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EUROPEAN UNION

‘Shady characters’: Will EU countries now put an end to ‘golden passport’ schemes?

Since Russia's invasion of Ukraine European countries are coming under pressure to end backdoor routes to EU citizenship which are deemed to be unfair and "shady". This week MEPs in the European parliament made their opinions on the scheme clear.

'Shady characters': Will EU countries now put an end to 'golden passport' schemes?
A picture taken on February 14 , 2022 shows national flags of European Union's member countries at the European Parliament in Strasbourg, France. (Photo by FREDERICK FLORIN / AFP)

The European Parliament on Wednesday called for the phasing out of citizenship by investment programmes operated by some EU countries and for EU-wide regulation on so-called ‘golden visas’ offered to wealthy individuals. 

Such schemes pose a threat to European security and democracy as they can be used “as a backdoor” to the EU for “dirty money”, MEPs argued during the debate.

Members of the European Parliament have been calling for the termination of ‘golden passport’ schemes since 2014, but the issue has become more prominent in the context of Russia’s invasion of Ukraine, because of the number of Russian citizens acquiring rights in EU countries through this route in recent years. 

The resolution passed by the parliament with 595 votes to 12 and 74 abstentions says golden passports should be phased out fully. 

The background…

The market of golden passports and visas developed rapidly since the 2008 financial crisis, as countries have sought to incentivise foreign investment

Three EU countries – Bulgaria, Cyprus and Malta – offer citizenship in exchange for a financial investment. Currently, however, Bulgaria is considering a government proposal to end the scheme, Cyprus is only processing applications submitted before November 2020, and Malta has just suspended the processing of applications from Russian citizens.

In addition, 12 EU countries (Cyprus, Estonia, Greece, Spain, Hungary, Ireland, Italy, Latvia, Luxembourg, Malta, the Netherlands and Portugal) grant residence permits on the basis of investments, the so-called ‘golden visas’. 

Each national scheme has different rules regarding minimum investment requirements, which range between €60,000 in Latvia and €1.25 million in the Netherlands. These can be through property ownership or contributions to public projects. 

A European parliament study estimates that, from 2011 to 2019, the total investment associated to these schemes has been of €21.4 billion. 42,180 citizenship or residence applications have been approved under such programmes and more than 132,000 people have benefited, including family members of applicants. 

Dutch MEP Sophie IN’t Veld, the European parliament rapporteur, said that “when governments are selling passports or visas, what is actually bringing in the cash is… the little blue and yellow logo on them” – in other words, the EU flag.

‘They are designed for shady business, shady money and shady characters’

Getting citizenship of one EU country of course means the freedom to live and work in all 27 member states, so one country’s passport policy affects everyone in the Bloc. 

Benefits include the right to move to other EU countries, exercise economic activities in the single market, vote and stand as candidates in local and European elections, receive consular protection outside the EU and travel visa-free in many other states around the world. 

Residence also ensures economic rights and the possibility to be joined by family members. 

All this bypassing standard citizenship requirements, which typically involve a period of residence and a “genuine connection” to the country, such as family links, or integration conditions, such as speaking the language and knowing the culture. 

“Passports and golden visa schemes are not about attracting any meaningful legitimate investment in the real economy of Europe. They are designed for shady business, shady money and shady characters,” Sophie IN’t Veld said during the debate.

A picture taken on March 8, 2022 shows European Union’s and Ukrainian flags fluttering outside the European Parliament in Strasbourg, eastern France. (Photo by Frederick FLORIN / AFP)

Security risks

In an earlier analysis, the European Commission found that such programmes pose risks regarding security, money laundering, tax evasion and corruption due to weak vetting procedures. 

For instance, EU countries offering citizenship by investment usually request clean criminal records from applicants or their country of origin, which are difficult to verify especially in case of a conflict. But Malta can waive the requirement “where the competent authority considers such a certificate impossible to obtain”. 

Cyprus, which is not part of the border-free Schengen area, is not connected to the Schengen Information System that allows member countries to share security information.

