In Fairness to Nottebohm: Nationality in an Age of Globalization

Abstract

The Nottebohm judgment from the International Court of Justice (ICJ) has recently come under attack in the context of the European Commission's position on “golden passports” programmes. The judgment has long received intense criticism from a consensus of scholars. This article challenges the conventional wisdom of Nottebohm. The ICJ did not, as critics argue, depart from international law on nationality, nor did it seek to create an international rule based on a “genuine link” requirement. A closer look at the majority's reasoning reveals that the ICJ's conception of nationality as something more than a mere formal classification was prompted by problems that can arise precisely from the phenomenon of globalization, including the instrumentalization of nationality. It further shows that the “substance-over-form” approach adopted by Nottebohm may, or already does, operate in more contemporary contexts.

The Nottebohm judgment¹ has seen renewed attention in recent discussions on the controversial Citizenship by Investment (CBI) schemes, also known as “golden passports”. These schemes allow wealthy individuals to obtain citizenship in a host country in exchange for a financial contribution, which may include the purchase of government bonds, real estate, or a donation. They offer faster and smoother gateways to acquire citizenship compared to more traditional naturalization methods, which often include conditions such as residency periods, local language knowledge, and civic tests. The global market for such schemes has increased over time and are in operation in more than sixty countries around the world.²

The commodification of citizenship triggered a backlash in the European Union (EU). Since 2014, the European Parliament and the European Commission have called on Member States to cancel their CBI schemes. Until recently, three Member States (Bulgaria, Cyprus, and Malta) had CBI programmes, enabling third-country nationals to buy EU citizenship. Following pressure from the Commission, Bulgaria and Cyprus terminated their regimes on 5 April 2022 and 1 November 2020, respectively. Thus, Malta is currently the only Member State operating a CBI regime. In September 2022, after having failed to heed its calls, the Commission referred Malta to the Court of Justice of the European Union (CJEU), claiming that its programme is incompatible with EU law.

The pushback from EU institutions against CBI schemes is driven by concerns that these schemes create side effects as regards security, money laundering, tax evasion, and corruption. Since the nationality of Member States is a gateway to EU citizenship and associated rights, such as free movement across the bloc, CBI schemes have implications for other Member States and the EU as a whole. In framing its position against CBI regimes, the European Commission relied on the Nottebohm judgment and argued that “each Member State needs to ensure that nationality is not awarded absent any genuine link to the country or its citizens”.³ This reliance on Nottebohm has triggered intense criticism, repudiating the judgment itself and questioning its relevance within the framework of EU law.

The predominant view among commentators is that Nottebohm is “bad law”.⁴ At the time the International Court of Justice (ICJ) decided the case, Nottebohm only held the nationality of the claimant State, Liechtenstein. What tends to go unnoticed is that Nottebohm acquired Liechtenstein nationality with the sole purpose of obtaining diplomatic protection against Guatemala. The ICJ held that Guatemala was entitled to refuse to recognize Nottebohm's nationality given “the absence of a real bond of attachment between Nottebohm and Liechtenstein”.⁵ The ICJ determined this “bond of attachment”, commonly referred to as the “genuine link”, by considering, among other factors, Nottebohm's habitual residence, the centre of his interests, and his family ties.⁶ The Court thus evinced a conception of nationality that goes beyond the formal legal classification of this status.

Critics argue that, in so holding, the ICJ wrongly drew from a rule of customary international law that deals with diplomatic protection claims by dual nationals: the rule of “real and effective” nationality. From an EU law perspective, scholars assert that requiring Member States to grant their nationality on the basis of a “genuine link” constitutes a direct incursion by EU institutions into a domain that falls within the exclusive competence of Member States.⁷ There is also the argument that the CJEU has, at any rate, rejected Nottebohm, holding that Member States should not impose additional conditions for the recognition of the nationality of other Member States.

This article challenges these views in an attempt to do justice to the Nottebohm decision and to show its overlooked growing relevance to our globalized world. Section I will take on the critics’ legal position. It will show that the ICJ took, and rightly so, a functional approach to the application of an accepted rule of international law to tackle problems that can arise precisely from the dynamics of globalization and human mobility. One of these problems relates to the liberal international legal framework governing nationality, which does not regulate situations where migrants, like Nottebohm, acquire a citizenship of convenience to evade a rule of law and to seek advantages not available to other citizens. In this respect, Nottebohm can also be read as a decision that sought to prevent an abusive manipulation of the right of states to confer nationality.

The remaining sections of this article will argue that, if the Nottebohm judgment does in fact form good law, there exists no reason to confine the scope of its operation. The rationale contained therein may operate as an appropriate and effective regulatory instrument in a variety of contemporary contexts. Nottebohm can offer equitable means to address the effects of global mobility in other areas of law, including EU law, international investment law, and international human rights law. Section II will argue that Nottebohm's “substance-over-form” approach can serve as a tool to address the concerns raised by CBI regimes. It will also show that the CJEU has, in fact, construed an understanding of nationality under EU law that reflects Nottebohm's conception of nationality, with a view to protect meaningful bonds of attachment between the individual and the State. Section III will show that Nottebohm may operate in international investment law as a norm of exclusion against the manipulation of nationality by investors with the purpose of gaining access to investment treaties. Section IV will examine how the Nottebohm-style determination of an effective nationality can work positively as a ground for inclusion in the field of human rights law protecting against nationality under-reach in immigration cases. Section V concludes.

I. Nottebohm is not Bad Law

A. Revisiting the Facts and the ICJ's Mandate

Friedrich Nottebohm was originally a German national born in Hamburg. At an early age, Nottebohm crossed the Atlantic to join his brothers’ business, Nottebohm Hermanos, a banking and trading house that would soon become the second-largest producer of coffee in Guatemala.⁸ For more than thirty years, Nottebohm spent most of his time in Guatemala, only occasionally returning to Germany for business.⁹ As Casey explains “[l]ike countless transatlantic migrants in the nineteenth and early twentieth centuries, Nottebohm never obtained Guatemalan nationality, but rather retained his status as a German national”.¹⁰ This is not surprising since, at the time and still today, foreign investors had more protection than nationals of the host country. If the host country expropriated or confiscated their property, “they had a further remedy: they could run to their nearest consul and ask for intervention and protection, a privilege that their naturalized and native neighbors certainly did not have”.¹¹

Nottebohm kept his German nationality until it became a liability. In October 1939, after Germany invaded Poland, Nottebohm travelled to Liechtenstein with the sole purpose of obtaining the Principality's nationality.¹² Having experienced the First World War as an enemy alien in Guatemala, Nottebohm wanted to avoid the consequences that might ensue for him or his business given his German nationality.¹³ On 9 October 1939, he applied for naturalization in Liechtenstein, which was granted in exchange for the payment of 40,500 Swiss Francs in fees and 30,000 as a deposit.¹⁴ Thus, as Shachar aptly observes, “Nottebohm, the main precedential case in this field, was decided by the International Court of Justice following an early exemplar of citizenship for sale.”¹⁵

Upon acquiring his Liechtenstein passport, Nottebohm lost his German nationality by virtue of German law and returned to Guatemala to continue his business activities.¹⁶ He barely maintained links with Liechtenstein other than holding his new passport. It is critical to emphasize that Nottebohm “changed” his nationality to that of Liechtenstein to become the subject of a neutral power and a new foreign subject in Guatemala. This would allow him to evade probable consequences under the international law of war, such as becoming an enemy alien, and to eventually seek diplomatic protection.¹⁷ Indeed, the State's right to espouse a diplomatic protection claim derives from the bond of nationality between the espousing State and the injured individual.¹⁸ Nottebohm thus acquired Liechtenstein nationality as a matter of convenience.

