NEWS Following the intervention of the European Parliament and EU Commission, the government of Malta gave in to pressure from the two bodies and agreed to add a one year residency requirement as one of the conditions to the acquisition of Maltese citizenship under the Individual Investor Programme (IIP), known as the ‘citizenship for sale’ scheme.
The new regulations giving effect to this and other changes were published in Legal Notice 47 of 2014 in early February.
However, the Maltese and English versions of this Legal Notice differed on the requirement of property purchasing or renting. The Maltese version of the Legal Notice says in Paragraph Five, Section IIB that investors have to retain their rented or purchased property for three years. But the English version says that the minimum period is of five years.
PN MP Jason Azzopardi had pointed this fact out in a Facebook post. Dr Azzopardi said that the government had said before Christmas that the property would have to be kept for a minimum of five years, as was stated in Legal Notice 450 of 2013.
The Parliamentary Secretary for Justice, Owen Bonnici had promptly replied that the government would correct the mistake and it has now done so through LN 59 of 2014 that corrected the mistake and both versions of the IIP law now say that applicants have to retain their property for at least five years.
Last week the PN said that it would present amendments to the fourth version of the IIP. It will seek to introduce provisions for clearer proof of residency and to “stop the conflict of interest by Henley and Partners.” The government has insisted that the law cannot be amended.
The second amendment to the Legal Notice on the IIP has just been published today in LN 63 of 2014. It contains an amended Form N, being Application form for Naturalisation as a Citizen of Malta (under article 10(9)(b) of the Maltese Citizenship Act, Cap. 188 and relative subsidiary legislation).
The latest amendment came in the form of a miniscule change to the application form for prospective new citizens, to the effect that they will need to prove residency. The addition to ‘Form N’ that needs to be filled out by applicants reads: “I undertake to provide proof of residence in Malta prior to being granted a certificate of naturalisation as a citizen of Malta in accordance with the Individual Investor Programme of the Republic of Malta Regulations 2014”.
This, however, varies very little from the change in the legal notice of 4 February, which had inserted the clause that an applicant “commits himself to provide proof of residence in Malta, and to provide proof of title to residential property in Malta in accordance with these regulations”.
In relation to Legal Notice 47 published on 4 February, The Malta Independent newspaper had reported that, while the government had presented the European Commission’s approval of the legal notice as a fait accompli, the European Commission was in fact still analysing the text to confirm that it ensures that its “effective residence” requirement is met.
Last week a Commission spokesperson had told the newspaper: “We are analysing the legal text which was published following the agreement reached between the Commission and the Maltese authorities to include an ‘effective residence’ requirement.”
But the government has been unusually evasive in describing what this “effective residence” actually means. When he announced the agreement, Prime Minister Joseph Muscat would not even commit himself to stating whether “a week’s holiday” was sufficient.
Both Dr Muscat and Parliamentary Secretary for Justice, Dr Owen Bonnici, have pointed out that 12 months’ residence neither meant spending 365 days in Malta, nor did it mean not having to set foot in the country at all, with the latter insisting that residency should not be assessed by counting the days spent in Malta.
Click the following links for the relevant Legal Notice:
- LN 47/2014 – Individual Investor Programme of the Republic of Malta Regulations, 2014
- LN 59/2014 – Correction of Laws Order, 2014
- LN 63/2014 – Citizenship (Amendment No. 2) Regulations, 2014
How the debate on ‘Citizenship for Sale scheme’ events unfolded
The publication of the latest Legal Notice amendment is the latest in a series of events that occurred during the past month. Below is are some of the news reports on this story sourced from reports published on The Malta Independent online:
89% of MEPs votes against Malta selling EU citizenship
The joint motion, signed by the EPP, the socialists, the greens and the liberals, called on the Commission to “assess the various citizenship schemes in the light of European values and the letter and spirit of EU legislation and practice, and to issue recommendations in order to prevent such schemes from undermining the values that the EU has been built upon, as well as guidelines for access to EU citizenship via national schemes.”
It also called on Malta “to bring its current citizenship scheme into line with the EU’s values, and on member states that have adopted national schemes which allow the direct or indirect sale of EU citizenship to third-country nationals to bring them into line with the EU’s values.”
MEPs were concerned about schemes established by various EU member states and in particular Malta, which result in the sale of national, and hence EU, citizenship, a European Parliament statement said.
Parliament called on the Commission to state clearly whether these schemes respect the letter and spirit of the EU treaties and EU rules on non-discrimination.
