Tag Archives: Citizenship

How can Caribbean CIPs survive increased global and regional competition and scrutiny?

Alicia Nicholls

Citizenship by investment programmes (CIPs) operated by five Caribbean small island developing States have been receiving increased international competition and scrutiny, with some arguing that a veritable “race to the bottom” has begun. Indeed, these programmes face increased competition not just inter se, but globally as more countries worldwide are turning to citizenship or residency programmes for attracting much needed investment.

The CIP-operating countries in the Caribbean are currently St. Kitts & Nevis (the world’s longest running), Dominica, Grenada, Antigua & Barbuda and most recently, St. Lucia. As all five of these countries are part of the CARICOM Single Market and Economy (CSME), investors who obtain citizenship under one of these countries’ CIPs are also entitled to the freedom of movement privileges under the CSME, which has caused legitimate national security concern in some non-CIP operating CARICOM countries.

  1. Eliminate price as a factor

Although Caribbean CIPs are already the most affordable in the world, there are irrefutable signs of increased price competition among Caribbean CIPs.  In January of this year, St. Lucia amended its regulations to, inter alia, reduce the minimum qualifying investment to US$ 100,000 to the National Economic Fund. In the wake of the passage of Hurricane Irma, St. Kitts & Nevis added a lower cost option (US$150,000 plus applicable fees) in the form of the temporary hurricane relief investment option (until March 2018), whereby the invested funds would be earmarked for assisting hurricane-affected areas. This latter change was sharply criticised. Even more recently, Antigua & Barbuda cut the investment threshold for the National Development Fund by 50%.

Any semblance of price competition among Caribbean CIPs is problematic for several reasons.  Although the majority of persons seeking alternative citizenship do so for the ease of business and travel a good quality passport brings, lowering the minimum investment threshold makes Caribbean CIPs more accessible to those persons who may seek alternative citizenship for nefarious purposes. Even if the due diligence processes remain unchanged, a perceived price war could cause third States to either reimpose visa restrictions or apply more scrutiny to passport holders of those States  (or of other Caribbean States!), which diminishes the value and attractiveness of those CIP-countries’ passports. It lessens the perceived value of the citizenship offered by those countries which may actually be a turn-off to some High Net Worth Individuals who may be more attracted to exclusivity.

What this speaks to is the need for CIP-operating Caribbean countries to eliminate price as a factor of competition by harmonising their minimum investment threshold, a point I made in a paper I delivered on this topic earlier this year.

2. Increase due diligence cooperation

Cooperation among CIP-operating Caribbean countries should also extend to cooperation on issues of due diligence to ensure that an applicant who fails one country’s due diligence requirements is not accepted under another’s. Based on my research, it appears that there is some due diligence cooperation already occurring, but more can be done. Additional options could be to harmonise due diligence requirements and to formulate a harmonised list of excluded countries instead of national lists as currently obtains in some CIP-operating Caribbean countries.  This would also address some of the national security concerns of non-CIP operating Caribbean countries, and third States.

3. Improve transparency

Lack of transparency remains a major problem plaguing the perception of Caribbean CIPs. Antigua & Barbuda’s legislation makes it mandatory for a 6-month report to be published and this information is found online. However, generally speaking, there is little information made available about Caribbean CIPs’ operation, except for the economic data found in the IMF’s Article IV consultation reports. With few exceptions, officials are often very reluctant to share data on these programmes’ operation, whether out of fear of competition or negative publicity.

Failure to share information only adds to the shroud of secrecy plaguing the programmes and it also makes it difficult to analyse the socio-economic impacts of these programmes.

It would be useful if CIP-operating Member States would use the framework for information sharing as mentioned in the Strategic Plan for the Caribbean Community Plan 2015-2019 to share data on the operation of their programmes for transparency purposes, including their approval and disapproval rates.

4. Compete on quality

Competition among Caribbean CIPs should be on quality of service and product without compromising standards. Caribbean countries already have inherent natural advantages which are pull factors for HWNIs, such as their natural beauty, pleasant climates, stable democratic societies and quality of life. But these alone are not enough. What the latest World Bank Doing Business Report 2018 shows is that there are several indicators on which Caribbean countries, including CIP-operating countries, can improve their attractiveness as investment destinations by improving the ease of doing business. Jamaica, which does not offer a CIP, is a good example of a Caribbean country which has been making sound reforms in the quest for  ‘best in class’ status as an investment destination.

