Immigration reform – the past decade

The Cayman Immigration Law has changed perhaps more than any other legislation in the Cayman Islands’ history. It certainly has always been a controversial and well-debated topic. 

To keep the immigration issue in perspective, it is worth making an international comparison. The U.K. has about 13 percent foreign nationals in its work force, the U.S. has about 16 percent and in Bermuda, which is a closer comparison to the Cayman Islands, 32.4 percent of the workforce are work permit holders.

Cayman, in contrast, has 56 percent of its work force on work permits and 36 percent of the total population are permit holders. According to immigration statistics for 2013, Cayman has a population of approximately 55,500. Out of a total work force of 36,000, there are more than 20,300 non permanent foreign workers and 15,700 are Caymanians and permanent residents. The number of work permit holders is not at an all time high and is in fact dropping.

To understand the ultimate impetus behind the raft of changes throughout the years, one must recall that up until 1992 the immigration legislation was known as the Caymanian Protection Law. This is perhaps the most telling: It was legislation that started off with the ultimate intent of protecting Caymanians.

A look at the long history of its immigration records will show that Caymanians were always outnumbered in their own country as a result of the high demand for skilled and unskilled workers.

But Cayman’s success has been due in every respect to its very diverse population. And so, trying to walk the fine line of preserving social harmony between Caymanians and work permit holders, whilst encouraging growth of its industry, has always been challenging, but necessary.

In spite of the change from the Caymanian Protection Law to the Immigration Law in 1992, which perhaps supported the evolution of Cayman’s standing in the finance industry and the need to address its growing foreign workforce, protecting Caymanians was still in focus.

As a result, for almost 10 years, there had been a moratorium on the grant of Caymanian Status to foreigners. It was not until 2001 that the moratorium was successfully challenged in court and came to an end. There was also a provision for a quota system for the number of status grants available, but government refused to implement the quota system, so as to avoid granting status. Eventually, the quota system provisions were also removed.

The rollover

In 2002 and 2003, there was a mass campaign to introduce what was referred to as the “rollover policy” into the Cayman immigration law.

In open and public statements, the public was advised that under the European Convention on Nationality, which we were told was applicable to the Cayman Islands, third party residents in a country for 10 years or more should get citizenship1  and that “rollover was introduced to ensure that we met the United Kingdom’s laws and conventions on nationality.”2

As Cayman had a considerable number of work permit holders, and there was no natural attrition of foreign workers, the public was advised to consider the impact of granting citizenship to work permit holders, particularly when 35 percent or more were unskilled, including the obligation to pay their health, pensions, schooling, housing and other benefits that Caymanians are entitled to receive.

Cayman, it was suggested, could not afford to offer residency to all of these work permit holders.

This was the basis for justifying the rollover policy, not only during the campaign to introduce the rollover policy into law, but indeed up until relatively recently. The time was arguably ripe for such a campaign, which came on the heels of what was known as the “mass status grants give-away,” when Cabinet granted Caymanian status to 2,850 people. Most but not all of the recipients had been in Cayman for years without security of tenure.

Interestingly, the new Immigration Law (2013 Revised) now allows foreign nationals to stay in the jurisdiction for up to nine years, although the initial proposal outlined by the People’s Progressive Movement (PPM) was for a 10-year term limit3, and the Term Limit Review Committee as recently as 2012 considered extending the seven-year term limit to 10 years.

Which begs the question: what of the European Convention that stipulated that persons in the jurisdiction for 10 years or more should get citizenship, which, as you will recall, was the basis for introducing the rollover in the first place?
It appears that this was in fact never the case and the Convention did not apply to Cayman4.

At the time of the campaign in Cayman to introduce the rollover policy into law, Bermuda already had the immigration rollover policy in place for some time. In fact, Cayman would adopt Bermuda’s immigration rollover policy almost verbatim, except for one critical if not fatal point: Bermuda’s rollover policy was just that, a policy, and it was never enshrined in legislation.

On Jan. 1, 2004, the Immigration Law (Revised 2003) including the rollover policy took effect. It also introduced the Permanent Residency Board, the Work Permit Board, and the Business Staffing Plan Board.

It is without a doubt that Cayman then went through one of the most tumultuous phases that impacted not just how business was done in Cayman but affected the lives of workers in Cayman, including Caymanians, perhaps in a way that most were never prepared for and certainly never anticipated.
Key employee exemption

Under the Immigration Law (2003 Revised), the introductory phase, or what was referred to as the “transitional provisions,” allowed anyone who had already been living and working in Cayman for five years or more prior to the law taking effect, up to no more than eight to nine years in total permits, so as to have an opportunity to apply for permanent residency.

