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.
The legal case
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. The vast majority of EU legal experts argue that the Commission has no legal right to become involved in how sovereign states define citizenship law.
The IMC has sought the opinions of several legal scholars, including Professor Dr Daniel Sarmiento, a leading specialist in EU competence law, and Professor Dr Carl Baudenbacher, the former president of the EFTA court. The conclusion is clear: The EU has no competence in the area of citizenship. Moreover, the concept of ‘genuine link’ that was invoked by the EU is both vague and arbitrary. The European Court of Justice already found in earlier decisions that it is not relevant.
It is therefore unlikely that the European Court of Justice would rule in favour in the matter at hand, as this could have very serious secondary consequences, and could open the way for the EU to encroach on the power of granting nationality, which is reserved, in EU Law, for Member States.
As rightly noted by the European Parliament, "Nationality is defined according to the national laws of that State."
Strong governance and due diligence
The IMC however understands and shares the concerns of both the EU and wider stakeholders around the question of proper due diligence on applicants to such programs. This is why it has developed, in cooperation with international anti financial crime firms BDO, Exiger and Refinitiv, a common best practice framework and developed a blueprint for good governance through due diligence standards to uphold the highest levels of integrity and transparency. [Download the ‘Due Diligence in Investment Migration: Best Approach and Minimum Standard Recommendations’ Report]
Nevertheless, the IMC suggests that there has been a significant exaggeration of the risks. Working in partnership with Oxford Analytica, the leading geopolitical risk analysis and advisory firm, it has identified that for all the publicly voiced concerns, the due diligence and governance in place already acts as a powerful deterrent. [Download the ‘Due Diligence in Investment Migration: Current Applications and Trends’ Report and the ‘Citizenship by Investment Programmes: An EU Risk Assessment’ Report]
Oxford Analytica found that the operational reality is that investment migration risks are primarily theoretical in nature. This assessment is broadly shared with the intelligence, security, and law enforcement professionals involved in managing investment migration. Potentially nefarious activity is a negligible percentage and compares very favourably to other legal migration pathways.
There are, of course, enhancements that should be made at corporate, sovereign state, and intragovernmental information sharing levels. The IMC and its membership community are committed to the highest of standards. We want to work in partnership with the relevant stakeholders to devise a formal regulatory system that mirrors those of financial and professional services providers and that will ensure the necessary protection. That system should be based on an objective and knowledgeable analysis of the reality of investment migration, not one that is based on scare stories and rumour.
A creator of societal and sovereign value
Investment migration is a vital lever for sovereign nations to raise debt-free capital, attract talented individuals, and deliver benefits to society as a whole. In Malta, to mention but one example, the Individual Investor Programme attracted EUR 1.4 billion directly into the island nation’s economy following the damaging Euro crisis. This liquidity has had profoundly positive consequences. There has been significant employment creation across all levels of society, and the Maltese government has greater autonomy to invest in vital infrastructure projects, some of which involve critical care for cancer patients.
Bruno L’Ecuyer, CEO of the IMC commented: "Investment migration pathways are now a well-established, normalised wealth management advisory practice. As is the case with other established financial and professional services practitioners, we want to work in partnership with all relevant stakeholders to ensure that sovereign and societal value can be maximised through prudent, responsible, and objective regulation."
For this to happen, all investment migration advisors must run operations to the highest possible standards and be prepared to face the consequences if they are found wanting. Equally, stakeholders must understand that the privilege of granting citizenship and residence rights is solely the domain of a sovereign state, and that significant sovereign and societal value can be created through investment migration, particularly in the Covid era, which moreover in many instances is aligned with the UNs Sustainable Development Goals.
About the Investment Migration Council
The Investment Migration Council (IMC) is the worldwide association for Investment Migration, bringing together the leading stakeholders in the field and giving the industry a voice.
The IMC sets the standards on a global level and interacts with other professional associations, governments, and international organisations in relation to investment migration.
The IMC helps to improve public understanding of the issues faced by clients and governments in this area and promotes education and high professional standards among its members.
The IMC is constituted as a not-for-profit association under Swiss law. Based in Geneva, it has representative offices in New York, London and the Cayman Islands. Managed by a Secretariat under the direction of a Governing Board, the IMC also has a non-executive Advisory Committee, in which the most important industry stakeholders are represented. The IMC is funded by membership fees, donors and income from activities such as events, education, training, and publications.
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