Vanuatu Officials Split Over CS Global’s $10,000-per-Application CBI Contract

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Last week, we reported that Vanuatu had appointed CS Global Partners (CSGP) to help revamp and market the country’s citizenship by investment program, as well as UK-based firm FACT to assist with enhanced due diligence.

This week, via the Vanuatu Daily Post, we gleaned details of the agreement between CSGP and the government and, moreover, that the extended period that elapsed between Vanuatu’s recognizing it needed international help bringing its program more closely in line with EU demands and its finally appointing international partners was a result of internal disagreement over contract terms.

Attorney General advised against the agreement

On October 1st last year, the State Law Office, presided over by Attorney General (AG) Arnold Kiel Loughman, issued its advice on the proposed agreement between CSGP and the government, addressed to representatives of the Citizenship Commission and the Prime Minister’s Office.

“In that advice,” wrote the AG in a letter to the PM on December 16th, “we concluded the agreement needed further negotiations and that it needed to get the Tender Board’s approval. On the 30th of November 2021, we issued the second advice addressed to the Minister of Finance and copied others, including yourself. In that advice, we raised our reservations regarding, amongst other things, the PFEM Act [ed.: Public Finance Economic Management Act of 2019] requirements, especially in relation to appropriation under part 8 of the Act and we concluded that government should not enter the contract in its current form.”

The AG specified that the agreement, in its proposed form, could be in breach of the Government Contracts and Tenders Act, as well as the PFEM Act, because the agreement’s clause 2.3 contained verbiage related to guarantees and indemnities, something that according to PFEM’s Section 60 can only be granted with the prior approval of Parliament.

Questions over added value of international marketing partners

Another point of contention had been the degree to which CSGP’s remuneration was commensurate with the added value the firm’s advisory activities were expected to contribute to the program.

The agreement states that CSGP will be paid US$10,000 per successful application. The AG points out in his Dec 16th letter to the PM that the contract did not specify the added value, in financial terms, that CSGP’s activities would engender and that, in any case, the contract did not stipulate any reporting obligations on the part of the advisory firm or any other means by which the government could monitor the activity to ensure the honoring of obligations.

The AG also expressed apprehension about taking on the additional cost when the program was already raising large sums of revenue prior to the appointment of international partners. The AG concluded in his letter to the PM that the agreement with CSGP, in its current form, would not benefit the government and therefore should not be executed.

Lack of unified messaging undermines the program, says Emmett

Speaking to IMI, Micha-Rose Emmett, CEO of CS Global Partners, makes her first public statement on the appointment and offers her reactions to the article in the Vanuatu Daily Post:

“The article has reported the details of the process inaccurately,” Emmett comments. “Throughout our discussions and negotiation with the Government, our legal team ensured that we dealt with the applicable departments, and the procurement process was followed as legally prescribed. The appointment of CS Global Partners was approved by their Central Tender Board and Council of Ministers and was a process of over a year.”

Emmett indicates it is precisely the internal incongruence on display this week that her firm seeks to help Vanuatu mitigate.

“Our advice to the Government is to ensure a unified message because such internal miscommunication directly affects the CBI program internationally as it spotlights the cracks in the country’s stability.”

Financial Intelligence Unit and Citizenship Commission at odds over appointments

Floyd Mera, Director of Vanuatu’s Financial Intelligence Unit (FIU), the government bureau in charge of vetting applicants, also expressed disappointment at the Citizenship Commission’s announcement of the appointment of international partners without prior consultation with the FIU. Mera pointed out that, according to his information, the value of the agreement over a five-year period could amount to as much as VT 6 billion (about US$ 53 million). This indicates Vanuatu was projecting (at least prior to the European Commission’s announcement) to approve more than 1,000 applications each year through 2026.

The FIU boss indicated his bureau, independently of the Citizenship Commission, has been conducting its own review of the program with a view to recommending the appointment of several international due diligence specialists. Mera also maintained that, according to the 2020 program amendments, the FIU – and not the Citizenship Commission – would be in charge of appointing due diligence specialists.

“As such, the FIU has promptly commenced its review of highly international specialist firms and has three prospective options that are currently being reviewed,” he said. “Of late, two of three international companies remain on the table having satisfied the latest criteria of due diligence checks based on competency and reputation. Costs are also being negotiated in order the ensure long-term affordability on behalf of the Vanuatu government.”

“Government took over two years to decide” on advisory appointment, unnamed source reported says

Cronulla News, an Australian publication, cites an unnamed source they claim works in “Vanuatu’s CBI Unit” (presumably referring to the Citizenship Commission) as saying “the government took over two years to decide which company can assist the CBI Unit of Vanuatu. Since the beginning of 2021, we have been trying to engage CS Global Partners for service as they were among the most professional service providers and are specialized in matters of economic citizenship.”

The inside source ostensibly added that it had taken more than a year to convince CSGP before the contract was finally signed in December 2021. The source posited that it was FIU director Mera and AG Loughman – who opposed the signing of the contract – who had released the contents of the agreement to the public.

“The approach of AG and FIU is highly unprofessional and embarrassing for Vanuatu at large,” the source reportedly told Cronulla News. “I think CSGP might also be reconsidering their association with the government regarding the CBI Programme of our country. There is a conflict within the government, and people will be left alone to pay for that,” he added.

“We are on the verge of getting kicked out of visa-waiver agreement with the EU, and next is the UK; if we lose both, the Citizenship by Investment Programme will no longer be of interest to people. And let me remind you that 50% of our revenue stands on that. If we lose CS Global Partners, we move closer to getting suspension from the EU.”