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Implement what you know with confidence

Discover action-based tools that provide simple steps for program improvement or robust plans for new ways of doing business. 

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Your ethics and compliance program is an ecosystem of moving parts. New laws and regulations, new lines of business, new geographies, mergers and acquisitions become part of a growing enterprise that your compliance ecosystem must support. 

Effective compliance programs are able to deftly navigate these complexities because they have built strong foundations that were developed with the nature of the compliance industry in mind.

This section will give you the expert advice and programmatic best practices to ensure the first steps you take to develop your program are in the right direction. Or if your program is more mature, these resources and insights will give you the necessary guidance to course correct and improve your program’s foundation at whichever stage it is in. 

 

How to Survive an International Joint Venture

Chapter 7 of The Worst-Case Scenario Survival Guide for Compliance Professionals

There's 5 steps you can take to avoid pitfalls and be successful in an international joint venture. Learn why international joint ventures frequently get caught up in FCPA enforcement actions and discover what you can do to survive.

Tom Fox 12/20/2017

Chapter 7 of The Worst-Case Scenario Survival Guide for Compliance Professionals

There's 5 steps you can take to avoid pitfalls and be successful in an international joint venture. Learn why international joint ventures frequently get caught up in FCPA enforcement actions and discover what you can do to survive.

FCPA enforcement actions are littered with companies that came to grief through an international joint venture. The problem starts with the unique structure of a joint venture, which requires the integration of disparate company cultures. This is compounded when your proposed partner is a foreign government of a state-owned enterprise. A joint venture creates a new set of compliance risks for the company that are subject to the FCPA as the company has, by definition, less control.  As a result, these issues need to be addressed during the formation of the joint venture.  If the company entering the joint venture has less than 50 percent control, issues become even more complex. Let’s take a look at five steps you can take to survive an international joint venture.

 

How to Survive
 

1. What’s Your Justification

Why are you going into business with a foreign partner? In other words, what is your business justification for giving up some of your control and profits? The justification must pass business muster before it goes to the compliance function for compliance scrutiny. Both parties should assess the other and conclusively decide that the joint venture is mutually beneficial and a good fit. This means each side will benefit.

So, how can a company fully protect itself and insure the joint venture will accomplish the business goals? By organizing your approach to a joint venture in a way that mirrors the business reasons for doing so.

 

2. Perform Due Diligence

The due diligence process should be built on principles like those involving third parties. The procedure should be robust, well-documented and address all potential risks involved. A company should use its due diligence review of the joint venture partner to properly assess and uncover any corruption risk. The risk in joint ventures is primarily that your foreign partner will be a foreign official or employee of a state-owned enterprise. The joint venture will be viewed by U.S. regulators as a mechanism to funnel illegal bribe payments to such a person. You need to take a deep dive into who is becoming your partner, all the way to the ultimate beneficial owner.

 

3. Terms and Conditions

The joint venture agreement between both parties should have explicit terms and conditions. You’ll want these in place for a variety of reasons including the following: (1) to set clear expectations between the parties; (2) to demonstrate the seriousness of the issue to the non-U.S. party; and (3) to provide a financial incentive to do business in a compliant manner.

Consider including these five clauses:

  • Absolute prohibition on bribery and corruption
  • Full audit rights
  • Right to cancel the joint venture agreement if there is material breach and recoupment rights for any FCPA violation
  • Clear governance rights if you are a minority partner
  • Ongoing, at least annually of certifications from your foreign partner they are not aware of any bribery and corruption