The EU’s Stance on Citizenship by Investment: A Closer Look

Nov 28, 2024

Obtaining citizenship by investment is far from a modern idea

The practice of selling citizenship dates back to antiquity. For instance, the Romans used it as a method to generate revenue, and a well-known Biblical account highlights this tradition. In Acts 22:22-23:11, a Roman centurion who detained Saint Paul the Apostle stated, “I had to pay a lot of money for my citizenship.”

Citizenship by Investment (CBI) schemes, or “golden passports,” have sparked debate in the EU due to concerns over security, money laundering, and tax evasion. While EU institutions largely oppose these programs, citing, for example, risks to the single market, proponents highlight financial benefits, including €25 billion in foreign direct investment.

Citizenship By Investment (CBI), what’s the EU position?

“Golden Passports” have been a sensitive topic at the EU level, particularly because acquiring citizenship in an EU Member State automatically grants EU citizenship. When discussing the EU’s position on this matter, it is more accurate to focus on the stance of specific EU institutions, as this can provide a clearer understanding of the current situation.

The European Commission’s Position

The European Commission has consistently opposed CBI schemes, citing risks related to security, money laundering, tax evasion, and corruption. In January 2019, the Commission published a report highlighting these concerns and called for increased transparency and oversight of such programs. 

In September 2022, the Commission referred Malta to the Court of Justice of the European Union (ECJ) over its CBI scheme, arguing that granting EU citizenship in return for predetermined payments or investments “without a genuine link” to the Member State is incompatible with EU principles. The ECJ’s final ruling is pending and may have significant implications for the future of CBI programs within the EU.

The European Parliament’s Position

In March 2022, the European Parliament issued a resolution proposing Member States to phasing out of CBI schemes and implement stringent checks for investor residence programs, emphasizing that CBI schemes are objectionable from an ethical, legal and economic point of view and pose several serious security risks for Union citizens, such as those stemming from money-laundering and corruption.

The Position of Council of the European Union

The Council does not have a favorable position regarding CBI schemes either. For example, in March 2024, the Council agreed start negotiating on a draft regulation to update the mechanism for suspending visa-free access for third countries under specific circumstances. One such circumstance includes the operation of investor citizenship schemes, where citizenship is granted in exchange for predetermined payments or investments without any genuine link to the country in question.

The European Court of Justice’s Position

The ECJ has been involved in assessing the legality of CBI programs within the EU. In October 2024, Advocate General Anthony Michael Collins issued an opinion advising the Court to dismiss the European Commission’s case against Malta’s CBI program. He argued that EU law does not define or require the existence of a “genuine link” for acquiring or retaining nationality, thereby supporting Malta’s discretion in determining its citizenship criteria. 

While the Advocate General’s opinion is influential, it is not binding; the ECJ’s final ruling is expected by early 2025.

But is the practice of CBI really so bad?

Some authors defend the sale of citizenship, arguing that it is less arbitrary and more transparent than other methods of acquiring citizenship, such as those based on the principles of jus soli (right of soil), jus sanguinis (right of blood), or discretionary naturalization.

• Both traditional criteria for granting citizenship are, in fact, arbitrary: one relies on the accident of birth within particular geographical borders, while the other depends on the sheer luck of descent.
• Why should those who have citizen parents or who were born within a state’s territory have a stronger moral claim to citizenship than foreigners who are willing to pay or invest?
• Furthermore, monetary investment can be seen as a way to contribute to the common good of a political community and should not be summarily dismissed as a legitimate basis for acquiring citizenship.

Acquiring citizenship by investment is not a modern concept

The sale of citizenship dates back to ancient times. For example, the Romans used to sell citizenship as a means to raise funds, and a famous anecdote from the Bible illustrates this practice. In Acts 22:22-23:11, a Roman centurion who apprehended Saint Paul the Apostle remarked, “I had to pay a lot of money for my citizenship.”

Similar practices continued during feudal times, where the link between money and membership in the polity often served a dual purpose: to exclude certain groups while granting additional rights and privileges to the wealthy.

Why are CBI schemes so controversial?

CBI schemes have raised concerns about certain inherent risks, particularly regarding security, money laundering, tax evasion, and corruption. Many scholars have equated CBI/RBI schemes with a form of commodification of citizenship. Some have highlighted that these schemes represent a particularly stark manifestation of the ‘commercialisation of sovereignty,’ a trend that has intensified since the economic crisis of the late 2000s. If citizenship still carried the same meaning it once did—representing sociological ties—then CBI schemes would not exist. In the past, such programmes would have been inconceivable.

Placing a price tag on citizenship, regardless of the amount, has a corrosive effect on non-market relationships, eroding the bonds that connect us and reshaping our understanding of what it means to belong to a political community. By linking wealth with privileged access to political membership, CBI schemes threaten not only the practical implementation of the ideal of citizenship but the ideal itself. Exchanging a higher-value good (citizenship) for a lower-value good (money) not only diminishes the value of citizenship but also corrodes public trust in the institution in ways that naturalisation on other grounds does not.

Examining the Advantages of CBI Schemes

Some authors defend the practice of granting citizenship by investment, highlighting several potential advantages:

• It is less arbitrary and more transparent than other methods of acquiring citizenship, such as those based on jus soli (right of soil), jus sanguinis (right of blood), or discretionary naturalization.
• Monetary investment can serve as a contribution to the common good of a political community. As such, CBI schemes should not be dismissed outright as a legitimate reason for granting citizenship.
• Citizenship by investment is not fundamentally different from the widespread practices of offering citizenship to prominent athletes or granting it to foreigners who have served in a country’s armed forces or provided exceptional service to the nation.
• Lastly, the significant financial benefits generated by these schemes cannot be overlooked. According to available statistics, at least €25 billion in foreign direct investment has flowed into the EU through golden visa schemes over the past decade.

Conclusion

CBI schemes are here to stay, and States retain their discretion to grant citizenship under specific conditions and requirements. Instead of questioning their legitimacy, efforts should focus on improving their governance and mitigating risks. Key actions include:

• Strengthening due diligence processes:
  Each State and its competent authorities must carry out robust background checks and ensure compliance with the highest standards.
  
• Protecting the integrity of the EU single market (for EU countries):
  Safeguarding EU principles of sincere cooperation, security, and justice is essential.
  
• Ensuring transparency and good governance:
  Effective implementation of CBI schemes must address risks such as the infiltration of non-EU organized crime groups, money laundering, corruption, and tax evasion.
  
• Addressing circumvention of Common Reporting Standards (CRS):
  According to the OECD, abuse of CBI/RBI schemes can be prevented by properly applying existing CRS due diligence procedures. Key measures include:
  • Requiring a real, permanent physical residence address (not just a P.O. box or in-care-of address) and verifying this through appropriate documentary evidence.
  • Instructing account holders to declare all jurisdictions of tax residence in their self-certification.
  • Ensuring that financial institutions do not rely on self-certification or documentary evidence if they know, or have reason to believe, that such information is unreliable, incorrect, or incomplete.

Additional approaches may include tax compliance measures and policies that consider the roles of all stakeholders, such as jurisdictions offering these schemes, tax administrations, financial institutions subject to CRS reporting, intermediaries promoting the schemes, and taxpayers.

This article was written by Marco Mazzeschi and Yuu Shibata

Web Content Manager

This article is posted by Mazzeschi Web Content Manager. Should you need any further information, please do not hesitate to contact us at info@mazzeschi.it. Follow us on social media @StudioMazzeschi to receive the latest updates.

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