The highly anticipated legal showdown between Malta and the European Union (EU) over Malta’s Citizenship by Investment (CBI) program began on June 17, 2024, at the European Court of Justice (ECJ) in Luxembourg. The European Commission (EC) has brought legal action against Malta, challenging the legitimacy of its CBI program, which allows foreign nationals to acquire Maltese—and by extension, EU—citizenship through substantial financial contributions. The hearings mark a significant development in the ongoing debate over national sovereignty and EU regulations concerning citizenship policies.
Court Hearings
The European Commission (EC) has sued Malta, arguing that its CBI program undermines the integrity of EU citizenship. The EC issued a “reasoned opinion” to Malta in April 2022, which was a formal step in the legal process before taking a country to the ECJ. According to Investment Migration Insider, the Commission asserted that EU law requires a genuine link between the applicant and the member state granting citizenship, which they claim Malta’s program fails to establish. The Commission argues that granting citizenship solely based on financial contributions violates the principle of sincere cooperation outlined in Article 4(3) of the Treaty on European Union (TEU), jeopardizing mutual trust and solidarity among member states.
Malta, conversely, defends its program, arguing that granting citizenship falls under national competence, supported by international law and the TEU. During the June hearings, the Maltese government emphasized that their CBI program entails rigorous due diligence and security measures to ensure that new citizens do not pose any risks. Malta also points out historical precedents for such programs, arguing that similar schemes have existed in Europe for centuries
During the litigation process, the judges have raised critical questions regarding the EC’s demand for a genuine link, a concept not previously mandated by EU law. They queried the definition of such a link and who should define it, emphasizing the need for legal clarity. Lawyers representing the EC maintained that a genuine link, reflecting a special relationship of solidarity and loyalty, is essential, while Malta argued that this requirement is not explicitly stated in EU legislation and that their program’s transparency and rigorous process of legal residence and due diligence meet the required standards.
Background
Malta launched its CBI program in 2013 dubbed as Individual Investor Program (IIP), which allowed foreign citizens to obtain Maltese citizenship in exchange for a significant financial investment. The program required a €650,000 donation, additional fees for dependents, a €150,000 investment in approved financial assets, and either a real estate purchase of €350,000 or a five-year lease at €16,000 per year. In response to EU criticism, Malta introduced a 12-month residency requirement before naturalization, which was later adjusted to a 36-month residency for those investing €600,000, or a 12-month stay for those contributing €750,000.
The EC’s objections center around concerns over potential corruption, money laundering, and security risks, as well as the lack of a substantive connection between new citizens and Malta.
The EU institutions have consistently criticized residency and citizenship by investment (RCBI) programs (sometimes dubbed as ‘golden visa’ and ‘golden passport’ schemes), citing concerns over security, money laundering, and the integrity of EU citizenship. In October 2022, the European Commission called for the ‘phasing out’ of these programs, emphasizing that such schemes undermine mutual trust among EU member states and breach European values.
Conclusion
The outcome of this case holds significant implications for the future of CBI programs within the EU and the broader issue of national versus supranational authority over citizenship matters. Critics of the EU’s stance argue that member states should retain the freedom to determine their citizenship laws, tailored to their unique economic and social contexts. They stress that investment migration schemes are crucial for certain countries to attract foreign capital and avoid reliance on international financial aid.
The Advocate General of the European Court of Justice is expected to deliver an opinion on the case in October 2024. The final judgment is anticipated to be issued towards the end of the year or in early 2025
Experts say that this ruling will have far-reaching consequences for the future of economic strategies, security measures, and the fundamental nature of EU citizenship; it will be pivotal in determining the balance between respecting national sovereignty and upholding the principles and values of the European Union.
The legal battle between Malta and the EC is not just about one country’s policy but about the broader implications for the integrity and unity of the European Union.