Pirates of the Mediterranean meet judges of the Kirchberg: the CJEU rules on Malta’s investor citizenship law

 

Steve Peers, Professor of Law, Royal Holloway University of London*

Photo credit: Aldo Ardetti, via Wikimedia Commons

*Thanks to Justin Borg-Barthet for corsair quote

**This blog post builds on research for the upcoming third edition of The EU Citizenship Directive: A Commentary, by Elspeth Guild, Steve Peers and Jonathan Tomkin (OUP, 2026)

 

Defending his country’s investor citizenship policy, a former Prime Minister of Malta once defined his homeland as a nation of ‘corsairs’, offering an explanation based on the legality (or not) of buccaneering behaviour:

“The difference between pirates and corsairs is that pirates do things illegally while corsairs have a license to do things that are on the brink of what is acceptable by the mainstream.”

Nevertheless, the Court of Justice of the EU has now ruled that the Maltese investor citizenship policy is a breach of EU law. So the Maltese government are pirates after all. Or are they? Is the real swashbuckling lawlessness here in fact the foray of the Luxembourg judges deep into the waters of Member States’ powers, to seize as treasure national competence which is plainly not theirs?

Background

According to the Declaration on nationality of a Member State, attached to the original TEU (the Maastricht Treaty):

The Conference declares that, wherever in the Treaty establishing the European Community reference is made to nationals of the Member States, the question whether an individual possesses the nationality of a Member State shall be settled solely by reference to the national law of the Member State concerned. Member States may declare, for information, who are to be considered their nationals for Community purposes by way of a declaration lodged with the Presidency and may amend any such declaration when necessary.

The point was reiterated in the ‘Edinburgh Decision’ of Member States a few months later:

The question whether an individual possesses the nationality of a Member State will be settled solely by reference to the national law of the Member State concerned.

Earlier in 1992, the CJEU gave its first ruling that fully addressed the issue: Micheletti. In this case, a national court asked the CJEU whether a dual citizen of a non-EU country and an EU Member State could rely upon EU free movement law, even though another Member State had doubts that his Member State nationality (acquired via his parents’ nationality) sufficed to entail a genuine link with that Member State, given that his previous residence was outside the EU.

The Court of Justice responded by referring to Member States’ power to define their nationality, with an ensuing obligation of mutual recognition by other Member States:

Under international law, it is for each Member State, having due regard to Community law, to lay down the conditions for the acquisition and loss of nationality. However, it is not permissible for the legislation of a Member State to restrict the effects of the grant of the nationality of another Member State by imposing an additional condition for recognition of that nationality with a view to the exercise of the fundamental freedoms provided for in the Treaty. [emphases added]

It followed that:

…it is not permissible to interpret Article 52 of the Treaty [now Article 49 TFEU] to the effect that, where a national of a Member State is also a national of a non-member country, the other Member States may make recognition of the status of Community national subject to a condition such as the habitual residence of the person concerned in the territory of the first Member State.

In the Court’s view, ‘this conclusion is reinforced by the fact that the consequence of allowing such a possibility would be that the class of persons to whom the Community rules on freedom of establishment were applied might vary from one Member State to another’.

Despite the reference to ‘international law’ in the context of a Member State granting or removing its own nationality, the Court implicitly rejected the approach of international law as regards judging whether another Member State’s nationality had to be recognised. In particular, the ICJ’s Nottebohm judgment had previously stated that countries could disregard another country’s nationality if there was no ‘genuine connection’ with that country. (The Advocate General’s opinion in Micheletti expressly argued that Nottebohm was not relevant).

