The University of Texas System10TH Annual Legal Conference – Austin, Texas Establishing Educational Partnerships Overseas Sue Snyder November 4, 2010 Jackson Walker, LLP 100 Congress Ave., Suite 1100 Austin, Texas 78701 512-236-2240 firstname.lastname@example.org
The International World Affects How We Live our Everyday Lives Our Life to be . . . http://www.youtube.com/watch?v=d4laPqYea6w&feature=related
Texas Today Texas is in the Top 3 in the Nation for Total Business & Academic R & D Texas has 2x the U.S. Average of Fully Bilingual Professionals in the Workplace Texas is the #1 Exporter – By Far $160B 95% of Retail and Commercial Consumers Live Outside the U.S. Texas Exports generates 500,000 jobs
More Texas Statistics Texas is in the Top 2 for Receipt of Foreign Direct Investment 2008: Texas Received over $22 Billion 2008 Monies Created 5500 New Jobs 2003-2008: Over $93 Billion Texas Leads U.S. in EU Commercial Property Investments (About $51B) Foreign Companies Employ 5.1 Million Americans 200,000 Texans work for European Companies 50,000 Texans work for Latin American Companies
University International Facts More than 600,000 International Students are here in the U.S. (See Open Doors 2009 Report) Total foreign students increased 8% in 2008/2009 Year (largest percentage increase since 1980) New enrollments up by 16% India increased by 9%; China by 21% There is now a Record Number of International Students in U.S. Higher Education
University International Facts More than 250,000 U.S. Students Study Abroad (See Open Doors 2009 Report) Overseas Study by U.S. Students is up by 8.5% and has increased 4X in the past two decades American Students are Heading to LESS Traditional Places Strong Rise in China, India, Japan, South Africa, Argentina
Texas’ International Student Statistics During 2009: Texas was 3rd in total Number of International Students The University of Teas was the 7th largest University with regard to Number of International Students (5,703) Texas’ Increase was double digits (NY and Calif. single)
International Program Changes Traditionally, top universities built their international presence through study-abroad programs research partnerships faculty exchanges joint degree programs offered with foreign universities. Overseas branches are now on the rise, but are considered RISKIER
Why are Universities Increasing International Structures? Scholars Note: Attract Top Research Talent Attract Grants Product Patents Raise Profile Build International Relationships Increase International Students (end of baby boom)
Universities Surveyed Tell Us Reasons to Increase International Presence Recruitment of Talent and Students (28%) Growing Reputation Abroad (26%) Increased Linkages with Universities Overseas (19%) Additional – Sharing research, access to top scholars, additional funding and grants, etc.
What are the Risks? New York Times Piece 2009 (Michigan Student Commentary) Lack of Due Diligence NY Attorney General Investigation Failures (Not Achieving Objectives, Campuses in Trouble) Legal Implications
Types of International Structures Contractual Programs University Sponsored Programs vs.
Contractual Programs Outsources aspects of overseas programs Overseas institution or domestic study abroad providers organize the program Can be used for previously University Run programs trips, internships, language immersion, etc. EASIER to control legal, administrative and liability aspects.
University Sponsored Programs Organized, operated and maintained by the University with little outside assistance. Short term faculty led trips Traditional study abroad programs (10 weeks with academic credit) Language immersion programs No outside entity involved in design or delivery GREATEST DEGREE of legal, administrative and liability risks
Legal Issues to Consider # 1 CAN YOU ENTER INTO AN INTERNATIONAL ENDEAVOR WITH THIS ENTITY OR COUNTRY? (different than should you) due diligence on reputation, risks, benefits, financial stability, shortfallings, etc.
“Bad Boy Lists” • Denied Persons List A list of individuals and entities that have been denied export privileges. Any dealings with a party on this list that would violate the terms of its denial order is prohibited. • Unverified List A list of parties where BIS has been unable to verify the end-user in prior transactions. The presence of a party on this list in a transaction is a “Red Flag” that should be resolved before proceeding with the transaction. • Entity List A list of parties whose presence in a transaction can trigger a license requirement under the Export Administration Regulations. The list specifies the license requirements that apply to each listed party. These license requirements are in addition to any license requirements imposed on the transaction by other provisions of the Export Administration Regulations.
