Dual nationality and abuse of right: 76 per cent out of 200 countries tolerate dual citizenship. But what happens when dual nationality is used to obtain benefits which the individual would not be otherwise entitled to?
_________________________________________________________________
In recent years there has been an increasing interest by many individuals in obtaining a second citizenship and a growing number of States have changed their legislations allowing the retention of nationality even in case of acquisition of a second citizenship.
76 per cent of 200 countries tolerate dual citizenship for emigrants, allowing their citizens to voluntarily acquire the citizenship of another country without automatically losing their citizenship of origin. As a result, in ever fewer countries citizenship is lost if another citizenship is acquired and in ever more destination countries migrants are no longer required to renounce their previous citizenship as a condition for naturalisation. (Migration Data Portal)
But the acquisition of a second citizenship can also create some issues when an individual seeks State’s diplomatic protection.
Dual nationality can cause some conflicts in case an individual seeks diplomatic protection against a State whose nationality such person also possesses. The 1930 Hague Convention on conflict of nationality laws, set forth that in this case a State may not afford diplomatic protection. Even though very few countries have ratified The Hague Convention, this provision (so called non-responsibility rule) has been for many years customarily accepted in international law.
But what happens in case of conflicts between nationalities? The non-responsibility rule seems no longer the prevailing principle applicable to cases where issues arise to conflicting nationalities. During recent years is being replaced by the principle of “effective nationality”
an individual’s claim may also be presented against a State of which the individual is citizen, as long as the connection with the claimant State is prevalent
In the milestone case Liechtenstein v Guatemala (Nottebohm case), the International Court of Justice affirmed that international arbitrators have given their preference to the real and effective nationality, which is based on stronger factual ties between the person concerned and one of the States whose nationality is involved. Factors which are taken into consideration for determining that the link is effective are: (i) the habitual residence of the individual; (ii) the centre of his interests; (iii) his family ties, his participation in public life; (iv) attachment shown by him for a given country and inculcated in his children.
After the Nottebohm decision, the “effective nationality” principle has been confirmed by many Tribunals. The Iran-United States Claims Tribunal in Case No. A-18, for example, affirmed that is the rule of real and effective nationality and the search for stronger factual ties between the person concerned and the one of the States whose nationality is involved, that must be taken into account. The same tribunal, Case n. 296 Bavanati, dismissed a compensation case brought by an Iranian-US dual national because
“evidence shows that since 1974, when the claimant moved to Germany, his habitual residence, center of interest, family ties, participation in public life and other attachments have been insufficient to support a finding that Mr. Bavanati’s links to United States were dominant over his links to Iran …”.
The Nottebohm award was not unanimous and some of the judges and some authors have expressed dissenting opinions for various reasons.
The possible limitations to the general applicability to all cases of the “genuine link” doctrine were clearly acknowledged in case Flegenheimer decided in 1957 by the Italian-US Concilation Commission. The Tribunal recognized, in fact, that if the genuine link doctrine were to be generalized, thousands of persons who possess the nationality of a State but have their centre of interest, family and business in another State, would be exposed to non-recognition of their nationality.
As pointed out by UN Special Rapporteur, John Dugarde:
Dual nationals can also be subject to another limitation when seeking diplomatic protection of their interests by one of the States of which they are nationals. The Nottebohm award, evidenced that situations of abuse of dual nationality may occur. The Court indicated in fact that, in the case of Mr. Nottebohm, naturalization was asked for not so much for the purpose of obtaining a legal recognition of his bond and allegiance to Liechtenstein, but with the sole purpose to enable him to substitute for his status as a national of a belligerent State (Germany) that of a national of a neutral State (Liechtenstein). Mr. Bottehom did not show any intent of becoming wedded to Liechtenstein’s traditions, its interests, its way of life or of assuming the obligations — other than fiscal obligations — and exercising the rights pertaining to the status thus acquired. Judge Guggenheim noted that
The concept of a possible abuse of dual nationality was further expanded The Iran-United States Claims Tribunal in Case No. A-18, and in other cases decided by the Iran-US Tribunal. In fact, among the most controversial claims to be decided by the tribunal were those brought by individuals who held both the Iran and US citizenship. In judging those cases, the Tribunal affirmed the principle that:
dual nationality cannot abused, i.e. the Tribunal could deny jurisdiction on equitable grounds in cases of fraudulent use of nationality.
