Globalisation of higher education - the rise of Australian providers operating overseas

12 minutes  19.05.2016 Pamela Madafiglio, Tom Fletcher, Alison Smith
This article is part I of II on the globalisation of higher education and is focussed on the regulatory issues that may arise when Australian universities and other higher education providers operate overseas.

Key takeouts


Particular regulatory issues must be considered by Australian universities and other higher education providers looking to operate in foreign jurisdictions and consideration of relevant issues in that context.
When providing education services in an overseas jurisdiction, Australian universities and other higher education providers will need to comply with that foreign country's local regulatory regimes and this may have a significant impact on the Australian provider's overseas operations and the terms of any agency or third party arrangement.
TEQSA and ESOS regimes have obligations that must be met.

Part II Globalisation of Higher Education – a guide for transnational higher education providers looking to operate in Australia focuses on Australia's regulatory framework from the perspective of overseas operators entering the Australian market.

This article provides:

  • a summary of the regulatory framework including Australia's TEQSA and ESOS regimes, and overseas regulatory regimes; and
  • a Third Party Provider Risk Checklist, which identifies some of the common risks that can arise when Australian universities or other Australian higher education providers partner with foreign agents or third party providers to recruit overseas students or deliver courses of study overseas.

Context

There is nothing new in prospective students looking outside domestic borders for their tertiary studies, certainly at a masters level but also increasingly for undergraduate studies. Those students are motivated by different drivers including, for example, the inability to access limited domestic places with high quality providers, a desire to relocate to a different country, access to programs not offered domestically and an increased demand by domestic employers for graduates educated in particular foreign jurisdictions.

Increasingly universities and other higher education providers are becoming more proactive in seeking to attract foreign students to enrol in their programs, typically by 'entering' those jurisdictions. Developments in electronic technology to facilitate online teaching and research are making it easier for universities to disrupt traditional higher education markets in foreign jurisdictions. Leaving regulatory matters aside, with advances in technology and teaching methods, what is stopping a leading university trading on its reputation to operate all over the world, especially in the delivery of programs that do not differ significantly in their content from jurisdiction to jurisdiction?

As one of the world's leading jurisdictions for the delivery of quality higher education services, Australia is no exception. A broad range of models are used by Australian universities and other higher education providers to enter foreign markets. At one extreme, Australian universities are opening campuses in foreign jurisdictions. At the time of writing this article, 10 Australian universities had established one or more offshore campuses, including in Canada, Singapore, the United Arab Emirates, India, South Africa, Malaysia, Italy and Vietnam. At the other extreme is a model in which a foreign student will study with an Australian university solely online and graduate with an Australian higher education award, without ever having entered a physical campus (either in Australia or in that foreign jurisdiction). In between, there a variety of models through which Australian universities partner with third party providers in foreign jurisdictions. For example, the foreign third party provider may play a significant role in the delivery of courses by the Australian university, providing teaching staff and materials on the ground. Alternatively, the foreign third party provider may make a more minimal contribution, such as providing student support, library resources and exam centres.

At the same time, Australian universities and other higher education providers are not immune from competition from foreign universities or other foreign higher education providers. There are now two foreign universities registered to operate in Australia, Carnegie Mellon University and University College London. There are also a large number of foreign providers that are registered as higher education providers in Australia. Some of those providers target prospective students from their national jurisdiction who wish to travel to Australia for study; others also target domestic students who do not wish to pursue or have been unable to gain entry into a program offered by a local university or other education provider.

There seems little doubt that the globalisation of higher education will continue. Among other things, countries are increasingly binding themselves to agreements intended to reduce barriers to entry for universities, higher education providers and vocational education and training providers in foreign jurisdictions. The recent Trans-Pacific Partnership Agreement entered into by Australia and other countries, covered in Implications of the Trans-Pacific Partnership Agreement for Australian Higher Education Providers, is just one example.
In this article, we consider particular regulatory issues that must be considered by Australian universities and other higher education providers looking to operate in foreign jurisdictions and relevant issues to consider in that context.

The regulatory framework

The regulatory framework governing the overseas operations of Australian universities and other Australian higher education providers includes:

  • the Tertiary Education Quality and Standards Agency Act 2011 (Cth) (TEQSA Act), which establishes standards for the provision of higher education, including the direct provision of higher education overseas or in partnership with a third party;
  • the Education Services for Overseas Students Act 2000 (Cth) (ESOS Act), which is relevant among other things to the overseas recruitment practices of Australian universities and other Australian higher education providers; and
  • the local regulatory regime in the foreign jurisdiction.

The TEQSA regime

The TEQSA Act regulates the registration of higher education providers that confer:

  • Australian higher education awards, regardless of where the course of study is completed; or
  • overseas higher education awards if the course of study is completed in Australia.

These higher education providers are required to comply with the Threshold Standards established under the Act. New Threshold Standards have recently been made and will come into effect on 1 January 2017.

In the context of Australia universities and other higher education providers operating overseas, the TEQSA regime will apply to courses provided overseas, so long as an Australian higher education award is conferred on completion of the course. This includes courses provided in whole or in part by a foreign third party provider (under a third party arrangement).

