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