I am a newbie on here and would just like to start by thanking anyone who reads and / or replies to my post. Last week we got the bad news that my Stepdaughters British Citizenship application has been refused. She is a 7 year old child, has duel Swiss / Thai nationality, she acquired her Swiss passport via her Swiss biological father with whom she has no contact, her Thai mum (my wife) has gone through the Settlement Visa, ILR and British Citizenship steps already and thus is now British.
We applied under section 3(1) at the Home Secretary's discretion but this was refused as they do not classify her as being "settled" here under the immigration laws. They (HO) state that as the minor of an EEA national she cannot be settled here until either she has ILR or has acquired Permanent Residence under European law. She has been living here very happily and attending school for the past 2+ years now and is very much "British" with a stronger local accent even than myself.
We brought her here to the U.K on Dec 29th 2013 and she entered the U.K on her Swiss passport gained as stated via her biological Fathers Country of origin, this passport was applied for and granted via the Swiss Embassy, Bangkok, Thailand.
This was just prior to my wife applying for and being successful in acquiring ILR which in turn became Citizenship last October 2015 (so Mum is now a British Citizen and Passport holder). The whereabouts of "Dad" are unknown and he plays no part in his daughters life, this was explained within the application and this did not form any part of the refusal. As my stepdaughter traveled upon her Swiss passport and entered the U.K on this passport so no visa was applied for in Thailand, her stay here in the U.K is lawful and she does not require a visa to be here, I have checked with the HO and explained all the facts, I have been told she is here as an EEA / Swiss person, is counted as a "qualified person" and has the right of abode.
For her to apply for ILR now whilst this can only be applied for from within the U.K as I understand things because she does not have a visa so she cannot actually apply for ILR now ?, she I believe would need to either return to Thailand and start the whole visa process from there or apply for discretionary FLR from within the U.K, however this route as I understand it could only be taken on her Thai passport but not on her Swiss passport (which is how she entered the U.K). Her Thai passport will soon expire and she has no prospect of gaining a new one without either her biological fathers consent or my wife having sole custody, both of which points we are stuck on as detailed below, the Thai consulate have confirmed there is no exception or discretion with regards to this in terms of them issuing a new passport once the current one expires, no Thai passport = no FLR / ILR as I understand things.
And so for her to qualify under the EEA Permanent Residence requirements she needs to have been living here for 5 years, however her 5 years will not be complete until Dec 29th 2018 (5 years to the day she arrived), still relatively straightforward right ?, however this is complicated by the fact that her Swiss passport will expire on Dec 2nd 2018 - around 4 weeks short of her 5 years residency period and we basically have no chance to renew this or obtain a new Swiss passport as under Swiss law it can only be issued with either her biological fathers signature / permission, his whereabouts are unknown and he plays no part in his daughters life now and so obtaining his signature for a new Swiss passport is seemingly impossible (even if he could be traced it is very very unlikely he would consent to sign), the other way would be if my wife had sole custody, however her Swiss Court divorce decree gave no custody provisions as the divorce was applied for and undertaken by my wife but in her absence which apparently is very rare in Switzerland - her circumstances were quite unique. So whilst the Swiss were aware of the child they made no provision thus it is joint custody by default, the Thai Courts will not issue custody as it was not set aside within the original Swiss divorce decree and the Thai Court state the custody provisions must be made within this, also now that my stepdaughter lives here in the U.K so it now falls outside of there jurisdiction anyway as in Thai law she must be living within Thailand for them to even entertain such a case. I have then contacted a U.K lawyer and looked into obtaining a "Child Arrangement Order" via the U.K family Courts (U.K equivalent of custody) however the lawyer confirmed that as the position was there was no dispute that my stepdaughter lives with her mum, as the child's father was not on the scene and not contesting anything so they will not issue any Child Arrangement Order. So 3 Countries none of whom we can obtain custody from, no custody, no consent from my stepdaughters father = no new Swiss passport, again whilst the Swiss Embassy have been very sympathetic and helpful it has been made clear there is no discretion or loophole, no way around this.
So applying under the 5 years EEA residence rules seems impossible, as the HO letter states she would need to first acquire Permanent Residence under European law to later be able to gain British Citizenship we seem to be very stuck. As I understand things via a few phonecalls to the HO she would need / must have a valid European passport to acquire this and as outlined above her passport would just have expired and with no prospect of gaining a new one, we also looked into if she could apply in advance of the 5 years prior to the Swiss passport expiring but were told "no" that she must have completed 5 years residency here to gain PR.
What really frustrates me is I called any number of times the "0300" HO number prior to applying for my stepdaughters British Citizenship and checked we could apply even though my stepdaughter had only been in the U.K 2 years, and had entered on a Swiss passport, no visa ect ect, I went into every possible detail of her circumstances and situation but all I was ever told was "Yes" we could apply, there were no residency requirements as she was a 7 year old minor, as Mum already had her Citizenship we could apply - no ILR necessary as she had entered on Swiss passport ect, this we did then we fail due to her not being "settled" here, and to be settled her she must either have ILR or have lived here for 5 years to then gain PR, both of which I was repeatedly assured were not necessary prior to making the application, I checked and checked so many times!!!.

Should we appeal using form NR with a cover letter explaining our predicament or is this likely a waste of time and money ?, can anybody suggest a way forward as to me it seems whilst my stepdaughter can legally reside her now and is not breaking any immigration law being here, so there seems no realistic way forward for her to gain Citizenship alongside her Mum, she is in limbo and caught between a rock and a hard place, completely stuck.