As a business owner, you have probably considered whether a joint venture ("JV"), merger or acquisition would help your company grow. If you do not have enough capital for an acquisition, are unsure about the U.S. market and potential U.S. customers, or are looking to co-develop new products or technology with a partner in the U.S., then a JV may be the right option for expanding your business in the U.S. Pre-planning for a successful JV involves many facets not only of the intended partner1 and its business, but also legal considerations. This article summarizes a few key legal considerations for a German company looking to establish a JV in the U.S.

CFIUS JV Loophole Is Closed

The Committee on Foreign Investment in the United States ("CFIUS") is empowered to review and investigate certain "covered transactions" that threaten to impair the national security of the U.S. Prior to the enactment of the Foreign Investment Risk Review Modernization Act of 2018 ("FIRMMA"), CFIUS was charged solely with review of transactions which could result in foreign control of a U.S. business. This excluded from CFIUS's purview non-controlling investments, investments which involved the acquisition of discrete assets or rights (but not a business), and changes in existing investments which could result in foreign control of a U.S. business. These limitations allowed certain types of sensitive foreign investment to proceed without the same CFIUS scrutiny as a more straightforward asset or equity sale or merger. That loop hole previously used by some JVs to avoid CFIUS review is now closed under FIRMMA.

If the reason for the JV is to gain access to or create new "critical technology" or "critical infrastructure," filing for CFIUS review may be required or advised. Further details and filing requirements can be found at

Thus, it is more important now for JV parties to review with their legal counsel and determine in advance if CFIUS filing is required or advised because the CFIUS review process will extend the timeframe for completing the JV even if the JV is approved by CFIUS.


Another factor in forming a JV in the U.S. is obtaining visas for key German employees that will come to the U.S. to work at the JV. Denial rates for visas have increased under President Trump's administration. Thus, it is important to structure the JV to increase the U.S. visas available to those key German employees of your company. For example, certain visa categories, such as the E category can only be applied for by a German JV partner if the German JV partner owns and controls at least 50% of the JV. If the success of the JV will depend upon a few key German employees working at the JV in the U.S., then those employees' credentials should be reviewed by one of our immigration attorneys to determine the visa categories available.

Export Control

When a German company enters into a JV in the U.S., export control laws need to be reviewed by legal counsel to determine if a license is required to transfer "technology" to the German partner or German employees working at the JV in the U.S. In this context, "technology" means information necessary for the development, production or use of an item subject to control under the Export Administration Regulations. A deemed export of technology occurs when the technology is released and made available to a foreign person in the U.S. In addition, U.S. export control laws prohibit dealing with prohibited end-users or enduses. Other export control laws may require a license if assets or technology are exported to Germany. Some visa categories, such as the L-1 and H-1, require the German company to certify that it has reviewed the U.S. export control laws and that no export license is required for German employees to work in the U.S. at the JV.

Unfortunately or Fortunately, All Things Do End

CFIUS review, immigration and export control considerations are similar for JVs, mergers and acquisitions. However, unlike mergers or acquisitions, JVs eventually end. When you are entering into a JV, it is an opportune time to discuss the terms for the end of the JV because the partners are on friendly terms and no partner knows what their economic position will be at the end of the JV. Thus, the parties are more likely to negotiate fairly.

If the issues and concerns are addressed up front and a procedure to address such issues is included in the JV agreement, the JV agreement becomes an effective tool to reduce disagreements and address major issues. It also provides for a more orderly termination of the JV so that you can focus on your future business instead of being distracted by lengthy negotiations or legal battles. If you cannot talk about these items now with your potential JV partner, that partner might not be the best partner going forward:

  • What intellectual property, assets, etc. will each partner contribute or license to the JV?
  • Who will own or be provided a license to the jointly developed intellectual property or products when the JV terminates?
  • Will any non-compete or non-solicitations provisions be in the JV agreement and/or survive after the JV is terminated?
  • What happens if there is a change in control of one of the JV partners, potentially to a competitor?
  • Who controls the JV entity taking into consideration immigration, tax and other business considerations?
  • How will disputes be resolved?
  • Is each partner required to remain in the JV for a period of time unless there is a default or breach of the JV agreement?
  • What happens if one partner defaults or breaches the JV agreement?
  • How will the entity terminate? Will the German partner be entitled to buyout the U.S. partner?
  • Will each partner have a right to outbid the other partner to own the entire JV?

Each of the above points has multiple legal solutions that are too numerous to list in this article. However, in our experience, discussing the solutions with counsel in the beginning and negotiating a solution included in the JV agreement reduces discord and provides for an orderly end of the JV.

Published : German American Chamber of Commerce of the Midwest, Inc.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.