The European Commission has decided to refer Malta to the Court of Justice of the European Union for its investor citizenship scheme, also referred to as the ‘golden passports', the commission said in a statement Thursday. 

The Commission said it considers that granting EU citizenship in return for pre-determined payments or investments without any genuine link to the Member State concerned is "not compatible" with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union, and with the concept of Union citizenship, as provided for in Article 20 of the Treaty on the Functioning of the European Union.

On 20 October 2020, the Commission sent a letter of formal notice to Malta, urging it to end its investor citizenship scheme. The Commission sent an additional letter of formal notice to Malta on 9 June 2021, following the introduction of a new scheme at the end of 2020.

Malta has not complied with the commission's requests.

Following Russia's war against Ukraine, Malta suspended this new scheme for Russian and Belarusian nationals. While the EC believes that this was a positive step, Malta continues to operate the scheme for all other nationalities and has not expressed any intention to end it.

On 6 April 2022, the Commission sent a reasoned opinion to Malta. Malta's reply did not satisfactorily address the concerns raised by the Commission, the commission said. Malta is the only remaining Member State that operates such a scheme.

Consequently, the Commission decided today to refer Malta to the Court of Justice of the EU under Article 258(2) of the Treaty on the Functioning of the European Union.

Background

EU citizenship and the rights it confers lie at the heart of the EU. Every person that holds the nationality of an EU Member State is at the same time an EU citizen. EU citizenship automatically gives the right to free movement, access to the EU internal market, and the right to vote and to be elected in European and local elections. For these reasons, the conditions for obtaining and losing nationality, regulated by the national law of each Member State, are subject to due respect for EU law.

Investor citizenship schemes allow a person to acquire a new nationality based on pre-determined payments or investments, and in absence of a genuine link with the naturalising country, such as long-term residence. These schemes are different from investor residence schemes (or ‘golden visas'), which allow third-country nationals, subject to certain conditions, to obtain a residence permit to live in an EU country. Both types of schemes pose serious risks, in particular as regards security, money laundering, tax evasion and corruption.

The Commission has been following up on the investor citizenship schemes in other Member States as well.

In October 2020, the Commission also started an infringement procedure against Cyprus for its investor citizenship scheme. Cyprus suspended its scheme and stopped receiving new applications on 1 November 2020. However, as it continued to process pending applications, the Commission decided to send a reasoned opinion to Cyprus on 9 June 2021. Cyprus finished processing all pending applications in July 2021. The Commission is closely analysing the situation before deciding on any next steps.

The Commission has also been in contact with Bulgaria on its investor citizenship scheme. Effective  5 April 2022, Bulgaria abolished the scheme.

Since the launch of the first scheme in 2014 (the ‘individual investor programme'), Malta naturalised several thousand investors and their family members. At the end of 2020, Malta established a new scheme (the ‘Maltese Citizenship by Naturalisation for Exceptional Services by Direct Investment' scheme), after the original one came close to reaching its limit of 1,800 successful main applicants. The new scheme maintains the principle that nationality can be awarded systematically, in return for pre-determined payments, without having to establish any genuine link between the applicant and Malta. On 2 March 2022, Malta announced that it had suspended, until further notice, the processing of applications from nationals of the Russian Federation and Belarus.

Government replies

In reply, the Government said it has taken note of the action taken by the European Commission in referring to the Court of Justice of the European Union the issue regarding the diverging interpretation of the treaties on competences relating to citizenship. Constructively and in good faith, the government has been exchanging views with the said Commission on the acquisition of citizenship by investment, regarding the allegation that such avenue for the grant of Maltese citizenship is a matter of national competence with the Commission adamantly insisting that such competence is not unlimited, notwithstanding that the government has provided the legal arguments that prove otherwise.

In a general manner it must also be said that cooperation by the Government was always forthcoming, in those processes initiated by the European Commission as regards cooperation and coordination to reduce risks related to Citizenship and Residence by Investment Schemes.

In this regard, the Government of Malta said it believes that it is not in breach of the principle of sincere cooperation as stipulated in Article 4(3) of the Treaty of the European Union (TEU) and that its legislative framework of citizenship by investment fully respects the provisions as laid down in the Treaty of the Functioning of the European Union (TFEU) by the operation of the said avenue of naturalization. The government, following consultations with experts in this field, strongly rejects the interpretation given by the Commission regarding such articles. Malta operates such avenue on the basis of robust due diligence processes which address the risks related to money laundering and the financing of terrorism and ensure that only worthy individuals would acquire Maltese citizenship and consequently European citizenship, the government said.

It reiterates that in this regard it is exercising its competency in this field in accordance with the article 20 TFEU and abiding with the conditions and limits defined by the treaties and the measures adopted thereunder. This legislative framework was carefully scrutinised in evaluations on the risks of money laundering and the financing of terrorism by several international institutions, namely Moneyval and FATF. The entities and their processes successfully passed the same evaluations and were even recognised as a model for other countries in the fight against the activities of the mentioned organised crime. These processes also include the sharing of information in a transparent manner with third country jurisdictions.

Such action shall, therefore, give Malta the opportunity to continue rebutting the said allegations and let the Court of Justice of the European Union settle the matter by ruling on the interpretation of the treaties, the government said.

Nationalist Party reacts

In a statement, the Nationalist Party told the government not to cause any more damage to Malta's reputation.

The opposition expressed its concern on the strong impact that news like this leaves on the reputation Malta. “It is really a pity that the Labour Government is not doing enough to strengthen the reputation of our country, which was already tarnished when Malta was put on the grey list of the Financial Action Task Force (FATF), particularly because we were the only Member State of the European Union to be placed on this list.”

In its statement, the PN asked the government what it will be doing to safeguard the country's reputation, “on which foreign direct investment depends so much”, and whether it can confirm if due diligence has always been done properly in the citizenship sale scheme. 

“In addition, the Government should also confirm whether there was always a genuine connection of the applicants with our country,” the statement read.

 

The statement was signed by PN spokesperson for Finance Jerome Caruana Cilia and PN Spokesman for Home Affairs, Security and Reforms Joe Giglio.