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What exactly constitutes a coproduction? Coproducing means that two or more producers, usually representing different countries, get together and contribute both creatively and financially to realize the same film. Breaking the Waves, Before the Rain, Stealing Beauty and The Young Poisoner's Handbook are all examples of recent films funded largely through coproduction financing.

When researching the possibility of qualifying your film for coproduction monies, you'll need to first make sure that your script lends itself to - or can be adapted to meet - the economic and creative prerequisites of an international coproduction.

If your film is set entirely in the U.S., it is very unlikely that it will qualify for coproduction finance. But, if a large section of your film could be set in Canada, Europe, Australia, New Zealand, Mexico, Argentina or any of the other countries which are currently signatory to coproduction treaties, then you may be able to benefit from financing opportunities that are usually only available to national productions in those countries. While monies available from coproduction treaty signatory countries are not free grants, they carry with them incentives that can make a production even more attractive to distributors and sales agents.

The advantage that Breaking the Waves, Stealing Beauty, The Young Poisoner's Handbook, Before the Rain, and other coproductions have over films which are funded entirely from one country is that they automatically qualify as "domestic" films in each of the participating countries. This can be an important selling factor for any distributor or sales agent; this "domestic status" is a means of protection against constraints which control many overseas buyers' acquisition ability.

At the moment, for example, 51% of all programming broadcast by European Union broadcasters must be of European origin. Consequently, competition is tough for purely American product. But European coproductions sidestep this programming requirement; they automatically qualify as national productions in all E.U. countries as well as in the country or countries of any non-E.U. participating coproducers. For example, a film could be a Canadian-Australian-French coproduction, and still qualify as a "domestic" production in each of these countries.

Australia, Canada, the U.K., Ireland, France, Italy, Germany and Spain have been taking advantage of coproduction financing possibilities for years to constitute the gap that in the U.S. is normally filled by a distribution deal.

So how can U.S. based filmmakers participate in, and benefit from, the financial opportunities that exist within the coproduction arena? Perhaps the most exciting piece of news for Americans is that coproduction regulations now permit a project to receive up to 30% of its budget from non-signatory sources and still qualify for local subsidies and also contribute towards fulfilling national quota requirements.

In practice, you can increase this percentage if, for example, you have U.S. financiers with offices in any of the countries participating in the coproduction; monies above the 30% limit can flow through this office and augment the local coproducer's share of the film. This type of scenario becomes necessary when the financing raised by the coproducers only amounts to 50% of the total budget required. At this point, a U.S. partner with a local office could allocate a portion of its 50% to one side of the coproduction so that the coproducing countries are then providing 70% and the U.S. partner only 30%.

Miramax, Fine Line & New Line International, Fox Searchlight, Village Roadshow, Alliance, Kinovelt, Majestic, Neue Constantin, Norstar, Paragon, the BBC and Film Four International are among the distributors and sales agents who have recently been successfully involved in coproductions. All of these companies have offices or partner offices in one or more of the countries currently signatory to the coproduction treaty. Universal and October Films, the distributor of Breaking the Waves, are also joining the coproduction bandwagon; both hosted a lunch at this year's Cannes Film Festival to promote their interest in international co-ventures.

So what are the monies available to coproductions and how do you access them? In many of the signatory countries there are public agency funds, tax incentives and other subsidies available to "domestic" productions. A coproduction will automatically access these benefits during the time the production spends in each of the partner/signatory countries. For example, a film shooting in Ireland may be able to access funds available through the Irish Film Board. If post takes place in the U.K., France or Germany, subsidies may be available from government agencies such as, respectively, British Screen, Centre National du Cinema (CNC), North Rhine-Westphalia or from the European Coproduction Fund. Productions taking place in Canada may be able to access monies from Telefilm Canada; in Australia from the FFC; in the Netherlands from the Dutch Film fund and so on.

In order to qualify for any of these subsidies a film must have a local producer in each of the participating countries. While production (including prep and post) and creative input must be split between at least two countries, it is possible for a film to be a multilateral co-production with the additional coproducers being financial partners only. Village Roadshow's Tarzan and Jane, due for release next year, was structured as an Australian-German-French coproduction which lensed in South Africa with post taking place in Germany; New Line International's The Red Violin is a Canadian-Italian coproduction lensing in Canada, Austria, Italy, the U.K. and China with post taking place in Montreal.

