{"id":50098,"date":"2025-07-11T12:16:37","date_gmt":"2025-07-11T12:16:37","guid":{"rendered":"https:\/\/my.legal500.com\/developments\/?post_type=legal_developments&#038;p=50098"},"modified":"2025-07-11T12:16:37","modified_gmt":"2025-07-11T12:16:37","slug":"european-citizenship-by-investment","status":"publish","type":"legal_developments","link":"https:\/\/my.legal500.com\/developments\/thought-leadership\/european-citizenship-by-investment\/","title":{"rendered":"European Citizenship by Investment"},"content":{"rendered":"<p><strong>By <a href=\"https:\/\/www.ccmalta.com\/people\/jean-philippe-chetcuti\">Jean-Philippe Chetcuti<\/a>, <a href=\"https:\/\/www.ccmalta.com\/people\/antoine-saliba-haig\">Antoine Saliba Haig<\/a> and <a href=\"https:\/\/www.ccmalta.com\/people\/marina-magri\">Marina Magri<\/a><\/strong><\/p>\n<h2><strong>Quo Vadis European Law on EU Citizenship, National Competence on Citizenship Acquisition Rules?<\/strong><\/h2>\n<p><strong>This paper delineates the evolution of European Citizenship by Investment from the European Parliament&#8217;s debates at the onset of Malta&#8217;s Individual Investor Programme, to the closure of the Cyprus Investment Programme in 2020, to the European Court&#8217;s Advocate General&#8217;s legal opinion backing Malta&#8217;s CBI model and its existing genuine links requirement, to the CJEU ruling opening the door to a new generation of investment migration programs, built on genuine connection, economic impact, and EU law compliance.<\/strong><\/p>\n<p><strong>\u00a0<\/strong><!--more--><\/p>\n<p>Key Legal Issues<\/p>\n<ul>\n<li>Definition and nature of\u00a0<strong>EU citizenship under Article 20 TFEU<\/strong>.<\/li>\n<li>Autonomy of Member States in granting nationality vs.\u00a0<strong>EU law obligations<\/strong>.<\/li>\n<li>The legality of\u00a0<strong>citizenship by investment<\/strong>\u00a0(CBI) within the European Union framework.<\/li>\n<li>Divergence between the\u00a0<strong>Advocate General\u2019s support for Malta<\/strong>\u00a0and the final CJEU ruling.<\/li>\n<\/ul>\n<h2>Legal framework for European Citizenship<\/h2>\n<p>European Citizenship by Investment (CBI) has long existed at the intersection of national sovereignty and Union-wide legal obligations. While the EU treaties leave nationality decisions to the Member States, they also attach Union-wide rights to those decisions. The 2024 Advocate General&#8217;s Opinion in\u00a0<em>Commission v. Malta<\/em>\u00a0upheld Malta&#8217;s sovereign discretion. However, the CJEU ultimately ruled that Malta\u2019s CBI model violated EU law for lacking a genuine connection between investor and state. This judgment does not outlaw CBI, but reshapes its future \u2014 towards investment-based naturalisation models that satisfy the EU\u2019s integrity standards.<\/p>\n<p>EU citizenship, codified under\u00a0<a href=\"http:\/\/www.eur-lex.europa.eu\/legal-content\/EN\/TXT\/?uri=CELEX:12012E\/TXT\">Article 20 TFEU<\/a>, is granted to nationals of EU Member States and confers rights such as free movement, consular protection, and participation in European democratic life.<\/p>\n<p>Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union.<\/p>\n<p>While nationality remains within the sovereign competence of Member States, cases such as\u00a0<em>Micheletti (C-369\/90)<\/em>\u00a0and\u00a0<em>Tjebbes (C-221\/17)<\/em>\u00a0established that such powers must be exercised\u00a0<strong>in line with EU law<\/strong>, especially where EU citizenship is a consequence.<\/p>\n<p><strong>Declaration No 2 on nationality of a Member State<\/strong>, annexed to the final act of the Treaty on European Union exposes the extent of\u00a0<strong>Member State prerogatives in the area of citizenship<\/strong>, stating that the acquisition of Member State nationality automatically results in the acquisition of EU citizenship, which all other Member States are bound under EU law to recognise. (<a href=\"https:\/\/www.ccmalta.com\/publications\/maltese-citizenship-european-law-national-sovereignty-citizenship-advocate-general-court-of-justice-eu\">AG Opinion, EC v Malta, 5\u00a0Oct 2024<\/a>, para. 45).