The European Parliament is working on a report for a legislative initiative on Citizenship by Investment (CBI) and residence by investment (RBI) schemes. To support this initiative, in October 2021 the EPRS-European Parliamentary Research Service issued a study called “European added value assessment” (EAVA).
This EAVA study proposed options that could be pursued against the CBI and RBI in the Members States, as well as the feasibility of these measures in the context of European law. The options propose by this report range from the closing of the CBI/RBI in the EU to discourage its demand through various means, such as the imposition of minimum stays, taxation, and even revise the visa-free agreement to the EU with third countries that have a CBI/RBI schemes in place.
In this article, Global Visa-free has summarised the most important points of the EAVA report. In the first part as a context for this article, we draw a timeline that contained the different reactions of the EU institutions regarding the CBI and RBI programmes. In the second part, we look at the policy options suggested by the report against the CBI/RBI. In the 3rd section, we summarise the different arguments used by the Member States with a CBI/RBI, to defend their programmes, as well as the arguments the EU could use as legal bases to implement the policy options suggested in the report against the CBI/RBI.
How all start and what is next?
2014, the European Parliament expressed concerns about CBI and RBI schemes, specifically that ‘the direct or indirect outright sale of EU citizenship, undermines the very concept of European citizenship.
2018, the European Parliamentary Research Service (EPRS) carried out a study titled “Citizenship by investment (CBI) and residency by investment (RBI) schemes in the EU –State of play, issues and impacts”. This study outlines the risk the CBI and RBI posed to the EU.
2019, the European Parliament called on the Member States to phase out the schemes due to serious risks they present, including security and corruption.
2019, the European Commission issued the report, “Investor Citizenship and Residence Schemes in the European Union” this report investigated the challenges posed by CBI and RBI schemes.
2020, European Commission President Ursula von der Leyen declared that European Citizenship is part of the values of the EU that are not for sale.
2020, the European Commission launched infringement proceedings against Cyprus and Malta concerning their CBI schemes.
2021, the European Commission advanced its infringement proceedings.
2021 -2026, the European Parliament is drawing a report for a legislative initiative on Citizenship and residence by investment schemes. Oct 2021 EPRS-European Parliamentary Research Service Issued the “European added value assessment (EAVA)” which intends to support the European Parliament’s legislative initiative. This report reviews the possible legal bases for EU action and assesses several policy options that could be pursued at the EU level against the CBI and RBI in the EU.
What are the policy recommendations?
The EAVA report defines five options.
Option 1: To stop the CBI/RBI schemes in the EU. This option intends to reduce the risk of the commodification of EU citizenship/residency.
Option 2: Tax CBI/RBI schemes. The grounds for this measure would be to compensate the other Members Stated that does not have a CBI/RBI in place, since they have to bear risks that these schemes generate, while the economic contribution that a third-country national paid to obtain the residency/citizenship has only benefited the member estate that granted such status.
Option 3: Regulate CBI/RBI schemes in the following areas:
• Regulation CBI/RBI industry (licensing for services providers, code of conduct, due diligence, etc.)
• Regulation approval procedures (exchange of information with EU agencies, standards background checks, etc)
• Regulation of investments (regulate the type of investment, liquidity, financial transparency etc)
Option 4: Introduce minimum presence requirements for RBI schemes. This policy option focuses specifically on RBI schemes since these schemes could be seen as pathways to permanent residency and eventually to citizenship. Under this option it will impose minimum physical requirements for beneficiaries of RBI, putting them on equal terms with other migrants.
Policy option 5: Regulate access to the EU for participants of CBI/RBI schemes in third countries that are in the EU accession process and in countries that have a visa-free agreement with the EU.
• Countries that operate CBI/RBI and which are under EU accession process are Montenegro (its CBI will terminate on December 2021); Albania (Albania is considering starting a CBI) and Turkey.
• Regulate the access to the EU, to people that have obtained a CBI/RBI in countries that have visa-free agreements with the EU. This measure could affect the visa-free access to Europe in countries such Antigua and Barbuda, Dominica, Grenada, Saint Kitts and Nevis, Saint Lucia and Vanuatu.
What are the arguments of each party?
Members States with a CBI, usually argue that the EU does not have competence on matters of acquisition and loss of citizenship as well on taxation since this is the exclusive competence of the Members States. Therefore, the EU cannot introduce a policy that hiders the right to decide in these internal matters, as this is part of the sovereignty of the Members States.
The position of the EU, which are highlighted in the report identified a series of risks that these schemes pose to the EU. Some of this risk falls into the areas of criminal law such as corruption, money laundering, tax evasion, etc. The nature of these risks provides legal bases for the EU to act on the schemes. It is important to note that extent of these criminal risks is not sufficiently measured, the report argues that this is due to limited data and transparency on these programmes. The EU also draw other EU principles that could be a risk of violation by the CBI/RBI schemes: sincere cooperation, fairness and discrimination, internal market integrity etc. These principles may give grounds to t EU to regulate the CBI/RBI. The report notes that the areas where they have strong legal bases to act are areas pertaining to AML, due diligence, long-term residence and third-country access to the EU.
Conclusion
Though, the report we have here analyzed, it is an academic in nature, and does not, therefore, reflects the position of the European Parliament. Still, we cannot ignore it is important, as it advances possible measures the EU parliament could take to deter the demand of the CBI/RBI in Member states, and also the consequences it may have to other third countries CBI/RBI and visa-free agreement to the EU.
It is important to note that the implementation of any of the measures suggested in the report is subject to a political and legal discussion. Especially in the areas related to taxation, and also the extent to which the EU has competence on acquisition and loss of Citizenship in the Member States, matters which are normally referred to as the exclusive competence of the Member States.
However, the attention that the EU is giving to immigration by investment schemes, can be an inflexion point for this young industry. In Global Visa-Free, we believe that policy option 3, that is, the regulation of the industry could be, an important step towards recognizing and professionalizing the provision of these services. In recent years we have seen an explosion of companies offering immigration services, companies that do not have the minimum qualifications and expertise. There is also known, how many companies, especially in China, has profited from the lack of regulation in the industry to fraud clients offering immigration programmes that do not even exist or, fraud the countries with a CBI/RBI by offering through illegal and practices packages for the below the minimum investment set by this coutries. Regulation of the industry will clean the industry of these irregular practices and offer a safer ground for the clients to safaly invest and relocate abroad.Still, we will see the course that this discussion will take, but definitely, we are in a moment important changes for the future on the industry.