Businesses were to apply for key employees for workers they hoped to keep beyond the seven year term limit, although confusion ensued as to whether it was the position or the employee that was key (existing Business Staffing Plans had allocated “key positions” which did not exist in law, and the Law at the time only referred to “exempted employees”, otherwise known as “key employees”). To compound matters, at that time under the law, the application to be a key employee, could only be done on the grant or renewal of the work permit.

Employers or employees were caught by surprise and ill-prepared for the impact of the law that took its biggest and most devastating effect after the transitional provisions expired in 2007.  There was no provision in the law that allowed any discretion to extend the workers’ time beyond a few weeks to allow them to sort out their affairs and exit the jurisdiction if they failed to apply for permanent residency or key employee in time or for employers to make new arrangements.

At the introduction of the rollover legislation, the legislation provided that one had to leave for no less than two years to break the seven year term limit for a work permit holder in the Islands, unless you were designated a key employee and/or applied for permanent residency. The PPM government reduced that two year period to one year.

In spite of many a discussion by both parties, as to how long the break could or should be or not be, including the United Democratic Party in 2011 indicating that they had an opinion that the break could be reduced to as little as a month5, the one year break period has never been reduced from one year.

It should be noted that prior to the 2003 Immigration Law, which introduced a two year break of term limits, the government by policy did recognize six months as a break in residency.

In the December 2003 Hansard Report, in addition to the EU Convention as the basis for the rollover, specific mention was made of the 6,000 persons living in Cayman who were not Caymanians, but resided here for 10 years or more and more than 300 persons who had resided here for more than 30 years in 2001 and who were concerned about “lack of security of tenure and were planning on leaving.”

The only security of tenure that was provided for foreign workers in the 2003 Law was for work permit holders who had been working for 15 years or more as of Jan. 1, 2004. They could apply for PR within three years of the enactment of the law and it should be granted in the absence of exceptional circumstances.

Financial crisis

It would be impossible to not look at the impact that the global economic meltdown had on the islands and its impact on immigration.

The years 2007–2008 started the end of the transition period under the rollover legislation, which meant many workers were forced to leave, and businesses were beginning to realize that they were caught in the crosshairs of the legislation, (notwithstanding that the law had been in effect since January 2004).  But 2007–2008 also marked the beginning of the global meltdown.The combination of the two, however, created unprecedented challenges for the country.

By June 2011, some eight years after the introduction of the rollover policy into law, the then leader of the opposition, Alden McLaughlin, outlined the proposal that the seven year term limit on work permit holders should be dropped6.

He commented that a more “equitable, business friendly system” be introduced as the rollover was “causing too many problems for the business community … as businesses were forced to lose trusted staff, often at a critical juncture.”

The then leader of the opposition laid the road map for the new Immigration Law that we have today.

At around this same time in the summer of 2011, Bermuda had already started to take steps to revise its own rollover policy with what was referred to as a “partial retreat.”7 Their economy was also struggling and their numbers of permits were also starting to decline.

In spite of the UDP and the PPM agreeing to the introduction of the rollover policy in the Immigration Law 2003, the then Premier McKeeva Bush also seemed to agree with Mr. McLaughlin’s view of the failure of the rollover policy. In September 2011, Mr. Bush went much further however in stating that the policy “has led to a decline in all sectors of the economy, it has therefore negatively, affected jobs for Caymanians, and will continue to cause our people to suffer economic hardship.”

He further announced that he intended to present a paper to Cabinet to place a temporary suspension on the rollover policy for up to two years pending an urgent report from a committee to be … tasked with reviewing the positive and negative aspects of the rollover policy.8
This resulted in the creation of the Term Limit Exemption Permits, which extended the term limit of workers due to leave for up to two years ending in October 2013, and in effect put more than 1,400 workers in limbo.

That very month the newspapers in Bermuda picked up the story that Cayman was looking to suspend its rollover policy. Its own premier Paula Cox commented, “The benefit of the Bermuda immigration model is that it is dynamic and this move by Cayman highlights the flexibility of our policy.
“Our approach differs from Cayman as they embedded their rollover policy in law, so it lacks the nimbleness of the Bermuda model which is a policy not a law.”9

She was, of course, spot on.

Paula Cox’s further comments are well worth repeating for any government of the day. She commented in response to Cayman’s revisit of its rollover policy that, “I do not think that Cayman’s actions alone on this front make Bermuda less competitive. The way they process work permits and the cost of work permits has always been a problem for them. For example, our charge of $20,000 for a 10 year work permit is less than what their fee is for an executive for one year ($25,000).”

