2014 Legal Issues in
Higher Education
October 14, 2014
5a - Have Risk, Will Travel –
Part I: Managing the Business
Aspects of Study Abroad
Presented by: Seth F. Gilbertson, Associate Counsel, SUNY Office of General Counsel
On the Docket
• Foreign employment issues
• Foreign property leasing and acquisition
• Structuring financial transactions in support
of international activity
• Establishing relationships with partners and
providers
• Insurance basics
• Export controls basics
• Essential policies for overseas operations
Jacques files for his pension
The French Department has used Jacques
for 15 years as its local coordinator in
Provence. He works out of his home making
travel, sightseeing, and accommodations
arrangements in Southern France and Paris
for groups of students from your campus.
The Department considers him to be an
"independent contractor."
La pensionné
• Jacques informs your university that he
intends on retiring (at 52). Soon after, the
Ministère des Affaires Sociales writes to
demand that you make 15 years of pension,
health, and employment tax payments
(equal to 150% of Jacques’ fee per year).
• What do you do?
• What are your options if the employment
determination stands?
Foreign Employment Issues
• What are the options for employing an individual
(or individuals) in-country?
• Is there an option or model that makes sense?
– Is your institution legally and operationally capable?
– Can you afford it?
• How do you make your chosen model a reality?
– What legal arrangements need to be in place?
• A specific type of agreement?
• A specific legal structure of vehicle?
• What about U.S. workers overseas?
– Is there and appropriate dichotomy between locals
and expats?
Foreign Employment Solutions
• Require legal review of any foreign pay-forservice relationship
– Use reliable paymaster (PSA) and/or have local lawyer
review any arrangement
– Periodic review every couple of years
• Analyze the status of people you send from U.S.
to foreign countries (faculty exchanges and trip
leaders)
– Limit time in country and follow visa restrictions
• Consider using foreign partner institutions as
agents
– Look for consortiums and services agents
• Consider operating a separate U.S. affiliate
We've got a place in _____
• Your university rents a small suite with a
classroom, common area, and office in Provence
for groups of students to congregate, study, and
receive instruction while in Provence.
• Jacques was in charge of making the
arrangements and he signed the lease in his own
name.
• Now he wants to transfer it to the university.
• How can this be accomplished?
Foreign Real Estate Issues
• To lease or to buy?
– Is your use sustained and permanent enough for
either?
• Look out for programs that are dependant on one individual
or program
– How much flexibility do you need?
• Is there an appropriate vehicle available?
• Are the uses you intend
permitted?
• Is the cost prohibitive?
Foreign Real Estate Solutions
• Rethink the need and options
• Have any leases reviewed by local counsel or
specialty firm
• Do a competitive search
• Consider creating a U.S.-based holding corp
– Might be same as employment vehicle
• Look to foreign institutional partners or
consortiums
• Definitely have license-status reviewed
• Whose your agent?
Trust But Verify
Prof. Peril leaves for Moscow with a group of
architecture students in three days. While in
country, the students will use dorms and
classroom space at the Putin Friendship
University of Russia, a partner of your
institution. In the past, the School of
Architecture at your institution has simply used
an electronic funds transfer to compensate
PFUR.
doveryai no proveryai
• PFUR's bank says that the payment has been
"flagged" by the Ministry of Finance and cannot be
processed. As of the day of departure, the transfer
has still not gone through.
• Was a bank-to-bank electronic funds transfer
appropriate?
• While trying to help, you notice that PFUR's
website markets its relationship to your institution
and includes a prominent display of your
institution's emblem. When you ask Prof. Peril
about this, he casually states that "It's okay. I told
them they could do that."
Foreign Financial Transactions
• Look at major programs (employment, real
estate, etc.) but don’t forget the small trips
• Ensure that travelers both
– Have access to the necessary capital, including
emergency funds (cash), and
– Don't carry too much across boarders
• Bring in internal controls
• Use qualified accounting or consulting firm to
navigate regulations and transfers
– This shouldn't be too easy
Driving Us Crazy
Your college institutes a new "service learning"
program in Columbia, sending a group of nursing
students to a remote underserved area to
administer vaccinations. The program is run be Prof.
