On 21 March 2023, the European Commission brought infringement proceedings against Malta in the Court of Justice of the European Union for its continued refusal to end a perceived ‘golden passport’ investor citizenship scheme whereby Maltese citizenship, and hence citizenship of the EU, could be created by naturalisation. It asserted that Maltese naturalisation in those circumstances is not compatible 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’, or the concept of Union citizenship provided for at Article 9 TEU and Article 20 of the Treaty on the Functioning of the European Union (‘TFEU’). The Court’s website indicates that the Commission ‘maintains that the programme is at odds with EU treaties, which require citizenship to be based on a “genuine link” to the country, such as a physical residency requirement. In turn the Maltese government insists that citizenship is a matter of strictly national competence, while continuing to grant citizenship to applicants not residing there.’
The Commission’s action was welcomed in many quarters. Adverse stories of ‘golden passport’ practice in Malta and a number of other EU member states, in particular Bulgaria and Cyprus, have appeared regularly in recent years. A report of the European Commission dated 23 January 2019 found that ‘Investor citizenship and residence schemes pose risks for the Member States and the Union as a whole, including in terms of security, money laundering, circumvention of EU rules, and tax evasion’. In her first State of the Union Address in 2020, the current President of the Commission described the practice of citizenship by investment as a ‘[breach] of the rule of law’ in the EU, opposed on the ground that ‘European values are not for sale.’ The escalated Russian aggression against Ukraine in February 2022 focussed attention on citizenship by investment schemes still further, with a resolution of the European Parliament characterising them as ‘objectionable from an ethical, legal and economic point of view’ and ‘[posing] several serious security risks for Union citizens, such as those stemming from money-laundering and corruption’, and urgent recommendations to States by the Commission itself and its Commissioner for Justice and Consumers to act against schemes used by Russian or Belorussian nationals to acquire EU citizenship. When the Commission on 29 September 2022 announced its intention to initiate proceedings, Transparency International greeted this caustically.
However, there is little comfort for the Commission in the Opinion of Advocate General Collins of 4 October 2024. He records (para 41) the Commission’s acceptance that its complaint is based on the 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’. The Commission accepted that it could only succeed in the proceedings if its ‘genuine link’ claim was correct.
In his Opinion, the Advocate General left open (para 51) 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 for support to the T Danmark [2019] EUECJ C-116/16 (26 February 2019) taxation case, paras 70-71. However, he entirely rejected the proposition central to the Commission’s case, 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, concluding (para 57) 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.’
The latest development in the Commission-Malta proceedings points again to a continuing controversy as to the effect of the ICJ’s decision in the Nottebohm case (Liechtenstein v Guatemala) ICJ Reports (1955) 4, which some claim gives rise to the ‘genuine link’ requirement relied on by the Commission against Malta.
In the Nottebohm case, Mr Nottebohm was a German national resident for many years in Guatemala, where his family had substantial commercial and other interests. In September 1939, the Second World War broke out. In October, Mr Nottebohm went to Liechtenstein, where he was granted naturalisation after a 12-day process, paying to have a requirement of local residence disapplied. His German nationality fell away ex lege. He returned to Guatemala, but later, that country declared war on Germany, detained Mr Nottebohm, and transmitted him to the United States, where he was interned until the end of the war. During that time, substantial assets in Guatemala were taken. After release by the United States, Mr Nottebohm took up residence in Liechtenstein and sought international protection from it as against Guatemala. The Court (p17) identified the question before it as whether Mr Nottebohm’s nationality was effective as a basis for international protection by Liechtenstein versus Guatemala: ‘The Court does not propose to go beyond the limited scope of the question which it has to decide, namely whether the nationality conferred on Nottebohm can be relied upon as against Guatemala in justification of the proceedings instituted before the Court’ (emphasis added). Mr Nottebohm’s Liechtenstein nationality was not questioned, the Court stating (p20) that it was for Liechtenstein ‘as it is for every sovereign State, to settle by its own legislation the rules relating to the acquisition of its nationality, and to confer that nationality by naturalization granted by its own organs in accordance with that legislation.’
The majority held (p26) that Liechtenstein was not entitled to extend its protection to Mr Nottebohm vis-à-vis Guatemala because of, at the time of the acts complained of, ‘on the one hand, the absence of any bond of attachment between Nottebohm and Liechtenstein and, on the other hand, the existence of a long-standing and close connection between him and Guatemala, a link which his naturalization in no way weakened.’ The judgment does not employ the phrase ‘genuine link’, though, in the French version, the term ‘link’ (‘lien’) is used at different points with various adjectives, including ‘durable’. The phrase ‘genuine connection’ was, however, employed in the context of describing the ‘general aim’ of international law underlying the institution of diplomatic protection (p23): ‘a State cannot claim that [its grant of nationality is] entitled to recognition by another State unless it has acted in conformity with this general aim of making the legal bond of nationality accord with the individual’s genuine connection with the State which assumes the defence of its citizens by means of protection as against other States.’
