Joint ventures look simple on paper. Two companies agree to do something together. Share the work, share the rewards, share the risk. Then it goes wrong, and you discover that the agreement you signed does not actually protect you the way you assumed it did.

In the GCC, this happens more often than it should. Joint ventures across the Gulf are routinely drafted on templates that were not built for the local legal environment. Clauses that work in London or New York get imported wholesale into agreements that will be performed in Saudi Arabia, the UAE, or Qatar, where they may not be enforceable at all.

If you are entering a joint venture anywhere in the GCC, here are the ten clauses you should fight for. Get these right and most disputes either never happen or resolve cleanly. Get them wrong and you may find yourself trapped in a venture you cannot exit, governing a business you cannot control, with a partner you can no longer work with.

1. Purpose and scope

The most fundamental clause, and the one drafted most carelessly. The purpose clause defines what the joint venture is for. The scope clause defines what activities it can undertake.

Why this matters: in a GCC context, a vaguely drafted scope is an invitation for one partner to push the venture into areas the other did not agree to. New markets, new product lines, related-but-different services. If your scope says “general commercial activities” you have effectively given your partner permission to drag you anywhere.

What to insist on: a narrow, specific scope. List the products, services, geographies, and customer types the JV will pursue. Anything outside that requires unanimous shareholder approval. This single clause prevents more disputes than any other.

2. Contributions and capital structure

What is each partner putting in. Cash, assets, intellectual property, customer relationships, employees, premises. And how is each contribution valued.

The trap: contributions that are easy to value (cash) get assigned proper value. Contributions that are harder to value (a customer list, a brand, technical know-how) get assigned vague language. Then the contributing party finds out years later that their non-cash contribution was worth a fraction of what the other partner’s cash was worth.

What to insist on: every contribution gets a specific value in the agreement, with a methodology for any contingent or earn-out elements. Where IP is being contributed, the agreement must specify whether it is being transferred, licensed, or used under permission, and what happens to it on exit.

3. Governance and decision-making

Who decides what, and by what majority. In a 50/50 JV, this is where most disputes start.

The standard structure: a board with equal representation, day-to-day operations run by a CEO appointed by one side, major decisions (called reserved matters) requiring unanimous or supermajority approval. Reserved matters typically include things like incurring debt, hiring senior executives, changing the business plan, related-party transactions, and disposing of significant assets.

The mistake people make: defining reserved matters too narrowly. If your reserved matters list is short, the operational partner can effectively run the business however they want and your minority protections are an illusion. If it is too broad, the JV becomes paralysed because every minor decision requires both sides to agree.

The right balance depends on the deal, but as a rule of thumb, anything that materially affects valuation, cash flow, or strategic direction should be a reserved matter.

4. Deadlock resolution

What happens when the partners cannot agree on a reserved matter. This is the clause everyone hopes they will not need and most agreements get wrong.

The common mechanisms:

• Escalation: the issue goes to senior executives of both partners for negotiation. Useful as a first step. Rarely resolves anything serious.
• Mediation: an independent third party helps the partners negotiate. Worth trying.
• Shotgun clause: one partner offers to buy the other out at a stated price; the other can either accept or buy the first partner out at the same price. Encourages fair pricing but only works when both partners have similar financial capacity.
• Russian roulette: variants of the shotgun with auction elements.
• Casting vote: one side gets to break the deadlock on certain matters. Heavily skews control toward that side.
• Sale of the business: if deadlock cannot be resolved, the JV is sold to a third party.

Important point for the GCC: shotgun clauses and Russian roulette mechanisms are not always enforceable in onshore UAE or Saudi courts. They are generally enforceable in DIFC and ADGM, which is one reason many sophisticated JVs use those jurisdictions as their governing law and forum.

What to insist on: a deadlock clause that actually fits the relative size and financial capacity of the partners, drafted with regard to where it will be enforced.

5. Exit rights

How and when can each partner leave. This is the second-most-litigated area of joint ventures after deadlock.

The basic categories of exit:

• Voluntary exit after a lock-in period. The partners agree they cannot exit for some number of years (typically 3 to 5), after which they can sell their interest, usually subject to first refusal rights for the other partner.
• Forced exit for cause. If a partner materially breaches the agreement or becomes insolvent, the other can buy them out, often at a discount to fair market value.
• Exit on change of control. If a partner is acquired by a third party, especially a competitor, the other partner has the right to exit or to require the new owner to exit.
• Exit on deadlock. Linked to the deadlock clause above.

What to insist on: clear triggers for each type of exit, a defensible valuation methodology, and a realistic timetable. Vague exit clauses are how partners get trapped.

A specific GCC point: in Saudi limited liability companies, share transfer provisions raise enforceability issues under Sharia principles. Many sophisticated parties solve this by holding their JV interests through an offshore vehicle in a common law jurisdiction (DIFC, ADGM, or sometimes BVI) so that share transfer clauses are enforceable in a familiar forum.

6. Restrictive covenants

What can each partner do outside the JV. Can they compete? Can they hire each other’s staff? Can they pursue similar opportunities directly?

