PROF. DR. DIMITRY KOCHENOv – CHAIRMAN OF THE BOARD OF THE INvESTMENT MIGRATION COUNCIL

Investor Citizenship and the EU: Zooming in on the European Commission’s ill-Informed Analysis

The European Commission has no competence to regulate, and a rather poor understanding of citizenship matters and the investment migration industry, writes Dimitry Kochenov, Professor of EU Constitutional Law in Groningen, and Chairman of the IMC.

In January 2019, the European Commission released its much awaited ‘Report on Investor Citizenship and Residence Schemes in the European Union’. Given the negative attention the whole issue of selling EU citizenship and residence has been receiving from the powers that be in the European Union, lawyers and policy-makers could expect much more from the Commission’s treatment of this hugely important topic. Rather than providing a clear rule-based analysis of the potential problems and opportunities at hand, the Report, regrettably, turns against the key achievements of the Union to misrepresent EU citizenship law. Instead of measured and careful analysis, it offers an outline of a moral panic, ignoring all the positive sides and inflating the negative sides of the story, while proceeding on the false premises of archaic nationalism and ignorance of EU law. Infinitely more could be expected of the Commission, and one can only hope that this first erroneous step will not set a trend.The Report is correct on many facts it communicates: indeed, Bulgaria, Cyprus, Malta and, less systematically Austria, offer EU citizenship for investment. Moreover, 20 or more member states offer (permanent) residence statuses for investment, which are often convertible into citizenship of those states. To summarise: more than 70% of the member states opted for a policy, which the Commission has no direct competence to regulate, but tackles in the Report. This alone makes the Commission’s take on investment migration worth looking at in some detail.

Framing investment migration

Undoubtedly, there is a fundamentally important issue at hand: investment migration is capable of bringing huge gains, but also generates risks. The Commission is dead silent on the former, but is absolutely right about mentioning the latter. When run in non-transparent and corrupt ways, investment migration – like any other enterprise – will certainly generate problems. In fact, the Report is such that it presents the whole issue of investment migration uniquely as a risk, rather than an opportunity.Silence on the benefits that the overwhelm-ing majority of the member states either receives or believes to be receiving, unquestionably sheds the Commission’s work in a deeply biased light: the suggestion is that 20 member states are be-having deeply irrationally, which is implausible, and deeply political in the negative sense of the word.

A hymn to a nationalist past

The Commission claims to have discovered what citizenship is about, writing that citizenship ‘is traditionally based on … ius sanguinis and … ius soli’. This is all correct, but the Commission does not make clear that a) it does not have the power to regulate this area; b) that the reality is much more complex than what its selective summary purports to demonstrate. Referring to citizenship by investment, the Commission writes that, in essence, such ‘citizen-ship is granted under less stringent conditions than under ordinary naturalisation regimes’. What is crucial here is to mention the differences marking citizenship law amongst all the member states to rationally accommodate the acquisition of citizenship by different categories of applicants. The sovereignty aspect of this story is also important. Starting with the latter, states are free to confer citizenship on those whom they consider qualified under the Hague Convention of Nationality (Art. 1) and, unquestionably, under EU law.EU law is funny in a way – and this is its un-questionable, pluralist strength. A US kid able to find a Greek great-great grandfather becomes an EU citizen automatically, without ever having visited Greece; a spouse of a Frenchman in Vietnam is naturalised without ever having lived in France; an EU citizen does not need to give up his or her original nationality when naturalising in Germany, unlike any non-EU nationality holder; and a Catholic dignitary retiring from the Vatican becomes an Italian, automatically and immediately. These are the groups (among, liter-ally, countless others) that are treated by immigration and citizenship law differently in all member states. The question of what is ‘legal’ does not arise, since it is not up to the Commission to ask or comment upon. And given that international law, similarly to European Law, is clear: Member states will decide as they see fit – ius soli and ius sanguinis in this context, is, while not incorrect, a reference to nowhere. The Commission simply misrepresents the complexity of standing citizen-ship law and policy to mount an assault on the investment migration industry.Besides, and equally importantly, ‘ordinary conditions’ – as opposed to the frowned-upon ‘less stringent’ ones – imply a level of due diligence, which is significantly lower than what investment citizenship promises: the entirety of one’s finances and business connections, as well as all the story of your past, would not normally be dug up by independent due diligence providers, unless you are an investor naturalising on that ground.This is only right: different applicants require different standards. The ‘context’ of citizenship acquisition, to which the Commission dedicated a whole section in its Report, is misleading: for-getting to mention ‘difference’ amounts to failing to tell a true story.

The Commission’s analysis seems to be based on the assumption, which is nowhere explained or defended properly, that presence in one of the member states for a period of time before naturalisation, is likely to alleviate security risks.

