MALTA CBI - DISSECTING THE ECJ's RULING

What Was The Ruling Of Case C‑181/23; The European Commission VS The Republic of Malta?

The European Court of Justice ruled in Case C‑181/23 that Malta’s citizenship-by-investment regulations breached two of the EU ‘s Articles by granting citizenship in exchange for fixed payments without requiring a genuine link to the country. The Court found this violated Article 20 TFEU and Article 4(3) TEU, declaring the regulations a transactional and commercialised process incompatible with the principles of EU citizenship and sincere cooperation.

In this article we will explore this ruling.

For context, let’s first take a look at some interesting facts. In economic terms, France, Germany, Spain, Italy, and Sweden represent five of the ten largest economies within the European Union, based on nominal Gross Domestic Product (GDP). Germany leads with a GDP of approximately €4.1 trillion (around 25% of the EU’s total economic output), followed by France at €3.1 trillion (about 18%), Italy with €2.2 trillion (13%), Spain at €1.5 trillion (9%), and Sweden at approximately €610 billion (3.7%). Collectively, these nations are responsible for nearly 70% of the EU’s total economic output. As of 2023, Malta’s nominal Gross Domestic Product (GDP) was approximately €17.5 billion, according to Eurostat and World Bank data. This places Malta among the smallest economies in the European Union—accounting for roughly 0.1% of the EU’s total GDP.

According to Eurostat’s 2023 citizenship statistics, these same five countries also dominate the landscape of citizenship grants in the European Union. Spain led all EU member states, granting approximately 240,200 citizenships – nearly 23% of the EU total – followed closely by Italy with 213,600 (20%), Germany with 199,800 (19%), France with 97,300 (around 9%), and Sweden granting 67,800 citizenships (approximately 6.5%). Together, these countries accounted for a striking 78% of the total new citizenships granted across the EU in 2023.

By Contrast, in 2023, Malta granted citizenship to 2,511 non-Maltese individuals, marking a slight decrease from the 2,652 granted in 2022. This figure represents just 0.24% of all EU citizenships granted that year – less than one quarter of one percent – Italy’s figures alone are 85 times that number. The stark disparity not only underscores Malta’s comparatively modest role in the broader EU citizenship landscape, but also exposes the disproportionate scrutiny Malta’s regulations face, despite its limited numerical impact.

Yet, despite the magnitude of these figures, Eurostat’s official statistics do not provide detailed breakdowns of citizenship acquisition methods such as discretionary or exceptional naturalisation. The inherent difficulty in providing explicit comparative examples of discretionary citizenship practices from these prominent EU states underscores precisely the systemic problem at hand – an almost total absence of transparency. Indeed, these countries, despite their economic and political prominence, offer no publicly accessible details on how discretionary citizenship decisions are made, nor on the criteria or circumstances under which citizenship may be granted exceptionally. The very impossibility of obtaining such examples vividly highlights the opacity and potential arbitrariness embedded within these national systems. Consequently, while specific comparisons remain elusive, the broader issue of non-transparency and potential hidden transactional motivations becomes even more striking and troubling.

Every European Union member state maintains provisions for discretionary citizenship grants, although national legal terminologies vary. When systematically analysed and synthesised, these seemingly diverse frameworks reveal a common underlying definition applicable across the EU:

“Citizenship may be granted by Ministerial, Presidential, Parliamentary, or Governmental decision to a foreign national or stateless person whose naturalisation serves an exceptional public interest or reflects outstanding service in areas such as science, education, diplomacy, security, economy, innovation, humanitarian work, culture, sport, or national prestige. Standard requirements – such as residence, integration, lawful status, financial means, language, or criminal background – may be waived where justified by the individual’s merit, the State’s interest, humanitarian grounds, or to prevent undue hardship. Such grants must be supported by a substantiated proposal or official endorsement, and may require confirmation by Parliament or a consultative authority where applicable. Honorary or exceptional naturalisation may be conferred without application or standard criteria when compelling national reasons exist. Stateless persons may qualify under eased conditions with evidence of residence or integration. Spouses and minor children may benefit through simplified procedures. These decisions are sovereign, discretionary, and non-reviewable, except in cases of manifest error or procedural breach.”

This unified definition accurately captures the essence of discretionary naturalisation provisions across the EU. For instance, Spain uses the “Carta de Naturaleza” mechanism, France applies naturalisation through Presidential decree, Italy grants citizenship by Presidential decree for exceptional merit, and Germany employs discretionary naturalisation via ministerial authority. Similarly, Sweden allows for naturalisation on exceptional or humanitarian grounds. Despite subtle national distinctions, each country permits substantial discretion in conferring citizenship based on vaguely defined criteria, often exempt from judicial scrutiny or detailed public transparency.

Consequently, this broadly-worded and discretionary framework facilitates significant variations in practice across EU states, potentially enabling citizenship grants influenced by subjective interpretations, political priorities, or even economic contributions, none of which can be conclusively disproven due to the systemic opacity embedded in existing national data-reporting practices.