5. Good governance

Good governance is key to the long-term sustainability of Caribbean CIPs. This includes ensuring that due diligence standards are robust, as well as that transparency and efficiency remain paramount to the programmes’ administration. It also entails keeping the programmes free of political interference.

6. Residency Criterion?

Currently, all five Caribbean CIPs are direct citizenship programmes which means that there is no requirement on the investor to reside in the jurisdiction for a fixed period of time before citizenship is granted. The lack of a residence requirement is one of the unique selling points of Caribbean programmes, but it is also one of the reasons why some third States are increasingly critical of these programmes.

The addition of  a short residency requirement, similar to Malta’s 12-month requirement, could be a possible option for Caribbean CIPs as it would remove some of the transactional nature to the process.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

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BREXIT fuelling British demand for alternative citizenship?

Alicia Nicholls

Nearly two weeks after the British people by a narrow margin voted in favour of the United Kingdom (UK) leaving the 28-member European Union (EU), it seems that the historic BREXIT vote may be having yet another impact.  Although the UK has not yet notified its intention to leave the EU under Article 50 of the Treaty of Lisbon, various news reports have reported an increase in enquiries and applications by Britons for alternative EU citizenship.

Russian media house RT reports “an explosion” of Belgian citizenship requests from British expatriates living in that European country. Bear in mind that Brussels, as one of the “three capitals of the EU”, is home to a large expatriate community, including bureaucrats and consultants working in EU organs and EU-related organisations. According to Sveriges Radio (Radio Sweden), in the immediate days following BREXIT, over 100 Britons applied for Swedish citizenship compared to 440 applications last year.

There is a good reason why some Britons are seeking to ensure that they keep an EU passport neatly tucked away for a rainy day. Article 20(1) of the Treaty on the Functioning of the European Union (TFEU) confers EU citizenship on every citizen of an EU country.  EU citizenship is additional to and does not replace citizenship of the member state. Currently, British nationals, as EU nationals, have the same rights to “move and reside freely within the territory of the Member States” per Article 20(2)(a) of the TFEU as the nationals of any other EU state.

There are possible economic reasons as well. The Office for National Statistics reports that in June 2016, the UK’s unemployment rate was just 5% and the number of unemployed fell during the first few months of the year. Despite this, unemployment could rise should the uncertainty from BREXIT lead to a slowdown in the UK’s growth and an exodus of businesses from the UK as some predict. An EU passport would give those Britons the right to look for work in the remaining EU countries should this occur.

While a contentious issue and believed to be one of the driving factors which influenced the “leave” vote, freedom of movement within the EU single market has benefited many young Britons who currently work and live in other EU member states, as well as British investors who have established businesses in other EU countries. For the reported 1.3 million UK nationals who currently live and work freely in other EU countries, this may change when the UK eventually leaves the EU should freedom of movement concessions not be part of the negotiated agreement. German Vice-Chancellor Sigmar Gabriel has been quoted directly in this article as suggesting that young Britons who live in Germany, France and Italy should be offered EU citizenship.

Dual Nationality

According to this report in the Irish Newspaper, The Journal, there has been an 80% increase in applications for Irish birth certificates since the referendum, as well as an increase in enquiries and applications for Irish passports at UK post offices. Under Irish law, a person with at least one parent who was an Irish citizen at the time of the person’s birth is entitled to Irish citizenship by descent. Those Britons who qualify for dual citizenship of another EU country, whether due to descent or marriage, are more likely to file applications for citizenship now that their rights to work and live in remaining EU countries are uncertain.

Citizenship by Investment

Current drivers of demand for citizenship under CBI programmes include the desire of high net worth individuals, particularly in emerging economies, for passports with greater mobility or to flee instability in their home countries, as well as nationality-based taxation and the reporting requirements the Foreign Account Tax Compliance Act (FATCA) in the case of Americans. However, it seems that there may be greater demand for EU citizenship by investment programmes like Malta’s and Cyprus’ in the wake of BREXIT. Golden Visas notes that “[their] website has seen a surge in enquiries of over 40%”. This is not unexpected as any person who is willing and able to make a qualifying investment (plus meeting the residency requirement) in one of these programmes is able to acquire an EU passport/nationality without much fuss.