In 1943, after Guatemala joined the Allies in the war, Nottebohm was deported to the United States as part of a programme for the detention of contributors to enemies.¹⁹ By the time of his release, Guatemala had seized most of his assets and he asked Liechtenstein, his more recent and only State of nationality, to exercise diplomatic protection on his behalf.²⁰ Having failed to resolve the situation amicably with Guatemala, Liechtenstein brought proceedings on behalf of Nottebohm before the ICJ, claiming reparations for his detention and for the expropriation of his property.²¹

Guatemala asked the Court to dismiss the claim on different grounds, including that Nottebohm had not “properly acquired Liechtenstein nationality in accordance with the law of the Principality”,²² and that:

Mr. Nottebohm appears to have solicited Liechtenstein nationality fraudulently, that is to say, with the sole object of acquiring the status of a neutral national before returning to Guatemala, and without any genuine intention to establish a durable link, excluding German nationality, between the Principality and himself.²³

The ICJ decided not to rule on the validity of Nottebohm's naturalization. It confirmed the widely recognized rule of international law found in the Hague Convention on Certain Questions Relating to the Conflicts of Nationality Laws (1930 Hague Convention), which provides that “[i]t is for each State to determine under its own law who are its nationals”.²⁴ The ICJ was, in other words, not concerned with the conditions set by Liechtenstein for conferring its nationality and respected Liechtenstein's sovereign right to regulate the matter.²⁵

The ICJ then observed that the 1930 Hague Convention also stipulates that the attribution of nationality under domestic law “shall be recognized by other States insofar as it is consistent with international conventions, international custom, and the principles of law generally recognized with regard to nationality”.²⁶ The International Law Commission (ILC) Draft Articles on Diplomatic Protection confirm that “[a]lthough a State has the right to decide who are its nationals, this right is not absolute”.²⁷ Accordingly, to use the words of Liechtenstein's counsel, “the essential question” for the ICJ was “whether Mr. Nottebohm, having acquired the nationality of Liechtenstein, that acquisition of nationality is one which must be recognized by other States”.²⁸ More concretely, “whether such an act of granting nationality by Liechtenstein directly entails an obligation on the part of Guatemala to recognize its effect, namely, Liechtenstein's right to exercise its protection”.²⁹

B. “Real and Effective” Nationality and the Genuine Link Theory

To decide this question, the ICJ resorted to decisions by courts and tribunals that were faced with “the same issue”.³⁰ In the much-quoted extract that is often labelled the “genuine link” requirement, the ICJ observed that:

According to the practice of States, to arbitral and judicial decisions, and to the opinions of writers, nationality is a legal bond having as its basis a social fact of attachment, a genuine connection of existence, interests, and sentiments, together with the existence of reciprocal rights and duties. It may be said to constitute the juridical expression of the fact that the individual upon whom it is conferred, either directly by the law or as the result of an act of the authorities, is in fact more closely connected with the population of the State conferring nationality than with that of any other State.³¹

And in another oft-quoted passage, the Court wrote:

Naturalization is not a matter to be taken lightly. To seek and to obtain it is not something that happens frequently in the life of a human being. It involves his breaking of a bond of allegiance and his establishment of a new bond of allegiance. It may have far-reaching consequences and involve profound changes in the destiny of the individual who obtains it.³²

The ICJ noted that this substantive understanding of nationality, which accords importance to the factual realities of the individual rather than the abstract status of nationality, had been applied in “cases of dual nationality, where the question [also] arose with regard to the exercise of protection”.³³ In these cases, the ICJ continued, tribunals had “given 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”.³⁴

The rule of “real and effective” nationality has been widely recognized as a rule of customary international law.³⁵ It is typically applied in cases where the injured individual has the nationality of both the espousing and respondent States. For the claim to be admissible, the injured individual's “factual ties” with the claimant State must go beyond the mere possession of a passport. The ICJ decided to apply this rule and listed the relevant factors to determine whether Nottebohm's nationality was “real and effective” as follows:

[T]he 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.³⁶

The ICJ found that Nottebohm's “actual connections with Liechtenstein were extremely tenuous” and thus his nationality was not “real and effective”.³⁷ Therefore, it concluded that Guatemala was under no obligation to recognize his Liechtenstein nationality for the purposes of diplomatic protection. For the Court, therefore, a mere formal relationship between an individual and a State could not bestow upon the State the right to exercise diplomatic protection on his behalf. This finding has long met widespread criticism. Scholars commonly argue that the ICJ's reasoning is “wrong as a matter of international law”³⁸ or “discontinuous with pre-existing law”.³⁹ The predominant view is that the ICJ wrongly drew from a rule of customary international law that only applies to dual nationals:

[T]he theory [of “genuine link”] reflected a novel extrapolation of a principle [of “real and effective” nationality] drawn from certain late nineteenth- and early twentieth-century arbitrations that had answered a distinct question: whether dual nationals could avail themselves of diplomatic protection against one of their own states of nationality.⁴⁰

I respectfully disagree with this view. The ICJ's sole mandate was to determine “whether full international effect was to be attributed to the nationality invoked”.⁴¹ The very same question was raised before the “international arbitrators” who decided cases of diplomatic protection involving dual nationals.⁴² These arbitrators did not have to decide, “strictly speaking”, on whether diplomatic protection could be exercised on behalf of a dual national but, rather, whether the claimant State could rely on the dual national holding its nationality against the respondent State.⁴³ They answered this question by applying the rule of “real and effective” nationality and found the claim inadmissible where, as in Nottebohm, the injured national barely maintained factual connections with the claimant State. Therefore, the ICJ took a functional approach to the application of an accepted rule of international law, which does not make the decision wrong as a matter of law. Crawford agreed that “the principle of effectiveness is not restricted to cases of dual nationality. If the principle exists, it applies to the Nottebohm permutation also.”⁴⁴ Accordingly, the ICJ did not, nor did it intend to, create a “genuine link” requirement as a general condition for the international recognition of nationality, let alone as a condition for the attribution of nationality.

Critics also assert that the judgment is morally problematic. The argument goes that, by allowing Guatemala to refuse the recognition of Nottebohm's nationality on the ground that it was not “real and effective”, the ICJ “prevented justice from being done to Nottebohm”.⁴⁵ He was, in this respect, rendered stateless for the purpose of diplomatic protection. On this point, commentators considered that the ICJ's conception of nationality ignored the fact that, in the mid-twentieth century, thousands of individuals, including Nottebohm, lived and did business in a State other than that of their formal nationality.⁴⁶ Under this view, applying the “real and effective” nationality test, which requires identifying migrants’ ties across the borders of states, can have negative consequences since it would deprive a large number of people of diplomatic protection. This criticism applies, a fortiori, in today's world of increasing permeability of State borders and the enhanced capacity for individuals to maintain connections with different countries.

As discussed below, far from being morally problematic, the approach adopted by the ICJ was prompted by problems that can arise precisely from the dynamics of globalization and human mobility. One of these problems relates to the instrumentalization of nationality.

C. The Instrumentalization of Nationality and Abuse of Rights

In his dissenting opinion, Judge Read observed that applying the “real and effective” nationality test in the sense of Nottebohm would leave hundreds of thousands of foreign nationals living or doing business abroad without diplomatic protection.⁴⁷ The ILC also remarked that the so-called “genuine link” requirement would:

exclude literally millions of persons from the benefit of diplomatic protection. In today's world of economic globalization and migration, there are millions of persons who have drifted away from their State of nationality and made their lives in States whose nationality they never acquire. Moreover, there are countless others who have acquired nationality by birth, descent, or operation of [the] law of States with which they have the most tenuous connection.⁴⁸

This criticism is misplaced. The ILC has rightly noted that the Court:

did not extend to expound a general rule applicable to all States but only a relative rule according to which a State in Liechtenstein's position was required to show a genuine link between itself and Mr Nottebohm in order to permit it to claim on his behalf against Guatemala with whom he had extremely close ties.⁴⁹

This reading of the decision seems difficult to reconcile with the preoccupation that Nottebohm's “real and effective” nationality test would deprive “millions of persons” of diplomatic protection. This is, at any rate, an exaggerated concern, for only a very limited number of persons, such as foreign investors, would, if at all, be willing to seek diplomatic protection against the domestic policies of host countries. In fact, in the post-Nottebohm era, Hailbronner writes, “no comparable case amounting to a refusal of diplomatic protection has ever been decided by international courts”.⁵⁰ Moreover, diplomatic protection has been replaced by alternative methods of dispute resolution, such as investor-state dispute settlement mechanisms under investment treaties.⁵¹ One cannot, however, deny that the ICJ did allow Guatemala to refuse the recognition of Nottebohm's Liechtenstein nationality for the purpose of diplomatic protection. Yet the Court's findings are justifiable.

