Ius Doni: Citizenship-by-Investment

Citizenship laws reinforce birth-based membership: “advantaging those who have access to the inherited privilege of membership”.1 Most states base their citizenship laws on a person’s birth2 — either ius sanguinis, citizenship by descent, or ius soli, citizenship by birth.3 Less commonly, one may become a citizen through naturalization, namely “acquisition after birth of a citizenship not previously held by the person concerned that requires an application to public authorities”.4 As pointed out by Prof. Dr. Dimitry Kochenov, “[c]itizenship, as a legal status of attachment to public authority, is always distributed uniquely by the authority itself (and) does not depend on any sentiments and feeling of the citizenry”.5

Inequality of Citizenship
Citizenships are inequal in terms of their practical value, to which the Kälin – Kochenov Quality of Nationality Index (QNI) rankings testify. International law has been more concerned with such inequality6 in terms of the problem of statelessness; having citizenship of any state is better than having no state protection at all.7 However, attempts to resolve the issue of statelessness have neglected “rectifying inequalities that correlate with the birthright assignment of membership in ‘this or that’ particular country”.8
Our nationality has an enormous impact on our life. For example, a child born in Laredo, USA, is able to access all the social and economic benefits of the American welfare state as an American citizen and as an adult can seek employment opportunities throughout the USA and enjoy extensive visa-free travel around the world.9 A child born in the adjacent town of Juarez, Mexico, has significantly fewer options.10 Allocation of citizenship thus amounts to a “birthright lottery”.11

Ius Doni
One of the latest trends in the allocation of citizenship is through investment, or ius doni.12 The emergence and rapid growth of citizenship-by-investment (CBI) programs and residence-by-investment (RBI) programs results from the discretionary powers of states in the field of immigration and citizenship on the one hand, and a counterbalance to the exclusionary character and global inequality of citizenship on the other.13 Furthermore, a new class of ‘global citizens’ has emerged, who have numerous bases and for whom holding multiple citizenships is the norm.14

The acquisition of citizenship through a CBI program is an example of facilitated naturalization based on the applicant’s exceptional contribution to the country’s economy. Residence and various tests or requirements are usually waived. Such privileged access to citizenship results from the state’s particular interest in naturalizing certain citizens rather than from the latter’s keenness to live or socially integrate in the former.

While ius doni took place even in antiquity,15 the first modern CBI program, that of St. Kitts and Nevis, was introduced in 1984.16 Today, immigration and citizenship laws of over 100 countries provide for RBI or CBI. Residence programs secure the investor’s residence and, after a relatively long period of time, citizenship. CBI programs vary: the majority require that investment is in the state’s national interest (without specifically defining this interest). Some programs have poorly defined goals, while others struggle to demonstrate meaningful economic benefits.17 The investment or donation requirements differ, largely depending on the attractiveness of the host country and the quality of its passport. The QNI offers a solid platform for assessing the general attractiveness of nationalities by taking into account a number of internal and external factors to determine the objective value and rank of each citizenship.18

Nationalities of Citizenship-by-Investment Countries
Eleven countries were running formal CBI programs in 2018: Antigua and Barbuda, the Commonwealth of Dominica, Cyprus, Grenada, Jordan, Malta, Moldova, St. Kitts and Nevis, St. Lucia, Turkey, and Vanuatu. These are countries with standardized requirements and procedures rather than vaguely defined criteria in their legislations — such as is the case in Austria, Cambodia, or Cape Verde. Four were in Europe; of these Cyprus and Malta are EU member states and hence may confer EU citizenship alongside sovereign nation citizenship. Montenegro is expected to begin receiving applications for its program in 2019.

