Analysis of Advocate General’s Opinion in EU vs Malta Case: Implications for CBI

Ivan Petrov
Sofia

On October 4, 2024, Advocate General Collins delivered an opinion in the European Commission v. Republic of Malta (Case C‑181/23), which centers on the legality of Malta’s Citizenship by Investment (CBI) program 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 EU boundaries on national citizenship policies and the significance of preserving EU citizenship integrity.

Recap of the case

The European Commission brought an action against Malta, asserting that its CBI program infringes on obligations under EU law, specifically Article 20 TFEU (EU citizenship) and Article 4(3) TEU (principle of sincere cooperation).

The Commission’s main argument is that Malta’s program, which allows non-EU nationals to acquire Maltese citizenship through investments without requiring a “genuine link” to Malta, compromises 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

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, national law solely governs determining who qualifies as a “national” of a Member State.

According to Collins, this principle requires that EU institutions and other Member States unconditionally respect each other’s nationality decisions, even if they do not necessarily 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 state. However, Collins found no such requirement in EU or international law.

Citing the Nottebohm case, the Advocate General noted that while the International Court of Justice endorsed the existence of a “genuine link” in recognizing nationality, it did not impose such a requirement for acquiring nationality.

Previous EU case law, such as Micheletti (1992), underscores that the EU prohibits Member States from imposing additional criteria on the 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, Collins noted that this does not equate to a “genuine link” prerequisite.

Instead, he emphasized that Member States can preserve the integrity of EU citizenship through rigorous due diligence, which Malta asserts is integral to its CBI program.

Additionally, while the EU can exercise oversight, especially regarding the revocation 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 program, which bases naturalization on financial investment, commodifies EU citizenship. Collins, however, noted that requiring a financial commitment does not inherently compromise the status of EU citizenship, provided safeguards exist to ensure the program’s integrity.

Collins found that the Commission’s position risked undermining national sovereignty in areas the EU traditionally safeguards for Member State discretion, calling 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 that the program does not substantially and systematically undermine EU law.

The opinion effectively validates Malta’s stance that its CBI program is not inconsistent with EU law so long as it incorporates safeguards that prevent potential abuses.

The opinion, however, also serves as a reminder for CBI firms: Such programs 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 Collins highlighted.

The Advocate General’s cautious emphasis on the principle of sincere cooperation in Article 4(3) TEU suggests that Member States should ensure their programs do not fundamentally disrupt EU citizenship’s collective value and mutual trust.

What the future holds

While not binding, the opinion provides valuable insights into how the Court of Justice of the European Union (ECJ) may approach Member State citizenship policies, especially regarding CBI programs.

For now, the Advocate General’s stance affirms that the EU’s legal framework permits citizenship by investment programs, provided they do not infringe upon the principles of EU law.

Clarifying EU constraints on CBI programs is a victory for Malta, affirming its authority to determine nationality criteria without mandating a “genuine link.”

The ECJ’s final decision will be critical for firms advising on citizenship and residency by investment.

Should the Court 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.

Nonetheless, Member States offering CBI programs should remain vigilant, as any action that could potentially destabilize mutual trust within the EU remains under scrutiny.

In sum, this opinion underscores the importance of adhering to high standards of due diligence and compliance while exercising national sovereignty in nationality matters.

The final decision will undoubtedly shape the future of CBI schemes within the EU, but for now, this opinion provides a favorable stance for Malta and other Member States pursuing similar investment-driven programs.