Abuse of dual nationality: you can’t have your cake and eat it too

Jun 30, 2020

This article is written by Marco Mazzeschi and contributed to our publication on Medium.com.

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Dual nationality is allowed by an increasing number of States, but it cannot be used to obtain benefits which the individual would not be otherwise entitled to.

In recent years there has been an increasing interest by many individuals in obtaining a second citizenship and a growing number of States have changed their legislations allowing the retention of nationality even in case of acquisition of a second citizenship.

A special interest is for obtaining citizenship and passport from an EU country, that can give to the holder and his family the possibility of living and working freely in any of the EU countries without need of obtaining any visas. EU bodies have raised some concerns about the pitfalls of many “citizenship by investment” schemes which are offered by some States. The EU pointed out that obtaining a residence permit and/or citizenship through these schemes can give access to very favourable tax regimes, and raises both questions of fairness and concerns regarding the risks.

The acquisition of a second citizenship can also create some issues when an individual seeks State’s diplomatic protection.

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Dual nationality and diplomatic protection under international law

There is a global trend towards a general acceptance of dual nationality and many States have recently changed their legislations in order to allow the retention of nationality even in case their citizens naturalize elsewhere. Dual nationality can however cause some conflicts in case an individual seeks diplomatic protection against a State whose nationality such person also possesses. The 1930 Hague Convention on conflict of nationality laws, set forth that in this case a State may not afford diplomatic protection. Even though very few countries have ratified The Hague Convention, this provision (so called non-responsibility rule) has been for many years customarily accepted in international law. The US State Department, for example, underlines that: “the US Government recognizes that dual nationality exists but does not encourage it as a matter of policy because ……… may limit US Government efforts to assist citizens abroad”.

Other Governments have the same position on the matter. The Australian Government indicates that “may be limited in its ability to provide you with consular assistance should you seek it.” The Canadian Department of Foreign Affairs outlines that “ … some countries do not legally recognize dual citizenship. This may limit or even prevent Canadian officials from assisting you, especially if you are incarcerated. Finally, the UK Home Office, points out that “As a dual national you can’t get diplomatic help from the Britishgovernment when you are in the other country where you hold citizenship.” Therefore, even though dual citizenship is in most cases allowed, many States are still discouraging their nationals in pursuing it.

Effective and dominant nationality

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But what happens in case of conflicts between nationalities? The non-responsibility rule seems no longer the prevailing principle applicable to cases where issues arise to conflicting nationalities. During recent years is being replaced by the principle of “effective nationality”

an individual’s claim may also be presented against a State of which the individual is citizen, as long as the connection with the claimant State is prevalent.

In the milestone case Liechtenstein v Guatemala (Nottebohm case), the International Court of Justice affirmed that international arbitrators have given their preference to the real and effective nationality, which is based on stronger factual ties between the person concerned and one of the States whose nationality is involved. Factors which are taken into consideration for determining that the link is effective are:

  • the habitual residence of the individual
  • 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
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Effective nationality must be based on strong factual ties

After the Nottebohm decision, the “effective nationality” principle has been confirmed by many Tribunals. The Iran-United States Claims Tribunal in Case No. A-18, for example, affirmed that is the rule of real and effective nationality and the search for stronger factual ties between the person concerned and the one of the States whose nationality is involvedthat must be taken into account. The same tribunal, Case n. 296 Bavanati, dismissed a compensation case brought by an Iranian-US dual national because “evidence shows that since 1974, when the claimant moved to Germany, his habitual residence, center of interest, family ties, participation in public life and other attachments have been insufficient to support a finding that Mr. Bavanati’s links to United States were dominant over his links to Iran …”.

In case of conflicts of nationalities, it is therefore the effective and dominant link of an individual to a State that will prevail over a citizenship which is held only formally by a person, but with no links or allegiance to the State.

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Genuine link theory cannot be generalized

The Nottebohm award was not unanimous and some of the judges and some authors have expressed dissenting opinions for various reasons. The possible limitations to the general applicability to all cases of the “genuine link” doctrine were clearly acknowledged in case Flegenheimer decided in 1957 by the Italian-US Concilation Commission. The Tribunal recognized, in fact, that if the genuine link doctrine were to be generalized, thousands of persons who possess the nationality of a State but have their centre of interest, family and business in another State, would be exposed to non-recognition of their nationality.