The Nottebohm decision has attracted interesting and perceptive commentary here by Lorin-Johannes Wagner and Javier Garcia Olmedo, as well as engrossing contributions from elsewhere over many years. In the Max Planck Encyclopaedia of Public International Law, Oliver Dörr states that the perceived ‘genuine link requirement’ has been ‘severely criticised both in legal doctrine and in judicial practice’ (Dörr, MPIL entry ‘Nottebohm Case’, March 2007). In recent years some leading scholars, including Audrey Macklin, Peter Spiro, and Dimitry Kochenov, have suggested that the decision of the majority is straightforwardly wrong.
But it seems to me not necessary to go down that route in order to address the Malta CBI issue. While stare decisis does not apply in any strict sense, consistency and respect for extant decisions provide significant reasons for caution, and I suggest the better view is the substantial body of opinion accepting a narrow understanding of the Nottebohm decision, as addressing only the particular issue of diplomatic protection in a situation in which the individual affected has a much stronger factual connection to a non-national country of residence than to a country of nationality seeking to exercise protection: see for instance Amerasinghe (Chittharanjan F. Amerasinghe, Diplomatic Protection, OUP, 2008, pp 113-116). As Robert D Sloane has written, the decision ‘did not establish a new rule limiting the internal competence of states to confer their nationalities’. Sloane and Olmedo consider the concept of abuse of rights – not any construction based on ‘genuine link’ as a condition for validity of naturalisation – critical to understanding the Nottebohm decision. The failure to follow it in the Flegenheimer arbitration, highlighted by Spiro, is explicable because Italy, contesting Mr Flegenheimer’s claim, sought not the application of the Nottebohm approach but its extension to a new situation in which the link to the United States, beyond nationality, was weak, but Italy had nothing like the close connection with the individual that Guatemala had with Mr Nottebohm. The Flegenheimer decision can be taken, as I believe Spiro might concede (see Spiro, pp12-13), as a rejection of the proposition that ‘genuine link’ is necessary, not a total rejection of the earlier decision.
In the Malta proceedings, the Commission seeks to discover a dramatic expansion of an interpretation of Nottebohm– invalidity of nationality rather than scope for refusal of recognition in the context of international protection- that is itself already maximalist (in its exaggeration of any principle discernible from that decision) and falsifiable (in that the decision provides no support for the Commission’s freestanding position. The Advocate General concludes of the Nottebohm decision (para 56) that:
The ICJ ruling is limited to allowing States to withhold recognition of nationality granted in the absence of a genuine link between a person and the State of which she or he claims to be a national. It does not oblige States to require that such a link exists either between them and their own nationals or between other States and their nationals… the ICJ did not define the concept of a ‘genuine link’ under international law, let alone require States to grant nationality by reference thereto. To the contrary: the ICJ held that ‘it is for every sovereign State, to settle by its own legislation the rules relating to the acquisition of its nationality…
The first sentence of the quoted passage does not help the Commission against Malta, but it should be noted that it may, in fact, still give much too expansive an account of the Nottebohm decision’s effect, if the Advocate General means to suggest that recognition of nationality may be withheld in any circumstances on the basis of absence of ‘genuine link’. The Nottebohm case as above seems to concern only a special form of ‘recognition’ engaged in the context of international protection, not so much recognition – a question of acceptance or rejection of facts and attribution of legal status to them – as opposability, the question of whether a legal act, has international legal effects. Article 1 of the 1930 Convention on Certain Questions Relating to the Conflict of Nationality Laws probably codifies customary international law when it provides both that ‘It is for each State to determine under its own law who are its nationals’ and that ‘This law shall be recognised by other States in so far as it is consistent with international conventions, international custom, and the principles of law generally recognised with regard to nationality.’ The basis for non-recognition stated in the 1930 Convention is obviously tied to consistency with the enumerated sources of authority. Outside the limited context of opposability, ‘genuine link’ does not have any clear purchase in ‘international conventions, international custom, and the principles of law generally recognised with regard to nationality.’ The proposition that it constitutes a general basis for non-recognition is unsupported by any authority. One interesting question looking forward is whether, in due course, the Court will, in contrast to the Advocate General, note this distinction.