In addition, EU member states consult on applications for short-stay visas issued to citizens from certain third countries, but they do not consult for citizenship by investment programmes and do not inform each other of rejected applications, the Commission noted.

Media investigations also highlighted how the schemes have been linked to corruption and crime. Journalist Daphne Caruana Galizia was murdered in Malta in 2017 following her investigations into corrupt politicians and money laundering through the citizenship by investment programme, MEPs reminded. 

Brexit-backing billionaire Christopher Chandler, born in New Zealand, was reported to have acquired EU citizenship using the Maltese scheme in 2016.

In 2021 Cyprus revoked the citizenship of 39 foreign investors and 6 members of their families, after it emerged that insufficient background checks had been carried out for over half of the 6,779 passports issued under the scheme between 2007 and 2020. 

‘It is not fair to Ukrainians at this point’

The parliament said on Wednesday that these schemes are “discriminatory and lack fairness” as they contrast “dramatically with the obstacles to seeking international protection, legally migrating or seeking naturalisation through conventional channels”. 

MEPs also called on the European Commission to propose, in 2022, EU-wide regulation on residence by investment schemes. These should include stricter background checks on applicants, their family members and the sources of their funds, minimum residence requirements, investments that truly benefit the economy of the country, and proper scrutiny of intermediaries helping people acquiring rights trough these channels.

“It should not be enough to just buy a house or a villa. The investment must be in the real economy and in line with the climate and social objectives of the Union,” said Sophie IN’t Veld. 

It is “very difficult for small countries whose revenue streams depend on this… I understand it is painful but it is not fair to European citizens, and Ukrainians at this point,” the rapporteur said.

Despite the vote in the European parliament EU powers on this issue remain limited because the rules on the acquisition of citizenship are defined at national level rather than in Brussels. 

The European Commission, however, has already launched a legal action at the European Court of Justice against Cyprus and Malta because “the granting of EU citizenship for pre-determined payments or investments without any genuine link with the member states concerned undermines the essence of EU citizenship”.

What about Russian nationals obtaining golden status?

Russian nationals account for 45 percent of those who have acquired citizenship in EU countries using this route, followed by Chinese nationals and people from the Middle East (15 percent for each group). Chinese investors account for over half of residence permits issued in this way.  

In consideration of Russia’s invasion of Ukraine, the European Parliament also appealed EU countries to stop operating citizenship and residency by investment schemes for Russian nationals with immediate effect and to re-assess whether those who benefited in the past have links to the Putin regime. 

In the first round of sanctions against Russia, the leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada and the United States committed to “limit the sale of citizenship… that let wealthy Russians connected to the Russian government become citizens… of our countries and gain access to our financial systems.”

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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TRAVEL NEWS

EXPLAINED: Which Schengen area countries have border controls in place and why?

Borders within Europe's Schengen area are meant to be open but several countries have checks in place but are they legal and will they be forced to scrap them? Claudia Delpero explains the history and what's at stake.

EXPLAINED: Which Schengen area countries have border controls in place and why?

The European Court of Justice has recently said that checks introduced by Austria at the borders with Hungary and Slovenia during the refugee crisis of 2015 may not be compatible with EU law.

Austria has broken the rules of the Schengen area, where people can travel freely, by extending temporary controls beyond 6 months without a new “serious threat”.

But Austria is not the only European country having restored internal border checks for more than six months.

Which countries have controls in place and what does the EU Court decision mean for them? 

When can EU countries re-introduce border checks?

The Schengen area, taken from the name of the Luxembourgish town where the convention abolishing EU internal border controls was signed, includes 26 states: the EU countries except for Ireland, Bulgaria, Cyprus, Croatia and Romania, plus Iceland, Norway, Lichtenstein and Switzerland, which are not EU members.

The Schengen Borders Code sets the rules on when border controls are permitted. It says that checks can be temporarily restored where there is a “serious threat to public policy or internal security”, from the organisation of a major sport event to a terrorist attack such as those seen in Paris in November 2015.

However, these checks should be a “last resort” measure, should be limited to the period “strictly necessary” to respond to the threat and not last more than 6 months.

