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Cyprus: “Legal case against passports for investment is weak” – Expert

Cyprus Citizenship By Investment Program Review

The Geneva, Switzerland-based Investment Migration Council has reacted strongly against the European Commission attempt to put an end to citizenship schemes.

“We defend the sovereign and societal value creation of Investment Migration Programmes, “ insists Bruno L’ecuyer, CEO of the Investment Migration Council (IMC).

“The two-month deadline set by the European Commission for the governments of Cyprus and Malta to reply to the letters of formal notice regarding their citizenship-by-investment pathways is approaching. In advance of this date, the Investment Migration Council (IMC) wishes to engage with all relevant stakeholders and remind them of a number of salient points,” L’ecuyer told the Cyprus Mail in an interview.

“The right to assign citizenship is very clearly the sole competence of a sovereign state. This analysis of the European Commission’s legal case has nothing to do with whether one agrees with the concept of citizenship by investment,” he maintains.

We asked L’ecuyer for more details about his position.

Question: Commissioner Reynders maintains that citizenship schemes are illegal, because they violate the terms of the Treaty by commoditising European values. “The granting by these Member States of their nationality – and thereby EU citizenship – in exchange for a pre-determined payment or investment and without a genuine link with the Member States concerned, is not compatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union.”

Can you address this argument?

L’ecuyer: We have engaged with a number of EU legal experts. Their advice is that the argument of the Commission is not convincing.. The principle of sincere cooperation enshrined in Article 4(3) TEU is about the achievement of EU objectives and genuine compliance with EU law and these are hardly related to acquisition of citizenship in general, and investment programmes in particular. Investment migration is not affecting the achievement of EU objectives in a negative way and is not incompatible with EU law. Quite the contrary, as held by the European Court of Justice, the ‘genuine link’ requirement is incompatible with EU law.

The fact that EU Member States are not allowed to question decisions of other Member States with regard to the grant of citizenship has little significance here. Namely, the ‘genuine link’ requirement on which the ICJ relied in the Nottebohm case in the context of recognition of nationality of another state has not developed into a binding rule of international law and has been only applied by international tribunals in the context of dual nationality where individuals hold the nationality of both states involved in a claim process. Outside that context, ‘genuine link’ related to citizenship has no value in international law, and is even contrary to EU law.

Last but not least, investment migration is not the only instance where citizenship is granted in the absence of ‘genuine link’. Thousands of citizenship are granted within the EU every year in the absence of genuine link – be that on the basis of ideological reasons of states, close cultural or linguistic ties, or achievements of individuals. Following the logic of the Commission, all such practices of Member States impede the principle of sincere cooperation. Such view of the Commission is not only wrong and contrary to EU law but may open a Pandora’s box, causing many unforeseen problems.

 Question: Risks associated with the Cyprus citizenship scheme have been increased due to corruption. Do the reforms last made for the programme address these risks sufficiently?

L’ecuyer: We believe that Cyprus should commission an independent and transparent audit to assess the potential risks and determine measures to be taken to address potential issues and improve the transparency of the programme and compliance with highest standards in the industry, as well as with applicable EU law and international law.

Most importantly, however, in order to ensure transparency of programmes in general and prevent corruption, there must be a clear separation between the CIU unit and the officers running the programme and politicians or business elites. The officers who work on the files must be completely independent in their work from any undue influence. Furthermore, officers working on the files should be experienced professionals with high integrity, assessing individual applications on the basis of evidence and facts in accordance with the law.

 Question: Can you apply aspects of the Oxford Analytica study to the case of Cyprus?

L’ecuyer: The two due diligence Reports are intended to help governments improve investment migration standards and transparency of programmes. We recommend that all minimum standards set out in the reports are fully incorporated and consistently applied by states.

The most important aspect, however, is the compliance with the standards, which must be ensured by states. It has been recommended in the Reports that failing to meet the minimum due diligence standards should be sanctioned. It remains up to governments, however, to police themselves. Political and societal pressures have shown to be important drivers towards positive change.

Question: What is the case of Austria? Switzerland also has a migration scheme, are you familiar with it?

L’ecuyer: The Commission seems to be more concerned with formal citizenship programmes than with states allowing for acquisition of citizenship by investment through their legislation, which is a more subtle way for achieving essentially the same result.

Austria, for instance, has never had a structured, formal CbIP, but the Act on Austrian Citizenship allows for acquisition of citizenship without prior residence on the basis of exceptional contributions to suitable foreign investors. However, while the Commission seems to have a rather soft approach towards the Member States with such practices, it should be aware that its argument with regard to the ‘genuine link’ and sincere cooperation equally applies in those circumstances (and beyond) too.

Question: What action should Cyprus and Bulgaria take? Should they [the EU] take the case to court?

L’ecuyer: Bulgaria and Cyprus are not in the same position. While the European Commission initiated infringement procedure against Cyprus, such procedure has not been yet initiated against Bulgaria.

With regard to Cyprus – it should be understood that the fact that the Commission initiated an infringement procedure does not necessarily mean that the case will necessarily reach the Court of Justice. The Commission has discretion as to whether to take the case to the Court. If the case reaches the Court, Cyprus would be in a good position defending its right to determine its conditions for acquisition of citizenship in line with principle of conferral and the EU case law.

It is another question what to do with the citizenship programme in Cyprus. We believe that investment migration is a major positive catalyst for enhanced FDI and a creator of sovereign and societal value. We also believe that Citizenship and Residence policy is both a sovereign right and is solely a member state competence.

We therefore advise that Cyprus appoints an independent party to provide a full and transparent audit of the previous programme and work together with neutral parties such as IMC, due diligence providers and geopolitical analysts to advise on how Cyprus could relaunch an investment migration program that can create significant value whilst also taking the valid concerns of multiple stakeholders regarding risk identification and management.




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