will be successful. For example, MIT and Cambridge University set up a separate entity to undertake a collaborative program that totaled $100 million over several years.
Another option is something called a “service blocker corporation.” In this case, the U.S. university would create a corporation on its own in the foreign country or the United States, without a foreign partner, in order to limit legal or tax liability. This mechanism can be useful in jurisdictions where enforcement of the laws is unpredictable or subject to considerable discretion, or where the political situation is unstable, presenting heightened risks. The service blocker corporation may be willing to take on greater risks than the university, and the corporation, if properly formed, operated and governed, insulates the university’s assets from tax, regulatory and other legal and financial exposures. Of course, the university will be closely identified with the corporation and will continue to be exposed to reputational risk.
One of the familiar models is a research collaboration agreement. This is an attractive option when there is some foreign government funding, and when the U.S. university is collaborating with an existing university or group of universities. Many times the foreign government prefers to fund an entity in its own jurisdiction because it is difficult to send money directly to the United States in any significant amount. Sensitivities may arise when the foreign university is to receive significant funding from its government and is then expected to flow a majority of the funding to the U.S. university. The U.S. university needs to ensure that the funding it receives will be available and adequate, which requires a clear understanding of the relationship between the foreign entity and its government. It is also important to ensure that the collaboration does not become a de facto partnership, by being clear about the nature of the relationship both in the express provisions of the agreement and in describing the relationship to third parties and to the public.
Ms. Keith pointed out that some universities have actually established foreign campuses or research institutes to provide a long-term, robust multicultural opportunity for students and faculty, while they maintain a close association with the primary institution. There are a variety of mechanisms to do this. One is for the U.S. university to actually own or lease facilities and employ the personnel. This may not be possible under the laws or customs of some jurisdictions. Also, this structure involves some special risks and burdens. There is a need to ensure that the entity follows foreign laws in areas such as human resources, environmental protection, and real estate, for example. Considerable local expertise is essential. In addition, if the