EU court rules Malta citizenship scheme illegal

The European Court of Justice (ECJ) has delivered a landmark ruling declaring that Malta’s controversial citizenship-by-investment programme violates European Union law. The binding judgment, issued on Tuesday morning, concludes that the practice of granting citizenship in return for payments and investments constitutes an unlawful “commercialisation of nationality,” undermining the principles of EU citizenship.

This high-profile decision marks a turning point in the EU’s long-standing opposition to so-called “golden passport” schemes, with potential implications not just for Malta but for other member states that may consider or operate similar initiatives.

The concept of EU citizenship under threat

In its ruling, the ECJ emphasized that nationality in an EU member state is not merely a transactional status, but a bond rooted in “solidarity, good faith, and the reciprocity of rights and duties” between a state and its citizens. The court asserted that these values are fundamentally incompatible with the notion of selling citizenship to the highest bidder.

The judgment read:

“The commercialisation of the grant of nationality of a member state, and by extension, EU citizenship, is incompatible with the basic concept of Union citizenship as defined by the Treaties.”

Malta’s citizenship-by-investment scheme, launched in 2014, allowed wealthy non-EU nationals to acquire Maltese citizenship—and thereby EU citizenship—by investing significant sums in the country. The programme, while financially beneficial for Malta, has long faced sharp criticism from EU institutions and transparency watchdogs.

How Malta’s citizenship scheme worked

Malta's Individual Investor Programme (IIP) was introduced during the tenure of former Prime Minister Joseph Muscat and was pitched as a tool for attracting foreign investment. Applicants were required to make donations to Malta’s national development fund, invest in real estate or government bonds, and fulfill a residency requirement. In return, they gained full citizenship, including access to the EU's single market and visa-free travel to many countries.

While the Maltese government repeatedly defended the programme as legitimate and beneficial, opponents warned it opened a backdoor to EU citizenship for individuals with questionable backgrounds.

The European Commission initiated legal action against Malta, arguing that the programme violated the EU treaties' core principle of sincere cooperation. Despite years of legal wrangling, the ECJ’s ruling now brings the issue to a legal conclusion.

Russian nationals among scheme beneficiaries

The controversy deepened following revelations that sanctioned Russian nationals had used Malta’s scheme to gain EU citizenship. A Financial Times investigation published just days before the ECJ ruling disclosed that at least seven Russian individuals, who were later sanctioned by the US, EU, or Ukraine over the invasion of Ukraine, had successfully acquired Maltese citizenship under the scheme.

The report also identified a total of 16 individuals with ties to political regimes or criminal activity who either purchased Maltese citizenship or were later sanctioned or convicted. These findings reinforced concerns about the scheme’s vulnerability to abuse by individuals seeking to launder reputations or shield assets in the EU.

In response to growing pressure, Malta suspended new applications from Russian and Belarusian nationals in 2022. However, critics argue this action came too late and failed to address deeper structural flaws in the programme.

Joseph Muscat reacts: “A political sentence”

Reacting to the ECJ ruling, former Prime Minister Joseph Muscat, who spearheaded the programme during his administration, described the court’s decision as a “political sentence” rather than a purely legal judgment. He insisted the scheme could still be salvaged through reforms and cited similar practices in the United States as justification.

Muscat also accused European Parliament President Roberta Metsola and Malta’s opposition Nationalist Party (PN) of undermining national interests by supporting the EU’s legal action.

“I thank them for working hard against this programme,” he said sarcastically. “The proceeds from the scheme helped Malta during the pandemic and contributed to the economy.”

Muscat also countered ethical criticisms by suggesting the programme was preferable to other forms of public spending, such as military expenditure.

“To those who will preach about their ethics, I say that I would much rather attract investments through this programme instead of spending on weapons as they would like to do.”

Transparency International and civil society welcome the decision

Transparency International welcomed the ECJ’s decision as a crucial step toward safeguarding the integrity of EU citizenship. Maira Martini, head of policy at the organisation, said:

“The ruling closes one door for corrupt actors buying their way into the EU. Many cases have shown how such programmes provided safe haven for suspicious individuals.”

