FormTypes of joint venture
What are the key types of joint venture in your jurisdiction? Is the ‘joint venture’ recognised as a distinct legal concept?
Joint ventures in Argentina are typically implemented either by means of the incorporation of a new legal entity, usually a special purpose vehicle (corporate JV), or the entering into a collaboration agreement (contractual JV).
Corporations (SAs) and limited liability companies have historically been the most frequently used types of vehicles to set up corporate JVs. Recently, a new type of company has been created by the Entrepreneurship Law, the simplified corporation (SAS), which is likely to be perceived by investors as an even better alternative, owing to its greater flexibility and lower costs of maintenance.
There are three basic forms of contractual JVs regulated under the Argentine Civil and Commercial Code (the Code):
- temporary associations (UTs), which are agreements for the temporary association of existing business enterprises that seek to perform specific work, service or supply. The main characteristic is their transitional character, although in practice some UTs subsist for several years. For instance, UTs created to become a party of public concession agreements which may remain in place for many years (for example, 10 or 20 years);
- collaboration groupings, which are agreements for the joint organisation of existing enterprises to facilitate or develop certain stages of the business activities of its members, or to improve or increase the results of such activities. The main characteristic is that the grouping itself cannot pursue a pecuniary interest; and
- cooperative consortia, which are agreements for the joint organisation of existing enterprises to facilitate, develop, increase or conduct operations related to the activities of its members, defined or not at the time of its formation, so as to improve or increase its results. The main characteristic is its possibility of pursuing a pecuniary interest, its perdurability and its ability to expand the scope of business to third parties alien to the agreement, even allowing activities that may not be determined at the time of its creation.
As opposed to corporate JVs, contractual JVs do not have a separate legal personality.Common sectors
In what sectors are joint ventures most commonly used in your jurisdiction?
Joint ventures could theoretically be used in every market, although certain restrictions may apply to specific forms of joint venture in regulated industries.
The use of corporate JVs is widely spread. The use of contractual JVs is usually more limited, with UTs being the most frequently used. UTs are commonly used in construction and oil and gas projects or other special projects, including those related to public bidding processes for government procurement.
PartiesRules for foreign parties
Are there rules that relate specifically to foreign joint venture parties?
Foreign companies participating in a corporate or contractual JV must previously register with the appropriate local public registry as shareholders of domestic companies or Argentine branches, respectively, and before the relevant Argentine tax authorities.
Restrictions may apply to the participation of foreign investors in certain industries or under certain special laws.Ultimate beneficial ownership
What requirements are there to disclose the ultimate beneficial ownership of a joint venture entity?
Joint ventures set up within the jurisdiction of the city of Buenos Aires must, at the time of initial registration and annually thereafter, file an affidavit with the public registry informing of the existence or not of ‘ultimate beneficiary owners’, defined as those individuals who, directly or indirectly, own at least 20 per cent of the share capital or voting rights of an entity or are otherwise able to control such entity or legal structure. Other jurisdictions within the country may have similar requirements, and banks and other third parties may also require similar information.
Setting up and operating a joint ventureStructure
Are there any particular drivers in your jurisdiction that will determine how a joint venture is structured?
The choice of the most convenient structure will depend on the objectives of the association, including the parties’ expectations as regards its duration, limitation to a certain project, contributions to be made, and policy for profit distribution, among others.
If the joint venture will operate in regulated industries, there could be limitations as to how the joint venture can be structured.
Also, the decision on whether to operate as a contractual or corporate JV may be driven by tax considerations (see question 6).Tax considerations
When establishing a joint venture, what tax considerations arise for the joint venture parties and the joint venture entity? How can tax charges be lawfully mitigated?
Corporate JVs are subject to the general tax regime, as with any other local entity.
Contractual JVs are considered for income tax purposes as transparent entities, and, therefore, any result (profit or loss) shall be directly allocated to its members. However, regarding value added tax (VAT) and turnover tax, contractual JVs are deemed as taxpayers and, to such extent, should be registered before the relevant tax authorities and pay taxes. In addition, the Tax Procedural Law sets forth that the members shall be severally and jointly liable for the tax liabilities of the contractual JV.
Depending on the type of business to be conducted through the joint venture, for tax efficiency purposes it may be convenient to set up one structure or the other.Asset contribution restriction
Are there any restrictions on the contribution of assets to a joint venture entity?
