While the Canadian government’s decision to cut the Immigrant Investor Program and eliminate the program backlog in February of 2014 was controversial and unpopular at the time, the decision seems to have produced a far greater headache for the government than they could have possibly predicted.
The Immigrant Investor Program (IIP) was an immigration program that allowed wealthy foreign nationals to obtain permanent residency in Canada in exchange for making a loan to a provincial government. To be eligible for the program, applicants needed a net worth of at least $1.6 million and needed to provide a provincial government with a 5 year interest free loan of $800,000. Mainland China and Hong Kong were by far the largest sources for immigrant investors under the IIP, accounting for more than half of the total applications to the IIP.
When the program was cancelled in February, there existed an inventory of 65,000 individuals waiting for their applications to be dealt with, which would have taken up to six years to process. In cutting the IIP, the government also chose to eliminate the entire backlog and not process any of the pending applications, many of which were from applicants that had been waiting years for their applications to be approved.
This action appears to be coming back to bite the government, which is now being sued in a class action lawsuit by a group of individuals who had their backlogged applications and their hopes of coming to Canada dismissed when the IIP was cancelled. More than 1,460 individuals, 1,350 of whom are from Hong Kong, are suing the Canadian government to have their IIP applications processed or for monetary compensation. The primary goal of the suit is to compel Citizenship and Immigration Canada (CIC) to deal with the outstanding applications before officially scrapping the IIP, but if the government is not willing to process the backlog, the complainants are seeking $5 million in compensation for each applicant in the suit and for each of the dependents named on their IIP applications. Tim Leahy, the Canadian lawyer heading the class action suit, estimates that this compensation package would cost the federal government a total of 16.5 billion dollars.
The IIP has been closed to new applications since July of 2012, which means that all of the applicants who are facing their backlogged applications being eliminated have been awaiting processing for almost two years or longer. The program was cut due to consistently not meeting its objectives, with CIC noting that the amount of capital associated with the program invested in economic development was disappointing. The IIP, created in 1986, had long been criticized as an avenue for rich foreign nationals to buy Canadian citizenship and access to Canada’s universal health care and social services. Evidence suggests that the program results in little benefit to Canada, as immigrant investors pay less tax, have the lowest English/French language ability of all immigrant classes, and are less likely to permanently stay in Canada. The decision of the federal government to cancel the program and eliminate backlogged applications, described by Tim Leahy as “un-Canadian,” was based on these factors among others that indicated the program was no longer serving its purpose.
While the members of the class action suit fight in court for what they see as their right to Canadian permanent residency, Citizenship and Immigration Canada will be working on the creation of a new immigrant investor program, announced in early May. The program, to be called the Immigrant Investor Venture Capital program, is currently in the pilot project phase, and aims to correct many of the problems of the IIP and ensure that program applicants are making a genuine investment in Canada.
FWCanada is a Montreal-based immigration law firm that provides professional legal services on Canadian immigration. For more tips and updates on Canadian immigration follow FWCanada on Facebook, Twitter, and Linkedin.