More “Bad Boy Lists” Specially Designated Nationals List A list compiled by the Treasury Department, Office of Foreign Assets Control (OFAC). OFAC’s regulations may prohibit transaction if a party on this list is involved. In addition, the Export Administration Regulations require a license ofr exports or re-exports to any party in any entry on this list that contains any of the suffixes “SDGT”, “SDT”, “FTO”, “IRAQ2” or “NPWMD.” Debarred List A list compiled by the State Department of parties who are barred by §127.7 of the International Traffic in Arms Regulations (ITAR) (22 CFR §127.7) from participating directly or indirectly in the export of defense articles, including technical data or in the furnishing of defense services for which a license or approval is required by the ITAR. Nonproliferation Sanctions Several lists compiled by the State Department of parties that have been sanctioned under various statutes. The Federal Register notice imposing sanctions on a party states the sanctions that apply to that party. Some of these sanctioned parties are subject to BIS’s license application denial policy described in §744.19 of the EAR (15 CFR §744.19).
Embargoed and Sanctioned Countries Balkans Belarus Burma Cote d’Ivoire (Ivory Coast) Cuba Democratic Republic of the Congo Sanctions • Iran • Iraq • Former Liberation Regime of Charles Taylor Sanctions • North Korea • Sudan • Syria • Zimbabwe
Anti-Boycott Laws A boycott is an agreement to stop doing business with, selling to, transacting with, or discriminating against another country Middle Eastern countries seek a boycott of Israel in their contracts This request may be found in bid invitations, contracts, letters of credit, MOUs, or verbal representations
Examples of Boycott Language & Other Restrictions “We are fully aware of the Syrian legislation concerning the boycott of Israel and undertake to comply with it.” Commerce Reporting / Tax Implications Request for Description of Business with Israel is reportable
Legal Issues to Consider # 2 What type of Arrangement is Preferable / What is Available in that Country Partnering with In-Country University Outsourcing Branch Office Non-Profits Etc.
Affiliation Agreement Collaboration Student Exchanges/Faculty Exchanges/Scholars in Residence/ teacher training/Professional and Technical Training. Very specific to Goal of Collaboration Contractual Issues Indemnity Choice of Law Enforcement IP Ownership
Third Party Provider Agreement Consortia to allow range of programming options for all students Usually administered by Study Abroad Provider Organizations Agreements shall address full range of issues such as who is providing insurance, admission criteria, admission of new universities, billing, indemnity, etc.
Foreign Investment Company Set up by Various Countries Could Require a Large Investment to begin May need funds to continue Tax issues remain and look at legal print Same legal issues to be discerned as for Affiliation Agreements Depends on Political and Economic Landscape of the Country
Direct Registration Register as a Foreign Entity Some countries allow filing a sample form with the Government (such as Ministry of Foreign Affairs, Ministry of Foreign Investment, etc.) Required Documents Often Include Charter Documents, Tax-Exempt Letter, Lists of Activities Liability should be Assessed May Not be Able to “Do Business”
Representative Office / Liaison Office Allowed in Many Countries Usually used for companies testing the waters to see if there is a market for their products. Restricted Activities but there are benefits Tax exempt sometimes Some countries say you can’t carry on Business Often good for a few employees on the ground to facilitate a program with the host university
Branch Office Not a separate entity One step up from a Representative Office Can Do Business Extensions of home entity with no independent legal existence Assets at Risk Risks – Tax Matters Often treated as In-Country Entities Education Registration could be very slow
Wholly-Owned Domestic Entity Types In Country / Tax Exempt Entities (non-profits) Government Requirements In-Country Involvement Ownership shares/IP etc/Directors etc. Registration Requirements Full Blown Entity with all issues pertinent thereto Board Resolutions / Powers of Attorney / Notary / Etc. Year long process
Legal Affiliate Creating a foundation or non-profit entity Members / Control Issues / Business Restrictions / Funding Restrictions
Non-Governmental Organization DEPENDS ON TYPE OF WORK BEING DONE Usually an easier creation Frequently exempt from VAT Duties/tariffs, Importation of Funds, Eased ex-pat rules, etc.