Moreover, the throwaway reference to Member States’ power to define their nationality being subject to the proviso of ‘having due regard to Community law’ was eventually clarified. Starting with the 2010 judgment in Rottmann, the CJEU ruled that a Member State’s decision to deprive its citizens of its nationality was not unlimited, despite the declaration and decision of 1992, because that resulted in the loss of citizenship of the EU:

It is clear that the situation of a citizen of the Union who, like the applicant in the main proceedings, is faced with a decision withdrawing his naturalisation, adopted by the authorities of one Member State, and placing him, after he has lost the nationality of another Member State that he originally possessed, in a position capable of causing him to lose the status conferred by Article [20 TFEU] and the rights attaching thereto falls, by reason of its nature and its consequences, within the ambit of European Union law.

The Court qualified its prior judgment in Micheletti:

The proviso that due regard must be had to European Union law does not compromise the principle of international law previously recognised by the Court, and mentioned in paragraph 39 above, that the Member States have the power to lay down the conditions for the acquisition and loss of nationality, but rather enshrines the principle that, in respect of citizens of the Union, the exercise of that power, in so far as it affects the rights conferred and protected by the legal order of the Union, as is in particular the case of a decision withdrawing naturalisation such as that at issue in the main proceedings, is amenable to judicial review carried out in the light of European Union law.

Having established that deprivation of nationality was within the scope of EU law, the Court went on to say that there was no breach of EU law in doing so in this case, given the international measures that refer to the prospect of deprivation of citizenship in case of fraud (referring to the Council of Europe Convention on Nationality and the UN Convention on the Reduction of Statelessness, and also to the Universal Declaration of Human Rights as regards arbitrary deprivation of nationality).

The Rottmann judgment led inevitably to further case law, given the importance of deprivation of nationality to any individuals facing it: Tjebbes (discussed here); C-118/20; C-689/21; and C-684/22. Broadly speaking, this case law is generally deferential to Member States’ decisions to deprive citizens of their nationality, but subject to some limits, particularly a need for a legitimate interest (criminal offences, absence from the territory, dual citizenship) as well as the principle of proportionality and the guarantee of procedural rights. (Note that British citizens’ loss of EU citizenship due to Brexit was not subject to this case law, because that loss followed from the UK choosing no longer to be a Member State – as confirmed by the CJEU in 2022 (see discussion here))

On the other hand, the Court did not have the opportunity to clarify whether there were also limits imposed by EU law on Member States’ rules on acquisition of their nationality – until the Commission challenged the Maltese rules on investor citizenship, on the grounds that they amounted to selling the nationality of a Member State (and therefore EU citizenship) to people who lacked a sufficient link to that Member State.

The Commission v Malta judgment

The Court’s ruling starts by addressing the Maltese government’s argument that the constraints set by EU law on acquisition of Member States’ nationality are much less than the constraints on deprivation of nationality: they should ‘be limited to a finding of significant breaches of the values or objectives of the European Union, which are general and systematic in nature’. In the Court’s view ‘[t]here is nothing in the wording or the scheme of the Treaties to 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’ only in such cases. Moreover, ‘such an exception cannot be accepted since it would amount to a limitation of the effects attaching to the primacy of EU law, which falls within the essential characteristics of EU law and, therefore, within the constitutional framework of the European Union’.

The Court then moves to the Commission’s argument that Malta had infringed Article 20 TFEU (the definition of EU citizenship, based on holding the nationality of a Member State) and Article 4(3) TEU (the EU law principle of sincere cooperation). The judgment points out that the Treaties aim to ensure free movement of people, in conjunction with the principle of mutual recognition. Next, the Court refers to the political participation elements of EU citizenship, by which ‘Union citizens participate directly in the democratic life of the European Union’; the EU’s ‘functioning is founded on representative democracy, which gives concrete expression to democracy as a value, which is, under Article 2 TEU, one of the values on which the European Union is founded’ (citing its recent judgment on EU citizenship and membership of political parties, which I discussed here). According to the Court:

It follows that the exercise by the Member States of their power to lay down the conditions for granting their nationality has consequences for the functioning of the European Union as a common legal order.