EU nationalities are ranked either in the Very High Quality tier or High Quality tier of the 2018 General QNI ranking; EU citizenship gives right of free movement and settlement in one of the world’s wealthiest regions and largest economic areas. In 2018, Cyprus and Malta ranked in the Very High Quality tier: Maltese nationality ranked 16th in the General QNI ranking, while Cypriot nationality was ranked 21st. Citizens of both countries could settle and work visa-free in the same number of foreign countries or territories (41), positioning both nationalities 7th in the Settlement Freedom Ranking. At 14th, Malta is higher in the Travel Freedom Ranking than Cyprus, which ranked 26th. Given their Very High Quality nationalities and access to the rest of the EU, these two countries have higher requirements than other CBI programs: Cyprus requires investors to donate EUR 75,000 to the Research and Innovation Fund or another certified innovation enterprise, donate EUR 75,000 to the Cyprus Land Development Corporation, and select from committing at least EUR 2 million to the purchase or construction of real estate, the purchase or creation of or participation in businesses or companies that are based and operating in Cyprus, or participating in alternative investment funds or purchasing financial assets of Cypriot enterprises or organizations licensed by the Securities and Exchange Commission, or a combination of the latter three options. Malta requires a non-refundable contribution to its National Development and Social Fund of at least EUR 650,000, plus participation in approved financial instruments of EUR 150,000 and the purchase of residential real estate with a minimum value of EUR 350,000 or the lease of a residential property with a rental value of at least EUR 16,000 per annum, which must be held for at least five years.19

The nationalities of the five Caribbean countries with CBI programs also ranked well in the 2018 General QNI ranking. All fall within the group of Medium Quality nationalities. Antigua and Barbuda ranked best among these in 2018 in 45th place. Slightly weaker was the nationality of St. Kitts and Nevis in 46th place, followed by Grenada in 52nd place, St. Lucia in 54th place, and the Commonwealth of Dominica in 57th place.

All Caribbean countries are part of the Organisation of Eastern Caribbean States (OECS) and the Caribbean Community (CARICOM), which provide mutual and conditional mutual freedom of settlement, respectively. Therefore, they also ranked well on the Settlement Freedom ranking. Antiguan nationality was again most successful, taking 26th position (owing to the free settlement to Georgia it provides), while the nationalities of the remaining four countries shared 30th position. All five Caribbean nationalities provide relatively wide visa-free travel, including in Europe’s Schengen Area countries. St. Kitts and Nevis performed best on the Travel Freedom scale, ranking 41st, followed by Antigua and Barbuda, (43rd), St. Lucia (51st), Grenada (53rd), and the Commonwealth of Dominica (58th).

A Caribbean passport can be acquired through a contribution to a national development fund or national treasury (ranging from USD 100,000 to USD 250,000 for a single applicant, more if dependents are included) or through real estate acquisition (starting at USD 200,000), and is thus one of the most value for money options. Furthermore, the socio-economic benefits that CBI programs have brought to these countries are obvious. Inflows from the Antigua and Barbuda Citizenship-by-Investment Program — created in 2013 — now constitute approximately 15% of the government’s annual revenue and are responsible for substantial investments in the public and private construction sectors as well as for the dual-island nation’s transition to renewable energy. The program has also been essential in generating sovereign equity to support the rebuilding of Barbuda after a recent tropical storm devastated the island. When the International Monetary Fund (IMF) reviewed the Antigua and Barbuda economy, it found that the revenue generated by investment migration had significantly boosted economic growth, pulling the country out of a deep recession. Antigua and Barbuda was able to pay back its entire debt to the IMF thanks to the income generated by the Antigua and Barbuda Citizenship-by-Investment Program.20 According to the IMF, at the end of 2015, St. Kitts and Nevis’ national development fund had accumulated assets equivalent to 20% of its GDP because of CBI-related inflows.21

The quality of the nationalities of the remaining four countries with CBI programs (Jordan, Moldova, Turkey, and Vanuatu) varies. Ranked 73rd, Moldovan nationality is of Medium Quality tier, as are those of Turkey (76th) and Vanuatu (78th). Jordan’s nationality is in the Low Quality tier, ranking 121st. Not being part of any agreements that facilitate the free movement of people, none of these four countries offers impressive international settlement rights. Their nationalities therefore rank lower on the Settlement Freedom scale. Moldova ranks 45th, offering free settlement access to two destinations, while Vanuatu is 50th, Turkey 51st, and Jordan 52nd, each offering settlement-free access to one destination only.
Although ranked higher than the other three nationalities, Moldovan nationality is the most affordable, with a minimum contribution of around USD 100,000 to the Public Investment Fund for a single applicant, and more with dependents. The minimum investment for Vanuatu is USD 150,000 for a single applicant, and more with dependents. Despite the substantial reduction of the minimum investment, the Turkish nationality still requires a higher investment than Moldova and Vanuatu with the minimum investment for real estate being USD 250,000. Jordanian nationality can be acquired through several investment options, but at USD 1 million the minimum investment threshold is set rather high.

