“It is all about European blood”

An article written by Prof Dimitry Kochenov, Leader of the Rule of Law Workgroup at the Central European University and Dr Elena Basheska, Post-doctoral Research Fellow at CEU Democracy Institute for the IM Yearbook 2023

The IM Yearbook sits down with Dimitry V.Kochenov and Elena Basheska to discuss the European Commission’s views on investment migration.

“It Is All About European Blood, Baby!” This is the attention-grabbing and thought-provoking title of a new report you just wrote. Why did you choose this title?

Dimitry Kochenov (DK): It is just a reflection of reality: The European Commission makes a clear distinction between those who acquire European ‘citizenship by blood’ and all others. When ‘blood’ is there, nothing else – such as residence, place of birth or income – usually matters, so the links to Europe are presumed to be there when one can trace the right ancestry. This means that the whole concept of citizenship as promoted by the European Commission is a blood-based status.

I’ll give you an example of citizenship by decent, which makes the absurdity of this quite obvious. So, if someone who has lived in Australia for many generations, suddenly finds a Greek ancestor, then this is the ‘blood link’ that counts and that automatically enables this person to get a Greek passport and all the rights in the European Union.

Of course, no due diligence and no other checks other than those about the blood connection are carried out. However, make sure all the line is male. Any grandmother would ruin the construct and you will need to spend years and/ or a lot of money to acquire European documents.

Be it as it may, it’s clear that the only thing that counts is the blood line. This explains the title, and there is nothing exaggerated about it. The blood paradigm is only broken by naturalisations, which amount to less than 2% of citizenship acquisitions around the world.

Over the past eight years, EU institutions have turned to investment on numerous occasions. For those who are not familiar with the issue, can you briefly summarise the EU’s actions and initiatives?

DK: It all started with a debate in the European Parliament (EP) when Malta was about to introduce its CBI in 2014. It’s interesting to note that back then there was already a programme in Ireland, which didn’t raise any red flags and was operating in a similar way to the one that Malta planned to introduce. And Cyprus did not interest the EP either: context did not seem to matter.

In other parts of the world such as the US and Canada, programmes were operating, too. But the European Commission did not think critically of these programmes. They only started exercising pressure on Malta as a result of the commotion in the European Parliament, which claimed that European citizenship should not be for sale. So, one part of the dispute revolves around the question whether the EU only wants to accept the blood connection or whether the EU wants to consider a more open version on the modalities of citizenship acquisition. The essence of EU citizenship is essentially at stake.

The other part of the dispute concerns the EU’s competence. When the European Parliament released its resolution in 2014, it underlined that the EU doesn’t have competence on the matter. Viviane Reding, Vice President of the European Commission, said the same earlier when asked about Cyprus, only to change her mind concerning the scope of EU law when Malta entered the picture. Knowing that the EU has no competence, the Commission pushed Malta, simply by exercising political pressure, to introduce a legal residency requirement.

In the years that followed, the position and the tone of the EU changed gradually as if the Union law about the separation of competences between the member states and the EU had changed, which was, of course, not the case. So, in the more recent reports of both the European Parliament and the European Commission, we already see that somehow the EU institutions think they should have a say in citizenship questions.

Elena Basheska (EB): Then, at the end of September 2022, the Commission announced that it would refer Malta to the Court of Justice of the European Union (CJEU). The Commission insists that CBI programmes are a violation of the principle of ‘sincere cooperation’ enshrined in Article 4(3) of the Treaty of the EU (TEU) because it confers citizenship in the absence of a ‘genuine link’.

To date, Malta operates the only active formal CBI programme in the EU; however, you argue that investment migration is legally practised by the absolute majority of the EU’s member states. Can you give us a few examples?