<\/p>\n<p>\u2026 wherever in the Treaty establishing the European Community reference is made to nationals of the Member States, the question whether an individual possesses the nationality of a Member State shall be settled solely by reference to the national law of the Member State concerned\u2026\u2019<br \/>\n<a href=\"https:\/\/eur-lex.europa.eu\/eli\/treaty\/teu\/fna_1\/dcl_2\/sign\/eng\"><em>Treaty on European Union:\u00a0Declaration No 2 on nationality of a Member State<\/em><\/a><em>.<\/em><\/p>\n<h2>The Emergence and Expansion of CBI in Europe<\/h2>\n<p>The concept of\u00a0<strong>citizenship by investment<\/strong>\u00a0took hold in the EU through\u00a0<strong>Cyprus and Malta<\/strong>, where economic contribution replaced traditional integration requirements. Cyprus launched a very lightly regulated route to citizenship in 2014 evolving it and adding layers of regulation over time leading to insufficient scrutiny of applicants and ultimately the abrupt demise of the Cypriot Investment Programme in 2020.<\/p>\n<p>Malta started its Individual Investment Programme with controversy with an initially circulated draft envisaging a &#8216;citizenship for a fee&#8217; model resulting in naturalisation after just 6 months of residency. However, Malta quickly bounced back with a strengthening of the residence requirement, requiring one year of residence prior to naturalisation together with the purchase or rental of property and an investment Maltese government bonds in addition to the proposed contribution. This earned the Maltese citizenship programme the approval of the European Union at the outset (<a href=\"https:\/\/ec.europa.eu\/commission\/presscorner\/detail\/fr\/memo_14_70\">Joint Press Statement by the EC and the Maltese IIP\u00a0Agency, 29 Jan 2014<\/a>).<\/p>\n<p>Malta&#8217;s CBI\u00a0story is marked by a well-resourced citizenship agency geared up to European standards of due diligence and Anti-Money Laundering measure together with a residency requirement agreed with the\u00a0European Union at the outset. A\u00a0high rejection rate characterised the first years of the programme until it was clear that Malta would not admit applicants with an undesirable reputation, in observance of the spirit of solidarity expected of it by its European partners.<\/p>\n<p>These schemes attracted both economic investment and criticism, prompting pressure from the European Commission, which raised concerns about security, money laundering risks, and the undermining of mutual trust between Member States. When the time came for the European Commission to start infringement proceedings in respect of Malta, running the last remaining CBI in Europe, security concerns did not feature on the EC&#8217;s case which focussed exclusively on the commercialisation of citizenship due to an absence of genuine links with Malta.<\/p>\n<h2>The Malta Case: AG Supports National Sovereignty<\/h2>\n<p>Malta\u2019s\u00a0<a href=\"https:\/\/www.ccmalta.com\/publications\/malta-individual-investor-program-miip\"><strong>Individual Investor Programme (IIP)<\/strong><\/a>\u00a0and its successor regime the Granting of\u00a0<a href=\"https:\/\/www.ccmalta.com\/products\/malta-citizenship-for-exceptional-services-regulations\">Maltese Citizenship by Exceptional Services<\/a>\u00a0permitted naturalisation based on significant investment, the keeping of a rented or purchased residence during the initial residence period and for 5 years post-naturalisation and at least 30 days of in-country presence. In addition to this, we have advised clients to ensure they build a footprint in Malta that befit their specific profiles in the form of &#8216;genuine links&#8217;. Some invested in local businesses and startups, others enrolled in academic institutions here, others still registered their private aircraft or pleasure yachts in Malta, while others structured and performed private equity investments in Malta.<\/p>\n<p>Unfortunately, the silence of Maltese law on specific requirements, other than the general reference to &#8220;personal, financial and investment ties with Malta&#8221;\u00a0reference in the agents guidebook, led to European quarters to assume there were none.