Wed. Dec 2nd, 2020
Malta’s IIP: analysis of the EU’s perspective

Much has been said about Malta’s Individual Investor Programme (IIP), with negative and positive implications being touted by those for and against this programme. As things currently stand, and should the European Commission have its way, this programme’s days now seem to be numbered.

The European Commission has long been voicing its concerns and opposition in relation to this programme. Despite the recent amendments by the Maltese government to the programme as originally launched, the European Commission has now decided to launch infringement procedures against Malta in relation to this programme by issuing a letter of formal notice.

The IIP is marketed by Malta as a programme which allows for the grant of citizenship by a certificate of naturalisation to foreign individuals and their families who contribute to the economic development of Malta. In an effort to appease the EU Commission, a number of more stringent conditions which must be satisfied by those seeking to become Maltese citizens have recently been introduced. These range from the requirement for the main applicant to provide proof that he/she has been a resident of Malta for a period of at least 12 months preceding the day from the grant of citizenship to more onerous financial thresholds attached to  investments which must be made by applicants.

Nonetheless, these changes have done little to allay the EU’s watchdog concerns that such ‘golden passport’ schemes flout the rules of EU membership and expose the union to risks in so far as security, money laundering, tax evasion and corruption are concerned.

Being part of the union is equivalent to forming part of any club, that is, adherence to the club’s rules is a prerequisite in order to benefit from membership. Hence, just as Malta has always welcomed with open arms any EU funding which comes its way and reaped from the benefits of forming part of a single market economy, it must also ensure that it plays fairly and in accordance with the rules of this club of which it forms part.

In its formal notice, the European Commission has highlighted a number of alleged breaches in relation to the operation of the Maltese IIP. The treaties which Malta signed upon membership make provision for the principle of sincere cooperation among all signatories of these treaties.

Article 4 (3) of the Treaty on European Union obliges member states to assist each other in carrying out the tasks entrusted to the EU by the treaties and to refrain from doing anything which might jeopardise the attainment of the EU’s objectives. One such objective, as enshrined in Article 3 of the Treaty on European Union, is that of offering its citizens an area of freedom, security and justice without internal frontiers, in which the free movement of persons is ensured in conjunction with appropriate measures with respect to external border controls, asylum, immigration and the prevention and combating of crime. The various secondary legislative measures adopted by the EU throughout the years are a living testament to the hard work being done at EU level to ensure the prevention of money laundering and other criminal action which might thwart the security both on a physical and an economical level to be enjoyed by EU citizens. Any action by any member state which might hinder such security is a clear breach of its obligation to not jeopardise the attainment of the EU’s objectives.

This can be explained better within the context of EU citizenship status as provided for in Article 20 of the Treaty on the Functioning of the European Union. When a member state awards nationality, the person concerned automatically becomes an EU citizen and enjoys all rights linked to this status, such as the right to move, reside and work freely within the EU, or the right to vote in municipal elections as well as elections to the European Parliament. This means that any investor citizenship schemes do not only leave their impact on the member state which is benefitting from them but also leave a ripple effect in their wake, impacting the entire EU territory. Due to the nature of EU citizenship, such schemes have implications for the union as a whole.

Hence, though citizenship matters do, as a rule, fall within the competence of each sovereign EU member state. The conditions for obtaining and forfeiting national citizenship are nonetheless subject to due respect for EU law.

Now that infringement proceedings have been launched by the commission, Malta has two months to reply to the letter of formal notice. If the replies are not satisfactory, the commission may issue a ‘reasoned opinion’ on the matter: a formal request to comply with EU law. It will also request the country to inform the commission of the measures taken to remedy the alleged breach, within a specified period, usually that of two months. If Malta refrains from complying, the commission may decide to refer the matter to the Court of Justice of the EU.

EU membership is clearly not something which can be used and abused at a state’s whim. Membership is not all about rights and opportunities but also about respecting the rules of the game and abiding by the commitments which the state pledges to undertake upon being admitted to the union.

Hence, any national measures or programmes implemented by member states at national level must respect the supremacy of EU law in its entirety.

Mariosa Vella Cardona is freelance legal consultant

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