Citizenship for Sale (Commission v Malta)

I

The Maltese “passports for sale” (Golden Passports) was big news a year or two ago but has now disappeared below the radar of public attention. Yet, the mills of justice might grind slowly, but grind they do. The case brought by the Commission against Malta is scheduled to be heard by the CJEU sometime later this year.

So, Malta offers passports for sale.¹⁾ Quelle Horreur! I hear you sniffing with disgust and indignation. They sell their citizenship, and hoopla – automatically these new citizens, ipso facto and ipso jure are European Citizens enjoying all the rights and duties which attach to such. And indeed, the club of similar states is not large and not particularly edifying comprising such world powers as Granada, St. Kitts, but also Turkey – even more reason to turn our noses up.

But if we turn to Golden Visa programs (Investor Residence is the terminus technicus here) the list is much larger and more respectable: According to a 2019 Commission Report²⁾ which set the whole saga in motion (hereinafter the Report) no less than 20 Member States have such schemes, where the investment threshold may be as low as 100,000 Euro. In this case, the global club is far more respectable including, inter alia, the United Kingdom, the United States, Canada, Australia and New Zealand.

It is not the same, I hear my readers saying. No, it is not the same. But as a matter of functional interest to fellow Member States, rather than the emotive gut reaction to the notion of “citizenship for sale”, the differences are wafer thin.

Don’t take my word for it. Download the Commission Report and see for yourself.

It is a sober report, the result of a specific study³⁾ exploring the policy concerns resulting from the practice of Golden Passports and Golden Visas. As you will shortly see, the Report is interesting and revealing for both what is in it, and what is left out.

Most notable, already in the introduction to the Report the point is made:

Investor citizenship schemes [Golden Passport] differ from investor residence (“golden visa”) schemes…. However, the risks inherent to such schemes are similar to those raised by investor citizenship schemes.

And one may add that Golden Visas are often times a prelude to, at times fast track, naturalization and citizenship.

What are these risks? The Commission lists 4 such risks which result equally from both Golden Passport and Golden Visa schemes:

• Security – concluding that “…[i]t is therefore important that any investor citizenship and residence schemes are organized in such a way as to prevent such security risks.
• Money Laundering – Here, too, the Commission concludes that “Member States should also take into account the potential risks of money laundering linked to investor citizenship and residence schemes in their national risk assessments carried out according to the EU anti-money laundering rules and take the necessary mitigating measures.
• Circumvention of EU rules – notably where licensing requirements include a nationality requirement.
• Tax Evasion – also linking the risks from both schemes.

These are real and serious concerns, well documented (except for tax) in the Report and its underlying study. I characterized the Report as “sober” since, with one exception (which I will discuss below), it is bereft of emotive rhetoric and is focused on the real tangible risks that result from both types of schemes. An objective reader of the Report would easily conclude that quantitatively speaking, the major risk surely would emerge from the 20 Member States operating Golden Visa schemes rather than the single Member State which operates a Golden Passport scheme.

The way to tackle these real risks would be to put in place, either under Union law or under mutually agreed Member State law and policy, specific provisions, which the Report suggests, to deal with these risks.

And if these measures – such as securing adequate security and fiscal checks before granting either residence or citizenship – were effective for Golden Visas they would be equally effective for Golden Passports. The current new EU migration law which is making its way through the appropriate process is a good example of that. It provides inter alia for agreed security checks which, for example, could in principle be applied also to Golden Visa and Golden Passport migrants.

And yet, when one tracks the follow-up (from publicly available Commission Press Releases⁴⁾) resulting in the case against Malta, one notes with some astonishment that practically all references to the various risks mentioned in the Report have disappeared.

In the Commission Press Release accompanying the decision to send a Reasoned Opinion to Malta, a first step for bringing the case, there is a change of tonal register. The case against Malta is now framed as follows:

European Values are Not for Sale (emphasis in the original) which is the title under which the Reasoned Opinion is explained in the Press Release.

One can regard this as a mere rhetorical device designed to whip up public support for the prospective law suit. But given the disappearance of practically all the functional considerations elaborated in the Report, and the single focus on Golden Passports to the exclusion of Golden Visas which raise similar risks and, quantitatively, would appear to be far more serious, one might suspect a much more profound agenda lurking below the surface. One smells a rat.