Some member states have introduced schemes which “directly or indirectly” result in the “sale” of EU citizenship to third-country nationals, even though every member state is expected to act responsibly in preserving the Union’s common values and achievements. These are invaluable, and “cannot have a price tag attached to them”, as stated in the approved resolution. Outright sale of EU citizenship undermines the mutual trust upon which the Union is built, it points out.
Parliament also stressed that the rights conferred by EU citizenship, such as the right to move and reside freely within the EU, should not be treated as a “tradable commodity”. EU citizenship implies having a stake in the EU and depends on a person’s ties with the EU and its member states or on personal ties with EU citizens, says the text.
Furthermore, citizenship-for-investment schemes “only allow the richest third-country nationals to obtain EU citizenship, without any other criteria being considered”, which implies discrimination, the EP noted in a statement.
Possible EU proceedings against Malta
On 17 January the usually well-informed Financial Times reported that the EU commission’s legal experts had discussed possible proceedings against Malta. Member states could, for example, agree among themselves on certain minimum standards for the allocation of passports – such as a requirement for residence in the awarding country, or exceptional service to that state.
Helen Warrell in London and James Fontanella-Khan in Brussels reported that Commissioner Viviane Reding had told the Financial Times that member states should award citizenship “only to those who have a ‘genuine link’ to the country in question – and not just a big wallet”.
But not all comments were negative. The FT quoted Kamal Rahman, head of immigration at UK law firm Mishcon de Reya, who said the parliament’s motion “effectively undermines European free movement rights”.
But, Ms Rahman added: “Whilst the Maltese government has sovereignty to determine its own citizenship requirements it will be under enormous pressure to dilute the single most advantageous requirement of its economic citizenship proposals – that is, the requirement for no prior residence.”
On the other hand, Julia Onslow-Cole, head of global immigration at London-based PwC Legal, added that uncertainties caused by the parliament’s resolution as well as US government anxieties about the programme were “serious negative factors” for prospective clients of the Malta passport.
House of Representatives debates European Parliament’s vote
On 20 January in a heated debate the Maltese Parliament discussed a motion on the European Parliament vote regarding the citizenship scheme. The government moved a motion to discuss the citizenship scheme in view of last week’s European Parliament motion and vote, which Prime Minister Dr Joseph Muscat said focused in a disproportionate and unjust manner on Malta.
Opposition Leader Dr Simon Busuttil said he welcomed the fact that the Prime Minister was welcoming the PN’s proposal, made on Sunday, after 90% of the EP voted against Malta’s scheme and the opposition had therefore no objection to discuss the motion. PN deputy leader Mario de Marco said the debate was important because the government’s intentions had humiliated the country.
However, the two sides disagreed on who was to speak first and last since both sides wanted to close the debate. In an animated exchange, the Opposition argued there was “lack of fair play” but accepted to take part in the debate. Time was to be divided equally between the government and opposition until the end of the session.
Dr de Marco continued, the arguments of government members in no way tried to address the concerns of the MEPs but only attempted to justify the scheme.
“What does it mean to introduce the scheme in national interest?” he asked.
“Does this mean to give it to anonymous people or to tarnish our island’s reputation and put us in the same basket as tax havens?”
National interest requires us to be serious and to show this is truly a country where one can invest safely and which can host financial services companies.
This is certainly no investment scheme but one of citizenship sale and no serious contry does that, he insisted.
Explaining that on Sunday Dr Muscat that the EP socialist for their support, Dr de Marco said: “Listen to what the socialists have told you, from what Swodoba said, from what the EPP members said and from what the Green Party said”.
In reply, Home Affairs Minister Dr Manuel Mallia said he listens to what the people are saying and the 37,000 voters who voted Labour to government.
The apologetic tone in PN MEP David Casa’s address was pitiful he said arguing that the two PN MEPs brought on the difficulties.
“Stand up to be counted he said,” arguing that the opposition needs to speak and act in national interest.
“The fund will be going to the people and this in itself is a tie to the nation,” he stated.
Referring to Dr Busuttil, he asked whether he truly had Maltese blood in his veins.
In a different case against Hungary, Dr Busuttil as an MEP had stated you cannot single out one country by means of a motion. The same principle should have applied for Malta this time, Dr Mallia argued.
He hoped that once the scheme is introduced and the debate over, the PN and all its legal experts do not grant any citizenships as part of the scheme.