Ours is indeed an era of the greatest international mobility in recorded history.⁵² The rapid “increase of in international migrants has been one of the main manifestations of globalization”,⁵³ and has in turn altered “the structure and meaning of citizenship and nation in the contemporary world”.⁵⁴ As Wagner notes, “[g]lobalization and liberalism … have created an environment that has unshackled the idea that nationality is a sacred status”,⁵⁵ leading to the “‘inevitable lightening’ of citizenship in liberal societies”.⁵⁶ The practice of States regarding facilitation for the acquisition of nationality and naturalizations, coupled with the absence of constraints imposed by international law in this realm, have transformed nationality into a manipulable category, “something that can be instrumentalized”.⁵⁷

As Joppke explains, “[w]hile states have always been strategists in matters of citizenship, particularly in inter-state relations, the novelty is to see individuals also in this role, seizing possibilities that states have often inadvertently created for them”.⁵⁸ People can “collect citizenship at a very little cost without any meaningful attachment to those states in which citizenship is maintained”.⁵⁹ As we shall see, CBI schemes is a perfect illustration of this phenomenon, which has raised a “citizenship industry”.⁶⁰ Sloane aptly notes, therefore, that “as the obligations associated with citizenship dwindle, individuals increasingly adopt nationalities of convenience”.⁶¹ Individuals acquire a citizenship, for instance, to facilitate their mobility among States. Harpaz also refers to the concept of “compensatory citizenship”, the practice where an individual seeks out a second citizenship to “fill a gap” where the current citizenship is deficient.⁶² More relevant for present purposes, multinational businessmen often “carry two or more passports” to simultaneously benefit from the statuses of both domestic and foreign investors.⁶³

The present international legal order governing nationality fails to reflect and regulate the instrumental turn of nationality, which can lead to ascriptions of “nationality on a person in an unreasonable manner that prejudices the rights of other participants in the international legal process”.⁶⁴ Nationality can, in this regard, become a “weapon” with different functions, including its use against another State.⁶⁵ In Nottebohm, the ICJ attempted to reduce the distance and disjuncture that exists between potentially harmful acquisitions of nationality granted at the domestic level and the liberal international legal regulation of nationality. The way and the reasons why Nottebohm acquired Liechtenstein nationality is a clear and early example of how nationality can be instrumentalized.

Guatemala challenged the validity of Nottebohm's nationality, arguing that he obtained it “with the sole object of acquiring the status of a neutral national before returning to Guatemala”.⁶⁶ The ICJ agreed with Guatemala that:

Naturalization was asked for not so much for the purpose of obtaining a legal recognition of Nottebohm's membership in fact in the population of Liechtenstein, as it was to enable him to substitute for his status as a national of a belligerent State that of a national of a neutral State, with the sole aim of thus coming within the protection of Liechtenstein but not of becoming wedded to its traditions, its interests, its way of life, or of assuming the obligations – other than fiscal obligations – and exercising the rights pertaining to the status thus acquired.⁶⁷

As such, in the ICJ's view, Liechtenstein nationality “was conferred in exceptional circumstances of speed and accommodation” with a twofold objective: first, to circumvent the application of the international law of war relating to enemy aliens and, second, if that effort failed, to enable Liechtenstein to exercise diplomatic protection on Nottebohm's behalf.⁶⁸ The newly acquired nationality was thus one of convenience.

Sloane has persuasively argued that Nottebohm should be “read as a narrow decision in which the ICJ tacitly invoked [the principle of abuse of rights] to prevent what it saw as a manipulative effort by the claimant to evade a critical part of the law of war”.⁶⁹ The principle of abuse of rights “is known in many legal orders and is therefore accepted as a general principle of law by most scholars and in State practice, or as a part of international customary law”.⁷⁰ It emanates from the foundational obligation of good faith and requires distinguishing between the existence and the exercise of a right. The rationale behind the principle is that, despite the existence of a State's right, the way in which it is exercised can still amount to an abuse:

A state which, though not with the actual object of breaking an international obligation as such, uses its right to apply certain laws, or to apply them in a certain way, in such a manner that the obligation is not in fact carried out, may be said to have committed an abuse of rights.⁷¹

Put another way, the principle forbids a State from exercising a right conferred upon it under international law, such as its sovereign prerogative to regulate nationality “in a way which impedes the enjoyment by other States of their own rights or for an end different from that for which the right was created”.⁷²

Sloane wrote that “[t]he expedient acquisition of Liechtenstein's nationality … struck the ICJ as abusive and potentially prejudicial” to Guatemala.⁷³ Although the ICJ was concerned about “the unusual and perhaps abusive manner in which Liechtenstein had conferred its nationality on Nottebohm”, he notes, the Court preferred to apply a modified version of the rule of “real and effective” nationality to avoid “imputing bad faith to a sovereign state”.⁷⁴ Other authors, including the former Special Rapporteur of the ILC, John Dugard, agreed with this reading of the judgment.⁷⁵ Besson similarly argues that, to the extent that Nottebohm was a clear case of instrumental citizenship through CBI, “one may consider that the ‘abuse of rights’ reading of the case and its applicability to dual nationality and/or diplomatic protection context is convincing”.⁷⁶

By applying the rule of “real and effective” nationality, the ICJ “effectively atomized nationality by function and scrutinized one of these functions: authorizing a person's State of nationality judicially to espouse a diplomatic claim in international fora”.⁷⁷ The ICJ, in other words, supplied the missing template for the regulation of an unreasonable instrumentalization of nationality facilitated by the lack of limitations on the State's competence to confer its nationality by internal law. Accordingly, as Brownlie aptly observed, the ICJ provided “the only logical approach to many problems of nationality law and avoids the inconveniences and structural flaws in the system of law which flow from the principle of freedom in nationality matters”.⁷⁸

In light of the foregoing analysis, I argue that Nottebohm can be interpreted and defended as a norm of inclusion that recognizes social bonds of attachment beyond formal nationality and as a norm of exclusion against abusive ascriptions of nationality. As discussed in the remainder of this paper, Nottebohm's double dimension can offer an appropriate and effective regulatory instrument in a variety of contemporary contexts. As Brownlie writes, the particular scenario in which this judgment was handed down, “does not obscure its role as a general principle with a variety of applications”.⁷⁹ The ICJ's substantive conception of nationality, based on social facts of attachment rather the abstract nationality status, seems to play a role in the field of EU law with a view to protect the rights granted by EU citizenship. This conception of nationality, understood as the “genuine link” requirement, can also serve as a tool to address the concerns raised by CBI regimes. Nottebohm's exclusionary anti-abuse standard reflects the approach taken by tribunals in the field of international investment law where arbitrators have applied the abuse of rights principle in an increasing number of cases involving manipulation of nationality. Identifying social bonds of attachment of the sort considered in Nottebohm has also become a regulatory mechanism used by the European Court of Human Rights (ECtHR) in deportation cases to strike a fair balance between the right of immigrants to family life and the legitimacy of deportation measures.