The cost of work permits was identified by the Term Limit Review Committee, after conducting a survey, as being one of the top concerns of business in Cayman.10

At this stage, both the political parties in Cayman seemed to agree on one thing: the magnitude of the failure of the rollover policy.

And perhaps even more telling, Bermuda, from whom we copied the policy, was already distancing itself from the policy.

This meant having to revisit yet again, the Immigration Law, driven by a struggling economy and the late acknowledgment that the Immigration Law remains key to the challenge of battling for business with other onshore as well as other offshore jurisdictions.

The latest version of the Immigration Law was indeed outlined for the most part, by the premier when he was campaigning as leader of the opposition. The current Immigration Law provides for all resident workers to apply for PR at year eight, although it was originally intended that they would have up to two years thereafter to apply for PR providing for a 10 year rollover.

This was ultimately reduced to nine years in the law that passed. This did away with the need for key employees etc. It was made clear from Premier McLaughlin’s political campaign, that the desire was to have some form of an equitable process and he is quoted as saying “the bar should not be set so high that only property owning professionals would be awarded residency, nor should the bar be so low as to allow everyone to receive PR.”

The challenge was, however, how do you strike the right balance, allowing all persons who enter the jurisdiction on a work permit to apply for PR, against the delicate balance of the high ratio of work permit holders to Caymanians? As a result, the point system went through a complex change to meet the challenge.

To date, it has yet to be put to the test, as no new PR applications have been heard under the new system.

The rollover, however, never really been totally set aside by Cayman.

In January 2013, Bermuda’s then newly appointed government on the other hand announced, an end to its rollover policy with immediate effect!

Its government stated that the elimination of the policy “represents the red-carpet approach, conveying that Bermuda is open for business … and the policy … has been identified as a barrier to job creation.”11

This was undoubtedly a gutsy move by the Bermuda government. It is without a doubt that Bermudians as well as Caymanians would have strong and passionate opinions as to the need for the rollover policy and perhaps equally strong opinions about any government of the day that walked away from the policy. This is particularly so when both Cayman and Bermuda recorded approximately 10 percent unemployment last year amongst their own.

And, in a government survey last year, 58 percent of Caymanians polled said they wanted to keep or modify foreign work restrictions, with one saying that it was unfair that foreigners held jobs when “Caymanians needed a chance at moving up the corporate ladder.”12

Challenges 

Big spenders – Top 10 countries ranked by consumption per capita

1Bermuda$37,924
2US$37,390
3Cayman Islands$34,020
4 Hong Kong$32,690
5 Luxembourg$32,000
6Norway$31,014
4Switzerland$29,465
8UAE$29,463
9Germany$28,478
10Austria$27,677

Both Cayman and Bermuda may face other hidden challenges: Anchor Investment Management did a recent analysis of Bermuda’s population and concluded that its government’s statistics, which showed an increase in the populous, were not accurate and that, in fact, there was an estimated drop by 6.4 percent since peaking in 2008.  Anchor says this is driven by two main factors: the loss of expatriate jobs and the decline of the “Bermuda-born” population.

In 2011, Charles Brown, Bermuda’s director of sustainable development stated that the number of [Bermudian] people aged between 15 -64 was expected to go down, “that translates into more jobs we may not have the people on island to fill.”

This may be attributed to ageing and lower birth-rate of Bermudians.13

This decline of Bermudians in Bermuda doesn’t seem to be the same in Cayman, which shows the numbers of Caymanians increasing, based on the Cayman labor force surveys. Although it is unclear what percentage of the growth are Caymanians as a result of acquiring PR and advancing to Caymanian status.

Based on numbers reported in 2012,14 there were 1,604 grants of PR to applicants since 2006, which equates to an average of 267 PR grants a year and between 2007 and 2011 there were 1,819 grants of PR to applicants as well as to their dependents which equates to 455 grants of PR per year when dependents are included. See figure 1

Foreign-Workers-

These are significant numbers for the size of the island, and it would be interesting to understand how many are granted status as a result of acquiring PR.

Our statistics, however, do show an overall steady decline in work permit numbers since 2005, (and again it is not clear the numbers of permit holders that have left the islands as opposed to those that have acquired PR).15

Anchor Investment Management’s report, however, does make interesting comments and observations: “It has become increasingly clear that over the past five years, a great deal of the decline in the economy has been a direct result of Bermuda’s declining population.

“Essentially, the longer term potential growth rate of a country relies on two factors: working population and productivity.

“A growing population is the source of an increasing workforce and the more productive these workers are, the wealthier they become. In the long run, a country becomes rich or stagnates depending on its mix of people, innovation and investment. If a country gets this critical mix right, short-term fluctuations in economic growth rarely matter.”