To put it bluntly, it appears (to me) as I shall argue below that this is but

1. a crass attempt by the Commission to circumvent proper constitutional and decisional procedures required under the Treaties; and
2. redefine European citizenship and its relationship to national citizenship,

in the hope that the CJEU will become complicit in these attempts.

II

The logic of the Single Market is unassailable when it comes to goods. Once they enter the Union, they enjoy free circulation among all Member States. Consequently, regimes such as the Common External Tariff are in place. Given the free circulation of goods, the Member States are subject, albeit not perfectly, to a common set of disciplines.

In principle, the same single market logic should apply to persons (as “factors of production”) when it comes to citizenship and permanent and long-term residence entries. Accordingly, the conclusion would be easy enough. It would surely be an [ever] “closer Union” if the Union had e.g. a Common Migration Policy, common rules for the granting of citizenship and residence and the like.

And yet, like it or not, the Member States in successive Treaty revision have refrained from going “all in” in this direction. And why so? Humans are not merely or even principally factors of production which underlies the single market philosophy. And the question of granting nationality and long-term residence involves profound social, political, economic, moral and identitarian issues, issues in relation to which the Member States may understandably and legitimately hold very distinct views and consequently want to reserve these decisions to themselves or, at a minimum, seek to reach a deliberative European wide consensus.

But, in the same Press Release of September 29, 2022, we find, too, the following:

EU citizenship and the rights it confers lie at the heart of the EU.

Maybe it would be a bit more forthcoming to acknowledge that national citizenship lies, too, at the heart of Member State identity and in this way demonstrate cognizance that one is dealing here with the fundamental tension concerning the delicate balance between Unity and Diversity. Given this tension of fundamentals (this is not about conflicting customs valuations), extra caution is required as regards, yes, the values of our Europe and the procedures which are designed to protect these values.

Here is a striking example which illustrates the non-“factor of production” sensitivity as regards who would be invited to live with us, whether as citizen or resident.

In a previous piece I heaped praise on Germany and the formidable Ms. Merkel, for saving the honor of Europe in the face of the humanitarian crisis resulting from the intra-Syrian conflict. Germany admitted around one million refugees. Not all Member States were happy (few were, perhaps, happy that it was Germany and not themselves). Not everyone within Germany was happy either.

All these new legal residents would enjoy Schengen rights and progressively enjoy all rights under Union law as explained, without, conveniently, a direct reference to this occurrence, in the Commission Report. By comparison, the Maltese scheme is numerically trivial. It is certain that if the German move were to be governed by the Union, it would not have happened. And yet for Germany, this was a profound identitarian issue, part of their self-understanding as a post WWII democratic republic. It was a policy which put, at least in some ways, values above direct utilitarian considerations. So, Commission v Germany, anyone?

One might not be happy with the structural architectural anomaly outlined above. As a dyed-in-the-wool Europhile I would favor a common EU migration policy; I would equally favor a mutually agreed harmonization of the conditions for granting national citizenship and long-term residence. The structural anomaly I highlighted above is in many ways untenable in the long run. And my rationale is not just a Single Market one. Nous ne coalisons pas des États, nous unissons des hommes is a telos not driven by market considerations.

But I am an equally dyed-in-the-wool believer in respecting correct constitutional procedures when translating desirable outcomes to binding Union law. And this is not driven solely by mechanical “Rule of Law” considerations: The Law is the Law is the Law. It is driven, too, by consideration of the current circumstance of our Union and by my long-held belief that in “healthy” federal type polities (of which the Union is one) respecting “fundamental jurisdictional boundaries” and decisional procedures, even if they are “inconvenient” is as important as respecting fundamental human rights.⁵⁾ Undoubtedly the new Migration Law (to come into effect, once it clears the final stages of the process, in 2026) is an example of how these issues should be dealt with.

I use this comparison of jurisdictional and procedural limits to human rights with a particular purpose in mind. We are all in favor of human rights, are we not? But the real test of commitment to human rights, say freedom of expression, is not when we are outraged and protest against the curtailment of expressions with which we agree. The test of our commitment is when we strongly disagree or even hate the expression in question, but defend the right in question.