Corporate JVs may receive capital contributions in cash or in kind. Capital contributions in the form of real estate, equipment or other non-monetary assets must be fully contributed at the time of subscription and will be subject to certain valuation rules. In principle, capital contributions cannot consist of services. The contribution in cash does not trigger income tax or VAT for the shareholders, while the contribution of assets may.
The Code does not contain special provisions as regards contributions to contractual JVs. Collaboration agreements are generally required to detail the contributions that each member will make to the operational fund. As regards recordable assets, it is common practice for the parties to contribute a right of use and exploitation of the assets owned by themselves, instead of property rights. Controversy exists on whether granting a right to use movable assets and services to contractual JVs would be subject to VAT. In the case of services, it is generally understood that participants shall charge the services performed with VAT.Interaction between constitution and agreement
What is the interaction between the constitution of the joint venture entity and the agreement between the joint venture parties?
Corporate JVs must register their articles of incorporation and by-laws with the appropriate local public registry. Agreements creating contractual JVs must also be registered with such registry. As a consequence of these registrations, the foregoing documents will become enforceable not only between the parties of the joint venture and, in the case of corporate JVs, the company itself, but also regarding third parties.
It is common practice that complementary agreements ruling certain rights of the joint venture parties be separately implemented. Such complementary agreements will, in principle, only be binding between its signatories. Because of this, it is usual that the parties decide to reflect at least some of these key provisions in the constitution documents. If the intention of the parties is that the complementary agreement should prevail, such rule should be expressly provided.Party interaction
How may the joint venture parties interact with the joint venture entity? Are there any restrictions?
The corporate JV is a separate entity and thus its shareholders, as a general rule, limit their liability to their capital contributions.
Corporate JVs adopt decisions through shareholders’ or board meetings depending on the nature of the decision. To ensure that the best interests of the company are prioritised, the Argentine General Companies Law (AGCL) provides that directors and shareholders should abstain from participating in any decision in respect of which they have a contrary interest (see question 11).
Also, directors are required to render accounts to the shareholders by submitting annual financial statements for their consideration.
In addition, the AGCL provides a generic right for shareholders to access information and supporting documentation or to request reports from the management or supervisory bodies. The foregoing is subject to certain restrictions, with different rules applying to the different company types and larger restrictions applying for companies with statutory supervisors.
Moreover, the AGCL provides certain cases in which the shareholders may sue directors for breach of their fiduciary duties.
It is worth bearing in mind that shareholders are entitled by law to revoke the appointment of directors with or without cause at any time.
Contractual JVs do not have a separate legal personality; consequently, they cannot, in principle, be sued. The Code sets forth different rules as regards the extent of the liability of the members of each collaboration agreement. While in some cases the general rule is the joint liability of the members, in others the opposite rule is provided.
Decisions of a contractual JV are generally adopted by its members.
The members must appoint representatives who are generally conceived as attorneys-in-fact subject to mandate rules. Attorneys-in-fact have certain duties to provide information and documentation to their grantors and to render accounts. Also, in the case of a conflict between their own interests and that of the grantors, they must privilege that of the grantors.
Financials should be prepared for the joint venture parties’ consideration.
Also, all collaboration agreements seem to permit revocation of the representatives with or without cause, although in some cases unanimity is required.Exercising control
How may the joint venture parties exercise control over the joint venture entity’s decision-making?
The AGCL contains certain rules aimed at providing protection to minority shareholders. Among others, regarding SAs, the AGCL sets forth a mechanism pursuant to which shareholders may vote their shares cumulatively in order to try to secure certain positions in the board and a right to demand acquisition of their shares if certain relevant decisions are adopted despite their negative vote (right to withdraw).
However, if the minority shareholder desires to secure a certain level of control over the company’s decision-making, it should enter into an agreement with the majority shareholder to obtain, among other things, a certain number of positions on the board and special majorities to pass resolutions regarding certain matters; while the AGCL provides different quorum and majority requirements, some (although not all) may be aggravated. In general, minority shareholders will be interested in reflecting agreements in the constitution documents so that these become enforceable with regards to the company and, upon registration, third parties.
Since contractual JVs do not have a separate legal personality, decisions are generally adopted by their members. While the Code provides certain rules as regards the majorities that decisions should meet, it is generally possible to aggravate the same by requiring the affirmative vote of more members. Also, the members can freely agree on the manner in which the representatives will be appointed. As in the case of corporate JVs, provisions included in the constitution documents - as opposed to those in unregistered complementary agreements - will become enforceable regarding third parties upon registration.Governance issues
What are the most common governance issues that arise in connection with joint ventures? How are these dealt with?
