Citizenship by investment and the need to establish a genuine link with the new country - The

Nottebohm case (International Court of Justice 1955)

Marco Mazzeschi

mm@mazzeschi.it

Keywords: citizenship by investment – nationality – genuine link – Nottebohm case -

Summary: Several States are offering citizenship to individuals willing to invest, in various forms, in the
country economy. The focus of most programs is however on the amount of the investment, creation of jobs,
etc. but in many cases applicants are not required to establish any real bonds with the country, such as
maintaining a permanent residency or other forms of stable allegiance. It is a well established principle in
international law that each State shall determine under its own law who are its nationals.i However, the
conferring state may not require other states to automatically accept its designation unless it has acted in
conformity with international law and practice. The most famous precedent in this field was set by the
International Court of Justice in 1955 in the Nottebohm Caseii. The Court ruled that in order for the State to
grant diplomatic protection there must be a “genuine link” between the individual with the State. Preference
must be given to the real and effective nationality that is the one based on stronger factual ties between the
person concerned and one of the States whose nationality is involved, such as: the habitual residence of the
individual concerned is an important factor, but there are other factors such as the centre of his interests,
his family ties, his participation in public life, attachment shown by him for a given country and inculcated in
his children.

________________________________________________________________________________

Introduction

There is an increasing interested by many individuals to acquire a second citizenship in some cases for tax
reasons or to have an escape route from politically sensitive countries.

Several countries have implemented provisions that grant citizenship on the basis of an investment and/or a
direct contribution to the state. The acquisition of citizenship of a State in the European Union is very
attractive because EU citizenship gives the right of establishment in all 28 EU countries. For this reason,
citizenship-by-investment programs developed by some EU countries have given rise to some controversies
and discussion within the European bodies.

The EU Parliament on January 16, 2014 approved a resolutioniii requesting the Commission to assess the
various citizenship schemes in the light of European values and the letter and spirit of EU legislation and

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practice. The Parliament asked the Member States that have adopted national schemes which allow the
direct or indirect sale of EU citizenship to third-country nationals to bring them into line with the EU’s values.

Amongst other principles, the resolution: (i) acknowledges that matters of residency and citizenship are the
competence of the Member States; (ii) calls on the Member States, nevertheless, to be careful when
exercising their competences in this area and to take possible side-effects into account; (ii) notes that EU
citizenship implies the holding of a stake in the Union and depends on a person’s ties with Europe and the
Member States or on personal ties with EU citizens and stresses that EU citizenship should never become a
tradable commodity.

As a consequence, Malta (that was implementing one of the most controversial schemes) agreed to amend
its Individual Investor Programme to include genuine links to Malta through the introduction of an effective
residence status in Malta prior to the possibility to acquire Maltese naturalisation. Malta also agreed that
no certificate of naturalisation will be issued unless the applicant provides proof that he/she has resided in
Malta for a period of at least 12 months immediately preceding the day of issuing of the certificate of
naturalization.iv

Citizenship by investment programmes

In Austria, citizenship can be granted to individuals who invest or bring other economic benefit to the
country. Citizenship is not granted on the basis of investment alone but the applicant must also make an
extraordinary contribution such as bringing new technologies or generate a substantial number of new jobs.

In Malta citizenship is granted to individuals who maintain resident status in Malta for a period of twelve
months immediately preceding the day of issuing of the certificate of naturalization. The applicant must make
a significant contribution to the National Development and Social Fund established by the Government. The
minimum contribution requested to the main applicant is a sum of EUR 650,000.

In Cyprus the Citizenship-by-Investment program have residence requirement of at least one year and
provided for various forms of investment, including a minimum investment of EUR 2 million with the Treasury
of the Republic or a direct investment in the country of at least EUR 5 million or a bank deposit of at least
EUR 5 million.

Outside the EU, Dominica Republic's citizenship program requires making an economic contribution to the
country, that for the main applicant is non-refundable investment of USD 100,000

Another well publicized Citizenship Program is established by St. Kitts and Nevis. Also this program requires
applicants to make an economic contribution of at least USD 400,000 to the country or alternatively making
a contribution to the Sugar Industry Diversification Foundation starting from USD 250,000.

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State’ exclusive competence on granting citizenship

It is a well established principle in international law that each State shall determine under its own law who
are its nationals. The principle is also stated by Article 1 of The Hague Convention of 1930 on Certain
Questions relating to the Conflict of Nationality Laws.v

The principle has been confirmed by several international courts, for example the European Court of Justice
in the Judgement C-369/90 of July 7, 1992 (Micheletti) stated that “Under international law, it is for each
Member State, having due regard to Community law, to lay down the conditions for the acquisition and loss
of nationality.”vi But as pointed out by the Court , the national rules “shall be accepted by other States in so
far as it is consistent with applicable international conventions, customary international law and the principles
of law generally recognised with regard to nationality.vii

But to what extent a citizenship acquired in compliance with national laws, can be legally disputed at
international level on the grounds that the individual cannot show to have sufficiently strong bonds with the
State which has granted citizenship?