Strength of UK passport

BREXIT may not only be fuelling demand by Britons for alternative EU citizenship but may impact on the strength of the UK passport. The president of one of the top global firms assisting clients in obtaining alternative citizenship has posited in this CNN Money article that BREXIT may reduce the power of the British passport which currently ranks among the top most powerful passports in the world.

As this very useful BBC article explains, there are five main models which could be the basis for the negotiated agreement between the EU and the UK. Only two of which I will briefly discuss as these involve freedom of movement. Like non-EU members Norway, Liechtenstein and Iceland, the UK could become a member of the European Free Trade Area (EFTA) and still be a part of the EU’s internal market via the European Economic Area (EEA) which provides for free movement of goods, services, people and capital. Alternatively, it could follow the model of Switzerland, also a member of the EFTA, but is not a part of the EEA. Its access to the EU single market is framed by several bilateral agreements. However, it is unclear which or whether any of these models will frame future EU-UK relations.

In a time of uncertainty like this where it is unknown what rights UK nationals will have in the EU once the UK and EU have negotiated the UK’s withdrawal, it seems that applying for second EU citizenship, whether through descent, naturalisation or by investment, is a source of comfort or an insurance policy for Britons should the worst happen .Nonetheless, for those many Britons who are currently living and earning a living in other EU countries, and do not qualify for alternative citizenship under any of these avenues, BREXIT brings much uncertainty and angst.

It is hoped that the negotiated outcome will permit British nationals to still enjoy some of the same rights to work and live in EU countries as they currently do. It should be noted though that the remaining 27 EU countries are unlikely not to demand reciprocity on the part of the UK in regards to any such freedom of movement concessions, which is quite ironic given that immigration concerns were part of the reason many Britons voted to leave the EU in the first place!

Turning to the Caribbean, it will be interesting to see what impact, if any, this development may have on the citizenship by investment programmes being offered by some Caribbean countries.  Will BREXIT lead to greater demand for EU based programmes like Malta’s and Cyprus at the expense of Caribbean programmes which (due to visa waivers) only give access to the Schengen area but not the right to live and work in the EU? Very little data is available on these programmes and their client bases but given that it would appear from reports that wealthy Chinese, Russians and Middle Easterners are among the main investors in Caribbean CBI programmes, it is unlikely that they will receive any major fallout from BREXIT. However, only time will tell. Suffice it to say, these are interesting times.

 Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Barbados passport tops Caribbean passports in ease of visa-free travel

Alicia Nicholls

Barbados has the best passport among Caribbean countries. This is according to Henley & Partners’ recently published Visa Restrictions Index 2016 in which Barbados has topped Caribbean countries in the ease of which its citizens/passport holders can cross international borders.

Barbadian citizenship/passport ranked 26 out of the 199 nationalities (passports) evaluated with its passport holders enjoying visa-free access to 141 countries. Last year Barbados ranked 24 on the Index with visa-free access to 138 countries.

Henley & Partners is the global leader in residence and citizenship planning and produces its Visa Restriction Index in cooperation with the International Air Transport Association (IATA). The index, which it has produced for the last ten years, ranks countries’ citizenship/passport according to the total number of other countries which they can access visa-free.

Besides Barbados, the other Caribbean countries whose citizenship/passports ranked in the top 50 are the Bahamas (27), Antigua & Barbuda (30), St. Kitts & Nevis (32), Trinidad & Tobago (34), St. Lucia and St. Vincent & the Grenadines tied (37), Grenada (39) and Dominica (41). Some of these tied in ranking with other countries.

Some other Caribbean countries’ rankings are as follows: Belize (55), Guyana (57), Jamaica (61), Suriname (64), Cuba (78), the Dominican Republic (83). The lowest ranked among Caribbean passports was Haiti (89) with a score of 48 countries to which visa-free travel is granted to Haitian citizens/passport holders.

Internationally, Germany topped the index again this year with a score of 177 countries to which visa-free travel is granted to German citizens/passport holders, while the worst was Afghanistan which ranked 109 with its citizens enjoying visa-free travel to only 25 countries.

For further information and access to the full Index 2016, please visit Henley & Partners‘s website.

Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

Economic Citizenship Programmes in the Eastern Caribbean: A Brief Look

Alicia Nicholls

In a world of eroded preferences for traditional Caribbean exports, the small island states of the Eastern Caribbean have had to find non-traditional ways to bolster their small open economies. There is growing global demand for alternative and second citizenship by mobile High Net Worth Individuals (HNWIs), a phenomenon on which an increasing number of states have sought to capitalise. At the Global Citizen Forum 2015 in Monaco last week, Prime Minister of St. Lucia, the Hon. Dr. Kenny Anthony announced his country’s intention to become the latest Caribbean state to offer economic citizenship. St. Lucia will join four other Caribbean countries: St. Kitts & Nevis, Antigua & Barbuda, Dominica and Grenada which operate direct citizenship by investment programmes. This article explores the current programmes in the Eastern Caribbean and whether the offering of economic citizenship is worth the risks involved.

The concept of citizenship, that is, the status of holding the nationality of a State, is imbued with a whole package of legal, political and other rights and duties. All states of the English speaking Caribbean have citizenship on a jus soli basis, that is, the right to citizenship by virtue of being born in the territory, as well as citizenship through descent and naturalisation. Those states which offer economic citizenship stretch the notion of citizenship to give qualifying investors the right to full legal citizenship and the right to hold a passport for themselves and their families through making a qualifying investment into the local economy.

Many of these mobile HNWIs are from China, the Middle East and Russia, seeking economic and political security, a more favourable tax climate, and the benefits of hassle free travel a good second passport could bring. According to The Wealth Report 2015, “it is estimated that 76,200 Chinese millionaires emigrated or acquired alternative citizenship over the 10 years to 2013”. Additionally, the US’ system of nationality based taxation and the onerous reporting requirements under FATCA have caused many Americans living abroad to renounce their American citizenship in record numbers (1,335 in the first quarter of 2015 according to this article).

Economic citizenship and residency programmes are not unique to the Caribbean. Several countries such as Malta and Cyprus operate direct Citizenship by Investment programmes. Some countries offer Immigrant Investor Programmes which use the prospect of citizenship or permanent residence to attract highly skilled HNWIs. The US’ EB-5 visa is a prime example. Similar programmes are also offered by the United Kingdom, Australia and New Zealand. Outside of this, there is a whole wealth and tax planning industry which has built up around advising HNW clients and their families on how and where they can get the best passport for their buck.

As countries known for their high standards of living, democratic principles, political stability, respect for the rule of law and healthy reputations internationally, it is little wonder several Eastern Caribbean countries have sought to leverage these pull factors and seek to get their share out of the second passport pie. The expected benefits to the host economy include foreign direct investment through purchasing real estate, funding for infrastructure development and the other economic benefits to be derived from HNWIs and their families spending in the economy.

The investor must meet the application requirements and go through stringent application procedures and invest in one of the options available which differs by country. In return, investors which take advantage of economic citizenship offered by one of those Eastern Caribbean states gets visa free travel to over 100 countries, a second passport, no requirement for residency, as well as second citizenship for themselves and their spouse and dependents. They also can take advantage of the tax benefits offered by a low tax jurisdiction, including no capital gains, wealth or inheritance taxes.

Below is a brief description of each programme:

St Kitts & Nevis – It is the oldest continuously operating citizenship by investment programme and has been in existence since 1984. Two options for investment: (1) making a non-refundable donation to the Sugar Industry Diversification Programme of a minimum of US$250,000 plus processing fees or (2) by investing in an approved real estate project worth at least US$400,000 plus registration and other costs.  While the investment in real estate is recoverable, the investor must hold the property for a minimum of 5 years. The next buyer also qualifies for citizenship. For further info: http://stkitts-citizenship.com/

Antigua & Barbuda – Three methods of investment: (1) Investment of at least US$400,000 in  an approved real estate project to be held for a period of no less than five years, (2) contribution of at least US$200,000 in the National Development Fund, (3) An investment of a minimum of US$1,500,000 directly into an eligible business as a sole investor or a joint investment involving at least 2 persons in an eligible business totalling at least US$5,000,000 and each of those persons individually invests at least US$400,000. For further info: http://cip.gov.ag/citizenship/

Dominica – Dominica’s programme requires the smallest minimum investment. Citizenship can be obtained through investment either in the Government Fund or the Real Estate Option. According to the website of the CBIU, the generated funds are utilised for public and private sector projects where a need is identified. To qualify for citizenship under the Government fund there are four investment categories with different contribution amounts, based on the number of dependents included in the application. For a single applicant, there is a non-refundable contribution of US$100,000 required. The contribution required increases where a spouse and dependents are involved. To qualify for citizenship of Dominica under the Real Estate Option under the Citizenship by Investment Program, an applicant must purchase authorized real estate to the minimum value of US$200,000 plus government fees which dependent on whether a spouse is included and number of dependents. For further info: http://cbiu.gov.dm/

