Key Legal Issues
- The legal precedent on Genuine Links requirement established by the International Court of Justice and mirrored by jurisprudence of the Court of Justice of the EU (CJEU). A pre-requisite for the validity of citizenship granted according to Member State Rules or for recognition of Maltese by other countries?
- The competence, if any, of the European Union in matters of citizenship.
- The actual requirement of 'genuine links' ingrained in Malta's 3- or 1-year residence requirement to qualify for the privilege of naturalisation as a Maltese Citizen.
- The Implications of this strong signal from the European Court on citizenship programmes in Europe and beyond.
- Precautions new Investor Citizens should take to ensure their citizenship is not disregarded by other countries who may apply a substance test.
The European Commission’s Complaint in a Nutshell
The European Commission seeks a declaration that, by establishing and operating the 2020 citizenship scheme, that offers naturalisation, in exchange for pre-determined payments or investments, to persons notwithstanding the absence of a genuine link between them and the Republic of Malta, that Member State has failed to fulfil its obligations under Article 20 TFEU and Article 4(3) TEU. The Commission also requested that the Republic of Malta be ordered to pay the costs.
The Republic of Malta's Response in a Nutshell
- EU law does not govern the conditions for acquiring citizenship - that is a matter of Member State sovereignty and national competence.
- Malta agrees with requirement of Genuine Links in granting Citizenship (it applies it) but Public International Law and EU law do not require ‘prior genuine link’.
- Commission has over simplified the 2020 citizenship scheme to mislead the Court, since Maltese citizenship rules do require applicants to demonstrate "evidence of personal, commercial, financial ties with the country" (verbatim, Maltese rules), in addition to satisfying the minimum investment criteria of the rules.
- The Commission should be ordered to pay the costs.
The Attorney General's Opinion, Advice to the Court in Nutshell
1. Opinion on National Competence & Member State Sovereignty
- The Commission has not proven a breach of the Treaty provisions governing citizenship - there is, therefore, no basis, in law or in fact, for the claim that the Republic of Malta is in breach of the duty of loyal co-operation. (AG Opinion, para. 40).
- Malta confirmed that, in exchange for payment of a specific financial contribution, a single year’s legal residence in that Member State suffices for the purposes of naturalisation. (AG Opinion, para. 41).
- The Commission based its single complaint upon the existence of a requirement under EU law – and under international law – that, in order to preserve the integrity of EU citizenship, there must be a ‘genuine link’ between a Member State and its nationals. (AG Opinion, para. 41).
- The enjoyment of EU citizenship is entirely dependent upon the existence of Member State nationality, and established case-law gives each Member State exclusive competence to lay down the conditions under which its nationality may be acquired and lost. (AG Opinion, para. 44)
As I indicated in my Opinion in Préfet du Gers,(38) the Member States could have decided to pool their competences and to confer on the European Union the power to determine who may become an EU citizen. They have chosen not to do so.
Advocate General, Opinion, para. 44.
- Declaration No 2 on nationality of a Member State, annexed to the final act of the Treaty on European Union exposes the extent of Member State prerogatives in the area of citizenship, stating that the acquisition of Member State nationality automatically results in the acquisition of EU citizenship, which all other Member States are bound under EU law to recognise. (AG Opinion, para. 45).
… wherever in the Treaty establishing the European Community reference is made to nationals of the Member States, the question whether an individual possesses the nationality of a Member State shall be settled solely by reference to the national law of the Member State concerned…’
Declaration No 2 on nationality of a Member State.
- Member States clearly chose not to pool their respective conceptions of nationality since these touch the very essence of their sovereignty and national identity. (AG Opinion, para. 45).
- Article 9 TEU, Article20(1) TFEU and Declaration No. 2 do not permit the EU institutions, or other Member States, to introduce any conditions for the recognition of the nationality of another Member State, as confirmed by the Court in the Micheletti and Zhu and Chen judgements. The corollary of this is that "Member States are not required to have a shared conception of what constitutes nationality and that the rules for its grant can diverge". (AG Opinion, para. 48)
- The AG agreed with Malta's assertion that the review of the withdrawal of MS nationality should not be subject to the same EU rules as its acquisition, given extra attention is given to avoid consequences of deprivation of EU citizenship such as statelessness. (AG Opinion, para. 52).
It follows from the Nottebohm judgment that, at least in the ICJ’s opinion, the rules for the grant of nationality are a matter for individual States.
Advocate General, Opinion para, 56.
- "A duty under EU law to recognise nationality granted by other Member States is a mutual recognition of, and respect for, the sovereignty of each Member State– not a means to undermine the exclusive competences that the Member States enjoy in this domain. To find otherwise would upset the carefully crafted balance between national and EU citizenship in the Treaties and constitute a wholly unlawful erosion of Member States’ competence in a highly sensitive field which they have clearly decided to retain under their exclusive control. (AG Opinion, para. 57, emphasis added).
2. Opinion on Genuine Link requirement.
- AG agrees with the European Commission that, in the Nottebohm judgement, the International Court of Justice (ICJ) held that a State may refuse to recognise nationality granted by another State, in the absence of a genuine link or a connection between that individual and the State. (AG Opinion, para. 56)
The ICJ ruling is limited to allowing States to withhold recognition of nationality granted in the absence of such genuine link... It does not oblige States to require that such a link exists either between them and their own nationals or between other States and their nationals.
