1.

Joint Ventures
1.1 Nature of a 1oint Venture

Articles

Ryan G.L.1. ~1oint Venture Agreements
(1982) 4(2) Australian Mining and Petroleum Law 1ournal 101

Ryan considers there is now suIIicient uniIormity in the operation oI iointly undertaken resource
proiects to be able to distinguish a 'typical ioint venture agreement. He looks at the nature oI the
relationship between parties to a 'typical ioint venture, to determine whether such an agreement
should be considered a separate legal concept, or whether it creates a Iorm oI partnership. Ryan
examines the legal history oI ioint ventures in Australia, and concludes that to date there is very
little case law that recognises the ioint ventures as distinct Irom a partnership. However, as
relationships that do not Iit the category oI a partnership continually present themselves,
Australian courts may in the Iuture recognise the concept oI a ioint venture as something outside a
partnership, although the precise nature oI that concept will take some time to emerge. In so
doing, the author believes courts should give eIIect to the express intention oI the parties, and that
the application oI partnership principles should be selective.

Merralls 1.D. ~Mining and Petroleum 1oint Ventures in Australia: Some Basic Legal
Concepts (1988) 62 Australian Law 1ournal 907

Merrill examines the diIIerent types oI ventures and how they diIIer Irom orthodox partnerships.
In canvassing the nature oI a ioint venture, he covers the range oI obligations and liabilities that
will be imposed by law and in equity, and the eIIect oI contractual provisions on those rights.

The second part oI Merrall`s article steps through all the elements oI a typical ioint venture
agreement, and thoroughly analyses the nature and implications oI the interaction oI contractually
agreed rights and legal principles that may operate on those rights. Discussion covers: interests oI
participants: assignment oI interests: management and control: the nature oI the operating
committee, operator, deIault procedures, and the potential remedies available.

Cases:
Mount Isa Mines Lta v Seltrust Mining Corp. Ptv Lta (1985) Unreported, Supreme Court oI
Western Australia (Rowland J.)

Pritchard R.L. ~Unincorporated 1oint Ventures in R.P. Austin and R.1. Vann, (eds) 1he
Law of Public Companv Finance, Law Book Company, Sydney, 1986, Chapter 18

In this chapter, Pritchard sets out the Iundamental characteristics oI an unincorporated ioint
venture, where the venture does not constitute a partnership. He considers the contractual nature
oI such a ioint venture (with regard to commencement and termination), and describes typical
1. JOINT VENTURES
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examples oI ioint venture agreements, including: ioint bidding agreements: production sharing
agreements: ioint exploration agreements: ioint operating agreements: tolling agreements: real-
estate development agreements: Iinancing agreements: and pre-incorporation agreements. An
overview oI the distinction between an unincorporated ioint venture and a partnership is covered,
the Iundamental question being 'what are the real intentions oI the parties as elicited Irom the
terms agreed between them and Irom their course oI dealing? The basis Ior liability oI the
venturers to third parties is discussed beIore considering the obligations and rights oI ioint
venturers inter se, with respect to Iiduciary duties, duty oI conIidentiality, and contractual
obligations. The Iinal part oI Pritchard`s paper gives a concise overview oI the nature oI
proprietary interests oI ioint venturers, assignment oI interests, and charges over interests oI ioint
venturers.

Ladbury R.A. ~Mining 1oint Ventures (1984) 12 Australian Business Law Review 312

Ladbury provides a clear and detailed overview oI the nature oI a mining and petroleum ioint
ventures under Australian law. He describes the Ieatures oI the typical unincorporated ioint
venture, that is not a partnership, discussing the reasons Ior seeking to avoid a partnership
structure and the legal, taxation and Iinancial implications oI such a distinction. Ladbury then
considers the main Ieatures oI a typical ioint venture agreement with respect to: purpose and
scope: ownership oI assets: size oI interests: Iorms oI management and operation oI the venture:
calls and expenditure: deIault: and assignment, and compares these Ieatures with those oI a
partnership under both Australian and United States law.