The Court also refers to the Treaty provisions on consular protection of EU citizens. Then:

It is in the light of those various rights that the Court has held that the provisions relating to citizenship of the Union are among the fundamental provisions of the Treaties which are part of the framework of a system that is specific to the European Union and which are structured in such a way as to contribute to the implementation of the process of integration that is the raison d’être of the European Union itself and thus form an integral part of its constitutional framework…

Next, the Court repeats its long-standing catchphrase that ‘Union citizenship constitutes the fundamental status of nationals of the Member States’, providing reasoning for that conclusion: ‘in the light both of the scope of the rights attaching to Union citizenship…and of the fact that that status derives automatically from the fact of being a national of a Member State’.

Therefore:

Union citizenship is thus one of the principal concrete expressions of the solidarity which forms the very basis of the process of integration…and which is an integral part of the identity of the European Union as a specific legal system, accepted by the Member States on a basis of reciprocity

And it follows that:

The exercise of the Member States’ power to lay down the conditions for granting the nationality of a Member State is not, therefore, in the same way as their power to lay down the conditions for loss of nationality, unlimited. Union citizenship is based on the common values contained in Article 2 TEU and on the mutual trust between the Member States as regards the fact that none of them is to exercise that power in a way that is manifestly incompatible with the very nature of Union citizenship.

The Court then reiterated (based on prior case law) that ‘the bedrock of the bond of nationality of a Member State is formed by the special relationship of solidarity and good faith between that State and its nationals and the reciprocity of rights and duties’, extending that to entail a principle underlying EU citizenship:

In the same vein, it is clear from the very wording of the first sentence of Article 20(2) TFEU that citizens of the Union are to enjoy the rights and be subject to the obligations laid down in the Treaties. In accordance with Article 20(1) TFEU, the special relationship of solidarity and good faith between each Member State and its nationals also forms the basis of the rights and obligations reserved to Union citizens by the Treaties.

When defining that ‘particular relationship of solidarity and good faith…the definition of the conditions for granting the nationality of a Member State does not fall within the competence of the European Union, but within that of each Member State, which has a broad discretion in the choice of the criteria to be applied, provided that those criteria are applied in compliance with EU law’.

But as the Court had already noted, that national discretion was not unlimited, but was subject to EU law. Crucially, then, the Court asserts that:

…a Member State manifestly disregards the requirement for such a special relationship of solidarity and good faith, characterised by the reciprocity of rights and duties between the Member State and its nationals, and thus breaks the mutual trust on which Union citizenship is based, in breach of Article 20 TFEU and the principle of sincere cooperation enshrined in Article 4(3) TEU, when it establishes and implements a naturalisation scheme based on a transactional procedure between that Member State and persons submitting an application under that programme, at the end of which the nationality of that Member State and, therefore, the status of Union citizen, is essentially granted in exchange for predetermined payments or investments.

A programme of that sort amounts to the commercialisation of the granting of the status of national of a Member State and, by extension, Union citizenship, which is incompatible with the conception of that fundamental status that stems from the Treaties.

The Court then recalls the mutual recognition principle from Micheletti, expressing its concern in that context:

Transactional naturalisation, which is granted in exchange for predetermined payments or investments, is not only contrary to the principle of sincere cooperation, but is also liable, by its nature, to call into question the mutual trust which underlies that requirement of recognition, since that trust relates to the premiss that the grant of the nationality of a Member State must be based on a special relationship of solidarity and good faith justifying the grant of rights resulting, in particular, from Union citizenship.

Diving into the specific rules of the Maltese investor citizenship scheme, the Court states that three of the five rules are essentially based on forms of cash payment. Although the fourth condition requires ‘legal residence in Malta for a period of 36 months’, the Court dismisses this as being, in effect, a Potemkin village: in practice, ‘that condition does not amount to a requirement of actual residence in the territory, since the physical presence of the applicant on that territory is required only when biometric data are collected in order to obtain the residence permit and to take the oath of allegiance’. This conclusion was reinforced by the opportunity to reduce the residence requirement to 12 months in return for further cash payments, and by comparison to the more stringent rules – entailing longer and genuine residence – which apply to the ‘ordinary’ naturalisation procedure of Malta. As for the final condition – a series of suitability checks in the public interest – the Court takes the view that they do not alter the essentially commercial nature of the sale of citizenship.

