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Sole Representative Route Amendment and Failures of Legal Certainty

Written by
Zoe Bantleman, Richmond Chambers
Date of Publication:
15 May 2020

In the Statement of Changes in Immigration Rules presented to Parliament in May 2020, released yesterday, the Secretary of State has made clear that she will significantly tighten the sole representative of an overseas business visa category from 4 June 2020.

I long expected these amendments. Compared to other routes under the Rules the requirements for a representative of an overseas business were relatively simple. For at least the past year, the Home Office sought to remedy this through unlawfully reading in an additional requirement: 'genuineness'. From 4 June 2020, the Rules will be amended to explicitly refer to this requirement, by inserting the word 'genuinely' before listing the requirements for entry clearance.

From these amendments, it is clear that the Home Office had four anxieties:

  1. Majority ownership and control of the parent company by the representative and/or their partner;
  2. The representative's skills, experience and knowledge (or lack thereof);
  3. The branch/subsidiary being established solely for the purpose of facilitating the entry and stay of the representative; and
  4. Genuineness.

The last - genuineness - is both an anxiety and a mechanism to enable refusal under the shield of the evaluative judgment of the Executive, with which a public law court will rarely interfere.

Mr Justice Saini in R (on the application of Karagul & Ors) v Secretary of State for the Home Department [2019] EWHC 3208 (Admin) recently held (albeit in relation to ECAA business plans), "The context in which the evaluative assessments are to be undertaken by the Secretary of State gives her a wide margin of appreciation as to the merits and feasibility of proposed businesses and whether they meet the paragraph 21 requirements. Specifically, it would be in a rare and extreme case that a court on judicial review would second-guess an overall assessment by the Secretary of State that an application failed on the merits."

Ownership and Control

It is important to first try to determine why ownership and control is relevant to the Home Office. On a contextual interpretation it appears that it relates to the parent company remaining headquartered and centred overseas. This is to disable a business from relocating to the UK. The route is purely for a branch or subsidiary to open in the UK and operate the same type of business. If a majority owner of the company were to move here, that may be an indication that a significant part of the business is shifting to the UK and may cease operations abroad. It is clear from the Sole Representative Guidance (at page 14) that intention is key: "The company must intend to keep its main centre of business abroad. This does not mean that you must refuse a company if there is evidence that it intends its UK branch or subsidiary to flourish so in the long term it might overshadow its parent company".

How did the Home Office remedy this underlying anxiety about businesses relocating to the UK? It expanded its requirements regarding shareholding to cover other forms of ownership and control, and to make stipulations regarding the partners of representatives and the control and ownership they can have.

The requirements for parent companies remain relatively unchanged. It is now specifically stated that the overseas business must be active and trading. The parent company must have, and continue to have, its headquarters and principal place of business outside the United Kingdom. For the sole representative to extend, it is clarified that the subsidiary must be established in the UK (not overseas). These are not groundbreaking additions and were always clear from the Guidance, but their inclusion in the Rules is welcome.

The full description of the parent company's activities must still include details of the company's assets and accounts and the company share distribution for the previous year. To this, details regarding ownership for the previous year are additionally required.

Requiring ownership details for the past year accords with the concerns regarding the representative's control over the parent company. Previously, from the text of the Rules, it appeared that the Home Office's fears could be assuaged if the representative was not a majority shareholder (i.e. owned not more than 50% of the shares).

However, the Rule from 4 June 2020 a catch-all will be introduced to go beyond ownership to cover control: the representative cannot have a "majority stake in, or otherwise own or control, that overseas business, whether that ownership or control is by means of a shareholding, partnership agreement, sole proprietorship or any other arrangement". The Explanatory Memorandum states that this is to "reflect that the ownership of overseas businesses is not limited to businesses that issue shares".

From the way the provision ("or otherwise own or control") is drafted it appears that the sole representative cannot own or control the overseas business at all. However, this cannot be correct given that it is prima facie contradictory with the remainder of the provision, from which it is clear that you cannot have a majority stake in the business by any arrangement. Had the Secretary of State intended to draft this clearly, she might have said the representative cannot have a "majority stake in, or otherwise have majority ownership or majority control of, that overseas business, whether that ownership or control is by means of a shareholding, partnership agreement, sole proprietorship or any other arrangement".

A similar rule is put in place for the partners of representatives. The spouse, civil partner, unmarried or same-sex partner of the sole representative, where they are accompanying or joining them, cannot "have a majority stake in, or otherwise own or control, that overseas business, whether that ownership or control is by means of a shareholding, partnership agreement, sole proprietorship or any other arrangement".

