{"id":49980,"date":"2025-07-10T08:26:39","date_gmt":"2025-07-10T08:26:39","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&p=49980"},"modified":"2025-07-10T08:26:39","modified_gmt":"2025-07-10T08:26:39","slug":"case-note-cjeus-commission-v-malta-rethinking-citizenship-by-investment","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/case-note-cjeus-commission-v-malta-rethinking-citizenship-by-investment\/","title":{"rendered":"Case Note: CJEU\u2019s Commission v Malta \u2014 rethinking citizenship by investment"},"content":{"rendered":"

CJEU rules Maltese naturalisation framework breaches EU law<\/strong><\/p>\n

Citation<\/em>: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Case C-181\/23, CJEU (Grand Chamber), Judgment of 29 April 2025<\/strong><\/p>\n

Case Reference<\/em><\/strong><\/p>\n

Court: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Court of Justice of the European Union (Grand Chamber)<\/strong><\/p>\n

Judgment date: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 \u00a029 April 2025<\/strong><\/p>\n

Case number: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 C-181\/23<\/strong><\/p>\n

Parties: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0European Commission (Applicant) v. Republic of Malta (Defendant)<\/strong><\/p>\n

Type of Action: \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Infringement procedure under Article 258 TFEU<\/strong><\/p>\n

<\/p>\n

    \n
  1. Background<\/em><\/strong><\/li>\n<\/ol>\n

    The case concerns Malta\u2019s 2020 investor citizenship framework, formally called \u201cCitizenship by Naturalisation for Exceptional Services by Direct Investment\u201d or NESDI. Under this framework, foreign nationals could apply for Maltese nationality by making substantial pre-determined financial contributions and fulfilling a residency status requirement of 12 or 36 months.\u00a0 This judgment follows the Commission\u2019s long-standing objections to what it calls \u2018\u201cgolden passport\u201d schemes\u2019, particularly those that grant nationality with minimal integration or connection to the granting state.<\/p>\n

      \n
    1. Legal framework<\/strong><\/li>\n<\/ol>\n

      Article 20 TFEU: Establishes Union citizenship for all nationals of Member States (MSs), including the right to move and reside freely, vote, receive consular protection, and participate in EU democratic life.<\/p>\n

      \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u201cEvery person holding the nationality of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to and not replace national citizenship.<\/strong>\u201d<\/em>\u00a0(Art. 20(1) TFEU)<\/strong><\/p>\n

      Article 4(3) TEU: Embodies the principle of sincere cooperation, requiring Member States to assist each other and refrain from actions that could jeopardise EU objectives. Declaration No 2 (TEU): Nationality is to be determined under national law.<\/p>\n

        \n
      1. Malta\u2019s programme \u2013 structure<\/strong><\/li>\n<\/ol>\n

        In essence, Malta\u2019s 2020 programme required applicants to:<\/p>\n

          \n
        • pay an exceptional direct investment of \u20ac600,000 or \u20ac750,000 (depending on the residence route chosen) to the Maltese government as an investment in the country\u2019s development;<\/li>\n
        • purchase or lease residential property (min. \u20ac700,000 purchase or \u20ac16,000\/year lease);<\/li>\n
        • donate a minimum of \u20ac10,000 to a local, regulated charity;<\/li>\n
        • reside legally in Malta for 12 or 36 months, with the shorter duration available for an extra \u20ac150,000 direct investment;<\/li>\n
        • undergo a very strict, multi-tier due diligence process, and;<\/li>\n
        • take an oath of allegiance to the Maltese Constitution.<\/li>\n<\/ul>\n

          The framework capped successful applications at 1,500 main applicants in total.<\/p>\n

            \n
          1. European Commission\u2019s arguments<\/strong><\/li>\n<\/ol>\n

            \u00a0<\/strong>Transactional nature of nationality<\/strong><\/p>\n

            According to the Commission, Malta\u2019s framework offered naturalisation \u201cessentially in exchange for predetermined payments or investments<\/em><\/strong>\u201d without a genuine link to Malta.<\/p>\n

