After years of commotion at the political level, in 2023, the Commission initiated proceedings against Malta and its ‘Citizenship-by-Investment’ (CBI) scheme, and made available its main arguments. After Advocate General Collins issued his Opinion in the case in October 2024, many writers have been quick to issue theirs. As Martijn van den Brink points out, the AG’s Opinion clarifies to an extent the Commission’s argument. Perhaps now is as good a time as we will get to revisit and comment on the legal-political debate about CBI schemes in the EU. Time will (soon) tell what the CJEU has to say.
What’s the Problem?
The Maltese investor citizenship scheme is but a single manifestation of a global trend towards marketizing and instrumentalizing citizenship, which in turn is an indication of the intrusion of capitalism and commodification in an ever-greater number of areas of our lives. For that reason (among others), many are not quite at ease with the idea of selling citizenship, and especially not in the EU, where not only nationality but also EU citizenship is at stake. But if we set aside crucial questions pertaining to fairness, global justice, and how we should respond to untamed capitalism in the EU, and turn to the case of Commission v Malta, much more straightforward questions arise. The simpler (key) question is if Malta is, in one way or another, constrained by EU law as far as the allocation of Maltese citizenship (and EU citizenship) is concerned.
The Commission, for one, thinks so. The Commission argues that Union law precludes schemes like the Maltese one ‘in the absence of a requirement for a genuine link between the State and the individuals concerned.’ To the contrary, scholars like Martijn van den Brink agree with AG Collins in that there is no such thing as a genuine link requirement in EU law for the acquisition of national citizenship (and, in turn, EU citizenship). Thus, plenty of attention has been devoted to the absence of a genuine link requirement and the ‘constitutional outrage’ it would be if the Court were to side with the Commission. In Joseph Weiler’s words, the case against Malta is ‘an egregious exercise of jurisdictional creep’, and the Commission officials ‘should put back on the shelf their copy of Plato’s Republic.’
I would like to (re)direct the attention to a somewhat neglected idea, which turns not so much on the question of whether the imposition of a genuine link on Member States would be an unfounded power grab, but on the principle of sincere cooperation, as enshrined in Article 4(3) TEU. To foreshadow my argument, it seems to me that if the Maltese scheme can be said to undermine the internal market objectives of the Union, the principle of sincere cooperation justifies, and arguably requires, intervention from EU institutions. The Commission (para. 19) mentions the Union’s objectives but it seems to have in mind ‘the essence and integrity of EU citizenship’, rather than the market. Meanwhile, in his Opinion, AG Collins rejects (para. 40) the application of the principle of sincere cooperation altogether.
Why a Genuine Link Does Not Apply
Since the principle of sincere cooperation should be seen in the context of mutual recognition and the internal market, let us first revisit the debate on the genuine link in EU law. As we know, the genuine link first surfaced in the context of EU law in Micheletti, a case on the mutual recognition of nationality. As we also know, the Court of Justice dismissed the application of the genuine link. It set out that, ‘[u]nder international law, it is for each Member State, having due regard to Community law, to lay down the conditions for the acquisition and loss of nationality’. The Court thus indicated that whilst EU law may entail certain constraints on Member States’ sovereignty in nationality matters, Member States are not allowed to make the recognition of nationality of another EU Member State subject to additional criteria ‘such as […] habitual residence’. It thereby dismissed any variation of the genuine link, as mentioned by AG Tesauro in his Opinion in Micheletti. A genuine link may apply to the recognition of nationality in international law, but such a rule does not exist in EU law.
It is therefore regrettable that the Commission suggests in its case brought against Malta (para. 24) that it follows from Micheletti that ‘[mutual] recognition in the EU legal order furnishes a legal basis for a common shared conception of nationality that entails the existence of a genuine link between a Member State and its nationals’. To substantiate a genuine link criterion in the idea of mutual recognition does indeed look like a power grab and undermines the credibility of the Commission’s argument.
On the other end of the spectrum, AG Collins, however, has also gotten it wrong. He writes in his Opinion (para. 57) that: ‘[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’. In Micheletti, the CJEU dismissed the genuine link not out of respect for the sovereignty of Member States but rather out of respect for the market and more specifically the freedom of establishment, which was what Micheletti was about. Recall that the case concerned Mr. Micheletti, an Italian national, who wanted to gain residence in Spain to establish himself as a dentist there, but Spain denied Mr. Micheletti residence because he also possessed the nationality of Argentina, which, according to Spanish laws, took precedence. The imposition of a genuine link would have rendered Mr. Micheletti’s Italian nationality ineffective, and it would therefore, as Dimitry Kochenov writes, have been antithetical to free movement. Mutual recognition of nationality is neither an expression of a shared conception of nationality among Member States, nor is it an expression of respect for the sovereignty of Member States. It is about internal market building.
