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Residence and Citizenship by Investment

Facilitated Naturalization and Citizenship by Investment

Dr. Christian H. Kaelin

Dr. Christian H. Kaelin is the Chairman of Henley & Partners

From rewarding soldiers to attracting talent and investors, sovereign states have, since ancient times, capitalized on the fact that their citizenship is a ‘good’ that is in demand. Ethnic considerations, close historical and linguistic ties, and special merit or achievement frequently drive policies in immigration and citizenship law, and often constitute the grounds for facilitated naturalization.

Consider just a few of the numerous examples testifying to the ethnic ideology behind many states’ provision of facilitated naturalization: Germany’s policy of granting immediate citizenship to repatriates; the Spanish laws granting citizenship to descendants of those who fled during the Franco regime and to descendants of Sephardic Jews who were expelled during the 15th‑century Inquisition; the Israeli ‘Law of Return’, which encourages Jews to immigrate to Israel and gives them citizenship upon their ‘return’ to Israel, regardless of their ages, skillsets, or economic statuses; the preferential treatment of Macedonians in Bulgaria for the purpose of citizenship; and the provision of Hungarian passports to hundreds of thousands of Serbians and Romanians. In Croatia, a country with a large diaspora both in Europe and overseas (predominantly in America, but also in Australia and New Zealand), it is possible for someone to regain citizenship immediately if they can demonstrate they are of Croatian descent. Relative to its size, Ireland has experienced one of the largest mass emigrations in history, and the country now has a very generous principle of descent in place, one of the most liberal in the world, which allows anyone with at least one grandparent born in Ireland to regain Irish citizenship.

Much like ethnicity and descent, military service frequently gives access to privileged naturalization. This is the case with the recruitment of foreign military personnel, for example, where citizenship is provided in return for soldiers’ commitment. This practice has occurred throughout history, and it occurs to the present day, in France with the French Foreign Legion, and in the USA with the US Army. Qualified members of the US Armed Forces can be exempt from certain naturalization requirements, including the requirement of residence and physical presence in the country, under Sections 328 and 329 of the Immigration and Nationality Act. This extraordinary naturalization option serves as an incentive and a reward for performing military service and risking one’s life.

Another example of facilitated naturalization is the recruitment of elite foreign athletes for national teams in the Olympic Games or in other world sporting championships. These foreign athletes gain not only the privilege of competing in international games for a given state but also actual citizenship rights in that state in return for their efforts. Famously named by Ayelet Shachar, this “Olympic citizenship” is focused on the “spread of the talent-for-citizenship exchange”, be it in sports, culture, science, or other fields. As an illustration of this widespread practice, the French sports paper L’Équipe gave the following account of the quarter-final of the European Table Tennis Championships in October 2013: “In the women’s singles, two‑time European champion Li Jiao of the Netherlands (2007 and 2011), lost to Portugal’s Fu Yu. In the semi‑finals, Fu Yu will meet Sweden’s Li Fen.” All the competitors appear to have been naturalized, although they represent three different European nations.

Table 1. Acquisitions of citizenship by previous citizenship group in the EU-27 and EFTA (2019)

Top foreign athletes who are of special interest to Germany are preferred for naturalization based on an administrative directive, although in recent times a maximum of only 10 top athletes per year have been admitted. Other countries are more lenient: at the World Athletics Championships in 2005, for instance, Qatar was represented by almost a dozen élite athletes born in Kenya and naturalized in Qatar. The USA, more than any other country in the world, has gone out of its way to perfect the technique of attracting accomplished athletes by offering them citizenship in return for their pursuit of Olympic medals. Shortly before the 2006 Winter Olympics, President Bush signed a Bill that granted citizenship to foreigners with extraordinary ability, allowing, among others, Russian ice dancer Maxim Zavozin to represent the USA. Zavozin thereafter became a Hungarian citizen just in time to represent Hungary at the Winter Olympics in 2010. Iceland naturalized the former world chess champion Bobby Fischer in 2005, helping him escape custody and possible extradition in Japan after authorities in the USA revoked the American passport that he was using to travel from Japan back to Iceland.

