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.Footnote ⁸ For more than thirty years, Nottebohm spent most of his time in Guatemala, only occasionally returning to Germany for business.Footnote 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”.Footnote 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”.Footnote 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.Footnote 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.Footnote 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.Footnote 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.”Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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.Footnote 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”,Footnote ²² and that:

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”.Footnote 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.Footnote 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”.Footnote 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”.Footnote 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”.Footnote 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”.Footnote 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”.Footnote ³⁰ In the much-quoted extract that is often labelled the “genuine link” requirement, the ICJ observed that:

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

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”.Footnote 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”.Footnote ³⁴

The rule of “real and effective” nationality has been widely recognized as a rule of customary international law.Footnote 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:

The ICJ found that Nottebohm's “actual connections with Liechtenstein were extremely tenuous” and thus his nationality was not “real and effective”.Footnote 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”Footnote ³⁸ or “discontinuous with pre-existing law”.Footnote ³⁹ The predominant view is that the ICJ wrongly drew from a rule of customary international law that only applies to dual nationals:

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”.Footnote ⁴¹ The very same question was raised before the “international arbitrators” who decided cases of diplomatic protection involving dual nationals.Footnote 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.Footnote 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.”Footnote 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”.Footnote 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.Footnote 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.Footnote ⁴⁷ The ILC also remarked that the so-called “genuine link” requirement would:

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

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”.Footnote ⁵⁰ Moreover, diplomatic protection has been replaced by alternative methods of dispute resolution, such as investor-state dispute settlement mechanisms under investment treaties.Footnote 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.Footnote ⁵² The rapid “increase of in international migrants has been one of the main manifestations of globalization”,Footnote ⁵³ and has in turn altered “the structure and meaning of citizenship and nation in the contemporary world”.Footnote ⁵⁴ As Wagner notes, “[g]lobalization and liberalism … have created an environment that has unshackled the idea that nationality is a sacred status”,Footnote ⁵⁵ leading to the “‘inevitable lightening’ of citizenship in liberal societies”.Footnote 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”.Footnote 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”.Footnote ⁵⁸ People can “collect citizenship at a very little cost without any meaningful attachment to those states in which citizenship is maintained”.Footnote ⁵⁹ As we shall see, CBI schemes is a perfect illustration of this phenomenon, which has raised a “citizenship industry”.Footnote ⁶⁰ Sloane aptly notes, therefore, that “as the obligations associated with citizenship dwindle, individuals increasingly adopt nationalities of convenience”.Footnote 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.Footnote 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.Footnote 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”.Footnote ⁶⁴ Nationality can, in this regard, become a “weapon” with different functions, including its use against another State.Footnote 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”.Footnote ⁶⁶ The ICJ agreed with Guatemala that:

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.Footnote 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”.Footnote 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”.Footnote 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:

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”.Footnote ⁷²

Sloane wrote that “[t]he expedient acquisition of Liechtenstein's nationality … struck the ICJ as abusive and potentially prejudicial” to Guatemala.Footnote 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”.Footnote ⁷⁴ Other authors, including the former Special Rapporteur of the ILC, John Dugard, agreed with this reading of the judgment.Footnote 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”.Footnote 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”.Footnote 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”.Footnote 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”.Footnote 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.

A. Concerns Raised by CBI Schemes

CBI can be defined as a “privileged and fast-track naturalization”Footnote ⁸⁰ procedure that allows high-net-worth individuals to acquire a second citizenship in exchange for an economic contribution to the granting State.Footnote ⁸¹ To be sure, “the applicant's wallet is the core, if not the sole criterion determining whether gates of admission will open”.Footnote ⁸² CBI is, in plain terms, a “passport-selling”Footnote ⁸³ mechanism that contributes to the marketization of citizenship.Footnote 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.Footnote 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.Footnote ⁸⁶ Joppke argues that the practice of combining jus sanguinis and jus soli “approximate the ‘genuine connection’ requirement” as expressed in the Nottebohm judgment.Footnote 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.Footnote 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.Footnote 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”.Footnote ⁹⁰ In Van den Brink's words, “the requirements imposed by states typically guarantee that genuine links exist by the time of [regular] naturalization”.Footnote ⁹¹

