Setting up a consortium: 6 essential legal tips

Contents

• Intellectual property
• Governance
• Financial management
• Conflict resolution mechanisms
• Compliance (competition law)
• Taxes

Intellectual property rights in consortium agreements

Exploring the world of consortium contracts? Discover the importance of intellectual property management in creating successful strategic alliances!

Collaboration is a powerful tool in today’s competitive landscape, and consortium agreements (CAs) are an excellent way for parties to work together, sharing resources and expertise. However, these consortium agreements can be problematic, particularly when it comes to protecting the intellectual property rights of each member. Here are some best practices for protecting intellectual property rights in consortium agreements:

Conducting intellectual property due diligence

Before concluding a cooperation agreement, a thorough intellectual property review should be carried out to identify and evaluate each member’s existing intellectual property assets (copyrights, patents, trademarks, know-how, etc.). This helps to clarify ownership and use rights and avoid potential conflicts.

Trading Clear IP

Negotiate and clearly define IP terms from the outset of the cooperation agreement. Ensure that all members understand and accept the clauses relating to ownership, co-ownership and licensing of IP. A precise definition identifies the economic rights (assignment, license and commercial exploitation) as well as the moral rights inherent in the works. The Board of Directors must therefore organize the distribution of rights between the partners right from the negotiation stage, for example by establishing rules of co-ownership or, where applicable, by providing for the assignment or granting of licenses in the event of a need for valorization or subsequent commercialization.

Implement intellectual property management strategies

Develop and implement IP management strategies to protect IP throughout the consortium life cycle. This includes regularly monitoring the use of IP, keeping detailed records of each member’s IP contributions, and continuously updating IP protection measures as necessary.

These strategies should also include proactive measures to identify potential intellectual property risks and address them promptly, ensuring that the rights of all consortium members remain protected, for example by

• Assign clear responsibilities for IP management to specific individuals or committees: these specific arrangements help maintain accountability and streamline the process of protecting and commercializing IP.
• These specific provisions, which establish protocols for reporting and dealing with intellectual property infringements or unauthorized use, will further enhance the security of the consortium’s innovative results.

Include confidentiality clauses

Establish guidelines for the publication and dissemination of research results and intellectual property developed within the consortium, and determine the publication approval procedure to prevent unauthorized disclosure of intellectual property.

Good Governance in Consortium Agreement

Are you exploring the world of consortium agreements? Discover the importance of good governance in creating successful strategic alliances!

Consortium agreement has become essential in today’s global business landscape. By forming strategic alliances, companies can pool resources, share expertise, and mitigate risks associated with large-scale projects. However, the success of these ventures relies heavily on the principles of good governance.

Good governance is paramount for the success of any consortium. It involves establishing clear and transparent processes for decision-making, accountability, and performance monitoring. Effective governance ensures that the consortium operates efficiently, maintains trust among members, and achieves its objectives.

Here are some best practices for governance:

Clearly state the objectives and missions

• Describe the objectives and missions of the consortium in a clear and concise clause.
• Ensure that all involved parties understand and share a common vision of what the consortium aims to accomplish. Establish performance indicators and evaluation methods to measure progress.
• Conduct periodic reviews to adjust strategies and objectives.

Define the roles and responsibilities

• Clearly defined roles and responsibilities help avoid misunderstandings and ensure that each member contributes effectively to the consortium’s activities.
• State the responsibilities of each member, including financial obligations, contributions, and intellectual property rights.
• Establish control and audit processes to ensure compliance with consortium objectives and standards.

Define the management structure

• Establish a governing board or committee, working groups, and specific roles of members, decision-making processes, including votes, consensus.
• Establish procedures for amending and modifying the consortium agreement to adapt to future changes.
• Ensure that all members have a voice and can actively participate in decisions.
• Implement procedures for conflict resolution to manage disagreements constructively by using contractual or judicial mediation when necessary.

Maintain regular communication

• Establish mechanisms for regular and open communication between consortium members to discuss issues, share updates, and coordinate activities.
• Organize frequent meetings and provide detailed reports on activities and finances.

By following these practices, consortium members can effectively protect their intellectual property rights and foster innovation and collaboration.

Let’s work together to foster strong, collaborative partnerships that drive innovation and growth.

Financing Mechanisms in Health & Biotech Consortium Agreements

In the healthcare and biotechnology sectors, consortium structures have emerged as critical vehicles for collaborative innovation. Whether for the co-development of advanced therapies, clinical trials, or large-scale R&D initiatives, these partnerships require carefully engineered financing mechanisms adapted to the sector’s risk profile and regulatory constraints. Unlike joint ventures, consortia do not constitute separate legal entities—hence, no equity financing in the strict sense—but the financial framework remains central to the success of the common project.

