Decision in the Malta case ends citizenship by investment programs in the EU

After years of investigation, the European Court of Justice (ECJ) has ruled that Malta’s golden passport program is illegal. The scheme, which allowed individuals to acquire Maltese - and by extension EU - citizenship through financial investment, was deemed a “commercialization of the grant of nationality of a Member State,” contrary to fundamental EU principles. The ruling marks a significant milestone in the European Union’s ongoing efforts to preserve the integrity of EU citizenship and reinforces the principle that national decisions on citizenship must respect shared European values and obligations.

The program originated from a 2020 legal amendment and has long faced criticism from transparency advocates, who warned it posed risks related to money laundering, corruption, and national security. In response to these concerns, the European Commission initiated legal action against both Malta and Cyprus in October 2020, accusing them of effectively selling EU citizenship. While Cyprus shut down its scheme ahead of the court case (C-181/23), Malta chose to defend its position, arguing that the decision to grant nationality falls exclusively within national competence.

The ECJ clarified that although EU Member States retain the sovereign right to determine the conditions for acquiring citizenship, they must do so in alignment with EU law and principles. The Maltese program was viewed as violating the principle of loyal cooperation, as it allowed individuals to gain full EU rights - including freedom of movement, voting rights, and consular protection - without establishing a genuine connection to the country or the Union. The Court found that Malta’s practice of granting citizenship primarily in exchange for financial contributions undermines mutual trust among Member States and violates the principle of loyal cooperation. As a result, Malta has been ordered to end the scheme or face financial penalties.

While the judgment focused specifically on citizenship-by-investment, it raises questions about the legality of residency-by-investment programs. These schemes, offered by countries like Portugal, Spain, and Greece, grant residence permits in return for investments, without directly conferring citizenship. However, critics argue that such schemes may still provide indirect pathways to EU citizenship and warrant greater scrutiny, especially when physical presence requirements are minimal.

Hungary’s recently introduced “guest investor” residence program could also come under the spotlight. Launched in 2023, the scheme grants residence to third-country nationals whose investments are deemed to serve Hungary’s national economic interest. Qualifying options include purchasing at least €250,000 in shares of a real estate fund registered by the Hungarian National Bank or donating €1 million to public-interest institutions in higher education, science, or the arts.

The European Commission may now assess the compatibility of similar investor schemes with EU law. The ECJ’s decision signals a firmer stance on upholding the principle that citizenship must reflect genuine ties and shared responsibilities, not simply financial capacity.