Malta and European Commission Face Off in Court: Detailed Summary of Yesterday’s Hearing

Yesterday, the European Court of Justice heard the case between the European Commission and Malta in its Grand Chamber in Luxembourg. At the heart of the dispute is Malta’s citizenship by investment program, the MEIN Policy, which the Commission alleges violates EU law by undermining the principle of sincere cooperation among member states.

The Commission argues that Malta’s program, which allows individuals to acquire citizenship in exchange for substantial financial contributions, lacks a genuine link between the applicant and Malta, thereby jeopardizing the integrity of EU citizenship. This hearing marks a pivotal moment in defining the limits of national sovereignty in matters of citizenship within the European Union.

EU citizenship scholar Prof. Dimitry Kochenov has insisted, on several occasions, that the Commission stands “zero chance” to win the case in court.

The respective arguments of the plaintiff and the defendant

European Commission’s Claims:

  1. Genuine Link Requirement
    The Commission argues that EU law requires a genuine link between the applicant and the member state granting citizenship. They claim that Malta’s CBI scheme, which grants citizenship based solely on financial contributions, fails to establish this link.
  2. Integrity of EU Citizenship
    The Commission asserts that Malta’s program undermines the mutual trust and solidarity between EU member states, as new citizens gain the rights of EU citizenship without having a substantive connection to Malta.
  3. Sincere Cooperation
    The Commission contends that Malta’s scheme violates the principle of sincere cooperation outlined in Article 4(3) of the Treaty on European Union (TEU) by allowing individuals to purchase citizenship without a genuine connection to the state.

Malta’s Defense:

  1. National Sovereignty
    Malta argues that the granting of citizenship is a matter of national competence, supported by international law and the TEU, which allows each member state to define its own criteria for nationality.
  2. Historical Precedence
    Malta points out that granting citizenship through investment is not a new concept and has historical precedents across Europe, citing examples from, among others, 16th century Netherlands.
  3. Security and Due Diligence
    Malta emphasizes that their CBI scheme includes rigorous due diligence and security measures to ensure that new citizens do not pose any risks, thereby maintaining the integrity of the national and EU legal framework.

Defense calls attention to the Commission’s moving goal posts

The defense further questioned the bona fides of the Commission’s claims by pointing out that the basis of its opposition to CBI had changed on several occasions in the past. In 2013, said the defense, the Commission, when questioned about Malta’s then-new CBI program had refrained from commenting on it, stating repeatedly that it was “for each member state to lay down the conditions for the acquisition of its nationality” and that it was therefore not the Commission’s place to comment on it.

By 2019, said the defense, this stance had turned more hostile on the grounds that CBI programs could pose serious security risks. In response, Malta had addressed those concerns through a comprehensive strengthening of its vetting procedures.

Now, said the defense, the Commission’s basis for opposition has shifted for a third time: “No reference to member state competence is to be found in submissions. No reference to security risks is to be found either. Now, it is all about the status of citizenship and the principle of sincere cooperation, and that is all.”

The Commission’s advocate responded to this by saying that the core argument is not about the evolving stance of the Commission but rather about the fundamental principles of EU law that should be adhered to by all member states. He maintained that the need for a genuine link between the naturalizing state and the individual is a principle derived from EU law, particularly Article 20 TFEU, and that this principle has consistently underpinned the Commission’s stance despite the apparent changes in focus over time.

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The current legal challenge, explained the Commission’s advocate, is based on the principle that EU citizenship should not be commoditized without a substantive connection to the member state. He commented that the Commission’s earlier concerns about security risks were part of a broader evaluation, but the current legal action focuses specifically on the legal limits established by EU law.

In essence, the Commission’s advocate emphasized that the legal basis for the current challenge remains consistent with EU principles, even if the emphasis and context have evolved over time.

Salient questions from the judges and the respective responses from the parties

Genuine Link Requirement
The judges questioned whether the Commission’s demand for a genuine link is a new criterion imposed by EU law and how it should be defined. They suggested that while the Commission argues for it, the court has not previously mandated it and queried how this link should be defined and by whom, emphasizing the need for legal certainty.

  • Commission’s Response
    The Commission maintained that a genuine link reflecting a special relationship of solidarity and loyalty is essential and that purely transactional citizenship through financial contributions does not meet this standard.
  • Malta’s Response
    Malta countered that their scheme is transparent and includes a rigorous process of legal residence and due diligence, arguing that the requirement for a genuine link is not explicitly mandated by EU law.

    Comparison with Historical Schemes
    The panel asked about the difference between Malta’s CBI scheme and historical schemes, like Spain’s naturalization of Sephardic Jews, which do not require physical presence.

    • Commission’s Response
      The Commission differentiated Malta’s scheme by highlighting its transactional nature, arguing that historical schemes are based on cultural and historical ties.
    • Malta’s Response
      Malta argued that discretionary naturalization has always been part of national prerogatives and that their scheme includes extensive security and due diligence measures.

      Function of Article 20 TFEU
      One of the judges asked whether Article 20 TFEU could be interpreted as opposing nationality granted without a genuine link, similar to the international law concept of opposability.

      • Commission’s Response
        The Commission agreed, stating that Article 20 should prevent the transactional sale of citizenship as it undermines mutual trust among member states.
      • Malta’s Response
        Malta argued that their scheme adheres to legal standards and that objections to similar schemes in third countries, like Vanuatu, are primarily based on security concerns, not the absence of a genuine link.

        Transactional Nature of Citizenship
        The panel further questioned the difference between granting citizenship for financial contributions and granting it to athletes for future representation.

        • Commission’s Response
          The Commission stated that naturalization for exceptional merit, including athletes, involves individual assessment, unlike Malta’s standardized transactional scheme.
        • Malta’s Response
          Malta argued that their scheme is not purely transactional but involves a comprehensive process of assessment and compliance, making it different from mere financial transactions.

          The hearing concluded with final remarks from both sides. The Commission reiterated its stance that Malta’s CBI scheme undermines the integrity of EU citizenship and violates the principle of sincere cooperation. Malta defended its position, emphasizing the transparency and rigor of its program and arguing that it does not deviate significantly from established practices of discretionary naturalization.

          The Advocate General will deliver his opinion on October 3, 2024, after which the court will deliberate and issue its judgment.

          Interested parties may view a full recording of the 3-hour hearing on the ECJ website today only.

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