The standard provisions: non-compete (the partners agree not to operate competing businesses in the same field for the duration of the JV plus some tail period), non-solicitation of employees, and non-circumvention (one partner cannot go directly to the JV’s customers or suppliers for personal benefit).

The GCC reality: non-compete clauses are scrutinised by UAE courts, which generally enforce them only if they are reasonable in scope, geography, and duration. A global, permanent non-compete is unlikely to be enforced. A two-year non-compete in the specific market the JV operates in is much more likely to hold up.

7. Confidentiality and intellectual property

Two distinct issues bundled together because they often overlap.

Confidentiality protects business information shared during the JV. Important provisions include: what information is confidential, who can access it, how it must be stored, what survives termination, and what the remedy is for breach.

IP is harder. The agreement must address: IP each partner owns before the JV (background IP), IP created during the JV (foreground IP), and IP that is improvements or derivatives. Who owns each category, and what rights does each partner have to use it during and after the JV.

A common mistake: assuming that “the JV owns everything created” is a clean solution. It is not. If one partner contributed valuable technology that gets blended with JV-developed improvements, separating ownership at exit can be impossible. Draft carefully.

8. Funding and follow-on capital

JVs almost always need more capital than initially expected. The agreement must address:

• How follow-on funding decisions are made (this should be a reserved matter)
• What happens if one partner can fund and the other cannot (anti-dilution, drag-down mechanisms, loans from the funding partner)
• Whether there are funding commitments and what happens if a partner fails to meet them

Without clear funding provisions, a JV that needs more capital can deadlock at exactly the worst time, when the business needs investment to survive.

9. Dispute resolution

This is not just one clause; it is a strategic decision that affects every other clause in the agreement.

The choices:

• Governing law: which legal system governs the agreement. Common law (English, DIFC, ADGM) offers more sophisticated tools and predictable outcomes. UAE federal law or Saudi law applies if the JV is operating there and certain matters must be governed by local law.
• Forum: where disputes are heard. Arbitration is the strong default for GCC joint ventures, typically administered by DIAC, ADCCAC, ICC, or LCIA. Arbitration offers confidentiality, choice of arbitrators, and easier enforcement under the New York Convention. Litigation in local courts is sometimes preferred for specific local issues but rarely for the main JV agreement.
• Seat of arbitration: the legal home of the arbitration. DIFC and ADGM are popular seats for GCC-related disputes because of their pro-arbitration courts. London, Paris, and Singapore are also common.
• Multi-tier mechanisms: many GCC joint ventures use a negotiation, then mediation, then arbitration sequence. Useful, but the timelines must be realistic. A vague “the parties shall negotiate in good faith for a reasonable period” clause creates more disputes than it solves.

Pick the dispute resolution structure deliberately, not by copying from a template. It is the clause you will care about most if the JV goes wrong.

10. Termination and post-termination

How does the JV end. What happens to assets, liabilities, employees, customer relationships, and IP after termination.

Termination triggers should include: completion of the project or term, material breach, insolvency, change of control, regulatory impossibility, prolonged deadlock, and mutual agreement.

Post-termination provisions need to address: who keeps the JV’s name and brand, who keeps the customer relationships, how shared IP is divided, what continuing obligations exist (confidentiality, non-compete, indemnities), and how outstanding liabilities are allocated.

Many JV agreements end on a vague “the parties shall agree on wind-down procedures.” This is a recipe for disputes. Specify in advance.

A note on legal structure

Whether the JV is structured as a separate legal entity (an incorporated JV) or as a contractual relationship between the partners (an unincorporated JV) significantly affects how the above clauses operate.

Incorporated JVs (companies) work well for long-term partnerships, businesses with their own brand and staff, and ventures that need a clean balance sheet. They require shareholders agreements alongside the JV agreement.

Unincorporated JVs (contractual cooperation, sometimes called consortium agreements) work well for project-specific ventures: construction projects, oil and gas joint operating agreements, large bid consortia. They are common across the GCC because they avoid the formalities of incorporation while allowing parties to combine for a specific purpose.

Different structures, different clauses, different risks. The starting point is being clear about which one fits your venture.

The bottom line

A good joint venture agreement does two things. It governs the relationship while the partners are working well together, and it provides clean exits and dispute resolution when they are not. Most agreements focus on the first and ignore the second, which is exactly backwards. The clauses you draft for the happy times are usually fine. The clauses for the difficult times are where deals are won or lost.

If you are entering a JV in the GCC, get the agreement reviewed by someone who has worked on these deals locally. Templates from London or New York will not survive contact with UAE or Saudi reality.

GLAS advises clients on joint ventures, M&A, and commercial transactions across the GCC, Middle East, and Latin America. Our principal is licensed by the District of Columbia Court of Appeals to advise on Dubai law, with country partners across the region. If you are negotiating a joint venture and want a legal view before you sign, get in touch.

Contact Details:
Call: +1 (202) 669-7464
Email: info@glasvc.com