Flawed reasoning rooted in obsolete authority

The second main flaw of the Report is its failure to come to terms with the basic meaning of citizenship in law as an abstract legal status. Not caring about the country and its purported values will not make you less of a citizen in the eyes of the law, just as caring a lot about some officially endorsed ‘culture’ or language will not make you a citizen, unless you are named such by law. Pretending that this is not the case is deeply unhelpful. When the Commission informs us that ‘the study looked for other factors … which might arguably create a link between the applicant for citizenship and the country concerned’, a citizen-ship lawyer reading it is puzzled. It is fundamental to realise that only citizenship can be such a link. A Tanzanian, who spent his whole life in the US and loves America, is still a Tanzanian unless US law tells us otherwise. And an American who spent his whole life in the UK – like the UK’s Boris Johnson – is still an American, liable to pay taxes and to renew his passport, no matter how little he thinks of the greedy motherland. The whole point of the text of the Report is the Commission’s apparent desire to play a somewhat totalitarian role: is this Maltese a ‘real’ Maltese? What if he has never visited the European Union? This is where the obsolete case-law of the International Court of Justice, expressly overruled by the EU’s own Court of Justice (!), comes into play: the Commission refers, quite extensively, to Nottebohm’s theory of ‘genuine links’. What the Commission’s file handlers should have not overlooked, however, is that ‘genuine links’ are incompatible with a world which is not composed of ‘genuine jails’: what the Court of Justice confirmed in Micheletti: as per Advocate General Tesauro, the ‘romantic period of international law’ is over. The Court of Justice of the European Union has expressly prohibited member states from relying on Nottebohm in dealing with each other’s nationals. References to the obsolete authority are only the start of the Commission’s puzzling campaign of putting legal reasoning to sleep. The Report essentially claims that since checking genuine links is expressly prohibited by EU law in Micheletti, member states have to ensure that such links exist. Given that Nottebohm unquestionably is bad law and the Commission was obliged to know it, and taking into account the reasoning of the Commission, trying to undermine the internal market, established case-law on free movement of persons, and the rule of EU law established in Micheletti amounts, in fact, to the Commission knowingly misleading the European Parliament, the Council, the European Economic and Social Committee, and the Committee of Regions, to whom the Report is addressed. This could be an example of the violation of the duty of loyalty, should the Report be more convincing.

Curious assumptions about the connection between residence, citizenship and security

In the Report the Commission is looking for solutions to address the risks in terms of security, tax evasion and money laundering – all vitally relevant concerns of huge importance for the EU and the member states. In so doing, however, the Report, instead of outlining concrete problems and proposing solutions, reaches a truly esoteric level: the Commission’s analysis seems to be based on the assumption, which is nowhere explained or defended properly, that presence in one of the member states for a period of time before naturalisation is likely to alleviate security risks. In fact, numerous recent security threats in the EU were caused by first- or second-genera-tion EU citizens who never claimed to be jetsetters or millionaires. This also undermines the appeal of the Commission’s findings akin to ‘this means that applicants can acquire citizenship of Bulgaria, Cyprus, or Malta – and hence EU citizenship – without ever having resided in practice in the member state’. The only answer is ‘Of course!’ in a situation where hundreds of thou-sands of EU citizens have never been to the EU in their lives, and there is no legal requirement, either in EU or in International law, to bother to visit one’s country of citizenship. A passport can also be renewed from abroad, as the Court of Justice has reconfirmed in Tjebbes, reinforcing the point that the member states, not the EU, will be deciding on the issues of conferral and withdrawal of nationality.

Conclusions

The Commission has been effectively telling 20 member states that most likely, they are doing it wrong, while enjoying no competence to regulate the field, and demonstrating rather poor command of the matter in question. Many will no doubt be offended by it, while blood and soil communitarians of all sorts will cheer.Beyond the haphazard argumentation and wilful misinformation concerning citizen-ship in general and EU citizenship law in particular, the Report sends a very clear message: the Commission wants to regulate citizenship. Ideology and incompetence have won for now, and citizenship lawyers and scholars in all the member states will need to mobilise to shame the Commission for failing to do its job to make sure the Report in question is an exception, rather than the rule.

BIO: Prof. Dr. Dimitry Kochenov chairs the board of the Investment Migration Council. he holds a Chair for EU Constitutional and Citizenship law at the University of Groningen, Netherlands. his research focuses on European citizenship and the principles of European Union law, with an emphasis on justice, democracy and the Rule of law. his latest books include ‘EU Citizenship and Federalism: The Role of Rights’ and ‘Europe’s Justice Deficit?’ his newest monograph is ‘Citizenship’, forthcoming from MIT Press in the summer of 2019. Dimitry is a consultant for governments and international organisations in his fields of interest, and is also co-creator, with Christian Kälin, of the Quality of nationality Index.