Dennis G. ~1oint Ventures: How to Select the Right 1oint Venture Vehicle for your Project
Institute for International Research Conferences, 21 March 1993

Dennis gives a practical overview oI the reasons to use a ioint venture vehicle (sharing oI risk and
resources, Ioreign investment rules, and private sector involvement in public proiects). He then
provides a convenient list describing the more common venture risks and some oI the methods by
which those risks can be overcome. The greater part oI Dennis` paper then identiIies the key
characteristics oI the diIIerent types oI ioint venture vehicles setting out the description, tax
consequences, advantages and disadvantages Ior each oI (i) a company: (ii) a unit trust (iii) a
common law partnership: (iv) a limited liability partnership: and (v) a participation consortium.

Millhouse A.M. ~1oint Ventures - Problems for Financiers? Paper presented at Continuing
Legal Education Seminar 5 August 1992, Queensland Law Society Incorporated, 1992

Millhouse begins the Iirst part oI his paper with a description oI the concept oI a ioint venture,
giving illustrations oI the most common Iorms in which the concept has maniIested itselI in
Australia.

Doran R.1.P. ~Commentary on 1oint Venture Accounting Procedures [1985] Australian
Mining and Petroleum Law Association Yearbook 68

Doran`s paper begins with a description oI the practical and procedural characteristics that
distinguish an Australian oil and gas ioint venture (diversity oI participants, paucity oI legal
precedents, absence oI pro-Iorma documentation, strict implementation oI ioint venture principles,
and predominance oI explorationists at key decision making levels) Irom its counterpart in other
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1. Joint Ventures 245
parts oI the world, noting however, that the reasons Ior these distinctions are related to the relative
youth` oI the oil and gas industry in Australia, which may be expected to change as the number
and experience oI participants in Australian ioint ventures grows.

Waite 1.H. ~Australian Resources 1oint Ventures: Some Legal Pointers for Investors,
Paper presented at LAWASIA (Energv Section), International Svmposium on Energv Law,
1akarta, 7 November 1985

Waite begins with an outline oI the principal characteristics oI an unincorporated (mining or
petroleum) ioint venture and an incorporated Iorm, beIore setting out a list oI the maior advantages
oI the unincorporated Iorm. He considers various deIinitions oI ioint venture, explaining the
reasons why the concept oI a ioint venture in an Australian context is generic, and can encompass
many Iorms oI legal relationship, including partnership.

The third part oI Waite`s paper discusses the typical provisions in Australian resources ioint
venture agreements that deal with the situation in which participants are in deIault in making their
Iinancial contribution to the proiect. A descriptive overview oI various deadlock breaking
mechanisms is given including: expert adiudication or arbitration: non-consent and sole risk:
mandatory transIer oI interest: Russian roulette: and the possible application oI partnership
dissolution rules. Waite provides a description oI the role oI an operator or manager oI a resources
ioint venture, outlining the capacity oI the operator as a participant: powers and Iunctions:
Iunding: third party contracts: operating standards and liability: and personnel matters. His
overview continues with a brieI discussion oI a number oI Iinancial issues arising Ior an
unincorporated ioint venture and the implications Ior the draIting oI Iinancial documents and the
ioint venture agreement itselI.

Merralls 1.D. ~Mining and Petroleum 1oint Ventures in Australia: Some Basic Legal
Concepts (1980) 3(1) Australian Mining and Petroleum Law 1ournal 1

Considered to be one oI the Iirst pre-eminent articles dealing speciIically with the nature oI ioint
ventures in the Australian mining and petroleum context, Merrall`s paper also argues the case Ior
recognising Australian resources ioint ventures as a distinct category oI structure requiring
diIIerent treatment at law, in the author's words 'that it is signiIicant Ior what it is not, as well as
what it is. Although such ioint venture arrangements have not become so stereotyped as to be
able to be treated universally, the signiIicant diIIerences between mining and petroleum ioint
ventures and other structures, require that their treatment under the various areas oI law applicable
to them, be Ilexible to the evolving needs oI this structure, or as Merralls describes it, 'the law oI
ioint ventures is not being made in the courts or the statute books, but in the voluminous
documents which order the complex exploration, development and Iinancing activities that mining
and exploration operations involve. Merralls discusses the common Ieatures oI a mining and
petroleum ioint venture, emphasising the contractual basis oI the relationship and distinguishing
the incidents oI partnership. Further Iundamental diIIerences between a ioint venture and a
partnership are evident in respect to the nature oI the interests held by ioint venture participants
and the assignability oI those interests, and Merralls describes how the ioint venture agreements
treat those interests.

