Asset Protection

Are All Animals Equal? Ethical Aspects of Investor Citizenship Programs


By Dr Jelena Dzankic, Marie Curie Fellow, European University Institute, Italy (01/10/2014)

Over the past couple of years, many countries have sought more creative ways to inject capital into their crisis-struck economies. This trend is mirrored in the mushrooming of investor citizenship programs, which enable rich individuals to gain residence in countries and eventually obtain their citizenship. If you have had the chance to watch The Wolf from Wall Street, you have probably been left with impression that money changes people. And just as quick access to money has the potential to change people, the exchange of citizenship for money has an equally strong potential to corrupt democracy and reduce citizenship to a tradable commodity.

Citizenship is a relationship between individuals and states. Yet, it is not merely a matter of the passport. As Bauböck noted, citizenship, similar to the Roman god Janus, has two faces.[1] One is the external dimension of citizenship, the fact that possessing the passport of a certain country gives us the possibility to travel to other countries. The other one, which we rarely think about in connection to citizenship, is its internal dimension.

By virtue of being formally linked to a particular country, we are granted the rights and subject to the duties of membership. In other words, we belong to a community in which we can exercise the right to vote, sign petitions, receive social (or other) benefits, while we have the duty to pay taxes, or meet other obligations set by the state (eg, military duty in some countries). The intimacy between taxation and representation inherent in the rights and duties of citizenship indicates that there is a relationship between money, property and membership.

The Puzzle of Money and Membership

In one way or another, wealth has historically been connected not only to defining the boundaries but also to the rights of membership. As far back as in ancient Greece and Rome, only free men who possessed property could be called citizens. The status of a citizen then allowed them to participate in the political life of the community, and, with the development of the Roman law, to conclude contracts, become married, inherit goods or receive protection from the state.

With the development of feudal systems, property and money became exclusive to feudal lords, a class-defined citizenship community with full access to membership rights. By contrast, peasants, with limited property and financial resources had restricted membership rights.

In modern democracies, the link between wealth and the distribution of rights has largely, but not fully, been broken. This can best be seen in the example of naturalisation. In most countries, in order to become a citizen of a given country, a person has to prove that he or she has sufficient income, residence, or that he or she has paid all the due taxes to the state. Such income-related conditions are designed to show that the individual is self-sustainable and that he or she will not become a liability in the distribution of the public good.

 

Investor Citizenship Programs: A Snapshot

Investor citizenship programs have turned money and property into functional grounds or ‘access points’ for membership. States apply their discretion in deciding on membership to grant residence or citizenship to wealthy individuals. States base their decision on the logic that such person’s contribution to the public good (expressed in terms of the financial contribution) is higher than that of an ordinary citizen.

However, there are different ways in which these ‘access points’ for membership function and we can distinguish between three types of investor schemes: 1) discretionary naturalisation on grounds of national interest; 2) detailed investor citizenship programs and 3) ‘golden residence’ programs.

Discretionary Naturalisation

Discretionary naturalisation on grounds of economic interest (as national interest) is based on the prerogative of sovereign states to admit those individuals who make an exceptional contribution to the country’s society, economy, sports, or culture.

The state has the power to waive all the ordinary naturalisation conditions or to alleviate some (eg, language knowledge, or renunciation of dual citizenship) while retaining others (eg, residence, oath of allegiance, etc). In principle, exceptional naturalisation is used only in a few cases annually. At present, there is no statistical data as to how many countries in the world apply this, but the data at the European Union Democracy Observatory (EUDO) on Citizenship indicate that out of the 28 Member States of the EU, 22 allow discretionary naturalisation on grounds of special achievements.[2] 

Detailed Investor Programs

Detailed investor programs, which exist in the pure form only in a few countries worldwide, imply that the country grants its citizenship in exchange for a pre-defined amount of money. Interestingly, all pure investor citizenship programs are run by small island nations.

The Caribbean islands of St Kitts and Nevis and the Commonwealth of Dominica have long-running investor citizenship programs dating back to 1984 and 1993 respectively.

Antigua & Barbuda and Vanuatu also have ‘pure’ investor schemes, along with Cyprus, the only European Union state that operates such a program.  Bulgaria, Malta and Romania also run investor citizenship programs, but require compulsory residence of one, one and four years on their soil, respectively.  While the amounts of investment required for citizenship varies in these countries from less than US$100,000 to €5 million, the principle is the same – citizenship is granted after the person invests, and due diligence and clean criminal record checks are complete.

