There are still a lot of question marks surrounding the operation of the Individual Investor Programme (IIP), and the government’s refusal to publish its contract with “concessionaire” Henley and Partners is not helping matters.

The contract was signed nearly a year ago, but only a short extract – detailing the commissions the company was set to receive – has been made public since. And it is not known whether or not the contract has been subsequently amended, considering the numerous revisions of the relevant legislation that have taken place since.

Back in January, Canadian immigration consultant Nuri Katz, president of Apex Capital Partners, told this newspaper that the revisions to the law actually made the programme worse, as it is now more advantageous to Henley and Partners than the original version had been.

The company will be holding the contributions each applicant makes until the process is concluded – a process which, according to the law, can take no less than six months and no more than two years. While this money is in its possession, Henley and Partners will presumably earn any interest accumulated. And since the law makes no mention of escrow arrangements, it does not even prevent the company from using the money in its possession in any way it sees fit, with all the risk that this might involve.

Contacted again by this newspaper, Mr Katz – who is adamant that his company “will not be touching the Maltese programme until Henley is gone” – highlights a few other concerns, and laments that the way the Maltese programme was drawn up was harming the reputation of the industry.

He notes that there has been “all sort of monkey business” concerning such programmes in the past, but adds that Caribbean countries operating such programmes have been working hard to clean up their act. However, Mr Katz maintains, Malta is setting the clock back.

“It’s not only affected my business, but it has affected the views of the whole industry, and that is a great problem for me,” he explains.

A pointless investment requirement

The original version of the programme only obliged applicants to make a “non-refundable contribution” of €650,000, or more if they also wished to acquire citizenship for their spouses, unmarried children and/or dependent parents.

In an apparent bid to appease the European Commission’s concerns over whether applicants granted citizenship were developing a genuine link with Malta, revisions to the already-approved legislation included obliging applicants to invest €150,000 in Malta.

Such a condition appears to be positive – investment creates jobs, after all – but what this investment entailed remained unclear until a notice was published on the 8 July edition of the Government Gazette.

The notice specifies that the investment referred to by the law “shall be in Malta Government Stocks (MGS) which have a maturity date of five years or longer… or in funds with a portfolio of Malta Government Bonds only.”

Technically speaking, that may be an investment, but is hardly likely to create any jobs.

After all, government bonds in Malta are routinely oversubscribed: forcing IIP applicants to acquire them only reduces opportunities for local investors to invest in what is traditionally perceived to be one of the safest investments one can make.

Mr Katz, for his part, flags another concern related to the investment requirement. IIP applicants will most likely have to go through stockbrokers to invest in bonds and prove that they will remain frozen for five years, as required by law, and he questions whether the provision provides another opportunity for someone – possibly Henley itself – to make a profit.

“There is no reason for this requirement to exist because it doesn’t actually benefit anyone,” he notes.

Residency still poorly defined

Another legislative weakness identified by Mr Katz is that the law does not define how IIP applicants actually become legal Malta residents to be able to meet the requirements for citizenship in the first place.

While freedom of movement means that EU nationals are free to live and work in Malta, non-EU nationals – referred to as third-country nationals in national legislation – may be granted residency status for a number of reasons.

According to Article 7 of the Immigration Act, residence permits may be issued by the minister responsible “subject to such conditions as he may deem proper to establish”, which is not meant to empower the government to issue permits on a whim, but to establish regulations governing their issuance.

Subsidiary legislation to the Immigration Act outlines the way in which residence permits are issued to various categories of third-country nationals, including students, asylum-seekers, researchers and highly-skilled workers who qualify for an EU Blue Card.

But no similar provisions specifically address IIP applicants: technically speaking, applicants can only become legal residents if they meet any of the other criteria covered by the law.

Jonathan Cardona, head of Identity Malta

Mr Katz also recalled that the head of Identity Malta, Jonathan Cardona, was reported as stating that effective residency could be proven with a functional address and other circumstantial evidence such as membership of a yacht club.

“I can buy yacht club memberships for many of my clients, but that does not make them residents,” he points out.

The vague descriptions of what it means to be a resident – the lack of proper definitions in Maltese law does not help – also makes Mr Katz suspicious of how objective those assessing applicants can be.

“Nowhere in the world does it say who is going to determine if someone has met the residency requirements,” he points out.

“Applicants have to make an investment, wait a year, somehow become residents – or pretend to be residents – and at the end of the year, somebody says that you have been a resident,” Mr Katz adds.

“But what if this person says no? What happens to the money, does it get refunded,” he asks.

Mr Katz questions whether Henley would end up keeping applicants’ deposit in such cases, pointing out that the law does not specify what happens.

“The whole thing is a mess,” he adds for emphasis.