Resolving Joint Venture Agreement Disputes Effectively
Joint ventures (JVs) form a critical architecture for business collaborations in the UAE’s dynamic commercial landscape. However, the structural complexity inherent in joint venture agreements often leads to
Joint ventures (JVs) form a critical architecture for business collaborations in the UAE’s dynamic commercial landscape. However, the structural complexity inherent in joint venture agreements often leads to
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
A joint venture that is working asks very little of its agreement. A joint venture that has stopped working asks everything of it at once — how a deadlocked board is broken, how a price is put on a departing partner's stake, how shares actually move, and what becomes of the licence, the staff and the customer contracts when the parties separate. Most agreements were not drafted with that day in mind, and it shows.
That is what a joint venture dispute usually turns out to be. Two parties who once agreed on a business no longer agree on how it should be run, and neither can force a decision or leave on terms it is willing to accept. The claim may be pleaded as a breach of the agreement, but the question that has to be answered is an exit question — on what terms someone gets out, and who fixes the number.
Related: Our joint venture agreement practice acts on formation, restructuring and exit.
First establish what kind of venture it is
The answer changes the dispute entirely, and parties are often unclear about it years in.
An incorporated joint venture is a company — an onshore LLC or a free zone entity — owned by the partners. The venture has its own licence, its own assets, its own employees and its own liabilities. Disputes here run through company law and the constitutional documents, and exit means transferring or cancelling shares.
A contractual joint venture has no separate entity. The parties agree to cooperate on a project, often with one of them holding the contract, the licence or the client relationship in its own name. Disputes here are contractual, and the party that does not hold the customer relationship discovers how little it controls. If your JV is of this kind, the most valuable protections are not governance clauses but rights over the contract, the receivables and the project records.
Federal Decree-Law No. 32 of 2021, which replaced Federal Law No. 2 of 2015, governs commercial companies. It applies to the incorporated venture. It has nothing to say about a cooperation agreement between two companies that never formed one.
Legacy ownership structures are now a live risk
A large number of UAE joint ventures were not commercial arrangements at all. They existed because mainland companies once required majority UAE-national ownership, and the commercial reality was documented in side agreements: nominee arrangements, pre-signed share transfers, powers of attorney, undated resignation letters and loan documents intended to make the registered ownership economically meaningless.
Federal Decree-Law No. 26 of 2020 removed the majority-ownership requirement for most mainland activities, and 100% foreign ownership has been available since 1 June 2021, subject to a list of activities of strategic impact. A local service agent for a foreign company's branch is a different arrangement and remains lawful.
What this means for legacy structures is straightforward. Where the ownership split exists only to satisfy a rule that no longer applies, the structure can often be regularised — and it should be, while both sides still cooperate. Side arrangements were never reliable, and they are worth least at precisely the moment they are needed: when the registered shareholder declines to sign. Restructuring is a licensing and corporate exercise conducted with the relevant economic department and the company's constitutional documents. It is not something to attempt in the middle of a falling-out.
When the JV agreement and the constitutional documents disagree
Partners negotiate a detailed joint venture or shareholders' agreement and then incorporate an entity using the registrar's standard memorandum. The two documents say different things about reserved matters, board composition, transfer restrictions and profit distribution — and the one filed with the authority is the one the registrar and the onshore courts work from.
The fix is to align them at incorporation: get the agreed governance into the constitutional documents wherever the form permits, and keep the private agreement for what genuinely cannot go there. Where a shareholder wants a veto to be effective against the company, it needs to be in the document the company is registered on, not only in a contract between shareholders.
Related: We handle the underlying shareholders' and joint venture agreements alongside the constitutional filings, so the two documents say the same thing.
Deadlock clauses fail on valuation
Most agreements contain something for deadlock: escalation to senior executives, a casting vote, a buy-sell mechanism where one party names a price and the other chooses whether to buy or sell, or put and call options at a trigger event.
These mechanisms work when the price is capable of being determined. They fail when the clause says the shares are to be transferred at "fair value" and stops there. There is then no agreed valuer, no basis of valuation, no treatment of shareholder loans, and no timetable — so the exit clause itself becomes the dispute, and the venture stays frozen while it is argued about.
A usable exit mechanism names the valuer or the method of appointing one, states the basis of valuation, says how debt owed to the shareholders is treated, sets a timetable, and addresses what happens to guarantees, brand licences and any supply arrangements between the venture and its owners. It does not need to be elaborate. It needs to be capable of producing a number without the parties' further agreement.
Exit has mechanics as well as terms
Winning the argument is not the same as completing the transfer. Moving shares in an onshore company involves steps before the notary and the licensing authority, and the registered shareholder's participation is normally required. An arbitral award or a judgment ordering a transfer therefore still has to be taken through the execution and registration process. Parties who understand this negotiate for the practical route as well as the legal right — completion mechanics, powers of attorney where they are effective, escrowed documents, and a clear position on what happens to the licence.
The same applies to the rest of the venture. Employees are engaged by an entity and their status follows it. Customer contracts sit with whichever party signed them. Bank facilities usually carry personal or parent guarantees that do not disappear when the relationship does. An exit agreement that deals only with shares leaves all of that unresolved.
Where these disputes are heard
Onshore joint venture disputes go to the onshore courts unless the agreement provides otherwise. Arbitration under Federal Law No. 6 of 2018, as amended in 2023, is the usual alternative, and DIAC administers most institutional cases in Dubai following Dubai Decree No. 34 of 2021, which abolished the DIFC-LCIA; ADCCAC was restructured as arbitrateAD from 2024. Ventures held through DIFC or ADGM entities can use those courts.
The point that matters more than the choice is consistency. A joint venture agreement referring disputes to arbitration, constitutional documents silent on the question, and an ancillary services or supply agreement pointing at the onshore courts will produce a jurisdictional argument before anyone reaches the substance. One clause, one seat, one governing law across the whole set of documents.
Related: Similar issues arise in franchise arrangements, where territory, termination and post-termination rights raise the same exit questions.
Related Services: Explore our Joint Venture Agreement service for formation, restructuring and disputes in the UAE.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
