The Commission and some members of the European Parliament have for years said they worry that Malta’s programme opens the EU to illicit money and money-laundering. Malta has argued against such concerns.

The top court in the European Union has declared that Malta’s citizenship-by-investment scheme, sometimes dubbed a “golden passport,” is unlawful, prompting angry pushback from one of the world’s most prominent firms advising on these programmes.

The Court of Justice said in a statement yesterday that it agreed with the European Commission's position, taken a few years earlier, when it had claimed Malta’s golden visa system infringed rules on EU citizenship.

“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 said. “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.”

“Such ‘commercialisation’ of citizenship is incompatible with the basic concept of Union citizenship as defined by the Treaties,” the court ruled.

A number of countries around the world, including EU member states such as Portugal and Spain, have adopted such programmes, although Portugal has tightened its scope and investment criteria, and Spain ended its system at the start of April. Italy has a residency-by-investment regime. Such countries have to some extent profited, so this publication understands, from an exodus of HNW individuals from the UK, which is in the process of ending its resident non-domiciled system and which axed its Tier 1 Investor Visa in 2022. 

Henley & Partners, an international firm that advises wealthy individuals about such programmes, criticised the court’s stance, and described the court’s comments as “politicised.”

“The EU Commission’s, and now the ECJ’s reasoning, lacks a solid foundation in EU law, as many leading legal scholars and the Court’s own Advocate General have pointed out prior to today’s ruling,” Henley & Partners said in a statement.

“Indeed, there is a stark contrast to the thoughtful and legally grounded opinion of the Advocate General, the ECJ’s lead judge, who concluded that the Maltese programme did not infringe EU law and that the EU Commission has no case. The court has now reversed course by a staggering 180 degrees and issued a decision that appears politically motivated, as the reasoning provided by the court is tenuous at best,” it said. “This undermines judicial consistency and confirms serious concerns about the increasing politicisation of the EU’s legal institutions. This undermines two of the most important values of the EU itself, democratic legitimisation and rule of law.” (See the AG's comments here.)

In the past, EU lawmakers have claimed that Malta’s scheme is a potential vulnerability in the fight against money laundering. Malta’s reputation has waxed and waned in recent years: the country, a former UK colony that joined the EU more than two decades ago, was removed from the Financial Action Task Force “grey list” in June 2022, after making significant progress in strengthening its anti-money laundering/counter-financing of terrorism (AML/CFT) framework. (To be on the “grey list” is to be under conditions of increased monitoring.)

Dr Juerg Steffen, CEO of Henley & Partners, said: “At the heart of this case lies the principle of sovereignty and national competence in citizenship matters. Member states have the exclusive right to determine the criteria for the acquisition of their citizenship, which is clearly laid out in the EU treaties. This principle was first acknowledged but ultimately sidestepped by the ECJ in favour of a ruling that enables EU encroachment on national competence.

“Even the EU itself, in its submission to the court, explicitly stated that it does not seek to infringe on the sovereign discretion of member states to confer citizenship. The EU just takes issue with the transparent and direct link of a specific amount of investment required – besides many other criteria needed to qualify – rather than the widely practised and rather untransparent discretionary citizenship grants that happen in all EU countries, which the EU Commission acknowledged it does not want to touch.

“This ruling, targeting the smallest EU Member State, sets a worrying precedent for the undemocratic extension of EU competences beyond its treaty-based limits. It would be interesting to see what the outcome would have been if the case was against France or Germany. Ironically, such judicial overreach undermines the very EU values the court claims to uphold, notably the rule of law and respect for democratic values,” Dr Steffen said. 

He added that scrutiny of Malta’s programme and the decision of the ECJ must also be seen in the context of how, such as in 2023 alone, EU member states granted over 1.1 million citizenships and “often based on tenuous links to the granting country, such as a remote ancestry connection, without any current connection to the country granting citizenship and no other formal requirements, whether investments or residence time or other requirements.”

These programmes have mushroomed in recent years, and in some ways are a feature globalisation and free movement, although they can provoke political controversy. In certain cases, such as in Canada, they have been suspended, because of concerns about the impact that they have in driving up property prices. In another case, when Russia invaded Ukraine in 2022, the UK ended its Tier 1 Investor Visa programme. (A number of Russians had applied for such visas.)

(Editor's comment: Without getting into the weeds of specific details about Malta's programme, the wording of the CJEU might lead one to presume that all citizenship, or indeed residency programmes that are obtained by investment might be deemed as "commercialising," and therefore illegitimate – which might give countries such as Italy, Portugal and others pause. Ironically, non-EU countries in Europe, most obviously Switzerland and the UK, might try to exploit the situation, although that seems unlikely in the UK because of the current Labour government's leftward leanings on tax, for example. On the other side of the Atlantic, US President Donald Trump has floated the idea of replacing a visa programme for foreign investors with a so-called "gold card" that could be bought for $5 million as a route to citizenship. It seems that these programmes aren't likely to die off any time soon.)