Analysis of the Advocate General’s Opinion in European Commission v. Republic of Malta: Implications for Citizenship by Investment

4 October 2024

Private Clients, Citizenship by Investment

On October 4, 2024, Advocate General Collins delivered an Opinion in the case European Commission v. Republic of Malta (Case C‑181/23), which centres on the legality of Malta’s Citizenship by Investment (CBI) programme under EU law. 

While the Opinion is non-binding, it carries substantial weight and may influence the Court’s ultimate judgment. For firms operating in citizenship and residency by investment, this Opinion offers valuable insights into how the EU might set boundaries on national sovereignty in citizenship policies.

Background of the Case

The European Commission (Commission) brought an action against Malta, asserting that its CBI programmeme infringes on obligations under EU law, specifically Article 20 TFEU (EU citizenship) and Article 4(3) TEU (principle of sincere cooperation). This mainly as Malta’s programme, allegedly fails to require of non-EU nationals a “genuine link” to Malta, which is said to compromise the integrity of EU citizenship.

The Commission contends that citizenship should represent a meaningful connection between the individual and the Member State. Conversely, Malta argues that, as nationality falls under Member State competence, it retains the right to establish its own criteria for granting citizenship, provided these do not undermine EU law’s overarching values.

Key Arguments and Findings in the Opinion

The Advocate General’s Opinion examines this conflict from multiple perspectives:

  • EU Citizenship and National Sovereignty

At the heart of the Advocate General’s analysis is the long-standing principle that Member States hold exclusive control over their nationality laws. Under Declaration No 2 annexed to the Treaty on European Union, determining who qualifies as a “national” of a Member State is governed solely by national law. According to AG Collins, this principle requires that EU institutions and other Member States unconditionally respect the nationality decisions of each Member State, even if they do not share a common definition of nationality.

  • The Absence of a “Genuine Link” Requirement

The Commission’s case relied heavily on the assertion that EU law mandates a “genuine link” between naturalized citizens and the naturalising state. However, AG Collins found no such requirement in either EU or broader international law. Citing the Nottebohm case, the Advocate General noted that while the International Court of Justice (ICJ) endorsed the existence of a “genuine link” in recognizing nationality, it did not impose such a requirement for the acquisition of nationality. Moreover, previous EU case law such as Micheletti (1992) underscores that Member States are prohibited from imposing additional criteria to recognise nationalities granted by other Member States.

  • EU Law’s Constraints on Citizenship Policies

While acknowledging that Member States have a duty to ensure that their citizenship policies do not undermine EU values or systematically impact other Member States, AG Collins noted that this does not equate to a “genuine link” prerequisite. Instead, he emphasised that the integrity of EU citizenship can be preserved through rigorous due diligence, which Malta asserts is integral to its CBI programme. Additionally, while the EU can exercise oversight, especially regarding the withdrawal of citizenship (such as in Rottmann), the grant of nationality, in the Advocate General’s view, lies outside the scope of direct EU intervention.

  • Proportionality in the Commission’s Approach

The Commission argued that Malta’s programme, by granting citizenship in exchange for financial investment, commodifies EU citizenship. However, Collins noted that requiring a financial commitment does not inherently compromise the status of EU citizenship, provided safeguards are in place to ensure the scheme’s integrity. Collins found that the Commission’s position risked undermining national sovereignty in areas traditionally safeguarded for Member State discretion, and called its approach disproportionately invasive.

Implications of the Advocate General’s Opinion

For Malta, the Opinion represents a significant success, as it reinforces the understanding that nationality decisions remain within the sovereign purview of Member States, provided EU law is not undermined in a substantial and systematic way. The Opinion effectively validates Malta’s stance that its CBI programme is not inconsistent with EU law, so long as it incorporates safeguards that prevent potential abuses.

However, the Opinion also carries a reminder for firms involved in CBI schemes: such programmes must balance attracting investment with rigorous due diligence to meet both EU and international standards. This means ensuring that any investor-citizen complies with anti-money laundering protocols and other due diligence requirements, which may include assessments on security, reputation, and systemic impact, as highlighted by Collins. The Advocate General’s cautious emphasis on the principle of sincere cooperation in Article 4(3) TEU suggests that Member States should ensure their programmes do not fundamentally disrupt EU citizenship’s collective value and mutual trust among Member States.

Conclusion 

While the CJEU may, when deciding the case, depart from the view taken in the Opinion, this is a well-argued and  valuable Opinion. For now, the Advocate General’s stance affirms that citizenship by investment programmes are permissible in principle, provided they do not infringe upon the principles of EU law. This clarification of EU constraints on CBI programmes may be viewed as a victory for member states, affirming their authority to determine nationality criteria without mandating a “genuine link.”. The distinction between “genuine link” as a requirement in the context of the recognition of citizenship versus its use in the creation of citizenship, appears highly defensible and well-justified. 

The CJEU’s final decision is expected in early 2025 and will be critical for firms advising on citizenship and residency by investment. 

Should the CJEU adopt the Advocate General’s Opinion, it would reinforce a nuanced approach, allowing Member States to maintain nationality schemes that align with EU obligations yet respect national sovereignty.

© New Balkans Law Office 2024

The Bulgarian and dual-qualified lawyers of New Balkans Law Office are regulated by the respective Bar of their registration. New Balkans Law Office is a brand name of Legal Services EOOD, a company registered under Bulgarian law. Reg’d No. 202331677. Further details are available here.

© New Balkans Law Office 2024