This morning, during the sitting of the Court of Justice of the EU for case C-181/23 Commission v Malta (Citizenship by Investment) [Passports] the judgement found that “the acquisition of Union citizenship cannot result from a commercial transaction While the definition of the conditions for granting and losing the nationality of a Member State is a matter of national competence, that competence must be exercised consistently with EU law.”

The judgement noted that “the bond of nationality with a Member State is based on a specific relationship of solidarity, good faith and the reciprocity of rights and duties between the State and its citizens.”

The European Court in its decision stated that “where a Member State grants nationality, and thus automatically Union citizenship, in direct exchange for predetermined investments or payments through a transactional procedure, it manifestly infringes those principles.”

“Such ‘commercialisation’ of citizenship is incompatible with the basic concept of Union citizenship as defined by the Treaties,” the Court said. “It infringes the principle of sincere cooperation and jeopardises the mutual trust between Member States concerning the grant of their nationality, which governed the establishment of Union citizenship in the Treaties.”

The European Court explained that following an amendment to the Maltese Citizenship Act in July 2020, Malta adopted regulations which established detailed rules for the acquisition of ‘Maltese Citizenship by Naturalisation for Exceptional Services by Direct Investment’ (‘the 2020 investor citizenship scheme’). Under that scheme, foreign investors could apply to be naturalised where they fulfilled a certain number of conditions, principally of a financial nature.

The Commission asserted that the scheme, which granted naturalisation in return for “predetermined payments or investments to persons without a genuine link with Malta, constitutes an infringement of the rules relating to Union citizenship and of the principle of sincere cooperation. It therefore brought an action against that Member State before the Court of Justice.”

The Court said that by establishing and operating the 2020 investor citizenship scheme, “which amounts to the commercialisation of the grant of the nationality of a Member State and, by extension, of Union citizenship, Malta has infringed EU law.”

The Court recalled that each Member State is free to lay down the conditions under which it grants or withdraws its nationality. That freedom must, however, be exercised in compliance with EU law. Neither the wording of the Treaties nor their scheme can support the inference that their authors intended to lay down, as regards the grant of the nationality of a Member State, an exception to the obligation to comply with EU law.

European citizenship guarantees free movement within a common area of freedom, security and justice. That common area is based on two essential principles: mutual trust between Member States and mutual recognition of national decisions, said the Court.

The European Court noted that “European citizenship embodies fundamental solidarity between Member States, based on a set of reciprocal commitments. Each Member State must therefore refrain from any measure that could undermine the EU common objectives, in accordance with the principle of sincere cooperation.”

“As a result, a Member State cannot grant its nationality – and indeed European citizenship – in exchange for predetermined payments or investments, as this essentially amounts to rendering the acquisition of nationality a mere commercial transaction,” the Court ruled.

It went on to say that, “such a practice does not make it possible to establish the necessary bond of solidarity and good faith between a Member State and its citizens, or to ensure mutual trust between the Member States and thus constitutes a breach of the principle of sincere cooperation.”

European Court note: “An action for failure to fulfil obligations directed against a Member State which has failed to comply with its obligations under EU law may be brought by the Commission or by another Member State. If the Court of Justice finds that there has been a failure to fulfil obligations, the Member State concerned must comply with the Court’s judgement without delay.

“Where the Commission considers that the Member State has not complied with the judgement, it may bring a further action seeking financial penalties. However, if measures transposing a directive have not been notified to the Commission, the Court of Justice can, on a proposal from the Commission, impose penalties at the stage of the initial judgement.”

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