Category: Blog

“Don’t it always seem to go / That you don’t know what you’ve got till it’s gone.”

Joni Mitchell, arch-priestess of the hippy movement, might have been singing about the environment but, somewhat ironically, her words ring true for capitalism – and its cousin, globalisation.

These two forces have done much more than shape the modern world – they have proven more effective at combatting the four horsemen of the apocalypse than any other system of government or economics.

We live in a time of unprecedented global peace, a new Pax Romana where conflicts are more often resolved through sanctions than kinetic warfare. The private sector has been far more successful than nation states at eradicating diseases like polio and malaria (witness the work of the Bill & Melinda Gates Foundation, for example). Meanwhile, the number of people living in poverty more than halved between 1990 and 2013 thanks largely to the greater opportunities provided by the world economy, while private organisations are helping to eliminating hunger through, among other means, biotechnology.

None of these achievements would have been possible – and certainly not on this scale – if it weren’t easy for people and money to cross international borders easily, and for wealthy people to invest their money where they see fit. So why are we hamstringing the free movement that is so central to world development, and threatening to make globalisation a mere memory of happier, more prosperous times?

Unfair migration policies

Current migration policies worldwide do not effectively support the movement of people and money that is so crucial for achieving the results that benefit the world’s poor, hungry, and economically-disadvantaged.

One’s ability to take up citizenship in a new country should depend on the good that you intend to do, not on the opposite, or whether your country of origin has cosy political relations with your intended destination.

Yet all too often, that’s how investment migration is perceived. It’s either used as a political pawn in a tit-for-tat diplomatic dispute, or the wider public consider the system unfairly benefiting oligarchs or kleptocrats, who can become citizens or residents with few or no questions asked about their background.

Nothing could be further from the truth. Take Roman Abramovich for example. Even someone with such a high profile, who impacts the local economy (in Chelsea), was delayed in his application as the UK followed its due diligence process to the letter.

Some nationalities are more equal than others

In today’s globalised world, the idea that your country of origin should decide your access to basic human rights – such as travel between two countries, the ability to migrate, or to invest your money where you choose – is anathema to all right-thinking people.

If we want migration to benefit large numbers of people and support the great things that capitalism can achieve, we need to make decisions based on the good that these people do – much in the same way that President Macron gave citizenship to Mamoudou Gassama following his daring rescue of a toddler in Paris a few weeks ago.

A new model for investment migration

We think it is time to re-think our approach to the migration of high-net worth individuals. People should not be judged on where they come from, but rather by what they plan to do with their money when they arrive.

In the UK, the Tier 1 Investment Visas enables anyone with £2 million to acquire citizenship or residency as long as they invest that money in British businesses or Government bonds. Other countries have similar programmes, to the extent that citizenship – and resident-by-investment – is a multi-billion-dollar global industry.

By setting out and enforcing strict self-regulatory rules and codes of conduct for investment migration, every country can ensure that when people move themselves and their money, it does the maximum amount of good for the people of that nation. Ensuring that this cash goes into the local economy, it helps to create jobs, sustain start-up businesses, and improve productivity – all the things that globalisation achieves when it’s working properly.

The battle for all who believe in capitalism and free movement is to convince others of the benefits that these migrants bring. It should be an easy win, but we face entrenched opposition from those who see investment migration as an unfair “fast track” to citizenship. Some two in five (42 per cent) UK residents say that wealthy individuals should not be allowed to obtain citizenship in a country other than where they were born through investment migration, according to recent research by the Investment Migration Council.

Capitalism faces a problem, which is the reluctance on the part of its adherents to discuss the good that it can bring to everyone. To do this effectively, we need to stand up for principles such as strict, rules-based investment migration, and be unafraid to discuss the benefits it brings.

Joni was right – you don’t know what you’ve got till it’s gone. Let’s not allow capitalism and free movement to slip through our fingers, lamented only after it’s been replaced by more restrictive systems that throttle free movement, entrepreneurship, and investment that benefits us all.

Investment migration refers to the attainment of citizenship or residential rights in return for a financial investment or other contributions to the host country. Today, investment migration is a global industry and is featured in immigration law in most UN recognized countries, albeit in different forms and shapes. Indeed, while there are currently 12 citizenship by investment (CBI) programs stricto sensu, many countries offer facilitated naturalization paths that allow for acquisition of citizenship under lessened requirements. Facilitated naturalization is often allowed on grounds of “special achievements” of applicants or “special interest” of states. Residence by investment (RBI) programs have similar paths to residency: while some RBI programs are specifically designed to attract foreign investors in return for residential rights, many countries with no investment programs issue business visas, international talent visas, and/or other economic residence options.

Five of the twelve formal citizenship by investment programs are in Europe, introduced by Cyprus, Malta, Moldova, Montenegro, and Turkey. Furthermore, the Albanian Prime Minister, Mr. Edi Rama, recently announced that Albania may also introduce a citizenship by investment program soon, which would add one more investment migration program in the “old world”. Other European states, including EU Member States, allow discretionary naturalization on the grounds of special achievements ̶ including economic achievements ̶  of applicants. Reportedly, 22 EU Member States allow discretionary naturalization.

