An IMGW Report
The public hearing in the European Commission’s case against Malta’s Citizenship by Investment (CBI) Programme took place on 17th June at the Grand Chamber of the European Court of Justice in Luxembourg. The case examined the legality of Malta’s CBI programme, which grants Maltese citizenship to individuals who invest about €1 million in Malta. The European Commission argued that this scheme violates EU law by granting citizenship without a genuine link to Malta, thereby undermining the essence of Union citizenship. The following is a snapshot of the session’s key highlights.
Key Arguments from the European Commission
Violation of Union Law:
The Commission argued that Union law precludes programmes that systematically grant nationality in exchange for predetermined payments without a genuine link to the state. Such programmes, according to the Commission, compromise the integrity of EU citizenship and mutual trust among member states.
Constitutional Significance:
EU citizenship is fundamental to European integration, providing rights to move, live, and work across member states. The Maltese passport, which includes these rights, is a key selling point of the scheme, but – according to the Commission – it undermines the concept of EU citizenship when granted without a genuine link to the nation bestowing this privilege.
Mutual Trust:
The principle of mutual trust is crucial in the EU. In the judgment in the Micheletti case (C-369/90 Micheletti v Delegation del Gobierno en Cantabria, 1992 ECR I-4239), the Court of Justice of the European Union (CJEU) stated that “under international law, it is for each Member State, having due regard to Community law, to lay down the conditions for the acquisition and loss of nationality.” This means member states must recognise each other’s nationality decisions without question. Nonetheless, the Commission remarked that this principle necessitates strong mutual trust, which, it contended, is eroded by programmes like Malta’s CBI.
Genuine Link Requirement:
The Commission insisted that member states must establish a genuine link between the individual and the state before granting nationality. The lack of such a link in Malta’s CBI initiative was seen as a violation of EU law, specifically Article 20 TFEU and the principle of sincere cooperation.
Legislative and Administrative Concerns:
The Commission pointed out that Malta’s CBI programme requires minimal physical presence, with just two short visits for biometric data and the oath of allegiance. This minimal requirement failed to establish a genuine link to the host nation, thus violating EU law.
Broader Legal and Constitutional Issues:
The Commission also raised questions about the balance between national sovereignty and EU competence, especially regarding nationality laws. While nationality laws fall under national competence, they must still comply with EU law.
Malta’s Defence
Economic Investment as Genuine Link:
In its defence, Malta argued that significant economic investment can establish a bond of solidarity. The country highlighted strict compliance mechanisms in place to prevent security risks such as corruption, tax fraud, and money laundering.
Sovereignty in Nationality Laws:
Malta contended that nationality laws are a matter of national competence and should not be interfered with by the EU. The country emphasised that their scheme complies with EU law and that the Commission’s action infringes on national sovereignty.
Historical and Legal Precedent:
Malta referred to historical practices where citizenship was granted through investment or other contributions elsewhere in the EU, suggesting that such schemes have long been part of European legal tradition.
Modifications and Compliance:
Despite warnings from the Commission, Malta has not discontinued its programme but has made adjustments to its conditions. Meanwhile, the programme has been suspended for Russian and Belarusian nationals following the invasion of Ukraine, demonstrating responsiveness and sensitivity to international concerns.
Mutual Trust and Cooperation:
Malta maintained that the EU initially recognised these programmes and that mutual trust should include respect for national competence in citizenship matters. Furthermore, the country argued that its framework includes necessary safeguards and promotes genuine connections through investment.
Court’s Questions and Observations
Genuine Link Criterion:
The court examined the nature and purpose of the genuine link requirement, questioning whether economic investment alone can suffice as a genuine link or if more substantial connections are necessary.
Relevance of the so-called ‘Passport Papers’:
The Commission clarified that the absence of a requirement for effective residence in Malta’s legislation supported their argument. Malta’s rules require no substantial physical presence beyond brief visits, which is insufficient to establish a genuine link.
Potential Discrimination and Other Criteria:
The court explored whether other legal criteria, such as discrimination based on race or religion, could also constitute violations of EU law in nationality rules. The Commission argued that the genuine link criterion is flexible and relevant, but other criteria might also apply.
Broader Implications
The outcome of this case will have significant implications for the future of CBI programmes within the EU and the balance of sovereignty between member states and the EU. The decision will likely impact how nationality laws are structured and enforced, emphasising the need for genuine connections between individuals and the states granting them citizenship.
Conclusion
The hearing highlighted a fundamental conflict between national sovereignty and EU integration. The European Commission argued that Malta’s CBI programme undermines the integrity of EU citizenship by allowing nationality to be granted without a genuine link. Malta defended its scheme as a legitimate exercise of national competence with significant economic benefits and strict compliance measures. The court’s decision will set a precedent for the regulation of citizenship by investment schemes across the EU, balancing national interests with the collective principles of Union citizenship.
This case also raised broader questions about the limits of national versus EU competence, especially in areas as sensitive as nationality laws. While nationality laws are primarily under national jurisdiction, they must be exercised with due regard to EU law.
The decision of the court will not only affect Malta but also set a benchmark for other member states with similar schemes. The judgement is eagerly awaited as it will define the contours of how member states can exercise their sovereign rights in alignment with EU principles.
Finally, it was announced that the Advocate General will deliver his opinion on this case on October 3, 2024.
Restricted Media:
IMGW News cannot present its readers with video of the three-hour-plus Malta case hearing on the ECJ website as the ECJ prohibits the downloading or recording of such media, including photos.
The following are extracts from the ECJ’s official website: “The broadcast of a hearing on the internet does not constitute, under any circumstances, an authentic recording, an official record, or the official minutes of that hearing. The Court of Justice of the European Union cannot be held liable either for the opinions expressed and statements made during a hearing broadcast on the internet, or for the consequences of a download or a recording.”
“The interpretation of public hearings of the Court of Justice and the General Court is undertaken in order to facilitate communication and does not constitute an official record of the pleadings. Only the original language is authentic. Interpreters are exempt from any liability in the exercise of their duties.”