What is a Consortium and what types and forms of consortia exist?

Cooperation between equal legal persons

A consortium is a temporary association of equal, economically and legally independent persons. As so-called consortia, these legal entities agree on the implementation of a joint project. The legal form of a consortium – also known as syndicate – in Germany is regulated in $705 et seq. of the German Civil Code (Bürgerliches Gesetzbuch – BGB); accordingly, a consortium is also referred to as a BGB company. 

Consortium types

Two types of consortia can be distinguished:

  • the external consortium or the open consortium, in which all consortium members are known and the consortium agreement is concluded between the joint client and all consortium members.
  • the internal consortium or the silent consortium, in which all consortia enter into an equal business relationship with the customer or client, but the consortium as a whole is generally represented externally by only one of the consortia – the so-called consortium leader – in a legally binding manner. The latter is often entitled to conduct negotiations on behalf of the consortium, to make agreements, to distribute tasks between the partners or to issue invoices to the customer.

In practice, the differences between external and internal consortia are fluid, because even in the case of an external consortium it makes sense to appoint a consortium leader for the purpose of efficient communication with the customer. Irrespective of the type of consortium, the services and capabilities that the consortia bring to the partnership must be agreed individually.

Consortium - which services and capabilities the consortia will contribute must be agreed individually.

Consortium forms

In addition to the types, there are also different forms of consortia:

  • In the case of a bidding consortium, the consortium tries to win the contract for a service put out to tender, often in the form of a tender.
  • In the case of a bank consortium, the syndicates try to establish joint project financing with simultaneous risk minimisation or risk distribution.
  • In an industrial consortium, consortia from one industrial sector work together and define standards, for example. Examples include the World Wide Web Consortium (W3C), the Object Management Group (OMG) and the HR Open Standards Consortium.

In the case of public-sector construction contracts, individual companies are often asked to form a consortium in order to guarantee the required capacities and securities. In the construction industry, these consortia are referred to as ARGE (which stands for the German term Arbeitsgemeinschaft).

In reality there are consortia in many sectors and industries. For example, there is a consortium

  • for distributed server storage,
  • of the Swiss university libraries,
  • for networked cars,
  • for organic plant breeding
  • for Translational Cancer Research,
  • for fuel cells,
  • for German Climate,
  • for open high-performance interconnect

The list can be easily extended. This alone indicates that the consortium is a popular instrument for cooperation between equal, economically and legally independent persons.

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