Finally, the Court dismisses Malta’s argument that its investor citizenship scheme ‘takes into account certain connecting factors on the part of the applicants’, in particular links via investments and possible future links after obtaining nationality. In the Court’s view: there was no evidence that the scheme ‘provides for a specific and concrete examination of the relevance of certain investments in order to establish the existence and extent of an applicant’s ties with the Republic of Malta, or to enable the development of such links with that Member State, distinct from’ examining whether an applicant meets the criteria; the prospect of deprivation of nationality after granting it was limited in scope; and the scheme was sold as conferring free movement rights in any Member State. Although Malta denied responsibility for how private parties sold the scheme, the Court points out that it had authorised them to act on its behalf – so (implicitly) had the power to prevent them from adopting these sales techniques, but failed to use that power. So, as a sales pitch, Malta was not really selling its nationality – it was selling citizenship of the European Union. And (implicitly again) Malta was not linking its nationality to its territory – it was linking it to being somewhere else in the EU instead.

Comments

I’ll start with the specific issues arising from the judgment (the impact on investor citizenship schemes) and move to the general (the impact on EU citizenship and the nature of the EU legal order more broadly).

Investor citizenship schemes

Several questions arise here. First of all, what happens to those who have already obtained citizenship under the Maltese scheme? Is Malta now obliged to yeet the rich?

Secondly, can Member States now refuse to recognise another Member State’s citizenship, if it has been obtained via means of an investor citizenship scheme that breaches EU law? Thirdly, would any system of investment citizenship by a Member State necessarily breach EU law?

Fortunately, immigration lawyer Simon Cox has already mused over these issues. On the first point, he points out that Malta did not ask the Court to limit the temporal effect of its ruling, so arguably it applies to citizenship already granted on the basis of the illegal scheme. Although, as he notes, Member States may not be keen to rescind citizenship already granted, other Member States have done so in similar circumstances (I would add that the CJEU case law on deprivation of nationality, mentioned above, would likely accept this on public interest grounds). But for those Member States reluctant to deprive investors of citizenship, it is possible that the CJEU may be asked to rule on this point – either if the Commission seizes the Court again, or if a Maltese court (perhaps seized by an NGO opposing the national scheme) asks the Court questions about the consequences of its judgment in that Member State.

But can another Member State now refuse to recognise the investor citizenship granted by Malta? The judgment touches on that point but very ambiguously, noting that a transactional citizenship rule is ‘liable, by its nature, to call into question the mutual trust’ underpinning EU citizenship, without answering the implied question of whether it is legal to do so. There’s a practical question of how to identify the Maltese citizens in question: presumably their passports are not literally golden. Perhaps immigration officials could profile those Maltese citizens who are flashing the biggest Rolexes and surrounded by the youngest women.

Assuming Member States do this, it should not be assumed, in light of the Court’s ambiguity, that it has overruled its long-standing judgment in Micheletti. Where the Court wishes to reverse its prior judgments, it does so explicitly (see, for instance, Metock: ‘It is true that the Court held [an absurd interpretation of free movement law in a previous judgment]….However, that conclusion must be reconsidered.’) In any event, in my view, the Micheletti judgment was and remains rightly decided on the mutual recognition point: the ICJ’s Nottebohm judgment was, with respect, poorly reasoned (paying insufficient account to the basic international law principle of state sovereignty), and it is hard to see how EU free movement law could function if Member States are second-guessing who is validly a national of another Member State. Above all, Member States had already made it clear (in the 1992 declaration and decision) that in the context of EU law, it was up to each of them – not other Member States – to determine who their nationals are.  

