Joint Venture: A Collaborative Business Model for Global Success

A joint venture is an agreement between two or more parties that decide to pool their resources to carry out a specific economic activity. This agreement may be for a short-term project or for an ongoing collaboration. Each party maintains its legal independence, but shares resources, risks and benefits related to the joint project.

There are mainly two types of joint ventures:

1. Equity Joint Venture: In this type, the parties create a new legal entity, such as a corporation or limited company, which carries out the joint project. The parties contribute capital and other resources to the new entity, which operates independently. Internationally, this model is very common for accessing various markets outside the European Union.
   
   
2. Contractual Joint Venture: In this type of joint venture, the parties do not create a new legal entity. Instead, they rely on a contract that defines the terms of the collaboration, including the contributions of each party, the distribution of profits, responsibilities and the duration of the project. This type of joint venture is common when the objective is a specific, time-limited project.
   
   

In Spain, joint ventures are mainly regulated by the Civil Code and Law 15/2007 on the Defence of Competition. According to Article 1255 of the Civil Code, joint venture agreements must respect the principle of freedom of agreement, provided that they do not contravene the law, morality or public order.

Case law has played a crucial role in the interpretation and application of joint venture agreements in Spain. The Supreme Court has dealt with several cases related to the distribution of liabilities and profits in joint ventures, underlining the importance of clearly defining the obligations and rights of each party to the contract.

For example, the Supreme Court’s judgment of 15 June 2009 (STS 3932/2009) dealt with a conflict between partners in a joint venture regarding the distribution of profits and the management of the project, highlighting the need for a clear contractual definition of the terms of the agreement.

At the international level, international joint ventures can be structured as separate legal entities, such as limited partnerships or limited liability companies, depending on local laws and business objectives. The creation of a new entity can facilitate project management and provide legal protection for the parties involved.

The management of an international joint venture can be undertaken by a dominant partner, where one partner makes most of the operational decisions, or by shared management, where both partners share responsibilities. It is essential that the management structure is clearly defined to avoid conflicts and ensure the smooth running of the collaboration.

At TBA we believe that joint ventures are an effective strategy for business collaboration, both nationally and internationally. The choice between a contractual or corporate joint venture will depend on the specific objectives and needs of the project. Spanish law provides a solid legal framework for these collaborations, and case law has helped to clarify and resolve conflicts in their practical application.