Thus, many disputes are caused by the realization by the non-Korean party that he/she doesn't need the Korean party and the realization by the non-Korean party that the Korean party had no intent in following the joint venture agreement.
We find that a joint venture is, normally, only successful in a few situations. The following are the major situations that we encounter that tend to make sense for both parties.
- The Korean party has instant access to a proven distribution network (retail outlets) or supply chain and the non-Korean has a product that easily fits into this supply chain. Often this, however, is best addressed through a distribution/license agreement and, not, a joint venture agreement, but in some cases the joint venture makes sense. Be careful, often a joint venture is not necessary and changed circumstances can kill the relationship.
- The industry is an industry closed to foreigners (few industries in Korea as closed to foreigners - ie. publishing) and the Korean party needs the expertise or money of the non-Korean party in order to succeed in the industry. Be careful, needs often quickly change and, often, these industries are heavily regulated and, often, lead into a money pit that you will never dig anything out of. Knowing the governor does not mean that you will receive government support. Everyone in Korea has contacts, however, few are able to capitalize on these contacts, thus, don't be sold a can of hooks.
- The non-Korean party is broke and, thus, unable to commercialize an invention and the Korean party is in need of a new product line or has spare manufacturing capacity. Be careful, the learning curve may not be as great as you think and this you may not be needed for too long.
- The industry is a niche industry with only a handful of players and the non-Korean can receive instant access to one of the main players through the joint venture and the Korean is able to gain access to the technology through the joint venture. Typically, this is a joint venture between a Korean conglomerate (chaebol) and a multinational company. Often these relationships are fleeting and lead us to many hours in arbitration.
Other articles that may be of interest;
- Listen to your Mother: Minority Shareholders' Rights in Korea
- Doing Business in Asia: Due Diligence, Agreements, Attorneys and Street Smarts
- Korea Joint Ventures: The Bare Essentials
- Resolving Korean Joint Venture/Partnership Disputes without an Attorney - Maybe
- Top 10 Mistakes of Companies Doing Business in Korea
Sean Hayes may be contacted at: SeanHayes@ipglegal.com.
Sean Hayes is co-chair of the Korea Practice Team for one of the leading international law firms. He is the only non-Korean to have worked as an attorney for the Korean court system (Constitutional Court of Korea). IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S. www.ipglegal.com