In an interesting and important decision of the Court of Justice of the EU, sitting as a Grand Chamber in Commission v Malta (Citizenship by Investment) [2024] EUECJ C-181/23, the Court has found that Malta’s 2020 ‘investor citizenship’ scheme is incompatible with EU law, in particular with the principle of sincere cooperation enshrined in article 4(3) of the Treaty on European Union (‘TEU’) by which ‘the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties’, and citizenship of the Union at Article 20 of the Treaty on the Functioning of the European Union (‘TFEU’).
The Court has, in significant respects, not followed the path taken earlier, in the Opinion of Advocate General Collins, delivered on 4 October 2024. This recorded both the Commission’s claim that there exists a requirement ‘under EU law – and, to a lesser extent, under international law – that, in order to preserve the integrity of EU citizenship, there must be a “genuine link” between a Member State and its nationals’, and that the Commission’s then admission that it could only succeed if that ‘genuine link’ claim was correct (§41). The Advocate General went on to reject the proposition central to the Commission’s case as then advanced, that for it to be legally valid at the level of EU or international law, naturalisation required a prior ‘genuine link’ between the State and a person naturalising as its citizen (§§55-57). He concluded in doing so that ‘There is no significant divergence between EU law and international law on the question as to whether a genuine link must exist between an individual and the State of which he or she is a national, since neither imposes such a requirement’ (§57).
In a post at the time I noted that the Opinion left open the proposition that legality of acquisition of EU citizenship might ‘in principle’ be examined in light of the ‘general principle of law according to which EU law cannot be relied on for abusive or fraudulent ends’, referring to Skatteministeriet v T Danmark [2019] EUECJ C-116/16. In the Opinion the Advocate General then focussed, understandably in the light of the way the Commission’s case was put, on the concept of ‘genuine link’, prayed in aid by the Commission and sometimes claimed, on a (contentious) reading of the ICJ decision in the Nottebohm case (Liechtenstein v Guatemala) ICJ Reports (1955) 4, as necessary for the validity of nationality under public international law.
I suggested in my post that the Nottebohm decision correctly understood offered no comfort to the Commission, and that the Advocate General might still give too expansive an account of its significance if extended to recognition more broadly, rather than limited to the particular context of opposability – the question of whether a legal act, has international legal effects – in the international law concerning diplomatic protection, applied to very particular facts.
The decision of the Grand Chamber follows a distinct course stated to rest exclusively on the European Union acquis. In its account of submissions for the Commission, the Court refers neither to the Nottebohm decision nor to international law more generally (§§42-62). The Court refers to the Nottebohm decision only in a reference to the submission for Malta that no ‘genuine link’ requirement can be inferred from that decision (§§63-78, §71). The phrase ‘international law’ in fact occurs only twice in the English version of the judgment, once in reference to submission for Malta, as referred to above, and the second time effectively to signal a move, after acknowledgement of EU documents identifying citizenship of the Union as additional to rather than replacing national citizenship, which can arise only from national laws (§§79-80), to focus narrowly on EU legal competence in the field of nationality and the scope for deployment of this:
That said, according to settled case-law, while it is for each Member State, having due regard to international law, to lay down the conditions for the grant and loss of the nationality of a Member State, those powers must be exercised having due regard to EU law (judgments of 7 July 1992, Micheletti and Others, C‑369/90, EU:C:1992:295, paragraph 10; of 2 March 2010, Rottmann, C‑135/08, EU:C:2010:104, paragraph 45; and of 5 September 2023, Udlændinge- og Integrationsministeriet (Loss of Danish nationality), C‑689/21, EU:C:2023:626, paragraph 30 and the case-law cited). (§81)
The nub of the Grand Chamber decision lies in three paragraphs (§§93-95) which successively express the propositions first that ‘Union citizenship is thus one of the principal concrete expressions of the solidarity which forms the very basis of the process of integration referred to in paragraph 91 of the present judgment [the process of integration that is the raison d’être of the European Union itself and thus form an integral part of its constitutional framework], and which is an integral part of the identity of the European Union as a specific legal system, accepted by the Member States on a basis of reciprocity’, secondly that ‘Moreover, in accordance with the principle of sincere cooperation enshrined in Article 4(3) TEU, it is for each Member State, inter alia, to refrain from any measure which could jeopardise the attainment of the European Union’s objectives’ (§94), and thirdly that (§95):
The exercise of the Member States’ power to lay down the conditions for granting the nationality of a Member State is not, therefore, in the same way as their power to lay down the conditions for loss of nationality, unlimited. Union citizenship is based on the common values contained in Article 2 TEU and on the mutual trust between the Member States as regards the fact that none of them is to exercise that power in a way that is manifestly incompatible with the very nature of Union citizenship.
