Numerous U.S. companies have come to FCPA grief for their overseas JVs and this continues to be a bane for many companies under the FCPA. There are some basic compliance terms and conditions which should be considered for any foreign JV agreement to help U.S. companies manage these compliance risks.

As a starting point, it is important to have compliance terms and conditions, these reasons can include some of the following: 1) to set 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 compliant manner. This all must be spelled out for them, so you should have language regarding the following:

  • Prohibition of all forms of bribery and corruption. 
  • Right to cancel, and recoupment rights.
  • Duties in JV Governance.
  • Audit rights.
  • Prohibited Parties.
  • Certifications.

After the contract is signed your company will have to work just as hard to keep the compliance program for any JV robust and meaningful. However, with these terms and conditions in place, you will have a chance to maintain your FCPA obligations and to manage the risk that is involved when working jointly with non-U.S. companies.

Three key takeaways:

  1. Failure to secure appropriate compliance terms and conditions in a JV agreement can cause great FCPA risk for a U.S. company.
  2. Certifications are important requirements to obtain.
  3. Audit rights must be secured and equally importantly, exercised.

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