The Nottebohm Case: the link of nationality must be genuine

The most quoted case at international level regarding the issue of citizenship and diplomatic protection is
the Nottebohm case, ruled by the International Court of Justice in 1955viii. Nottebohm was a German citizen
who lived in Guatemala from 1905 until 1943 and never became a citizen of Guatemala. In 1939, Nottebohm
applied became a citizen of Liechtenstein. He then returned to Guatemala on his Liechtenstein passport and
informed the local government of his change of nationality. During the 2nd World War he tried to return to
Guatemala but was refused entry as an enemy alien since the Guatemalan authorities did not recognise his
Liechtenstein naturalization and regarded him as still German. He was later extradited to the United States,
where he was held at an internment camp until the end of the war. All his possessions in Guatemala were
confiscated.

The Government of Liechtenstein granted Nottebohm protection against unjust treatment by the
government of Guatemala and petitioned the International Court of Justice. The government of Guatemala
argued that Nottebohm did not gain Liechtenstein citizenship for the purposes of international law.

In this case , the Court stated:

“International arbitrators have . . . given their preference to the real and effective nationality, that which
accorded with the facts, that based on stronger factual ties between the person concerned and one of the
States whose nationality is involved. Different factors are taken into consideration, and their importance will

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vary from one case to the next: the habitual residence of the individual concerned is an important factor, but
there are other factors such as the centre of his interests, his family ties, his participation in public life,
attachment shown by him for a given country and inculcated in his children, etc.”

The Court rejected Liechtenstein’s claim to grant diplomatic protection to Mr. Nottebohm because it did not
assess a genuine link between Mr. Nottebohm and Liechtenstein. In fact:

“he had always retained his connections with members of his family who had remained in Germany and he
had always had business connections with that country. ………………….. He had been settled in Guatemala for
34 years. He had carried on his activities there. It was the main seat of his interests. He returned there shortly
after his naturalization, and it remained the centre of his interests and of his business activities. He stayed
there until his removal as a result of war measures in 1943. ………………… In contrast, his actual connections
with Liechtenstein were extremely tenous. No settle abode, no prolonged residence in that country at the time
of his application for naturalization: the application indicates that he was paying a visit there and confirms
the transient character of this visit by its request that the naturalization proceedings should be initiated and
concluded without delay. No intention of settling there was shown at that time or realized in the ensuing
weeks, months or years – on the contrary, he returned to Guatemala very shortly after his naturalization and
showed every intention of remaining there.”ix

The Nottebohm principle was taken into account also by Iran-US Claims Tribunal in a decision of 1984x, in
which the Tribunal stated:

“the relevant rule of international law which the Tribunal may take into account for purposes of interpretation,
as directed by Article 31, paragraph 3(c), of the Vienna Convention, is the rule that flows from the dictum of
Nottebohm, the rule of real and effective nationality, and the search for "stronger factual ties between the
person concerned and one of the States whose nationality is involved”.

The Iran/US Tribunal quoted as relevant precedent also the Merge Case decided by the Italian-United States
Conciliation Commission set up by application of the peace Treaty of 1947. The Commission set forth the
principle ". . . based on the sovereign equality of States, which excludes diplomatic protection in the case of
dual nationality, must yield before the principle of effective nationality whenever such nationality is that of
the claiming State."xi

The Tribunal outlined in its decision that support for the principles applied in these cases is shared by some
of the most competent international lawyers .xii

Conclusions

Individuals seeking to obtain a second citizenship (and passport) must carefully evaluate all aspects of their
decision. As stated by the International Court of Justice in the Nottebohm case, “naturalization is not a matter
to be taken lightly. It involves his breaking of a bond of allegiance and his establishment of a new bond of

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allegiance. In order to appraise its international effect, it is impossible to disregard the circumstance in which
it was conferred, the real and effective, and merely the verbal preference, of the individual seeking it.”