What about alternative versions of investor citizenship? Certainly the general tone of the judgment is one of disgust for commercialisation of EU citizenship in general. But as Simon Cox points out, the judgment also seems to suggest that a genuine residence requirement would overcome the Court’s revulsion. A less blatant sales pitch might help too. We can only speculate how long the super-rich would have to endure the inconvenience of mooring their yachts in Valetta for, to satisfy the Court – because it only told us that the current Maltese law was insufficient, without detailing which alternative would be legal.

EU citizenship and the EU legal order

This train already left the station with the Rottmann judgment 15 years ago, but it bears saying again, as the Court confirms that this case law applies to also the acquisition of Member State nationality: this whole line of judgments, with respect, has no basis in the wording of the Treaties or EU legislation. Not only is there no reference to any EU law constraints on Member States’ nationality law in the Treaties, the 1992 declaration and decision make absolutely clear that Member States interpret the Treaty to mean that nationality of a Member State is defined solely by national law.  

The Court’s specific rationales for rejecting Malta’s proposed high threshold for EU law constraints on acquisition of Member State nationality throw more flimsy fuel on this unconvincing fire. Yeah, of course the authors of the Treaties said nothing about an exception from EU law as regards acquisition of Member State nationality – because they said nothing about EU law applying to Member States’ nationality law in the first place. In fact, the 1992 declaration and decision clearly state that the authors of the Treaties believe EU law doesn’t apply to Member States’ nationality law at all. “We are very concerned about what the authors of the Treaties wrote” says the Court – while ignoring what the authors of the Treaties actually wrote on this very issue. This is simply judicial gaslighting.

As for the primacy of EU law, this is just confused. Even assuming one agrees with the Court’s conception of the primacy of EU law, it is a means of enforcement of EU law in the event of a conflict with national law. That primacy tells us nothing about what the scope or substance of EU law is – whether it applies at all to the acquisition of national citizenship, and if so what constraints it places upon those rules.

I have to say that if I read this reasoning on an EU law exam, the student would get nowhere near a 2:1.

Having said that, the judgment is what it is. We cannot avoid having to grapple with the Court’s explication of how it conceives of EU citizenship, and what that might mean more generally. And here, despite the weak foundations of its demand to set constraints upon national citizenship, the Court develops many interesting principles.  

The prior case law on the deprivation of Member States’ nationality was focussed on what the consequent loss of EU citizenship might mean for the individual concerned, particularly as regards free movement. But as regards acquisition of nationality, in this judgment at least the Court is not concerned about the impact on the individual. It is not even wholly focussed – as you might reasonably expect of the sale of nationality as a means to free movement – on the impact on other Member States. Rather it focusses in many respects on the impact for the European Union.

And what a European Union that is. As in the earlier case law, the Court mentions free movement aspects of citizenship, but it now adds references to consular protection and especially political rights. Coupled with the Court’s disdain for the sale of nationality, it seems that in this judgment, EU law is no longer founded on the internal market; it is now based on the internal marketplace of ideas. 

The Court does not mention the rather inconvenient fact that EU citizens face financial thresholds to exercise free movement rights: benefit recipients can move from Hamburg to Hanover, but not from Bucharest to Bremen. While EU free movement law is more generous than the usual immigration law for those of modest means, it is still more stringent than the rules applying to citizens of a Member State moving within it – on financial grounds. The Court is Captain Renaut in Casablanca: shocked, shocked to find that citizenship rights are dependent on money in here.

The judgment also links EU citizenship to democracy and the values of the EU, asserting an impact of Member States’ rules on acquisition of nationality upon ‘the functioning of the [EU] as a common legal order’, and ‘the identity of the [EU] as a specific legal system’. This stress on the legal nature of the EU reads like an attempt at fashioning constitutional patriotism by bloodless legal technocrats; and it is inevitably undermined by the profound weaknesses of the Court’s legal reasoning as regards the existence of EU constraints upon Member States’ nationality law.

