The European Court of Justice ruled that Malta's "golden passport" scheme violated EU law, which aims to force the island to abolish the commercialization of EU citizenship.
"Member states cannot grant their nationality, or even their nationality, in exchange for a scheduled payment or investment, because this is essentially an acquisition of nationality is merely a commercial transaction," the court said.
The court ruled that “by establishing and operating an institutionalized citizen investment program,” Malta “has failed to fulfill its obligations under the EU treaty of its EU citizenship.”
Now, Malta will be forced to cancel the citizen investment plan, or fine it in its current form.
"The legal implications of the judgment are being studied in detail so that the regulatory framework for citizenship can be consistent with the principles outlined in the judgment," the Malta government said in a statement.
The European Commission welcomes the court's judgment. The commission handed Malta to the group’s Supreme Court in 2023, believing that the sale of EU passports undermined the “ethics of EU citizens”, which relies on mutual trust among member states.
The Malta program has an impact on the entire group because people who have Malta citizenship have the right to live and work anywhere in the group and have the right to vote for EU elections.
Cyprus and Bulgaria abolished their paid citizenship program under pressure from Brussels, which argues that such programs pose risks of corruption, money laundering and tax evasion.
In its ruling, the court said that citizenship is “one of the main concrete expressions of solidarity and forms the basis of the integration process…it is an integral part of EU identity.”
It said: “Member States clearly disregarded the requirement of this particular relationship of solidarity and honest faith…when it was established and established naturalization plans based on transaction procedures.”
Malta overhauled its plan in 2020, and the Malta government said it had tightened due diligence requirements for applicants. It also bans Russian and Belarusian nationals from entering the program in 2022.
People who purchase Malta passports must make a one-time investment of at least €600,000, whether they purchase or rent property, donate €10,000 to charity and live in the country for three years. For those who invest 750,000 euros, the residence requirements can be reduced to one year.
But the court said that even with improved due diligence inspections, the plan “follows the transaction process and constitutes the commercialization of the grant of Malta nationality.”
An analysis by the Financial Times showed that the 16 people who received Malta passports were politically exposed individuals, or were later sanctioned or convicted.
Among those identified in foot, some spent only a few days in Malta before naturalization.
The court said: "It cannot be considered that the Republic of Malta considers that actual residence on the territory constitutes the basic standard for granting nationality to the member state under the scheme."
The ruling could increase pressure on Malta to revoke passports issued under the plan, which would be a long and complicated process.
“What’s really interesting is whether other states inside or outside the EU can question the citizenship of people holding Malta or Cyprus passports, and citizenship will never be valid,” said Simon Cox, a lawyer specializing in EU immigration law, referring to Malta and the now-grown Cyprus program.
Cox said that while "Malta is unlikely to adopt a general policy of revoking all these citizenships", it could "increase their chances of revoking (individual passports) to avoid political conflict with other countries."
According to the latest government report, Malta has approved more than 5,300 citizenships by the end of 2023.
In at least one case, the passport awarded to Russian millionaire Pavel Melnikov was later revoked. Melnikov obtained Malta nationality in 2015 and was convicted in Finland in February this year for tax and accounting fraud. He is calling for a conviction and says he will challenge the revocation of his Malta passport.
"Today's judgment confirmed that member states cannot commodify EU citizenship and carry out reckless gold passport programs," said Maíra Martini, CEO of Transparency International. “Miscellaneous cases show how these plans can be granted to safe havens to corrupt actors around the world and other suspicious people in the EU.”
Daniel Freund, a green member of the European Parliament, also welcomed the ruling. "European passports are not for sale. Criminals, dictators and terrorists should not be able to buy tickets in the EU," Flund said. "It's time to end gold passports throughout Europe. It's a shame that some Russians can use them to bypass EU sanctions."