One of the main concerns is avoiding conflicts of interest. In the case of corporate JVs, the AGCL provides that directors must act loyally and as good business people. Also, as regards conflicts of interest, it provides that directors should abstain from participating in the deliberations of the board as regards matters in which they may have a contrary interest. Failure to comply with these standards will make the director unlimitedly and jointly liable towards the entity, the shareholders and third parties for any losses resulting therefrom.
Shareholders having a conflict of interest are also required to abstain from voting in any decision regarding which they have a contrary interest. Otherwise, they shall become liable for any losses resulting therefrom if their vote was determinant.
The Code does not provide specific rules as regards conflicts of interest in contractual JVs. However, since the representatives are generally conceived as attorneys-in-fact subject to the mandate rules of the Code, the rules explained in question 9 will apply.
In addition, there are other rules under the Code that could arguably provide grounds on which to question certain actions or omissions of the members or representatives (such as the general principles providing that rights cannot be exercised abusively and that no person has a right to cause damages to another person, among others).
Guaranteeing access to information in favour of the joint venture parties is another common governance issue (see question 9).Nominee directors
With an incorporated joint venture, what controls exist in your jurisdiction in relation to nominee directors? How should a nominee director balance the potentially conflicting interests of the joint venture company and the appointing shareholder?
See question 11.Competition law
What competition law considerations are engaged by the formation and operation of the joint venture? Is approval needed?
The Antitrust Law does not explicitly regulate joint ventures; however, they are subject to the same regulations as other economic concentrations.
Full-function joint ventures are deemed to be an economic concentration, subject to mandatory notification if the applicable thresholds are met and no exemption applies. Full-function joint ventures have to notify if the acquiring group (parent companies) and the target surpass a combined turnover of 100 million adjustable units (equivalent to US$45 million at the time of writing; because of the volatility of the Argentine peso, it is strongly recommended to use Argentine peso when possible and further verify the exchange rate at the moment of carrying out the analysis) in the previous fiscal year in Argentina. The first landing and de minimis exemptions (among others set out in the Antitrust Law) can be applied for.
According to the Antitrust Authority’s case law, non-full function joint ventures - defined as joint ventures that do not constitute an autonomous economic entity in the market - are exempt from notifying for approval.
The new Antitrust Law sets up a pre-closing system where notifying parties are unable to close a transaction without the Antitrust Authority’s prior approval. This is estimated to become operational in late 2020/early 2021, subject to the constitution of the new Antitrust Authority. It should be noted that under the current post-closing regime, joint ventures can file before or up to one week after closing; therefore, approval is not required in order to close.Provision of services
What are the key considerations in your jurisdiction in structuring the provision of services to the joint venture entity by joint venture parties?
As mentioned in question 7, in principle, capital contributions to corporate JVs cannot consist of the provision of services. Thus, any service agreement between the shareholders and the company will need to be separately implemented for consideration.
On the contrary, there are no specific rules banning members from contributing services to a contractual JV.
Some of the issues more heavily discussed in connection with services agreements in Argentina include the currency applicable to payments, place of payment (see the comment regarding recently re-enacted foreign exchange control regulations in question 18), price adjustments in the case of increased costs, term and causes of termination, liability of the parties and indemnification provisions, among others.
In any case, the manner in which any services could be contributed or implemented and the terms thereof should be analysed on a case-by-case basis.Employment rights
What impact do statutory employment rights have in joint ventures?
The Argentine Labour Law contemplates the ‘transfer of establishment’ pursuant to which, upon transfer of an autonomous business unit (it being the whole company or an independent line of business or business unit), employment contracts shall continue with the transferee, who shall honour employees’ prior labour conditions and acquired rights, including, but not limited to, years of service, compensation, benefits and responsibilities of the transferred employees. This type of transfer does not require the transferred employees’ consent, but they may, however, consider themselves constructively dismissed if they are adversely affected by the transfer. Transferors and transferees are jointly and severally liable for labour obligations existing at the time of the transfer. Thus, if employees are transferred to a corporate JV in the context of a transfer of establishment, employees would be transferred by operation of law with no further consent being required.
