Reciprocity: Definition
Reciprocity in law refers to a principle of private international law that governs relations between states. Jurisprudence defines the principle of reciprocity as the “condition of effectiveness of the rule that grants a right to a foreigner,” further specifying that reciprocity is relevant “not as the foundation of the right but as a condition of effectiveness of the aforementioned rule” (Cass. SS.UU. Sent. 18 March 1999, No. 147).
Three types of reciprocity can be identified:
- Diplomatic
- Legislative
- De facto
Diplomatic reciprocity involves treating foreigners on par with citizens to the extent provided and regulated by specific intergovernmental agreements.
Legislative reciprocity exists when the legal system of a foreign state includes a provision that grants foreigners the same rights as its own citizens. Therefore, an Italian citizen can exercise the same rights in that foreign state as the rights that foreigners can claim in Italy.
De facto or substantial reciprocity occurs when, regardless of formal legal provisions, the foreign legal system allows its citizens to enjoy the rights that the foreigner seeks to benefit from. In this case, the assessment is not limited to verifying the legislation of the foreign country but also takes into account customary practices.
To clarify the concept, an example may be useful to observe the practical implications. For instance, a North Korean citizen may only be able to purchase a property in Italy if an Italian citizen could make a similar purchase in North Korea.
Regarding the more purely legal aspect, the Italian legal system’s references to the principle of reciprocity are contained in various sources. Starting with the Constitution, Article 10 states that the Italian legal system conforms to the norms of internationally recognized law. Article 117 further states that “legislative power is exercised by the State and the Regions in compliance with the Constitution, as well as the constraints arising from community legislation and international obligations.” Thus, the application of the principle of reciprocity is conditioned by obligations assumed by Italy based on bilateral or multilateral agreements (including agreements concluded by the EU) involving the state subject to the verification of reciprocity.
Another legislative source that includes the principle of reciprocity is Article 16 of the general law provisions, also known as preliminary legislation or preliminary discipline “Preleggi” of the Civil Code. It states that “a foreigner is allowed to enjoy the civil rights granted to citizens subject to reciprocity and subject to provisions contained in special laws. This provision also applies to foreign legal persons.”
Moreover, the principle of reciprocity is mentioned in Legislative Decree 25 July 1998, No. 286 (Consolidated Immigration Law and Regulations on Foreigners’ Status), and its related implementing regulation (Presidential Decree 31 August 1999, No. 394).
Reciprocity is fundamental, especially as a preliminary step to any type of legal transaction. It represents an essential verification, and according to prevailing doctrine, the condition of reciprocity, meaning the possibility for an Italian citizen to exercise the same right in the foreign country of the foreign citizen, is a foundational and necessary element for the foreigner to acquire legal capacity concerning that right. The consequence of the lack of reciprocity would be the radical nullity of the legal transaction, which cannot be cured through validation or authorization, as the legally incapacitated person is denied the capacity to be the holder of the relationship, even through a representative. This preliminary assessment is crucial to determine whether the foreigner has the actual capacity to engage in specific legal activities. If the check results in a negative outcome, the foreigner lacks legal capacity, and any transaction attempted is invalid and punishable with irremediable nullity.
It would seem, therefore, that reciprocity would be an indispensable test, yet there are cases of exemption.
Exemption from the verification of reciprocity
There are cases where it is not necessary to verify the condition of reciprocity. According to Legislative Decree 25 July 1998, No. 286, the following individuals are treated on par with Italian citizens and are therefore exempted from the verification of reciprocity:
- Citizens (natural or legal persons) of European Union Member States, as well as citizens of EEA countries (Iceland, Liechtenstein, and Norway);
- Non-EU citizens residing in Italian territory and holding a residence permit or a regular stay permit issued for reasons of subordinate work, self-employment, exercising a business, family reunification, humanitarian reasons, and study purposes;
- Stateless individuals who have been residents in Italy for at least 3 years;
- Refugees who have been residents for at least 3 years;
- Citizens of those countries with which Italy has concluded bilateral agreements regarding the promotion and protection of investments (Bilateral Investment Treaties, or BITs).
EU citizens
The first case of exemption from the verification of reciprocity concerns citizenship (or nationality in the case of entities) of a European Union member state. Both the Treaty on the Functioning of the European Union of 25 March 1957 (TFEU) and the Treaty on European Union of 7 February 1992 (TUE) contain provisions that prohibit any discrimination among European citizens, especially concerning reciprocity.
In particular, the following provisions apply:
- Article 18 TFEU (within the scope of application of the treaties, and without prejudice to the special provisions contained therein, any discrimination based on nationality is prohibited);
- Article 49 TFEU (restrictions on the freedom of establishment of citizens of one member state in the territory of another member state are prohibited based on the freedom of establishment);
- Article 6 TUE (the Union recognizes the rights, freedoms, and principles set out in the Charter of Fundamental Rights of the European Union of 7 December 2000).
Switzerland
A separate consideration concerns Switzerland. Switzerland is part of the EFTA countries (European Free Trade Association), which also includes Norway, Iceland, and Liechtenstein. The EFTA was established by the Stockholm Convention of 1970, now replaced by the Vaduz Convention. Except for Switzerland, Liechtenstein, Iceland, and Norway, the other countries are also part of the European Union’s Internal Market under the European Economic Area (EEA) Agreement signed in Oporto on 2 May 1992, which includes principles of free movement of goods, persons, services, and capital. However, Switzerland did not ratify the agreement, meaning its citizens are not treated as EU citizens, even though they enjoy free movement because the Swiss Confederation signed an agreement on the free movement of persons with the European Community and its member states on 21 June 1999 (ratified by Italy with Law No. 364 of 15 November 2000).
