CJEU Rules Against Malta’s Citizenship by Investment Scheme
Malta’s Citizenship by Investment framework has long drawn scrutiny from EU institutions. Now, the Court of Justice of the European Union (CJEU) has ruled against Malta, declaring the scheme incompatible with EU law. This article explains the legal dispute, outlines the main arguments from both sides and considers the broader implications of the Court’s decision.
What is the Citizenship by Investment framework?
In the present case, the European Commission (‘Commission’) challenged Malta’s Citizenship by Investment framework (‘CBI framework’). The Malta citizenship by Naturalisation for Exceptional Services by Direct Investment is a framework whereby individuals who make a significant contribution to Malta’s economic development may be granted Maltese citizenship.
Under the CBI framework, individuals are allowed to gain Maltese citizenship through the fulfilment of the concept of ‘exceptional services’ which consist of:
- a non-refundable contribution of €750,000 if they reside in Malta for 12 months, or €600,000 if they reside in Malta for 36 months,
- a donation of a minimum of €10,000 to a Maltese-registered NGO in the cultural, philanthropic, sports, or artistic sectors, and
- the acquisition and hold of a residential immovable property in Malta with a minimum value of EUR 700 000, or a lease of a residential immovable property in Malta for a minimum of 5 years at a minimum annual rent of EUR 16 000.
In addition, the applicants must also pass an eligibility assessment before submitting their application and undergo several stages of due diligence.
What prompted the dispute?
The Commission first raised concerns about Malta’s approach to citizenship back in October 2020. The Commission issued a letter of formal notice to Malta, stating that the then Individual Investor Programme (‘IIP’) was incompatible with EU law.
Following this, Malta repealed the IIP and replaced it with the CBI framework in 2020. However, in June 2021, the Commission issued another letter of formal notice, asserting that the new framework was still in breach of EU law, as it maintained the same transactional nature as the previous IIP scheme.
Malta disagreed.
The Commission escalated the matter by issuing a Reasoned Opinion in April 2022 whereby it reiterated and developed the arguments set out in the letters of formal notice. Malta remained firm in its view that its investor citizenship legislative framework complied with EU law.
In March 2023, the Commission brought an infringement action before the Court of Justice of the European Union (‘CJEU’/‘Court’) under Article 258 Treaty on the Functioning of the European Union (‘TFEU’). The Commission sought a declaration that,
“by establishing and operating an institutionalised programme (…) that offers naturalisation in the absence of a genuine link of the applicants with the country, in exchange for pre-determined payments or investments, the Republic of Malta has failed to fulfil its obligations under Article 20 TFEU[1] and Article 4(3) TEU[2]“[3]
Arguments used by the Commission against Malta
The Commission’s case rested on three main arguments:
Limitation to National Sovereignty
The Commission acknowledged that Member States are competent to set the rules governing the acquisition of their nationality. However, it also emphasised that the exercise of this competence is subject to EU law.
The principle of mutual trust underpins the concept of EU citizenship. It is the very respect towards this principle that prohibits Member States from adopting citizenship rules that undermine the essence, value and integrity of EU citizenship.
Provided that acquiring nationality of Member State automatically grants EU citizenship, and naturally, the enjoyment of the right attached thereto, the conditions under which citizenship may be conferred has a direct impact not only on the Member State granting its nationality, but also on the rest of the EU, and therefore the granting of citizenship is no longer the exclusive concern of that single Member State[4].
Genuine Link Requirement, and the lack thereof
The Commission reiterated the principle that the automatic extension of EU rights and freedoms – such as the right to move, reside, work and study freely across the EU – to nationals of Member States is grounded in the shared understanding that nationality ultimately represents a genuine link between the Member State and its nationals, characterised, amongst other things, by reciprocity of rights and duties[5]
The Commission argued that an investor citizenship scheme under which citizenship is granted in exchange for pre-determined payments, without requiring the existence of any genuine link between the Member State and the individuals concerned, undermines the essence and integrity of EU citizenship.
Insufficient Safeguards
The Commission stressed that the Maltese CBI framework, unlike ordinary naturalisation procedures, contains insufficient safeguards to ensure that the residence obligation is more than a purely fictitious requirement or that there is any genuine link between Malta and applicants for Maltese nationality thereunder[6].
Furthermore, the Commission rejected Malta’s assertion that it may grant citizenship based on ‘prospective links’ such as anticipated future integration or contribution to the Member State. It argues that this ‘buy now – develop a link later’ approach is incompatible with EU law, particularly in view of the immediate attachment of EU rights to Maltese – and therefore, EU – citizenship. There is no guarantee that individuals naturalised under Malta’s CBI framework will ever establish meaningful ties with Malta. In fact, they may choose to relocate to another Member State without ever developing genuine ties to any Member State.[7]
Lastly, the Commission submitted that the due diligence process focused mainly on assessing applicants’ security or reputational risk and the extent of their wealth but did not seek verify the existence of any genuine connection with Malta. The Minister’s discretion to refuse the granting of a certificate of naturalisation does not alter the inherently transactional natural of the CBI framework.[8]
How did Malta defend its CBI framework before the CJEU?