If the transfer does not qualify as that of an autonomous business unit, employees would not be transferred by operation of law and it would be necessary to resort to the individual employee transfer regulations, which are mostly similar to that described above in terms of requirement to honour prior conditions and joint liability. The main difference is that, in this case, prior written consent would be required.
As regards contractual JVs, despite the fact that labour judges have understood that these joint ventures do not have a separate legal personality and, consequently, cannot hire employees, administrative labour and tax authorities have accepted them as employers. When the contractual JV appears as the employer, its members will, as a general rule, be liable for any labour dispute that may arise. The extension of their liability should be analysed on a case-by-case basis.Intellectual property rights
How are intellectual property rights generally dealt with on the creation, operation and termination of a joint venture in your jurisdiction?
There is no specific regulation in connection with intellectual property rights (IPRs) and joint ventures, so general intellectual property laws and principles will apply.
Upon formation of a corporate JV, the parties could either transfer or license relevant IPRs to the joint venture. In doing so, they should be careful to adopt a structure that reflects their intention as to the ownership, management and licensing of IPRs. They should also consider the tax consequences of any IPR transfer or license.
Parties may choose to address any newly developed IPRs in different ways. For instance, corporate JVs could retain ownership of such newly created IP, and license it to the parties. Parties should also carefully determine how IPRs are treated upon termination of the joint venture. For example, one party could retain ownership of any IPRs and grant the other party a worldwide, perpetual, sublicensable and free licence to use such IPRs, or both parties could agree on joint ownership of any rights (such joint ownership will be subject to any regulations or limitations regarding specific IPRs).
In the case of contractual JVs, the parties could choose to regulate IPRs in the joint venture contract or through a separate agreement. It is important for any provisions regulating IPRs to be clear as to the management and ownership of IPRs, as well as to foresee what will occur to any IPRs upon termination of the joint venture. In particular, it is important to consider that IPRs in the context of a contractual JV may result in the creation of jointly owned IPRs.
Funding the joint ventureTypical funding
How are joint ventures generally funded in your jurisdiction? Are there any particular requirements relating to funding and security packages?
The funding of joint ventures can be generally accomplished either by contributions (capital contributions in the case of corporate JVs and contributions to the operating fund in the case of contractual JVs) or through financing.
The constitution document of the contractual JV shall include provisions related to the way in which the joint venture activities will be funded.
The AGCL requires some corporate JVs to have a minimum capital. In the case of contractual JVs, there is no minimum capital required.
If a corporate JV is funded through capital contributions, the following should be considered from a tax perspective:
- capital contributions in cash will not be subject to income tax;
- capital contributions in kind could be subject to income tax and, in particular, contributions of movable assets could also trigger VAT. However, should there be a tax credit related to VAT, such credit may be used by the corporate JV in the future prior registration as a VAT taxpayer;
- the net worth of the corporate JV and consequently the tax basis of personal assets tax (0.25 per cent of the net worth) will be increased; and
- any voluntary capital reduction may trigger a dividend distribution, which will be subject to a withholding tax of 7 per cent (or 13 per cent, depending on the fiscal year from which the profit derived).
If a corporate JV is funded through financing, the following should be considered:
- pursuant to thin capitalisation rules, interest and negative currency exchange differences in the principal arising from financial debts with related parties (either resident or not) would be deductible up to the annual amount to be established by the government (not yet regulated) or up to the equivalent of 30 per cent of the net income corresponding to the fiscal year prior to deducting the interest, whichever is the highest;
- transfer pricing regulations will apply to intercompany loans with related non-resident lenders;
- interest payments may be subject to withholding tax (see question 19); and
- stamp tax may be applicable to the instrumentation of loans.
Regarding contractual JVs, as they are not income taxpayers, most tax aspects should be analysed in respect of the impact on the members (eg, the income tax should be borne by these companies including the income obtained in their own annual corporate income tax returns).
The setting up of security packages will be subject to different requirements depending on the type of security being granted. Security packages usually include collateral from the shareholders or members and may include, for example, the assignment to creditor of the proceeds of the business of the joint venture as collateral.Capital injection restrictions
Are there any legal or regulatory restrictions on the injection of capital into, or the distribution of profits or the extraction of cash by other means from, the joint venture entity?
