One of the most difficult things to plan for effectively in any joint venture is conflict resolution and decision deadlock between the joint venture partners. Joint venture agreements in the mining industry can be voluminous documents. Pages are devoted to calculating partner dilution, setting out partner rights, outlining how and by whom JV operations will be managed. At the same time, little thought is often given to how the partners will deal with a deadlock over an operational decision.

In a way it is not surprising that mechanics dealing with decision deadlock can be an afterthought – most CEOs want to plan for success. However, spending some time thinking about how a JV partner can break a deadlock long before a deadlock occurs is a wise investment; this especially rings true in the case of a 50/50 JV where no single party will be able to make any decision, major or minor, without the agreement of its JV partner.

This article outlines some of the mechanics we have seen used in 50/50 JVs by companies in the mining industry to resolve a deadlock or to solve a dispute. While it is often the case that parties in 50/50 JVs will spend more time thinking of solutions to deadlock than those in non 50/50 JVs, the concepts described below can be applied in almost any type of JV.

Escalation to CEO

A basic dispute resolution approach calling for the dispute to be escalated to the senior management of the JV partners, who will meet for a set number of days to try and find a way forward. While it sounds good on paper, the most common outcome will be a continued deadlock and the JV partners left looking for other solutions in a JV where the relationship is increasingly becoming toxic. Senior management of each JV partner will likely need to be briefed by their local project managers before meeting with their counterparts and so will often be armed with the same arguments that have led to the deadlock in the first place.

Chairperson Tie Break

Sometimes JV agreements will give a casting vote to the chair of the managing body for the JV at the time of the dispute. While a casting vote can be useful for dealing with minor issues that the JV partners disagree about, it would not be an appropriate method to resolve a deadlock over an important project milestone, such as whether a feasibility study should be prepared for the project, or whether a development decision should be made. Such decisions go to the core of the mining project and leaving them in the hands of one JV partner would defeat the purpose behind many 50/50 JVs, except in a scenario where one of the parties has acknowledged superior operational expertise.

Mediation, Arbitration and Experts

Referring disputes to mediation and its more potent (and expensive) cousin, arbitration, is one of the most common dispute resolution mechanics found in modern mining JV agreements. While useful in some instances to possibly head off a much more divisive and expensive court date between JV partners, mediation and arbitration are much less effective (or appropriate) for resolving operational differences or deadlock over a major project decision.

Part of the problem is that the arbitral award may not be what either party expected. While in most cases arbitrators will gamely attempt to fully apply themselves to find a solution to the problem at hand, the types of decisions that lead to operational deadlock will often have complicated technical and financial underpinnings. In such situations, well intentioned arbitrators faced with a technical decision that they are not equipped to properly make, may craft a “solution” that is (unintentionally) damaging for the project and both JV partners.

An alternative to the traditional arbitration model that has begun to appear in 50/50 JV agreements, is for the JV partners to retain the services of an expert to make a binding ruling in the form of a baseball style arbitration – the expert can be chosen on the basis of the type of dispute at hand, whether technical, financial or legal in nature.

Shotgun Rights

An effective but somewhat extreme solution to operational deadlock is a “shotgun” clause. If the JV partners are deadlocked over an operational matter for an extended period of time, either partner can elect to send a buy/sell offer to its JV counterparty. Upon receipt of such an offer, the JV counterparty must either choose to buy the exercising party’s JV interest, or choose to sell its own JV interest to the exercising party (in each case at the same fair market value).

While having the significant advantage of providing a definitive end to the deadlock, the obvious major drawback with this type of approach is its finality. Once exercised, the JV has in effect failed and one party will be walking away from the project with a (likely not entirely satisfactory) amount of cash in its pocket, while the now 100% owner will have to move the project forward on its own or find a new JV partner. It may also be an undesirable solution for a participant that has limited financial wherewithal.

“Path to Production”

An alternative to the finality of the shotgun clause, the “path to production” deadlock resolution mechanic allows both parties to maintain an interest in the project, but allows one party to unilaterally move forward with its vision of the project, by funding such vision on its own. The risk to the sole funding participant is that there may be no guarantee of recouping the amounts it sole funds.

While it may be a challenge to agree on how such a mechanic would actually work (since at some point a reckoning between the sole funding partner and the free rider partner needs to happen), we have seen some creative solutions that provide for both parties to either re-engage in the project or for the sole funding partner to move forward on its own.

Care and Maintenance

The final deadlock mechanism mentioned here is not really a deadlock breaking mechanism, but rather a “time-out” for the partners and the project. Essentially in cases of certain extreme deadlock and no other contractual mechanics to deal with such deadlock, the operator of the project is authorized to stop major operations at the project and only require expenditure at such levels as needed to maintain the mineral tenure in good standing. The idea is that during such time-out, the JV partners can continue to try and reach a mutually acceptable solution to the impasse while avoiding serious expenditure and at the same time protecting the project assets.


While the mechanics described in this article will often be found in most well-constructed 50/50 JV agreements, they can be applied to almost any kind of JV as quite often major project decisions will require a unanimous or near-unanimous decision of the JV partners. Increasingly we are seeing two or even three or four of the above mechanics used in a single JV agreement, with different categories of decisions being sent down different resolution paths. While a deadlock over a major decision is akin to being stuck up the proverbial creek, sophisticated parties will use the JV agreement to give themselves the tools to make a paddle.