Initial Project Funding

The initial funding phase typically covers feasibility studies, early-stage research, regulatory filings, or preclinical activities. In pharmaceutical and biotech consortium, this funding is often structured as cost-sharing arrangements between industrial partners, research institutions, or public stakeholders (e.g., EU-funded programs). These contributions are contractually formalized, with precise definitions regarding eligible expenses, funding ratios, reimbursement conditions, and cost allocation keys. Particular attention must be paid to compliance with public funding regulations and IP ownership clauses.

Milestone-Based Tranche Financing

In clinical and biotech development, projects are highly dependent on predefined regulatory and scientific milestones. Financing is therefore commonly structured around tranche mechanisms, each conditioned upon the successful achievement of key deliverables—such as IND approvals, clinical Phase I/II results, or EMA/FDA designations. These milestones act as contractual triggers, enabling the staged commitment of financial resources while ensuring alignment between scientific progress and capital exposure.

Intra-Consortium Loan Contributions

As the project advances toward later-stage development or market authorization, members may opt to provide inter-party financing through shareholder loans or similar instruments. Such funding—often structured as shareholders’ funding or convertible notes—ensures continuity without altering ownership or governance balances. In biotech consortium, these contributions must be carefully documented, particularly when clinical trial liabilities or IP licensing are involved, to ensure traceability and avoid requalification risks under financial or tax regulations.

Accessing External Debt

Finally, external debt financing—though less common at the pre-commercial stage—can be mobilized once the consortium demonstrates technical validation and regulatory traction. Specialized lenders in life sciences (including venture debt funds or development banks) may intervene, subject to due diligence on IP portfolios, licensing arrangements, and revenue-sharing models. The presence of a strong consortium agreement and a tested internal financing framework are prerequisites to structuring such financings effectively.

A robust and phased financing strategy—starting with internal resource pooling, followed by milestone-aligned tranches and potential external debt—enables these ventures to navigate uncertainty while accelerating medical innovation.

Amicable Dispute Resolution

Are you exploring the world of consortium contracts? Discover the importance of amicable dispute resolution mechanisms in consortium contracts!

In the context of complex and ambitious collaborations required by consortium contracts, managing disputes is a critical aspect. Tensions and disagreements among consortium members can arise at any moment, whether concerning task execution, responsibility allocation, or contract clause interpretation. To ensure harmony and cooperation between partners, amicable mechanisms for dispute resolution hold particular importance, before they escalate to formal litigation.

This is particularly important to:

• Preserve business relationships between members: Poorly managed disputes can quickly damage relationships among consortium members. By opting for amicable resolution, parties engage in a constructive dialogue process that fosters mutual understanding and the search for solutions acceptable to all. This helps maintain a smooth and productive collaboration throughout the project.
• Reduce costs and delays: Disputes brought before courts or formal arbitration bodies are costly and time-consuming. In contrast, amicable mechanisms such as mediation or negotiation offer faster; less expensive and “win-win” solutions. This is a decisive advantage, especially in projects where time and financial resources are limited.
• Protect confidentiality: Disputes handled through public judicial procedures risk exposing sensitive or strategic information about the project. By incorporating amicable resolution mechanisms into consortium contracts, parties can ensure that discussions and solutions remain confidential, thereby protecting their respective interests and reputation.
• Keep the project on track: Unresolved or litigiously managed disputes can lead to significant delays in project execution. By promoting amicable resolution, consortiums minimize interruptions and ensure that common goals remain a priority, enabling effective project implementation.

Accordingly, consortium contracts should clearly specify mechanisms for amicable resolution. Here are key elements for an effective amicable dispute resolution clause:

