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£100 million investment visa loan scheme ruled legal after all


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A £100 million scheme for loaning migrants the money for an Investor visa was legal after all, the Court of Appeal has ruled. The case is R (Wang & Anor) v Secretary of State for the Home Department [2021] EWCA Civ 679. It overturned a previous Upper Tribunal decision that the scheme did not meet the Investor rules because the money invested was not under the borrower’s control.

The court reached this conclusion reluctantly and criticised the shoddy drafting of the Immigration Rules in allowing the scheme to operate despite what the Home Office intended.

Loans invested in a sister company

Applicants for an Investor visa need to put a minimum sum into qualifying investments such as shares in a British company. The scheme at issue in this case was a way for would-be investors to raise that sum without necessarily being ultra-rich. First they would borrow £1 million from Maxwell Asset Management, incorporated in England but owned by a Cypriot holding company. They were then required to invest that money in a Jersey-registered firm, Eclectic Capital. The loan money passed directly from Maxwell to Eclectic.

The two companies are linked. Maxwell is owned by Russian businessman Dimitri Petrovich Kirpichenko and Eclectic by his wife Nina. Eclectic’s main business activity is securities dealing in Russia. In this way, as the Court of Appeal put it, they were able to “circulate funds, which they originally controlled through Maxwell and which they received back through Eclectic… without investment in what might naturally be regarded as a UK trading company… but rather for the purposes of investments outside the UK”.

Ms Wang paid what was in effect a fee of £200,000 to take part in the scheme, along with over 100 others. But when she came to renew her visa in 2017, the Home Office refused. It considered that the money was not under her “control” as required by the relevant Immigration Rules. This was because “she had not exercised any choice regarding placement of the investment funds with Eclectic”.

Officials also decided that putting the money into Eclectic was not a “qualifying investment”. Paragraph 65(b) of Appendix A prohibits investments in “open-ended investment companies, investment trust companies, investment syndicate companies or pooled investment vehicles”. The Home Office decided that Eclectic was one of these, although it did not specify which.

The Upper Tribunal, in a judgment reported in December 2019, agreed on both counts. Ms Wang appealed.

What does “control” over investment money mean?

Lord Justice Popplewell accepted that “the arrangements make no commercial sense unless the money lent were required in practice to be invested in Eclectic”. But that did not mean that the money wasn’t under Ms Wang’s “control”. That concept, in the context of the “perplexing” Immigration Rules, had to do with the “personal availability” of the money to the Investor applicant. The tight terms and conditions of the loan did not mean that it wasn’t personally available to Ms Wang to invest (even though she never saw a penny of the money): 

If the applicant has sole and unrestricted power to direct that the proceeds of the loan are used for a qualifying investment, the personal availability purpose which I have identified is fulfilled. It matters not whether there is a choice within that category amongst various alternatives or Hobson’s choice of only one: the result will be investment in a qualifying vehicle, which ex hypothesi fulfils the purpose of the Investor Migrant scheme in the Rules… The [Home Office] and Upper Tribunal erred in the construction of “control” as a matter of law in treating it as directed to restrictions on use, rather than personal availability.

Popplewell LJ also overruled the tribunal on the “qualifying investment” issue. Here, the sticking point was the fact that the Home Office hadn’t specified which of the four prohibited business structures it considered Eclectic to be. Had officials argued that Eclectic was a “pooled investment vehicle”, the judge said, he might have backed them. But the failure to choose one was “fatal to [the] conclusion that it rendered investment in Eclectic ineligible as a qualifying investment”.

The appeal was therefore allowed.

Ms Wang’s solicitor, Leon Chua of Jackson & Lyon, said that this decision will affect not only her but “all the other applicants who borrowed money from Maxwell Asset Management Limited and have been refused for the same reasons. The interpretation of ‘control’ is important to ensure all Tier 1 (Investor) migrants satisfy the Immigration Rules for their further leave or indefinite leave to remain applications”. We understand that the Court of Appeal has refused permission to appeal.

Dreadful drafting strikes again

Popplewell LJ noted:

I have not reached these conclusions with any enthusiasm, and can readily understand why the [authorities] regarded the Maxwell/Eclectic scheme as objectionable… Such a scheme does not fulfil the purpose expressed in Rule 245E of the applicants making a substantial financial investment in the UK as high net worth individuals. This result is, however, a product of the drafting of the Rules… Investor Migrants cannot be criticised if they take advantage of a scheme which is permitted by the terms of the Rules as drafted simply on the grounds that the [Home Office]’s intended objective was that it should not be permitted. 

Underhill LJ added:

… the drafting of the relevant rules leaves a great deal to be desired: see in particular paras. 47-51 and para. 66. This Court has repeatedly drawn attention to problems with the quality of the drafting of the Immigration Rules generally and of those parts which govern the points-based system in particular… I very much hope that active consideration is being given by the Secretary of State to a comprehensive review of the drafting of the Immigration Rules. 

For a medley of judicial criticism along similar lines going back a decade, see How complex is UK immigration law and is this a problem?.

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CJ McKinney

CJ McKinney is a specialist on immigration law and policy. Formerly the editor of Free Movement, you will find a lot of articles by CJ here on this website! Twitter: @mckinneytweets.