Second passport seekers are alerted: without establishing a genuine, real and effective bond of attachment
with the State which grants the second nationality (especially when the acquisition of a second citizenship is
mostly driven by fiscal reasons) their costly shopping can result in an empty bag.

i
Article 1 of The Hague Convention of 1930 on Certain Questions relating to the Conflict of Nationality Laws
ii
Nottebohm Case (Liechtenstein v. Guatemala); Second Phase, International Court of Justice (ICJ), 6 April
1955, I.C.J. Reports 1955, p. 4

iii
European Parliament resolution of 16 January 2014 on EU citizenship for sale (2013/2995(RSP))

iv
European Commission - MEMO/14/70 29/01/2014

v
It is for each State to determine under its own law who are its nationals. This law shall be recognised by
other States in so far as it is consistent with international conventions, international custom, and the
principles of law generally recognised with regard to nationality

vi
ECJ Case C-369/90 Mario Vicente Micheletti and others v Delegación del Gobierno en Cantabria [1992] ECR
I-04239. See also, ECJ Case C-200/02 Zhu & Chen v Secretary of State for the Home Department [2004] ECR
I-9925; ECJ, C-192/99 The Queen v Secretary of State for the Home Department, ex parte: Manjit Kaur [2001];
ECJ, Case C-135/08 Janko Rottmann v. Freistaat Bayern [2010];

vii
Art. 3 of the European Convention on Nationality of 1997

viii
Cit.

ix
See also International Law Association - RESOLUTION No. 5/2006 (DIPLOMATIC PROTECTION OF PERSONS
AND PROPERTY - Toronto, Canada, 4-8 June 2006): “The link of nationality to the claimant state must be
genuine and effective, and in case of concurrent nationalities, predominant
x
Case No A/18, IRAN-US Tribunal, Decision, April 6,1984;

xi
Merge Case (United States v. Italy) 14 R.I.A.A. 236, 247 (1955). The Commission then applied this same
analysis in numerous other similar cases involving dual nationals. The Franco-Italian Conciliation Commission
also decided several claims of dual nationals according to the "link theory". See Rambaldi Claim (France v.
Italy) 13 R.I.A.A. 786 (1957); Menghi Claim (France v. Italy) 13 R.I.A.A. 801 (1958); Lombroso Claim (France v.
Italy) 13 R.I.A.A. 804 (1958).

xii
.:Basdevant wrote that effective nationality must prevail, because nationality is the juridical translation of
a social fact. n12 Maury in "L'Arret Nottebohm et la Condition de Nationalite Effective," 23 Rabels Zeitschift
515 (1958), expressed his doubts about the alleged rule forbidding a State to act against another State in
cases of dual nationality, and concluded that the Nottebohm decision has a general scope. In "Cours General
de Droit International Public", 136 Recueil des Cours 162-63 (1972), Paul de Visscher wrote: La doctrine du
lien effectif ou du rattachement dominant a ete regulierement appliquee au cours du XIXe siecle mais, parce
qu'elle le fut generalement pour rejeter des demandes, la doctrine, constatant par ailleurs que les Etats eux-
memes repugnaient a accorder leur protection a des nationaux qui possedaient en meme temps la
nationalite de l'Etat fautif, en est venue a enseigner qu'en "regle generale" les demandes formees au profit

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de doubles nationaux sont irrecevables . . . .[L]'idee s'est implantee que toute demande de protection
introduite au profit d'un double national devait etre declaree irrecevable. Cette regle . . . que l'Institut de
droit international a cru devoir reaffirmer en 1965, n'est pas l'expression corrects du droit en vigueur . .en
prononcant l'arret Nottebohm, la Cour internationale a bel et bien entendu affirmer un principe general . . .
.De Visscher concluded that the decision in the Merge Case ". . . parait resumer assez exactement l'etat du
droit applicable . . . ." Id. at 163. n12 Basdevant, "Conflits de Nationalites dans les Arbitrages Venezueliens
de 1903-1905", Rev. de Droit Intern. Prive 41, 60-61 (1909).Recent legal literature has suggested that the
"actually dominant theory", Rousseau, Droit International Public, Precis Dalloz, 112 (1976), is, at least before
international tribunals, the effective nationality theory. See Batiffol et Lagarde, I Droit International Prive No.
82 (7th ed. 1981); Siorat, Juris-Classeur Droit International, La Protection Diplomatique, Fasc. 250-B, No. 20
(1965); Reuter, Droit International Public, Themis, 236 (5th ed. 1976); [1961] 2 Y.B. Int'l Law Comm'n 46, 49,
U.N. Doc. A/CN.4/134, Add. 1; 1977 Digest of United States Practice in International Law 693-94; Rode, "Dual
Nationals and the Doctrine of Dominant Nationality", 53 Am. J. Int'l L. 139 (1959); Messia, "La protection
diplomatique en cas de double nationalite," 1960 Hommages Basdevant 556; Donner, The Regulation of
Nationality in International Law 95 (1983). Brownlie pointed to the need for a predominant link to be proved
and states that where a choice can be made, "then the principle of equality is not necessarily infringed,
although it might be if tenuous links acknowledged by a municipal law were allowed to render the claim
inadmissible." See Brownlie, Principles of Public International Law 399 (3rd ed., 1979). Leigh asserted his
belief that "any attempt to reconcile the two is likely to result in a victory for the effectiveness theory." See
Leigh, "Nationality and Diplomatic Protection", 20 The International and Comparative Law Quarterly 453, 475
(1971).

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