II. EU Law and CBI

As explained earlier, CBI schemes, also known as “golden passports”, triggered a backlash in the EU. The European Commission has asserted, by reference to the Nottebohm judgment, that the conditions for the ascription of the nationality of Member States should be linked to the “genuine link” criteria. Scholars have criticized the European Commission's position, arguing that EU institutions are not competent to interfere in the field of nationality. This Section will first examine the concerns associated with CBI regimes. It will then show that Member States’ autonomy in matters of nationality is subject to certain limitations posed by the derivative status of EU citizenship. In this regard, the CJEU held that Member States should apply the principle of proportionality when adopting nationality measures that may impact the person's rights as an EU citizen. In so holding, the CJEU has sought to bring the law of membership closer to factual reality, an approach that reflects the conception of nationality expressed in Nottebohm. This Section will argue that this approach can offer an appropriate tool to address the concerns raised by CBI schemes.

A. Concerns Raised by CBI Schemes

CBI can be defined as a “privileged and fast-track naturalization”⁸⁰ procedure that allows high-net-worth individuals to acquire a second citizenship in exchange for an economic contribution to the granting State.⁸¹ To be sure, “the applicant's wallet is the core, if not the sole criterion determining whether gates of admission will open”.⁸² CBI is, in plain terms, a “passport-selling”⁸³ mechanism that contributes to the marketization of citizenship.⁸⁴ In this sense, CBI deviates from the traditional (and most used) birthright modes of citizenship acquisition wedded to the nation-state and territorial sovereignty, under which citizenship is acquired at birth based on jus sanguinis and jus soli rules.⁸⁵ In the EU, jus sanguinis remains the most common mechanism for the attribution of birthright citizenship, although some Member States combine this mode with jus soli rules.⁸⁶ Joppke argues that the practice of combining jus sanguinis and jus soli “approximate the ‘genuine connection’ requirement” as expressed in the Nottebohm judgment.⁸⁷

CBI also differs from ordinary naturalization procedures. Most Member States have provisions in their domestic laws allowing foreigners to naturalize as citizens upon the fulfilment of multiple requirements.⁸⁸ A common requirement is that applicants must legally reside in the country for a certain period, which in most cases is between five and ten years.⁸⁹ Long-term resident status is often accompanied by other conditions such as the individual's knowledge of socio-cultural norms of the polity (assessed through language and culture tests), financial sustainability, and an expression of loyalty. These criteria, Kostakopoulou writes, “serve to unite the national community, to strengthen its identity, and revitalize the values of loyalty, allegiance, and of individual sacrifice for the common good”.⁹⁰ In Van den Brink's words, “the requirements imposed by states typically guarantee that genuine links exist by the time of [regular] naturalization”.⁹¹

CBI schemes enable wealthy individuals “to jump the regular naturalization queue”.⁹² They do not contain the standard conditions that apply to foreign individuals living in the conferral State, such as a substantial period of residency. In fact, “[i]n most cases of [CBI], it is the money rather than the investor, that must be physically present in the country”.⁹³ As Kochenov and Surak note, “the act of migration, viewed as a unidirectional movement from A to B, is not a feature of [CBI schemes] in many if not possibly the majority of cases” but, rather, “the global extraterritorial rights” granted by the newly acquired citizenship.⁹⁴ Accordingly, to concur with Kälin, CBI is based on “an individualistic, depoliticizing liberal conception of citizenship that is formal, legalistic, and without ties to a collective identity or membership in a particular community”.⁹⁵

Until recently, three Member States (Bulgaria, Cyprus, and Malta) had CBI programmes that allowed third-country nationals to purchase their nationality.⁹⁶ Malta, for instance, offers citizenship to third-country nationals making a non-refundable donation, acquiring property of a certain value, and residing legally in the country for only twelve months, a requirement that does not involve physical presence in the country.⁹⁷

In a 2019 report, the European Commission raised concerns about CBI regimes, pointing out that, though individuals may acquire the nationality of Member States through these regimes “for legitimate reasons”, they “may also be pursuing illegitimate ends”.⁹⁸ The Commission stated, in particular, that these citizenship policies “create risks to security … as well as risks of money laundering, corruption, and tax evasion”.⁹⁹ The Commission relied on a study from the European Parliamentary Research Service (EPRS) that drew attention to various scandals and criminal investigations “shedding light on dubious practices” surrounding CBI schemes.¹⁰⁰ The EPRS alluded to the controversial backgrounds of some of the applicants, including persons accused of misappropriating financial assets and charged with breaching international sanctions.¹⁰¹ Questions have, as such, been raised with respect to due diligence checks and transparency in the schemes. Corrado and Marsh, for instance, explain that Malta's scheme customer due diligence “remains subject to problematic case assessments” and “needs to be expanded to ensure the perpetuation of [CBI]”.¹⁰²

These risks, the European Commission rightly observed, “are exacerbated by the cross-border rights associated with citizenship of the Union”.¹⁰³ As noted, investor migrants do not seek citizenship of a new country to settle there but, rather, to enjoy the extraterritorial rights granted by that citizenship. The external dimension of the rights granted through CBI schemes is particularly noticeable in the EU. A decision by one Member State to sell its nationality automatically leads to the conferral of EU citizenship and associated rights, including free movement within all Member States.¹⁰⁴ It is precisely the benefits of EU citizenship that are often advertised as the most attractive feature of CBI schemes.¹⁰⁵ To concur with Joppke, therefore, the “post-national” EU citizenship has “instrumentalism written on its forehead in terms of free movement rights”.¹⁰⁶ In this context, “when one member state ‘sells’ national citizenship as a gateway to gaining Union citizenship, tension inevitably arises, since the state's action in doing so also affects other EU member states”.¹⁰⁷ In the words of Transparency International and Global Witness, “a minority of Member States are reaping profit from jointly shared EU assets by hawking internal free movement and external visa-waiver agreements, and they are enjoying the spoils whilst exposing their neighbours to risk”.¹⁰⁸

In addition, it has been argued that CBI threatens the conception of citizenship as membership based on ideals of equality and participation. The argument goes that since “only a tiny percentage of the world's population” can pay the price of a “golden passport”, CBI schemes “are profoundly and intentionally inegalitarian and elitist”.¹⁰⁹ In this regard, the EPRS also pointed to the “inherent lack of fairness” that the regimes represent.¹¹⁰ As explained, the naturalization of ordinary foreigners is subject to several requirements, such as long-term residency status, that do not apply to CBI applicants. The implementation of the regimes, in fact, “occurred in parallel with the trend in Member States to place [even] more stringent [ordinary naturalization] requirements on migrants through labour market and social integration tests”.¹¹¹

As a result of these concerns, the European Commission called on Cyprus, Malta, and Bulgaria to terminate their CBI regimes. It also instituted infringement proceedings against Malta and Cyprus.¹¹² In response, only Bulgaria and Cyprus terminated their schemes, on 5 April 2022 and 1 November 2020, respectively.¹¹³ Thus, Malta is currently the only Member State operating a CBI regime. In September 2022, after having failed to heed its calls, the Commission referred Malta to the CJEU.¹¹⁴ In framing its position against CBI regimes, the Commission relied on the Nottebohm judgment and argued that, since EU citizenship is a consequence of acquiring the nationality of a Member State, “each Member State needs to ensure that nationality is not awarded absent any genuine link to the country or its citizens”.¹¹⁵ The Commission further asserted that “the granting of EU citizenship in return for pre-determined payments or investments without any genuine link to the Member State concerned undermines the essence of EU citizenship”.¹¹⁶ These arguments can be understood as an objection to the instrumentalization of EU citizenship and the ensuing cross-border implications of CBI schemes. As discussed below, the Commission's reference to Nottebohm faced strong opposition from a number of scholars.¹¹⁷