He once again stated the government is convinced of the scheme and will go on with it.
Opening the debate, the Parliamentary Secretary for Justice, Owen Bonnici, said the island is strong and united in national interest and this is resulting in investment. Prime Minister Joseph Muscat was taking decisions of courage in favour of the island but on the other hand, Simon Busuttil was using tactics which other countries are enjoying due to competition.
The impression at the EP was that Malta was selling something that was not its own however, every country has the possibility to regulate it residence conditions and citizenship.
“The IIP (Individual Investors Programme) is not a passport sale programme and the Opposition should stop saying this lie,” Dr Bonnici said.
“What is the Opposition’s interest against this programme? Why is he pushing forward the interests of their countries having similar programmes and what is the reason for not wanting to bring such investment to the island? He asked.
Mentioning Nuri Katz, he said this individual promotes similar programmes of other countries and his reaction against Malta’s programme is therefore obvious.
Insisting the programme will be of great benefit to the island, he encouraged the Prime Minister to go on with the programme noting this will change the island’s future for the better.
Prior to rebutting his statement, PN MP Marthese Portelli, noted the Prime Minister was not even present to take note of what was being said.
Both the vote and Commissioner Reding’s reaction has one implication: “Malta is falling behind and is losing respect”.
Malta needs the cooperation of other countries, including that of the EU to move forward but in 10 months, the opposite thing has happened.
It is positive for the country to make good money but you have to take into consideration what the other side will give back.
It is wrong for the Prime Minister to be comparing funds from this scheme with EU funds, she said, explaining the European Parliament’s reservations to the scheme.
“With the sale of passports, people come, give you money and leave while with EU funds, the money is received and the benefit is enjoyed by all in restored bastions, new roads and educational projects,” she said.
The scheme is creating a false impression that Malta is in dire need of money and that it is no longer safe.
She appealed for better focus on creating employment and attracting better investment.
Mentioning the case of a financial services company which made 65 people redundant this morning, she said we should see the two sides of the coin.
She made an appeal for the Prime Minister to truly understand what the EU is saying. “The EU is built on mutual trust”, Dr Portelli pointed out quoting the EP motion. No man is an island and cooperation is a must but citizenship sale undermines such mutual trust, she reiterated.
Parliamentary Secretary Ian Borg highlighted the scheme was implemented following discussions with the Chamber of Commerce and social partners. Meanwhile, he stressed the Opposition has been attempting to damage our island’s reputation and fend off investment.
PN MP Jason Azzopardi said the island’s reputation was badly damaged last week and the island is suffering the consequences of a strong headed Prime Minister.
With reference to declarations made, he argued the Prime Minister failed to read the writing on the wall and could not understand how in a press conference on Thursday, Dr Muscat said at a press conference that applications started to be received when the Government Gazzette announced the scheme’s implementation on Friday.
PN deputy leader Beppe Fenech Adami reiterated that 90% of MEPs voted against Dr Muscat’s scheme explaining the project is fundamentally wrong, is in breach of EU and international laws and gives the Prime Minister no honour.
Despite the labour Party’s talk of road map and promises, he said the government has no ideas except for a project that was in no way mentioned in its electoral programme. It should be ashamed to have made such a proposal, that was condemned by all.
The government is completely isolated since all political parties at the EP, including the socialists, voted against the scheme.
Opposition tables a petition by Maltese-Australians against citizenship scheme
On 29 January at the start of the parliamentary session Opposition leader Dr Simon Busuttil’s presented a petition against the Individual Investor Programme signed by over one thousand Maltese-Australians. The presentation led to a shouting match in parliament as he accused Foreign Minister Dr George Vella of treating the petitioners with disdain.
The petition, which collected over 1,000 Maltese citizens living in the Australian states of Victoria and New South Wales, was organised by a committee named Maltese Pride. Dr Philip Manduca had delivered it on behalf of the organising committee to Dr Busuttil at PN Headquarters in Pieta’ on 23 January.
The petitioners objected to the sale of Maltese citizenships and insisted that the scheme should be changed to achieve political consensus, to include proper investment requirements and a reasonable residency period. They also insisted that the due diligence process should be government’s sole responsibility.
Dr Busuttil read out the petition, but he spotted Dr Vella laughing as he mentioned and praised the committee that organised the petition.
“The Foreign Affairs Minister may laugh as much as he wants at the signatories, but I can assure him,” Dr Busuttil said, but stopped halfway through his sentence after being met by uproar from the government benches. The minister’s retort was perhaps inadvisable.