Other talents, statuses, and sources of fame also can form the basis for facilitated naturalization. In Denmark — a country that has one of the most restrictive naturalization regimes in place today and that, as of 2000, naturalizes only those who speak Danish and know the history and values of Denmark — the Australian wife of Crown Prince Frederik, Mary Donaldson, received Danish citizenship by an Act of Parliament on their marriage in 2004. More recently, in 2020, Tom Hanks and his wife Rita Wilson were granted Greek citizenship for their role in wildfire aid, and a young Malian migrant Mamoudou Gassama, who rescued a child dangling from a balcony, was granted French citizenship in 2018. Also in 2018, three stateless boys from a soccer team and their coach, who were rescued from a flooded cave in northern Thailand, were granted Thai citizenship. The story captured the attention of the world and highlighted the plight of thousands of other stateless people from Thailand and neighboring countries, living in Thailand, who were born in areas where borders have changed, leaving their nationalities uncertain. Ralph Fiennes received a Serbian passport in 2017 for filming in the country, and young Afghan refugee Farhad Nouri was offered Serbian citizenship because of his skillful drawings — a privilege not extended to the many other refugees living in the country. The list of grounds and examples cannot be exhaustive since the discretion of states in the field of citizenship law is virtually absolute, with an extreme example being Saudi Arabia conferring citizenship on a robot in late 2017.

In line with these exemplars of facilitated naturalization, citizenship can also assist in recruiting overseas investors, who are granted citizenship in exchange for their significant foreign direct investment in (or other economic contribution to) a country. Investors are often given an easier path to citizenship than other candidates for naturalization. Applicants who pay do not have to wait for years to be granted citizenship, although, crucially, they do have to be suitably qualified and undergo strict due diligence checks. ‘First come, first served’ is effectively displaced by the ethics of the market: ‘You get what you pay for’. Ius doni, the acquisition of citizenship by investment, is essentially, then, a fast-track procedure for gaining citizenship, a form of facilitated naturalization that is based on the ability and willingness to contribute economically.

Citizenship by investment and other forms of naturalization

Acquiring citizenship by investment should not be seen as different from, or treated differently to, other forms of facilitated naturalization. Indeed, there can be no logical qualitative difference between citizenship allocated on the basis of natural-talent assets and citizenship allocated on the basis of financial assets. Both are in the national interest. As Arthur M. Okun puts it, “When people differ in capabilities, interests, and preferences, identical treatment is not equitable treatment.”

Yet it is no secret that certain people are sensitive when it comes to money matters, feeling strongly about the trade of what they deem to be non‑tradable goods. For this group, such goods acquire a kind of ‘sacrosanct’ status that must not be questioned. Critiques along these lines see investors not as talented entrepreneurs who contribute to a state’s prosperity in much the same way as talented athletes or people who are able and willing to serve in a military force, but rather only as individuals who jump the queue and are spared the requirements of regular naturalization. Shachar, for instance, makes the following observation: “Rapid processes of market expansionism have now reached what for many is the most sacrosanct nonmarket good: membership in a political community. More puzzling is the willingness of governments — our public trustees and legal guardians of citizenship — to engage in processes that come very close to, and in some cases cannot be described as anything but, the sale and barter of, membership goods in exchange for a hefty bank wire transfer.” Some commentators, then, are of the opinion that citizenship by investment should be distinguished clearly from Olympic citizenship and other nonmonetary forms of facilitated naturalization so as to distinguish citizenship recipients who are given special treatment on the basis of their human capital from those who gain citizenship on the basis of their commitment of financial capital.

It has been further argued that citizenship by investment programs link citizenship with social standing and wealth, and that selecting future citizens on the basis of investment or economic contribution is a departure from the “egalitarian thrust that underlies rules of birthright citizenship as well as residence‑based naturalization”. This line of argument, however, fails to demonstrate why selection on the basis of financial capacity — which very often reflects an individual’s overall abilities as an entrepreneur and investor, abilities that are understandably highly valued by societies and states — is any more arbitrary than selection on the basis of where you were born or any less egalitarian than selection on the basis of exceptional talents, such as being able to play table tennis really well and help a national table tennis team excel. Both mechanisms, in fact, bestow global mobility on those with rare, sought‑after resources while immobilizing within their national borders those less well off and less talented.