DK: Yes, in fact the backdrop to all the above is that today almost 20 member states offer residency by investment. And, of course, we know very well that accumulating residency is the easiest path to EU citizenship, if you cannot find blood. Moreover, most EU countries – although they do not operate formal CBI programmes – allow for discretionary naturalisation on the grounds of ‘special achievements’, which often includes economic achievements. The difference between the two approaches is formal rather than substantial: CBI programmes are specifically designed to attract foreign investors, set clear criteria for applicants and are marketed by service providers, while naturalisation on the grounds of ‘special achievements’ is traditionally less transparent in terms of qualifying criteria and not marketed by agents.

You claim that the EU lacks legislative competence in the area of citizenship while the principles of international law also do not back the Commission’s position. Can you outline your reasoning?

DK: The ABC of global citizenship law is that states are free to confer citizenship on those whom they consider qualified under the Hague Convention of Nationality and, unquestionably, under EU law. No sane academic voice would argue that the EU has competence to legislate here, which is why all the documents that the Commission released so far with the aim of attacking the investment migration industry are not legislative proposals, even if they attempt to push the member states, purely politically, to alter their regulation in a certain way. France still decides on who is French and retains all the rights to do so, just as Malta decides on who is Maltese and Finland on who is Finnish. The law is crystal clear.

You argue that the European Commission is abusing its power and has concerted a “large-scale political campaign to mislead the public”. What other elements in the Commission’s narrative led you to this conclusion?

DK: The Commission is routinely demonising investment migrants – an approach, which is questionable at best. Its core argument in numerous documents could be boiled to the following: third- country nationals who invest in member states may be criminals and, therefore, investment migration programmes create security risks; the fact that EU citizenship provides for cross-border rights increases such risks further. The Commission seems to make assumptions about investors largely on the basis of their status as beneficiaries of RBI and CBI programmes. The presumption of innocence, apparently, does not enter the picture. This is contrary to the EU Charter and wider EU law, especially given that discrimination based on the mode of citizenship acquisition is prohibited.

In fact, the Commission’s attack against investment migration assumes that it is acceptable to target groups of EU citizens and single them out for differentiated treatment based on the ground on which nationality of an EU member state and, thus, EU citizenship had been acquired. This type of discrimination is squarely prohibited in EU law. Treating Europeans differently based on the rule which made them EU citizens is not what EU law allows and most national constitutions would prohibit it too. The crusade against CBI is an assault on this principle.

What, in your opinion, are other problematic aspects in the European Commission’s approach?

DK: Another critical aspect is the whole assumption that there needs to be some sort of link that should underpin a person’s citizenship when we have already seen that blood is the only one that the European Commission and the European Parliament are interested in. Furthermore, it goes directly against the EU’s internal market and the principle of non-discrimination on the basis of nationality – the very core of what the EU is all about.

In fact, concrete member state nationality is made irrelevant by the successful operation of EU law. So, for a child born in Luxembourg with a Danish passport, who lives his or her whole life there and has no connection to Danish society, the principle of non- discrimination holds. Luxembourg will not be legally allowed to mistreat this child. The CJEU has already ruled that member states of residence are not entitled to question lawfully acquired citizenship of the EU.

What other comments would you like to make about the European Commission’s attitude towards investment migration?

EB: The Commission makes frequent references to genuine links and the principle of sincere cooperation. These are somewhat misplaced. The Commission’s argument is that a lack of genuine link undermines the status of EU citizenship in accordance with Art 20 TFEU and is incompatible with the principle of sincere cooperation enshrined in Article 4(3) TEU. This argument of the European Commission is very weak.

Furthermore, infringement of the principle of sincere cooperation, without violation of a more specific Treaty obligation, cannot be successfully invoked, and Article 20 TFEU which is often put by the Commission in the same context with the principle of sincere cooperation does not impose such specific obligation on member states. It, therefore, remains unclear how investment programmes infringe Article 4(3) TEU. It is difficult to imagine that the principle of sincere cooperation could be successfully invoked in the context of investment migration. Article 4(3) TEU concerns the achievement of EU objectives and genuine compliance with EU law, none of which seems to relate to investment migration.

You mention that the European institutions used the war in Ukraine as an opportunity to again voice its opinion about investment migration. What thoughts would you like to share about this issue?

