International Contracting Issues: Getting to the Nuts and Bolts

International Contracting Issues:Getting to the Nuts and Bolts Minnesota State Colleges and Universities CAO, CSAO and Deans Spring Meeting 2013 Mary Al Balber, Assistant General Counsel Kris Kaplan, Deputy General Counsel

Overview • Pre-contracting considerations • Types of international agreements • Elements of good contracts • Applicable system policies and procedures • Special topics for international contracting

Board of Trustees 2010-2014 Strategic Plan MnSCU and the State Operate in GLOBAL Environment Goal 2.2 requires graduates to have “strong, adaptable, globally competitive and flexible skills.” Strategic Direction 3: Provide learning opportunities, programs and services to enhance the global competitiveness of the state.

International Activities Long-Established: • Hosting international students and scholars on MnSCU campuses; • Study abroad • Faculty-led or 3d party provider Other types of international agreements and collaborations on the rise . . .

Some Examples of System Internationalization Initiatives • Memoranda of Understanding (MOU) • Faculty/student exchange programs • Institution-wide or program-specific • Joint degree programs • Delivery of courses or training abroad in collaboration with foreign institution • Delivery of courses or training at MnSCU campuses for international clientele

International Income/Customized Training Contracts • Require customized legal advice and are not included as part of this presentation. • Possible issues include: • tax consequences • employment/employee issues • “business presence” • legal requirements/regulations of foreign countries • Contact system legal counsel early in the planning process if considering any international income/customized training business transactions.

Put Globalization into ContextA Vision Thing • Internationalization Strategy • Goals grounded in college or university mission and core values • Defined benefits for students, faculty, community culture and economic development • Internationalization Plan • Study abroad; curriculum development; student recruitment and services • Collaborative agreements

International Agreements • Strategic Framework • Rationales, goals • Priority regions, programs, issues • Alignment with current academic offerings • Program Decisional Guidelines • Further mission, core values • Aligned with internationalization strategy, plan, partnership framework • Build in sufficient time for legal review, if needed

Take a Hard Look: • “Due diligence” review of proposed collaborator: • Who is this? Private or public? • Have necessary resources to launch and sustain or even expand partnership? • How strong is their commitment? • Track record? Other U.S. Institutions—have you inquired? • Academic reputation? • Culture, economics, politics of country?

The Minnesota State Colleges and Universities Employee Code of Conduct Code of Conduct – conflict of interest issues in selection process? Remember that system contract procedures apply Our Code is a compilation of various existing statutes and policies that govern employee conduct. Adopted as a system procedure http://www.mnscu.edu/board/procedure/1c0p1.html Frequently Asked Questions are linked on the above website. Effective July 1, 2008

Why Is Employee Ethical Behavior Important? • We are obligated to comply with law. • Violations can result in • Criminal penalties; • Employment sanctions-including termination

International Agreements • Most common in system: • MOU or MOA • Exchanges • Study abroad service providers

Memorandum of Understanding • A formal agreement between two or more parties • Generally, not legally binding but they carry a degree of seriousness and mutual respect • Does not involve the exchange of money or resources • Sets out the parties’ mutually accepted expectations to carry out common objectives • Stronger than a handshake agreement • Often, MOUs are the first steps towards a legal contract • Sometimes required by other party (or government) to begin discussions of more substantive relationship

How are Contracts Different? • The legal definition of a contract is: An agreement between two or more persons/institutions that creates an obligation to do or not to do a particular thing. • Usually a document that is recognized by courts of law and grant substantial rights to both parties. If either party defaults on the conditions stated in the document, the other party can file a case for breach of contract and seek damages. • MnSCU contracts should address: purpose, payment, business terms and responsibilities, term of agreement and termination, intellectual property, jurisdiction, legal requirements, liability, insurance and other important provisions intended to protect you.

International agreements other than MOUs should be treated as contracts • System policies and procedures apply • Use system templates where available, or seek assistance in crafting amendments if vendor contracts are used • Campuses need procedures for processing any international agreement that include • Timely review of terms • Appropriately authorized signatures

Typical International Exchange Agreements Might Include: • Identification of the campus contact and unit that will be responsible for administering and implementing Agreement; • Description of the activity to take place under the proposed exchange Agreement; • Identification of College/University Resources to be utilized; • Duration of agreement, termination provision • Description of any other campus commitments required. • Financial obligations - including tuition support benefits, teaching or research assistantships, travel expenses, housing, medical insurance coverage, or maintenance allowances - must be specifically stated in the agreement. If no such commitments are intended, a general provision should make this clear.

Procedure 5.14.2 Consultant, Professional or Technical Services • Contracts must be prepared on forms approved by the system office to assure that they include all state required contract language. Any modification of forms approved by the system office or the use of a non-system office form requires the review of the system legal counsel and approval of the vice chancellor-chief financial officer.

Essentials of a Written Contract • Clarity, completeness, and common understanding is essential; • Supersedes previous oral discussions or “how we’ve always done it;” • After contract signed, if wish to change it, conversations or e-mails to change the contract are not sufficient. Changes to contracts (amendments) must be in writing and signed by the parties; • Contract must be signed before (!) the parties begin performing duties under the contract • Good practice and state law requires • Good contracts are preventative care: • Easier to work out issues before signing contract than to leave things unaddressed or “silent” and risk breaching the contract and/or litigation later.