Indeed, ius doni has been particularly criticized on grounds of non‑discrimination: specifically, for producing general inequality in citizenship matters. This is despite the fact that citizenship is by its nature and history exclusionary, and that states have total discretion in determining who does and who does not qualify as a citizen. The contradiction inherent in the non-discrimination and equality argument is widespread in the literature.

Which ‘equality principle’ has been broken, one wonders, if states have no obligation to treat those who want to naturalize equally to existing citizens or to one another, instead discriminating on such markers as birth, bloodline, ethnicity, marriage, and race?

It bears noting that the granting of citizenship because of investment is not substantially different from other citizenship requirements as conditions for naturalization, such as a guaranteed minimum income level or proof of independence from government welfare payments. Such conditions could likewise bring up issues of discrimination and equality, but they generally do not. Why not? For one, they are mainly concerned with promoting the sustainable integration of an applicant into the host country, which corresponds with the idea of the state community as a member-based collective in which everyone owes a certain contribution to the success of the whole. This idea is a corollary of the principle of solidarity, in the sense of a contractually based obligation of mutual care and protection. Citizenship by investment, by ensuring upfront that individual applicants have the means needed and that, in addition, they make a substantial financial contribution to the state, can just as easily be associated with the spirit of solidarity and collectivity as it can be associated with the spirit of discrimination.

Citizenship by investment and inequality

Inequality among different modes of acquiring citizenship — which has always existed and will continue to exist, with or without the presence of citizenship by investment — is actually less problematic than the global inequality of states themselves. The latter results in a glaring disparity in quality of life across states, as well as in passport quality, which determines the mobility and life opportunities available to citizens outside their home states.

It would be difficult even to conceive of citizenship by investment programs in a world of equal opportunities. That ius doni is a result of the inequality among states is evidenced by the relatively small number of intra‑EU naturalizations compared to the far higher number of EU naturalizations for non‑EU‑origin citizens, and it is equally evidenced by the significantly increased number of applications for Irish citizenship after the Brexit vote. The uniform opportunities for movement, travel, and trade available across the EU provide a useful control for measuring the relationship between inequality and the desire for improved citizenship.

There have been many debates about whether the conferral of citizenship based on economic contributions to a state is desirable, or whether it should instead be avoided as an inappropriate commingling of the spheres of money and statehood, or an inappropriate expansion of markets and market values. Many have sought to identify the areas or spheres of human society and its legal systems in which money can play a role versus those areas — or domains of rights — in which it should not. The latter are also referred to as ‘blocked exchanges’.

The fundamental issue at stake here, then, centers on the following theoretical questions: Does the acquisition of citizenship by means of investment fall within the area of blocked exchanges? Or rather, should the primary aim of having well-off citizens of the world linked to a state via naturalization, based on their significant economic contributions to that state, be considered as a legitimate function of modern-day citizenship in light of modern citizenship laws, increasing transnational financial and migration flows, and increasing globalization?

The allegation that such liberalism undermines itself by favoring the wealthy or the privileged is not entirely correct. While citizenship by investment does imply that an economic transfer of some kind is made in return for the granting of a status, there is nothing to preclude the transaction being supported by a loan or by future income. Indeed, in the USA, this practice has become relatively common, with private financial institutions offering citizenship loans to cover the costs of the ordinary naturalization process.

The utilitarian argument and the argument of the effective allocation of goods — that is, that market exchanges benefit buyers and sellers alike by improving everyone’s collective well-being — also support the case for a market‑based allocation of citizenship: markets are not good or bad; they are simply the most effective means of allocating resources and goods. Additional inflows or economic contributions improve common well-being in a country. Everyone benefits from this practice, including, of course, the applicants themselves, who value the citizenship they obtain enough to incur the costs of applying under investment migration programs. The state, for its part, receives additional funding at virtually no cost. This funding comprises investments in its private or public sectors, or direct monetary contributions, depending on how the citizenship by investment program is structured. In return, the state adds wealthy entrepreneurs and investors as new citizens.

