Citizenship by Investment programs (CBI) commonly known as ‘Golden Passports’ have sparked discussion and controversy the last few months particularly in relation to the genuine link criteria. These schemes promote fast-track citizenship to foreign nationals in exchange for their substantial investment in the country without the need for the individual to be present and reside in the state or have any sort of real links to the country other than the investment. They essentially allow the world’s moneyed elite to circumvent many of the traditional requirements for acquiring nationality.
In the 1990’s, modern CBI programmes were mainly associated with former colonies such as Saint Kitts and Nevis. This investment-centred migration is only present for less than two decades in the EU. Bulgaria, Cyprus, and Malta introduced such investor citizenship schemes in 2005, 2007 and 2013 respectively. The mentioned countries did not require an efficient prior residence or physical presence in the country concerned, nor a requirement of other real connections with the country before granting their citizenship.
The Concept of Nationality
The terms ‘nationality’ and ‘citizenship’ are frequently used synonymously. They “emphasize the same notion that is membership to a state”. Generally, speaking, nationality denotes the ‘legal bond’ between the citizen and the state. This bond will then create some enforceable rights and duties for both sides of that relationship such as the right of that state to exercise ‘diplomatic protection’ on behalf of its own nationals.
Traditionally, international law has seen nationality as belonging to the core of national sovereignty, the ‘domaine réservé’ of states, suggesting an almost complete freedom for states. However, the nature of nationality as a matter of domestic regulation does not thwart the existence of an international or perhaps regional framework relating to nationality.
Nationality and Limitations on the State: The Pre 1955 Scene
In 1923, the Permanent Court of International Justice (“PCIJ”) stated in the Tunis Morocco Nationality Decrees opinion that nationality falls within a domain of legal competence reserved to internal law, although it may be limited by treaty obligations. In this reserved domain, ‘each State is sole judge’. The same Court, the same year, in its Polish Nationality Opinion merely confirmed its previous ruling.
The 1930 Convention on Certain Questions Relating to the Conflict of Nationality Laws adds that ‘Any question as to whether a person possesses the nationality of a particular State shall be determined in accordance with the law of that State.
This law shall be recognised by other states insofar as it is consistent with international conventions, international custom and the principles of law generally recognised regarding nationality. The convention’s provision however was very vague without any solid regulation for states.
Post 1955: The Nottebohm case and Genuine Link
In 1955 the International Court of Justice’s ruling in the Nottebohm Case came to be described as one of the most important limitations on the state’s naturalization discretion. Particularly, as stated by the Court “[…] nationality is a legal bond having as its basis a social fact of attachment, a genuine connection of existence, interests and sentiments, together with the existence of reciprocal rights and duties.” As further stated by the ICJ, ‘[I]nternational arbitrators have decided in the same way numerous cases of dual nationality. […] They have given their preference to the real and effective nationality, that which accorded with the facts, that based on stronger factual ties between the person concerned and one of the States whose nationality is involved’. Yet, the dissenting Judges Klaested, Read, and ad hoc Guggenheim argued that, existing international law did not supply any basis for limiting states’ authority to determine their own rules of nationality, apart from fraud and abuse of right.
One of the curious features of Nottebohm is that its afterlife has been marked by a strong disciplinary divergence. In the wake of this decision, much discussion has taken place in jurisprudence and literature on the function of a genuine connection requirement as a restriction on the freedom of states to regulate nationality. The genuine or effective link came to be understood by some as a general requirement for ‘effective’ nationality, which required that a legal bond of nationality expressed the ‘fact of attachment, a […] connection of existence, interest and sentiments’.
Interestingly, in 1992 the Advocate General in the CJEU’s Michelleti case said that Nottebohm belongs to a “romantic period” of public international law. Professor Kochenov assumes that the decision in Nottebohm is an ‘entirely arbitrary and potentially harmful rule of international law’ and finds the genuine link model ‘incoherent and logically inexplicable’. Therefore, some commentators support that genuine link and nationality go together, and that state membership and the enjoyment of rights should be kept only for those individuals who are both resident in and active members of a state. Simultaneously, others support that this genuine link concept should only be used in the case of diplomatic protection and dual citizenship, while others totally reject it. Yet others have re-construed it as amounting, to an “abuse of rights” test in that context.