Memoranda of Understanding (MOUs) Usually something with a overseas government entity Sometimes assists in setting up business Sometimes required Comes in all shapes and sizes
Bottom Line Type of Structure will Depend on Numerous things Activity (student/faculty exchange, joint research, joint teaching, share grants, issue degrees, etc.) Length of Venture or Stay in Country Country/Host Institution Available Structures Minimization of Liability EVERY ARRANGEMENT WILL BE DIFFERENT
Legal Issues to Consider # 3 EMPLOYMENT MATTERS Assessment of issues relative to ex-pats, in-country hires, etc. As soon as you send someone over to perform work, or hire someone, you need to assess the laws.
University Employee Working in the Host Country Legal responsibility to register / Business Structure Working Permits Tax Implications (you and them) Liability Implications Immigration / Visa Issues Insurance Issues Banking Issues – NACHA Taking Laptop, data etc – Export Rules
Employment Law – Country Specific Employment Law in other Jurisdictions often seems to Not Make Sense Differences between hiring locals, expats, etc. Employment Agreements / Direct Hire Agreements
Additional Considerations Certain countries REQUIRE entity establishment before hiring in that country Employment laws often cannot be waived Compensation Benefits Termination Rights
Additional HR Considerations Defense Base Act Federally Sponsored Institutions to purchase worker’s compensation for employees working oversees and others. Federal Laws Title VII; Age Discrimination in Employment Act; Americans with Disabilities Act; but Fair Labor Standards Act Privacy Laws HIPPA, etc. European Union Data Protection Act. “Personal Data”
Legal Issues to Consider # 4 TECHNOLOGY / EXPORTS
Technical Rules Technical Exchanges – Export Rules Classification of data exchanges Classification of research Exporting of Computers etc.
Export Controls ITAR -- International Traffic in Arms Regulations USML (United States Munitions List) Dept. of State Very Strict Military Matters Also need to register
Export Administration Regulations (EAR) Department of Commerce Dual Use Items Commerce Control List (CCL) vs. EAR99 Need to Know Item Use Country User
Exclusions Applicable to Universities Published Technology Generally accessible to the public in any form. Submitted papers etc. Fundamental Research IF the resulting information is published and shared broadly in a scientific community (but maybe not prepublication review, corporate involvement, etc.) Educational Information Course Catalogs
Deemed Export Rule Release of technology to a foreign national (one who is not a permanent resident) even in the U.S. is a “deemed export” Looks at foreign national’s most recent country of citizenship or residency
Legal Issues to Consider # 5 IP MATTERS
IP Matters Is any IP being created? Who owns Protection of Country Government Laws Compulsory Licensing Existing IP Compulsory Licensing Trademarks / names / usage
Legal Issues to Consider # 6 ANTI-BRIBERY
Foreign Corrupt Practices Act (FCPA) Giving anything of Value(including a promise or authorization) to a Foreign Officialwith Knowledge of or Intent that some or all of the gift is for the purpose of Influencing the Foreign Official to assist in obtaining a Business Advantage for the Covered Person making the payment.
Foreign Official Officer, Employee or other person acting in an official capacity for: A foreign government Any department, agency or instrumentality of a government Any quasi-governmental entity and corporation owned or controlled by a foreign government (parent corporations) Any Public International Organization (i.e. UN, etc) Any Foreign Political Party Candidate for Foreign Political Office
Covered Persons U.S. Citizens U.S. Residents U.S. Visitors who commit bribery while in U.S. U.S. Corporations, Partnerships or other Businesses Foreign Subsidiaries of U.S. Businesses if U.S. Company owns 50% or More
Additional Covered Persons Other Corporations, Business Organizations with a Principal Place of Business in the U.S. Other persons if they participate in a prohibited activity as an officer, director, employee, representative (including stockholder acting on behalf of the company) or agent of any U.S. business.