Golden Residence Program

By contrast to these two types of investor citizenship, in the case of the ‘golden residence’ programs, the investment generates only residence rights or privileges. This means that, in order to be naturalised, a person benefitting from a ‘golden residence’ program is required to meet other conditions for naturalisation, including living in the country and knowing its language and customs. This type of program exists in the United Kingdom, the United States, Belgium, Ireland, Singapore, Portugal, Bulgaria, Hungary, Greece, Spain, and many others.

 

Potential for Corruption

So, if there has always been a link between wealth and citizenship, dating back as far as Ancient Greece, why is ‘selling citizenship’ considered at best questionable and at worst simply wrong? The simplest answer is – corruption. Corruption of the state’s institutions and corruption of democracy.

The potential for the exchange of money and membership to corrupt the state’s politicians and institutions also dates back to ancient Rome, where the wealthy Peregrines (subjects of the Roman empire, but not its citizens) would bribe governors and high officials in order to gain citizenship.

The most famous anecdote related to this practice is the Biblical story of the Roman centurion who apprehended Saint Paul the Apostle in 60 AD and stated, ‘It cost me a large amount of money to become a Roman citizen.’ This type of corruption still exists today, and it is particularly pronounced in countries that implement discretionary naturalisation on grounds of national interest.

A notable case of corruption was the Austrian ‘Part-of-the-game Affair’, where the Carinthian Freedom Party (FPK) politician Uwe Scheuch, allegedly promised to facilitate the granting of Austrian citizenship to a Russian investor in return for a €5million investment in Carinthia and a five to 10 per cent donation of this amount to the FPK. Following a series of court appeals, the affair resulted in a prison sentence and a pecuniary fine for Scheuch. Similar cases of corruption and secret deals indicate that abuses of political power and influence are common problems of investor citizenship programs.

A further peril of these programs is their potential to corrupt the notion of democracy. In the modern democracies, citizenship is associated with internal equality and with the idea of a ‘right to have rights’.[3] Liberal ideas about equality imply that all the citizens should be treated in the same way despite their social standing, wealth, or class. Yet, the question that arises from investor citizenship is whether those who are not members of the polity should also be treated equally. In fact, there is no obligation for the state to do so apart from general provisions requiring non-discrimination between citizens and non-citizens on grounds of race, ethnicity, and religion.

However, while the state has the prerogative to decide on its membership and thus it is indisputable that it can choose from among those who apply to be naturalised, the process of granting a foreign national citizenship of a given state is normally accompanied by the person’s fulfilment of certain criteria.

By contrast, investor citizenship programs allow facilitated naturalisation to a group of people only on grounds of their wealth and social standing, while some or all of other conditions are waived. This means that such a person benefits not only from the country’s passport on the grounds of wealth and social class, but also from the rights attached to citizenship.

Investor citizenship effectively commodifies not only the institution of citizenship, but also the related ones, including participation and social rights. In other words, by selling citizenship to investors, we also sell them the right to decide on the future of the community.

Paradoxically, many of the people who obtained citizenship on grounds of investment only have an accidental and instrumental interest in a state that offers them a favourable investment environment or a passport with fewer travel restrictions. Hence, unfortunately for modern democracies, investor citizenship programs affirm that ‘all animals are equal but some animals are more equal than others’.[4]

 

About the Author

Jelena Dzankic is a Marie Curie Fellow at the European University Institute. She holds a PhD from the Faculty of Politics, Psychology and Social Sciences (PPSIS) at the University of Cambridge (New Hall College). Her academic interests include citizenship in Europe and beyond, Europeanisation, and politics of identity.  Before coming to the European University Institute, Jelena was part of the CITSEE team at the University of Edinburgh. Since 2011, she has been tracking the development of investor citizenship programs.



[1] Rainer Bauböck (2014), ‘Should citizenship be for sale? - What is wrong with selling citizenship? It corrupts democracy!’ EUDO Citizenship, http://eudo-citizenship.eu/commentaries/citizenship-forum/citizenship-forum-cat/990-should-citizenship-be-for-sale?showall=&start=6

[2] The citizenship laws of the Denmark, Finland, Poland, Spain, Sweden and the United Kingdom do not contain provisions on naturalisation on grounds of special achievements. European Union Democracy Observatory (EUDO) on Citizenship, CITLAW Indicators (2013) <http://eudo-citizenship.eu/databases/modes-of-acquisition?p=&application=modesAcquisition&search=1&modeby=idmode&idmode=A24 >

[3] Hannah Arendt (1951), The Origins of Totalitarianism (Harcourt Brace Jovanovich), 294

[4] George Orwell (1956), The Animal Farm (Secker and Warburg), 112.