In the Case Esphahanian, the Tribunal affirmed that
“Such a case might occur where an individual disguises his dominant and effective nationality in order to obtain benefits with his secondary nationality”.
Judge Mosk, in his concurring opinion for case A-18, affirmed that
“the use by a United States citizen of his or her Iranian nationality in a fraudulent or other inappropriate manner might adversely affect the claim by that person”.
In the case Saghi, the Tribunal denied the claim because the claimant
“had consciously sought and obtained Iranian nationality solely for the purpose of having certain shares …placed in his name in order to minimize the adverse effects of the Law of Expansion. … To rule otherwise would be to permit an abuse of right”.
More recently, in the 19 May 2023 Award in Mihaljević v Croatia (a dispute submitted to ICSID), Croatia challenged the Tribunal’s jurisdiction, arguing — amongst other objections — that
(i) the Claimant committed an abuse of process (or abuse of rights) by attempting to revoke his host State nationality after the dispute had arisen, with the sole purpose of circumventing ICSID’s host State nationality restriction;
(ii) there exists a consistent practice that a change of the claimant’s nationality to manufacture jurisdiction rationae personae in a particular dispute is an abuse of process”.
Also in the Concurring Opinion of Ms. Maria Vicien-Milburn it was pointed out that:
“Such abuse may, in my view, arise equally in the case of acquisition or renunciation of nationality, since both entail an alteration of form designed to obtain a right that would not otherwise exist.”
and
“For an individual to renounce his or her nationality in order to gain the protection of the ICSID Convention could therefore ….. constitute an abuse of process.”
The same principles apply to corporations, when they structure or restructure their holdings, in a way to secure deliberately the protection of certain investment treaties or legislations. A domestic investor that would not otherwise benefit from the rights of foreign investors may form a company, for example, in a ICSID contracting State with its home country as a vehicle to be able to bring claims against its State. To avoid this practice, commonly known as nationality planning or treaty shopping, International Courts have developed the concept of abuse of process.
One of the most recent and publicly known case in which the doctrine was applied is the arbitration brought by Philip Morris against the Government of Australia. The case originated after Australia enacted the Tobacco Plain Packaging Act, a legislation that removed brands from cigarette packs. Philip Morris served a Notice of Arbitration against Australia claiming that the enacted legislation amounted to an expropriation of its intellectual property rights. The Tribunal concluded that:
the initiation of the arbitration constitutes an abuse of rights, as the corporate restructuring by which Philip Morris acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining Treaty protection
Approximately 76% of 200 countries surveyed now tolerate dual or multiple citizenship, marking a significant shift in the global landscape.
This growing acceptance is driven as (i) an unavoidable consequence of gender equality (mothers as well as fathers can transmit their citizenship to the child by descent), (ii) transnational migration (migrants and their children acquire the citizenship of the destination country while retaining the citizenship of the origin country)and (iii) in part by the increasing number of countries offering citizenship by investment (CBI) programs, which has sparked interest among individuals seeking a second citizenship for various reasons.
However, it’s essential to note that international arbitration decisions and commentaries have established that manipulating citizenship, such as acquiring or renouncing it to gain a right that would not otherwise exist, is considered an abuse of rights (abuse of process) and may be deemed fraudulent.
In such cases, a state may refuse to recognize the change in nationality, highlighting the importance of genuine intentions and transparency in citizenship matters.
Attorney at law.
One of the leading corporate immigration lawyers in Italy. Admitted to the Milan Bar Association (1988) and to the Taipei Bar Association (2016), a member of the American Immigration Lawyers Association (AILA) and an accredited partner of Invest in Tuscany.
Related posts:
