General Information on Parties SPANISH MED Spanish Med is a small niche player in medical appliances. It is looking for whatever will be most financially

General Information on Parties

SPANISH MED

Spanish Med

is a small

niche player

in medical

appliances. It

is looking for

whatever will

be most

financially

beneficial..

FRANCE MEDOC

France Medoc

is a strong

player

worldwide in

the medical

industry. It

has a very

good

reputation

DEUTSCH DOC

Deutsch Doc

is the leader

in his Medical

appliances

sector in

Germany but

is rather

absent

internationall

y.

DEUTSCH MEDAID

Deutsch

Medaid is a

small German

player,

competitor to

Deutsch Doc

with a world

renowned

patented

process

MEDIGROUP

MARKET

Back-ground and

Context

4 Firms – 1 Spanish, 1 French and 2 Germans, decide to enter

into a consortium in order to provide a new league of medical

appliances, Eco-friendly X-Rays, which they would not be able to

develop, manufacture and distribute alone.

They decide to enter a cooperation agreement to rule their

mutual relationships and that with the external world.

MEDIGROUPMedical Consortium Spain – France - Germany

Ques-tions

1. What is the first question these companies should ask

themselves from a legal point of view?

Question


Ques-tions



Cooperation

Agree-ment

PARTIES TO AGREEMENT

DEFINITION OF TERMS

PURPOSE OF COOPERATION / AGREEMENT

DESCRIPTION OF ACTIVITIES

PROPERTY RIGHTS

FINANCIAL MANAGEMENT

INTERNAL/EXTERNAL LIABILITY

GOVERNANCE

CONFIDENTIALITY

DISPUTE RESOLUTION

ENTRY INTO FORCE, DURATION, TERMINATION

CHOICE OF APPLICABLE LAW

The cooperation agreement shall contain the following

provisions. Which will, according to you be subject to

most negotiation and why? Classify these items in terms

of complexity in reaching an agreement, between

“Easy”, “Average” and “Difficult”

How should we organize our cooperation? Through (i) an

established company or (ii) solely through a light contractual

architecture? The 4 firms decided to establish a company named

“MEDIGROUP S.A” to handle their common program

Answer 1


Ques-tions

Cooperation

Agree-ment


DEFINITION OF TERMS



PROPERTY RIGHTS



GOVERNANCE

CONFIDENTIALITY

DISPUTE RESOLUTION




provisions. Which will, according to you be subject to

most negotiation and why? Classify these items in terms

of complexity in reaching an agreement, between

“Easy”, “Average” and “Difficult”

Question 2


Ques-tions



Cooperation

Agree-ment


DEFINITION OF TERMS



PROPERTY RIGHTS



GOVERNANCE

CONFIDENTIALITY

DISPUTE RESOLUTION




provisions. Which will, according to you be subject to most

negotiation and why? Classify these items in terms of

complexity in reaching an agreement, between “Easy”,

“Average” and “Difficult”

How should we organize our cooperation? Through (i) an

established company or (ii) solely through a light contractual

architecture? The 4 firms decided to establish a company named

“MEDIGROUP S.A” to handle their common program

Answer 2

Medical Consortium Spain – France – GermanyFocus on Financial Management

ISSUES?

The 4 participating firms are both shareholders of Medigroup and providers of resources for development and manufacturing of the Medigroup Appliances, which are sold throughout Eastern Europe: All 4 firms are even shareholders of Medigroup Contribution in terms of resources is the same…but Cost of

resources is different according to the countries; ex: Medigroup products are sold €200,000 but same contributions on the part of the 4 firms cost them, per Medigroup product, €15,000 (Spain), €25,000 (France), €30,000 (Germany)

ALTERNATIVES?

POSITIONS AND

INTERESTS?

SITUATION

Question 3

Medical Consortium Spain – France – GermanyFocus on Financial Management

ISSUES

ALTERNATIVES

POSITIONS AND

INTERESTS

SITUATION

1. What sharing key to use to define the financial repayments to

Participating firms?

2. What rules for invoicing and settlement?

1. (i) equal distribution of turnover, on basis of shareholders’

agreement, (ii) proportional distribution on basis of

contribution cost…other

2. (i) monthly, (ii) quarterly, (iii) yearly…other

1. Spain which has lowest production costs will favor the

alternative 1(i) whereas Germany will favor (ii). France which

has average cost can play a pivotal role and bargain its

position on other issues

2. This is a financial experts’ issue. All companies would have a

preference for early repayment by the company.

Nota bene

• This illustrates the search alliances and trade-offs in multi-

lateral negotiations. Where the French party does not find this

point critical, it is critical for the other parties. On other issues

(see later), other distribution of positions will occur, and

issues which are critical to France may not be for other

parties. Thus, it is essential to identify what trade-offs and

alliances are possible, and this is achievable only if you

identify prior to negotiation all parties positions and interests.

Answer 3

The 4 participating firms are both shareholders of Medigroup and providers of resources for development and manufacturing of the Medigroup Appliances, which are sold throughout Eastern Europe: All 4 firms are even shareholders of Medigroup Contribution in terms of resources is the same…but Cost of

resources is different according to the countries; ex: Medigroup products are sold €200,000 but same contributions on the part of the 4 firms cost them, per Medigroup product, €15,000 (Spain), €25,000 (France), €30,000 (Germany)

Medical Consortium Spain – France – GermanyFocus on Internal / External liability

ISSUES?

Medigroup distributes the consortium’s appliances throughout Eastern Europe to hospitals and clinics.

It receives claims on the quality of its products Lately, an incident with the appliance was associated with the

serious injury of a patient in Hungary. A fault on the appliance is

mentioned as the cause of the wrong diagnosis made which led to

the patient injury.

ALTERNATIVES?

POSITIONS AND

INTERESTS?

SITUATION

Question 4

Medical Consortium Spain – France – GermanyFocus on Internal / External liability

ISSUES

ALTERNATIVES

POSITIONS AND

INTERESTS

SITUATION

1. How are the 4 firms liable one towards the others? (internal

liability)

2. Who is liable towards the market, and to what extent?

(external liability)Internal: 1.1 (i) liability in all cases, (ii) liability except in some cases (hardship,

Force Majeure…), other…

1.2 (i) Unlimited, (ii) Capped to a certain amountExternal: 2.1 (i) Medigroup liable, (ii) 4 Firms’ joint liability”, (iii) 4Fs “several

liability”, (iv) 4Fs “joint and several liability”

2.2.(i) Unlimited, (ii) Capped to a certain amount

1. All companies should agree on the basis of “good faith” on an option, based on their “commitment”

2. France Medoc which has a strong reputation worldwide wishes to be liable towards the market. German Firms, which established Medigroup for it to be “autonomous”, do not wish to be liable in its place. Spain Med does not have a strong position. So it can play a pivotal role for France Med and therefore can be a bargaining tool (see Finance issue). All agree that liability needs to be capped.

Nota Bene

Behind a party’s position, it is essential to look for its interest. For the French party, the image protection is the interest driving its position. For the German parties, what is the interest driving their position for an “autonomous Medigroup directly liable towards the market ? Perhaps it is based on legal, tax or financial considerations from a German Law standpoint…?

Answer 4

Medigroup distributes the consortium’s appliances throughout Eastern Europe to hospitals and clinics.

It receives claims on the quality of its products Lately, an incident with the appliance was associated with the

serious injury of a patient in Hungary. A fault on the appliance is

mentioned as the cause of the wrong diagnosis made which led to

the patient injury.

Documents

General Information on Parties SPANISH MED Spanish Med is a small niche player in medical appliances. It is looking for whatever will be most financially