Malta's Victory in the EU Citizenship Case: What It Means for Expat Investors

The investment migration press is abuzz with news from Europe… which has huge implications for anyone seeking citizenship in the European Union.

It starts with Malta’s Citizenship by Investment (CBI) program. The Mediterranean island nation is the only one in the EU that will give you a passport in exchange for a financial investment. Countries that used to do this, like Cyprus and Bulgaria, have backed down under threats from Brussels.

Malta’s program, officially called “Malta Citizenship by Naturalization for Exceptional Services by Direct Investment,” or MEIN, has two pathways. For a direct investment of €600,000 plus various donations and fees, you can get multi-Maltese citizenship after 36 months. For €750,000, you can get citizenship after 12 months. Those investments can be in residential property (Greece is the only other EU country where this is still possible).

By contrast, most European countries require that you have lived there for at least five years or more to become a permanent resident and even longer to become a citizen.

The European Commission—the executive branch of the EU—doesn't like the Maltese program. It says CBI programs violate Article 20 and Article 4(3) of the EU constitution. The former sets out the conditions for EU citizenship, while the latter requires all EU members to cooperate sincerely with each other on matters of mutual concern.

The specific beef is that Malta is granting its citizenship—and, by extension, EU citizenship—to people without a genuine link to the country. That dilutes the integrity of EU citizenship, making it a commodity. It also opens the door to individuals hostile to the region or with criminal backgrounds.

On 4 October, EU Advocate General Michael Collins delivered an opinion about this issue. He made two points that give hope to countries wanting to sell their citizenships.

First, he noted that the constitutional definition of EU citizenship doesn't refer to “genuine links.” This requirement, he said, was made up by EU politicians after the fact, and has no legal binding force.

Second, he showed that Declaration No. 2 annexed to the Treaty on European Union reserves questions of nationality to member states. The EU has no role in this matter. On top of that, EU case law prohibits member states from imposing added criteria on nationalities granted by other states.

His conclusion was that member states have every right to sell their citizenship as long as they take steps to preserve its integrity through rigorous due diligence. He therefore recommended that the European Court of Justice (ECJ) drop the case against Malta.

This is a big deal. If the court rules that Malta's program is compatible with EU law, one of three things could happen.

• EU states agree to amend the Constitution to redefine the nature of EU citizenship and grant member states the right to interfere in each other's citizenship policies. This is highly unlikely since it would require unanimity amongst member states.

• The EU accepts that its member states have the right to sell citizenship but would have to renegotiate the Schengen Treaty to exclude such countries from free travel and work in the bloc. That would also be politically difficult, especially if the court rules that CBI programs don't violate the EU constitution. However, there is precedent for EU membership without Schengen membership.

• The most likely outcome is that EU states rush to reestablish CBI programs or create new ones. Several have offered CBI in the past. It would also embolden countries who have applied for EU citizenship and have held off on CBI programs out of concern that they might be denied for that reason.

Countries That May Launch or Relaunch CBI Programs

Cyprus, Bulgaria, Montenegro, and Hungary may reintroduce CBI programs post-Malta ruling.|©iStock/Kirillm

Here are countries that might relaunch CBI programs:

Republic of Cyprus: The country offered CBI in exchange for an investment of at least €2 million in real estate or other investments. It was suspended in 2020 following corruption allegations and EU pressure. Note that Cyprus is already excluded from the Schengen zone because of its shared border with the breakaway Turkish Cypriot enclave on the north side of the island.

Bulgaria: Bulgaria once allowed investors to gain citizenship after two years with an investment of around €250,000. The program was suspended in March 2022 under EU pressure, which involved refusing to allow Bulgaria to join the Schengen zone if it didn't change its policy. Bulgaria is now part of the Schengen zone, so it would have little to lose by relaunching its CBI program.

Montenegro: The increasingly popular Balkan country has toyed with the idea of a CBI program for some time. Until recently, Montenegro's accession to the EU was unlikely given a corrupt government, but reformists are now in charge. The new leadership has held off on CBI, fearing that it would block EU membership, but now they may be emboldened to launch it.

Hungary: Hungary has never had a CBI program. But under President Viktor Orban, it is determined to create new residency pathways, particularly favoring Russians and Belarusians, who are blocked from the EU because of the war in Ukraine. This has caused alarm in the EU. If the EC J rules in favor of Malta, I would expect Hungary to proceed to a full citizenship offering.

It's not clear when the European Court of Justice will issue its final ruling. I'll be keeping tabs on this issue, of course, but for now, it's clear that there may be another pathway for those with deep enough pockets to buy an EU passport.

The final decision rests with the European Court of Justice. Stay tuned.