Access Approved Contract Templates Here!(Your FIRST stop for a Contract -- Bookmark!) • MnSCU Finance Contracts website: • http://www.finance.mnscu.edu/contracts-purchasing/contracts/index.html • What Contracts/Agreements are on the Site: Hotel Contract* Professional/Technical* Prof./Tech. Amendment* Services Contract* Guest Lecturer* Joint Powers* Inter and Intra Agency Agreements* Various Lease Agreements* Maintenance Service Master Contract* Occupancy/Facility Use Agreements* Clinical Affiliation Agreements* Income and Customized Training* Payment Card Industry (PCI) Amendment Template…and more!! • MnSCU Board Policies and Contract and Procurement Procedures: • http://www.mnscu.edu/board/policy/index.html • Board Policy 5.14 Procurement and Contracts • Procedure 5.14.2 Consultant, Professional or Technical Services • Procedure 5.14.5 Purchasing

Request For Proposal - Resources • MnSCU Request for Proposal Template http://www.finance.mnscu.edu/contracts-purchasing/contracts/forms/index.html • Additional links and documents near bottom of Contracts page: • Procurement dollar threshold table (.pdf) (52KB) March 2010 – Office of General Counsel • Request for Proposal Template(.pdf) (155 KB) Updated: 2009

Not a MnSCU Form or Template? College/university must review for essential elements, prohibited provisions, practicality and business decisions, logistics; Don’t assume that a provision suggested by a party can not be changed or modified; If other party wants to use its contract form, consult with MnSCU Office of General Counsel or Attorney General’s Office for legal review and possible negotiation and recommended changes, or drafting addendum or amendment; Avoid “We’ll sign yours, if you’ll sign ours.”

Lead Time • Plan accordingly – expect the best andplan for the worst • Use system templates and forms • Allow time for negotiation, especially with foreign entities • Answer questions: WHO, WHAT, WHEN, WHERE, HOW MUCH, MISSION RELATEDNESS, BENEFITS TO CAMPUS/MNSCU • Not every contract can be an emergency

Consideration and Terms of Payment • Compensation (Negotiate cost savings. It’s okay.) • By deliverable or task, when possible • Include rate of pay, how much for the services listed in the duties – in US dollars • Avoid a “lump sum” contract if possible-instead break down budget as much as possible (helpful for tracking dollars if there is a dispute) • Reimbursement of travel and subsistence expenses • Vendor’s expenses need to be identified before the contract is written and included in the total cost • Per diem defined by Commissioner’s Plan • Terms of Payment- “prompt payment” • Agree to pay 30 days after invoice is received • Ensure we are not prepaying for services unless otherwise permitted

Encumbrance** Mn. Stat. 16A .15 Subd. 3 • Has work/travel/obligations begun prior to contract’s full execution? That is not allowed, per Minnesota Statutes MS16.A.15. • Process an MS16A.15 Form, found at: http://www.finance.mnscu.edu/contracts-purchasing/contracts/forms/index.html #1 • No signed contract without encumbrance • Payment made in violation of statute is illegal • Statute says: Employee authorizing payment is liable to the State for amount paid. • Statute says: If an employee knowingly incurs an obligation or authorizes or makes an expenditure or payment in violation of statute, the violation is just cause for removal.

Delegation of Authority • Board Policy 1A.2.2 http://www.mnscu.edu/board/procedure/1a02p2.html • Process and forms on Finance website http://www.finance.mnscu.edu/about/delegationofauthority/index.html • Must have delegated authority to sign contracts to legally bind college/university

Indemnification And Liability • Be alert for sections in other parties’ contracts headed: Hold Harmless; Indemnification; Limitations on Liability; or Liabilities. Indemnification: a provision in the contract in which one party agrees to pay damages or claims that the other party may be required to pay to another. Hold Harmless: a type of indemnity provision or clause that would require one party to fully protect the other party from a claim asserted by another. This may also include payment of costs and/or attorneys fees. • Colleges and universities prohibited by law from agreeing to indemnify the other party to a contract (reference: Minnesota Constitution article XI, section 1 and Minnesota Statutes section 16A.138). Minnesota Statutes prohibit insurance of an obligation without an encumbrance and the Minnesota Constitution provides that no money is to be paid out without an appropriation.

Insurance • All contracts generally require liability insurance • Check with risk management for requirements for your proposed activity: Keswic Joiner at 651 201-1778 keswic.joiner@so.mnscu.edu or Marlys Williamson at 651 201-2591 marlys.williamson@state.mn.us • Study abroad health insurance: MnSCU has a contract with HTH for health/accident insurance for travel abroad that may be purchased; contact Keswic Joiner for assistance in accessing information about that policy.