On 1 September 2019, Decree No. 609/2019 of the Argentine Executive Branch was published in the Official Gazette, which, among other measures, established the obligation of Argentine residents to transfer to Argentina and sell in the Argentine Foreign Exchange Market the foreign currency proceeds from their exports of goods and services, and authorised the Argentine Central Bank (BCRA) to regulate the cases that will require its prior approval to purchase foreign currency with pesos in the FX market and transfer it abroad. Pursuant to the Decree, effective from the date thereof, the measures implemented therein are ‘transitory’ up to 31 December 2019.
On that same date, the BCRA issued Communication A 6770, which implemented the measures adopted by the Argentine Executive Branch, establishing certain specific regulatory requirements. The Communication, effective from 1 September 2019 until 31 December 2019, has limited the ability of both Argentine and non-Argentine residents to purchase foreign currency with pesos in the FX market and transfer it abroad. Currently, prior approval by the BCRA will be required to access the FX market to pay profits and dividends abroad, and legal entities must request the prior approval of the BCRA to purchase foreign currency in the FX market for investment purposes. Lastly, prior approval by the BCRA will be required for non-Argentine residents to purchase foreign currency in excess of US$1,000 per month in the aggregate of institutions authorised to operate in foreign exchanges.Tax considerations
What tax considerations should be taken into account in the operation of the joint venture?
As explained in question 6, for income tax purposes, a contractual JV is considered a transparent entity, and, therefore, any result shall be directly allocated to its members and subject to the tax rate applicable to such member.
If the joint venture is a corporate JV, the total tax burden of corporate income is, theoretically, about 35 per cent, with a two-stage partial integration tax scheme:
- the company is taxed at a rate of 30 per cent (applicable to the first and second fiscal years initiated as from 1 January 2019) and 25 per cent (applicable to the third and subsequent fiscal years thereafter); and
- the shareholder or owner - individual or non-Argentine resident - is taxed at a rate of 7 or 13 per cent, depending on the fiscal period from which the distributed profit derived. Likewise, the 7 per cent tax rate will be applicable to the dividends or distributed profits arising from income derived from fiscal years taxed on a corporate level at 30 per cent, while this increases to 13 per cent when the dividends or distributed profits derive from fiscal years taxed on a corporate level at 25 per cent.
Interest payments by an Argentine company to a creditor that is not an Argentine resident would be subject to Argentine withholding tax at a rate of:
- about 12 per cent, in most cases, if the creditor is a resident of a country that has signed a tax treaty for the avoidance of double taxation with Argentina;
- 15.05 per cent if the lender is a banking or financial institution that is under the supervision of the relevant central bank or equivalent authority located in a jurisdiction that is not considered a low-tax jurisdiction or in a jurisdiction that is party to an exchange of information treaty with Argentina and, as a result of the application of its internal regulations, cannot refuse to disclose information to Argentine authorities on the basis of bank or stock secrecy rules;
- 15.05 per cent on financing interest in connection with imports of fixed assets, excluding automobiles, granted by the suppliers; or
- 35 per cent otherwise.
Argentine transfer pricing rules would apply to transactions between related parties.Accounting and reporting issues
Are there any noteworthy accounting or reporting issues for the joint venture parties regarding their investment in the joint venture?
Joint ventures must carry accounting books and are subject to several reporting duties established in local legislation.
To name one specific reporting rule, according to General Resolution 3573, the legal representative of a contractual JV must inform the Argentine tax authority of the execution, amendment or dissolution of any collaboration agreement within 10 days of the registration of the agreement with the public registry, or its execution date should no registration be required. In addition, the legal representative shall file the contractual JV’s financial statements or accounting reports.
Deadlock, exit and terminationDeadlock provisions
What deadlock provisions are commonly included in joint venture agreements in your jurisdiction?
Deadlock provisions usually include different forms of call and put options, the right to terminate the joint venture, or the submission of the matter to a third-party expert or to arbitration.
It is worth noting that the Code provides that options may not be granted for more than one year. Since the Code was only recently implemented, it is still uncertain whether courts will construe this as a mandatory rule, which is non-waivable. Alternatively, agreements could include a buy-sell procedure that, while having the same effects, could arguably be construed as not being subject to the foregoing limitation.
In the case of contractual JVs, call and put options must adopt less traditional forms since there are technically no shares to be acquired or sold. On the contrary, what the members may transfer is their contractual position in the joint venture.
It is also worth noting that the Code grants certain powers to the legal representative or co-administrators of the companies in the case of deadlock situations, which, in some cases, the shareholders of corporate JVs may want to limit.
