Foreigners Law: Russian plaintiff intends to establish an accommodation business in the form of a GmbH in Germany.

Administrative Court of Berlin, Judgment of November 16, 2016, Case No.: 14 K 240.15 V

Background of the Case: Visa Application for Self-Employment

The plaintiff, born in 1979 and a Russian national, sought to obtain a visa to pursue self-employment in Germany. He is the majority owner (90% of the share capital) and has been the managing director of A… GmbH, which operates a guesthouse in Bad Nenndorf, since 2015. The GmbH was founded in 2013, with the plaintiff’s brother initially serving as the sole managing director. The guesthouse itself has existed since the 1990s, and the plaintiff purchased the property on which the guesthouse is operated from the previous owner.

In June 2014, the plaintiff applied for a work visa at the German consulate in Yekaterinburg. He intended to work as the second managing director of A… GmbH and submitted an employment contract as well as documents detailing his professional background in Russia, including evidence of his work as a process technologist and deputy director of another GmbH in Russia. However, the Federal Employment Agency denied its consent to issue the visa, leading the consulate to reject the application. The plaintiff appealed this decision, arguing that he was seeking self-employment, which did not require approval from the Federal Employment Agency.

Expert Opinions and Authorities‘ Decision

The Chamber of Industry and Commerce and the trade authority of the Nenndorf municipality were involved in the proceedings. The Chamber of Industry and Commerce indicated that, while self-employment could generally be assumed if the plaintiff acted as the managing director of the GmbH, there was no sufficient economic interest in his activity. The GmbH was a small business, and the plaintiff had neither industry expertise nor business or entrepreneurial experience in Germany. Additionally, there was no apparent regional need for the business. Based on these opinions, the authorities denied approval for the visa in July 2015, and the consulate rejected the plaintiff’s application again in a decision dated September 29, 2015.

The plaintiff then filed a lawsuit, submitting additional documents to demonstrate the economic viability of his project. He presented a shareholders‘ meeting protocol documenting his appointment as the second managing director, as well as business evaluations and tax assessments for 2014 and 2015. The plaintiff argued that the guesthouse had been successfully operating for years and that there was increased demand for accommodation in Bad Nenndorf. Furthermore, the local economy benefited from the employment of staff and the procurement of goods and services. Additionally, the financing of his business was secured through equity.

Court’s Review: No Viable Business Idea

The administrative court reviewed the case and concluded that the lawsuit was unfounded. The plaintiff had no claim to a visa since the requirements of § 21 (1) of the Residence Act (AufenthG) were not met. According to this provision, a visa for self-employment may be granted to a foreigner if there is an economic interest or regional need, the activity is expected to have positive effects on the economy, and the financing is secured. The court determined that the plaintiff had not sufficiently demonstrated that he intended to engage in self-employment as defined by the law. Although he was acting as a managing partner of the GmbH, this was more akin to managing his own assets rather than engaging in independent entrepreneurial activity.

Moreover, the court found no economic interest in the plaintiff’s planned activity. The guesthouse operation had no significant positive impact on the German economy. A… GmbH was a small business with a capital investment of €25,000 and annual profits of around €25,000 on revenues of €135,000. These economic figures were economically insignificant. The plaintiff also failed to present a long-term viable business plan that would indicate a substantial increase in revenues. Additionally, the company’s profits in 2016 had decreased by 24% compared to the previous year, raising further doubts about the business’s economic viability.

Further Concerns: Lack of Language Skills and Regional Need

The court also expressed doubts about the plaintiff’s ability to effectively perform his role as managing director. It was noted that the plaintiff lacked sufficient German language skills to handle the business contacts and correspondence required for a leadership position in Germany. The suggestion that his brother could act as a translator was dismissed as impractical, as it would require his brother to give up his own professional activities. The fact that the business was already operational and generating profits did not exempt the plaintiff from needing to possess the necessary entrepreneurial skills.

Another important argument against issuing the visa was the lack of regional demand for the plaintiff’s business. The court noted that there were already numerous accommodation businesses in Bad Nenndorf, and no specific need for additional establishments of this type was evident. The plaintiff was unable to provide concrete evidence to the contrary. Furthermore, the number of employees at the guesthouse was too low to suggest a significant job creation impact. In 2016, only four people were employed at the guesthouse, three of whom were part-time workers, and the fourth was the plaintiff’s brother, the second managing director.

Conclusion: No Prospects for the Plaintiff’s Success

In conclusion, the court ruled that the lawsuit was unfounded, and the plaintiff had no claim to a visa. There was neither an economic interest nor a regional need for the plaintiff’s activities. Additionally, the plaintiff could not sufficiently demonstrate the financial viability of his business plan. The lack of language skills and entrepreneurial experience in the hospitality industry further weakened the prospects of success. The consulate’s rejection of the visa application was therefore lawful, and the decision did not violate the plaintiff’s rights.

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