This is particularly true in the case of fundamental boundaries in a system of attributed and delegated powers such as the Union. It is also true when the decisional procedures are not to our liking especially when they require unanimity. We might ardently favor this or that policy, but respecting fundamental boundaries and fundamental procedural guarantees must discipline us not to yield to the temptation if achieving such does not respect correct procedures and a solid legal basis. If we allow the end to justify the means, we may win the short-term battle but lose the long-term war and make a mockery of our solemn commitment to our civic Holy Trinity – democracy, human rights and the rule of law.

One must resist the functional institutional ethos, still detectable oftentimes in Commission practice, when a policy desideratum is articulated and then the Legal Service is charged with finding a way of achieving such – “if there is a political will, there will also be a legal way.”

In my view, odious as one may find the idea of “selling citizenship”, the case against Malta is, as mentioned above, an egregious exercise of jurisdictional creep and circumvention of constitutionally correct procedures. And the Commission is hoping that the Court will become complicit in such. I find selling these constitutional values no less odious than selling citizenship. And I should add that it is a perverse notion to consider this position as “Euroscepticism.”

It is also reasonably clear (more of this below) why the functional considerations (security and all the rest) disappeared. For if these concerns were the true motivation behind the case, the correct route would be to put in place a variety of procedural safeguards rooted in appropriate decisional procedures. And that this would apply both to Golden Passports and Golden Visas which, as the Commission Report explicates, pose similar risks and quantitatively are more serious.

The key to the case can be found in one anomalous section buried in the Report. I say anomalous since it is the one section that on careful reading departs from the sober functional tenor of the rest. It is worth reading with care.

Section 2.4 of the Report on Investor Citizenship Schemes and EU Law, commences thus:

In line with the Treaties, every person who becomes a national of a Member State shall be a citizen of the Union. Citizenship of the Union is destined to be the fundamental status of nationals of the Member States.

The logic of this statement seems to be the following: If we have a tension, or even a conflict between Member State constitutional prerogatives when it comes to the issue of nationality and citizenship and European Union citizenship prerogatives, since,“in line with the Treaties” “citizenship of the Union is destined to be the fundamental status of nationals of the Member States” the European interest should prevail over Member State prerogatives.

And, relying in the Report on what I consider a tendentious reading of Nottebohm⁶⁾, granting naturalization without a genuine link to the country in question, (assuming that is what the Malta scheme allows) constitutes, in and of itself, a violation of the Treaties – the constitution of Europe.⁷⁾

Yes, except no.

“In line with the Treaties” the Commission statement begins. Given the solemnity and gravity of the statement (our destiny, no less!) the innocent reader would be forgiven if he or she thought that “citizenship of the Union is destined to be the fundamental status of nationals of the Member States” is actually to be found in the Treaties as the Commission statement implies. It is not.

This formula must count as one of the most unfortunate dicta of the Court starting with Grzelszyk⁸⁾ and followed in all other citizenship cases.⁹⁾ No matter how often it may be repeated, this does not give it any epistemic credibility. The Court never explained how it reached that conclusion. In fact, it is pure judicial invention arising ex nihilo.

As a matter of text, legislative history and Telos of the integration project the best one can say that it is an untenable reading of the Treaties.

Text: Although the Commission, citing Article 20(1) says “[i]n line with the Treaties”, it conveniently, or cagily (take your pick) left out the second sentence of Article 20(1) TFEU.

Citizenship of the Union shall be additional to and not replace national citizenship which, to put it mildly, gives the clause a somewhat different flavor to the way the Commission would have us believe, and, to my reading, contradicts the “fundamental status” rhetoric.

Legislative history: Destined by whom? Certainly not by the Member States who drafted the citizenship clause in the Treaties. In fact, their intention would appear to be quite the opposite. In the original Maastricht Treaty one simply found: “Every person holding the nationality of a Member State shall be a citizen of the Union.” The Member States were clearly unhappy with this formulation and in Amsterdam and Nice introduced a significant amendment: Citizenship of the Union shall complement and not replace national citizenship.

And, as seen, Article 20 of the TFEU finally settled on Union citizenship being additional. The introduction of these limiting clauses amending the original Maastricht formulation surely points towards a restrictive rather than expansive reading of the clause. Could you imagine the famous “destined to be the fundamental status” formula being approved by the IGC if anyone dared put it on the table?

If anything, this history indicates, that a respectable hermeneutic reading would suggest that national citizenship is destined to remain the fundamental status of nationals of the Union.