Montenegro will start running its CBI program in 2019, offering citizenship to investors who will donate at least USD 113,400 and invest USD 283,500 in an undeveloped area of Montenegro (or at least USD 510,300 in a developed area of Montenegro). Ranked 64th, Montenegrin citizenship is of Medium Quality. While this nationality currently offers free settlement to two destinations only and is ranked 45th in the Settlement Freedom ranking, its value is likely to increase steadily in future as the country progresses towards EU membership.

Arguments against Citizenship-by-Investment
CBI has often been criticized. EU institutions, notably the European Commission and the European Parliament, often express their dissatisfaction with CBI in general and with the existing CBI programs in particular. However, in claiming that ‘[i]n compliance with the criterion used under public international law, member states should only award citizenship to persons where there is a “genuine link” or “genuine connection” to the country in question’22 and expressing concerns that obtaining citizenship through investment schemes ‘undermines the very concept of European citizenship’23 both the European Commission and the European Parliament have misrepresented the law and undermined the achievements of the EU. The ‘genuine link’ is not a requirement in international law but has merely been engaged to resolve diplomatic protection issues in cases of multiple citizenship.24 Furthermore, the very existence of EU citizenship essentially pre-supposes rights beyond the member state. In practice, EU citizenship weakens ties with a member state.

Acquiring citizenship through investment departs, according to the Commission, from the traditional ways of granting nationality in the member states and affects the EU citizenship.25 However, while ius soli and ius sanguinis are traditional forms of granting citizenship, ius doni equally has its roots in antiquity.26 Furthermore, while Cyprus and Malta have typical CBI programs, several others have CBI provisions in their laws, including Austria, France, Italy, Slovenia, and 20 member states have RBI programs. Acquisition of citizenship through investment is therefore not atypical as it is represented by the European Commission. In addition, the EU has diminished the legal relevance of member state nationalities in many areas where EU law applies, led by the principle of non-discrimination on the basis of nationality.27 And while recognizing the Micheletti ruling and the fact that EU law prohibits checking of genuine links and the right of sovereign countries to decide on their own naturalization procedures, the Commission concluded that member states must ensure that genuine links exist. Such conclusion is the opposite of the Court’s judgment in Micheletti.28

While noting that “citizenship is granted under less stringent conditions than under ordinary naturalization regimes, in particular without effective prior residence in the country concerned’’, the Commission did not acknowledge other ways of facilitated naturalization that do not require residence either, for example based on ethnic considerations, close history, or special merit and achievements. Furthermore, EU citizenships based on investment account for less than 1% of all EU natuaralizations.29

While every admission to citizenship may be seen as a potential security threat, CBI presents no greater risk than other routes. Residence requirements would not lower the risk; as noted by Kochenov, many security threats in the EU have been caused by first- or second-generation EU citizens.30

Ius doni is an important stride towards supporting economics with sovereign equity rather than increasing sovereign debt.31 It is further an important “step in the demystification of states and empowerment of individuals”.32 As Prof. Dr. Christian Joppke maintains, states “have always been strategists in matters of citizenship”;33 however, “[t]he novelty is to see individuals as citizenship strategists”.34

