Published on: Jun 3, 2022

Joint Venture EAC and
Robowatch

As part of our ongoing research into European joint ventures in Europe, Datenna decided to highlight and research remarkable cases. This case considers the joint venture set up by the German Robowatch Robotics Group.

Joint Venture Cases

Short read

  • The joint venture Beijing Chiyi Unmanned Digital Perception Technology has been established in 2007 and sees the cooperation between the German Robowatch Robotics Group, North Navigation Control Technology, the main shareholder, and other Chinese investors.
  • The foreign partner is a German company that makes software solutions for service robotics and Development services for robotic vehicles.
  • The Chinese state influence in the joint venture is labeled as high.
  • North Navigation Control Technology Co.,Ltd. is a provider of military scientific research systems and products. Among the main shareholders of this company we can find the China Soldier Investment Management Co., Ltd. which is heavily involved in the country’s military sector

The core business of the new established joint venture is mainly the research and development of intelligent robot technology and the production of intelligent robot products.

The Joint Venture Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd

Beijing Chiyi Unmanned Digital Perception Technology Co., Ltd. is a joint venture which core business is mainly the research and development of intelligent robot technology and the production of intelligent robot products.

The company has been established in 2007 and is a cooperation between the Chinese North Navigation Control Technology Co., Ltd and the German Robowatch Robotics Group which activities revolve around the development of software solutions facilitating automated production for small and medium manufacturers. The German company holds 27% of the shares within the joint venture an absolute minority share within the entity. The registered capital of the joint venture is 1.0M euros.

Links with the Chinese Military sector

The Chinese main partner, which holds 45% of the shares, is North Navigation Control Technology Co.,Ltd., a state-owned enterprise. The company has a registered capital of € 193.6 million, and strongly focuses on military scientific research systems. North Navigation Control Technology Co.,Ltd., is controlled by two main shareholders.  The first being the North Navigation Technology Group Co., Ltd. directly owned by China North Industries Group Co., Ltd, which is in turn the nation’s backbone of the army’s mechanization, informatization and intelligent equipment development.

The second shareholder is “Zhongbing Investment Management Co., Ltd”, which can literally be translated as “China soldier investment management”, which is an investment vehicle for China North Industries Group Co., Ltd. North Navigation Technology Group Co., Ltd. is in the end controlled by the State-owned Assets Supervision Commission(SASAC) of the State Council. There is, however, a second significant Chinese partner in the Joint Venture, which is the Chinese General Department for Ordnance Industry Systems. The latter is a research institute for Chinese military technology, founded in 1982. Together, North Navigation Control Technology Co., Ltd. and the Chinese General Department for Ordnance Industry Systems account for 65% of the shares in the joint venture, leaving the German parties with a minority share. Considering that the ultimate beneficial owner of the North Navigation Control Technology Co., Ltd. is the SASAC of the State Council, the state influence within this joint venture is high.

The threat of technology transfer

Technology transfer

Despite the registered capital of the joint venture being relatively small, in total 1M euros, the critical technology managed within the entity is an element that could easily lead to concerns on technology transfer. It is important to note that the Intellectual Property Rights (IPR) developed within a joint venture agreement generally belong to the jointly funded entity. In this respect, the minority partner is granted with only a little amount of control over the know-how and IPR resulting from the cooperation.

Moreover, when a state-owned company is heavily involved in the joint venture, there are reasons to believe that the Chinese government has a strategic interest in the joint venture and the IPR of the foreign company. In this case, where even military actors are involved, and the foreign partner just holds a minority of the shares, concerns arise whether the foreign company’s IPR’s could be transferred to the Chinese military.

Increased foreign investment protection

The new Foreign Investment Law of China was issued on January 2020 and improvements have been made in the protection of foreign investment within the country. In terms of investment protection, the main breakthrough in the field of IP rights is the facilitation of the settlement on IP disputes and a broader protection of foreign investors’ IP rights, as stipulated by article 23. In particular, the law prevents forced technology transfer practices and requires authorities to take measures to protect trade secrets that the foreign partner might disclose when cooperating within the joint venture agreement scope. At the same time, the process of technology transfer is difficult to determine or prevent, and it is usually part of a tacit agreement between the two parties in order for the foreign party to gain access to the Chinese market.

Robowatch Robotics Group is going to be used for North Navigation Technology Group’s activities in the Chinese military sector. It is undeniable though that holding a minority share means occupying a weaker position within the cooperation, which could potentially expose the foreign firm to know-how extraction activities.