legal matters. Using Strict Compliavnce to Damage Joint Ventures
2. Ensure that, if the Thai or domestic party has agreed to assist, and has made representations that due to its familiarity with the local legal and business environment, that the scope of duties – and importantly – liabilities, are attributed to reflect this in the joint venture and/or shareholders agreement and articles of association of the company.
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Desmond Hughes
3. Ensure that the joint venture bears the costs of strict compliance, and that the joint venture puts in place a mechanism for reporting alleged infringements in its management structure, to at least try and avoid direct reporting, so that compliance breaches can be remedied promptly before incurring penalties. A fine balance must be achieved between remedying breaches and not concealing breaches from investigators. Of course, when Thai investors invest in other jurisdictions, they face similar issues. However, in the context of Thailand and a general policy of trying to attract foreign investment, with appropriate conditions and protections for the economy, society and culture, if the behaviour of domestic parties is given freedom to abuse laws and reporting procedures for opportunistic commercial gains, the strategy will backfire on the entire market as foreign investors will learn from their experiences and invest less money to reflect the risk or seek more secure markets where the risk premiums can be properly assessed. Strict compliance is a dangerous weapon to bear in commercial quarters due to both its narrow and wide ramifications. Investors should be aware of the issues and attune their risk analysis and behavioural patterns to take these issues into account.
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By Desmond Hughes, Senior Partner of Hughes Krupica. Hughes Krupica is a law firm which specialises in Dispute Resolution; Corporate Transnational and Domestic Law; Real Estate; Hospitality; Construction Contract Support; Transnational Structuring and Compliance; Transnational Commercial; and Litigation, operating in Bangkok and Phuket, servicing clients in relation to their business activities in Thailand and in other regions of Asia www.hugheskrupica.com
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