In the loss of Union citizenship cases, the Court’s jurisprudence has not turned on the market, but on human rights. Rottmann, Tjebbes, and X v Udlændingeministeriet have provided plenty of evidence that Member States are not unconstrained by EU law when deciding on matters of loss of citizenship, and in all cases, the justification for limiting Member State sovereignty was rooted in human rights. For example, as the Court reasoned in Tjebbes (para. 37), the legitimacy of the loss of nationality in Member States is subject to international human rights instruments, in that the loss of nationality must not lead to statelessness.
By contrast, if we look at the acquisition of citizenship, this can hardly be framed in the context of human rights, at least not with respect to CBI. I therefore also disagree with Luke Spieker, who argues that the Court does not categorically distinguish between acquisition and loss of citizenship and that the case law has started to ‘increasingly bring not only the loss but also the acquisition of nationality within the scope of Union law.’ While the loss and acquisition of citizenship represent two sides of the same coin, they should be separated conceptually. As AG Collins rightly points out (para. 52), the rationales underpinning the loss of citizenship are different from the ones underpinning the acquisition of citizenship. Also, Wiener Landesregierung, which concerned a revocation of a guarantee for granting Austrian nationality to an Estonian citizen, did not change much in this respect. It surely resembled a case of citizenship acquisition. Crucially, however, the Court decided that the case fell within its jurisdiction because the person had lost their Estonian citizenship (para. 44). Contrary to what Luke Spieker suggests, the Court has not (yet) brought the acquisition of nationality within the scope of Union law.
In the absence of a convincing rationale, there is no ‘strong case’ for a genuine link requirement for the acquisition of citizenship in the EU. In fact, there seems to be none. This holds at least for voluntary citizenship acquisition, as opposed to non-voluntary acquisition, where human rights might be violated. For the voluntary acquisition of citizenship, a rationale for imposing a genuine link is lacking. This state of affairs surely invites us to ponder the much bigger question: how could a genuine link be justified? That normative question is beside the point here, however. The question is whether there is a reason to constrain Malta under EU law.
Is Malta Constrained by EU Law?
What has been missing in the recent debate is whether an internal market-based argument can be made for constraints, hinging on the principle of sincere cooperation, much in line with what Sergio Carrera Nuñez suggested a decade ago. The Commission is in my view right in pointing out that if the adoption and operation of the Maltese scheme could be said to be detrimental to the Union’s objectives (para. 19), this would justify intervention.
Along the lines of Sergio Carrera Nuñez, it is true that there is no precedence for constraining Member States in terms of how they distribute nationality. The only argument for a constraint that has made its way to the judicial branch is that of ‘mass naturalizations’. As AG Maduro argued in Rottmann (para. 30), the principle of sincere cooperation could be affected ‘if a Member State were to carry out, without consulting the Commission and its partners, an unjustified mass naturalisation of nationals of non-member States’. This is an interesting idea, that has, however, not been taken up by the Court. At any rate, it seems irrelevant for the case at hand. Investor citizens in Malta are, to the contrary, naturalized in rather small numbers.
However, there is another side to that argument. AG Collins rejects (para. 40) the application of the principle of sincere cooperation, since it cannot be invoked without an alleged violation of a specific Treaty obligation, and it is surely difficult to argue that Malta would violate Article 20 TFEU, as the Commission suggests (para. 19), on the count merely that it ‘undermines both the essence and integrity of EU citizenship’. However, Member States are not only obliged to assist each other in carrying out the fulfillment of EU law, including Article 20 TFEU. They are also required to refrain from imposing any measure which could jeopardize the attainment of the Union’s objectives; and one of such objectives is the establishment of an internal market.
The question arises: how is the principle of mutual recognition of nationality in the EU, which, as we saw above in Micheletti, is driven by internal market thinking, reflected in the principle of sincere cooperation? I would suggest that, in the context of the acquisition of citizenship, the principle of sincere cooperation goes beyond a principle of mutual recognition. In short, it goes beyond mutual recognition to the extent that Member States are required to refrain from carrying out certain measures. Also, recall that, in contrast to the genuine link, the principle of sincere cooperation does not depend on whether EU competence is exclusive. Member States must always abide by Article 4(3) TEU, also in areas where competence has not been transferred to the EU; that includes nationality, where competences seem to be overlapping.
