Custom MR approval rule does not work with subgroups

Summary

Creating a new approval rule specifying only the parent group does not allow members of subgroups to approve, regardless of their role.

Split from: #389374 (comment 1329358902) as per @abdwdd request.

Steps to reproduce

Create the following setup:

• Create group/subgroup containing user Alice with Developer role
• Inside group members, invite subgroup with Developer role as max level (note that Alice is part of group only through subgroup)
• Create project inside group
• In the project settings, create a custom approval rule with group (not subgroup!) constituting the approval list

Example Project

This shows the setup.

However note that Gitlab Premium is needed for Merge Request Approval rules, and this was created on a free account.

What is the current bug behavior?

The user part of the subgroup will not be able to approve the MR unless he is a direct member of group too.

What is the expected correct behavior?

The user part of the subgroup will be able to approve the MR via the custom approval rule.

Relevant logs and/or screenshots

Workaround

Add subgroup explicitly to Approval Rule