Law: A passport to invest

Controversial legislation offers law firms rich pickings by helping wealthy foreigners gain UK citizenship - in exchange for cash
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The Independent Culture
FOUR YEARS ago, when the last government created a special category for wealthy foreigners to become British citizens if they invested a requisite amount in the UK, the take-up for the new scheme was practically non-existent.

Lawyers and other white-collar immigration specialists felt that with a new left-of-centre government looking to be the likely outcome of the general election, the legislation could end up on the scrap heap.

Generally, the scheme was not widely known about and had certainly not appeared to concern the tycoons in the boom-saturated markets of South- East Asia and the embryonic capitalist states of the former Eastern bloc.

But the New Labour Government has left the scheme untouched, the South- East Asian bubble has burst, and suddenly, according to specialists in the immigration field, a nearly dormant piece of legislation is coming to life.

Lawyers are reporting a surge of interest in the Investor Category, particularly from ethnic Chinese millionaires fleeing from persecution in Indonesia, and Russian entrepreneurs who amassed fortunes before the recent market collapse. Of the 200 million population of Indonesia, several hundred thousand are considered dollar millionaires.

Those in the know in the legal marketplace are heading abroad to find "business" in the form of millionaires who want to settle in Britain or hold British passports and may not know about the new category.

Described by some as "selling passports", the Investor Category is immigration at the top end of the scale. Applicants should have a minimum of pounds 1m which they intend to bring into the UK. They have to provide an outline of an investment portfolio showing that they intend to invest not less than pounds 750,000 of their capital either in UK Bonds or in share or loan capital issued by UK registered companies. They may not invest the money in property or offshore companies or banks and building societies. They cannot work as an employee, but they can engage in business or be self- employed.

In return, they get initial permission to stay in the UK for 12 months, at the end of which, provided they still meet the criteria, that is extended for three more years. After that, they and their dependants can apply to the Home Office for permanent residence.

In short, if you have the funds, then the Investor Category is the easiest way to get a UK passport - and access to the rest of Europe.

But take-up has been slow. In 1995, the first year of the category's life, only 10 people were admitted as investors. The following year, there were 30, in 1997, 20, and so far this year, 10.

Lawyers involved in the already flourishing area of corporate immigration are only now becoming proactive in the area, some using contacts among foreign banks and trusts to find new clients.

"The awareness has been very slow in coming," says Glenn Hurstfield, head of immigration at law firm Lawrence Graham, which has been dealing with more investors recently. "The Home Office is not in the habit of advertising anything and with the vast majority of immigration practitioners outside the City, the number of times they come across multi-millionaire investors is pretty small."

He believes that the Investor Category is the easiest way for many to make the UK their permanent home. But investors must still satisfy the Home Office of their suitability before they can proceed with their applications. Potential money-launderers and gun-smugglers are not likely to get through, say the authorities.

But why would so many foreign millionaires want to head for these shores? It may be partly because once inside the UK, the investors are not taxed on a worldwide basis as they would be had they gone to the US or Canada. Only their British holdings are subject to taxation.

And according to another Lawrence Graham partner, Andrew Young, who has succeeded in settling a Russian professor/businessman and his family in this country, a British passport still carries cachet. He refers to a "flight to quality" by these investors.

Young has visited Singapore where he was alerting the business community to the Investor Category. "It's win-win for advisers and clients. It will generate a lot of business. As far as banks and offshore trusts are concerned, they get excited because a lot of their clients will want to invest in the UK and will typically already have an interest here, such as a home."

When the Investor Category was first created (it replaced the more limited "persons of independent means" category), it attracted some adverse reaction in the world of immigration workers. The legislation seems blatantly unfair, as it opens doors for the rich, doors which seem to be closed more frequently to asylum seekers with no means.

Karen Sturtivant, a lawyer who runs her own specialist corporate immigration practice, says there is a broad misconception about immigrants' attitudes. She finds that many do not wish to be known as asylum seekers, even if they are qualified for the title, because they feel there is a stigma attached to the term. They are at pains to point out that they will support themselves, pay for their children's education and not be a burden to the state.

It is not a political issue, says Sturtivant. It is simply a combination of the exodus from Indonesia, Russia and other countries by the wealthy and the ease of using the Investor Category compared with other existing categories. The rich have always been catered for in immigration terms. This new category, say the experts, makes entry to Britain easier and faster.

City lawyers who have been alerted to the possibilities are talking of a "bonanza" in terms of rich clients. The Investor Category may not get all the headlines, but it will certainly do wonders for law firms' profits.