The European Commission said on Tuesday it was launching infringement procedures against Cyprus and Malta by issuing letters of formal notice regarding their investor citizenship schemes also referred to as “golden passport” schemes.
The move comes after Cypriot politicians, an MP, and the Speaker of the House, were caught on camera by undercover Al Jazeera reporters, offering to help a fictitious Chinese investor with a criminal record obtain a Cypriot passport.
While the Cyprus government has cancelled its ‘golden passport scheme,’ it was considering replacing it with a new and more carefully structured one.
The Commission is taking the position that this is not lawful. “Such schemes are in violation of EU law and this is why we are launching the infringements today,” a spokesperson for the Commission said at a press conference on Tuesday. “What is important is that going forward no Member State is operating schemes that essentially result in selling of EU citizenship. As Commission President Von der Leyen said, ‘European values are not for sale.’”
Cyprus will have the option of disputing this position in court, should they choose to.
Malta has reacted by closing down its scheme.
“The Malta Individual Investor Programme (IIP) will be coming to a close,” the Parliamentary Secretariat for Citizenship and Communities said in a press release on Wednesday.
“Malta has taken note of the concerns raised by the European Commission and by the expert group established by the Commission on citizenship and residence by investment legislations found in most European member states.”
“Subsequently, Malta will be implementing new residence regulations which may lead to citizenship and which take into consideration the European Commission’s concerns and recommendations. The agency which operates the IIP has, since last August, stopped receiving new applications. The Malta Individual Investor Programme Agency will also be closing in the coming weeks. Since its inception, around 1,460 families have been approved and just over 500 not approved.”
The Commission said it considers that the granting by the two Member States of their nationality – and thereby EU citizenship – in exchange for a pre-determined payment or investment and without a genuine link with the Member States concerned, is not compatible with the principle of sincere cooperation enshrined in Article 4(3) of the Treaty on European Union.
“This also undermines the integrity of the status of EU citizenship provided for in Article 20 of the Treaty on the Functioning of the European Union,” a statement said.
“Due to the nature of EU citizenship, such schemes have implications for the Union as a whole,” it added, “as 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.”
As a consequence, the effects of investor citizenship schemes are neither limited to the Member States operating them, nor are they neutral with regard to other Member States and the EU as a whole, according to the Commission.
The Cypriot and Maltese governments have two months to reply to the letters of formal notice. If the replies are not satisfactory, the Commission may issue a Reasoned Opinion in this matter.
Bulgaria also has a citizenship scheme, and the Commission is sending on Tuesday a political letter to Bulgarian authorities about its ‘golden passport’ offer, the spokesperson added. “The letter is urging Bulgarian authorities to phase out their citizenship scheme in context of ongoing legislative procedure currently in the country. We also ask Bulgarian authorities to provide the Commission with clear information about this scheme. Bulgaria has one month to reply, and the Commission will not hesitate to take the appropriate measures also in this case if our concerns are not addressed.”
What are infringement procedures?
Infringement procedures are invoked If the EU country concerned fails to communicate measures that fully transpose the provisions of directives, or doesn’t rectify the suspected violation of EU law, according to Commission rules.
For the first step, the Commission sends a letter of formal notice requesting further information to the country concerned, which must send a detailed reply within a specified period, usually 2 months.
If the Commission concludes that the country is failing to fulfil its obligations under EU law, it may send a reasoned opinion: a formal request to comply with EU law. It explains why the Commission considers that the country is breaching EU law. It also requests that the country inform the Commission of the measures taken, within a specified period, usually 2 months.
If the country still doesn’t comply, the Commission may decide to refer the matter to the Court of Justice. Most cases are settled before being referred to the court.
If an EU country fails to communicate measures that implement the provisions of a directive in time, the Commission may ask the court to impose penalties.
If the court finds that a country has breached EU law, the national authorities must take action to comply with the Court judgment.
When referring an EU country to the court for the second time, the Commission proposes that the court impose financial penalties, which can be either a lump sum and/or a daily payment.
These penalties are calculated taking into account: The importance of the rules breached and the impact of the infringement on general and particular interests; the period the EU law has not been applied; the country’s ability to pay, ensuring that the fines have a deterrent effect.