B. Genuine Links as a Condition to Acquire EU Citizenship

Scholars have raised two main objections against the European Commission's actions. The first is that, as Kochenov argues, requiring Member States to grant their nationality based on the genuine link theory constitutes a direct incursion “in a sphere of exclusive competence of Member States”.¹¹⁸ Sarmiento similarly asserts that the domain of nationality falls within the scope of Member States’ autonomy and that the Nottebohm judgment shall not “trigger new competences in favour of the EU”.¹¹⁹ The second is that, to quote D'Oliveira, the CJEU actually “denied the impact of Nottebohm for Community purposes” in the Micheletti case.¹²⁰

These scholars are right to note that the CJEU rejected Nottebohm within the framework of the EU in Micheletti. As we have seen, the “substance-over-form” conception of nationality the ICJ expressed in Nottebohm served as a mechanism for exclusion in that case. The “extremely tenuous” connections that Nottebohm had with Liechtenstein led the ICJ to conclude that Guatemala was under no obligation to recognize his nationality for the purposes of diplomatic protection. In Micheletti, the Spanish authorities were reluctant to recognize the Italian nationality of Mr Micheletti, which he had acquired to establish a business in Spain, given that he was also (and initially) a national of Argentina. The CJEU held that it is impermissible for Member States “to restrict the effects of the grant of the nationality of another Member State by imposing an additional condition for recognition of that nationality”.¹²¹ In this context, it should be noted that the European Commission's reference to the “genuine link” requirement does not involve Member States’ national rules on the recognition of nationality but, rather, on the acquisition of nationality. Indeed, the Commission argued that “each Member State needs to ensure that nationality is not awarded absent any genuine link to the country or its citizens” (emphasis added).¹²² Although the European Commission mistakenly assumed that Nottebohm concerned the acquisition of nationality, this in no way invalidates its suggestion that the ascription of the nationality of Member States should be based on the idea of a “genuine link”.

As critics also note, nationality is not included among the competences delegated to the EU pursuant to Article 5 of the Treaty on the European Union (TEU).¹²³ Accordingly, domestic rules on the loss and acquisition of nationality, in principle, fall within the reserved domain of Member States.¹²⁴ The competence of Member States to regulate nationality is, however, subject to certain requirements on account of the derivate status of EU citizenship. As we have seen, EU citizenship grants “a constantly growing number of rights”,¹²⁵ which include freedom of movement. This right “is a central element of Union citizenship” and evidences the cross-border effects of the nationality of Member States.¹²⁶ This is the most attractive feature for the buyers of EU citizenship, and the major source of concern for Member States and the EU.

Access to EU citizenship is dependent on the acquisition of the nationality of a Member State. Article 20 of the Treaty on the Functioning of the European Union (TFEU) provides that “every person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to and not replace national citizenship.”¹²⁷ The term “being additional and not replace national citizenship” means that EU citizenship shall not be understood as being independent of national citizenship. EU citizenship is, therefore, considered as a derivative status.¹²⁸ Given the link between EU and national citizenship, the CJEU has consistently held that Member States must, before taking a decision to withdraw or confer their nationality, consider the consequences of such a decision for the person concerned as regards the loss of the rights they enjoy as an EU citizen. In this context, the CJEU has “begun to erode” the sovereignty of Member States in the field of nationality.¹²⁹ In so doing, it is submitted that the CJEU construed an understanding of nationality under EU law that reflects the “genuine link” approach and has so far adopted this understanding as a norm of inclusion.

In Rottmann, the CJEU held that while:

Member States have the power to lay down the conditions for the acquisition and loss of nationality … the exercise of that power, in so far as it affects the rights conferred and protected by the legal order of the Union … is amenable to judicial review carried out in the light of European Union law.¹³⁰

Rottmann was an Austrian national by birth who, after some years of residence in Germany, obtained German nationality by naturalization. He then automatically lost his Austrian nationality by application of Austrian law.¹³¹ The German authorities thereafter deprived Rottmann of his German nationality because it was acquired by deception, thereby leaving him stateless. The Court observed, seemingly paraphrasing Nottebohm, that:

[I]t is legitimate for a Member State to wish to protect the special relationship of solidarity and good faith between it and its nationals and also the reciprocity of rights and duties, which form the bedrock of the bond of nationality.¹³²

In this respect, the Court considered that a Member State is entitled to revoke the nationality granted to an individual if “that nationality was obtained by deception”.¹³³ However, the Court held that, in adopting that decision, the Member State concerned has to observe the principle of proportionality. This principle requires that national courts and authorities balance public interests, such as the acquisition of its nationality by fraud, against the “consequences that the decision entails for the person concerned and, if relevant, for the members of his family with regard to the loss of the rights enjoyed by every citizen of the Union”.¹³⁴ The Court left it to German courts to proceed further with the issue regarding the principle of proportionality.

Just as in Rottmann, the CJEU in Tjebbes explained that a Member State's wish “to protect the special relationship of solidarity and good faith between it and its nationals and also the reciprocity of rights and duties, which form the bedrock of the bond of nationality” was legitimate.¹³⁵ This case concerned four Dutch citizens who also held the nationality of a non-EU State and had lost their Dutch nationality by operation of Dutch law due to their residence abroad (and outside the EU) for more than ten years. Dutch law seeks to combat multiple nationality and to ensure that Dutch nationals have and retain a “genuine link” with the Netherlands, which is deemed to be lost in the event of long-term residence outside the State.¹³⁶ The Court agreed with the Advocate General's view that requiring a “genuine link” between a Member State and its national is, in principle, legitimate for reasons of public interest.¹³⁷ However, the Court went on to state that, as also held in Rottmann, a decision entailing the loss of EU citizenship and associated rights must be proportional “so far as concerns the consequences of that loss for the situation of the person concerned”.¹³⁸ The proportionality test, the Court noted, “requires an individual assessment” by the competent authorities and courts of how the domestic measure can “affect the normal development of his or her family and professional life”.¹³⁹ According to the Court, “the circumstances of the individual situation of the person concerned, which are likely to be relevant in the assessment” include:

particular difficulties in continuing to travel to the Netherlands or to another Member State in order to retain genuine and regular links with members of his or her family, to pursue his or her professional activity, or to undertake the necessary steps to pursue that activity.¹⁴⁰

A final case worth considering is JY, the first in which the CJEU dealt with a situation where the acquisition of the nationality of a Member State was at stake. It is also the first case where the Court not only reminded national authorities of the general proportionality criteria established in previous cases but also conducted the assessment itself.¹⁴¹ JY, an Estonian national resident in Austria, had applied to become an Austrian national through naturalization in 2008. She was assured that she would be granted that nationality if she relinquished her citizenship of Estonia as required by Austrian Law, which she did in 2015.¹⁴² In 2017, the Austrian competent authority rejected JY's naturalization application, offering a “public policy” justification for that decision due to the fact that she had committed a series of administrative offences, including driving a motor vehicle while under the influence of alcohol.¹⁴³ The Court found that “the gravity of the offences committed by” JY were not proportionate to “the significant consequences” that Austria's decision to revoke the assurance of naturalization, which entailed the permanent loss of EU citizenship, has for “JY's situation, as regards, in particular, the normal development of her family and professional life” in the EU.¹⁴⁴ This included “the right to respect for family life as stated in Article 7” of the Charter of Fundamental Rights of the EU.¹⁴⁵

This consistent case law shows how the CJEU has “challenged Member State sovereignty in nationality law”.¹⁴⁶ As the “final arbiter” in this domain,¹⁴⁷ the Court has “unreservedly embraced [the] position that Member States are not absolutely free in framing their nationalities as they see fit”.¹⁴⁸ The European Commission itself observed that “while it is for each Member State to lay down the conditions for the acquisition and loss of nationality, they must do so having due regard to Union law” and, in particular, the proportionality principle.¹⁴⁹ This principle seeks to recognize and protect the personal, business, and territorial links between an individual and a Member State against nationality rules that may impact their rights as EU citizens. One can therefore argue that “the notion of nationality in EU law is based on a jurisdictional conception that builds on the idea of a genuine link”, an idea that resembles Nottebohm's “substance-over-form” understanding of nationality.¹⁵⁰ As Wagner puts it, “[n]ationality for the purpose of EU law and Union citizenship by extension … are construed on the basis of nationality as understood in international law reflecting the individual's embeddedness within the legal and social fabric of his/her [Member State]”.¹⁵¹