The number of investment programs in Europe (specifically in EU Member States) has, naturally, triggered the interest of EU policymakers. The freedom of movement enjoyed by EU citizens, by virtue of the EU law, means that citizens of any EU Member State can settle in any other Member State as well as in Switzerland, Iceland, and Norway. Thus, a Cypriot or Maltese citizen who has obtained his citizenship through an extraordinary investment, can freely relocate to Germany and enjoy most rights domestic citizens do, including the right to stay, establish, or work there. Therefore, the EU has a legitimate interest in following developments related to the acquisition and loss of citizenship in EU member States.

EU institutions have a lot of criticism about these programs and initiate a lot of discussions (and potential legislation) to address them, but this criticism and activity is one sided. The IMC works to balance the discussions and is encouraging other groups to work with them to do the same. In doing so, the integrity of the programs will be strengthened all around.

EU Criticism

Investment migration has attracted strong criticism from EU institutions ever since the launch of the Maltese CBI program, which triggered proactive EU involvement. Since this time, various EU institutions and bodies have initiated discussions and levied numerous critiques of CBI and RBI programs. Criticism was related to the general principle of fairness and discrimination, the EU principle of sincere cooperation, the principle of genuine link, the commodification of citizenship, and specific issues surrounding corruption, money laundering, and other criminal activity.

In 2014, the European Parliament (EP) questioned whether investment programs aligned with EU values, asking the European Commission (EC) to analyze the matter further. The TAX3 Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance, established in March 2018, demanded that all CBI and RBI programs be phased out in EU Member States, stressing that CBI and RBI programs carry significant risks related to devaluation of EU citizenship, corruption, money laundering, tax evasion, lack of proper due diligence checks, and uncertain economic sustainability and viability of the investments provided through the programs. The European Parliamentary Research Service (EPRS) researched investment migration in somewhat greater detail. However, the EPRS study ignored several relevant legal arguments related to the subject of sincere cooperation between EU Member States, the principles of fairness and discrimination in light of citizenship, and the principles of fairness and discrimination.

In January 2019, the EC issued its report on investment programs, relying heavily on previous documents of EU institutions and bodies. While recognizing that applicants may invest in a Member State for legitimate reasons, the EC underscored the risks associated with investment migration programs, including money laundering, corruption and tax evasion, as well as the possibility of criminal infiltration in the EU. Following the report, and through the lobbying efforts of the Investment Migration Council, the EC set up a group of experts from EU Member States to look at the specific risks associated with investment migration, develop a common set of security checks in this respect, and address the aspects of transparency and good governance with regard to the implementation of investment migration programs. It also consulted with civil society and industry representatives (including IMC) who were given the opportunity to provide their feedback on a number of questions raised in the report.

Most recently, the European Economic and Social Committee reaffirmed the stance of the EP’s TAX3 Special Committee in its Opinion on investment programs, calling for phasing out all investor programs and urging EU Member States to follow that recommendation “or provide reasonable arguments and evidence for not doing so”.  It further recommended that “while working towards a phase-out of existing schemes in the EU, accession countries should not be allowed to run CBI or RBI schemes when they join, so that no new schemes are added to the ones currently in place”.

With the new MEP’s and European Commission in place for the ninth parliamentary term, discussions on investment migration in the EU are expected to continue in the upcoming years. The European Parliament Committee on Economic and Monetary Affairs (ECON) has confirmed the establishment of a permanent subcommittee on tax and financial crime (TAX4) for the 2019 – 2024 parliamentary term, which can be seen as a confirmation that the EP intends to continue to focus strongly on these issues during the mandate. Various intergroups, and especially the recently formed intergroup on anticorruption, are also expected to raise questions related to investment migration in the future.

Involvement of the Investment Migration Council

The Investment Migration Council (IMC) supports discussions by civil society, governments, policymakers, and industry professionals aimed at strengthening the legal and security aspects of citizenship and residency programs. Unfortunately, reports from EU institutions are often unbalanced, focusing too heavily on the critiques of the programs and rarely taking into account the benefits and evident legal arguments in favor of investment migration. Furthermore, these reports are largely shaped by negative stereotypes and bias against the industry, which leads to unbalanced information and wrong conclusions. Investment migration is indeed a sensitive and highly politicized matter. This is primarily because of the money involved in trade with (what seem to be) non-tradable goods. Money makes investment migration different than other forms of facilitated naturalization, such as fast-track naturalization of talented sportsmen or naturalization through marriage or ancestry. Yet, sensitivity and politics are one thing; law is quite another. In the eyes of the law, citizenship and residency through investment are perfectly legal ways of acquiring citizenship or residency in the country providing for such options and not much different from other legal ways of facilitated naturalization or immigration.

