CJEU rules Maltese naturalisation framework breaches EU law

Citation:                             Case C-181/23, CJEU (Grand Chamber), Judgment of 29 April 2025

Case Reference

Court:                                   Court of Justice of the European Union (Grand Chamber)

Judgment date:                29 April 2025

Case number:                   C-181/23

Parties:                                European Commission (Applicant) v. Republic of Malta (Defendant)

Type of Action:                Infringement procedure under Article 258 TFEU

1. Background

The case concerns Malta’s 2020 investor citizenship framework, formally called “Citizenship by Naturalisation for Exceptional Services by Direct Investment” 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.  This judgment follows the Commission’s long-standing objections to what it calls ‘“golden passport” schemes’, particularly those that grant nationality with minimal integration or connection to the granting state.

2. Legal framework

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.

            “Every 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.” (Art. 20(1) TFEU)

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.

3. Malta’s programme – structure

In essence, Malta’s 2020 programme required applicants to:

• pay an exceptional direct investment of €600,000 or €750,000 (depending on the residence route chosen) to the Maltese government as an investment in the country’s development;
• purchase or lease residential property (min. €700,000 purchase or €16,000/year lease);
• donate a minimum of €10,000 to a local, regulated charity;
• reside legally in Malta for 12 or 36 months, with the shorter duration available for an extra €150,000 direct investment;
• undergo a very strict, multi-tier due diligence process, and;
• take an oath of allegiance to the Maltese Constitution.

The framework capped successful applications at 1,500 main applicants in total.

4. European Commission’s arguments

a. Transactional nature of nationality

According to the Commission, Malta’s framework offered naturalisation “essentially in exchange for predetermined payments or investments” without a genuine link to Malta.

It commodified Union citizenship, undermining its essence, when Union citizenship is “destined to be the fundamental status of nationals of the Member States.”

b. Violation of mutual trust

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.

“Union citizenship is accompanied by rights conferred directly by the EU legal system… and has a strong civic component… destined to be the fundamental status of nationals of the Member States.” [para. 43]

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.

c. Lack of genuine link

The Commission also argued that the Maltese ‘scheme’ 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.

The possibility to reduce residence from 36 to 12 months with an additional payment showed the primacy of payment over genuine connection.

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.

“A 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”, the Commission argued (para 100).

d. Promotion of EU rights as benefits

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

“The scheme was publicly presented… as offering primarily the benefits arising from Union citizenship.” [para. 120]

5. Malta’s defence

a. National sovereignty

Malta insisted that citizenship is a sovereign competence, protected under Article 4(2) TEU, and that the Commission’s approach risked expanding EU powers beyond the Treaties.

b. No rules on genuine links

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

c. Robust framework and safeguards

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.

d. Overreach

According to Malta, the Commission’s interpretation would inappropriately extend EU competences into national lawmaking on citizenship.

“The 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’s national identity.” [Malta’s submission]

e. Commercial character denied

Malta denied that the process was transactional, arguing that no automatic right to nationality existed and that many applications were refused.

“Compliance by an applicant with the requirements does not confer… an automatic right to be naturalised.” [para. 76]

6. Key findings of the Court

A. Applicability of EU Law to Nationality

According to the Court:

• while nationality is governed by national law, its effects on Union citizenship fall under EU law;
• Member States must exercise nationality powers in conformity with EU law, especially where Union citizenship is directly affected;

“The exercise of Member States’ power to grant nationality… is not unlimited.” [para. 95]

“The Court has repeatedly held that Union citizenship constitutes the fundamental status of nationals of the Member States.” [para. 92]

B. The nature of the programme

 The Court found:

• Malta’s programme to be primarily transactional, given the centrality of payments and the, perhaps, symbolic (in the eyes of the Commission and of the Court) nature of the residency requirement.

“That Member State established a transactional procedure which amounts to the commercialisation of the grant of the nationality of a Member State.” [para. 120]

• that physical presence in Malta was not genuinely required, undermining any serious claim of a real connection.