However, unlike the circumstances and the position taken in Nottebohm, the conception of EU citizenship based on the idea of a “genuine link” has so far been used as a mechanism for inclusion with respect to measures concerning the acquisition and loss of the nationality of Member States. The question arises as to whether this understanding of EU citizenship should also apply to prevent individuals from acquiring EU citizenship based on a monetary payment alone; that is, when the individual does not maintain meaningful ties within the society of the Member State and the EU.¹⁵² To concur with Van den Brink:

The lack of a genuine link may be insufficient reason to refuse to recognize a grant of nationality, but that does not undermine the argument in favour of there being a genuine link for the purposes of its being granted.¹⁵³

He observes, and rightly so, that it is precisely “the fact of globalization” and the capacity of individuals to maintain multiple nationalities that “supports the case for conditioning the granting of nationality on the existence of a genuine link”.¹⁵⁴ “This is certainly so”, he adds, “in highly integrated regions such as the EU, where the unwillingness of States to fashion naturalization policies with an eye to a genuine link creates the problems of” CBI regimes.¹⁵⁵

A major concern about granting EU citizenship through investment is that this method has potential side effects for Member States. As we have seen, although citizenship can be acquired through CBI regimes for legitimate reasons, it can also be exploited by individuals and governments via money laundering, tax evasion, corruption, and other illegal activities. CBI programmes considered as an exercise of State sovereignty, combined with the lack of sufficient safeguards as to their implementation, are arguably the root cause of these problems. Given that EU citizenship includes the right to travel throughout the EU and to reside in a Member State of which the citizen is not a national, these risks extend beyond the States granting nationality through CBI regimes. Another legitimate concern is that CBI regimes facilitate naturalization and, thus, access to EU citizenship for a privileged few with deep pockets, while regular naturalization requirements are increasingly becoming more difficult to satisfy for most migrants. If CBI regimes “undermine the legitimate interests of other Member States [and exacerbate inequalities,] there would be reasons to make the acquisition of national and EU citizenship subject to a genuine link requirement”.¹⁵⁶

Having already imposed certain limitations on the power of Member States to deprive individuals of EU citizenship, it remains to be seen whether the CJEU will expand on its case law to restrict nationality practices such as the CBI regime implemented by Malta. Some believe the Court should do so¹⁵⁷ while others consider that “[i]t will be difficult for the Court to justify broadening the reach of its case law”.¹⁵⁸ At any rate, what is clear is that the individual's life circumstances and social bonds with a given Member State and the EU are factors that the CJEU has considered as relevant when reviewing nationality measures that affect the status of EU citizenship. We can, in this respect, argue that Nottebohm's understanding of nationality as “a social fact of attachment”¹⁵⁹ so far operates in the field of EU law as a norm of healthy inclusion. This is not, however, the only field where the Nottebohm judgment may play a role.

III. International Investment Law

Nationality plays a vital role in international investment law. This regime is governed by a network of more than 3,000 largely bilateral investment treaties (BITs) that contain broadly worded substantive protections and arbitration mechanisms for investors to bring compensation claims against host States. Investment treaties follow customary international law insofar as they only protect investors (legal and natural persons) holding the nationality of the home State party under its domestic laws.¹⁶⁰ The preferred instrument for the settlement of investment disputes, the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention), also limits jurisdiction to nationals of a Contracting State.¹⁶¹ Despite nationality being one of the principal requisites to access the robust procedural and substantive protections of investment treaties, most of these instruments contain broad definitions of what constitutes an eligible national. A legal entity will often qualify as a protected national if it is lawfully incorporated in the home State party. Investment treaties do not tend to include additional requirements such as substantial business activities, effective management and control, or ownership of the investment.¹⁶² As for natural persons, an individual to whom the home State has granted its nationality will normally be entitled to protection under the applicable investment treaty,¹⁶³ even if they hold other nationalities, including that of the host State, and maintain connections to different countries. Accordingly, investment treaty practice has developed to a point where the “bond of nationality” has diminished to a mere formality.

Expansive definitions of national, coupled with the increasingly complex ownership structures of multinational entities and the diffusion of identity brought about by globalization, have resulted in instrumental-strategic approaches towards both corporate and individual nationality. This phenomenon denotes the conduct by which investors change nationalities to access investment protection that would otherwise be unavailable. Nottebohm's exclusionary standard based on the principle of abuse of rights may serve as a norm of exclusion in cases where investors resort to the manipulation of nationality for the purpose of gaining access to investment treaties. In fact, investment tribunals are increasingly willing to apply the principle of abuse of rights to regulate nationality by function and to refuse jurisdiction in cases involving abusive nationality planning.

A. Abuse of Rights and Legal Persons

In the context of juridical persons, “[c]ompanies today operate in ways that make it very difficult to determine nationality because of the several layers of shareholders … operating from and in different countries”.¹⁶⁴ This gives corporate investors the flexibility to create a diversity of nationalities with the aim of benefiting from investment treaty protections. A parent company incorporated in a State that has not signed an investment treaty with the host State of the investment can, for instance, incorporate a “mailbox” company, or transfer shares through an entity already located in a State having an investment treaty in force with the host State. These kinds of practices, commonly known as corporate restructuring, have been facilitated by the secular decline in legal barriers to cross-border trade and liberalized policies on foreign direct investment.¹⁶⁵

The alteration of the investor's organizational structure to secure investment treaty rights resembles the instrumental attitude towards nationality adopted in Nottebohm. As Sinclair asks:

Is the mischief aimed at in seminal cases such as Nottebohm … not broadly similar to the situation where an investor seizes upon a US$100 shelf company in a foreign jurisdiction to use as an investment vehicle so that it might attract investment treaty protection?¹⁶⁶

Although corporate restructuring has generally been considered a “perfectly legitimate goal”,¹⁶⁷ a number of tribunals have begun to set limits to this practice. In doing so, they have scrutinized the functions of corporate nationality, adopting an approach that reflects the ICJ's exclusionary anti-abuse standard. The most prominent case is Philip Morris v. Australia.¹⁶⁸ This dispute arose out of the so-called plain packaging legislation that Australia passed on 21 November 2011. Australia announced its intention to introduce plain packaging measures on 29 April 2010, and, in the interim period, Philip Morris Australia (PM Australia) and its ultimate parent company, Philip Morris International (PMI), clearly stated their strong opposition to the proposed legislation.¹⁶⁹ The measures affected the shares held by the Swiss branch of PMI in PM Australia, but there was no investment treaty between Switzerland and Australia. In order to benefit from the protection of the Australia-Hong Kong BIT, a Hong Kong-based subsidiary of PMI acquired all the shares in PM Australia. The Australia-Hong Kong BIT defined corporate nationality merely by reference to incorporation.¹⁷⁰ The restructuring took place on 23 February 2011; that is, ten months before the contested plain packaging legislation was enacted, and PMI's Hong Kong subsidiary subsequently brought a claim under the BIT¹⁷¹

Australia challenged the jurisdiction of the Tribunal, arguing that the manipulation of PMI's corporate nationality amounted to an abuse of rights.¹⁷² Relying on previous case law,¹⁷³ the Tribunal recalled that:

the initiation of a treaty-based investor-state arbitration constitutes an abuse of rights (or an abuse of process, the rights abused being procedural in nature) when an investor has changed its corporate structure to gain the protection of an investment treaty at a point in time when a specific dispute was foreseeable.¹⁷⁴