CBI schemes enable wealthy individuals “to jump the regular naturalization queue”.Footnote 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”.Footnote 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.Footnote 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”.Footnote ⁹⁵

Until recently, three Member States (Bulgaria, Cyprus, and Malta) had CBI programmes that allowed third-country nationals to purchase their nationality.Footnote 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.Footnote 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”.Footnote 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”.Footnote 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.Footnote 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.Footnote 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]”.Footnote ¹⁰²

These risks, the European Commission rightly observed, “are exacerbated by the cross-border rights associated with citizenship of the Union”.Footnote 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.Footnote ¹⁰⁴ It is precisely the benefits of EU citizenship that are often advertised as the most attractive feature of CBI schemes.Footnote ¹⁰⁵ To concur with Joppke, therefore, the “post-national” EU citizenship has “instrumentalism written on its forehead in terms of free movement rights”.Footnote 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”.Footnote 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”.Footnote 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”.Footnote ¹⁰⁹ In this regard, the EPRS also pointed to the “inherent lack of fairness” that the regimes represent.Footnote 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”.Footnote 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.Footnote ¹¹² In response, only Bulgaria and Cyprus terminated their schemes, on 5 April 2022 and 1 November 2020, respectively.Footnote 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.Footnote 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”.Footnote 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”.Footnote 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.Footnote 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”.Footnote 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”.Footnote ¹¹⁹ The second is that, to quote D'Oliveira, the CJEU actually “denied the impact of Nottebohm for Community purposes” in the Micheletti case.Footnote 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”.Footnote 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).Footnote 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).Footnote ¹²³ Accordingly, domestic rules on the loss and acquisition of nationality, in principle, fall within the reserved domain of Member States.Footnote 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”,Footnote 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.Footnote 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.”Footnote 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.Footnote 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.Footnote 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:

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.Footnote 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:

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”.Footnote 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”.Footnote 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.Footnote 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.Footnote 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.Footnote 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”.Footnote 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”.Footnote 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:

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.Footnote 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.Footnote 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.Footnote 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.Footnote ¹⁴⁴ This included “the right to respect for family life as stated in Article 7” of the Charter of Fundamental Rights of the EU.Footnote ¹⁴⁵

This consistent case law shows how the CJEU has “challenged Member State sovereignty in nationality law”.Footnote ¹⁴⁶ As the “final arbiter” in this domain,Footnote ¹⁴⁷ the Court has “unreservedly embraced [the] position that Member States are not absolutely free in framing their nationalities as they see fit”.Footnote 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.Footnote 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.Footnote 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]”.Footnote 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.Footnote ¹⁵² To concur with Van den Brink:

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”.Footnote 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.Footnote 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”.Footnote 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 soFootnote ¹⁵⁷ while others consider that “[i]t will be difficult for the Court to justify broadening the reach of its case law”.Footnote 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”Footnote 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.

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”.Footnote 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.Footnote 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:

Although corporate restructuring has generally been considered a “perfectly legitimate goal”,Footnote 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.Footnote 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.Footnote 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.Footnote 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 BITFootnote ¹⁷¹

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

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.Footnote 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]”.Footnote 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,Footnote 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.Footnote 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”,Footnote ¹⁷⁹ a global order of “overlapping authorities and criss-crossing loyalties”.Footnote ¹⁸⁰ As such, it is not excluded that natural persons also resort to strategic nationality practices with the intent to secure investment protection.Footnote 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.Footnote ¹⁸² One of these cases was Okuashvili v. Georgia.Footnote 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”.Footnote 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”.Footnote 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]”.Footnote 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”.Footnote 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”.Footnote 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.Footnote 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”.Footnote 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,Footnote ¹⁹¹ following which he filed a second request for arbitration.Footnote 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.Footnote ¹⁹³ Croatia relied on the approach taken by tribunals that applied the abuse of rights doctrine in cases involving corporate restructuring.Footnote 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”.Footnote 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”.Footnote 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).Footnote 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]”.Footnote 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”.Footnote 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”.Footnote 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”.Footnote 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.