In a landmark judgment adopted on 29 April 2025 in case C-181/23 Commission vs. Malta, the Grand Chamber of the Court of Justice (the “Court”) of the European Union (EU) found that, by amending its citizenship legislation to facilitate the acquisition of the Maltese citizenship by wealthy individuals, such as investors, the Republic of Malta (“Malta”) failed to fulfil its obligations on the EU citizenship (Article 20 ff. TFEU) as well as the principles of sincere cooperation (Article 4, para. 3, TEU), mutual trust and recognition among Member States under the Treaty of the European Union (TEU) and Treaty on the Functioning of the European Union (TFEU).
Background to the dispute
In 2020, Malta amended the Maltese Citizenship Act to establish the Maltese Citizenship by Naturalisation for Exceptional Services by Direct Investment (the “2020 Investor Citizenship Scheme”). The 2020 Investor Citizenship Scheme established that foreigners “providing exceptional services” to Malta could be naturalised as Maltese citizens. Among such exceptional services the scheme recognised the contributions of, inter alios, investors and entrepreneurs.
More particularly, under the 2020 Investor Citizenship Scheme, foreign investors may apply for naturalisation, inter alia, by directly paying contributions (of at least EUR 600,000) to the government, purchasing residential properties (with a minimum value of EUR 700,000) or take on a lease of a residential property for a minimum annual rent of EUR 16,000 and for a minimum period of five years, making donations to a state or authorised non-governmental organisation, or legally residing in Malta for a 36 month-long period following the above mentioned contributions to the government, which could be drastically reduced to 12 months, again by contributing EUR 150,000 in addition to the government (i.e. for a total of EUR 750,000).
Estimating that the 2020 Investor Citizenship Scheme could breach the provisions on the EU citizenship, the European Commission (the “Commission”) triggered the pre-contentious procedure under Article 258 TFEU (infringement procedure) to inquire on the scheme’s legal consequences. Faced with Malta’s disagreement vis-à-vis its position, the Commission started a procedure against Malta before the Court.
The issues at stake
Since its outset, the case appeared sensitive, as it bore the risk of affecting the definition of the rules on the acquisition (and loss) of national citizenship, which is a sovereign prerogative of states, recognized in international as well as EU law (See for instance judgments of 7 July 1992, in case C‑369/90 Micheletti and of 12 March 2019, in case C‑221/17 Tjebbes and Others). However, the attribution of the citizenship of a Member State causes immediate legal consequences in the EU legal system, as Article 20 TFEU provides that Member States nationals are also EU citizens. The EU citizenship grants the rights to move and reside freely within the whole EU territory,[1] the economic freedoms,[2] voting rights as well as the right to receive diplomatic protection by any other Member States.
Thus, the possible “commercialisation” of the citizenship of a Member State implied in the 2020 Investor Citizenship Scheme is relevant for EU and Member States. Wealthy individuals would benefit from a fast lane to acquire a national citizenship, thereby benefiting from the rights attached to the EU citizenship, despite failing to meet the core principles in national laws on the acquisition of citizenship (such as continuous residence in a country for some years).
The findings of the Court
In its judgment, the Court, like the Commission, accepted that the definition of the conditions for nationality is a prerogative of Member States, but developed the Commission’s approach based on the international law conception of citizenship as based on a “genuine link” between nationals and state. As a result, the Court stated that the core of the citizenship is a “special relationship” of solidarity and good faith between states and their nationals and reciprocity of rights and duties.
While this relationship exists in all states, the rights attaching to the EU citizenship are concrete expression of the solidarity among Member States and, as such, contribute essentially to the EU integration process. In this framework, Member States need to respect the right of nationals of other Member States to access, reside and work on their territories, which often also involves the recognition of the education, formation and titles obtained elsewhere.
Such respect is based on the mutual recognition of the citizenship of other Member States, a duty which these accept to observe on grounds of the reciprocal trust they put on fellow Member States’ policy choices in this area. Yet the 2020 Investor Citizenship Scheme would impose Member States to accept that citizens from other Member States be able to move, reside and work freely on their territories despite their citizenship resulting from an exchange for investments (or other payments),
The lack, in such EU citizens, of the special relationship of solidarity and good faith between states and nationals would impair the mutual trust and recognition among Member States, as, the Court seems to suggest, such persons gained a Member State’s nationality due to their wealthy condition and the “complicity” of a national legislation allowing it.
The way forward
The judgment delivered by the Court is complex and will raise discussions for its extreme, though rigorous, legal reasoning affecting Member States’ sovereign prerogative citizenship rights. The Court appears to dismiss the traditional genuine link principle used in international law (and considered by the Commission), to bring forward its own reasoning in a legitimate wish to state that the grounds of the EU citizenship are unique. Hence, applying thereto the principles of international law would be too limiting.
It is also significant that the Court preferred to ignore the opinion of Advocate General Collins advising rather to dismiss the Commission’s action for failure to prove that, in order to lawfully grant national citizenship (and, consequently, the EU citizenship), Article 20 TFEU requires the existence of a genuine link between a Member State and an individual other than what domestic law may require.
Following this case, in the future Member States may find it difficult to enact legislations to “capitalise” on being part of the EU and attract investments. It is worth mentioning that Luxembourg does not have a direct citizenship-by-investment scheme akin to Malta’s. Instead, Luxembourg offers a residence‑by‑investment route, which can eventually lead to citizenship provided naturalization requirements be respected (among which a 5-year-period continuous residence and knowledge of Lëtzebuergesch).
[1] Enshrined in Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States.
[2] Free movement of workers and services; freedom of establishment.
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