But there’s a broader stress on non-legal values here too. The overall vibe is of a court preparing itself with arguments to defend the rule of law and other EU values – despite contrary developments in one country across the Atlantic and, more cogently, certain Member States. We shall soon see how this might play out in the pending case about EU values and Hungarian LGBT restrictions. And, circling back to Member State nationality, it is hard to see how the Hungarian government’s plan to suspend the Hungarian nationality of dual citizens who are insufficiently orgasmic about Orban could possibly be compatible with EU law in light of this new judgment.

One issue is notable by its absence from the Court’s reasoning: the argument that the rules on acquisition of nationality of a Member State are an aspect of national identity, which the Treaties explicitly require the EU to respect – even though Malta argued the point. It’s a strong argument in general terms, but its strength may differ in separate cases. There’s obviously a better case for (say) the grant of Irish nationality to (most of) those born in Northern Ireland as being intrinsically linked to the history and identity of Ireland, than there is for the souvenir shop citizenship of the Maltese law in this case. But the Court should nonetheless have answered the objection.

Conversely, the Court explicitly uses this judgment as a vehicle to express itself on the ‘identity’ of the European Union: as we have seen already, as a ‘specific legal system’. Presumably the specificity of this legal system explains – although again the Court avoids saying this directly – why the judgment implicitly rejects the Commission’s argument that Member States must base their nationality law upon a ‘genuine link’ with the country (echoing international law), and instead develops an EU-specific set of principles. (The break with international law is another point of divergence with the case law on deprivation of citizenship; perhaps it didn’t help that the Advocate-General’s opinion inaccurately claimed that the Council of Europe Convention has no rules on acquisition of nationality).   

Rather, the basis for the EU law rules on the acquisition of Member State nationality is the ‘special relationship of solidarity and good faith between each Member State and its nationals’; and the test is apparently whether a particular national rule is ‘manifestly incompatible with the very nature of Union citizenship’. Applying that test, ‘a Member State manifestly disregards’ this requirement when it sells its nationality on a commercial basis. Note that the Court does not say that this would be the only type of rule on acquiring nationality which is, in its view, incompatible with EU law.

What might this mean in other cases? Simon Cox’s blog post usefully points out some examples of other rules which might be challenged as a barrier to acquiring nationality (rather than, as in this case, making it too easy to obtain in some cases). He refers to high fees and education requirements; I would add that, by analogy with the case law on loss of citizenship, EU law may give applicants for nationality procedural rights too. And the link the Court makes with the values of the EU should, for example, preclude any practice (as in Trump’s USA) of refusing citizenship based on criticism of the actions of a foreign government – still less arresting the applicant at a citizenship interview with a view to deporting him.

Conclusion

This is the Alien v Predator of constitutional moments. I’m equally unimpressed by both the arrogant Eurofederalism of the Court and the fridge-magnet nationalism of the Maltese government. But what, in an ideal world, would be the best way forward?

There’s certainly a case, given the impact of the grant of nationality upon other Member States, of some form of coordination of nationality law within the EU. This would also be consistent with the logic of declaring the existence of citizenship of the European Union: why should the notion of citizenship be subject to no common rules at all?

But the development of such principles needs to be consistent with the rule of law, not the Court’s untenable interpretation of the 1992 decision and declaration. I doubt that there is much prospect of a Treaty amendment to confer competence upon the EU in this field: Orban may be many things, but he is not a turkey who would vote for Christmas. As things currently stand, principles could be agreed on the basis of soft law, or even treaties between Member States, on the basis of a ‘coalition of the willing’ if need be.

As I doubt that such a coalition will be easily forthcoming, I think we will be stuck with the development of legal principles in this field based on further elaboration of the Court’s judicial activism for the foreseeable future.  Time will tell whether the Court’s judgment is an anomaly – a reaction to a particularly egregious national policy in the context of broader allegations of corruption – or a key part of further case law on nationality law in particular and the EU legal order in general. 

To adapt the words of a famous on-screen pirate, look at the Court: they are the captain now.