<\/p>\n<p>In\u00a0<strong>Case C-181\/23<\/strong>, the European Commission initiated infringement proceedings, arguing the scheme:<\/p>\n<ul>\n<li>Undermined the\u00a0<strong>status of EU citizenship<\/strong>,<\/li>\n<li>Violated\u00a0<strong>Article 4(3) TEU<\/strong>\u00a0(sincere cooperation), and<\/li>\n<li>Enabled access to EU rights without a\u00a0<strong>genuine link<\/strong>\u00a0to the issuing Member State.<\/li>\n<\/ul>\n<p>Crucially,\u00a0<strong>Advocate General\u00a0<em>Anthony Michael Collins\u00a0<\/em>sided with Malta<\/strong>, issuing a robust Opinion in 2024 affirming that nationality decisions fall\u00a0<strong>within the exclusive competence<\/strong>\u00a0of Member States. He emphasised that EU citizenship is a derivative status, and that Malta\u2019s approach \u2014 while politically contentious \u2014 did not infringe EU law.<\/p>\n<p>The European Court&#8217;s own Advocate General undertook an in-depth study of the process and found that checks at the outset of an application and at the end before proceeding with the grant of citizenship ensured that applicants would have satisfied their pre-approved commitments to genuine links with Malta.<\/p>\n<h2>The CJEU Ruling: A Shift Toward Substantive Citizenship<\/h2>\n<p>Despite the AG\u2019s backing of Malta, the\u00a0<strong>CJEU ruled against Malta on 21 March 2023<\/strong>.<br \/>\nThe Court held that granting citizenship\u00a0<strong>in exchange for financial consideration alone<\/strong>, without ensuring a\u00a0<strong>genuine connection<\/strong>\u00a0between the individual and the State, breached the\u00a0<strong>principle of sincere cooperation<\/strong>\u00a0under Article 4(3) TEU.<\/p>\n<p>The judgment effectively introduced a\u00a0<strong>substantive requirement<\/strong>\u00a0for national citizenship schemes that confer EU citizenship: a real, verifiable bond between the applicant and the granting country.<\/p>\n<h2>The Future of CBI in Europe<\/h2>\n<p>While the Court ruled Malta\u2019s model in its current state unlawful, it did\u00a0<strong>not reject the concept of economic citizenship<\/strong>\u00a0outright. Rather, it made clear that:<\/p>\n<ul>\n<li>A\u00a0<strong>financial contribution alone<\/strong>\u00a0is insufficient,<\/li>\n<li>A\u00a0<strong>genuine link<\/strong>\u00a0must be established, and<\/li>\n<li>Member States must exercise their nationality prerogative\u00a0<strong>in a manner consistent with the values and obligations of the EU legal order<\/strong>.<\/li>\n<\/ul>\n<p>This opens the door for a\u00a0<strong>reimagined generation of CBI models<\/strong>\u00a0built on:<\/p>\n<ul>\n<li><strong>Actual residence<\/strong>, even if limited,<\/li>\n<li><strong>Cultural, linguistic, or civic integration<\/strong>, and the already existing<\/li>\n<li><strong>Transparent due diligence<\/strong>, aligning with both EU values and global best practice.<\/li>\n<\/ul>\n<h2>Strategic Takeaways for Member States and Stakeholders<\/h2>\n<ul>\n<li><strong>Citizenship by Investment is not dead in Europe<\/strong>\u00a0\u2014 but it must now evolve.<\/li>\n<li>Programmes must be\u00a0<strong>restructured around residence, integration, and genuine ties<\/strong>, not mere economic exchange.<\/li>\n<li>Member States like Malta can retain investor migration tools by shifting towards\u00a0<strong>compliant naturalisation-by-investment models<\/strong>.<\/li>\n<li>Future-proof CBI frameworks may resemble\u00a0<strong>tiered naturalisation schemes<\/strong>, combining investment, residence, and social participation over time.<\/li>\n<\/ul>\n","protected":false},"featured_media":0,"template":"","class_list":["post-50098","legal_developments","type-legal_developments","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments\/50098","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/legal_developments"}],"about":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/types\/legal_developments"}],"wp:attachment":[{"href":"https:\/\/my.legal500.com\/developments\/wp-json\/wp\/v2\/media?parent=50098"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}