Sergio Carrera Nuñez initially argued, in 2014, that Malta could be conceived as a ‘free rider’, as Luke Spieker also touches on. Malta charges a price for something that gives access to something other EU Member States provide (including free movement and residence) and thus there is the risk that the Maltese scheme weakens, to an extent, the coherence and integrity of the internal market. In response to that line of thinking, Martijn van den Brink has argued more recently that the over-inclusiveness in CBI schemes (on the count of financial investments serving as the connecting factor) in Member States cannot be an argument for limiting competences of the Member States in terms of nationality, since ‘any decision to grant nationality may have repercussions for other Member States’. In my view, however, Martijn van den Brink’s argument, which hinges on mutual recognition, is not fully convincing.
The CJEU has intervened in nationality policy-making thus far by addressing the genuine link in the context of loss of nationality. While the genuine link has no bite as far as the acquisition of citizenship is concerned, loss of nationality, which may be made subject to (the absence of) a genuine link, is only legitimate insofar as it does not lead to statelessness. Moreover, as we saw in Tjebbes, rights such as those enshrined in Article 7 of the Charter must be observed (para. 45). This goes to show that nationality is about more than mutual recognition. In cases of loss of citizenship, EU law protects the individual. This suggests that it cannot suffice, from the perspective of European integration, to rely on mutual recognition alone. In the context of the acquisition of citizenship, that proposition lends itself to the following idea: if a nationality policy, by way of the effects it may have on other Member States, can be said to undermine the internal market objectives of the EU, this would justify intervention from EU institutions.
It seems to me, therefore, that a crucial and missing question to address in the (current) debate concerns the extent to which this may be true. If we consider the effects that CBI, as a type of nationality policy, might have on other Member States, a 2021 study conducted by the European Parliament is helpful. The study refers to the effects on the internal market as a social cost of production – negative externalities – informed by economic theory. The question concerns the extent to which such negative externalities arise, and are caused by, CBI schemes, as the one in Malta. That question is ultimately an empirical one. As a substantial amount of empirical evidence has at this stage of the debate been gathered, let us consider a few examples.
One example concerns the matter of the use of CBI schemes for tax planning and benefits. CBI schemes often offer tax benefits, which exacerbates the risk that citizenship is acquired for the purpose of avoiding CRS reporting, or evading taxes altogether. In the first place, any kind of tax evasion and lack of compliance due to transparency deficits in CBI schemes is undesirable in a social market economy. What is more, because of the combination of low personal income tax rate and a lack of transparency and the minimal (to non-existent) residence requirements, there is the risk that CBI schemes exacerbate a harmful tax competition – a race to the bottom – in the EU. As such a harmful tax competition could lead to an ‘uneven playing field within and outside the internal market’, there is reason to think that the Maltese CBI scheme has the potential to affect the coherence and integrity of the internal market.
As another example, the European Parliament has stressed that CBI schemes in the EU that fail to perform adequate security checks could have a ‘negative impact on citizens’ freedom of movement’. In general, visa agreements between states rely on the assumption that citizens are safe to admit. Based on a similar rationale, free movement is made possible by a certain level of mutual trust among Member States. In a long-term perspective, if Member States find that citizens of other Member States are not safe to admit, this could lead to an erosion of said mutual trust between Member States. In the case of Malta, that could be the case if newly created citizens engage with criminal activity and have been admitted without proper security and/or due diligence checks. Such a situation where the mutual trust between Member States shatters would obstruct the free movement of persons, which is a fundamental ingredient to the attainment of a well-functioning internal market.
Conclusion
The case for constraints on Member States by an appeal to the principle of sincere cooperation may well be, as Jo Shaw once put it, ‘rather weak’ (p. 33). But it is, in my view, the only case there is. Framing the case around a notion of a ‘shared conception of nationality’ has no traction in EU law. Even if one were to find that this would be a normatively desirable world – one in which the requirements for acquiring nationality in Member States were harmonized across borders – this is not the world in which we currently live. We do live in a world, though, where Member States must refrain from carrying out measures that might jeopardize the attainment of valuable Union objectives, including a well-functioning internal market. The AG is therefore wrong, I believe, in advising the Court to not examine Article 4(3) TEU (para. 40). If it can be proven that the Maltese scheme undermines the objective to attain a well-functioning internal market, the EU institutions may intervene.
Christian Gormsen is a PhD candidate at the European University Institute (EUI), Department of Law. His thesis focuses on the concept of EU citizenship, political theory, and the marketization of citizenship in the EU.