Advocate General, Opinion para. 56. (emphasis added)
AUTHORS' COMMENT:
- In fact, the binding guidelines on the 2020 Maltese Citizenship Rules require applicants submitting an application for eligibility to include in his application a commitment letter describing how, during his residency period potentially leading to naturalisation as a Maltese citizen, the applicant and his/her family propose to integrate through the establishment of “personal, financial and investment ties” during the year/s leading to citizenship. (verbatim from the Rules' Handbook).
- This Residence Criteria Proposal Letter is an integral part of an application, and is processed together with deep and comprehensive disclosure of assets, explanations of source of wealth, as well as background checks conducted by the applicant’s agents, and further background checks by the processing agency financed by pre-determined due diligence fees payable on application by the applicant.
- Even after approval of eligibility, at various stages prior to the grant of citizenship, the Citizenship Agency verifies the completion of the commitments undertaken by the applicant family by way of personal, financial and investment ties, and in the case of material defaults, defer the grant of citizenship until the commitments are completed.
3. Final Recommendation and Costs
- The Advocate General has recommended that the Court of Justice of the EU should dismiss the Commission's Case.
- Accordingly, since the Commission has failed to prove its case successfully, he recommended that the Commission should bear its costs and those of the Republic of Malta. (AG Opinion Para. 62)
The Role of the Advocate General
Influence of Opinions on Final Judgements: AG Opinions are not binding but are often followed by the CJEU. In the absence of dissenting opinions filed by the CJEU judges, the opinions of the Advocates General therefore play an important role and are referred to in later cases. The CJEU is not bound by these opinions; nonetheless, according to empirical research, in the case of an action for annulment of an EU act, the CJEU is 67 % more likely to annul it if doing so was advised by an Advocate General.
History: The office of the Advocate General was introduced into the Treaty of Rome under the influence of the French who proposed a French model that allowed an official to offer legal advice to the court on cases being tried.
Appointment: Advocates General are members of the Court of Justice of the EU, and are appointed under the same procedure as judges and enjoy the same privileges (immunity) and cannot be removed from offices before the end of their 6-year term.
Role: However, unlike judges they only have an advisory role and do not take part in the decision-making process of the Court. The Advocate General assists the court by writing impartial opinions. In principle, the opinion of an Advocate General is sought in all cases to be tried by the CJEU, unless the Court decides that there is no new point of law (30% of cases annually, but clearly not this case). (if interested, read more on the role of Advocate General here).
What Next?
The Advocate General’s opinion clearly supports Malta’s position that the Mediterranean member state should be allowed to serenely determine the rules on he acquisition and deprivation of Maltese citizenship within the Island's sovereign competence, subject to the limits applicable to the loss not acquisition of citizenship. It is to be noted that the AG's opinion is not binding on the Court and that the final decision ultimately lies in the hands of the Court of Justice of the European Union. As the judges deliberate, we can expect the final judgement as early as December 2024 or in the early months of 2025.
What this means for the Citizenship by Investment Sector?
The Case of the European Commission vs Malta has been regarded as the gateway case for the rest of the industry that has suffered several setbacks, with several EU member and candidate countries closing their programmes due to a mix of domestic and European pressure. This Opinion solidifies Malta as an exemplary and top citizenship by investment route on account of the following reasons:
- By not raising populist concerns about the possible misuse of Maltese citizenship by investment for money laundering and tax evasion, and by not questioning the probity of applicants granted Maltese citizenship, the Commission has tacitly endorsed the Maltese investor citizenship rules at least in terms of these past concerns.
- As the last citizenship by investment programme standing in the EU, Malta is likely to have withstood the ultimate litmus test of citizenship by investment programmes judging from this Opinion, setting the bar for other existing and prospective programmes, in terms of:
- Due Diligence: Malta's multi-tiered due diligence process was references in the Opinion and AG commented that this was not being disputed by the Commission.
- Genuine Links: although the European Union may not impose any condition or rule for a Member State's citizenship grants, genuine links remain objectively critical in ensuring new citizens pass substance tests applied by countries of origin or other countries that may wish to challenge their new citizenship. Malta ticks this box well by ensuring a moderate but sufficient level of physical presence during the minimum of one-year residence and a host of other "personal, financial and investment ties" that applicants must commit to as part of the application and that the Maltese Citizenship Agency will monitor and verify before granting citizenship and for 5 years post-citizenship.
What this means for HNW Investors & Prospective Applicants
This opinion sends a strong message to investors and high-net-worth families considering the destination for their hard earned investment. Malta will surely remain at the top of the list for discerning and risk-averse families in view of the security provided by this European endorsement of Malta by the Advocate General. Malta's is serious in its approach to running a sustainable citizenship by investment route. Malta's robust due diligence framework, its flexible but real genuine link requirements truly ensure sufficient integration with Malta to merit the sustainable grant of Maltese citizenship by Investment.
Detailed Analysis of the Attorney General's Opinion
This news item is a short update outlining the key outcomes of the Attorney General's advice to the Court of Justice of the EU. For a more detailed overview, refer to two analytical publications:
➡️ Maltese Citizenship: Genuine Links Requirement in European Law - Advocate General, Court of Justice EU
➡️ Maltese Citizenship: European Law on National Sovereignty on matters of Member State Citizenship - Advocate General, Court of Justice
Inquiries
Should you wish to discuss the implications of this opinion on your application or on your existing citizenship, please reach out to us for a complimentary chat. But please bear in mind that the final decision will be out in the coming months,
