In January 2019, European Commission haspublished the report on Investor Citizenship and Residence Schemes，in the European Union after carefully reviewing the report our institute would like to make following response：
The Commission report relies on the concept of the genuine link in criticizing the relation between investors and States offering CBI/RBI programmes. However, the genuine link doctrine has been disputed ever since it wasdefined by the International Court of Justice in the Nottebohm case.Moreover, international law is silent as to the requirements for States to grant naturalisation, and commentators have argued that the analysis of the motives that lead someone to naturalise should not be made by third parties. Commentators have equally claimed that EU law is presently not allowed to interfere with the competence of the member states to determine who their nationals are.
This is confirmed by Article 20 of Treaty on the Functioning of the European Union which states that EU citizenship is an additional status and is not meant to replace national citizenship. The principle of sincere cooperation, as invoked by the Commission, is therefore irrelevant in this matter. The Commission also notes that member states currently do not consult each other on applicants for investor citizenship. However, state practice shows that it is very questionable that countries inform each other of citizenship decisions generally.
In addition, the Commission observes that under none of the investor citizenship schemes comprehensive information is available about the identity of people who successfully obtain citizenship on the basis of investment. State practice as regards naturalisation, however, shows that the grant of nationality is generally by a discretionary decision of the competent authorities. Countries that grant naturalisation by Act of Parliament, leading to the publication of the applicants’ personal details in the Official Gazette, are the exception.
EU Border Security
The European Commission report states that citizenship by investment programs create potential security risks. However, CBI States have already addressed such concerns.
The European Commission report states that citizenship by investment programs create potential security risks. However, CBI States have already addressed such concerns. Not only areapplicants for most European CBI programs first requiredto apply for a residence permit, which subjects them to the regular security requirements of EU law. But they also have to under go additional due diligence checks. In Malta, for example, applicants are considered as ineligible on numerous grounds and are also subjected to anenhanced external due diligence screening Cyprus has, since 2018, restricted its requirements and demands that intermediary agencies conduct a due diligence screenings on their applicants. The European Commission rightly states that these enhancedsecurity requirements cannot eliminate all potential risks. Nevertheless, it should be acknowledged that these procedures have added value and that citizenship by investment programmes usually impose more stringent security requirements on their applicants than other naturalisation routes.
In response to the Commission’s Report, I would like tounderline two main points. First, one ofthe arguments used by the European Commission against CBI and RBI programmes is that they could undermine. EU’s efforts to secure its territory as RCBI beneficiaries would not be subjected to the same type of control as other third country nationals crossing EU borders.
In the report, the Commission mentions the lack of information related to theuse of instruments such as the Schengen Information System or the Visa Information System in RCBI programmes. As a response, Malta specified that their due diligence checks are already using EU’s centralized information systems. We are in favour of the sharing of information in this regard by other EU countries proposing RBI and CBI schemes in order to better inform the EU of the existing procedures in place to mitigate potential security risks.
Additionally, an important aspect is not mentioned, namely that all residency permit granted under RBI schemes currently proposed by EU member states have to follow EU law. Then, the Commission expresses concern about the external dimension of RBI/CBI programmes for example in relation to Moldova and Montenegro. However, as most monitoring tools for countries benefiting from visa-free travels and bench marks for accession countries already include the issues of security money laundering, transparency and good governance these concernsare ill-founded. A better communication between countries offering RCBI schemes and the EU, leading to a better understanding of this specific field, will surely be enough.
Economic Impact- The Case of Malta and Cyprus
I would like now to showcase the economic impacts of Investment Migration programmes with a focus on real estate markets of Cyprusand Malta.
Malta requires participants in the Citizenship by Investment scheme to purchase residential property worth at least €350,000 or lease a property with an annual lease rateof over €16,000. In 2016, all Citizenship by Investment relatedreal estate transactions accounted for less than 1% of all real estate transactions in Malta. However, these transactions accounted for over 5% of the total value of all real estate transactions.
This shows that investment related to the CBI scheme can have outsized impact on the real estatemarket in Malta, and in this case could cause inflationary tendencies Cyprus also requires investors to purchase residential property. In December 2018, the International Monetary Fund announced that over 25% of all residential construction in Cyprus was backed by foreign investors, most of whom are part participants in the Citizenship by Investment scheme. This goes to show that on one hand, that investment from the Citizenship by Investment scheme can help spur growth in an industry but on the other hand, can leave an industry vulnerable and in this case the construction industry tochanges in the level of investment.
Investing in Licenced Fund for Improved Security and Transparency
It can also be argued that different investment options pose different risks and security concerns. Some states have introduced the option of investing in a licenced fund. The fund will be directly monitored by home Member State regulators with enhanced risk management and transparency. It leads to significant risk reduction. The investment scale is also expected to be much largerand the investment impact can also be more easily quantified.