The IMC works to paint the whole picture of investment migration and create balance in the discussion, by interacting with other professional associations, governments, and international organizations daily. Furthermore, the IMC continuously assesses various aspects of the investment migration industry through vigorous research, including academic articles, reports, forums, education, and more. The aim is twofold: first, the IMC seeks to improve public understanding of all aspects of the investment migration industry; and second, it aims to promote education and high standards among its members. In pursuing these objectives, the IMC is guided by three important edicts:

1.    The IMC is primarily focused on the legal aspects of investment migration. When it comes to the acquisition of citizenship, national laws and EU law are rather clear: citizenship matters, and the criteria for acquiring citizenship remain the sole competence of Sovereign States/EU Member States.

Accordingly, the IMC has addressed points made by EU institutions that go against the sovereign rights of states to decide on questions related to acquisition of citizenship. Furthermore, the IMC participated constructively in the investment migration discussion hosted by the European Commission and arranged numerous meetings to make EU and other policymakers aware of their standpoint and work.

2.    Various studies and analyses aside, investment migration remains largely an unregulated industry. Establishing minimum standards across the industry would contribute to creating a common regulatory framework that would address the risks associated with investment migration. 

The IMC has started bridging the gap created by the lack of standards. The IMC, in coordination with BDO, Exiger, and Refinitiv, formed a Due Diligence Working Group to examine the state of play of due diligence and explore the potential for minimum standards across the investment migration industry. An independent research think tank, commissioned by the IMC, has drawn on industry-wide insights to conduct independent research on these questions and produce two reports.

3.    Any objective assessment of the investment migration programs should include all relevant aspects and players in the industry.

The IMC repeatedly called EU institutions to involve them in discussions and other activities related to CBI and RBI programs. Challenges and issues can be successfully addressed only if policymakers and stakeholders are willing to hear all arguments and assess objectively all relevant aspects of the industry. The IMC is open to different opinions and arguments that would contribute to a healthy and regulated industry.

Finally, all actors working in the field of investment migration ̶ within or outside of Europe ̶ should join the IMC’s efforts and work together to put an end to abuse of investment migration programs, and maintain high standards for the industry.

[1] These include 12 formal citizenship programs specifically designed to attract foreign investors offered by: Antigua and Barbuda, Cyprus, Dominica, Grenada, Jordan,alta, Moldova, Montenegro, St Kitts and Nevis, St Lucia, Turkey, and Vanuatu.

[2] On 21 June 2020, the Moldova’s Parliament has repealed the law on citizenship by investment thus closing the program before it really even properly started.

[3] ‘Europe’ is not only about geography but is also a historical, political and a cultural concept. For instance, Cyprus is geographically in Asia, but is rather European and a fully-fledged EU Member State (except for Northern Cyprus, which is not part of the EU); the largest part of Turkey is in Asia, but the country is candidate for EU membership; Greenland is geographically part of North America, but is politically and culturally associated with Europe, to name but a few examples.

[4] EUI Globalcit database – information under ‘Mode A24, Special Achievements’, available at: <https://globalcit.eu/acquisition-citizenship/> last accessed 11 February 2020. As of 1 February 2020, the United Kingdom is not a part of the EU and has been treated as a non-EU Member State for the purposes of this analysis. It is worth mentioning, however, that the UK Tier 1 Investor visa program attracts a large number of candidates from around the world.

[5] For detailed information on free movement of all nationalities see Dimitry Kochenov and Justin Lindeboom (eds), ‘Kälin and Kochenov’s Quality of Nationality Index Nationalities of the World in 2018’ (Hart, Oxford 2020).

[6] European Parliament resolution of 16 January 2014 on EU citizenship for sale (2013/2995(RSP).

[7] Para. 91, Draft Report of the Special Committee on financial crimes, tax evasion and tax avoidance on financial crimes, tax evasion and tax avoidance (2018/2121(INI)).

[8] Para. 87, Draft Report of the Special Committee on financial crimes, tax evasion and tax avoidance on financial crimes, tax evasion and tax avoidance (2018/2121(INI)).

[9] EESC Opinion, ‘Investor Citizenship and Residence Schemes in the EU’ SOC/618-EESC-2019 (EESC Opinion).

[10] Para 1.1. EESC Opinion.

[11] Para 4.2.2 EESC Opinion.

[12] Christian H. Kälin, Ius Doni in International Law and EU Law (Brill Nijhoff, Leiden/Boston 2019) 48.

[13] This is notwithstanding the growing importance of EU law with regard to certain aspects of citizenship matters, such as loss of EU citizenship. States’ sovereignty and respect for their freedom of deciding on citizenship criteria is of paramount importance and a starting point for every discussion of investment migration.

[14] The two reports on ‘Due Diligence in Investment Migration Current Applications and Trends’ and ‘Due Diligence in Investment Migration Best Approach and Minimum Standard Recommendations’ are available at <https://investmentmigration.org/industry-reports/> last accessed 11 February 2020.