If applied to the case of Golden Passports, the genuine link requirement will mean that many naturalizations would open doubt on fraudulent nature and perhaps non-recognition by other states as they would lack traditional prerequisites of naturalization such as residency.
The residency requirement could arguably constitute one of the most important factors of the nexus between a person and the country granting citizenship. ‘Previous residence in the country, along with language and cultural tests are common requirements across the EU for the conferral of citizenship’. Interestingly, the Cypriot authorities considered that the investment in Cyprus is itself a sufficient bond between the applicant and Cyprus: under the relevant Council of Ministers decision, the residence criterion which was required under the ordinary naturalisation procedure is replaced by an investment criterion. Further, Malta’s citizenship program considered that an individual that had a local mobile phone, or a membership to a local club or professional body could establish a genuine link to the Country.
EU law, Citizenship, and International Law
Inevitably, the EU’s integrity could be jeopardised due to these programmes. The 1992 Treaty on European Union created the concept of European citizenship. Article 8(1) declares that “Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union.” These schemes are of common EU interest since every person that acquires the nationality of a Member State will simultaneously acquire Union citizenship. The decision by one Member State to grant citizenship in return for investment, automatically gives rights in relation to other Member States, most importantly free movement and access to the EU internal market to exercise economic activities.
In the Rottman case, the European Court of Justice (ECJ) maintained that EU Member States should exercise their right to regulate their national citizenship ‘having due regard to Community law’. In the same case, Advocate General Maduro argued that national citizenship rules can, in certain circumstances, breach the Member States’ duty of loyal and sincere cooperation. In its Micheletti judgment, the ECJ stated that ‘under International law, it is for each Member State, having due regard to Community law, to lay down the conditions for the acquisition and loss of nationality. Member States must, therefore, take into account all rules that form part of the EU legal order, including international law, which requires a ‘genuine connection’ between the State in question and the person that is granted citizenship.”
In 2013, the European Commission noted that the EU had no grounds to prevent Malta from selling citizenship. In 2014, the European Parliament condemned Malta’s citizenship programme (among others) and called on the Commission to further investigate their fundamental legality. The Commission finalized the review in 2019, and while it had raised further concerns about money laundering and corruption being regularized through these schemes, the Commission continued to defer to the Member States on the management of citizenship. In 2019 Commissioner for Justice, Consumers and Gender Equality, Věra Jourová supported that ‘We want more transparency on how nationality is granted […]. There should be no weak link in the EU, where people could shop around for the most lenient scheme.’
In the wake of the Cypriot Passport scandal, the European Union came to severely criticize Cyprus and ask for examination of the allegations over the violations of EU Law. In October 2020, the European Commission launched infringement procedures against Cyprus and Malta and issued letters of formal notice about investor citizenship schemes. The Commission mentioned that the issuing by Member States of their passports in exchange for an amount of money and without the existence of a genuine link with the Member States concerned, is not compatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union. As Fripp noted, ‘[i]n the EU level it is not implausible to imagine future claims of breach of solidarity (or lack of sincere cooperation) and abuse of right against member states that blatantly commodify citizenship.’
What can be inferred is that there is generally an agreement on the principle that a type of connection should exist. The only question is how intense this factual relationship must be. It is not the first time that states have been accused of granting their nationality to people not having sufficient links to the state in question. Perhaps, the neoliberal understanding of the individual’s relation to the state has changed the traditional requirements of genuine link and substituted them with new economic terms. Even under this scenario, states should not use their rights in an abusive manner especially when dealing with issues pertaining to state sovereignty. There is the possibility that soon, other states may refuse to recognize nationalities acquired through golden passport schemes.
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