European Parliamentary Research Service publishes report on European CBI/RBI schemes

Earlier this year EU Commissioner Vera Jourova announced that the EU Commission, on the request of the European Parliament, will publish a report on European CBI and RBI programmes. The European Parliamentary Research Service has meanwhile produced its own research report entitled Citizenship by investment (CBI) and residency by investment (RBI) schemes in the EU – State of play, issues and impacts in which it is confirmed that the Commission plans to issue its report in November 2018.

Using a methodology developed specifically for its report, the Research Service aimed ‘to identify the schemes that minimise the constraints incumbent on the applicants and maximise the rights obtained in terms of mobility and tax advantages’. The report touches on many issues but it studies the CBI/RBI schemes primarily from two perspectives – that of the European Union, on the one hand, and that of the schemes’ possible abuse for illicit purposes, on the other. It also concludes that ‘the economic impacts of CBI/RBI schemes are often modest and elusive’ and that the spillover effects on tax revenues and job creation are uncertain. This may very well be different in non-European countries running CBI/RBI schemes. However, in the European context the Research Service seems to conclude that the (societal) drawbacks of the schemes in terms of, for example, rising property prices or threats to security and justice if people with a criminal background slip through the cracks may be greater than the benefits.

The Research Service confirms its conclusion from earlier this year that the EU lacks formal power to intervene with the national citizenship of the member states, and that therefore ‘the EU’s competence in the matter remains very much contested’. Nevertheless, the report discusses the compatibility of the investment programmes with the EU principle of sincere cooperation (given that the acquisition of a member state nationality gives access to the EU as a whole), the ‘genuine link’ criterion, and other instruments of EU law. For example, the fact that the schemes require none to very low physical presence on the territory from the applicants contrasts with the five-year residence period required under the EU Long-term Residence Directive, where it is stated in Recital 6 that legal and continuous residence is required ‘in order to show that the person has put down roots in the country’. In addition, applicants under CBI schemes will often be exempt from taking language and civic tests in applying for naturalisation, which ‘largely contradicts the recent Member State’s efforts to resubstantiate citizenship through tests and integration requirements’.

The other focal point of the report is that of the risks carried by the CBI and RBI schemes, including the ‘potential for corruption, money laundering and tax evasion’. This analysis is complicated because, according to the Research Service, ‘there is very little transparency over the number and origin of applicants, the number of citizenship or residency granted by CBI/RBI schemes and the amount invested through those schemes’.

The generally critical report ends with the conclusion that ‘there is potential for the EU to take action’ while recognising that ‘such action would not necessarily exceed EU competences on the matter, and in any case should be assessed against the principles of subsidiarity, proportionality and EU added value’. It is now for the Commission to publish its report next month.

Author: Dr. Olivier Vonk