One last comment from Anchor House Investments report might ring a bell in Cayman: “Bermuda has a huge ‘denominator problem.’ Its grossly underfunded pension plans and soaring healthcare costs are compounding with the reduction in the number of payers … without a constant influx of younger (and preferably healthy) new entrants into these plans, entitlements and/or services are likely to be cut or suspended.”

It is interesting to note that notwithstanding all of this, a new study by the World Bank measuring annual spending and consumption has ranked the Cayman Islands as the world’s third largest purchasing country per capita, beaten by only Bermuda and the United States, with Bermuda ranking with the highest when it comes to individual annual spending and consumption.

This study looked at 199 countries. With Caymanians spending $34,020 per year, only Bermuda with a whopping average-spend of $37,924 per person and the world’s largest economy, the U.S., at $37,390 spends more than residents here. It is worth looking at the labor survey to understand the numbers in our labor force that can actually spend US$34,020 per annum and appreciate how tricky and challenging our immigration policies can be.

But we must appreciate these are remarkable statistics that demonstrate our ability to survive the economic challenges.

Given these remarkable statistics from the World Bank, and the equally remarkable statistics from the Labour Force Survey that suggests that Caymanians may well account for the majority of those spenders, that the number of Caymanians is growing or sustaining and the number of permits is declining, and are not at the all time high that it was in 2008, what is our long-term immigration objective? How many people do we need to sustain our economy, to keep our pensions and healthcare costs in check and to help drive industry? Can we produce enough Caymanians to fill the needs of industry and to grow our economy?

If not, how many people do we need here and can we break it down to understand the needs of each industry? And if we have a number in mind, what age group should they be in or does it matter? What of the 10 percent of Caymanians who are unemployed and how does this relate to our current statistics?

Of even greater interest, as much as we talk about a rollover policy and the number of work permit holders, can our government afford a reduction in work permits? How much of its own budget is based on the projection of work permit grants and the increase of those grants and their renewals? To what extent is our government budget dependent on work permits being sustained and if there is a minimum number, is there a particular sector or sectors that carries the weight of that budget and upon which government cannot afford to compromise?

Every year, government has had an unspoken mandate to reduce the numbers of Jamaican nationals as they are by far the largest category of non-residents outnumbering all other nationalities.

Do we have a number that we intend to reduce it to, do we want to increase another or all other nationalities? Are Caymanians satisfied with this mandate and comfortable in increasing, let’s say, the Filipino numbers or is there another category of nationality that we intend to increase or does it matter?

Conclusion

Rather than adopting policies from other jurisdictions, we need to tailor our own, specific to our needs as they stand now, and for long-term objectives. And in this regard, accurate and specific statistics are necessary.

The policies should be monitored regularly as the economy changes and the needs of the islands change. Without this, we are in danger of being always reactionary, not seeing the big picture and never having strategic and well thought through objectives.

This article is based on Sophia Harris’ presentation to attendees of VC Tutorial’s Distinguished Guest Lecture Series on 13 May, 2014 
 

 

ENDNOTES: 

  1. Cayman Islands Official Hansard Report 2003/4 Session
  2. CNS, Jan 23, 2010 ‘Rollover Gap to Shrink’
  3. CNS, June 16, 2011 ‘Drop rollover, says Alden’
  4. Term Limit Review 2012 – Subcommittee
  5. CNS, Oct. 21, 2010 ‘Advice flawed says Chuckie.’  Bush “We have legal advice from the UK that says we can make rollover time as limited as we want to in our legislation,” he said, later indicating that the rollover gap could be reduced to as little as one month.
  6. CNS, June 16, 2011 ‘Drop rollover, says Alden’
  7. Bernews, Sept. 19, 2011 ‘While Cayman acts, Bermuda dithers’
  8. Speech by Cayman Premier McKeeva Bush on term limits on work permits, Sept. 21, 2011
  9. Bernews, Sept. 19, 2011
  10. Caymanian Compass 8/7/12 The rollover debate is over.
  11. Cayman Compass 31/1/13 Bermuda Scraps Rollover Policy.
  12. Bloomberg, ‘Paradise lost facing expats in Cayman work visa crackdown’
  13. Charles Brown, director of sustainable development
  14. Caymanian Compass, July 8, 2012 ‘The rollover debate is over’
  15. Department of Immigration Quarterly Statistical Report December 2013
     

 

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Sophia Harris

Sophia-Ann Harris is the Managing Partner of the firm Solomon Harris.  Her specialties include mutual funds and unit trusts, local licensing and immigration, corporate and commercial law, banking and trusts.

Sophia Harris
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