“I inform [Dr Busuttil] that I was not even considering what he was saying: I was laughing at a joke made by my colleague,” Dr Vella said.
Dr Busuttil was strongly critical of the Minister for Foreign Affairs’ response, noting how the Minister had just confirmed that he was disregarding a petition signed by 1,000 Maltese expatriates.
“This is the foreign minister we are talking about,” he repeated several times for effect, provoking another uproar which prompted speaker Dr Anġlu Farrugia to attempt to keep order.
Dr Vella raised a point of order, stating that Dr Busuttil may have been justified in his criticism had he said anything original. But he emphasised that he was already aware of the petition and what it called for.
Dr Busuttil then continued his point, amid some heckles. “I hope that the government listens to them, and does not treat them with disrespect as the minister did today,” he concluded.
Agreement reached between Malta and EU Commission on citizenship scheme
On 29 January it was reported in the Maltese media that the Malta government had given in to the pressure of the European Commission and it was expected to announce changes to the citizenship scheme that would include a bond of residency of one year.
A government delegation was in Brussels earlier that week to hold talks with the European Commission.
The Prime Minister announced these changes in a press conference later that day. He said that the European Commission had endorsed Malta’s Individual Investor Programme after the government accepted to introduce a one-year residency requirement for applicants.
This endorsement was confirmed in a joint statement issued by the Commission and the government following talks which were concluded this afternoon. The Commission was left satisfied that the amendment – described as “minor” by Dr Muscat when he addressed the press at the Auberge the Castile – guaranteed that those obtaining Maltese citizenship through the programme had forged genuine links to Malta.
Another legal notice would have to be published as a result of the agreement, which will lead to the third iteration of the programme in as many months.
The first was approved with parliament last November, only for the government to announce talks with the opposition in the face of international criticism. But the government forged ahead with an amended plan after these talks break down, only to face a European Parliament motion condemning the sale of citizenship and mentioning Malta by name.
While the government insisted that citizenship is an issue of national competence, it did give in to pressure from the European Commission – which was preparing a legal challenge – and enter talks on the programme.
Dr Muscat stressed that the government maintained its stance, but was ready to talk to the Commission as a lot of misinformation had come out about the programme. He insisted that the positions of the government and the Commission were actually very close at the outset, and that ultimately, it took only a few hours to reach an agreement.
The Commission confirmed that Malta does not need to cap the number of applicants, Dr Muscat announced. But he added that at present, the government had no intention of lifting the existing cap of 1,800 applications.
He also said that the Commission recognised that the programme provided successful applicants with all the rights granted to Maltese and EU citizenship – and that this citizenship could not be revoked. The PN has insisted that it would revoke applicants’ citizenships if elected to government.
Another issue raised by Dr Muscat was the citizenship programmes of other countries, which he has long insisted, over their objections, are very similar to Malta’s own. He said that in light of its agreement with Malta, the Commission will now call on other member states to amend their programmes.
Malta insisted that what applied to it should apply to other countries, he said, “even though no MEPs complained about them.”
‘One minor change’ secures agreement
The Prime Minister also insisted that “one minor change” to the law was all that was required: applicants will now have to wait a minimum of 12 months before acquiring citizenship, as opposed to the 6-month period established in the present iteration of the programme.
While the joint statement with the Commission states that “no certificate of naturalisation will be issued unless the applicant provides proof that he/she has resided in Malta for a period of at least 12 months immediately preceding the day of issuing,” Dr Muscat clarified that this did not mean that applicants had to spend 12 months in Malta.
But he did not provide a clear answer on the period of time that applicants would actually have to spend in Malta, beyond pointing out that they would have visit the country at some point and – as already established in the present regulations – purchase or rent a residence.
Pressed further, he said that Maltese laws did not establish any periods of time. In contrast, for instance, recipients of a British investor visa cannot be outside of the UK for more than 180 days in any 12 consecutive months before they apply for permanent resident status.
But Dr Muscat also stressed that Malta entered into the agreement with a “spirit of genuineness.”
“We are not trying to be clever,” he maintained.
He was subsequently asked whether a 1-week holiday would suffice to meet residency requirements, and while he objected to the term, neither did he rule out that such a short stay would be sufficient.
Opposition clearly wrong, Muscat insists
During the press conference, a triumphant Dr Muscat also devoted some time to dismissing the opposition’s intense criticism over the scheme, insisting that the Nationalist Party has been wrong-footed by the Commission.
