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National Venture Capital Association Files Lawsuit to Enforce International Entrepreneur Rule

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On September 19, 2017, the American Immigration Council in cooperation with Mayer Brown LLP, filed a lawsuit in federal district court on behalf of the National Venture Capital Association (National Venture Capital Association, et.al. v. Duke, et. al.) challenging the President’s postponement of the International Entrepreneur Rule. The Plaintiffs in the lawsuit collectively argue that the United States Department of Homeland Security (DHS), unlawfully delayed enforcement of the International Entrepreneur Rule by circumventing key provisions of the Administrative Procedure Act.

In order for a federal rule to become effective, the Act requires federal agencies to abide by a notice-and-comment rule making procedure, a process by which the government invites the public to comment on a proposed version of a government rule published in the Federal Register. After the comment period has ended, the government responds to comments, considers feedback, and decides whether such feedback will have any influence on the content of the rules. The Supreme Court has ruled that the notice-and-comment procedure is required for “legislative” or “substantive” rules that intend to “bind” the public, and that similar to a statute, these types of rules have the “force and effect” of law. The notice-and-comment rule making requirement, however does not apply to interpretive rules, which are rules that do not bind the public or have the “force” of law in the same way that legislative or substantive rules do. The National Venture Capital Association argues that the government unlawfully invoked the “good cause” exception of the APA to postpone the Rule, and that the Rule was unlawfully halted under the pretext that doing so would prevent harm to the public interest, when no emergency situation existed which would allow such a delay.

The International Entrepreneur Rule was first published in the Federal Register on January 17, 2017, and the notice-and-comment period was set to begin 30 days from the date of the rule’s publication in the federal register. However, the government never announced a comment period for the Rule. On July 13, 2017, the Department of Homeland Security announced that the implementation of the rule would be delayed to March 14, 2018, at which time the government would seek comments from the public, with a plan to rescind the rule.

The move was astonishing, given the President’s commitment to creating more jobs for Americans, and expanding the number of cutting-edge businesses in the United States. If implemented, the International Entrepreneur Rule would allow foreign entrepreneurs to start innovative companies in the United States, and create thousands of jobs for Americans. Under the Rule, entrepreneurs would be required to demonstrate that their entry to the United States would create a ‘significant public benefit’ to the United States, and that their proposed businesses would provide a ‘substantial’ and ‘demonstrated potential’ to create more jobs and business growth in the United States, and not merely to provide income to the entrepreneur and his or her family members.

Qualifying for the rule however is no easy task. In order to receive temporary permission to enter the United States for a 2.5-year period, for the purpose of starting or scaling a start-up business in the United States, entrepreneurs would be required to demonstrate among other things, that their business would yield a ‘substantial’ potential for rapid business growth evidenced by:

  • a significant investment of capital of at least$345,000 from certain qualified U.S. investors that have a proven track record of success;
  • significant awards or grants of at least$100,000 from federal, state, or local government entities; or
  • partially satisfying one or both of the above criteria, in additionto presenting other reliable and compelling evidence to show the startup entity’s substantial potential for rapid growth and job creation in the United States.

The National Venture Capital Association—the largest organization of venture capitalists in America, Foreign Entrepreneurs, and leaders of Start-Up companies have joined together in this lawsuit to oppose the postponement of the Rule on behalf of foreign entrepreneurs everywhere who would have benefitted from the Rule. The American Immigration Council voiced their dissatisfaction and frustrations in the current employment-based immigration system in saying that, entrepreneurs “often face significant barriers to obtaining permission to travel and work in the United States,” and are currently “unable to otherwise travel to or work in the United States due to ineligibility for existing visa categories or numerical caps . . . [and] are being forced to move their businesses and accompanying jobs elsewhere.”

The International Entrepreneur Rule would have been the first step to resolving these difficult barriers and allow foreign entrepreneurs to bring their talents, innovation, and great potential for job creation with them to the United States.

For more information on the lawsuit please click here.