This means that the sole representative cannot transfer the majority of the shares to their spouse or partner who will accompany them to the UK. This may have been done if the representative had too many shares to meet the shareholding requirement, and did not want the shares to leave the family or if their partner had significant involvement in the parent company and needed to travel to conduct business and could not be the full-time employee of the business in the UK or meet the 180-day absence requirement for settlement (even if they had no intentions to represent the parent company in the UK). The amendment will also prevent the circumvention of the Rules where partners of majority shareholders apply as representatives and bring the majority shareholders as a dependent.

Cumulatively, however, it appears that the partner and representative can together have a majority or more than a majority, but neither can individually.

Technically, the Rules only require that the representative (and their partner) not be a majority owner or controller at the date of application. Ownership and shareholding for the past year must be declared by the company. However, from this we still remain unsure of what the impact will be if a sole representative had a majority stake, or other control or ownership, in the year prior to their application, but does not on the date of their application. The impact this will have on any 'genuineness' assessment is crucial, but is also left open by the amendments to the Rules.

Skills, experience and knowledge

Previously, the Rules and Guidance had no reference to the "skills, experience and knowledge" necessary to undertake the role of sole representative of the overseas business, which are now required by the amendment.

All the Guidance stated was that, "You can expect the sole representative to have:

• been employed by the parent company in a senior job role within the company

• a track record of setting up branches for other companies, if they have been employed specifically to undertake this role

• authority to take operational decisions once in the UK, as indicated by their role in the company hierarchy".

The amended Rules require the employer to provide a letter confirming the applicant has the relevant skills, experience, knowledge and authority to negotiate and take operational decisions on behalf of the business. However, it is not clear whether the employer certifying this will be sufficient for the Home Office's purposes.

Yet, no further evidence is required which would enable explicit scrutiny of the recruitment or selection process via the advertisements, applicants for the role, job description, and their qualifications (as there is with Tier 2 resident labour market tests). Nor is the sole representative required to provide their CV (as was referenced in the Tier 1 (Entrepreneur) Modernised Guidance). Therefore, these references remain vague, and open to the Home Office's subjective consideration, unless the Home Office accepts the employer's word in their letter.

In other matters, I have seen Entry Clearance Officers refuse to accept matters as laid out by the employer in their notarised statement. However, no deception or falsity of the document is explicitly alleged, even if that is the implicit assertion. There is no reason to expect the Secretary of State will cease to sidestep her burden of proof and the 'genuineness' requirement will provide a graceful way to avoid allegations of deception. She could simply assert that she was not satisfied that the proposed sole representative "genuinely" had the relevant skills, experience, and knowledge, on the balance of probabilities.

Facilitating Entry

An interesting addition to the Rules, is the requirement that the branch or subsidiary of the overseas business "is not being established solely for the purpose of facilitating the entry and stay of the applicant".

This seems simple, it cannot be solely for that purpose, but of course leaves open that it could be an ancillary purpose.

A genuine overseas business could have a senior employee who suggests to management that they are able and willing to assist the company open a branch in the UK. That employee wouldn't mind relocating to the UK, where her family could benefit from life in the UK, and her children could attend British schools. The company wants to open the branch because it makes good business sense with respect to their expansion plans and opportunities in the market. I see no reason why this genuine sole representative should be prohibited from meeting the Rules. Facilitating her entry is not the "sole" reason.

The explanatory memorandum (at §7.22) states that the "amendment is being made to prevent an overseas business sending a representative to facilitate their entry to the UK when there is no genuine intention for them to establish a branch or subsidiary in the UK". So long as they do have a genuine intention, representatives should then be in the clear.

However, the Home Office will assess the intentions of the parent company and the representative, and whether they will be disbelieved, is a separate matter. I imagine this was inserted to provide for another ground for refusal full of double negatives: "on the balance of probabilities I am not satisfied the branch is not being established solely for the purpose of facilitating the entry and stay of the applicant". Actually, a few genuinely's would likely be thrown in for good measure.

'Genuineness'

Paragraph 144 of the Rules sets out all of the factors that should be considered when assessing an application of a representative of an overseas business. However, in the past year it has been clear that Entry Clearance Officers have gone beyond the requirements prescribed by the Immigration Rules and Guidance and considered irrelevant factors, couched in 'genuine' and 'credible' phraseology.

Why is it problematic for the Home Office to read in a requirement of genuineness, one might ask. Sole representatives should be genuine, should they not? The problem is that reading in novel requirements leaves applicants (and their legal representatives) without legal certainty.