The Grand Chamber then held that acquisition of nationality of a member State, and hence of citizenship of the Union, is incompatible with EU law if it is, in the Court’s word, ‘transactional’, because ‘essentially granted in exchange for predetermined payments or investments’ within a system of the ‘commercialisation of the granting of the nationality’ of a member State (§§99, 103):
Transactional naturalisation, which is granted in exchange for predetermined payments or investments, is not only contrary to the principle of sincere cooperation, but is also liable, by its nature, to call into question the mutual trust which underlies that requirement of recognition, since that trust relates to the premiss that the grant of the nationality of a Member State must be based on a special relationship of solidarity and good faith justifying the grant of rights resulting, in particular, from Union citizenship.’ (§101)
The decision of the Court looks to, and well beyond, both Case C-369/90 Micheletti v Delegacion del Gobierno en Cantabria [1992] ECR I-4239, in which EU law required Spanish authorities to treat a dual Argentine and Italian national as a citizen of the Union rather than adopt a distinct national approach to recognition in multiple nationality cases to exclude the Italian nationality and disapply the status of citizen of the Union, and EU jurisprudence concerning the application of EU law in the context of deprivation of nationality. By its decision, the Grand Chamber has effectively created, at the level of EU law, a form of ‘genuine link’ requirement, expressed as the need for ‘a special relationship of solidarity and good faith justifying the grant of rights resulting, in particular, from Union citizenship’ (§101).
It is a marked feature of its decision that the Court does not even suggest the separate existence of any ‘genuine link’ requirement in international law. However, the birth of a separate concept akin to this in EU law calls into urgent question the impact of the requirement. In the Commission v Malta decision, the Court seems to attach weight to the absence of a convincing requirement of actual (as opposed to ‘legal’ or deemed residence) residence in Malta prior to naturalisation as showing the absence of the requisite ‘special relationship’ (§§101, 104-111). But residence is not a general requirement for the acquisition of nationality in international law – in particular, nationality ius sanguinis does not assume any residence or even intention to reside on the territory of the State. It seems clear that the Court envisages the need to consider at least two elements- negative, ‘transactional’ features such as substantial payment to or investment in the State, and positive linkage amounting to or demonstrating ‘special relationship’, such as actual residence. But the parameters of each remain unclear. If there is no ‘transactional’ payment, is there still a need to demonstrate the relevant ‘special relationship’? On the other hand, would the 2020 Malta scheme of ‘golden passports’ be compatible with EU law if, for instance, it incorporated the requirement of a weekend’s ‘actual residence’ in Malta? If not, would a full week or perhaps a fortnight suffice?
The Commission v Malta decision likely represents an important landmark – a crossing of the Rubicon in the extension of EU law to the grant of nationality by States. In principle, it may be welcomed by many as affording a critical basis for greater control over what has been seen as a practice of ‘golden passports’ which is exploitative of, in particular, EU free movement. But the decision creates some important questions, which may include the following:
i. As above, what are the requirements for the compatibility of EU law of any given naturalisation by an EU member State? How much payment renders a nationality which is valid under domestic law incompatible with EU law? What is required, by way of ‘actual residence’ or otherwise, to ground the ‘special relationship’ required for compatibility with EU law of the grant of nationality by a State;
ii. Is ‘transactional’ grant of nationality in return for payment or investment, but absent the required ‘special relationship’, the only circumstance in which a State’s grant of nationality may be incompatible with EU law? It is on the face of it possible to construct cases in which character or conduct of individuals – for instance past or present criminality, or being subject to sanctions – might be said to render naturalisation incompatible with EU law. If there are other relevant categories beyond the so-called ‘golden passport’ cases, what are these?
iii. Where a member State of the EU has engaged in naturalisation practices that are incompatible with EU law, what is the effect of this on the resulting nationality of an individual? Is this invalid for EU law purposes, though valid (as nationality of the State) in international law? If it is invalid for EU law purposes, is this retrospective? What of secondary nationality – for instance, children of ‘golden passport’ people, where the child has become a national through ius sanguinis?
iv. To what degree does the decision create what could be called a ‘reverse Micheletti’ situation, in which one member State may decline to recognise the nationality, in a particular case, of another, and/or to give effect to citizenship of the EU in such a case? Has the Court laid the ground for an EU law of recognition (of nationality), parallel to that in international law?
v. What is to happen in respect of nationality previously granted, not only by Malta under its current scheme, but also by the same country under the earlier 2014 scheme (the one which first attracted the attention of the Commission as potentially incompatible with the EU’s purposes), and by other EU member states who operate or have operated ‘golden passport’ schemes, such as, for instance, Cyprus and Bulgaria?
vi. What are the implications for any case in which incompatibility with EU law may require consideration in conjunction with the international law relating to statelessness and reduction thereof, for instance the 1961 Convention on the Reduction of Statelessness, (addressed in relation to EU law by the Grand Chamber in Wiener Landesregierung (Revocation of an assurance of naturalisation) (Citizenship of the European Union – Statelessness – Criteria for acquisition of nationality – Opinion) [2021] EUECJ C-118/20), because an individual who has acquired a nationality incompatibly with EU law has not retained any other nationality?
Those are not matters which can wait long for resolution. It seems likely that lawyers and legal advisers will have to consider the implications of the Grand Chamber’s decision immediately and with urgency.
