A federal judge in Washington, D.C. has vacated a Department of Homeland Security rule that delayed implementation of an Obama-era regulation that allows foreign entrepreneurs to remain in the U.S. to start and grow their businesses.

The International Entrepreneur Rule was finalized in the last days of the Obama administration and was set to take effect July 17, 2017. Just before that date, the Trump administration issued a new rule delaying the effective date until March 18, 2018 and signaled its intention to scrap the Entrepreneur Rule altogether. The administration subsequently began the process of rescinding the regulation.

Several individuals and businesses led by the National Venture Capital Association sued, claiming that DHS did not go through proper rule-making procedures when it issued the rule delaying implementation.

The court found that the government did not show good cause for not following the requirements of providing a public notice and comment period under the Administrative Procedure Act.

“To date, Defendants’ justification for their delay remains vague. The Government’s briefing never explains the time lag, and, when pressed at oral argument, it struggled to explain what the agency did between learning of the Executive Order and issuing the Delay Rule,” wrote U.S. District Court Judge James Boasberg in a 25-page written order. “Even on its own terms, the agency’s proffered reasons for bypassing notice and comment easily fall short of good cause.”

Background: The International Entrepreneur Rule allows DHS to grant discretionary parole (temporary permission to stay in the U.S.) to foreign nationals who formed a new start-up in the last five years and demonstrate minimum capital requirements (at least $250,000 from established U.S. investors or at least $100,000 in grants from government entities) and potential for rapid growth and job creation.

BAL Analysis: The ruling vacates the Trump administration regulation that delayed implementation of the International Entrepreneur Rule. It is therefore expected that DHS should begin implementing the rule, but the agency has not yet issued guidance in response to the ruling or released any announcements regarding implementation. While this is a positive development for foreign entrepreneurs in the U.S., the granting of parole under the rule would remain within the discretion of DHS.

This alert has been provided by the BAL U.S. Practice group. For additional information, please contact berryapplemanleiden@bal.com.

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