• Define what constitutes a “dispute” under the contract to avoid ambiguity about when the dispute resolution mechanism is triggered.
• Establish a progressive resolution framework that may include:
  • Direct Negotiation: Direct negotiation involves a preliminary step where the disputing parties engage in open dialogue to resolve differences. It prioritizes transparency and mutual understanding, allowing parties to address concerns directly without intermediaries. Such negotiations often uncover the root causes of disagreements and pave the way for collaborative solutions.
  • Elevation to Executive Leadership: If direct negotiation fails to resolve the dispute, the next step is to refer the matter to the executive leadership teams of the respective consortium members. This elevation ensures that individuals with greater decision-making authority and a more comprehensive strategic perspective address the issue, thereby expediting resolution processes and fostering a more pragmatic, solution-oriented approach.
  • Mediation with a neutral third party: It represents a structured conflict resolution approach that introduces a neutral third party who serves as an impartial facilitator during discussions. Unlike arbitrator or judge, mediators do not impose a solution but rather guide participants through a collaborative process to explore options and reach mutually acceptable agreements. Mediation is particularly effective in resolving disputes with emotional or relational complexities, as the mediator ensures that communication remains constructive and focused.
  • Expert determination for technical matters: When disagreements involve complex technical issues, a neutral expert—chosen by all parties—evaluates the matter and issues a decision, often binding. This approach ensures disputes are resolved quickly and by someone with relevant expertise, helping to keep projects on track and maintain effective collaboration.
  • Arbitration as a final binding mechanism: Should initial efforts fail, simplified arbitration offers a structured yet expedient alternative to formal judicial proceedings. In this mechanism, parties agree in advance to abide by the decision of an arbitrator or an arbitral tribunal.
• Establish precise timeframes for each dispute resolution tier to ensure efficient progression and prevent unnecessary delays; The establishment of these structured timeframes serves to maintain momentum in the dispute resolution process, prevent tactical delays by either party and provide clear expectations for all stakeholders involved.
• Clearly specify the governing law and jurisdiction applicable to both the amicable resolution process and any subsequent formal proceedings.
• Include requirements for maintaining confidentiality throughout the dispute resolution process.
• Define and implement a comprehensive cost-sharing framework among all parties: Specify whether costs for negotiations, mediation, and any related proceedings will be shared equally, allocated proportionally based on each party’s involvement or responsibility, or borne by each party individually. Further, detail any procedures for handling ancillary expenses (such as travel, venue, and expert fees) to avoid ambiguity and ensure transparency throughout the resolution process.

By integrating these mechanisms into consortium contracts, parties can safeguard relationships, uphold confidentiality, and maintain efficient project timelines. The adaptability and effectiveness of amicable dispute resolution methods ensure that conflicts remain manageable and do not jeopardize collaborative initiatives.

Competition law in consortium agreements

A consortium is defined as a temporary grouping of two or more companies that pool their resources in order to carry out a joint operation. They are frequently used in calls for tender. Consortium agreements (CAs) must be examined under the rules of competition law. Here are the main points to bear in mind.

Determine the framework of the cooperation before any competitive analysis

It is important to determine the precise legal framework of the cooperation. Where the cooperation leads to the creation of a joint venture, it may fall within the scope of merger control – if it performs on a lasting basis all the functions of an autonomous economic entity and subject to certain turnover thresholds being exceeded. On the other hand, a cooperation arrangement governed by a CA will, a priori a priori of antitrust law, which is the subject of this analysis.

Identifying practices to be avoided in antitrust law

Depending on the type of CA, the main practices to be avoided in CAs in order not to fall foul of the prohibition on anti-competitive agreements may be as follows: concerted fixing of prices or margins, sharing of markets or customers, exchanges of commercially sensitive information other than that which is strictly essential to the purpose of the consortium, or limiting production or innovation. Beware also of excessive exclusivity or non-competition clauses.

This list is not exhaustive, and a precise competitive analysis will be required before entering into a CA. This analysis will differ depending on whether the parties to the CA are (current or potential) competitors or non-competitors. Depending on the outcome of this analysis, solutions could be put in place where appropriate, such as clean teams or effective confidentiality rules.

Determining the applicable exemption regime

A CA, particularly insofar as it includes an element of economic rationalisation, may qualify for the benefit of the block exemption, if certain conditions are met (in particular the market shares of the parties to the CA), so that it will not be prosecuted on the grounds of an anti-competitive agreement.

In practice, depending on its purpose, the CA could, for example, fall under Regulation 2023/1066 in the case of cooperation in research and development.

Determining whether there is a risk of abuse of a collective dominant position

Depending on the circumstances, a CA could serve as a vehicle for an abuse of a collective dominant position if it is used to foreclose a market or drive out competitors without objective justification.

A collective dominant position is established when the undertakings in question together have the power to adopt the same course of action on the market and to act to an appreciable extent independently of other competitors, their customers and, ultimately, consumers. This presupposes the existence of a collective entity and whether that entity holds a dominant position on a defined relevant market.

Cases of abuse can be wide-ranging, such as predatory pricing, discriminatory practices or exclusionary research and development.

It is therefore important to determine whether the parties to the CA could hold a collective dominant position in order to avoid possible abuses if this is the case.

Let’s work together to foster strong, collaborative partnerships that stimulate innovation and growth.

The Consortium and its tax dimensions

In a world where ambitious projects require diverse skill sets, tight coordination, and a fair distribution of risks, the consortium has emerged as a strategic and adaptable structure. It allows multiple companies or legal entities to temporarily collaborate to pursue a shared objective – whether building infrastructure, advancing research, tackling complex exports, or engaging in cultural or scientific partnerships. The Louvre Abu Dhabi, for example, was not built by a single French company, but by a Franco-Arab-Spanish consortium – offering a vivid example of the wide range of configurations possible.