To ensure legal certainty, and thereby the rule of law, the Immigration Rules must be applied with sufficient precision and predictability to enable applicants to foresee the circumstances in which the law would or might be applied and regulate their conduct accordingly. In R (on the application of Alvi) v Secretary of State for the Home Department [2012] UKSC 33 it was said with regard to certainty and section 3(2) of the Immigration Act 1971, 'The key requirement is that the immigration rules should include all those provisions which set out criteria which are or may be determinative of an application for leave to enter or remain' [§97]. The genuineness factors, which were determinative in recent refusals we have seen, were not contained in the Immigration Rules or in the Home Office's Guidance. This, of course, opened them to challenge. Broad stroke amendments to the Rules appears to be the Secretary of State's response.

However, adding the word 'genuinely' before all of the requirements does not resolve the problem of legal certainty.

Paragraph 144 by comparison, was and is simple, and placed great trust in the parent company. From the above amendments/anxieties, we can see that re-orientation is from the parent company to the sole representative.

Ultimately, the Home Office created its own monster. The closure of the Tier 1 (Entrepreneur) category last March forced businesses and business women and men overseas to consider new ways to bring their business to the UK. This route was the last indication that the UK was not entirely closed for business, just certain aisles were off limits. Many sole representative applicants may be founders and owners of the proposed parent company but do wish to expand operations to the UK, without moving them here. Many of these may be small independent family-owned businesses. The best person to open a branch or subsidiary in the UK may be a person high up in the hierarchy chart, possibly an owner, co-founder, or a person with control. It may be the case that the representative could pass off their responsibilities and control to others in order to enable a branch to be opened here under this route.

However, it seems the Home Office has been dissatisfied with that arrangement, and wants to push for a mere employee to move, ideally one with no control or ownership. This is all circumspection, as it can only be deduced from decisions I have seen and the amendments made. The Explanatory Memorandum explains little.

I never thought I would praise the Tier 1 (Entrepreneur) Rules, but at least they detailed the matters and the factors relevant to the genuineness assessment. For example, paragraph 245DB(f) stated, "The Entry Clearance Officer may take into account the following factors: (i) the evidence the applicant has submitted; (ii) the viability and credibility of the source of the money [...]; (iii) the viability and credibility of the applicant's business plans and market research into their chosen business sector; (iv) the applicant's previous educational and business experience (or lack thereof); (v) the applicant's immigration history and previous activity in the UK; and (vii) any other relevant information." Detailed Guidance explained how the genuine entrepreneur test would be conducted in a paper and interview assessment with a non-exhaustive list of evidence that could be provided. This provided applicants with some legal certainty. That is not to say that no irrational or unlawful decisions were ever made, but they could be overturned on administrative or judicial review with reference to the Rules and Guidance. This placed legal representatives on better footing to assess the merits of an application, and assess any unfairness, illegality or irrationality in the decision making process.

To find grounds for a negative decision, I have seen interviews (akin to those for entrepreneurs), and assessments of business plans with reference to "reasonableness" of business decisions, or the level of in depth research, when of course a business plan is not even specified document in paragraph 144 (currently or in the Statement of Changes). The Tier 1 (Entrepreneur) Rules specifically required a business plan, and it was sensible that an entrepreneur would know their own business plan. For sole representatives, in the Guidance (at page 16) the employer's business plans are only relevant to decide whether the sole representative would have "the authority to take the majority of key operational business decisions locally." However, an Administrative Reviewer in a decision I saw recently claimed that, "Not submitting a business plan and not being able to produce one if asked by the assessing officer would significantly undermine your credibility as a business representative". Therefore, I am sure that sole representatives will continue to be quizzed on the parent company's plans, and expected to know them forwards, backwards, and to a decimal point. If they fail to, the broad genuineness requirement will be used to impugn their recruitment, intentions, skills, knowledge, experience, and authority.

Downing Street has continued to promise a new points-based system, to make the system simpler and fairer. Those plans have no apparent relation to this route. Forget points. The Rules do not even provide guidelines as to what factors are relevant, even less so how they will be assessed or weighed. Despite these amendments, from 4 June 2020, we will remain in the dark.

The Secretary of State may update her interpretative Guidance, but if it contains additional requirements which will lead to applications being refused if they are not satisfied (as in Alvi), they should be contained in the Immigration Rules, which are currently too scant and permit too much subjectivity.

Perhaps the Secretary of State amended her Rules to avoid their ambiguity being exploited. However, the Secretary of State ought to ask herself if she is not doing the same, through sweeping references to "genuineness" which open the door to subjectivity. Blunders could be avoided and relevant matters addressed by applicants and their legal representatives, if only the Rules were drafted with greater precision. This is an appeal for the Secretary of State to do so.