            It commodified Union citizenship, undermining its essence, when Union citizenship is \u201cdestined to be the fundamental status of nationals of the Member States.<\/em><\/strong>\u201d<\/p>\n

            Violation of mutual trust<\/strong><\/p>\n

            The Commission insisted that citizenship confers immediate and direct access to EU rights, and the scheme risks undermining mutual recognition and trust between Member States.<\/p>\n

            \u201cUnion citizenship is accompanied by rights conferred directly by the EU legal system\u2026 and has a strong civic component\u2026 destined to be the fundamental status of nationals of the Member States.<\/em><\/strong>\u201d [para. 43]<\/p>\n

            According to the Commission, the scheme breached Article 20 TFEU, which protects the substance of EU citizenship, and Article 4(3) TEU, which requires sincere cooperation.<\/p>\n

            Lack of genuine link<\/strong><\/p>\n

            The Commission also argued that the Maltese \u2018scheme\u2019 lacked the requirement of actual residence, allowing naturalisation based on legal residence only, which could be reduced by additional payments. According to the Commission legal residence under the scheme was largely formal, requiring no actual integration or significant physical presence.<\/p>\n

            The possibility to reduce residence from 36 to 12 months with an additional payment showed the primacy of payment over genuine connection.<\/p>\n

            The process was transactional, not merit- or connection-based, thus undermining the special relationship of solidarity and good faith between a state and its citizens.<\/p>\n

            \u201cA programme of that sort amounts to the commercialisation of the granting of the status of national of a Member State and, by extension, Union citizenship<\/em><\/strong>\u201d, the Commission argued (para 100).<\/p>\n

            Promotion of EU rights as benefits<\/strong><\/p>\n

            The Commission (and the Courts) also chastised authorised agents for promoting EU rights (e.g., free movement, family inclusion) as key selling points.<\/p>\n

            \u201cThe scheme was publicly presented\u2026 as offering primarily the benefits arising from Union citizenship.<\/em><\/strong>\u201d [para. 120]<\/p>\n

              \n
            1. Malta\u2019s defence<\/strong><\/li>\n<\/ol>\n

              \u00a0<\/em>National sovereignty<\/strong><\/p>\n

              Malta insisted that citizenship is a sovereign competence, protected under Article 4(2) TEU, and that the Commission\u2019s approach risked expanding EU powers beyond the Treaties.<\/p>\n

              No rules on genuine links<\/strong><\/p>\n

              Malta also insisted that there is no EU or international rule on Genuine Links, and no EU obligation to require a prior genuine link.\u00a0 Malta also argued that the Nottebohm doctrine is not binding on the EU.<\/p>\n

              \u00a0<\/strong>Robust framework and safeguards<\/strong><\/p>\n

              The Maltese framework involved detailed procedures, discretionary decisions, and multi-layered due diligence. Applicants also had to be legally resident, integrate economically, and take an oath of allegiance to the Maltese Constitution.<\/p>\n

              \u00a0<\/strong>Overreach<\/strong><\/p>\n

              According to Malta, the Commission\u2019s interpretation would inappropriately extend EU competences into national lawmaking on citizenship.<\/p>\n

              \u201cThe power to confer nationality is at the very core of national sovereignty and is attached closely to the conception and the development of a Member State\u2019s national identity.<\/em><\/strong>\u201d [Malta\u2019s submission]<\/p>\n

              \u00a0<\/strong>Commercial character denied<\/strong><\/p>\n

              Malta denied that the process was transactional, arguing that no automatic right to nationality existed and that many applications were refused.<\/p>\n

              \u201cCompliance by an applicant with the requirements does not confer\u2026 an automatic right to be naturalised.<\/em><\/strong>\u201d [para. 76]<\/p>\n

                \n
              1. Key findings of the Court<\/strong><\/li>\n<\/ol>\n

                \u00a0<\/strong>Applicability of EU Law to Nationality<\/strong><\/p>\n

                According to the Court:<\/p>\n