Setting up and operating a joint venture
Structure
Are there any particular drivers in your jurisdiction that will determine how a joint venture is structured?
The laws of mainland United Arab Emirates (UAE) and most UAE free zones do not generally facilitate mechanisms often incorporated into joint venture (JV) agreements, unlike in other more developed jurisdictions. In particular, the enforceability of certain rights relating to share transfers, including drag, tag, call and put options, which JV partners would often view as standard and necessary contractual protections in the context of a JV, is largely untried and untested. As a result, JV partners often prefer to use offshore, Dubai International Financial Centre (DIFC) or Abu Dhabi Global Markets (ADGM) vehicles where they can be certain that those rights can be enforced.
Disputes
Choice of law and resolution methods
In your jurisdiction, are there constraints on the choice of law or the method of dispute resolution provided for in joint venture agreements?
A company’s constitutional documents may not be made subject to foreign law; however, under article 257 of the Civil Code of the United Arab Emirates (UAE), parties are free to agree and will be bound by what they have agreed to do under the contract. As such, UAE law recognises the principle of freedom of contract such that parties are free to agree upon a foreign law to govern their contracts.