In addition to the utilitarian and market‑based arguments, the fact remains that the practice of granting citizenship for economic reasons has been in place since antiquity. The questions surrounding this practice are, therefore, strictly ethical: they are no different from asking whether blood, descent, nationalism, military service, or talent in soccer should play a role in access to citizenship.

Money is a medium of societal integration. Undoubtedly, money is also able to buy things that previously were not considered appropriate for buying and selling. The open market for the right to pollute the air (the EU, for example, operates the EU Emissions Trading System, which enables companies to buy and sell the right to pollute); for‑profit schools and prisons; naming rights for schools, public parks, and civic spaces; or the system of financing political campaigns that comes close to permitting the buying and selling of elections are but a few examples. Michael Sandel argues that some of the good things in life are corrupted and degraded if they are turned into commodities, and that society has drifted from having a market economy to being a market society: a way of life in which market values seep into every aspect of human experience.

To believe that a good has been corrupted, though, one must value that good above, or in different ways from, others. One must make a value judgment, as Sandel notes: “It hardly makes sense to speak of corrupting an activity — parenthood, say, or citizenship — unless you think that some ways of being a parent, or a citizen, are better than others. Moral judgments such as these lie behind the few limitations on markets we still observe. We don’t allow parents to sell their children or citizens to sell their votes. And one of the reasons we don’t is, frankly, judgmental: we believe that selling these things values them in the wrong way and cultivates bad attitudes.”

According to this reasoning, as Sandel points out, “paying foreign mercenaries to fight our wars might spare the lives of our citizens but may also corrupt the meaning of citizenship”. Certainly, fighting in the wars of other states would ‘corrupt’ the meaning of citizenship in the same way that acquiring citizenship through investment or through marrying a generous prince or princess supposedly does.

While critics have a point in claiming that the very fact that citizenship has a price tag risks undermining and devaluing it, the opposite can also be said to be true: granting citizenship and a passport to highly successful and esteemed persons can make that same citizenship highly esteemed, too. Moreover, the migration of investors, which is usually assessed as a negative from the perspective of their countries of origin, might be assessed as a positive in the economic sense, as it ultimately contributes to international economic, technological, and cultural exchange and, moreover, to consistent market discipline. In agreement with Dimitry Kochenov, there is no real negative ‘brain drain’ in the world if properly put into perspective. That said, ‘brains’ will move anyway, and the same is true of capital. Public policies should therefore support rather than thwart this process.

There can certainly be no ethical justification for the allocation of citizenship based exclusively on birth rather than based on natural talent or private contribution, any more than the exclusive allocation of wealth and property on such terms can be justified. The ‘selling’ of citizenship to investors is only one instance of the wider, systemic unfairness in allocating citizenship. The granting of citizenship according to the circumstances of birth is no less arbitrary, and yet it is the norm worldwide: the overwhelming majority of people are allocated their citizenship at birth, based on nothing more than where and to whom they were born. Much like inherited wealth, these markers constitute the most arbitrary and unjust allocation system, reminiscent of the feudal system of the past. Ius doni, then, with its very limited scope of application, and despite how it may appear to some, pales in comparison to many of the other inequities attending the ordinary transmission of citizenship. It is, in fact, a more equitable form of citizenship allocation, and one that also immediately benefits the host community.

Printed references

1 A.M. Okun, Equality and Efficiency: The Big Tradeoff (Brookings Institution Press 1975)

2 M.J. Sandel, What Money Can’t Buy: The Moral Limits of Markets (Farrar, Straus, and Giroux 2012)

Dr. Christian H. Kaelin, TEP, IMCM, Chairman of Henley & Partners, is considered one of the world’s foremost experts in investment migration, a field he pioneered. Holding master’s and PhD degrees in law from the University of Zurich, he is a sought-after speaker and advises governments and international organizations. He is the author, co-author, and/or editor of many publications, including standard works such as the Global Residence and Citizenship Handbook, the Kälin – Kochenov Quality of Nationality IndexIus Doni in International Law and EU Law, and the Switzerland Business & Investment Handbook.


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