A coproduction between two countries need not have a 50/50 split of financing. In any bi-lateral coproduction, each of the participating countries may not contribute any more than 80% or less than 20% of the overall budget. In trilateral or multilateral coproductions, financial contributions may not exceed 70% or be less than 10%. In each case, producing partners retain ownership rights to the finished film and back-end profits are divided pro-rata-pari-passu with their investment.

Upon application for coproduction status and on delivery of the picture, all coproductions are subject to audit by the competent authorities in each country. Audits measure the ratio of funding to creative input of each coproduction partner. A Canadian-Australian coproduction might have its financing split 80-20% in favor of Canada. The audit would have to verify that the majority of the production budget was spent in Canada or on Canadian key talent and crew. There are innovative ways to deal with balancing the financing/creative input ratio, but it should be noted that the director, writer, producer and all but one of the key talent must be nationals of one or the other of the coproducing countries.

This sounds a lot more restricting than it actually is. You only have to look at the foreign sounding names among the front and end titles of most films to realize that probably one quarter of the U.S. film industry are emigres from other countries (and therefore hold those valuable international passports). If coproducing with a European, you allow yourself some more flexibility as any national of the 12 member countries will qualify, for audit purposes, as a national of your coproducing partner's country.

Other items required before coproduction funds are released include evidence of the source of the rest of the film's finance, a bonded or bondable budget and a list of the key talent attached. In most cases, if accessing a public funding agency for subsidies, you will need to provide evidence of the film's potential profitability as well as assurance of the agency's inclusion as a participator in revenues amassed from the film's sales. Funding from a government agency is rarely free and while a portion of its funds may be provided as a grant, inevitably there will be a portion that will be equity money - recoupable with interest and profit participation pro-rata and pari-passu with the film's other investors.

Tax advantages normally available only to local producers may also benefit coproductions. While recent changes in the Canadian tax-shelter agreement have deprived American productions of the financial benefits of shooting in Canada, coproductions may still take advantage of them and obtain up to 12% tax credit on any monies spent in Canada. Ireland has a similar tax incentive program which currently provides local productions (and, therefore, coproductions) with 18% of 60% of the budget spent in Ireland. France has a similar tax incentive scheme known as SOFICA, which is a tax shelter for private investors.

While cultural content is always a significant factor in coproductions, certain countries are more flexible when it comes to fulfilling treaty requirements. In some cases you may be able to shoot a minor portion of the production in a third non-treaty country if the script demands it.

The downside of forming a coproduction which involves some U.S. financing is that American distributors and sales agents are often loathe to split a film's copyright ownership and to deal with the complicated distribution of revenues. Many American investors have a tendency to treat foreign investment as some kind of slush fund or non-accountable covenant. Invariably, a foreign sales agent will work to be first in line for recoupments. But, so will the bank if gap financing is involved, and while government agency funds will rarely demand to be in first place above other investors, they will demand fair or equal treatment. The only solution is to carve a corridor from "dollar one" through which the various government funding agencies can reasonably expect to recoup. In response to this, Andrew Matthews, v.p. of finance and international affairs for New Line says, "We are always interested in receiving projects which have appeal outside the U.S. and have successfully negotiated satisfactory recoupment positions for our overseas partner investors. While coproduction agreements may divide up rights, they also minimize risk for all parties involved."

Finally, for a coproduction to succeed, there needs to be cooperation between the coproducers from the earliest stage. For an American producer or financier interested in accessing coproduction monies, this means being open to the idea of not hiring a U.S. writer, producer, director or talent, but rather exploring the possibilities of foreign talent. In other words, a more international approach that, one hopes, avoids the pitfalls of "Eurosoup" and retains a single voice for the film. Although coproductions are often quite complicated to set up and do involve a division of rights, the upside is that they also minimize the risk to each investor and increase the licensing value of the finished film.

As the list for government agencies providing guidelines for coproductions is too long to list here, your best first stop for more information is to contact either the national film commissions (some of which have offices in Los Angeles) or through embassies or consulate cultural attaches. - Ed.

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