There can be differences in opinion about what will constitute the 'part' provision of a course of study and to what extent a third party provider must be involved in the provision of a course to fall within the scope of the TEQSA regime. TEQSA says that a third party arrangement exists if 'a higher education provider has any aspect of its higher education activities or functions carried out on its behalf through a third party, agent or partner arrangement.'

This issue should be considered on a case by case basis.

If the award is offered under a third party arrangement, the foreign third party provider will not itself have any obligations under the TEQSA Act (unless it is itself offering a higher education award falling within the scope of the TEQSA regime). However, it will be a condition of the continued registration of the Australian higher education provider that it ensures the foreign third party provider operates consistently with the Threshold Standards.

Compliance with the Threshold Standards is monitored by the Tertiary Education Quality Standard Agency (TEQSA). TEQSA has broad powers of investigation and enforcement, including the ability to cancel registration and/or apply for civil penalties if a provider breaches a condition of their registration, or makes a false representation about its registration or about an award or course of study.

The ESOS regime

The ESOS Act applies to the provision of education services to 'overseas students' (a phrase defined in the Act to mean a person, whether within or outside Australia, who holds a student visa). It establishes a register of providers approved to offer courses to overseas students, known as the CRICOS register, and establishes a National Code for registered providers. If a registered provider fails to comply with the National Code, the relevant Minister may suspend or cancel that provider's registration, or impose conditions on the provider's continued registration. That is significant because a university or other higher education provider cannot provide services to 'overseas students' without being on the CRICOS register.

Registered providers may also be required under ESOS to comply with the English Language Intensive Courses for Overseas Students (ELICOS) Standards or the National Standards for Foundational Programs. These standards will apply to the provision of English language courses or foundational programs to overseas students studying in Australia and are outside the scope of this article.

Integrity in the marketing and recruitment of overseas students and consumer protection for overseas students are key objectives of the National Code. In 'An overview of allegations of corrupt conduct in universities: Part II', we discussed the use of agents to recruit international students in the context of the recommendations made in 2015 ICAC Report, 'Learning the Hard Way: Managing Corruption Risks associated with international students at universities in NSW'.

The National Code sets legislative standards for marketing and recruitment practices and makes registered providers responsible for any breach of the ESOS Act or National Code, including a breach by a foreign third party provider that has been engaged by the registered provider to provide a course on its behalf.

The registered provider is also required to inform TEQSA if and when it engages a third party provider to provide a course, along with the nature of that engagement (see Part C, section 10 of the National Code).

Overseas regulatory regimes

When providing education services in an overseas jurisdiction, Australian universities and other higher education providers will need to comply with that foreign country's local regulatory regimes and this may have a significant impact on the Australian provider's overseas operations and the terms of any agency or third party arrangement.

For example, regulations in the foreign jurisdiction may require certain minimum involvement of a local provider in the provision of education services, or may prescribe specific standards or requirements for the provision of education services.
Australian universities and other higher education providers should conduct a due diligence prior to entering into an agreement with a foreign agent or third party provider. As part of this due diligence, providers should identify the regulatory requirements of the local jurisdiction and the status of the agent or third party provider within the local regulatory frameworks. The agent or third party provider's corporate governance structure and financial position should also be considered.

These issues may in part dictate the extent to which the Australian provider can operate independently of the local provider and the contractual terms that should be included in the contractual arrangement between the two providers. For example, the Australian provider should ensure that they have the right to terminate any agency or third party arrangement if the local provider loses the local authorisation or registration required to provide the services under the agreement or otherwise does not comply with local law.

If an issue arises in the provision of Australian higher education overseas, TEQSA may seek cooperation from the local higher education regulator. TEQSA has entered into memoranda of understanding (MOU) with a range of overseas regulatory bodies including in the United Kingdom, Singapore, Hong Kong, Malaysia, Japan, United Arab Emirates, New Zealand, China and Papua New Guinea. These MOUs adopt a commitment to cooperate on regulation and quality assurance matters by, for example, sharing information.

An effective agency or third party arrangement for your overseas operations

It is common for Australian universities and other higher education providers to engage foreign agents to recruit overseas students and to engage a foreign third party provider to assist in the overseas provision of a course. However, in our experience Australian universities and other providers do not adopt a 'one size fits all' approach.

In some cases, arrangements are adopted whereby overseas students may be granted admission into a course of study with an Australian university or other higher education provider on successful completion of a unit or units of study with the foreign third party provider, which then counts towards completion of the Australian course of study (these are sometimes referred to as articulation arrangements). Alternatively, successful completion of study with the foreign third party provider may simply be a pathway to entry into a course of study with the Australian university or other higher education provider. In other cases, the foreign third party provider simply provides services associated with the delivery of the course of study by the Australian university or other higher education provider (without any articulation or pathway arrangements).

It is important that the terms and conditions of the agreement with the foreign agent or third party ensure that the Australian university or other higher education provider is able to discharge its obligations under the TEQSA and ESOS regimes, and that the terms and conditions protect (so far as is possible) against the foreign agent or third party acting in a way that could damage the Australian provider's reputation or the international reputation of Australian higher education more generally.

