Dual nationality and abuse of right: 76 per cent out of 200 countries tolerate dual citizenship. But what happens when dual nationality is used to obtain benefits which the individual would not be otherwise entitled to?
Source: Citizenship and migration | Migration data portal
Key Principles and Challenges of Dual Nationality under International Law
- Each State can determine who are its own nationals: It is an established principle in international law that it is for each State to determine under its law who are its nationals
- States’ attribution of nationality must be recognized by other States: States’ nationality laws are recognized internationally only if they align with international conventions, customary law, and generally accepted legal principles.
- Genuine link: most of tribunals have accepted the “dominant and effective link” theory. In nationality conflicts, the individual’s nationality with the State they have a genuine connection to will take precedence.
- The genuine link of the individual with a State is determined with several criteria: the genuineness and dominance of the connection are assessed based on habitual residence, center of interests, family ties, public life participation, and other attachments.
- Genuine link doctrine cannot be generalized: some scholars and arbitrators question the broad use of the genuine link doctrine, as it could deny recognition to many with formal nationality but foreign ties.
- Dual nationality cannot be used fraudulently: acquisition or renounciation of nationality in order to obtain benefits to which an individual would otherwise not be entitled to is considered an abuse of right (abuse of process). 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.
Dual nationality and diplomatic protection under international law
Dual nationality can 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. Although few countries have ratified The Hague Convention, the non-responsibility rule it contains has long been accepted as customary international law.
Dual nationality, Effective and dominant nationality
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: (i) the habitual residence of the individual; (ii) the centre of his interests; (iii) his family ties, his participation in public life; (iv) attachment shown by him for a given country and inculcated in his children.
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 involved, that 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 …”.
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.
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 acknowledged that applying the genuine link doctrine could lead to many nationals being denied recognition if their main ties lie in another State.
As pointed out by UN Special Rapporteur, John Dugarde:
Abuse of nationality
Dual nationals may face limitations when seeking diplomatic protection from one of their States of nationality. The Nottebohm award, evidenced that situations of abuse of dual nationality may occur. In the Nottebohm case, the Court found that naturalization was sought mainly to replace German nationality with Liechtenstein’s for strategic, not genuine, reasons. Mr. Nottebohm showed no intention to adopt Liechtenstein’s traditions, interests, lifestyle, or fulfill obligations beyond tax responsibilities. Judge Guggenheim noted that
Effective nationality cannot be disguised in order to obtain illegittimate benefits
The concept of a possible abuse of dual nationality was further expanded The Iran-United States Claims Tribunal in Case No. A-18, and in other cases decided by the Iran-US Tribunal. Some of the most controversial tribunal claims involved individuals holding both Iranian and U.S. citizenship, raising complex dual nationality issues. While 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 benefitswith 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”.
More recently, in the 19 May 2023 Award in Mihaljević v Croatia(a dispute submitted to ICSID), Croatia challenged the Tribunal’s jurisdiction, arguing — amongst other objections — that
(i) the Claimant committed an abuse of process (or abuse of rights) by attempting to revoke his host State nationality after the dispute had arisen, with the sole purpose of circumventing ICSID’s host State nationality restriction;
(ii) there exists a consistent practice that a change of the claimant’s nationality to manufacture jurisdiction rationae personae in a particular dispute is an abuse of process”.
Also in the Concurring Opinion of Ms. Maria Vicien-Milburn it was pointed out that:
“Such abuse may, in my view, arise equally in the case of acquisition or renunciation of nationality, since both entail an alteration of form designed to obtain a right that would not otherwise exist.”
and
“For 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.”
Nationality planning and “treaty shopping” by corporations
The same principles apply to corporations that structure or restructure holdings to deliberately gain protection under specific investment treaties or laws. A domestic investor may create a foreign company to access ICSID protections and bring claims against its own State as a foreign investor. 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
Approximately 76% of 200 countries surveyed now tolerate dual or multiple citizenship, marking a significant shift in the global landscape.
This growing acceptance is driven as (i) an unavoidable consequence of gender equality (mothers as well as fathers can transmit their citizenship to the child by descent), (ii) transnational migration (migrants and their children acquire the citizenship of the destination country while retaining the citizenship of the origin country)and (iii) in part by the increasing number of countries offering citizenship by investment (CBI) programs, which has sparked interest among individuals seeking a second citizenship for various reasons.
Manipulating citizenship to gain rights not otherwise available is considered an abuse of process and may be treated as fraudulent in international arbitration.
In such cases, a state may refuse to recognize the change in nationality, highlighting the importance of genuine intentions and transparency in citizenship matters.
