Industry – Agriculture
Territory – China
Client – Global manufacturer of agro-tech products.
Case – The client established an Equity joint venture in China with a Chinese company, which was listed in Shanghai Stock Exchange, for manufacturing and marketing client’s agro-tech products. The partners agreed upon the following contractual obligation:
- The client provided the EJV with intellectual property, advanced production technology, specialized equipment and production lines, engineering and management expertise.
- The Chinese partner took full responsibility for the marketing, minimum level of sales (per annum) and for providing land, building and manpower.
The client entered into a dispute with the Chinese partner due to the following:
- Breach of contractual obligations related to the sales and marketing.
- Breach of the client’s IP rights.
- The Chinese partner’s forceful behavior in issues related to management and finance.
- Restrictions imposed on the client’s representatives during audits and visits to the EJV
The client failed to resolve the disputed matters and was exposed to strategic risks related to loss of trade secrets, IP, production lines and its future ability to operate independently in China.
Actions – The following actions were conducted by our experts, based on a multi-phase plan:
- Phase 1: Gathering and analyzing of competitive intelligence. Our experts acted in several jurisdictions “ China, US and Europe, gathered and examined documentary material from which we were able to identify issues related to fraudulent activities committed by the Chinese party in relations to the EJV, including misleading information and forged documents that were provided to the client.Furthermore, we discovered that the Chinese partner was involved in serious fraudulent activities that were committed before and during the listing of its shares in Shanghai Stock Exchange.
- Phase 2: Planning and strategy. The findings were presented to client’s BOD and following the client’s BOD decision to dissolve the EJV, a strategic plan that took into consideration the complexity of the legal system in China was prepared and approved by the BOD.
- Phase 3: Implementation.
An action plan was prepared and implemented as follows:
- The client’s engineers were instructed to leave the EJV with all the technical material, which caused an irrevocable, shut-down of production lines.
- Attempts by the Chinese partner to co-operate with European engineering entities in order to re-start the production, were blocked.
- Direct negotiations were conducted with the Chairman of the Chinese partner..
Outcome – The negotiations led to a settlement agreement in which the EJV was dissolved, the client’s IP and trade secrets were safeguarded and the production lines were returned to the client that continued to operate in China, independently.