In exceptional circumstances, if the functioning of the entire Schengen area is at risk, EU governments can recommend that one or more countries reintroduce internal border controls for a maximum of two years. The state concerned can then continue to impose checks for another six months if a new threat emerges. 

Which countries keep border checks in place?

Countries reintroducing border controls have to notify the European Commission and other member states providing a reason for their decision. 

Based on the list of notifications, these countries currently have controls in place at least at some of their borders: 

Norway – until 11 November 2022 at ferry connections with Denmark, Germany and Sweden. These measures have been in place since 2015 due to terrorist threats or the arrival of people seeking international protection and have sometimes extended to all borders.

Austria – until November 2022 11th, since 2015, at land borders with Hungary and with Slovenia due to risks related to terrorism and organised crime and “the situation at the external EU borders”. 

Germany – until November 11th 2022, since November 12th 2021, at the land border with Austria “due to the situation at the external EU borders”.

Sweden – until November 11th 2022, since 2017, can concern all borders due to terrorist and public security threats and “shortcomings” at the EU external borders. 

Denmark – until November 11th 2022, since 2016, can concern all internal borders due to terrorist and organised criminality threats or migration.

France – until October 31st 2022 since 2015, due to terrorist threats and other events, including, since 2020, the Covid-19 pandemic.

Estonia – until May 21st 2022, from April 22nd 2022, at the border with Latvia “to facilitate the entry and reception of people arriving from Ukraine”.

Norway, Austria, Germany and France also said they are operating checks on non-EU citizens. 

Can Schengen rules survive?

Despite the exceptional nature of these measures, there have been continuous disruptions to the free movement of people in the Schengen area in the past 15 years. 

Since 2006, there have been 332 notifications of border controls among Schengen countries, with increasing frequency from 2015. In addition, 17 countries unilaterally restored border controls at the start of the pandemic. 

In December 2021, the Commission proposed to reform the system to ensure that border controls remain an exception rather than becoming the norm. 

According to the proposals, countries should consider alternatives to border controls, such as police cooperation and targeted checks in border regions. 

When controls are restored, governments should take measures to limit their impacts on border areas, especially on the almost 1.7 million people who live in a Schengen state but work in another, and on the internal market, especially guaranteeing the transit of “essential” goods. 

Countries could also conclude bilateral agreements among themselves for the readmission of people crossing frontiers irregularly, the Commission suggested. 

If border controls have been in place for 6 months, any notification on their extension should include a risk assessment, and if restrictions are in place for 18 months, the Commission will have to evaluate their necessity. Temporary border controls should not exceed 2 years “unless for very specific circumstances,” the Commission added. 

At a press conference on April 27th, European Commissioner for Home Affairs Ylva Johansson said the EU Court ruling about Austria is in line with these proposals.

“What the court says is that member states have to comply with the time limit that is in the current legislation. Of course we can propose another time limit in the legislation… and the court also says that it’s necessary for member states, if they would like to prolong [the border controls] to really do the risk assessment on whether it’s really necessary… and that’s exactly what’s in our proposal on the Schengen Border Code.”

Criticism from organisations representing migrants

It is now for the European Parliament and EU Council to discuss and adopt the new rules.

A group of migration organisations, including Caritas Europe, the Danish Refugee Council, Oxfam International and the Platform for International Cooperation on Undocumented Migrants (PICUM) have raised concerns and called on the EU institutions to modify the Commission proposals.

In particular, they said, the “discretionary nature” of controls in border regions risk to “disproportionately target racialised communities” and “practically legitimise ethnic and racial profiling and expose people to institutional and police abuse.”

Research from the EU Fundamental Rights Agency in 2021, the groups noted, shows that people from an ‘ethnic minority, Muslim, or not heterosexual’ are disproportionately affected by police stops.

The organisations also criticize the definition of people crossing borders irregularly as a threat and a new procedure to “transfer people apprehended… in the vicinity of the border area” to the authorities of the country where it is assumed they came from without any individual assessment. 

The article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK.

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