EU Court Declares Malta’s Investor Citizenship Scheme Illegal

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Angelos G. Paphitis Angelos G. Paphitis Managing Partner

On April 29, 2025, the Court of Justice of the European Union (CJEU) delivered a landmark judgment in Commission v Malta (Case C-181/23), ruling that Malta’s investor citizenship scheme, commonly known as the “golden passport” program, violates EU law. The Court determined that granting nationality in exchange for predetermined financial contributions constitutes a “commercialisation” of citizenship, infringing upon Articles 20 of the Treaty on the Functioning of the European Union (TFEU) and 4(3) of the Treaty on European Union (TEU).

Key Findings of the Judgment

A. Transactional Nature of the Scheme

The Court found that Malta’s program established a “transactional procedure” whereby nationality was “essentially granted in exchange for predetermined payments or investments.” This approach was deemed fundamentally incompatible with the concept of citizenship as representing a “special relationship of solidarity and good faith between a Member State and its nationals”.

B. Lack of Genuine Link

The Court emphasized that the scheme lacked provisions for establishing a genuine connection between applicants and Malta. The minimal residency requirements and the ability to expedite naturalization through additional payments undermined any serious claim of a real connection.

C. Violation of EU Principles

By operating such a scheme, Malta was found to have violated the principles of sincere cooperation and mutual trust among EU Member States. The Court stated that the scheme jeopardized the mutual trust necessary for the proper functioning of the EU, particularly concerning the recognition of national decisions on citizenship.

Comparative Perspective: Cyprus’s Experience

Cyprus faced similar scrutiny over its investor citizenship program. In response to EU concerns, Cyprus terminated its scheme in November 2020 and subsequently revoked the citizenships of 39 individuals. This proactive approach allowed Cyprus to align with EU expectations and avoid legal proceedings.

Commentary from AGPLAW

The CJEU’s decision underlines the importance of aligning national citizenship laws with EU principles. Cyprus’ experience demonstrates that while the termination of such programs may have short-term economic implications, it also opens avenues for developing alternative investment strategies that comply with EU law. For instance, Cyprus has since focused on enhancing its residency programs and attracting foreign investment through transparent and lawful means.

Malta now faces a critical juncture. By studying the Cypriot model, Malta can explore compliant avenues to attract foreign investment without compromising the integrity of EU citizenship.

Conclusion

The CJEU’s ruling marks a significant development in EU citizenship law, emphasizing that citizenship cannot be commodified. Member States are reminded of their obligations to uphold the principles of sincere cooperation and mutual trust. As the EU continues to explore the complexities of citizenship and investment, this judgment serves as a precedent for ensuring that the acquisition of citizenship remains a process grounded in genuine connection and adherence to EU values.

On those grounds, the Court (Grand Chamber) declared that:

  1. By establishing and operating an institutionalised citizenship investment scheme, such as the Maltese Citizenship by Naturalisation for Exceptional Services by Direct Investment scheme, based on Article 10(9) of the Maltese Citizenship Act (Chapter 188 of the Laws of Malta), as amended by the Maltese Citizenship (Amendment No. 2) Act (Act XXXVIII of 2020) and the Granting of citizenship for Exceptional Services Regulations, 2020 (Subsidiary Legislation 188.06 of the Laws of Malta), which establishes a transactional naturalisation procedure in exchange for predetermined payments or investments and thus amounts to the commercialisation of the grant of the nationality of a Member State and, by extension, that of Union citizenship, the Republic of Malta has failed to fulfil its obligations under Article 20 TFEU and Article 4(3) TEU, and
  2. It ordered the Republic of Malta to pay the costs.

Click here for the JUDGMENT OF THE COURT (Grand Chamber).

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