Telos: The idea that European citizenship should become the fundamental status is a European version of the American telos – e pluribus unum, and harks back, to those who dreamt and some who still dream of a United States of Europe. The originality of the European construct, its distinctive character and genius are reflected in the rejection of that telos and its replacement with the Ever Closer Union among the Peoples of Europe. Peoples, not destined to be one people. This is a much more original, albeit challenging telos. Granting European citizenship (with its rather limited set of rights enumerated in the clause, some of which predated the citizenship clause) is welcome so long as one does not disturb the delicate balance between the two without clear Member State authority.

Frustrating as it may appear to some, Articles 20 (properly cited) hardly seems a solid legal basis for a case which puts in tension the autonomy which the Member States kept to themselves and were careful not expressly to delegate to the Union and a desired Union policy.

And so, this shaky legal basis is shored up by reference to Article 4(3) TEU, the principle of Sincere Cooperation on which the case of the Commission seems to hang. This is truly scraping the bottom of the legal barrel. Here, too, conveniently the Commission fails to mention the clause of Article 4 TEU which precedes 4.3:

4.2. The Union shall respect the equality of Member States before the Treaties as well as their national identities, inherent in their fundamental structures, political and constitutional, inclusive of regional and local self-government. It shall respect their essential State functions, including ensuring the territorial integrity of the State, maintaining law and order and safeguarding national security. In particular, national security remains the sole responsibility of each Member State.

4.3. Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties.

Surely Article 4.3 should be read in the light of Article 4.2. As mentioned, the Commission, this time with integrity, mentioned as its first concern with the Golden Passports and Visas, the issue of security. No wonder it disappeared between the Report and the case, seeing that the Treaty, is so emphatic regarding the sole responsibility for such.

And compare the language of 4.2 with its reference to national identities, fundamental structures – political and constitutional – and all the rest, with the language of of 4.3 which speaks of the Member States assisting the Union and each other, in full mutual respect in carrying out tasks which flow from the Treaty. The Commission, it may be worth reminding some European mandarins, is not synonymous with “the Union.”

Res Ipsa Loquitur.

Imagine the Commission puts forward a proposal to harmonize the requirements for granting of Member State nationality and residence. When it comes up for a vote it does not achieve the required majority. Maybe one Member State vetoed it. It would surely be untenable for the Commission to bring an action against such a Member State on the grounds that by voting against the Commission proposal they violated the principle of sincere cooperation ex Article 4.3. Could they get around this difficulty by simply not making a proposal and not bringing it to a vote?

Not only, it would seem, is the Commission, in setting down norms for the grant of nationality by Member States, using Art 4.3 as a way to circumvent appropriate decisional procedures but they are at the same time perverting what I would regard as the true meaning of Article 4.3 itself.

Again, make no mistake. There is every reason for the Union to be concerned with the various dangers which the Report spells out and which result from the underlying structural anomaly in the constitutional architecture mentioned above. But the only way correctly to address the consequences of this anomaly if not by Treaty amendment, would be through appropriate Union legislative and administrative procedures or by a procedure properly agreed among the Member States in the spirit of sincere cooperation ex Art. 4.3.

This is not such the case here and the Court should not be invited to act as if it were.

If Article 4.3 is interpreted in the way the Commission is arguing in this case, it would give them a Golden Visa to avoid the values enshrined in constitutional procedures and achieve results through judicial fiat.

III

It is also worth considering with a little bit more depth the issue of “genuine connection.” This is not to deny that these issues could potentially be a matter of concern and even a common European norm. But they are far more complex than meets the eye and should not be resolved by a simplistic categorical black and white rule as the Commission invites the Court to do.

First if you care to take a look, many of our Member States have provisions for granting nationality for example to distinguished artists, or, footballers (!) which are quite lax on genuine connection, something barely mentioned in the Report. Why complicate the dossier?

One might perhaps dismiss these instances as de minimis. So, consider then the tens of thousands, if not hundreds of thousands of Union nationals who have migrated and have made their life in other countries – Canada, Australia, the United States and elsewhere. There are, thus, a very large number of sons and daughters born in those countries who by virtue of the prevalent jus sanguinis provisions in most constitutions, are nationals of Member States. Sometimes the original Member State has quite liberal nationality rules which might go even beyond sons and daughters. A country like Ireland, and there are more, legitimately values this important understanding of itself. And yet, these sons and daughters or grandsons and granddaughters, or great grandsons and granddaughters have automatically all the rights mentioned in the Report and the Reasoned Opinion (and pose the same risks) even if they have never set foot in the territory of the Union and do not speak its language of their European nationality. Not convinced? Reread the Collins case, a sharp reminder of such.¹⁰⁾ By no sense of imagination can one consider the Collins’ of the world as having a “genuine connection” in the sense outlined in the Report to the nation of their ancestors.

