The Cyprus Investment Program seemed problematic from the beginning and even the amendments could not save and protect the abuse of the Program. The Cyprus Government decided to terminate the Program with final submission date the 30th of October 2020 after amending the Law regulating the Citizenship by Investment Program. The new policy of the Government let to many rejections of new applications and initiated many revocation procedure for investors who had already received the Cypriot passport.
Administrative law – Challenge of Governmental decisions
The administration and public authorities have wide discretionary decision-making powers but an administrative act may be challenged if they are exercised arbitrarily, without any control violating the Constitution, the Administrative law, the European law, established principles and caselaw. In order to annul an administrative act, someone needs to invoke certain reasons of invalidity as dictated in article 146 of the Constitution. Even one reason suffices to lead to the annulment and some of the reasons are the following:
- Violation of the Law in General
- Violation of the Law: General Administrative Principles Law
- Violation of the Law: Constitution & Constitutional rights
- Violation of the Principles of Good Administration
- Abuse of Administrative Power
- Non – Compliance of the Administration with Decisions of the Supreme Court
- Lack of Adequate Reasoning & Insufficient Research
For better understanding of the above we have made a short analysis of the two occasions with focus on the Cyprus Administrative Law.
Rejection of CIP Applications
The law dictates that the decisions of the Authorities must be sufficiently and dully justified be specific and apparent so it will not leave any doubt as to the real reason which led the administration to issue that decision. Lack of proper justification is a very common reason for challenging decisions of the Administration with regards to abuse of its discretionary powers. Furthermore, the Administration cannot decide in advance and in a general way for cases which may occur in the future. They are obliged to conduct adequate investigation of all relevant facts of the case before issuing a decision.
If the Authorities declined a CIP applications without proper justification and/or did not proceed with sufficient investigations before issuing their decision and/or their decision based on incorrect or false information, the investor affected, may challenge the decision before the administrative courts since the rejection was issued in violation of the discretionary powers of the Authorities.
Revocation of Passports
The revocation of passports is regulated by the new amending Law 145(I)/2020 of the Civil Registry Law (the “Amending Law”).
There is no explicit provision securing the retroactive effect and therefore, the general principles must be applied according to subparagraph 3, of article 54 of 158(I)/1999 Law, and only for reasons of public interest. However, the public interest cannot supersede every case, and thus the elapse of reasonable time is a crucial factor for the administration. The existence of the reasonable time is examined by the circumstances of each case.
It is allowed to revoke an illegal administrative act - even after a reasonable period of time - if it was issued after fraudulent or deceptive action of the interested party or when the person concerned was aware of the illegality of the transaction at the time of its issuance or on grounds of public interest. However it is not permitted to simply invoke the previous decision based on public interest. The Administration has the obligation to specifically justify and provide in detail the reasons of why public interest supersede (or not), taking in consideration as well the implications of possible violations of the Constitution and the vested rights of the individuals affected.
The reasonable trust of the citizens in the current legal framework and their legitimate expectation is based on the principle of the constitutionality of the rule of law. Thus, a revocation under Article 54(3) on grounds of public interest, can be further challenged suggesting possible violation of the principles of equality, good faith, legitimate expectation, proportionality and statelessness as analysed below. We believe that these principles in many cases (citizenships granted before 2015) surpasses the public interest. Further on, the principle of proportionality includes the elements of appropriateness, necessity, and proportionality, i.e. the administrative measure must be appropriate for the purpose pursued, necessary and choose the solution that has the least possible disadvantages for the citizen. Simply put, there must be a fair balance of conflicting legitimate interests.
The good faith and the legitimate expectation of the citizen may also be violated since the administration - according to this principle - shall avoid from acting inconsistently, contrary and in bad faith, so that it deceits and bring hardship to the administered without reason, and thus impairing the legitimate expectation and reasonable trust of the citizen to the Administration. Additionally, the Administration is also not permitted to cancel ex-post in a particular case incentives provided by law to attract certain behaviour of the governed (Investment Program).
Furthermore, the administration is not entitled - citing its own omissions - to ignore a situation favourable to the citizen, for which it is not the fault of the administered. Especially, if it has lasted for a long time the administration shall neither deny the benefits nor the legal consequences that arose in favour of the governed. The principle of good faith is of particular importance in relation to the revocation of administrative acts, albeit illegal, which in the meantime (especially after a reasonable time) created rights and generally favourable circumstances for the governed.
For the matter at issue there is a very interesting case "Rottmann", where according to the conclusions of the European Court of Justice, the authorities should consider the possibility that in case of revocation, the citizen will remain stateless. The importance of the case, however, is that the court equated European citizenship with other nationalities, so if the citizen loses his European citizenship, he will be considered stateless, even if he holds another citizenship of a Non-Member State.
Under the Amending Law, which passed by the House of Representatives on August 2020, Article 113 is amended and states that: “It is understood that, in case a person has been deprived of the status of a citizen of the Republic which he acquired under Article 111A, no investment and/or contribution of money and/or donation made to the Republic and/or which was the reason for the granting of the citizenship of the Republic is returned”. Even in circumstances that the government directly or indirectly expropriates the assets of the citizen (since no remuneration is provided) in grounds of public interest, then he/she may be entitled for compensation by the Republic either with the help of the National Law or the International Investment Law.
In both cases, the complainant can challenge these decisions before the administrative court if all the typical requirements are in place. The steps for the first case are quite simple since the decline of the application consists an administrative act which as such can be challenged before the administrative courts. However, the second case is more complex and has many stages that the complainant may try with preliminary actions block a decision. It is important to remember that when a case comes before the courts, no legal status changes until there is a court order, and therefore even if there are little possibilities of winning, time can be used in favour of the complainant.
Disclaimer: This explanatory report is limited to the matters expressly mentioned above and no opinion is implied or inferred beyond the issues and questions expressly mentioned herein. We have not been asked to issue any legal opinion and the above analysis and assumption do not apply directly or indirectly on any case.