Residence permits
According to Article 1(2) of Presidential Decree 31 August 1999, No. 394, the verification of reciprocity is not required for foreign citizens holding a residence permit pursuant to Article 9 of the Italian Immigration Act, as well as for foreign citizens holding a residence permit for subordinate work, self-employment, exercising an individual business, family reunification, humanitarian reasons, or study purposes, and for their family members in compliance with the residence requirements.
Bilateral Agreements on Promotion and Protection of Investments
In cases not falling under the above-mentioned exemptions, for all non-EU individuals or entities, it will be verified whether international conventions or bilateral agreements on the promotion and protection of investments (Bilateral Investment Treaties, or BITs) have been ratified in Italy. These agreements have a lex specialis character compared to the general provision of Article 16 of the Preliminary Legislation and, therefore, establish the existence of reciprocity concerning the matters they regulate.
If not covered by such agreements, reciprocity will be examined.
However, fundamental human rights provided for by domestic laws, valid international conventions, and general international law are still recognized to foreigners, regardless of reciprocity, which does not apply to fundamental human rights.
Further Applications of the Principle of Reciprocity
Real Estate
Among the various applications of the principle of reciprocity, real estate presents interesting implications. The condition of reciprocity in real estate purchases allows only foreign citizens coming from countries where reciprocity is guaranteed to purchase real estate properties within their territory.
This means that a country will permit citizens of a specific country to purchase real estate within its borders only if the country of origin of those citizens offers the same opportunity to foreigners from the hosting country. This principle is often used to ensure that real estate transactions are bilateral and that there is fair and equal treatment between citizens of the involved states.
For example, if Country A allows citizens of Country B to purchase real estate within its territory, then Country B should allow citizens of Country A to do the same. If Country B does not grant this opportunity to citizens of Country A, Country A may restrict or prohibit real estate purchases by citizens of Country B.
The conditions of reciprocity in real estate purchases can vary significantly from country to country and may be subject to changes based on bilateral agreements and policies between the nations involved.
Some aspects in which the condition of reciprocity applies in reference to property purchases, more generally, include:
- Citizenship and Residence: In many countries, the right to purchase real estate is reserved only for citizens of the country or legal residents.
- Restrictions and Limitations: For example, foreign citizens might be allowed to own only certain types of properties or in designated areas.
- Registration and Approval: Real estate purchases by foreigners might be subject to special registration procedures or require approval from the government or a competent authority.
- Tax Exemptions and Incentives: In some cases, reciprocity may result in tax exemptions or incentives for citizens of countries that treat citizens of the host country equally regarding property purchase taxes.
- Bilateral or Multilateral Agreements: The principle of reciprocity in property purchases can be regulated by bilateral or multilateral agreements between countries that establish the conditions and terms for foreigners to acquire real estate.
- Quantitative Limits: In some cases, reciprocity may impose quantitative limits on the number of properties foreign citizens can purchase in the host country or the amount of land they can own.
It is emphasized once again that the conditions of reciprocity in property purchases vary significantly among nations and may change over time based on government policies and international agreements.
Therefore, applying the general principle of reciprocity seen previously to the real estate case, the following individuals will be able to purchase property or real estate in Italy:
- Citizens of European Union countries or EFTA member states and stateless individuals residing in Italy for more than three years have no limitations on purchases.
- Other foreigners, if legally residing with their family members or stateless individuals for less than three years, must possess a valid residence permit or stay permit.
- If the foreigners are not legally residing, it is necessary for there to be an international agreement allowing it, or the so-called condition of reciprocity must exist, meaning that in the foreigner’s country of origin, Italian citizens are also allowed to purchase property.
The case of Canada
A recent example of the application of the principle of reciprocity in real estate can be found in Canada. Starting from January 1, 2023, Canada prohibits the purchase of residential properties by foreign individuals.
The prohibition is contained in the “Prohibition on the Purchase of Residential Property by Non-Canadians Act,” which forbids non-Canadians, defined as individuals without Canadian citizenship, or not registered under the “Indian Act,” or not permanent residents in Canada, from acquiring residential properties. It also extends to entities formed under laws other than Canadian law, entities incorporated under Canadian law whose shares are not listed in Canada and controlled by non-Canadians, and individuals indicated by the law.
Therefore, the direct or indirect purchase of residential properties by non-Canadians is strictly prohibited. However, there are some exceptions:
- Purchase by a person temporarily residing in Canada with refugee status or protected status according to the “Refugee Protection Act”;
- Purchase made jointly with a Canadian spouse or partner;
- Purchase in cases provided by law;
- Purchase by a foreign state for diplomatic or consular purposes;
- Purchase as a result of a preliminary contract or other agreement concluded before the law came into force.
These measures, as mentioned, depend on considerations of opportunity, economy, and politics. In fact, the provision was conceived and approved following the increase in housing prices recorded since the beginning of the pandemic and the belief of some politicians that the reasons for such increase are attributable to real estate investments made by non-resident foreigners.
So, applying the principle of reciprocity, if Canada forbids a foreigner to purchase a residential property, Canadians will not be able to purchase a residential property in a foreign Country.
The Fundamental Role of Reciprocity in International Relations
In conclusion, reciprocity represents, in its various forms, a fundamental condition whose verification is essential to proceed with any type of transaction and avoid nullity of the operations carried out. It is a fundamental principle governing relations between states and parties involved in different legal transactions, based on equal treatment and equity, ensuring that there is a correspondence between actions and concessions made by one party and the response obtained from the other party, promoting cooperation and mutual understanding between nations and parties involved in legal transactions.
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