Our gut reaction is, correctly perhaps, that it’s not quite the same. It is not. But from the perspective of the policy concerns (security, money laundering etc.) it is not all that different. And, after all, it is the functional dimension which would be the justification for the Union to interfere in a domain traditionally reserved to the Member States. So, Commission v Ireland next? Or Commission v Germany (with its nationality rules concerning historical minorities)?

Don’t read more into these two examples than I am trying to argue. I am simply saying that the issues are complex and involve a wide range of details which would require serious deliberation and should not be whitewashed by a judicial procedure which avoids all these complexities. It is not for the Commission on its own to address these complexities and, respectfully, neither is it for the Court. If there are to be Union norms setting out conditions for granting citizenship or residence, these delicate political issues should be thrashed out and decided by the appropriate democratic political procedures inconvenient as this might be.

IV

So what’s behind this Commission gambit? One can only speculate. Here then are some speculations.

We tend to speak of “The Commission”, “The Court”, “The Parliament” etc. We reify these institutions and forget that they are made of humans, flesh and blood, like you and me, with all the virtues and vices that come with the human condition.¹¹⁾ Once we de-reify them, the explanation might come down to personal pride, to embarrassment at the failure to have any meaningful action plan to deal with the real problem resulting from the structural anomaly or, perhaps, frustration with the 10 year process of the Migration Law? All forgivable sins but not a license for such a constitutional grab.

But there might be more to it. In its September 22 decision to refer Malta to the Court we find in the Press Release the following enigmatic statement:

On the one hand they write (referring to Golden Passports):

These schemes are different from investor residence schemes (or “golden visas”)…

Well, yes, on their face they are different, but the Press Release immediately adds:

Both types of schemes pose serious risks, in particular as regards security, money laundering, tax evasion and corruption.

So why pick just on Malta and not go after the 20 or so Member States, where quantitatively, the real serious risks lie? Well, taking on 20 Member States which have different versions of Golden Visas posing such risks is a tad more difficult than taking on Super Power Malta.

There is also an issue of proportionality. If the Commission concern was truly with the four risks, would it not be sufficient, for example, to subject Golden Visa and Golden Passport recipients to the same kind of checks which, under the new Migration Law, are provided for other forms of migration? Would this more restrictive approach not be more respectful of the correct interpretation of the Treaty in this constitutionally sensitive area? Do what is strictly necessary to deal with the functional problems and no more?

Taking the appropriate legislative route, with its institutional and democratic safeguards is not easy. It would probably involve Article 352 with its unanimity requirement and possibly an agreement of the Member States outside the framework of the Treaties as has happened in other instances. That’s daunting and the Commission is less likely to get all it wants. The new Migration law has been ten years in the making. Would it not be wonderful, then, if one could get a ruling from the Court that would blow open Article 4.3 TEU and thus allow the Commission to impose its views of what is acceptable and non-acceptable without the headache of Art. 352 and all the rest? If one wanted to stretch the meaning of Article 4(3) one could not have chosen a better case because of the emotive appeal which is no more about the various real risks but about “European Values are not for sale”.

The Commission officials should put back on the shelf their copy of Plato’s Republic. Constitutional democracy is not about philosopher kings who know best what is good for us. Constitutional democracy is never easy, it requires patience, it requires compromises but it, too, “lies at the heart of the EU.”

We are all aware that the issue of jurisdictional limits and appropriate procedures – intra vires-ultra vires – has become a lightning rod in the current socio-political circumstance of the Union and quite a few national jurisdictions have been sending signals of such in recent years. I suspect it is too late for the Commission to withdraw from this gambit. In fact, I expect they will dig in. But here is a golden opportunity for the Court, in a high visibility case, to assert its authority, and to be seen as asserting such authority, as an effective guardian of the profound values inherent in jurisdictional limits and constitutional procedures.

An earlier version of this post referred to Art. 308 TFEU, the pre-Lisbon numbering. It’s Art. 352 TFEU.