CJEU Decision in EC v Malta: Legality of Citizenship by Investment Under EU Law

On the 29th of April, the European Court ruled that Malta's citizenship by investment laws should meet the genuine links requirement applicable under EU law (in disagreement with the influential Advocate General’s Opinion directing the European Court that Malta was fully compliant with EU Citizenship Law.)

• Genuine Links Requirement Applied by Malta was not reflected in Maltese law: Evidence presented by the Maltese legal team demonstrating the physical presence and genuine links requirements actually enforced in Malta's Citizenship by Investment rules were not found clearly in the legal framework currently in force, which does not define 'residence' required before granting citizenship. Therefore the rules, in their current state, are not compliant with EU law unless Malta formalises this requirement in amended rules.
• Transactional citizenship breaches EU Law: In the absence of a formal legal provision setting a genuine links requirement, the remaining criterion for granting citizenship was the payment of a financial contribution to the government of Malta. This renders the rules a financial transaction incompatible with EU law.

The highly-influential Advocate General’s Opinion – EC v Malta published in October 2024 was expected to guide the court in its final determination on the matter EC v Malta, on the two main areas:

AG Opinion on National Competence & Member State Sovereignty

The Advocate General’s opinion clearly supports Malta’s position that the Mediterranean member state should be allowed to serenely determine the rules on he acquisition and deprivation of Maltese citizenship within the Island's sovereign competence, subject to the limits applicable to the loss not acquisition of citizenship.

Legal Precedent on Genuine Links Requirement

The Advocate General’s opinion clearly supports Malta’s position that the Mediterranean member state should be allowed to serenely determine the rules on he acquisition and deprivation of Maltese citizenship within the Island's sovereign competence, subject to the limits applicable to the loss not acquisition of citizenship. The AG found evidence that disproves the EC’s contention that Malta grants citizenship without genuine links.

The European court's emphasis on genuine links does not come as a surprise.

A study the judgement indicates that the Court has significantly departed from the detailed legal analysis applied by the Advocate General. No reference is made to pre-existing genuine links requirements within the 2020 citizenship rules that require "personal, financial and investment ties to Malta" in addition to 20-30 nights in-country, and not just 'legal residence'.

• In fact, the binding guidelines on the 2020 Maltese Citizenship Rules require applicants submitting an application for eligibility to include in his application a commitment letter describing how, during his residency period potentially leading to naturalisation as a Maltese citizen, the applicant and his/her family propose to integrate through the establishment of “personal, financial and investment ties” during the year/s leading to citizenship. (verbatim from the Rules' Handbook).
• This Residence Criteria Proposal Letter is an integral part of an application, and is processed together with deep and comprehensive disclosure of assets, explanations of source of wealth, as well as background checks conducted by the applicant’s agents, and further background checks by the processing agency financed by pre-determined due diligence fees payable on application by the applicant.  
• Even after approval of eligibility, at various stages prior to the grant of citizenship, the Citizenship Agency verifies the completion of the commitments undertaken by the applicant family by way of personal, financial and investment ties, and in the case of material defaults, defer the grant of citizenship until the commitments are completed.

The Court’s ruling requires Malta to legislate to comply with stricter minimum genuine links requirements. Malta must ensure that citizenship is not granted in a manner that undermines the concept of a genuine link and does not result in the commercialisation of Union citizenship. Legislative and regulatory reforms are expected to bring the framework into compliance with EU law.

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. (Malta Government Press Release)

Amendments to Maltese Citizenship by Investment

The Government has embarked on a process of implementing the amendments including:

• The Genuine Links requirement, already present in its binding guidelines to Agents, with more clarity in the principal legislation.
• Changes to the contribution format to involve and empower investor applicants to determine the public interest projects that the funds within the NDSF get paid to, thereby leaving impact deserving of recognition through naturalisation, while depriving the Government of unfettered discretion in the use of investor contributions, thereby eliminating the transactional characteristics of the original rules.

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Any new applications for Maltese citizenship and any citizenship applications currently in progress will need to comply with a new or amended legislation having clearer and stricter rules ensuring compliance with the genuine links requirement enshrined in the latest judgement.  To find out more about the standard of genuine links requirement that applies going forward, speak to one of our partners.

Impact on persons naturalised as Malta Citizens by Investment

It is important to clarify that decisions taken under both the current and the previous legislative framework remain valid.
(Malta Government Press Release)

Maltese Government's Reaction to the Judgement

The Government of Malta officially declared that, despite its disagreement with the outcome of the CJEU proceedings, it will honour the findings of the court. and immediately embark on effecting the necessary amendments to allow Malta to continue to attract significant foreign direct investment while respecting Malta's European obligations.

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. (Malta Government Press Release)

• The CJEU found that investment migration laws enabling naturalisation without a real connection violates the spirit and letter of EU law.
• The Court explicitly condemned the practice of treating EU citizenship as a commodity, stating this is incompatible with the values of the Union.

The message is strong and clear. Member State of the European Union are not allowed to offer schemes granting citizenship in return for a mere financial consideration without genuine links with the country. This has saved to dispel the fear of a 'race to the bottom' that would have resulted from an overzealous interpretation of a Malta win as witnessed in the industry's reaction to the Advocate General's opinion back in October 2024. For lawyers and tax advisors, the idea of 'substance' is not new. It is perfectly normal to expect its equivalent to apply to European citizenship by investment in the form of genuine links.

The ruling signals a significant tightening of the regulatory environment for citizenship and residence by investment in Europe. Other programmes, not least programmes in place in Portugal, Greece and in the Caribbean, must incorporate substantive residence, integration, or other genuine connection requirements to remain viable within the EU framework.

In all its activities, the Union shall observe the principle of the equality of its citizens, who shall receive equal attention from its institutions, bodies, offices and agencies.

Every national of a Member State shall be a citizen of the Union. Citizenship of the Union shall be additional to national citizenship and shall not replace it.
Article 9 TEU

Key Official Documents

• Advocate General’s Opinion – EC v Malta (October 2024)
• Final CJEU EC v Mala Judgment Text
• European Commission Press Release (Background)

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With decades of experience in investment migration, EU law, and international mobility, our team at Chetcuti Cauchi Advocates has been at the forefront of advising governments, institutions, and private clients on citizenship and residence matters worldwide.

Learn more about our Immigration and Global Citizenship Practice.