The State Law Office, in particular, Attorney General (AG) Arnold Kiel Loughman, had advised Prime Minister, Bob Loughman, that the Government should not enter into the agreement with CS Global Partners (CSGP) in its current form.
This came to light as Chairman of the Citizenship Commission, Ronald Warsal, conveyed in a recent statement that in understanding the importance of the programme and its impact on the country, the current coalition government led by PM Loughman has taken proactive stance to review and re-evaluate the architecture of the programme to ensure a robust offering that not only provides economic growth to the people of Vanuatu, but also offers security and protection to the international community.
Mr. Warsal said in line with the nation’s objective, the government has formally finalized the engagement its first international due diligence service provider, UK agency, FACT UK. He said the company, the first several leading global due diligence agencies to be appointed, will provide strong due diligence service to the Vanuatu government citizenship programme.
The Chairman said Vanuatu’s due diligence processes will be further enhanced to ensure that only reputable investors can obtain citizenship and therefore each investor application will undergo a comprehensive and careful audit to mitigate any security, financial crime and reputational risks.
He said the government shall retroactively run full due diligence checks on all CBI applicants granted citizenship in the last six years to ensure that only reputable applicants have been approved. He said if an economic citizen fails the due diligence check, their citizenship will be likely revoked.
But on 16th of December 2021, AG Loughman wrote a letter to PM Loughman saying that on 14 December 2021, the Council of Ministers (COM), in consideration of the proposed contract between the government of Vanuatu and CS Global, decided to have the matter reconsidered.
A special group consisting of First Political Advisor (PA) to the PM, William Timakata, First PA to the Minister of Finance, Benjamin Shing, First PA of Internal Affairs, Georgio Calo, Chairman of the Citizenship Commission, Ronald Warsal, DG of Foreign Affairs, Kalfau Kaloris, Director of Foreign Affairs, Yvon Basil and the AG, held a meeting to consider the proposed contract. At the meeting frank discussions were held, expressing views for and against the proposed contract. The meeting concluded that the State Law Office should provide another advice on the matter.
Following that meeting, AG Loughman wrote to the Prime Minister on 16th of December 2021, stating: “We understand this matter had come before COM on one or two occasions previously but was deferred for further consultations. On 1st of October 2021, we issued an advice on the matter, addressed to the Chairman of the Citizenship Commission, Mr. Ronald Warsal, Secretary General of the Commission, Mr. Denny Virahake Gaua, Director General of the PM’s Office, Dr Gregoire Nimbtik and the First Political Advisor to the PM’s Office, Mr. John Timakata.
“In that advice, we concluded the agreement needed further negotiations and that it needed to get the Tender Board’s approval. On 30th of November 2021, we issued the second advice addressed to the Minister of Finance and copied to others including yourself. In that advice, we raised our reservations regarding, amongst other things, the PFEM Act requirements, especially in relation to appropriation under part 8 of the Act and we concluded that government should not enter the contract in its current form.”
The AG also referred to an advice from the Minister of Finance dated November 29, 2021 which raises very important points and concludes that if executed, the proposed contract could breach provisions of the Government Contracts and Tenders Act [CAP245] and the Public Finance Economic Management (PFEM) Act [CAP245].
It maintained its views as expressed in its advice on November 30, 2021 and that is to consider certain provisions of the agreement.
The agreement states that the government desires to reform the Citizenship by Investment framework to ensure the longevity of this FDI route.
“And that the government wish to engage a competent independent consulting firm to support the government’s objectives to develop the Citizenship by Investment offer globally through effective marketing services and with the purpose to promote the program to reputable applicants.”
The Appointment (2.3) states: “In consideration of CSGP accepting its appointment under this agreement, the government represents and warrants as at the date of this agreement…”.
The State Law Office said the language of clause 2.3 is such that if the contract is executed in its current form, it could be in breach of section 60 of the PFEM Act. Section 60 of the PFEM Act requires that any guarantees and indemnity could only be given with the prior approval of Parliament.
