by Dr. Hussain Farooq
Caribbean countries, along with certain European countries, continue to be at the forefront of the economic citizenship industry.
Economic citizenship, ius pecuniae, or citizenship by investment, refers to the naturalisation, or acquisition of citizenship, of a foreign national upon making certain monetary contribution, or investment, in the host country.
Different countries offer right of naturalisation or citizenship, in different ways, to foreign
nationals. The concept of citizenship may go as back as Ancient Greeks, according to one view. While
other ways of acquisition of foreign citizenship, such as ius soli, a rule practiced in the
Americas, which grants the right of nationality or citizenship to anyone born in the territory of a
state, may not be that criticised, ius pecuniae or citizenship by investment does draw some
criticism, something which is debatable.
Economic club theory of citizenship by Buchanan in 1965, which also supports Reich’s idea, explains
the rationale behind grant of citizenship to foreigners on the basis of investment.
The first ever reported case of Citizenship by Donation, or ius pecuniae, was that of Friedrich
Nottebohm, a German national naturalised in Liechtenstein in 1939, on the basis of payment to the
Commune, to the State, a security sum deposit, and payment of annual naturalisation tax subject to
the proviso that the payment of these taxes was to be set off against ordinary taxes, which would
become due if the applicant took up residence in Liechtenstein. This was cited in the famous
Nottebohm case in the International Court of Justice (1955).
While Caribbean countries were the first ones, but not the only ones these days, to formally
regulate the grant of citizenship right to foreigners, upon meeting a certain pecuniary (monetary)
criteria, certain other countries also provide facilitated naturalisation to foreign nationals who
make exceptional contribution to the economy of the host countries, Austria being one such notable
example. It may be noted that regulating the grant of citizenship to foreigners upon making an
investment, a concept first pioneered by Saint Christopher (St. Kitts) and Nevis in 1984, does take
some governmental or ministerial discretion away from the concerned authorities which may,
otherwise, have discretion over grant of citizenship to people who make exceptional contribution to
the economy of the respective country. However, to make sure that unwanted people do not misuse such
programs, robust due diligence procedures need to be adapted by each such governments to ensure the
integrity of such programs which play a pivotal role in the economy of the smaller nations.
European countries, unlike the Americas, have abolished unconditional ius soli, with Ireland being
the last such country to abolish birthright citizenship by enacting Twenty-seventh Amendment of the
Constitution of Ireland in 2004.
Citizenship by investment has also been adapted by certain European countries.
The Republic of Ireland ran an investor citizenship or economic citizenship program from 1989 to 1994 which utilised the grant of naturalisation by way of exception to people of ‘Irish associations’. Qualified
applicants were deemed to fulfil the criteria of ‘Irish Association’ by establishing a manufacturing
or international service or other acceptable wealth and job-creating project involving a substantial
investment. Another European country, Montenegro, a beautiful country in the Balkans and part of the
former Republic of Yugoslavia, used to have a citizenship by investment program.
Montenegrin ‘citizenship-by- investment’ was available to those individuals who have invested in Montenegro’s economy, or donated funds to Montenegro. Pursuant to the decision (art. 3), such
persons should be ‘established experts or investors of undoubted international reputation’. The
program was put on hold, however, the current Government of Montenegro is carefully analysing the
structuring of a new citizenship by investment program as an effective tool to improve the economy.
Currently, two European countries and members of the European Union, Malta and Cyprus run a modified
version of citizenship by investment programs. The programs, which at the time of their launch, did
not require the applicants to reside in the country, were later amended to introduce some residency
requirements, twelve (12) months in Malta and six (6) months in Cyprus.
Republic of Moldova has, very recently in September 2017, approved the legislation to grant right of
citizenship to foreign investors who would meet the qualifying criteria. The program, however,
hasn’t started yet.
Vanuatu, as island country in the Pacific Ocean, also runs a citizenship by investment program.
While ius pecuniae, or citizenship by investment, has been opted by a relatively fewer number of
countries, investor immigration or investor residence programs have been opted by a number of
countries, including some of the most developed nations. Canada, which doesn’t have an economic
citizenship program, one of the fewer countries to practise ius soli, pioneered the concept of
Business Immigration Programs in 1978 with the introduction of classes of entrepreneur and
self-employed persons. The Investor class introduced, later, in 1986 and redesigned in 1999 became
one of the most successful investor immigration programs in the world. Other countries including but
not limited to United States of America (USA), the United Kingdom (UK), Australia, Portugal, Spain,
Greece, Latvia, Bulgaria, and Monaco operate investor residence programs which grant right of
residence to foreign nationals upon making the qualifying investment in the respective countries.
Certain countries, such as Switzerland, operate tax-based scheme.
In this globalised era, where businesses are growing globally, more and more individuals want to
acquire freedom of movement globally, freedom to choose a place of residence in the country of their
own choice, freedom to get their children educated from the institutions they feel are best for them
worldwide, freedom to get medical treatment from the hospitals they feel can provide best cure and
the freedom to run a business in the jurisdiction of their choice. Excluding the individuals who are
involved in any sort of illegal activity, this demand of freedom and liberty by individuals can be
considered just.
More and more countries are designing citizenship by investment or investor immigration programs to
attract foreign investment into their countries for improving their economies. More than 80
countries in the world offer residence or citizenship rights to foreign investors in one way or
another. However robust due-diligence standards, pricing befitting the offered benefits, smart
processing and effective channeling of the foreign direct investment for the economic development of
the countries and for the prosperity of their nations, by the recipient governments, will determine
which programs will outperform in this competitive marketplace.
Countries where tourism, financial services, and economic citizenship play a significant role in the
economies, a more astute approach may be required, by each country, to ensure the integrity and to
keep the popularity of such economic citizenship programs. There will, always, be a competition and
the programs with futuristic approach will continue to perform better. HF Corporation on one side
advises the high net worth individuals on acquisition of second citizenship and residence, by way of
ius pecuniae, while on the other hand it runs a government-advisory practice that liaises with the
different governments to build up strategies for structuring and promotion of such programs to
attract foreign investment into the respective countries.
The article is written by Dr. Hussain Farooq, President & CEO of HF Corporation, a consulting firm that is specialised in providing services for residence and citizenship by investment programs, around the world, to high net worth individuals and families who do not want borders to be boundaries for them. He regularly advises affluent families on strategies for effective citizenship & residence planning. The firm also has developed a government-advisory practise to liaise with the different governments to build up strategies that could help in boosting FDI in their respective countries.
HF Corporation Email:
info(@)hfcorporation.co
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