A maior Ieature oI resource ioint ventures is the presence oI an operating or management
committee that oversees the management oI the operations conducted by an operator/manager.
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246 Joint Venture Bibliography (2003) 22 ARELJ

The second part oI Merrall`s paper describes the activities oI the operator/manager regarding
Iunding, third party contracts, property, employment, indemnity and duties oI good Iaith owed by
the operator to the other participants, highlighting the importance oI the ioint venture agreement
itselI in deIining the scope oI these activities and obligations.

Merralls then considers the maior procedures utilised in cases oI deIault under the ioint venture
agreement. He considers in particular, whether the operation oI such deIault clauses have any
implications with respect to the creation oI charges or abatement oI interest provisions oI the
Companies Act 1961 (Cth). He also discusses brieIly, the potential Ior deIault mechanisms to be
considered a penalty. Merralls notes the distinction between deIault by breach and deIault by non-
perIormance, observing the equity will view the Iirst less Iavourably, and advising that any
abnormally high rates on outstanding contributions or large premiums Ior reinstatement, may need
to by iustiIied by the circumstances.

Legislation:
Companies Act 1961 (Cth) sections 100,293(1), and 227(1)

Crommelin M. ~Mining and Petroleum Titles (1988) 62 AL1 863

Australian mining and petroleum ioint ventures are subiect to speciIic statutory regimes governing
exploration Ior and production oI mineral and petroleum resources. As a leading author on the
nature and operation oI petroleum titles, Crommelin sets out in comprehensive detail, the
proprietary rights to mineral and petroleum resources, both onshore and oIIshore. He begins with
an historical and legal analysis oI the two maior types oI titles to minerals namely 'possessory
titles and 'administrative titles including discussion oI the operation oI the various State Mining
Acts: the processes Ior challenging possessory title claims: the proprietary status oI prospecting
licences: and the procedural requirements Ior obtaining administrative titles.

In the second part oI his paper, Crommelin explains the scope Ior dealing with interests in titles.
Although statutes contain indirect evidence oI legislative intention to permit dealings, the nature
and eIIect oI such dealings is less certain. Through a close examination oI case law, Crommelin
elucidates the principles applied by courts in determining the proprietary status oI mineral and
petroleum titles. Also considered is the nature oI proprietary rights to production titles created by
mineral or petroleum royalties.

Cases:
Hunter Resources Lta v Melville (1988) 62 ALJR 88
ICI Alkali (Australia) Ptv Lta (in Jol Liq) v FCT (1979) 53 ALJR 220
Saskatchewan Minerals v Keves |1972| SCR 703
Australian Energv Lta v Lennara Oil NL |1986| 2 Qd R 216
BHP Petroleum Ptv Lta v Oil Basins Lta |1985| VR 725
National Executors ana Trustees Co of Tasmania Lta v Eawaras |1957| Tas SR 182


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Fabri N. ~The Legal Nature of Petroleum Agreements: A Comparative Analysis
[1986] Australian Mining and Petroleum Law Association Yearbook 1

Fabri`s paper considers the legal nature and eIIects oI the petroleum agreement. It explores Iirst
the legal Iramework and the wide range oI diIIerent Iorms oI arrangements, which have been
developed in diIIerent countries. Next, he analyses the legal status oI the agreement, whether it is
contractual or otherwise and what incidents attach to this status. An examination oI the
representative legal systems in which the agreement operates Iorms the subiect oI the next section.
In considering the various issues involved, Fabri discusses in turn the extent to which rules oI
particular municipal systems protect Irom alteration or abrogation rights oI the kind that the
petroleum regime conIers. The paper closes with an evaluative appraisal oI the various theories
advanced which purport either to municipalise the petroleum regime to the extent oI giving an
absolute right to the state to alter or revise the terms oI the arrangement in exercise oI its
legislative competence or to 'internationalise or 'delocalise the arrangement by subiecting it to
a supra-national body oI law with the aim oI insulating the host country-company relationship
Irom the operation oI national law.

