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MUMBAI: A US district court judge ruled on Friday that the Trump administration cannot delay an Obama-era immigration rule, which enables eligible foreign entrepreneurs to temporarily stay in the US to nurture and grow their startups. America’s doors are open again to foreign entrepreneurs under the International Entrepreneur Rule (IER), which in common parlance is referred to as the ‘startup visa’ route.
Finalised by the Obama administration, IER enabled qualified (based on prescribed criteria) entrepreneurs to obtain immigration ‘parole’—that is to temporarily enter and stay in the US despite not having a visa or green card. Commonly, IER is known as the startup visa, but it is actually a permit to foreign entrepreneurs to stay in the US for two and a half years with the possibility of a similar extension. The IER was to come into effect from July 17, 2017; however, less than a week before that, the US Department of Homeland Security announced that it would be delayed to March 14, 2018 and that it intended to rescind the final rule.
As was reported by TOI in its edition dated October 6, this action of the DHS at the behest of the Trump administration prompted a group of entrepreneurs including some from India, along with the US-based National Venture Capital Association (NVCA) to file a lawsuit in the US Federal Court.
The plaintiffs argued that because the DHS did not solicit advance comments from the public on the delay, it violated the clear requirements of the Administrative Procedure Act. Hardships that the delay caused to the plantiffs were also pointed out. In addition, they contended that the US would miss out on the economic activity that would have been generated as result of these new businesses.
The order pronounced by district judge James E Boasberg, on December 1, a copy of which is available with TOI, now compels the DHS (the Citizenship and Immigration Services wing falls in its ambit) to begin accepting applications from foreign entrepreneurs.
Paul Hughes, lead counsel for the plantiffs and partner at Mayer Brown, a law firm, told TOI: “The court’s order confirms that while American administrations may change, basic legal requirements ensure agency transparency, guarantee public participation, and prevent reactionary, ill-considered policy changes. The court has held that the Trump administration’s delay of the IER was unlawful.”
The stakes were high for all foreign entrepreneurs and US investors and not just the plantiffs. Traditionally the US has been known to provide a conducive ecosystem for startups. To illustrate, a 2016 study by the National Foundation for American Policy pointed out that immigrants have started more than half (44 of 87) startups in the US that are valued at $1 billion or more. Fourteen of these startups were founded by Indians.
As the recent order points out, since the US does not have any dedicated work visa for foreign entrepreneurs, the DHS had promulgated the IER to encourage them to set up and develop startup entities with high growth potential. Attracting foreign entrepreneurs would benefit the US economy through increased business activity, innovation and dynamism was the basis of formulating this rule.
In an official statement, Bobby Franklin, president and CEO of NVCA, referred to the order as a significant victory for talented foreign entrepreneurs, the entrepreneurial ecosystem and the US economy. “The facts speak for themselves—the US economy has long thrived on the contributions and innovations of immigrant entrepreneurs and we are a better country as a result,” he said.
“The order requires immediate implementation of the IER. We anticipate that qualified entrepreneurs will immediately begin applying for parole, so that they can get to work in the United States, build new businesses, and create new jobs for the economy as a whole,” summed up Hughes.
What the plantiffs had contended
The association had repeatedly urged the Trump administration to maintain the IER and expeditiously implement it. NVCA’s members were harmed by the delay in IER. These members have invested, will invest or would consider investing in startups that have founders who could apply for entry and stay in the US under IER. The delay puts these investments in jeopardy and chills potential future investments.
Startups and their founders:
Omni Labs, which provides digital platforms to its customers for data visualisation and analytics, had set up a US entity in 2015. However, two of its founders—Nishant Srivastava and Vikram Tiwari (both Indians) who would have otherwise qualified under IER, were not able to operate from the US. Thus an office had to be set up in Canada. In addition to operational challenges and increased costs, as the founders were not based in the US it could also result in difficulties in obtaining funds from US investors the company had contended. Similar operational difficulties, including of not being able to launch their digital platform in the US and challenges relating to obtaining additional US investments were also expressed by Indian-origin brothers Atma and Anand Krishna, co-founders of LotusPay.
Conditions under International Entrepreneur Rule:
1. A new startup entity must be set up in US within 5 years of the application
2. The foreign entrepreneur can remain in the US for up to 30 months to grow his startup. A further stay of up to 30 months could also be granted
3. The applicant is required to have an ownership of at least 10% in the startup and also play an active role in the business
4. The startup needs to have substantial potential for rapid growth and job creation
5. A minimum investment of $250,000 is required from qualified US investors or at least $100,000 in grants from US government entities