EU Citizenship by Investment is Dead: Long Live Citizenship by Merit

There’s an old Chinese proverb that says, “上有政策，下有对策” – “Above, there are policies; below, there are countermeasures.”

It’s a timeless reminder that when authorities impose restrictions, those affected by them soon find creative workarounds.

Last month, from above – the European Court of Justice (ECJ) – came a new restriction:

EU citizenship programs may not be “transactional.“

With that word, the ECJ has signaled its intent to end formulaic, structured, price-tagged Citizenship by Investment (CBI) programs across the European Union.

But demand for citizenship in the EU remains stronger than ever, and the companies that used to offer EU CBI will not simply stop catering to it. It will adapt to the new policy through countermeasures:

The Countermeasure: Citizenship by Merit, at Scale And on The Down-Low

You may have noticed that during the years of heated EU criticism of CBI programs in Malta, Cyprus, and Bulgaria, we never once heard a complaint about Austria, which has granted citizenship to hundreds based on investment.

The reason is that Austria doesn’t have a CBI program. Instead, Austria has relied on Citizenship by Merit (alternatively called citizenship by decree, by exception, or by discretion).

These are legal provisions that allow a country to grant citizenship to anyone it considers deserving of it, typically for (broadly defined) “significant contributions” in sciences, arts, sports, business, or similar fields.

Citizenship by Merit (CBM), as a concept, has been around for as long as the concept of citizenship itself has. According to the IMI Citizenship Catalog, 69% of all countries have CBM provisions in their nationality laws.

Each country has the discretion to determine what it considers a “significant contribution”, and the decision is typically left to the discretion of the Prime Minister, the President, Parliament, or the executive branch more broadly.

In some countries, it’s only exercised in exceptional circumstances, such as when French President Emmanuel Macron bestowed citizenship on a Malian migrant to reward him for a conspicuous and selfless act of bravery.

Other countries, such as Austria and Serbia, apply CBM more liberally and in exchange for investments, and it is in countries like these where much investment migration industry ingenuity will focus in the coming years.

Crucial Differences Between CBI and CBM

While both CBI and CBM can lead to a passport, they operate on entirely different legal and practical foundations:

1. Case-by-Case, Not Box-Ticking:
   CBM is not a standardized, formulaic application process. Each case is evaluated individually, allowing governments to maintain full discretion.
2. Nebulous Criteria:
   There are no published thresholds or quotas for what qualifies as a “significant contribution.” This ambiguity makes CBM opaque, but also shields it from accusations of being purely transactional. Firms that are “in the know” may still discern where the de facto price floor sits.
3. Opaque Process:
   Unlike CBI programs, which often publish approval data, processing times, and requirements, CBM operates in the shadows. No public lists, no price tags; just quiet approvals.
4. Shielded from EU Scrutiny:
   While Brussels has aggressively targeted formal CBI programs, it views CBM as a sovereign prerogative of individual member states. This distinction offers legal cover for countries that wish to grant citizenship selectively without triggering EU interference.

Careful What You Wish For

While the ECJ ruling will impact the supply of citizenship, it will do nothing to dampen the demand for citizenship in the EU and in countries on the European periphery.

Countries in regions like the Balkans and the Caucasus would love to raise capital by selling citizenship. But the threat of EU sanctions has deterred them from launching formal CBI programs. Now, these same countries, with the assistance of enterprising investment migration firms, will turn to CBM as the alternative.

The shift will bring greater complexity. Unlike CBI, which offered predictable timelines and fixed fees, CBM is a less precise, more bespoke proposition. But for those who can navigate it, the rewards, including higher fees for consultancies, are substantial.

The crucial question is whether countries and their advisors will attempt to standardize CBM processes by informally defining what qualifies as a “significant contribution.”

The question is to what degree companies and countries will attempt to standardize these CBM paths by putting a defined number on what’s considered a “significant contribution.”

Investors want the predictability of a fixed price. But openly fixing a price would make it “transactional”, potentially drawing the EU’s ire.

The EU banned the commoditization of citizenship through CBI. Now, it will get the commoditization of citizenship through CBM instead.

Instead of fixed-price programs, we will now see Citizenship by Merit, at scale but in private.

As long as demand for citizenship persists, the market will find a way. The cat-and-mouse game of policy from above and countermeasures from below will continue – only now in the shadows.