In March 2023, the European Commission initiated legal proceedings against Malta, challenging its “Citizenship by Naturalisation for Exceptional Services by Direct Investment” program. This scheme, established in 2020, allows foreign nationals to acquire Maltese citizenship through significant financial contributions, including a direct investment of €600,000 to €750,000, property acquisition or rental, and a philanthropic donation. The Commission contended that this program violated EU law by granting citizenship without requiring a genuine link between the applicant and Malta, thereby undermining the integrity of EU citizenship (Article 20 TFEU) and breaching the principle of sincere cooperation (Article 4(3) TEU).

Advocate General Anthony Michael Collins delivered his opinion on October 4, 2024, arguing that EU law does not mandate a “genuine link” requirement. Collins emphasized that the determination of nationality falls within the sovereign competence of each Member State, as affirmed by Declaration No. 2 annexed to the Treaty on European Union, recommending dismissal of the Commission’s case.

Contrary to this opinion, the Court ruled against Malta on April 29, 2025. The Court held Malta’s scheme violated EU law by enabling citizenship acquisition without a genuine connection to the country, characterising it as transactional and thus commercialising EU citizenship. Yet the derivative nature of EU citizenship, explicitly affirmed by landmark cases such as Micheletti (C-369/90) and Rottmann (C-135/08), fundamentally complicates this selective scrutiny. The Court itself consistently recognised that EU citizenship depends solely on nationality granted by individual Member States, further questioning the unique criticism aimed at Malta.

While concerns about commodification – security threats, potential abuse of mobility rights, or money laundering – are somewhat valid for the uninitiated observer, Malta’s established record of rigorous due diligence, comprehensive risk assessments, and stringent compliance frameworks substantially mitigates these concerns. Indeed, the ECJ notably refrained from criticising Malta’s sophisticated procedures, implicitly recognising their robustness and effectiveness.

Both the European Commission and Malta must bear responsibility for fundamental inadequacies exposed by the judgement. The Commission, while aggressively targeting Malta, egregiously failed to confront its own structural oversight – the lack of transparency and accountability across discretionary citizenship grants elsewhere. Malta, in turn, demonstrated equal culpability through a weak and excessively cautious defence, neglecting to robustly assert the profound strengths embedded within its scheme, whose transparency and rigorous due diligence practices stand unmatched in Europe.

Regrettably, statements made by Maltese nationals occupying roles within the EU, in the aftermath of the ECJ ruling, epitomise the worst kind of politically convenient distortion – selective outrage cloaked in moral posturing, devoid of factual integrity. Their declarations ignore not only the Court’s own acknowledgment of Malta’s robust due diligence and procedural rigour, but also the widespread, opaque use of discretionary citizenship powers across every other EU Member State – particularly those they refuse to scrutinise. To portray Malta’s programme as a reckless “get-rich-quick” scheme or a symbol of “greed and bribery,” while remaining silent on the untraceable, unaccountable naturalisations occurring under identical discretionary provisions elsewhere, is not merely hypocritical – it is a calculated deception aimed at misinforming the public.

That a Maltese national and the sitting President of the European Parliament, would use their high institutional office to castigate their own country while ignoring the broader EU-wide context is especially alarming. Their role demands neutrality, dignity, and a defence of Member State equality – not the partisan weaponisation of a complex legal outcome to score domestic political points. In doing so, both individuals seem to betray the spirit of honest governance, the foundational principles of the Union, and the dignity of the very institutions they represent.

Ultimately, paradoxically and unintentionally, the ECJ’s judgment provides Malta and other Member States with the clearest roadmap yet for continuing and even expanding citizenship-by-investment schemes under discretionary frameworks. Malta, uniquely positioned by its unmatched transparency, comprehensive risk assessment, and meticulous compliance oversight, can now confidently discard its defensive posture. By asserting these unparalleled strengths explicitly, Malta emerges not as a defensive outlier, but as the visionary leader, reshaping citizenship-by-investment into a benchmark of transparency, security, and procedural integrity – truly embodying the sincere cooperation envisioned by Article 4(3) TEU.

Citizenship by investment, as previously conceived, may indeed appear to have reached its final sentencing; yet in our view, it is far from over. Rather, it stands poised for transformation – reborn and elegantly redefined within the protective framework of discretionary naturalisation, where sovereign judgment, not commodification, becomes the guiding principle. At Yakof Agius & Associates, we believe the path forward lies in restoring dignity and constitutional purpose to the grant of citizenship – anchoring it in national interest, legal integrity, and ministerial discretion. A principled, defensible framework could elevate the sovereign grant to an act of statecraft. Though yet to be debated, its contours reflect what we believe should define Malta’s next chapter – unmistakably Maltese in spirit, and unquestionably European in coherence.