Under the agreement, the role of CSGP is to promote and market Vanuatu’s citizenship by investment options in the international market, promote strategic marketing advice in support of the citizenship by investment options and the future development of any revised or newly developed citizenship by investment options, recommend strategies to manage risks and mitigate adverse perceptions of the citizenship investment by options.
It will also evaluate the citizenship by investment options and provide the government with recommendations on how to enhance the citizenship by investment options, wherever possible protect the citizenship by investment programs through dialogue with international partners and organizations, provides strategies to the government to address government concerns about the management of the programs and to protect the reputation of the programs, suggest modifications which may include review of legislation and due diligence frameworks to enhance the attractiveness of the citizenship by investment options, provide recommendations on the adoption and implementation of the new investment options.
The definition of program is wide enough to include the current DSP program and also the REO program the government recently entered into.
From the commencement date, the government shall pay USD10,000 to CSGP, which is equivalent to over VT1 million for each successful applicant under the program.
The AG also noted while the agreement outlines CSGP’s roles and responsibilities, there is no reporting obligation to the Government on its activities and no clear indication of how the government will monitor it, to ensure it honors its obligations.
In addition, while CSGP holds itself as a “leading international Citizenship by Investment Marketing Consultancy,” however the government already knows how much annual revenue DSP makes for the country.
The AG noted the contract does not show what added value in terms of money this contract will bring to the government and country to what it is already earning through DSP.
In light of all these, the AG told the PM that their advice is that the contract in its current form will not benefit the government and therefore the government must not execute the contract in its current form.
The Director of Vanuatu’s Financial Intelligence Unit (FIU), Floyd Ray Mera, said it is unfortunate to learn of Vanuatu Citizenship Commission’s announcement of the appointment of this international company without consulting the FIU, which breaches Vanuatu’s regulations.
Mr. Mera said the information the FIU has received regarding the value of the contract signed by Mr. Warsal is VT6 billion over a 5-year period. This is a huge increase, in comparison to the costs by FIU of less than VT1 million annually, despite the duplication of due diligence process.
He said the efforts to address the imminent partial suspension of the Visa Waiver Agreement with EU as raised by the European Commission may be more effectively addressed by implementing stronger internal controls within citizenship program, to complement the engagement of the international specialist firm.
Mr. Mera said the FIU expects to finalize the review and recommendation to the successful international specialist firm in the near future.
The Director said the Citizenship Program that was amended in 2020 requires for the international specialist firm to be engaged by the FIU, and not by Vanuatu Citizenship Commission. It also defines that the international specialist firm in reference be a globally reputable firm which specializes in citizenship and visa in due diligence checks.
“As such, the FIU has promptly commenced its review of highly international specialist firms and has three prospective options that are currently being reviewed,” he said.
“Of late, two of three international companies remain on the table having satisfied the latest criteria of due diligence checks based on competency and reputation. Costs are also being negotiated in order the ensure a long-term affordability on behalf of the Vanuatu government.”
Meanwhile, a reliable source close to the Prime Minister’s Office (PMO) told Daily Post that a staff from the PMO reportedly boarded a flight and took the agreement with CSGP to PM Loughman while he was on his home island of Tanna on December 31, 2021 so he could sign the agreement.
But this did not eventuate and as a result, Chairman Warsal signed the agreement. Sources said a junior staff of the Citizenship Office also signed the agreement because another attempt to get the signature of the Secretary General of the Commission was also unsuccessful.
Leader of the Opposition bloc, Ralph Regenvanu, said the European Union’s requirements triggered the review of citizenship program, and one of the recommendations under the previous Salwai-led government was to identify and appoint a reputable international company to do due diligence.
Mr. Regenvanu said the only role of such a company is to carry out the due diligence services on the applicants and not marketing.
On the same issue, Chairman Warsal has responded to an Op-Ed published by Daily Post this week, saying it wasn’t an individual decision taken by him but rather a collective decision on a paper presented by the PM to the Council of Ministers (COM) on three occasions.
He said it passed through the CTB and it was approved by COM in December 2021. However, this cannot be officially confirmed and it cannot be ascertained whether there were some changes made to the agreement after the AG’s advice, because repeated attempts to get a copy of this COM decision since Monday this week were futile.
