12 September 2013
EPAM Legal Highlights: Non-compete provisions to joint venture agreements may be valid



The FAS clarified the criteria of a joint venture agreement validity and how to evaluate certain non-compete provisions therein.

The FAS issued the clarification on its approach to such joint venture agreements’ assessment.



Reasonable non-competition provisions to the joint venture agreement might be deemed justifiable if the following requirements are fulfilled:

  • the agreement meets criteria of the joint venture agreement;
  • party`s joint market share does not exceed 35%;
  • the agreement is not purposed to the restriction of competition and the non-competition provisions are not excessive in relation to the purpose of the agreement.

If the second or the third condition mentioned above is not fulfilled or fulfilled partly an additional investigation will be conducted. The agreement could be considered admissible but certain restrictive conditions may be imposed on the parties to the agreement aimed at reducing anticompetitive effect and ensuring competition. Simultaneously, if the agreement imposes restrictions on the third parties and no production development or customers benefits are provided, the non-compete provisions should be deemed unjustifiable.



Even though no preliminary FAS approval to the joint venture agreement containing non-compete provisions is currently required by Law, submission of the draft agreement to the FAS in advance to acquire its preliminary consent may significantly secure the parties to the agreement and mitigate risks. Otherwise if the agreement is investigated after its execution and considered inadmissible the parties thereto should be subjected to significant turnover fines.

The recommendations regarding certain types of agreements and/or different provisions are very ambiguous and investigation in some aspects is based on subjective criterions.



Apply for professional legal aid to assess if non-competition provisions are compliant with formal requirements;

Submit the draft joint-venture agreement containing non-competition provisions to the FAS;

Seek professional legal assistance within the framework of FAS investigation of the agreement.