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Prasenjit Chakravarti (left) and Akarshita Dhawan, Khaitan & Co
It is not uncommon for joint venture partners to face impasses on operational matters during the lifecycle of a JV. These differences could be wide ranging, from day-to-day business issues to high-level strategic decisions such as capital expenditure, business expansion, entering into a new line of business, raising of funds, changing the business plan and sale or disposal of business or assets.
Often, parties resort to arbitration in order to resolve such commercial logjams. However, is arbitration really the most efficacious remedy for resolving operational issues while preserving the value of the JV?
Arguably, disputes over legal questions qua operational issues (where neither party may necessarily be in breach of any law or terms of the agreement) warrant differential treatment.
Unfortunately, arbitration is not the most efficient remedy for successfully resolving such issues on account of the following reasons:
Alternative mechanisms to tackle operational deadlocks
There is no ‘one size fits all’ solution, and a blend of various mechanisms is often adopted to tackle deadlocks in operational matters. Some of these are set out below:
Conclusion
As is evident from the above, no straight jacket formula will perhaps suffice to resolve each operational deadlock and parties will have to carefully assess as to what may work best for them in light of the particular facts and circumstances.
However, one thing is explicitly clear, that for purely operational deadlocks, arbitration or litigation may not be the appropriate recourse and parties would be well advised to take refuge of one of the several options outlined above.
The significance of a well-defined JV agreement also cannot be overstated as an unambiguously worded agreement can go a long way to minimise the potential areas on which a deadlock may arise.
Prasenjit Chakravarti is Partner and Akarshita Dhawan is Associate at law firm Khaitan & Co. Views are personal.
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