Pre-emption pitfalls during changes of control in a joint venture

Key Points:

Courts will interpret pre-emptive rights clauses by adopting a purposive approach.

Participants in joint ventures often seek to control who leaves and enters the joint venture via pre-emptive rights set out in the underlying joint venture agreement. A recent decision (Santos Offshore Pty Ltd v Apache Oil Australia Pty Ltd [2015] WASC 242) demonstrates that sophisticated parties can misinterpret the practical effect of these provisions ‒ even when those provisions are based on equivalent clauses contained in the commonly used AIPN Model Form JOA.

Parties that have agreed to these, or similar, clauses will benefit from the court's guidance on how these clauses should be interpreted ‒ particularly, what parties will need to do if those rights are exercised.