Data Issues • Often, a CONTRACTOR will ask that MnSCU promise to maintain the confidentiality or even the terms of the contract itself. • We can’t do that unless the materials in question are classified as private, confidential or protected nonpublic under the Data Practices Act. • Include provisions to protect system IP, where applicable, including college/university name, logo • Require vendor to obtain release from individuals for use of their photos.

Amendments, Addenda and Exhibits When parties want to modify terms of existing contracts: A superseding Amendment or Addendum is drafted - May modify, add, or supplement existing contract; Signature and date by authorized representatives of both parties needed for validity; Amendments/Addenda reference existing contract, and state how it is changed; (cont.)

Exhibits • Sometimes parties refer to Exhibits and incorporate them by reference so that the exhibit is part of the contract, e.g.: “Exhibit A, attached herein, and is incorporated by reference in its entirety as part of this Agreement.” • Frequently used to describe details of responsibilities or other matters too lengthy or complex for the contract, such as exchange agreements. • AVOID attaching Vendor’s proposal or Vendor’s contract and incorporating it by reference. WHY: Often contains terms and language in conflict with agreed upon contract; includes other terms not negotiated; is not specific in detail (“happy language”); or includes terms that MnSCU is prohibited from agreeing to.

Frequently-Noted Issues • Study Abroad Vendors • “Free” travel, incentives offered to faculty • Pre-payment for services • Indemnification • Publicity • Insurance

Frequently-Noted Issues • Exchange Agreements • Use of term “partner” • Visa assistance • Homestays – if considering offering for incoming students, or if incoming students may be minors, seek legal assistance • Keep control of academic standards • Clearly assign responsibilities • Choice of law/jurisdiction • Contract in another language

Internal Campus Considerations For International Contracts • Understand/formalize and communicate campus review and approval process for international agreements • How do others find current agreements • Consider internal brief reporting summarizing activity for previous two years (if five year contract) or previous year, including plan for remaining years of contract • What are the exchange numbers for each year? Has it been reciprocal? • Could other programs at campus or MnSCU benefit from participating? How?

Contracting Best Practices • Use most current template directly from Finance website each time you draft to avoid use of outdated forms. Never modify or omit required clauses without AGO or OGC review. Ensure no changes are made. If there are changes proposed by other party, contact our office. • Understand your internal campus contract process for reviews, approval, and contract management and post contract evaluationor monitoring. This sometimes involves multiple departments and system office. • Follow the template instructions, proofread, check your math, and delete any instructions. • Ask: Does this make sense and would be clear to others unfamiliar with the contract ? • Never modify or omit required clauses without AGO or OGC review. Ensure no changes are made. If there are changes by the contractor, contact our office. • Don’t agree to jurisdiction in another state or country without further legal review and approval. • Be alert to attempts by the other party to change MnSCU contract template language to limit their liability. Never modify or omit the required liability or insurance clause without AGO or OGC review. • Don’t agree to indemnify the other party or to a mutual indemnification clause. • Avoid “we’ll sign yours if you sign ours.” • Avoid appearance of “junkets” with student or public resources and or funds.

International Contract Additional Considerations • Ensure foreign party is properly identified and full address included in MOU or contract. • Specify all payments in U.S. Dollars if contract is performed or payable outside U.S. • Ensure transparency in contract process (arms length transaction) • Any export control/ITARs issues-contact system legal counsel • Ensure term and termination, and any renewal process identified and understood • Ensure compliance with MnSCU travel policy and State Dept. • Limit use of highly technical terms and jargon • Spelling, formatting, grammar, punctuation, and general appearance of document are professional and accurate • Sufficient lead time for review and approval of campus units and legal counsel

Consult Legal Counsel When . . . • No MnSCU template is available • Or the activity requires adding new provisions or changing standard language • Using third party’s template – even if an MOU • To ensure provisions are legally appropriate • If contemplating an activity that raises foreign presence or operational legal issues

Helpful Contracts Coming Soon! • “Sample” Memorandum of Understanding with (Foreign) Affliliate Institution • “Sample” International Services Contract • Posting/Access location to be determined on website. • Contact General Counsel’s Office if needed.

Resources MnSCU Finance Contracts website: http://www.finance.mnscu.edu/contracts-purchasing/contracts/index.html MnSCU Board Policies and Contract Procedures: http://www.mnscu.edu/board/policy/index.html OGC Webinars page (to access past contracts-related Webinars): http://www.ogc.mnscu.edu/events/workshops.html

Resources(Don’t leave home without us!) • Office of General Counsel • Gail Olson 651 201-1750 gail.olson@so.mnscu.edu • Kris Kaplan 651 201-1749 kristine.kaplan@so.mnscu.edu • Mary Al Balber 651 201-1752 maryal.balber@so.mnscu.edu • Scott Goings 651 201- 1753 scott.goings@so.mnscu.edu • Sarah McGee 651 201- 1410 sarah.mcgee@so.mnscu.edu • Risk Management (insurance) • Keswic Joiner, Director of Risk Management- MnSCU(651) 201-1778 keswic.joiner@so.mnscu.edu • Marlys Williamson, State Program Admin Coordinator, Administration Department (651) 201-2591 marlys.williamson@state.mn.us

International Contracting Issues: Getting to the Nuts and Bolts