INSIGHT: When Academic, Health-Care Institutions Should Hire Overseas Counsel

American universities and hospitals continue to expand their international reach, despite concerns from the National Institutes of Health, the National Science Foundation, the Department of Education, and Senate about the influence of foreign investment and governments in U.S. education and research.

Many institutions have such widespread overseas education, research, health-care delivery, and humanitarian operations that they have set up multi-disciplinary global affairs offices to help facilitate and manage the extensive and highly project-specific issues that arise from them.

These overseas activities are impacted by U.S. laws with extraterritorial application (e.g., FCPA, export controls, import restrictions, sanctions and anti-boycott regimes, and labor and tax laws), complex federal funding source requirements, and regulations based on the nature of the activity (such as human subjects research).

One key consideration for American institutions when establishing or reviewing such projects is whether to engage local counsel in the country where the project will take place.

To some extent, this will be a question of the risk tolerance of the institution conducting the project and the ability of the institution to review the relevant laws itself. But the principal consideration will be the nature of the activities the institution is carrying out in the foreign jurisdiction, particularly in its own right or through a corporate affiliate rather than through a collaborator or partner.

Benefits of Hiring Local Counsel Don’t Always Outweigh Risks …

Hiring local counsel can present its own challenges and risks. Most countries do not have a developed health-care or higher education law bars, and often the only lawyers with any real familiarity with local laws governing the provision of medical care or the conduct of research are in-house, if they exist at all. As a result, there is a real risk of getting incorrect or incomplete advice on a specialty law question.

In addition, many jurisdictions do not recognize an attorney-client privilege as we would in the U.S., and rules or customs pertaining to conflicts of interest and attorney professional behavior can differ greatly from country to country.

These issues all require careful management from afar, often with a new and untested relationship and sometimes in a foreign language.

… But Sometimes Can’t Be Avoided

Notwithstanding the challenges of engaging with foreign counsel, any organization that is launching a branch campus, special purpose vehicle, or other legal presence in a foreign jurisdiction will inevitably need local counsel.

In addition, even if the organization is not specifically intending to establish a corporate presence in a foreign country, certain activities may necessitate doing so anyway, including opening a bank account, signing a lease or other contracts on behalf of the organization in the country, hiring in-country nationals, generating income, or having U.S. employees assigned to the country.

In some countries, sponsoring a clinical trial also requires a legal presence in-country, and USAID-funded projects often request a level of in-country presence that requires local legal advice.

Other activities done in the name of the U.S. institution—such as rendering medical care, conducting biomedical research, purchasing real estate or automobiles, or importing drugs—will often require licenses or permits and will almost always benefit from in-country legal advice about the implications of the activities there.

Strategies to Make Foreign Counsel Less Necessary

If the U.S. institution’s relationship to the host country will principally be defined by contracts—e.g., through a services agreement, a collaboration agreement, or subaward—instead of by direct in-country activity, it will often be possible to limit the risks to the U.S. institution in a satisfactory way without navigating the potential pitfalls of local counsel, provided the U.S. institution has done adequate due diligence into its local partners.

Many projects can be successfully (and even optimally) structured by engaging with an in-country partner institution, keeping in mind the relevant funding source monitoring and auditing standards and the limited ability for the U.S. institution to recover its own indirect cost rate on true federal subawards.

In addition, even in most underdeveloped countries, it is possible to engage personnel agencies that will hire local staff and manage payroll and visa issues.

Whenever possible, contracts with local institutions should be in English, use an arbitration mechanism or otherwise avoid local courts, contain appropriate indemnities backed by insurance, and require any in-country collaborating institutions to describe any legal obligations imposed by the foreign jurisdiction relevant to the U.S. institution’s participation in the project.

When a project involves an in-country partner providing medical care or conducting human subjects research, informed consent forms should explicitly state that the U.S. institution is not itself providing any care or services.

Of course, for almost any project, U.S. institutions will need to understand the legal basis on which it is able to carry out the work it envisions, whether or not the foreign partner has a contractual obligation to inform them of this. Many countries have laws that govern access to data, biological specimens, plant material, or cultural property that will return to the U.S. for analysis, and many countries have laws governing the conduct of human subjects research.

The Office of Human Research Protections maintains an international compilation of human subjects research rules—a listing of over 1,000 laws, regulations, and guidelines on human subjects protections and data privacy in 133 countries and from many international organizations. Most of the listings provide hyperlinks to the source documents, so it is a useful resource for in-house counsel.

In addition, although they cannot give purely legal advice, contract research organizations, U.S. embassy personnel, USAID missions, other NGOs, and local officials can often provide useful information. Institutions should engage early and in writing with relevant in-country ministries, ideally developing a memorandum of understanding that will at a minimum help provide political and legal cover for projects in an uncertain environment and may additionally provide for licensing, customs, and tax exemptions, liability protections, and other forms of assistance.

Regardless of the foreign legal issues presented by these projects, the legal and practical issues presented by American law and funding requirements are significant and fraught with risk and should always have senior institutional buy-in and be evaluated by experienced counsel.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Clint D. Hermes is an attorney at Bass, Berry & Sims PLC where he advises health care and education clients on regulatory, contracting, and corporate governance matters. He has extensive, on-the-ground experience helping institutions establish overseas projects, particularly in Africa, Asia, and the Middle East.