CHAPTER 11
Securing Government Approvals of the basic economic and business terms related to the proposed JV, they should turn their attention to the steps required to form the enterprise and launch the business. In most cases, formation cannot occur until the parties have secured approvals from government authorities in their home countries, and in any other countries where the JV expects to be conducting business. If the local government has been involved in the negotiation process, the process of approval can be eased substantially. If not, the parties can expect to expend substantial time and effort dealing with government officials. In so doing, care should be taken not to run afoul of laws such as the United States Foreign Corrupt Practices Act, which regulates gifts made to public officials for assistance in obtaining favorable treatment for commercial transactions, including the creation and operation of a JV.
WHEN THE PARTIES HAVE COMPLETED NEGOTIATION
Foreign Investment Regulations Most countries have some sort of investment law or an investment code that regulates foreign investment in their country, including investment in a JV with one or more local partners. Foreign investment laws may regulate any type of foreign investment or may be limited to investments in a specified industry sector, such as tourism, agriculture, services, or certain manufacturing areas. Foreign investment laws usually require review of the transaction by at least one, and sometimes more than one, governmental authority. GENERAL AREAS OF FOREIGN INVESTMENT REGULATION
Foreign investment laws and regulations define the local government’s policy regarding foreign participation in the local economy. Although there are a myriad of potential variations in the scope of regulation, in almost every case foreign investment laws and codes will cover the following areas: (1) restrictions on foreign investment in specified industry sectors; (2) limits on the percentage ownership by foreign investors in a project; and (3) controls and conditions. ■ RESTRICTIONS ON INVESTING IN SPECIFIED INDUSTRY SECTORS
In many cases, the foreign investment law will restrict foreign investment in one or more specified areas. At a minimum, foreign investment will be precluded in certain sectors deemed to be sensitive to national security and defense. Thus, it is common to find many countries restricting investments by foreigners in the areas of armaments or telecommunications. Even the United States, which historically has exercised little control over foreign investment activity, has adopted laws and regulations that authorize the President of the United States to review the purchase of certain United States businesses by foreign entities and, if necessary, to block the transaction, either prospectively or retroactively, for national security reasons.
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