How to prevail when technology fails - Flipbook - Page 31
Technology M&A, joint ventures and outsourcing: An opportunity to be considered carefully | 31
“You must enter technology JVs with Chinese parties with your
eyes wide open. You should assume that any technology will be
shared with the Chinese government and come up with a plan B for
enforcing judgments.”
Antonia Croke | Partner, Hogan Lovells
6
Evaluate how
government
intervention creates
litigation risk
In the U.S., CFIUS has become active in scrutinizing
deals involving Chinese companies’ investments into
technology businesses. Litigation may result if it is
not clear who bears the risk of CFIUS intervention
or if one party believes the other has not made
every effort to obtain CFIUS approval. It can also
happen if government pressure or intervention
results in other commercial contracts not being met.
CFIUS aside, you should carry out extra checks to
understand how their intellectual property will be
shared when entering into JVs with counterparties
in other jurisdictions. You should also stipulate in
deal documentation where any dispute will be heard
and how judgment will be enforced.
7
Take extra precaution
when entering
emerging markets
Assessing litigation risk in emerging markets is
difficult because regulations and the degree of
penalties for non-compliance may be less clear.
You must conduct a more thorough risk assessment
when considering acquisitions of, and JVs with,
companies located in emerging markets, including
checking for anti-bribery and corruption risks, and
engage directly with industry, data protection and
other relevant regulators to check whether your
plans raise any obvious issues. It is wise to devise
a plan that stipulates who should liaise directly
with regulators.
You must also establish in deal documentation the
mechanism for resolving any disputes and stipulate
that any dispute should be heard in a neutral,
independent and efficient forum with courts that
have the expertise to ensure any decisions are
enforceable in a reasonable time. Based on our work
with clients, we are seeing arbitration used as the
mechanism of choice for these types of transactions.
This also increases enforcement options in a
dispute with a partner whose assets are based in an
emerging market where it might be more difficult to
enforce a court judgment.