Turning to the facts, the Tribunal found that PMI had changed its corporate structure to gain the protection of the BIT at a point in time when the dispute with Australia was foreseeable, and therefore declined jurisdiction.¹⁷⁵ A further factor that led to this finding was that the “main and determinative, if not sole, reason for the restructuring was the intention to bring a claim under the [BIT]”.¹⁷⁶

Similar to PMI's strategy, Nottebohm changed his nationality when he foresaw that Guatemala would enter the war on the side of the Allies and the ensuing consequences for him and his business. He acquired Liechtenstein nationality with “the sole aim of … coming within the protection of” international law,¹⁷⁷ which, as this article has argued, the ICJ considered an abuse of the liberal international legal regulation of nationality. The abuse of rights doctrine, as applied in Nottebohm and Philip Morris, can also offer a valuable tool to regulate the manipulation of nationality by natural persons. It should first be noted that the doctrine of abuse of rights has long been associated with corporate restructuring.¹⁷⁸ This is understandable given that corporations are the most frequent claimants in investment arbitration. However, while corporations have long been strategists in matters of nationality, individuals can also adopt this role seizing opportunities that States have inadvertently generated for them.

B. Abuse of Rights and Natural Persons

As previously explained, globalization increased the transborder movement of individuals and their capacity to acquire multiple nationalities. It created a “diverse array of transborder solidarities”,¹⁷⁹ a global order of “overlapping authorities and criss-crossing loyalties”.¹⁸⁰ As such, it is not excluded that natural persons also resort to strategic nationality practices with the intent to secure investment protection.¹⁸¹ In a situation like this, might the principle of abuse of rights equally offer the correct legal rationale for a tribunal to disavow jurisdiction? Tribunals have faced this question in recent cases where the policy considerations that animated abuse of rights arguments resemble those at work in Nottebohm.¹⁸² One of these cases was Okuashvili v. Georgia.¹⁸³ The Claimant, Zaza Okuashvili, instituted arbitration proceedings pursuant to the rules of the Stockholm Chamber of Commerce in 2019, alleging violations of the Georgia-United Kingdom BIT. Okuashvili, a Georgian national by birth, was the ultimate beneficial owner of a group of companies, the Omega Group, which had interests in the Georgian tobacco, distribution, printing, and television industries. The dispute arose out of a series of events that occurred between 2004 and 2015. In particular, the Claimant argued that Georgia sent armed men to invade and occupy the Omega Group in 2004 and that the occupation did not end until he agreed to transfer the license of his TV network to individuals associated with the former Georgian government. According to the Claimant, despite his repeated requests, Georgia failed to investigate the 2004 occupation, which, he claims, “constitutes a breach of the Treaty”.¹⁸⁴

Following the 2004 events, the Claimant moved to the United Kingdom where he naturalized as a British national in 2011. He thus became a dual Georgian-British national. It was undisputed that his investments in Georgia were made when he exclusively held Georgian nationality. Georgia raised a number of objections, including that the Claimant's claim “constitute[d] an abuse of right” on account of the fact that he had acquired British nationality “to internationalize his dispute with the Respondent”.¹⁸⁵ According to Georgia, the Claimant acquired British nationality at a time when the dispute with Georgia was foreseeable, “this being conduct broadly similar to ‘chang[ing]’ nationality in order to secure jurisdiction under a [BIT]”.¹⁸⁶ The Tribunal remarked that the principle of abuse of rights would “compel it to decline or to exercise jurisdiction” since it is “a generally accepted principle of general international law”.¹⁸⁷ The Tribunal then relied on the approach taken in the decisions involving corporate restructuring practices and dismissed the objection, holding that the Claimant's decision to “be naturalized as a British citizen indicate[d] no impropriety or a desire to serve the instrumental purpose of mounting a Treaty claim”.¹⁸⁸ Although the Tribunal ultimately rejected Georgia's objection, this case shows that the principle of abuse of rights can equally apply to natural persons.

Another case worth mentioning is Mihaljević v. Croatia, a dispute submitted to ICSID by Marko Mihaljević under the Croatia-Germany BIT. The Claimant was a dual national of Germany and Croatia at the time he submitted the request for arbitration.¹⁸⁹ The ICSID Convention contains a clear rule excluding individual claimants who also hold the nationality of the host State. Article 25(2)(a) provides that the Convention does not cover any person who had the nationality of the “State party to the dispute on the date on which the parties consented to submit such dispute to conciliation or arbitration as well as on the date on which the request was registered”.¹⁹⁰ This “negative” nationality requirement placed the Claimant in a difficult position given his status as a Croatian national. In an attempt to fabricate ICSID's jurisdiction, the Claimant applied to renounce his Croatian nationality before the Croatian Interior Ministry,¹⁹¹ following which he filed a second request for arbitration.¹⁹² This strategy also resembles Nottebohm's conduct as he changed his nationality with the sole purpose of having a claim pursued on his behalf by Liechtenstein before the ICJ.

Croatia challenged jurisdiction on different grounds, including that the Claimant had committed an abuse of rights by trying to relinquish his Croatian nationality after the dispute had arisen with the sole purpose of circumventing ICSID's host State nationality restriction.¹⁹³ Croatia relied on the approach taken by tribunals that applied the abuse of rights doctrine in cases involving corporate restructuring.¹⁹⁴ In a legal opinion submitted by Professor Christoph Schreuer in support of Croatia's objection, he observed that the “policy considerations” that have led arbitrators to decline jurisdiction in those cases “apply with equal force to the manipulation of the nationality of individuals”.¹⁹⁵ The Tribunal was “troubled by the Claimant's conduct”, as “the facts strongly suggest[ed] that the sole reason for the Claimant's application to relinquish his citizenship was so that he could pursue arbitration against the Respondent”.¹⁹⁶ The Tribunal did not, however, rule on Croatia's objection. Instead, it declined jurisdiction on the basis that the Claimant remained a Croatian national at the relevant times under Article 25(2)(a).¹⁹⁷

Although the Tribunal ultimately rendered futile the Claimant's attempt to fabricate ICSID jurisdiction, one of the arbitrators considered it necessary to address the question of abuse of rights in a Concurring Opinion. She observed that tribunals have an obligation to prevent “an abusive manipulation of the system of international investment protection under the ICSID Convention and the [BITs]”.¹⁹⁸ In her view, “[s]uch an abuse” can equally arise in cases of acquisition as well as renunciation of nationality by natural persons, “since both [may] entail an alteration of form designed to obtain a right that would not otherwise exist”.¹⁹⁹ She considered that the abuse of rights doctrine played an even greater role in the present case, in view of the clear ICSID's automatic bar to actions instituted by host State nationals. In her view, “[f]or an individual to renounce his or her nationality in order to gain the protection of the ICSID Convention could therefore … constitute an abuse of process”.²⁰⁰ She concluded that, even if the Claimant had secured jurisdiction under Article 25(2)(a) of the Convention, “his institution of this arbitration would still have amounted to an abuse of process rendering his claims inadmissible”.²⁰¹

This Section has shown that Nottebohm's exclusionary anti-abuse standard is reflected in the contemporary system of investment arbitration. Arbitrators have also atomized nationality by function and scrutinized one of these functions: enabling an investor to bring an investment treaty claim. This means that, in investment law, nationality on paper is not always sufficient to access investment treaty protection. Arbitrators are willing to promote the doctrine of abuse of rights as the norm of exclusion to deter investors from employing abusive manipulations of nationality with a view to protect the legitimacy of the investment treaty system as a whole.

