Optomagic, Inc. is a U.S. corporation that produces optomagic gizmos. Production of optomagic gizmos involves a confidential gizmo-processing technique (which is described in printed confidential Optomagic manuals), labor-intensive processing, and inclusion of an optomagic component for which Optomagic was granted a U.S. patent six months ago. The optomagic component has widespread uses in the space, aviation, and medical industries.

Eight months ago, in the African country of Varoom, a relatively peaceful popular uprising resulted in the removal of the “old guard” leaders, who had favored a strong, centrally planned economy. The new provisional government called for free elections in one year, began taking immediate steps to reform the economy, and promised to liberalize foreign investment laws to attract foreign investors.

Because the government bureaucracy is still in some disarray, it is extremely helpful, as a practical matter, to have close contacts with a government official who can speed the review and approval process for applications for foreign investment. In a recent official tour of the United States, Dr. Segun Ayantuga, the minister of health and welfare of Varoom, visited Optomagic’s manufacturing facility in Boston, Massachusetts. Ayantuga is an eminent surgeon and a strong proponent of bringing advanced medical technology to his developing country so that the best medical care can be made available to the public. In addition, to earn badly needed foreign exchange for Varoom, he is interested in finding labor-intensive U.S. industries that may be able to produce products in Varoom for export to the more developed countries. Optomagic is very interested in the newly emerging markets of Africa and in Varoom in particular. Optomagic would also like to obtain gizmonium, a raw material necessary for the production of optomagic gizmos, which is found in great abundance in the mountains of Varoom, but which, under Varoomian law, is available only to Varoomian enterprises.Two weeks after his visit to Optomagic, Ayantuga wrote to the CEO of Optomagic to make the following proposal. Ayantuga and a state-owned medical clinic, Varoom Medical, are interested in establishing a joint venture in Varoom with Optomagic. Current Varoomian law limits foreign investment interests in Varoomian enterprises to50 percent of the total investment. Ayantuga states that, although under local law the Varoomian partners share equal responsibility for the management of the venture, they will in fact defer to Optomagic in all material matters related to the operation of the manufacturing facility. In addition, Ayantuga assures Optomagic that the foreign investment law is likely to be liberalized within the year. As his investment in the venture, Ayantuga offers to contribute his lease interest in certain property in Varoom and to ensure that all the necessary government permits for the construction and licensing of the facility are obtained. Ayantuga expresses his confidence in being able to obtain all the government approvals for the proposed project because “our government has recently issued a decree emphasizing the national importance of upgrading our health-care industries.”

The father of Optomagic’s CEO emigrated from Varoom sixty years ago. He is excited about the developments in Varoom and finds Ayantuga to be a delightful, dynamic man. He is convinced that Optomagic should move into Varoom now, before its competitors do.

Your assignment is to put together a business plan for the proposed joint venture, assuming that it’s going to cost something up front but will be worth the expense in the long run. The CEO wants a preliminary report in two weeks to take to the board of directors, which will be considering establishing a wholly owned subsidiary in Cairo, Egypt to operate prospective sales and manufacturing facilities in Africa. He also wants a comprehensive report to follow in another four weeks.

a. You have full access to your expert in-house legal counsel, who has experience in international projects. How can you best use her to assist in putting your plan together? What issues of particular importance should be addressed by counsel for inclusion in the preliminary report?

b. Given the uncertainty in the development of Varoom’s foreign investment laws (and its government), what types of terms or conditions do you think should be included in the contract for the proposed joint venture to protect against unexpected changes in the laws or government policies? What is your evaluation of the desirability of other forms of protection?

c. Are there any legal problems with including Ayantuga as an investor in the project? As paid consultant?