References
1. Ayelet Shachar, ‘Citizenship and Global Distribution of Opportunity’ in Engin F. Isin, Peter Nyers, and Bryan S. Turner (eds.), Citizenship Between Past and Future (Routledge, NY/Oxford 2013) 145
2. Otto Palandt, Bürgerliches Gesetzbuch (71st edn., Beck, Munich 2012) 140
3. Douglas B. Klusmeyer and Alexander T. Aleinikoff, Citizenship Policies for an Age of Migration (Carnegie Endowment for International Peace, Washington D.C. 2002)
4. Definition borrowed from Sara Wallace Goodman and Rainer Bauböck, Naturalisation, European Union Direct Observatory (EUDO), Citizenship Policy Briefs (Robert Schuman Centre for Advanced Studies and European Union Institute, Florence 2010)
5. Dimitry Kochenov, ‘The Citizenship of Personal Circumstances in Europe’ in Daniel Thym (ed.), Questioning EU Citizenship: Judges and the Limits of Free Movement and Solidarity in the EU (Bloomsbury/Hart, Oxford/Portland, OR 2017) 39
6. Kingsbury, ‘Sovereignty and Inequality’
7. Shachar, The Birthright Lottery 9
8. Ibid
9. The USA nationality scored weaker than all EU nationalities but better than most other nationalites around the world, being ranked 25th in the 2018 General QNI Ranking with a value of 70.0%
10. The Mexican nationality was ranked 52nd in the 2018 General QNI Ranking with a value of 45.7%
11. Shachar, The Birthright Lottery 8
12. The term ius doni coined by the author derives from the Latin expression used for a gift or a contribution (dōnum/gen. dōnī) and signifies the right to citizenship by making a contribution by investing in the host state
13. Peter J. Spiro, ‘Cash-for-Passports and the End of Citizenship’ in A. Shachar and R. Bauböck (eds.) in Should Citizenship be for Sale? (EUI Working Paper RSCAS, 2014/01)
14. Henley & Partners, The Global Residence and Citizenship Programs 2017–2018: The Definitive Comparison of the Leading Investment Migration Programs (Ideos, New York/London/Zurich/Hong Kong 2017)
15. Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44
16. Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44
17. Madeleine Sumption and Kate Hooper, Selling Visas and Citizenship: Policy Questions from the Global Boom in Investor Immigration (MPI, Washington D.C. 2014) 3
18. Other important aspects influencing decisions of potential investors, such as favorable taxation, residence requirements, weather conditions, or environmental cleanliness to mention only a few, must not be underestimated either. These aspects, however, go beyond the scope of this work
19. These requirements are currently under review and are expected to change. It is expected that the overall cost will slightly increase
20. Henley & Partners, ‘ Sovereign Equity Launched as a Solution to Sovereign Debt and Financial Inequality in Davos Debate’ (Press Release, 25 January 2019) accessed 13 March 2019; Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44
21. International Monetary Fund, Country Report, St. Kitts and Nevis’ Article Consultation (Press Release and Staff Report 16/250, 26 July 2016) accessed 13 March 2019
22. Viviane Reding, ‘Citizenship Must Not Be up for Sale’ – European Commission, Plenary Session debate of the European Parliament on ‘EU citizenship for sale’ (Strasbourg, 15 January 2014) (Viviane Reding’s Speech)
23. European Parliament, Resolution of 16 January 2014 on EU citizenship for sale (OJ C 482/117 (2013/2995(RSP)) of 16 January 2014 (EU Citizenship for Sale Resolution) point G
24. Robert D. Sloane, ‘Breaking the Genuine Link: The Contemporary International Legal Regulation of Nationality’ (2009) 50 Harv. Int’l L.J. 13; Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44 Gotthard Mark Gauci and Kevin Aquilina, ‘The Legal Fiction of a Genuine Link as a Requirement for the Grant of Nationality to Ships and Humans – the Triumph of Formality over Substance?’ (2017) 17 ICLR 167
25. European Commission, ‘Investor Citizenship and Residence Schemes in the European Union’ 6
26. Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44 et seq.; Deborah Kamen, Status in Classical Athens (Princeton UO, Princeton, NJ 2013) 79; Michael J. Osborne, Naturalization in Athens: The Testimonia for Grants of Citizenship (AWLSK, Brussels 1983) 147 et seq.
27. Kochenov, ‘The Citizenship of Personal Circumstances in Europe’
28. C-369/90, Mario Vicente Micheletti and others v Delegación del Gobierno en Cantabria, [1992] ECLI:EU:C:1992:295 (Micheletti) para 10
29. The percentage is based on the total number of new EU citizenships granted each year provided by Eurostat accessed 13 March 2019
30. Dimitry Kochenov, ‘EU Report on Investor Citizenship and Residence – When the Commission Misleads’ (Investment Migration Insider, 23 December 2019)
31. Christian H. Kälin, Ius Doni in International Law and EU Law (Brill/Martinus Nijhoff, The Hague 2019) 44
32. Christian Joppke, ‘The Instrumental Turn of Citizenship’ (2018) J. Ethn. Migr. Stud. 18
33. Ibid.
34. Ibid

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