IV. Human Rights Law

Nottebohm may also operate in the field of human rights law. The ECtHR has taken an approach that resembles Nottebohm's conception of nationality in immigration cases to establish a fair balance between the protection of human rights and States’ traditional autonomy to regulate migration flows. Human rights law gives individuals standing to personally vindicate their rights before international and regional bodies.²⁰² The European Convention on Human Rights (ECHR) provides that the ECtHR “may receive applications from any person, non-governmental organization, or group of individuals claiming to be the victim of a violation by one of the High Contracting Parties of the rights set forth”.²⁰³ This right coexists with the right of the contracting States to bring claims. However, an individual's standing to vindicate their rights under treaties does not depend on their State of nationality. This means that:

nationality disappears as a vinculum juris for the exercise of protection … sufficing that the individual complainant – irrespective of nationality or domicile – is (even though temporarily) under the jurisdiction of one of the States Parties to the human rights treaty at issue.²⁰⁴

Notwithstanding the “denationalization” of the protection of human rights, as Rubenstein and Adler note, “the cases evolve where human rights law is called upon to imbue an individual with certain rights associated with nationality though nationality is formally lacking”.²⁰⁵ Rights that have traditionally been linked to nationality, such as the right to entry, stay, and exit, are becoming more connected to the status of social membership. Under Article 8 of the ECHR, for example, non-nationals who have their family or social life in a country to which they migrated could enjoy protection against forced removal notwithstanding the position of the state of residence.²⁰⁶ In these cases, the concept of nationality elaborated by Nottebohm as a “a social fact of attachment, a genuine connection of existence, interests, and sentiments, together with the existence of reciprocal rights and duties”²⁰⁷ has played an important role.²⁰⁸ International human rights law, among other things, tries to protect those social bonds between an individual and a State irrespective of their formal nationality.

Beldjoudi v. France, decided by the ECtHR, illustrates the relevance of Nottebohm in this context.²⁰⁹ Mohand Beldjoudi was an Algerian citizen born in France to Algerian parents. He did not have French citizenship because he did not comply with the relevant statutory procedure for converting his “special civil status” to full citizenship.²¹⁰ Yet, the ECtHR observed that “he ha[d] spent his whole life – over forty years – in France, was educated in French and appear[ed] not to know Arabic [and he did not] seem to have any links with Algeria apart from that of nationality”.²¹¹ Because of his history of criminal convictions resulting in a number of terms of imprisonment, France considered him “a threat to public order” and sought to deport him.²¹² Beldjoudi alleged that the deportation order against him violated several provisions of the ECHR,²¹³ including Article 8, which provides as follows:

1. (1) Everyone has the right to respect for his private and family life, his home, and his correspondence.

2. (2) There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.²¹⁴

Based on this provision, the main question before the ECtHR was whether expelling a person from the country in which their immediate family resides amounts to a violation of “the right to respect for his private and family life” when weighed against what may be characterized as justified “interference” pursuant to Article 8(2). For the ECtHR, deportation, insofar as it “may interfere with a right protected under paragraph 1 of Article 8”, must be “necessary in a democratic society … and, in particular, proportionate to the legitimate aim pursued”.²¹⁵ Beldjoudi claimed that “all their family ties, social links, cultural connections, and linguistic ties were in France” and, therefore, “there were no exceptional circumstances which could justify deportation”.²¹⁶ The ECtHR agreed, holding that France's “legitimate aim” would be disproportionate to the degree of interference that deportation would impose on Beldjoudi's right to “private and family life” given his strong and longstanding connection to France.²¹⁷

Rubenstein and Adler rightly observe that “the Court's discussion of the level of the interference caused by deporting the applicant engages the discourse of effective nationality”.²¹⁸ Indeed, the ECtHR applied a modified version of the rule of “real and effective” nationality with the aim of protecting a “quasi-Frenchman”,²¹⁹ despite his formal Algerian nationality and his lack of French nationality under French law.

The ECtHR's decision in Beldjoudi v. France reflects its case law on Article 8 of the ECHR.²²⁰ This jurisprudence has prevented States from deporting individuals who have lived within their territory for an extended period of time during which they have developed a “network of personal, social, and economic relations that make up the private life of every human being”.²²¹ Thym notes that this case law signals that sovereign States have lost the power to control the entry and stay of foreigners within their borders.²²² The context of international human rights law can, therefore, reveal how international norms might further limit the power of State sovereignty.

In Stewart v. Canada, the Human Rights Committee, established under the International Covenant on Civil and Political Rights (ICCPR), rejected an applicant's claim based on similar facts to those of Beldjoudi v. France.²²³ Charles Edward Stewart was a British national who, from the age of seven, had lived with his family in Ontario, Canada.²²⁴ He thus considered himself to be a Canadian national for most of his life, although he had never been naturalized and, consequently, had never achieved that status.²²⁵ He was convicted of several criminal offences, which led the Canadian government to deport him to the United Kingdom in accordance with the Canadian Immigration Act.²²⁶ Stewart claimed that this act by Canada violated, among others, Article 12(4) of the ICCPR, which provides that: “[n]o one shall be arbitrarily deprived of the right to enter his own country” (emphasis added).²²⁷ The Human Rights Committee held that Stewart's right under Article 12(4) of the ICCPR had not been infringed in view of Canada's legitimate security and criminal justice interests. However, the Human Rights Committee affirmed that the concept “own country” in Article 12(4) was broader than the concept of “country of his nationality”:

Since the concept “his own country” is not limited to nationality in a formal sense, that is, nationality acquired on birth or by conferral, it embraces, at the very least, an individual who, because of his special ties to or claims in relation to a given country cannot there be considered to be a mere alien.²²⁸

In a dissenting opinion, Elizabeth Evatt and Cecilia Medina Ouroga similarly considered that “[t]he words ‘his own country’ on the face of it invite consideration of such matters as long[-] standing residence, close personal and family ties, and intentions to remain (as well as to the absence of such ties elsewhere)”.²²⁹ As Albanese and Takkenberg observe, “this approach had already been affirmed by the ICJ in the Nottebohm case”, which did not consider Liechtenstein to be Nottebohm's “own country” for diplomatic protection purposes.²³⁰

V. Concluding Remarks

Scrutiny of Nottebohm's origins and legacy suggests that current resentment towards the decision is misplaced. It is hard to deny that Nottebohm can play a role today with a variety of applications and that it offers equitable means to address the effects of globalization in other areas of law. The Nottebohm-style determination of an effective nationality can work positively as a ground for inclusion (protecting against nationality under-reach and reflecting human rights norms in immigration cases), and negatively as a ground for exclusion (protecting against nationality over-reach in cases involving manipulation of nationality in investment arbitration). In EU law, Nottebohm's “substance-over-form” approach can serve as a tool to address the concerns raised by CBI regimes and is reflected in the way the CJEU understands the relationship between EU and national citizenship. These examples represent only a sample of the potential applications of Nottebohm.

Peters, for instance, argues that Nottebohm also offers a regulatory mechanism to address the “Russian passportization policy”, which provides a fast-track extraterritorial naturalization en masse of residents from various districts of Ukraine's Donetsk and Lugansk regions. She considers this kind of naturalization as “exorbitant” and contends that “the conferral of nationality on the citizens of another state without sufficient factual links, especially without a residence requirement, and on a large scale” should not be recognized or accepted by “third states (including the former patron state)”.²³¹

The lesson of Nottebohm is that the dynamics of globalization, especially global mobility, challenge the classic legalistic understanding of nationality based on the nation-state model. The legal principles associated with nationality need refashioning to better reflect the realities of nationality in a globalized world. The international legal order governing nationality, which largely conceives this concept as a formal legal status, does not comprehensively address the cross-border effects of nationality. Nationality has become a tool that individuals and, when applicable, corporations conveniently use for different purposes. Sooner or later, the discussion on the role and instrumentalization of nationality on the international plane will need to address efforts to codify the international legal regulation of nationality. The task here is to reduce the distance and disjuncture that exists between law and the reality that it should seek to govern. The ICJ's decision in Nottebohm could supply a template for these efforts.