The Daphne Caruana Galizia Foundation, named after the slain Maltese investigative journalist, also praised the decision. Director Matthew Caruana Galizia described it as a “win for all Maltese and EU residents who have been unfairly exposed to the whims of money launderers and corrupt criminals.”

He urged the Maltese government to not only comply with the ruling by dismantling the citizenship scheme but to also address the risks posed by Malta’s golden visa programme, which offers residency—but not full citizenship—in exchange for investment.

The future of golden passports in Europe

The ECJ’s ruling could have ripple effects across the continent. Although Malta has been in the spotlight, other EU countries, including Cyprus and Bulgaria, have run similar schemes. Both nations have already been pressured to scale back or terminate their programmes due to EU scrutiny.

The ECJ ruling may serve as a precedent, making it more difficult for any EU country to justify the sale of citizenship moving forward. The European Commission has repeatedly called for an end to such practices, arguing they pose serious security, money laundering, and corruption risks.

Economic and political implications for Malta

While the ECJ ruling marks a legal defeat for Malta, it also raises questions about the financial consequences. The citizenship-by-investment programme reportedly generated hundreds of millions of euros in revenue for the country. These funds were used for various national projects, including health and infrastructure, particularly during the COVID-19 pandemic.

Critics of the ECJ decision argue that it may constrain smaller EU economies from exploring innovative financial strategies. However, proponents of the ruling emphasize the need for ethical governance and transparency over short-term financial gain.

Call for regulatory overhaul

The ECJ ruling also amplifies calls for the establishment of a harmonized EU-wide approach to the issue of citizenship and residency investment programmes. While member states retain control over their nationality laws, the court’s decision underscores the intersection between national policies and EU-level responsibilities.

Policy experts are urging the European Commission to follow through with stronger regulations and oversight mechanisms to prevent exploitation of such schemes.

Conclusion

The European Court of Justice’s ruling against Malta’s citizenship-by-investment scheme marks a decisive moment in the EU’s ongoing battle against the commodification of citizenship. By declaring the programme incompatible with the foundational principles of Union citizenship, the ECJ has reaffirmed the idea that nationality—and by extension EU citizenship—must be built on genuine ties between individuals and the state, not on financial transactions. While Malta benefited economically from the programme, the ruling highlights the broader ethical, legal, and security risks posed by such schemes.

As the EU moves forward, this judgment is likely to shape future legislation and encourage greater alignment across member states regarding citizenship and residency policies. For Malta, it presents both a challenge and an opportunity: to transition away from questionable practices and toward more transparent, integrity-driven approaches to attracting investment. The decision may also serve as a warning to other countries contemplating similar programmes, underscoring that EU citizenship is not for sale.

FAQs

What is Malta’s citizenship-by-investment programme?
It was a scheme launched in 2014 allowing foreign nationals to gain Maltese citizenship—and thus EU citizenship—by making financial investments and donations.

Why did the European Court of Justice rule against the scheme?
The ECJ ruled that selling citizenship in exchange for money violated EU law and the principle of sincere cooperation among member states.

Who benefited from Malta’s scheme?
Wealthy individuals from various countries, including several sanctioned Russian nationals, obtained Maltese passports through the scheme.

What did Joseph Muscat say about the ruling?
Muscat described it as a political decision and defended the programme, claiming it brought economic benefits during the pandemic.

What impact did the scheme have on Malta’s economy?
It generated significant revenue used for national development and pandemic recovery, though it also attracted criticism and legal scrutiny.

Did Malta suspend applications from certain countries?
Yes, in 2022 Malta suspended new applicants from Russia and Belarus in response to the war in Ukraine and international sanctions.

What’s the difference between golden passports and golden visas?
Golden passports grant full citizenship, while golden visas only offer residency rights, often with fewer obligations and privileges.

How did civil society respond to the ruling?
Transparency International and the Daphne Caruana Galizia Foundation welcomed the ruling, calling it a win for anti-corruption efforts.

Is Malta’s scheme unique in the EU?
No, similar programmes existed in countries like Cyprus and Bulgaria, though many have been rolled back due to EU pressure.

What’s next for Malta after the ruling?
The Maltese government will likely need to fully dismantle the programme and consider reforms to align with EU legal standards.