European Commission seeks power to prevent Malta 'citizenship sale'

The Maltese government has announced that it intends to go ahead with a controversial plan to 'sell citizenship' to applicants who pay €1.15m. The government intends that the Individual Investor Program (IIP) scheme should go live in February 2014.

However, there may be a last minute hitch. European Commission vice-president Viviane Reding is said to be taking legal advice about whether the Commission has the power to stop the scheme under EU Treaty law. The European parliament has already held a vote censuring Malta.

Malta announced in October 2013 that it was planning on selling Maltese citizenship to up to 1,800 applicants. Each applicant under the IIP would have to

• Pay Malta €650,000; 70% of this would go into a national development fund
• Purchase a property worth €350,000 (or rent one for €16,000 a year on a five year contract)
• Invest at least €150,000 in Maltese bonds or shares also for five years

No residence requirement

Applicants are not required ever to have lived on the island. Indeed, IIP applicants would only be required to visit to carry out the transactions that would lead to their citizenship. They would, however, be obliged to sign an 'oath of allegiance' to Malta.

Applicants would also be able to bring with them their spouse and any children aged below 26. They would also be able to bring their parents and grandparents. Each additional visa would cost either €25,000 or €50,000.

The Maltese government has insisted that it has not introduced the scheme because it is in financial difficulty. A spokesman for the prime minister Joseph Muscat told the EU Observer 'We have a strong economy. We're doing this to attract reputable people who can invest in the country'.

Malta – gateway to Europe

But, whatever the intentions of the Maltese government, it is highly likely that those applying for the IIP will have their eyes on other benefits that come with Maltese citizenship. These have little to do with Malta's pleasing Mediterranean climate and everything to do with the fact that Malta is an EU state.

The principle of free movement of people is enshrined in the EU constitution and so anyone who has a Maltese passport, particularly anyone with €650,000 to spend on that passport, can live anywhere in the EU; in London, Berlin, Rome or Saint Tropez as well as in Valetta.

As EU citizens, they will also have rights to travel to many other countries, including the US, Canada, Australia and New Zealand with only the lightest of security checks

Security risk

Unsurprisingly, there is considerable disquiet, both among opposition MPs in the Maltese parliament, and in Brussels, that the Maltese scheme may pose a security risk unless the security checks are sufficiently stringent. There are concerns that this may not be the case.

The main ground for concern at present is that the scheme was devised by the Maltese government with the assistance of a London based consultancy. The London firm will also manage the scheme and stands to make at least £60m if the scheme is fully subscribed.

The firm, which we will not name here, is said to have made substantial campaign contributions to the Maltese Labour Party, Mr Muscat's party, before he was elected in 2013. The firm denies any wrongdoing.

Confidential business information

Mr Muscat has refused to reveal the details of the contract with the UK firm saying that to do so would expose confidential business information. This refusal has led some in Malta to suspect corruption.

A further concern arises because the London firm will be allowed to market the scheme to wealthy people from outside the EU but will also be in charge of carrying out security checks on applicants. This has led some to fear that it will favour its own clients over other applicants who apply through another immigration agency or in person.

In addition, because the London firm will only be paid for its security screening if an application is successful, some fear that it may be tempted to allow applicants to pass the security check even if there are legitimate grounds for concern.

Conflict of interest

One opposition MP, Jason Azzopardi, told the EU Observer 'It's like giving a teacher a stack of exam papers to mark and saying 'I'll give you €26,000 for every student who passes the exam.

European Union institutions are opposed to the Maltese scheme but it is not yet clear if there is anything that they can do to stop it.

The European Parliament censured Malta in a debate in early January 2014. The vote censuring Malta had no power to make Malta abandon the IIP but support for the motion was virtually unanimous with only 22 people opposing the motion, among these being Malta's Labour MEPs.

Citizenship is a matter for national governments –European Council

Mr Muscat will draw some comfort from the fact that The European Council has told MEPs that the terms under which citizenship is awarded to foreign applicants is a matter for national governments.

But it seems that the European Commission does not intend to leave the IIP in place if it can possibly prevent it. Viviane Reding has said that citizenship is not for sale. The Maltese news site Maltatoday reports that Ms Reding has asked for legal advice on whether the Commission can bar the Maltese scheme using Article 4.3 of the Treaty on European Union.

This article states that 'The Member States shall facilitate the achievement of the Union's tasks and refrain from any measure which could jeopardise the attainment of the Union's objectives.

European Commission 'not bluffing'

Maltatoday quotes an anonymous expert in EU law as saying 'I think the Commission is not bluffing and it has sufficient legal grounds for proceeding. It is increasing the tempo and taking its time to start infringement procedures to allow Malta to adjust its law'. The expert adds that the EC will probably allow the Maltese government time to change the law voluntarily. Only if it persists with the IIP scheme will it take Malta to the European Court of Justice.

For now, Malta appears to be standing fast. We will report on further developments.

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