(Disclaimer: I'm not part of the organizing team, but I do work for Reaktor - so this is just my opinion, not an official position.) As I've understood, the same country requirement works just like in sports: you need to be a citizen of the country if you want to play in the national team.
I would suggest contacting the organizers about your situation.
I think that comparison is flawed as there's only one team per country (and discipline) sent to e.g. the Soccer World Cup or the Olympic Games, whereas here it could be potentially way more.
As a sibling already mentioned: there shouldn't be any artificial borders in a global (hacker) community.
It would be a shame if they disqualified me/us. I'm in this for fun. I guess everyone is. If I can travel freely in Europe and have no problems being in a "German" team, I think there mustn't be any problems.
I agree. The main point of this competition is fun - having beta tested the system I can promise that writing bots and watching them compete is a lot of fun. I hope your team can participate.
I would suggest contacting the organizers about your situation.