The revival of Le Coq Sportif is also a compelling demonstration of what a well-structured consortium can achieve. Around entrepreneur Dan Mamane, several players with complementary expertise – financiers, industrialists, strategists – joined forces without merging their operations, to acquire and relaunch this iconic French brand, all without creating a new legal entity. This agile arrangement, approved by the Paris commercial court, exemplifies the power of the consortium model: a flexible and efficient form of contractual cooperation, with specific tax implications that remain widely underappreciated.

The Le Coq Sportif brand, a pillar of France’s textile heritage, was indeed recently acquired by a group led by entrepreneur Dan Mamane. The operation, approved by the Paris commercial court, is a textbook case of a consortium in action: several complementary partners – investors, industrial actors, and management experts – temporarily coming together to revive a struggling business while maintaining their own legal structures. The ambitious target: a return to profitability and €300 million in revenue by 2030.

Unlike a legal entity with separate personalities, a consortium is not an autonomous legal structure. It rests on a contract between distinct members, each maintaining their own corporate identity, rights, and obligations. This autonomy ensures valuable tax transparency.

Domestic Tax Considerations

Under French tax law, this transparency means that tax is assessed directly at the level of each member. If the consortium generates profit, each party reports its share in its own taxable income. In the case of losses, each member can offset their portion against their own taxable profits. This avoids double taxation while ensuring an accurate allocation of economic results among the participants.

The same principle applies to VAT: depending on the contractual arrangements, the consortium itself may be liable for VAT on third-party transactions, or the members may be required to self-account for VAT on internal operations.

However, this flexibility comes with requirements. The accounting and tax management of a consortium requires rigorous coordination—clear rules for profit-sharing, cost allocation, and loss attribution. Without precise terms, the risk of audit adjustments or disputes increases considerably.

International Tax Implications

At the international level, consortium structures raise even more complex tax questions. Chief among them is the recognition of cross-border tax mechanisms – particularly the ability to transfer losses between entities in different jurisdictions.

In a landmark ruling on 1 April 2014 (CJEU, Case C-80/12), the Court of Justice of the European Union held that the UK could not prevent British companies within a consortium from transferring losses between themselves solely because the consortium’s coordinating company was established in Hong Kong via a Luxembourg entity. The freedom of establishment required that this intra-consortium transfer not be obstructed – even across borders.

This decision echoed the earlier Papillon judgment (CJEU, 27 Nov. 2008, Case C-418/07), where the Court found that France had wrongly excluded a French company from a consolidated tax group simply because it was held through an intermediary based in another EU Member State.

These rulings affirm that fiscal coordination within a consortium can, under certain conditions, benefit from similar protection to those afforded to formally integrated tax groups.

That said, these European guarantees are no longer carved in stone. Since the UK’s withdrawal from the EU, the protective framework of EU law no longer automatically applies to consortiums involving British entities. For example, cross-border loss transfers may once again be disallowed under UK domestic law – significantly weakening the tax efficiency of such arrangements.

Litigation Risks and key Areas for attention

Despite their advantages, consortiums are not without risks—legal, tax, and operational.

• Direct attribution of losses – Each member bears its share of any losses, which may impact its taxable income and even strain its cash flow where losses are substantial.
• Complexity of management – The lack of a unified legal framework places a heavy burden on the precision of the consortium agreement. Ambiguities may trigger disputes between members or tax reassessments due to disagreements on the classification of flows or profits.
• Risk of recharacterization as a permanent establishment – Internationally, a French entity participating in a foreign consortium could be deemed to have a permanent establishment in the host country, potentially leading to local taxation. Likewise, the French tax authorities could recharacterize a foreign consortium with sustained activity in France as a société de fait (de facto company) and subject it to corporate tax accordingly.

Conclusion

The consortium offers an elegant model of economic and technical cooperation – well suited to the challenges of globalization. It combines legal flexibility with tax transparency, provided that it is carefully structured. Yet this contractual freedom also demands vigilance: in tax matters, every clause, every financial flow, and every execution location can have long-lasting consequences.

Where governance is unclear or member contributions are intermingled without clear rules, tax authorities may seek to recharacterize the arrangement as a de facto company – triggering complex legal and tax implications. Likewise, individuals or entities involved in managing, funding, or executing projects must assess their tax position early on: location of taxation, deemed distributions, or potential permanent establishment status can all quickly become contentious.

For international projects in particular, securing the consortium’s structure from the outset – with the support of seasoned advisors – is essential. While cooperation is the consortium’s beating heart, rigor is its shield against litigation.

The Tax and Private Clients team at UGGC regularly assists companies, entrepreneurs, investors, and institutions in the design, implementation, and tax security of their consortium-based projects.