He noted that in contrast with the PN, the Commission entered negotiations in good faith, and sought more reasonable conditions than the party did. He noted that while the PN wanted a 5-year residency requirement and a restrictive cap of a few dozen applicants a year, the Commission was satisfied with a 1-year residency and no cap whatsoever.
The Prime Minister also noted that while the PN has insisted that the programme breached EU law, “the only illegal action is revoking citizenships.”
He called on the PN to revoke its “frivolous” judicial protest and its parliamentary motion over the issue, and said that it was clear that party leader Simon Busuttil had driven his party into a corner.
“[Dr Busuttil] insisted that the programme will have to be scrapped; but only his plans will have to be,” the Prime Minister said.
Citizenship scheme talks based on 183-days-a-year residency
The discussions held on 29 January between the Malta government and the European Commission on adopting a residency clause were based on the international taxation law model that requires applicants to physically reside in Malta for at least 183 days in a year to be considered as residents, The Malta Independent online reported.
The government that day had announced that it had obtained the commission’s approval after taking the ‘citizenship for sale’ scheme through its third round of changes. After having dropped the secrecy clause and then introducing the ‘investment aspect’, the government has now also included a one-year residency requirement prior to the granting of a passport.
But it was unclear at the time as to what the 12-month residency referred to by European Commission meant. In a statement issued jointly by the EC and the government, it is said that “no certificate of naturalisation will be issued unless the applicant provides proof that he/she has resided in Malta for a period of at least 12 months immediately preceding the day of issuing of the certificate of naturalisation.”
But Prime Minister Joseph Muscat was quick to point out that applicants do not necessarily have to live in Malta to apply. He said that applicants do not have to live in Malta for a whole year but neither does this mean that they would not set foot on Maltese soil. Dr Muscat said that the whole thing will be based on Maltese residency laws.
Like the International Tax Law, Maltese law states that residents cannot spend more than 183 days outside the country. During the press conference, however, Dr Muscat was more evasive on the issue and seemed to imply that there will be no set term on residency.
On the other hand, PN Leader Simon Busuttil insisted that the Prime Minister was contradicting the commission. Dr Busuttil said that the PN would wait until the details of this requirement are clearer before pronouncing its position.
A spokesperson for Commissioner Reding this morning told this paper that the Commission will be “closely monitoring Malta’s implementation of the newly amended scheme and it will be keeping in touch.” The spokesperson also remarked that Ms Reding had insisted from the start that there should be a genuine link between the applicant and Malta.
Citizenship scheme ‘settled issue’ for EC
On 30 January it was reported in The Malta Independent that with EU vice-president Marcos Sefcovic declaring that the Individual Investment Programme now being a settled issue, Prime Minister Joseph Muscat said that now that agreement with the EU has been reached on the citizenship scheme, the only problem remaining would be if one tried to remove citizenship.
It was a clear reference to the Nationalist Party’s stand that if elected to government, citizenships granted under the IIP would be revoked by a PN government.
Mr Sefcovic said relations between the EC and Malta are “excellent”. Declaring the IIP a settled issue, Mr Sefcovic was positive about how the Maltese government chose to discuss the matter with the EC.
Dr Muscat said the issue is now settled and the arrangement was satisfactory to both sides. Talks had taken only a short time, he said.
A residency period for someone taking citizenship is a national issue and how long a person stays here is regulated by a country’s naturalisation law. Dr Muscat told the news conference that 12 months did not mean that one had to stay here 365 days. When he was an MEP, Dr Muscat said, he was not in Malta for 365 days, but he still retained his Maltese citizenship.
Dr Muscat said one could not ask anyone to stay in Malta and not leave. After all, it was not the number of days which mattered, but the good will and genuineness in implementing the rule.
Mr Sefcovic said there was good will on the two sides and the European Parliament should also be satisfied with the agreement, referring to the vote taken overwhelmingly against Malta in the past days. He said other countries had similar programmes and the EC would now be considering them.
Dr Muscat said it was normal to hold discussions and for there to be disagreement, but the final agreement is proof of the good relations between the two sides.
Deputy Prime Minister Louis Grech said other subjects had been discussed with Mr Sefcovic, including the European Monetary Union, dialogue between countries, immigration and EP elections.
Mr Sefcovic praised Malta for its work in trying to bring its finances under control and praised Mr Grech for his work for Malta.