We have prepared the attached table, identifying some of the common risks that can arise when Australian universities or other Australian higher education providers partner with foreign agents or third party providers to recruit students or deliver courses of study. For each risk, we identify some of the issues that need to be considered in finalising the contractual arrangements with the foreign agent or third party provider. However, as operating in each overseas jurisdiction gives rise to its own issue and, as identified above, given Australian universities and other higher education providers do not adopt a uniform approach to these matters, in each case it is necessary to have regard to the specific risks that arise in relation to the arrangement and jurisdiction in question.

Third Party Provider Risk Checklist

Being responsive to risks when partnering with foreign agents or third party education providers

An agent engages in, or has engaged in, unethical recruitment practices Navigation Show below Hide below

An agent engages in, or has engaged in, unethical recruitment practices.
Or a third party provider engages in, or has engaged in, unethical recruitment practices with respect to students hoping to gain entry into a course of study at your institution and/or credit towards a degree at your institution.

Items to consider

Are the terms of the agreement with the agent consistent with Standard 4 of the National Code? Under this standard, registered providers:

  • cannot enter into an agreement with an agent, or accept students from an agent, that has engaged in unethical recruitment practices; and
  • must terminate an agreement with an agent if the provider becomes aware of, or reasonably suspects, the agent has engaged in conduct that is inconsistent with the standard.

What visibility does the Australian provider have over recruitment practices?

What restraints have been placed on recruitment and marketing methods and materials? For example, can the agent/third party use material that has not been approved by the Australian provider?

Have the requirements to provide certain information to prospective students under the Threshold Standards and National Code been complied with?

The students participating in the program are failing to meet expected academic outcomes. Navigation Show below Hide below

The students participating in the program are failing to meet expected academic outcomes.

Issues to consider

What mechanisms are in place to monitor the quality of services being provided to these students? Section 4 of the Provider Registration Standards in the Threshold Standards requires providers to have mechanisms in place to manage and quality assure any arrangement with a third party provider.

What mechanisms are in place to ensure compliance with the Provider Course Accreditation Standards of the Threshold Standards? For example, what mechanisms are in place to ensure:

  • resourcing for the course is appropriate (including access to electronic and/or physical library and information resources, and adequate IT resources);
  • students enrolled in the course meet the admission criteria and are sufficiently competent in English;
  • the qualifications of staff, and the availability of staff to students, meet requirements; and
  • students who need academic support are identified and provided with academic support?

The third party provider's poor performance / breach of the third party agreement Navigation Show below Hide below

The third party provider's poor performance / breach of the third party agreement is jeopardising the provision of a course or unit of study being in accordance with the Threshold Standards.

Issues to consider

Can the Australian provider seek remedial action or terminate the agreement? Must it seek remedial action before it can proceed to terminate?

What are the dispute resolution procedures under the third party agreement and do these adequately protect the Australian provider (both from a regulatory and financial perspective)?

What arrangements are in place to assist affected students?

To minimise this risk, you should consider what level of visibility the Australian provider has of the third party's operations, including the third party's reporting obligations, the mechanisms available to monitor the third party and the level of engagement the Australian provider has 'on the ground' in the foreign jurisdiction.

The third party can no longer provide the services or fulfil their obligations Navigation Show below Hide below

The third party can no longer provide the services or fulfil their obligations.

Items to consider

Does the third party provider have any notification obligations which require it to bring this to the Australia provider's attention?

What presence does the Australian provider have in the local jurisdiction, and what relationships does it have with other local providers? Can this assist with managing the changes that will be required, or with communicating these changes to affected students?

What services were being provided by the third party? Were the services essential to the Australian provider's compliance with the Threshold Standards or any other relevant regulatory standards, its reputation or the reputation of the Australian higher education sector more generally?

What arrangements are in place to minimise the impact on students and to ensure students are able to complete their course of study by, for example, continuing with another provider?

The level of visibility of the third party's operations will be also relevant to minimising this type of risk.

The third party enters liquidation or administration Navigation Show below Hide below

The third party enters liquidation or administration (or the equivalent in its local jurisdiction), whether voluntarily or involuntarily.

Issues to consider

What immediate impact will this have on the third party provider's ability to provide the services or fulfil its obligations? The issues identified above that relate to whether adequate arrangements have been made for students will be relevant.

What fees does the third party provider collect from students?

Does the third party collect fees on behalf of the Australian provider? If it does, what mechanisms are in place to prevent the third party from collecting fees from students in these circumstances?

What preventative measures are in place to address this type of risk, for example:

  • what mechanisms are in place to monitor the financial viability of the third party, such as appropriate financial reporting obligations; and
  • does the agreement require the timely payment of fees, including fees paid by students via the third party?
TEQSA has also published some useful information papers and guidance notes on the provision of education offshore, which are available online via TEQSA's website.
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https://www.minterellison.com/articles/globalisation-of-higher-education-the-rise-of-australian-providers-operating-overseas

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