The AGCL also provides a right of withdrawal to the shareholders of corporate JVs (see question 10).
Deadlock solutions may be reflected in the constitution documents or by separate agreement (see question 8 for the interaction between these documents).
When analysing the incorporation of specific deadlock provisions to a certain joint venture, it is important to take into consideration its potential effects. For instance, if the joint venture has been set up to perform certain work adjudged by means of a public bidding, it would be critical to ensure that solutions do not conflict with the terms of the public bidding.Exit provisions
What exit provisions are commonly included? Does the law restrict any forms of mandatory transfer provision or any basis of calculation?
Exit provisions usually include call and put options, tag- and drag-along rights and rights to request termination of the joint venture, among others (see question 21 for certain comments that also apply to exit provisions).
It is understood that mandatory transfer provisions agreed between sophisticated parties should not be questioned, although some debate exists as regards the validity of these clauses considering that they will require that one party be forced to relinquish its investment.
As regards the basis of calculation, apart from the provisions of the AGCL regarding the price to be paid to shareholders of a corporate JV exercising the right of withdrawal, there are no specific rules as regards the consideration to be paid. Therefore, in principle, the basis of calculation can be agreed by the parties, with certain limitations. In this sense, the AGCL provides that provisions entitling one party to acquire another party’s interest in a certain joint venture for a price that does not reflect the actual value at the time of the acquisition shall be null and void. Likewise, the Code grants certain rights to the party of an agreement that has assumed an obligation that has become excessively onerous with the passing of time.
The Argentine Bankruptcy Law does not specifically refer to compulsory transfers of shares by the shareholders of a company undergoing a bankruptcy proceeding. As a general rule, shareholders can sell their shares in a company even if it is undergoing a bankruptcy procedure.
If the sale is, however, somehow made in detriment to creditors, it would become an ineffective act (which requires proof) by means of a bankruptcy ‘revocation’ action. If it is a donation, for example, it is ineffective in its own right and the court usually declares it as such.
Moreover, if a shareholder exercises the right to withdraw at the time the insolvency status of the company began, that shareholder must reimburse the amount they received from the company.Tax considerations following termination
What are the tax considerations on termination of the joint venture?
Upon termination of a corporate JV, if the company dissolves and winds up, any asset to be transferred to the shareholders could trigger VAT and income tax for the price difference between the tax cost and the fair market value of the involved assets.
As a general rule, the termination of a contractual JV could trigger taxes if assets other than cash are transferred to the members. Also, withholding tax of 7 or 13 per cent, as the case may be, may apply if winding-up dividends are approved.
DisputesChoice 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?
Argentine law generally allows parties to choose the law that will govern their agreements as long as some connection to the system of law that is selected exists, although certain matters shall be governed exclusively by local law. Therefore, members of a contractual JV would, in principle, be permitted to choose the law that will govern their collaboration agreement. The same rule would apply to complementary agreements of both corporate and contractual JVs. Constitution documents of a corporate JV, however, must be governed by Argentine law.
Argentine law also acknowledges that parties to a contract may select a jurisdiction other than Argentina for the settlement of their disputes, provided that the matter is of an international nature and relates to pecuniary rights. However, Argentine courts retain their exclusive jurisdiction over certain types of dispute, such as insolvency proceedings relating to debtors domiciled in Argentina or whose principal place of business is in Argentina. As to the dispute resolution method, both litigation and arbitration are generally permitted in joint venture agreements. Therefore, provided that the above requirements are met, members of a contractual JV would, in principle, be permitted to select a jurisdiction other than Argentina or to arbitration. The same rule would apply to complementary agreements of both corporate and contractual JVs. With regards to the constitution documents of corporate JVs, it is generally accepted that by-laws may provide that disputes should be submitted to arbitration, although it is controversial whether this could be seated in a foreign jurisdiction.
It is worth noting that the possibility of setting different laws or methods of dispute resolution in the constitution and complementary agreements should be carefully reviewed since it may be inconvenient from a practical perspective (eg, leading to contradictory interpretations of the rights of the parties and to discussions as to which would be the competent tribunal for dispute resolutions) .
In the case of joint ventures aimed at participating in public projects (known as consortia) involving foreign investors, resorting to investment arbitration may also be an available method of dispute resolution on the basis of a bilateral investment treaty.
If the JV will operate in regulated industries or apply to a certain public bidding process, it will be important to review the above in light of specific applicable regulations or bidding rules.Mandatorily applicable local law
What mandatory provisions of local law will apply irrespective of the choice of governing law?