Selfless. The Nursing Department contracts with
Leave-It-To-Us, a tour provider that will handle all of
the necessary travel arrangements. Leave-It-To-Us
in turn hires Mr. Bus to take the students from
Medellin to the village where they will be staying.
Half way there, the bus breaks down.
Driving Us Crazy
• Mr. Bus is not bonded and apparently cannot
afford the necessary repairs.
• Calls to Leave-It-To-Us go unanswered. Apparently
their CEO, Ms. Selfless, is out of the country on
business.
• With the help of a Columbian faculty member, you
are able to arrange for another bus to pick up the
students in the jungle and take them back to
Medellin, but the cost is exorbitant.
• Nothing in the contract covers this scenario
• What do you do?
Affiliates & Providers
• Who to choose
–
–
–
–
Tour providers
Hotels
Transportation
Facilities
• What to look for
• How to contract
• Agreements with
foreign institutions
Choosing Providers
• Due Diligence
– Don't rely on faculty!
• Larger companies might not seem as
"authentic" or fun, but it's no fun to manage
an emergency with mom & pop
• Look for higher education experience
– We have needs!
• History can be invaluable
Choosing Providers
• Attempt to institute a competitive process
– Consider using a committee
• Academic, Risk, Legal and Business all have important
views here
– Use an RFP (or modified) if possible
– Get multiple quotes
• May require some flexibility in plans
– Look at multiple inputs
• Price is not determinative
What to look for
• Tour Providers:
–
–
–
–
Experience
Size
Credentials
Insurance
• Housing/facilities:
– Security
– Fire safety
• Transport:
–
–
–
–
Licensed
Bonded
Insured
No student or faculty/staff drivers!
Contracting
• Bind risk to control at every turn
– Indemnity
– Insurance
• U.S. law or local counsel
• Guarantees
– Locations (tour)
• Sites & hotels
– Timing
– Staff #s
– Licensure
Contracting
• Deposit, then increments
– Cost should be all-inclusive
– Consider taxes and other payments (gratuity, etc.)
• Institution pays
– Students never a party
• No kickbacks
– Including "free" faculty travel
• If college is unwilling to pay for a necessary element, trip
should be rejected
• Consider contracting for multiple trips
– Better rates and avoids search/negotiation process
Agreements With Foreign Institutions
• Avoid "agreements to agree"
– If you must, just keep it short and don't hard
commit to anything
• Start small, a few students, and expand slowly
• Choice of law & dispute resolution
– Your state
– Keep silent, or
– International arbitration (non-binding if possible)
• Governing language or equally-weighted
copies?
Agreements With Foreign Institutions
• Include intermittent termination options, but
make sure students in the program can finish
• Consider space, staffing options, and financial
transaction procedures (and currency)
• Be clear about who's responsible for license
issues
– This can get complicated quick if credit or degrees
are crossing boarders
• Create course equivalency chart
Insurance
• Too boring for a hypo?
• Four basic types:
–
–
–
–
Liability
Kidnap & Ransom
Health
Evacuation
• Important for employees to
have all four (depending on place)
• Students need health and evacuation (can be
combine)
• Make sure trip leaders know basics and have
contact info
Export Controls
• Goes beyond research
• Academic conferences becoming suspect
• Prioritize by country
• China and Russia first
• Then Eastern Europe and Middle East
• Maintain "clean" technology
• Look at incoming and outgoing
• Beware "deemed exports"
• I-140 section 6
• Consider engaging in outside expertise if you don’t have it
• Ripe for an audit or compliance review
Bonus Risk: Brand Maintenance
• Be like DisneyTM
• Not every school, department or professor
should be speaking on behalf of or granting
IP licenses to foreign "partners"
• Clarify that usual protocols apply abroad
• Register vigorously
• Include language in every contract
Policies you need
• No person goes overseas without approval
– Have self verification checklist (more in Part II)
• Tie to indemnification
– Tracking process is essential
– Include export controls questionnaire
• No money spent overseas without approval
– Centralize all international outflows
• Tie planning/approval to reimbursement
• Have procurements and contract authority sit
outside of academic or research area
– Require justification
– Require legal review
Discuss