Books

Taylor M.P.G., Winsor T.P. and Tyne S.M. 1he 1oint Operating Agreement, Longman,
London, 1989

In the context oI the UK system oI petroleum licensing, the authors set out in complete detail over
the course oI this book, the practical and legal workings oI a typical UK Continental ShelI Joint
Operating Agreement (JOA). Chapter one looks at the legal nature oI UK petroleum licences, and
the Iunction and development oI the UK Iorm oI JOA. Other documents related to the JOA are
deIined and discussed, namely: bidding agreements: transportation agreements: abandonment
agreements: unit operating agreements: Iinancing and marketing agreements: state participation,
and 'illustrative agreements. Other chapters are dedicated to: the operator, authorisations and
accounting procedures: sole risk and non-consent: deIault: assignment and withdrawal: unit
operating agreements: JOAs Ior Onshore Operations: and abandonment. The appendix contains a
model Joint Operating Agreement Ior a Petroleum Production Licence, as used in the UK Ior oil
and gas licences on the Continental ShelI.

Thompson N. ~The Nature of the 1oint Venture in W.D. Duncan (ed), 1oint Jenture Law in
Australia, The Federation Press, Sydney, 1994, Chapter 2

Thompson gives a comprehensive and detailed account oI the history and development oI ioint
ventures, highlighting the similarity between the typical unincorporated ioint venture oI today and
the early cost book company, a sui generis type oI mining partnership originating in Cornwall. He
then compares the typical Australian unincorporated ioint venture with its US counterpart, and sets
out the Ieatures oI relationships commonly described as an unincorporated ioint ventures, giving
examples oI structures that Iall into this general description.

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The second part oI Thompson`s paper oIIers an extensive comparative examination oI the concept
(and history) oI partnerships and the attributes oI a modern contractual ioint venture. He notes
that the US and Scotland have subsumed ioint ventures under the heading oI partnership, and that
some Australian iudges advocate that ioint ventures can adequately be addressed by the
established body oI partnership law. Thompson strongly argues however, that there are
suIIiciently valid practical and historical bases Ior distinguishing the two concepts, to warrant the
continuation oI 'ioint ventures as a separate category.

Thompson examines in detail the case law and statutes dealing with the ioint ventures and
partnerships, to discern the commonly accepted basis Ior distinguishing partnerships Irom ioint
ventures, namely:
- 'several rather than 'ioint activity:
- 'sharing oI proIit:
- obtaining a 'product or 'beneIit as distinct Irom 'proIit:
- undertaking oI a 'single activity:
and questions whether Australian commercial exigencies necessitate the recognition oI a ioint
venture as a separate structure - that partnerships are not necessarily suitable vehicles Ior
commercial change. Thompson proceeds to consider the obligations implicit in a ioint venture
relationship which resemble a partnership, which may still attract obligations and rights under
partnership law principles, notwithstanding a separate category is recognised, including: the
obligation to share losses: equal division oI gains: obligations arising under contract: and
obligations arising by law.

Eddey P.H. Accounting for Interests in 1oint Arrangements, Australian Accounting Research
Foundation, Melbourne, 1985

The Iirst chapter in this small book by Eddey, sets out the nature oI ioint ventures and the principal
legal and accounting diIIerences between incorporated and unincorporated ioint arrangements. An
overview is given oI the nature, legal characteristics, and advantages oI a ioint venture structure.
Eddey discusses the accounting distinctions between partnerships and unincorporated ioint
ventures, and provides a table oI the maior legal and accounting distinctions between the two.
1.2 Structure

Articles

Greiner C. and Barnett A. ~Introduction to the Basics-Choice of Structure and
Information Gathering Paper presented at BLEC Seminar in May 1998, Annual 1oint
Jentures Seminar, Business Law Education Centre, Sydney, 2000

Greiner and Barnett brieIly discuss particular issues arising out oI the choice oI ioint venture
structure. These issues include: discussion oI Whvwait Ptv Limitea v Davison as to when a
relationship` may be considered a partnership: appointment oI directors in a ioint venture
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