The Ministry of Extractive Industries in a high-risk jurisdiction announces the discovery of a large mineral reserve in the country. The Ministry announces that the government will be holding an auction for the rights to mine the reserve. A condition of winning the auction includes partnering with a local firm based in the high-risk jurisdiction. The local firm must hold at least 20% share in the entity conducting mining operations. Mining Company, traded on a US stock exchange, is considering making a bid for the mining rights.
- The DOJ and the SEC take the position that under certain circumstances a partner to a joint venture (whether incorporated or unincorporated) can be held liable for the actions of the joint venture or for the actions of a joint venture partner taken to benefit the joint venture.
- Under the Bribery Act, a member of a joint venture operating through a separate legal entity can be held liable for a bribe paid by its joint venture partner if that joint venture partner is performing services for the member and the bribe was paid with the intention of benefiting the member.
- Before agreeing to participate in the auction, the company should conduct due diligence on the local partner. This should include, among other things: ownership information; what business the company has with the government; whether any government official is affiliated with the entity; the financial structure of the joint venture and bid; whether the local firm has the financial wherewithal to contribute; whether the company will be expected to “carry” the local firm; and the company’s ABC policies, trainings, and audits/investigation reports.
- Obtain ABC certifications, ABC representations and indemnifications, audit rights, and termination rights from the local joint venture partner and consider conducting ABC training for the partner.