Malta based its arguments primarily on the principle of sovereignty, asserting that the power to confer nationality lies at the heart of national sovereignty. It argued that, historically, States have sought to attract wealth and prosperity by granting citizenship or equivalent status to high-net-worth individuals.[9]
Malta emphasised that the decision to adopt the ‘genuine link’ criterion – and the discretion to determine what constitutes such a link – lies solely within the remit of each Member State’s democratic institutions. Neither the EU Treaties nor their travaux préparatoires impose an obligation on Member States to require a ‘prior genuine link’ as a condition for naturalisation or granting of citizenship.
Malta further submitted that only when a Member State’s naturalisation laws result in a serious breach of EU values and objectives could it amount to a violation of EU law. This, Malta argued, was not the case under the CBI framework.
Malta challenged the Commission’s characterisation of the CBI framework as an ‘automatic and unconditional’ route to Maltese nationality, involving the ‘systematic granting of nationality in exchange for pre-determined payments’ to serve Malta’s ‘purely budgetary interests’, arguing that such a depiction is a gross oversimplification without any legal or factual basis.
While an initial investment provides access to the CBI framework, it does not result in the automatic or unconditional conferment of nationality. In fact, each application is subject to a rigorous and individualised assessment which considers a range of factors including ‘security, reputation, systemic effects, compliance and other criteria’. Malta maintained that the CBI framework is a legitimate, robust, professionally managed, and effective naturalisation scheme that does not undermine the objectives of the European Union[10].
Opinion of Advocate General Collins (issued on 4 October 2024)
Advocate General (‘AG’) Collins largely supported Malta’s position, reaffirming Member States’ exclusive competence in setting naturalisation rules. Established case-law confirms that each Member State, in exercising its sovereign competence and with due regard to international law, has the sole authority to determine the conditions under which nationality may be acquired or lost.[11] Reference was also made to Declaration 2 on nationality of a Member State annexed to the final act of the Treaty of the European Union, wherein Member States affirmed their intention not to pool their sovereignty and national identity – of which each Member State’s conception of nationality forms an essential part thereof. [12]
AG Collins therefore found that while a Member State may, under its own nationality laws, require proof of a genuine link, EU law does not define, much less require, the existence of such a link in order to acquire or to retain that nationality[13]. In principle, EU law can constrain the manner in which Member States exercise their prerogative to confer or withdraw nationality, but only where such exercise contravenes EU law.
Ultimately, Advocate General Collins advised that the Court reject the Commission’s arguments since it failed to prove that in order to lawfully grant citizenship, EU law requires the existence of any ‘genuine’ or ‘prior genuine’ link between a Member State and an individual other than that which a Member State’s domestic law may required[14].
The final word of the CJEU
Although Advocate General Collins’ Opinion offered Malta a glimmer of hope, this was swiftly extinguished by the Court’s judgment delivered today, 29 April 2025. The Court rejected AG Collins’ views on Malta’s CBI framework and held that, by introducing and operating the CBI framework, Malta infringed EU law. The CBI framework was deemed to amount to the commercialisation of the conferral of Member State nationality and, by extension, European Union citizenship.[15]
The Court reaffirmed its recognition that Member States retain the sovereign right to determine the conditions under which nationality is granted or withdrawn. However, despite this competence, such power must be exercised in compliance with EU law. There is nothing in the EU Treaties to suggest that Member States are exempt from adhering to EU law when establishing the requisites for granting nationality to individuals.
European Union citizenship guarantees free movement across the European Union – a common area of freedom, security and justice. This common area is founded on two key principles: mutual trust between Member States and mutual recognition of national decisions. Therefore, Member States must refrain from carrying out any measure which undermines the EU’s common objectives, and this with respect also to the principle of sincere cooperation
As a result, the CJEU declared that Malta’s CBI framework, insofar as it establishes a transactional naturalisation procedure in exchange for predetermined payments or investments, amounts to the commercialisation of the grant of the nationality of a Member State and, by extension, that of Union citizenship, violates Malta’s obligations under Article 20 TFEU and Article 4(3) TEU.
[1] Article 20 of the Treaty on the Functioning of the European Union (TFEU) establishes EU citizenship,
[2] Article 4(3) of the Treaty on European Union (TEU) enshrines the principle of sincere cooperation.
[3] European Commission, Application, Case C-181/23, European Commission v Republic of Malta
[4] AG Opinion para. 17; [5] AG Opinion para. 18; [6] AG opinion para. 20; [7] AG opinion para. 22; [8] AG opinion para. 25; [9] AG opinion para. 26; [10] AG opinion para. 29; [11] AG opinion para. 44; [12] AG Opinion para 45; [13] AG Opinion para 55; [14] AG Opinion para 58;
[15] In accordance with Article 9 TEU and Article 20(1) TFEU, every person holding the nationality of a Member State is to be a citizen of the European Union. According to those provisions, Union citizenship is to be additional to and is not to replace national citizenship.
