The JSBA will typically appoint one of the consortium members to act as the operator for the purposes of the JSBA, including applying provisions for invoicing the parties for their respective shares of the costs of performing the JSBA and giving those parties rights of audit in respect of those costs, and limiting the liability of the party selected to act as the operator for acting as such.
The JSBA might also recite mutual confidentiality undertakings between the parties where they have agreed to exchange data as part of their study exercise, unless a standalone confidentiality agreement has already been entered into. The JSBA should also contain boilerplate provisions relating to governing law, dispute resolution, notices, control of public announcements and other essential operational matters.
(d)Migration to a JOA
The JSBA will cease to apply if the parties elect not to make a bid for a concession or if they do make a bid but they are unsuccessful in their endeavour, and will most obviously cease to apply if the parties’ bid for the award of the concession is successful and a JOA subsequently comes into force between the parties.
Because of the nature of its content, and in light of the purpose for which it is principally intended, the JSBA is generally regarded as being insufficient to act as the resultant JOA over the long term if the parties are successful in their application for the award of the concession. The JSBA is properly intended to apply to the business of securing, rather than of managing, the concession. Nevertheless, some commentators suggest that if the parties are unable to agree the form of the JOA then the terms of the JSBA might be adequate to regulate the relationship between the parties going forward. This approach is adopted in part in the AIPN model form JSBA, where the JSBA will continue to apply as an interim measure so as to govern the relationship between the parties pending finalisation of the JOA. This philosophy may have some merit if the JSBA contains sufficient detail to be able to govern the joint operations but the more realistic expectation is that, despite the many similarities of broad principle between the terms of the JSBA and the JOA, for the longer term the parties will need to put in place a JOA which will govern their relationship after the award of the concession.
Conceptually, as the precursor to the JOA, the JSBA is a short-term agreement which is intended to operate in the period between the concession being awarded and the JOA being finalised. However, it is not uncommon for the negotiation of the JOA to take considerable time and for it to be subject to lengthy contention, particularly if the parties are from different jurisdictions and have varying degrees of experience in dealing with the jurisdiction in which the concession is to be awarded. A prolonged negotiation of the JOA will result in extending the duration of the reliance of the consortium on the JSBA as the vehicle for governing their joint venture. This can be an alarming proposition for the consortium if the JSBA does not anticipate this possibility.
The text of a fully termed JOA might be appended as a schedule to the JSBA, with that JOA to be executed by the parties if they are successful in their application and are awarded the concession. This is the best way to go in the interests of promoting certainty, but it is typically the case that the practicalities of assembling a consortium to apply for a concession do not allow sufficient time also to prepare that JOA in any great detail. The parties might also be reluctant to commit resources to negotiating the JOA for fear that their application for the concession will be unsuccessful and so the effort will be wasted. In practice, the effort which the parties might be inclined to devote towards negotiating the terms of their intended JOA will be linked to the confidence which those parties have about the chances of success which they think their concession application is likely to enjoy.
Alternatively, therefore, and more commonly, the JSBA might oblige the parties to negotiate the JOA (within a specified time frame) only if their application for the concession proves to be successful. To assist in this process, the JSBA might identify a model form JOA that the parties agree to use as the basis for their subsequent negotiations. This approach is taken in the AIPN model form JSBA, wherein if the parties are successful in their application for the award of a concession they will endeavour to sign a JOA within an agreed number of days after the concession becomes effective. Thus, the JSBA will continue to govern the relationship of the parties pending execution of the JOA. The AIPN model form JSBA suggests that the parties will use the AIPN JOA as the basis for their negotiations, but beyond that no guidance is given as to the content of the JOA.
Another alternative to consider, if a fully termed JOA is not appended to the JSBA, is that the JSBA will be supplemented by a term sheet which recites an outline agreement between the parties of the essential commercial elements of their prospective JOA relationship (such as the identification of which party will be the operator, the respective participating interests of the parties, a procedure for accounting between the parties and provisions relating to the ability of a party to transfer its interests to a third party). These provisions will be part of the JOA, but can also be expressed to apply in the interim in governing the relationship of the parties through the currency of the JSBA.
A further formulation which sometimes appears, where the parties have been awarded a concession and are awaiting state approval of the terms of the JOA as a condition of the concession is one whereby the parties will attach a fully termed draft JOA to a head agreement which they execute, and under the terms of that head agreement the parties agree, for that interim period, to comply with all terms of the draft JOA as if it was a live agreement, pending state approval. This is an alternative to relying on the terms of a JSBA to regulate the relationship between the parties during that interim period.
The JSBA should come to an end in accordance with its terms prior to the commencement of the JOA but there may be some transitional issues (such as the carry-over of payments made under the JSBA to be accounted for under the JOA and the application of any agreed carry arrangements (see 3.2) which need to be taken into account in the ensuing JOA.
(e)Exclusivity and commitment
It is common for the JSBA to prohibit the consortium parties from being party to an application for the award of a particular concession outside of the consortium to which the JSBA relates. Consideration should also be given to prohibiting the parties from making an application for any other concession in the concession award round, unless it is made with the same members of the consortium under the JSBA.
A situation may arise where a party to a number of consortia (if that is permissible) focuses more resources on its most preferred application, resulting in its commitment to other applications being lessened. In the worst case, it may be that such a party has merely been tyre-kicking various consortia and will only agree to progress the application which it most favours, resulting in that party attempting to withdraw from all but one application.
It will be a matter for debate as to whether the obligations of exclusivity given by a party should apply equally to affiliates and associated interests of that party.
The JSBA might also provide that any concession interests which are secured by a party in breach of the JSBA’s exclusivity commitments must be transferred to, or held on trust for, the other members of the consortium.
The exclusivity provisions in the JSBA might also be expressed to apply to the parties for a period of time after the JSBA is terminated in respect of them (such as where the application has been unsuccessful).
The exclusion of consortium parties from making other applications could present competition law problems, depending on how the exclusion is structured. Care therefore must be exercised when considering and drafting the exclusivity provisions in the JSBA.
Careful consideration must also be given to provisions to manage the introduction of a third party as a new party to the consortium (whether in addition to the existing parties or in replacement for a departing party). The JSBA will usually provide that a party can