Europe: IMC Statement in ref to the October 2021 study of the EPRS.

Published: 4 November 2021

On the 21 October 2021, the European Parliamentary Research Service (EPRS) published a Study – European added value assessment (EAVA) intended to support the drawing up of a legislative-initiative report on Citizenship and residence by investment (CBI/RBI) programmes by the European Parliament’s Committee on Civil Liberties and Home Affairs (LIBE Committee). The ERPS defined five policy options for the future of investment migration programmes in the EAVA:

  • Phasing out CBI/RBI programmes;
  • Taxing CBI/RBI programmes;
  • Regulating conditions, guarantees and safeguards of CBI/RBI programmes;
  • Introducing minimum presence requirements for RBI schemes and amending the scope of the Long-term Residence Directive (2003/109/EC);
  • Regulating access to the EU for third countries with CBI/RBI schemes.

The Investment Migration Council (IMC) welcomes the EAVA and EPRS efforts to take into consideration both positive and negative aspects of investment migration programmes. We are also pleased to see that our efforts in engaging are useful and that many academic research papers and reports we published or worked on have been consulted for the preparation of the EAVA.   

The IMC has been restlessly working on the strengthening of standards under which investment migration programmes operate. Thus, in 2019, the IMC together with due diligence experts BDO USA, Exiger and Refinitiv formed a Due Diligence Working Group to examine the state of due diligence within IM and then explore the potential for creating minimum standards for agents dealing with IM programmes and governments with such programmes. The work of the Due Diligence Working Group resulted in the publication of two reports by Oxford Analytica in 2020. The First Report, ‘Due Diligence in Investment Migration: Current Applications and Trends’, explained the circumstances and trends in the field of investment migration, while the Second Report, ‘Due Diligence in Investment Migration: Best Approach and Minimum Standard Recommendations’ recommended the adoption of minimum standards in investment migration. These two reports present the actual situation on the ground and offer solid solutions to the existing problems in the field. The EAVA closely resembles some of the observations and recommendations made in the reports even if it does not directly rely on them. However, we feel that EPRS has not used the reports to their full potential, omitting to take into consideration and elaborate further the proposed minimum due diligence standards. The two reports were conducted by highly respectable due diligence experts with significant experience in the field and represent a first yet solid attempt for setting common standards for the investment migration industry.

With regard to the suggested policy options in the EAVA, the IMC is supportive of the third option. In fact, the IMC is a strong advocate of regulating  investment migration and has repeatedly offered its support and cooperation in the field to international and supranational organisations. 

We welcome that the third option for regulating conditions, guarantees and safeguards of investment migration comes very close to the recommendations made by the IMC and expert due diligence providers for creating strict harmonised standards for all parties working in investment migration.

Unlike other policy options defined in the EAVA that either start with the premise that investment migration has essentially detrimental effects and should, therefore, cease to exist or be made less attractive through certain measures, the third option offers a lasting solution that addresses risks inherent to investment migration while allowing for continuity of debt-free capital inflows to Member States with investment programmes. Furthermore, and as recognised by the ERPS, the legal basis for phasing out citizenship by investment by the EU are weak and even if such a step is taken, heightened demand for other, similar, migration pathways would rise. The IMC, therefore, does not support the first option suggested by the EPRS.

Similarly, the second option is aimed at compensating for negative externalities and/or discouraging the use of investment programmes. To that end, the EPRS has suggested that tax is introduced similar to the tax demanded from environmental polluters. However, unlike pollution that has proven negative effects, no known negative effects of investment migration have been established or quantified yet. While associated risks cannot be denied and should be addressed accordingly, investment migration has  contributed significantly to financial inflows of states with such frameworks. The IMC is, therefore, of the  view that investment migration should not be discouraged but encouraged along with the strengthening of transparency and harmonised due diligence standards.

Regulation of investment migration by implementing measures to promote transparency, consult and facilitate audits at EU level, as suggested by the third policy option, is an acceptable and much-needed solution. In such scenario, investment migration would be regulated in four general areas: 1) Regulation of the service providers’ value chain; 2) Regulation of approvals and approval procedures; 3) Regulation of investments and capital inflows related to the programmes; 4) Information and consultation with the EU when programmes are established and modified, and EU level audit of the schemes. There are solid legal bases in EU law for such regulation of investment migration that would minimise inherent risks of the industry allowing for increased transparency, oversight and higher due diligence standards.

Contrary to this, introducing minimum residence requirements for residence by investment programmes as suggested by the fourth option would discourage investors (who are usually busy people with dynamic lifestyles) from applying, making investment migration unattractive. Same applies to the fifth option which is related to enhanced vetting of third-country nationals entering the EU. Such policy is primarily meant for non-EU countries with investment programmes rather than for EU Member States and is, therefore, insufficient in itself. Enhancing vetting of third-country nationals who have gained their citizenship through investment may create discrimination among citizens of same nationality and make investment migration unattractive.

In summary, the suggested option for regulation of investment migration is the only viable option that would address all risks inherent to the industry while maintaining the benefits. Notwithstanding the strong efforts of the IMC to enforce minimum due diligence standards in the field, the lack of regulation on an international or supranational level has prevented the full implementation of such standards. The IMC, therefore, welcomes the proposal of the EPRS for regulation of investment migration, hoping that the third policy option will be seriously taken into consideration and further elaborated by the LIBE Committee.

For the full Study, the European Parliamentary Research Service (EPRS) published, please click here

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