As pointed out by UN Special Rapporteur, John Dugarde:

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. The genuine link theory, if applied strictly, would exclude them from the benefit of diplomatic protection.

Abuse of nationality

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Dual nationals can also be subject to another limitation when seeking diplomatic protection of their interests by one of the States of which they are nationals. The Nottebohm award, evidenced that situations of abuse of dual nationality may occur. The Court indicated in fact that, in the case of Mr. Nottebohm, naturalization was asked for not so much for the purpose of obtaining a legal recognition of his bond and allegiance to Liechtenstein, but with the sole purpose to enable him to substitute for his status as a national of a belligerent State (Germany) that of a national of a neutral State (Liechtenstein). Mr. Bottehom did not show any intent of becoming wedded to Liechtenstein’s 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.

Judge Guggenheim noted that “nationality acquired for the sole purpose of claiming diplomatic protection … forms part of a transaction which is to be regarded as generally fraudulent and a State may refuse to recognize the change of nationality”.

Effective nationality cannot be disguised in order to obtain illegittimate benefits

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The concept of a possible abuse of dual nationality was further expanded in case A-18 and in other cases decided by the Iran-US Tribunal. In fact, among the most controversial claims to be decided by the tribunal were those brought by individuals who held both the Iran and US citizenship. In judging those cases, the Tribunal affirmed the principle that

dual nationality cannot abused, i.e. the Tribunal could deny jurisdiction on equitable grounds in cases of fraudulent use of nationality.

In the Case Esphahanian, the Tribunal affirmed that “Such a case might occur where an individual disguises his dominant and effective nationality in order to obtain benefits with his secondary nationality”. Judge Mosk, in his concurring opinion for case A-18, affirmed that the use by a United States citizen of his or her Iranian nationality in a fraudulent or other inappropriate manner might adversely affect the claim by that person. In the case Saghi, the Tribunal denied the claim because the claimant “had consciously sought and obtained Iranian nationality solely for the purpose of having certain shares …placed in his name in order to minimize the adverse effects of the Law of Expansion. … To rule otherwise would be to permit an abuse of right”.


Dual nationality cannot therefore be used by an individual in a fraudulent manner, in order to obtain benefits to which he would not be otherwise entitled to.

Nationality planning and “treaty shopping” by corporations

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The same principles apply to corporations, when they structure or restructure their holdings, in a way to secure deliberately the protection of certain investment treaties or legislations. A domestic investor that would not otherwise benefit from the rights of foreign investors may form a company, for example, in a ICSID contracting State with its home country as a vehicle to be able to bring claims against its State. To avoid this practice, commonly known as nationality planning or treaty shopping, International Courts have developed the concept of abuse of process. One of the most recent and publicly known case in which the doctrine was applied is the arbitration brought by Philip Morris against the Government of Australia. The case originated after Australia enacted the Tobacco Plain Packaging Act, a legislation that removed brands from cigarette packs. Philip Morris served a Notice of Arbitration against Australia claiming that the enacted legislation amounted to an expropriation of its intellectual property rights. The Tribunal concluded that the initiation of the arbitration constitutes an abuse of rights, as the corporate restructuring by which Philip Morris acquired the Australian subsidiaries occurred at a time when there was a reasonable prospect that the dispute would materialise and as it was carried out for the principal, if not sole, purpose of gaining Treaty protection.

Conclusions

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It is an established principle in international law that it is for each State to determine under its law who are its nationals. But States’ attribution of nationality under their internal laws shall be recognized by other States in so far as it is consistent with international conventions, international custom and the principle of law generally recognized with regard to nationality. After the Nottebohm decision by the International Court of Justice most of tribunals have accepted the “dominant and effective link” theory, even though this theory has been contested because it cannot be generalized.

In case of conflict of nationalities, the nationality of the State of which the individual has a genuine connection and bond will prevail. The genuinity and dominance of the connection shall be assessed taking into account the person’s habitual residence and other factors such as the centre of his interests, his family ties, his participation in public life, and other attachments.

Dual nationality has some limitations. It can limit the State’s ability to protect its citizens abroad and, more important, cannot be used fraudulently in order to obtain benefits to which an individual would otherwise not be entitled to.

Marco Mazzeschi

Attorney at law. One of the leading corporate immigration lawyers in Italy. Admitted to the Milan Bar Association (1988) and to the Taipei Bar Association (2016), a member of the American Immigration Lawyers Association (AILA) and an accredited partner of Invest in Tuscany.

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