“It cannot be considered that actual residence on that territory was regarded… as constituting an essential criterion…” [para. 108]

• That the promotional material further supported the view that the scheme’s value lay in its access to EU-wide benefits, not to Malta per se.

In Commission v Malta, the CJEU consequently ruled that Malta’s investor citizenship framework breached EU law by turning Union citizenship into a ‘commodity’ – or by ‘commercialising’ EU citizenship (to use the Court’s language).  The Court further held that offering nationality in exchange for money, and thereby obliging other EU MS to recognise that nationality and the EU rights that derive from it, without genuine links to the Member State violated both Article 20 TFEU (Union citizenship) and Article 4(3) TEU (sincere cooperation).

This marks a sharp departure from the Advocate General’s Opinion, which emphasised Malta’s sovereign competence in nationality matters and the absence of a “genuine link” requirement in EU law.

The Court disagreed and said in its judgement:

            “That scheme amounts to the commercialisation of the granting of the status of national of a Member State.” (para. 100)

           “Union citizenship… is not compatible with a transactional model of naturalisation.” (para. 99)

Notably, the Court also rejected the idea that only systemic or widespread abuses of nationality laws warrant CJEU intervention. Even one Member State, acting unilaterally, can breach EU law if its policies undermine the foundations of Union citizenship, according to the CJEU.

According to the Court, therefore:

EU citizenship rights are fundamental and not ‘commodifiable’: The Court emphasised the civic and democratic substance of EU citizenship, underlining its foundational role in the Union’s structure;

A genuine link is missing: the Court found that Malta’s scheme failed to establish the required “special relationship of solidarity and good ”;

The scheme’s transactional nature breached EU law: the scheme amounted to a “transactional naturalisation procedure”—incompatible with EU values and legal obligations.

7. Operative part of the judgment

The Court found Malta in breach of its obligations under Article 20 TFEU and Article 4(3) TEU.

The Court declared:

“By establishing and operating an institutionalised citizenship investment scheme… which establishes a transactional naturalisation procedure in exchange for predetermined payments or investments and thus amounts to             the commercialisation of the grant of the nationality of a Member State… the Republic of Malta has failed to fulfil its obligations under Article 20 TFEU and Article 4(3) TEU.”

Malta was ordered to pay the costs.

8. Key quotations

• “Union citizenship is not for sale.” – implicit conclusion from paras. 99–100
• “A programme of that sort amounts to the commercialisation of the granting of the status of national of a Member State.” [para. 100]
• “Union citizenship is one of the principal concrete expressions of the solidarity which forms the very basis of the process of integration.” [para. 93]
• “The Republic of Malta broke the mutual trust on which Union citizenship is based.” [para. 99]
• “The actual presence of the applicant was required only on two occasions… biometric data and oath.” [para. 106]

9. Implications

This is the first CJEU ruling directly addressing an active investor citizenship programme, reinforcing EU oversight where national citizenship grants EU rights. While evidently not outrightly outlawing such programmes, the decision will undoubtedly influence policy debates and legal reforms in this space.

The Maltese government, whilst reassuring existing passport holders that all decisions taken to date remain valid and will not be impacted, was quick to declare its respect for the decision and to state its commitment to review its naturalisation framework in order to bring it in line with the principles laid down in the CJEU decision.  According to the Government of Malta:

“As always, the Government of Malta respects the decisions of the courts, while at this moment the legal implications of this judgment are being studied in detail, so that the regulatory framework on citizenship can then be brought in line with the principles outlined in the judgment…. It is important to clarify that decisions taken under both the current and the previous legislative framework remain valid.

            The Government of Malta takes pride in the wealth generated through this framework over recent years, which enabled the establishment of a national fund for investment and savings to address the needs of both present and future generations. The Government remains committed to continuing to attract the best investment, from which the Maltese and Gozitan people benefit.”