In Argentina, the selection of foreign law will only be valid to the extent that it is was not agreed in order to evade the application of any mandatory rules contained in the Argentine laws that would apply in the absence of a choice-of-law provision. Typical public policy laws that may be relevant to consider in joint venture agreements include criminal, tax, labour and bankruptcy laws, as well as certain corporate and contractual rules. Similarly, the Code requires that the law selected by the parties does not breach Argentine public policy or international mandatory rules of those states that may have a strong connection with the case.Remedy restrictions
Are there any restrictions on the remedies a tribunal can grant that would have a bearing on the arbitration of joint venture disputes? Are there any restrictions on the arbitration of shareholder claims?
Under the Argentine legal system, arbitrators can resolve the dispute under their jurisdiction and grant orders or preliminary measures (iudicium) but lack the power to enforce their decisions by force (imperium). The parties or the arbitrators themselves must therefore resort to the state courts to coerce the parties to comply with the arbitral tribunal’s decisions, such as attachment of assets ordered by the arbitrators. In principle, there are no restrictions as to the arbitration of shareholders’ or members’ claims.Minority investor protection
Are there any statutory protections for minority investors that would apply to joint ventures?
See question 10.Liabilities
How can joint venture parties have liabilities to each other beyond what is expressly agreed in the joint venture agreement?
As a general rule, the shareholders of a corporate JV limit their liability to their capital contributions. Also, the Code sets forth different rules regarding the extent of the liability of the joint venture members for each collaboration agreement.
The joint venture parties may, however, have liabilities beyond the foregoing and any specific provision agreed by the joint venture parties in certain cases, such as when the rights of users and consumers are involved in the dispute or in the case a court understands that there are sufficient grounds to pierce the corporate veil - in the case of corporate JVs. In these cases, liabilities may be extended to the right of compensation on behalf of the parties.Disclosure of evidence
Are there any particular issues that can arise in joint venture disputes in your jurisdiction concerning disclosure of evidence?
There are no particular issues regarding the disclosure of evidence in joint venture disputes. However, it should be noted that, in accordance with the Argentine legal system, the evidence is produced within the process, as there is not a pretrial discovery stage. Likewise, evidence is revealed within the process and incorporated to the file, becoming a key tool for the judge to support the decision.
Market overviewJurisdictional advantages
What advantages does your jurisdiction offer for parties wishing to set up and operate joint ventures?
The Argentine legal framework provides investors with a great variety of instruments through which joint venture businesses could be implemented. This allows for the implementation of tailor-made structures that meet the needs of the joint venture parties and the project they seek to carry out.
Also, since the current administration took office, many regulations have been adopted that aim at attracting investments, reducing bureaucracy and simplifying administrative procedures, including the registration procedures required to initiate operations in Argentina (see ‘Update and trends’).Requirements and restrictions
Are there any particular requirements or restrictions relating to joint ventures in your jurisdiction that could deter international investors?
Each project should be analysed on a case-by-case basis to determine its viability under applicable laws. However, at the current time, recently restored foreign exchange restrictions can represent a challenge for certain investment structures. Having said that, we are currently providing advice to a client in the setting up of a 50/50 corporate JV who has decided to move forward with the investment in spite of recent regulations.
Updates & TrendsKey developments of the past year
What are the current trends affecting joint ventures in your jurisdiction? What recent developments in legislation and case law have had an impact on joint ventures?Key developments of the past year32 What are the current trends affecting joint ventures in your jurisdiction? What recent developments in legislation and case law have had an impact on joint ventures?
In 2019, the administration has successfully implemented certain prior legislative efforts aimed at reducing bureaucracy and simplifying administrative filings, as well as providing certain simplified investment vehicles, such as the SAS, which has been well received by the market.
It has also promoted certain investment-friendly benefits such as the enactment of a new promotional regime for the import of capital goods used in the oil and gas sector and of certain regulations pursuant to which taxpayers could request a refund of VAT credits originated in the acquisition of capital assets under certain circumstances.
Despite the above, 2019 has been a challenging year for the country from a macro economic perspective. The political context has not been steady, either: the results of the primary elections held in August suggest that the opposition party, Frente de Todos, may return to power in the general elections of October.
The markets’ reaction to the political news created additional volatility that led the administration to reinstate the already referred to foreign exchange restrictions.