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The University of Texas System10TH Annual Legal Conference – Austin, Texas

Establishing Educational Establishing Educational Partnerships OverseasPartnerships Overseas

Sue Snyder November 4, 2010

Jackson Walker, LLP100 Congress Ave., Suite 1100Austin, Texas 78701512-236-2240ssnyder@jw.com

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The International World Affects How We Live our Everyday Lives

Our Life to be . . . http://www.youtube.com/watch?v=d4laPqYea6w&feature=related

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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

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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

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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

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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

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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)

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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

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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)

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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.

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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

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Types of International Structures

Contractual Programs

vs. University SponsoredPrograms

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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.

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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

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Legal Issues to Consider

# 1# 1CAN 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.

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“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.

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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).

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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

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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

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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

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Legal Issues to Consider

# 2# 2What type of Arrangement is Preferable /

What is Available in that Country – Partnering with In-Country University– Outsourcing – Branch Office– Non-Profits– Etc.

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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

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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.

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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

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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”

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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

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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

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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

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Legal Affiliate

• Creating a foundation or non-profit entity • Members / Control Issues / Business Restrictions /

Funding Restrictions

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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.

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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

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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

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Legal Issues to Consider

# 3# 3EMPLOYMENT 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.

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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

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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

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Additional Considerations

• Certain countries REQUIRE entity establishment before hiring in that country

• Employment laws often cannot be waived• Compensation• Benefits• Termination Rights

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Additional HR Considerations

• Defense Base ActFederally Sponsored Institutions to purchase worker’s compensation for employees working oversees and others.

• Federal LawsTitle VII; Age Discrimination in Employment Act; Americans with Disabilities Act; but Fair Labor Standards Act

• Privacy LawsHIPPA, etc. European Union Data Protection Act. “Personal Data”

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Legal Issues to Consider

# 4# 4TECHNOLOGY / EXPORTS

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Technical Rules

• Technical Exchanges – Export Rules– Classification of data exchanges– Classification of research– Exporting of Computers etc.

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Export Controls

• ITAR -- International Traffic in Arms Regulations– USML (United States Munitions List)– Dept. of State– Very Strict– Military Matters– Also need to register

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Export Administration Regulations (EAR)

• Department of Commerce– Dual Use Items– Commerce Control List (CCL) vs. EAR99

• Need to Know– Item– Use– Country– User

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Exclusions Applicable to Universities

• Published Technology Generally accessible to the public in any form. Submitted papers etc.

• Fundamental ResearchIF the resulting information is published and shared broadly in a scientific community (but maybe not prepublication review, corporate involvement, etc.)

• Educational InformationCourse Catalogs

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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

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Legal Issues to Consider

# 5# 5IP MATTERS

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IP Matters

• Is any IP being created? – Who owns– Protection of Country– Government Laws– Compulsory Licensing

• Existing IP – Compulsory Licensing – Trademarks / names / usage

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Legal Issues to Consider

# 6# 6ANTI-BRIBERY

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Foreign Corrupt Practices Act (FCPA)

Giving anything of Value (including a promise or authorization) to a Foreign Official with 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.

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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

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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

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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.

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Exceptions / Affirmative Defenses

• Grease Payments for “Routine Government Action”• The Payment is lawful under written laws and

regulations of the foreign country• Reasonable expenses to promote performance of

contract or display services

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Anti-Bribery Special Note

Numerous Other In-Country Anti-Bribery Statutes

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Legal Issues to Consider

# 7# 7NUMEROUS OTHERS

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Liability Protections

• Many Countries Do Not have Non-Profit or Public Entities (tax problems)

• Sovereign Immunity Issues• Choice of Law / Choice of Forum• Type of Legal System / Legal Environment• Enforcement• Foreign Sovereign Immunities Act – here in the U.S.

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Others

• Real Estate• Insurance• Health and Safety• In Country Administrative Rules• Banking/Funding/Money Conversions

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Heaven is where the police are British, the cooks are French,

the mechanics are German, the lovers are Italian and everything is organized by the Swiss.

Hell is where the cooks are British, the mechanics are French,

the police are German, the lovers are Swiss, and everything is organized by the Italians.

Final Thoughts… All Countries are Different

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The University of Texas System10TH Annual Legal Conference – Austin, Texas

Establishing Educational Establishing Educational Partnerships OverseasPartnerships Overseas

Sue Snyder November 4, 2010

Jackson Walker, LLP100 Congress Ave., Suite 1100Austin, Texas 78701512-236-2240ssnyder@jw.com