Grenada – After a thirteen year hiatus, Grenada restarted its Citizenship by Investment programme in 2014. Application is by invitation only. Citizenship can be obtained by investment of a minimum of US$ 350,000 in an Approved Real Estate project plus fees and costs. The investment is subject to a minimum holding period of four (4) years. The second option is a non-refundable donation to the Island Transformation Fund which is not yet open. For further info: http://www.citizenship.gd/ 

St Lucia – St Lucia has indicated its programme will begin from January 2016 and details about the programme are not yet available.  It has stated that they expect significant economic benefits from the programme.

There is little data publicly available on the success of Caribbean CbI programmes. It would be interesting to know the number of applications received and approved on a yearly basis, the countries from which most applicants have come, and what have been the tangible benefits to the host countries. However, the IMF Staff Report  on St Kitts & Nevis noted the citizenship by investment programme in St. Kitts & Nevis, the region’s most successful CbI programme, is bearing fruit. It notes as follows:

Continued rapid inflows under the Citizenship-By Investment (CBI) program have led to a surge in construction activity, and supported a large increase in government and Sugar Industry Diversification Fund (SIDF) investments and spending, including on the People Employment Program (PEP). These factors, together with the ongoing recovery in tourist arrivals fueled rapid GDP growth of about 6 percent in 2013 and 2014.

Entangled in the notion of economic citizenship are a whole set of moral and legal issues. For one, the definition of ‘spouse’ in the legislation of these Caribbean countries still means either of a man or woman who are married to each other. In light of competition from other CbI programmes, will this definition eventually be amended to allow gay HNWIs and their spouses to take advantage of these programmes?

There are also regulatory and national security implications, including concerns about the potential use of second passports to facilitate money laundering, organised crime and terrorist activity. Of course, there are stringent screening methods, including requirements of police certificates of character. After all, all countries prefer to attract investors of good character who are self-sufficient, and willing to make a significant economic investment to the country in which they are seeking citizenship. Under the Antigua & Barbuda programme for example, a person can be deprived of citizenship in several instances e.g: fraud, conviction or failure to spend at least 35 days in Antigua & Barbuda during the period of five calendar years after his registration. There is the potential for attracting ‘undesirables’, even with a rigorous programme.

A few countries worldwide have found that the potential investment inflows were not worth the risk or they could not cope with the volume of applications. Canada cancelled its Immigrant by Investor Programme, while Hong Kong has suspended its CIES programme. Barbados has clearly stated that for policy reasons it will not go the route of economic citizenship. It currently offers the Special Entry and Reside Programme (SERP) for qualifying HNWIs and their spouses/dependants. In order to qualify as an HNWI in Barbados, the investor must have assets of at less than US$ 5 million. In spite of this, Eastern Caribbean CbI programmes not only have to compete amongst themselves but also face increased competition globally from potentially more attractive CbI and residency programmes worldwide.

Moreover, countries which offer economic citizenship programmes do open themselves to reputational risks, especially if other States have doubts about the rigor of their screening procedures. The US Treasury has accused persons obtaining St Kitts & Nevis passports for financial crime  and Canada imposed visa requirements on St. Kitts & Nevis nationals on November 22, 2014. The merits of these actions are debatable. However, these are the kinds of risks which countries operating these programmes face. Moreover, they may result in holders of those passports, including natural born citizens, being blacklisted or subject to more scrutiny by foreign jurisdictions, which may redound to more harm than good for that State and undermine the very programme itself.

In light of the foregoing, any Caribbean state considering a Citizenship by Investment programme must not only consider the possible investment inflows but weigh them carefully against the potential reputational, security and other risks, as well as the sustainability of such a programme.

Disclaimer: This article is NOT intended to provide investment advice and the Author is not accountable to anyone who relies on the information in this article. The information was taken from sources deemed to be accurate and correct at the time of publication. For further information on the respective CbI programmes stated above, please contact the relevant authorities in the respective countries.

Alicia Nicholls, B.Sc., M.Sc., LL.B., is an international trade and development consultant with a keen interest in sustainable development, public international law and trade.