EB: In March 2022, the EP called on the member states with residence by investment schemes to review all beneficiaries of such residence status and to revoke those attributed to Russian high-net-worth individuals and their families, in particular those linked to sanctioned individuals and companies. The Commission equally regarded the start of the war as a pretext to voice its opinion on investment migration, calling for the immediate termination of existing CBI programmes and stricter checks of RBI in respect of Russian and Belarusian citizens who naturalised or obtained their residence through investment.

However, the Commission did not make the same recommendation about Russians and Belarusians who obtained or are in a process of acquiring their EU citizenship for ‘special achievements’ or who claimed citizenship by decent. The Commission justified such a move with ‘the difficulty to conduct the appropriate security checks and due diligence in these particular circumstances and in view of the gravity of the situation’. And again, the Commission did not express similar concerns about Russians and Belarusians who are acquiring their EU residence permits on the basis of grounds other than investment migration. This suggests that the Commission is fighting its own war against investment migration in this context rather than being genuinely concerned about security risks. Such policy is dangerous, especially if we know that nowadays Russian elites in the country are expected, if not forced, to support the war in Ukraine.

Moreover, stripping Russians and Belarusians of their citizenship acquired through investment may be problematic even if that is conducted for justified security reasons. EU member states have conditions for withdrawal of citizenship, including for security reasons and such rules are equally applicable to naturalised citizens of all nationalities and notwithstanding the naturalisation grounds. Applying such rules to Russians and Belarussians specifically, as seemingly suggested by the European Commission, is arbitrary and discriminatory. Even more so, according to experts in the field, the deprivation of nationality of citizens on national security grounds is presumptively arbitrary and exceptions to that are very limited.

In the report, you talk about the “failure of structures” and “abusive misuse of EU law”. What aspects of this development worry you the most and what change would you like to see?

DK: What worries me the most is that EU citizenship, which was construed first to liberate us from the bonds of nationalism, is now being hijacked by some 19th-century blood nationalists who happened to hold the upper hand in the European Commission. I can’t believe that the Commission’s Legal Service, which is the in-house legal counsel to the Commission, supported the decision to refer the matter to the CJEU. To me all this is a clear sign that basic checks and balances within the Commission are absolutely hijacked by politicians who have zero interest in citizens’ rights and in the preservation of the main achievements of the European Union.

What line of argument do you think the CJEU will adopt?

DK: The CJEU is in a very difficult situation. Obviously, no one is interested in the European Commission losing its face. However, should the Commission win this case, it would destroy the main achievements of the EU. The court will have to be extremely careful in trying to preserve the internal market without being too harsh on the Commission.

What I can predict is that the CJEU will focus on the problems, which the Commission tries to connect with investment migration, which would be money laundering, terrorist financing and tax evasion. Ironically, these are the fields in which the Commission already has competence to act. If the Commission thinks there is money laundering going on, it has the competence to legislate and should work with the member states to make sure that legislation is operational on the ground. So, then it would not be about the institution of citizenship but how to deal with the negative consequences of a particular way of acquiring citizenship.

Do you think the case and, ultimately the CJEU’s decision, will have repercussions on the countries outside of the EU?

EB: I think it depends on the outcome. If the CJEU disapproves the Commission’s arguments, it will probably stimulate other member states within the EU and even beyond to launch formal investment migration programmes. So, the court case will have the opposite effect of what the Commission wanted to achieve. And again, I don’t see how the CJEU can support the Commission’s argument that CBIs violate the principle of ‘sincere cooperation’ due to the absence of the ‘genuine link’.

DK: We also need to keep in mind that the EU is not the top market for citizenship by investment, and we know that what the EU thinks about it has a very limited effect on what happens outside of the EU. And if we are honest, declaring a war against investment migration when you are not actually the market leader in investment migration is a very problematic start to begin with. But even if the CJEU will not uphold the current law, it will probably not destroy investment migration at all. Investment migration will simply move to other regions of the world.

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