European Citizenship by Investment

European Citizenship by Investment (CBI) has long existed at the intersection of national sovereignty and Union-wide legal obligations. While the EU treaties leave nationality decisions to the Member States, they also attach Union-wide rights to those decisions. The 2024 Advocate General's Opinion in Commission v. Malta upheld Malta's sovereign discretion. However, the CJEU ultimately ruled that Malta’s CBI model violated EU law for lacking a genuine connection between investor and state. This judgment does not outlaw CBI, but reshapes its future — towards investment-based naturalisation models that satisfy the EU’s integrity standards.

EU citizenship, codified under Article 20 TFEU, is granted to nationals of EU Member States and confers rights such as free movement, consular protection, and participation in European democratic life.

Citizenship of the Union is hereby established. Every person holding the nationality of a Member State shall be a citizen of the Union.

While nationality remains within the sovereign competence of Member States, cases such as Micheletti (C-369/90) and Tjebbes (C-221/17) established that such powers must be exercised in line with EU law, especially where EU citizenship is a consequence.

Declaration No 2 on nationality of a Member State, annexed to the final act of the Treaty on European Union exposes the extent of Member State prerogatives in the area of citizenship, stating that the acquisition of Member State nationality automatically results in the acquisition of EU citizenship, which all other Member States are bound under EU law to recognise. (AG Opinion, EC v Malta, 5 Oct 2024, para. 45).

… 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…’
Treaty on European Union: Declaration No 2 on nationality of a Member State.

The concept of citizenship by investment took hold in the EU through Cyprus and Malta, where economic contribution replaced traditional integration requirements. Cyprus launched a very lightly regulated route to citizenship in 2014 evolving it and adding layers of regulation over time leading to insufficient scrutiny of applicants and ultimately the abrupt demise of the Cypriot Investment Programme in 2020.

Malta started its Individual Investment Programme with controversy with an initially circulated draft envisaging a 'citizenship for a fee' model resulting in naturalisation after just 6 months of residency. However, Malta quickly bounced back with a strengthening of the residence requirement, requiring one year of residence prior to naturalisation together with the purchase or rental of property and an investment Maltese government bonds in addition to the proposed contribution. This earned the Maltese citizenship programme the approval of the European Union at the outset (Joint Press Statement by the EC and the Maltese IIP Agency, 29 Jan 2014).

Malta's CBI story is marked by a well-resourced citizenship agency geared up to European standards of due diligence and Anti-Money Laundering measure together with a residency requirement agreed with the European Union at the outset. A high rejection rate characterised the first years of the programme until it was clear that Malta would not admit applicants with an undesirable reputation, in observance of the spirit of solidarity expected of it by its European partners.

These schemes attracted both economic investment and criticism, prompting pressure from the European Commission, which raised concerns about security, money laundering risks, and the undermining of mutual trust between Member States. When the time came for the European Commission to start infringement proceedings in respect of Malta, running the last remaining CBI in Europe, security concerns did not feature on the EC's case which focussed exclusively on the commercialisation of citizenship due to an absence of genuine links with Malta.

Malta’s Individual Investor Programme (IIP) and its successor regime the Granting of Maltese Citizenship by Exceptional Services permitted naturalisation based on significant investment, the keeping of a rented or purchased residence during the initial residence period and for 5 years post-naturalisation and at least 30 days of in-country presence. In addition to this, we have advised clients to ensure they build a footprint in Malta that befit their specific profiles in the form of 'genuine links'. Some invested in local businesses and startups, others enrolled in academic institutions here, others still registered their private aircraft or pleasure yachts in Malta, while others structured and performed private equity investments in Malta.

Unfortunately, the silence of Maltese law on specific requirements, other than the general reference to "personal, financial and investment ties with Malta" reference in the agents guidebook, led to European quarters to assume there were none.

In Case C-181/23, the European Commission initiated infringement proceedings, arguing the scheme:

• Undermined the status of EU citizenship,
• Violated Article 4(3) TEU (sincere cooperation), and
• Enabled access to EU rights without a genuine link to the issuing Member State.

Crucially, Advocate General Anthony Michael Collins sided with Malta, issuing a robust Opinion in 2024 affirming that nationality decisions fall within the exclusive competence of Member States. He emphasised that EU citizenship is a derivative status, and that Malta’s approach — while politically contentious — did not infringe EU law.

The European Court's own Advocate General undertook an in-depth study of the process and found that checks at the outset of an application and at the end before proceeding with the grant of citizenship ensured that applicants would have satisfied their pre-approved commitments to genuine links with Malta.

Despite the AG’s backing of Malta, the CJEU ruled against Malta on 21 March 2023.
The Court held that granting citizenship in exchange for financial consideration alone, without ensuring a genuine connection between the individual and the State, breached the principle of sincere cooperation under Article 4(3) TEU.

The judgment effectively introduced a substantive requirement for national citizenship schemes that confer EU citizenship: a real, verifiable bond between the applicant and the granting country.

While the Court ruled Malta’s model in its current state unlawful, it did not reject the concept of economic citizenship outright. Rather, it made clear that:

• A financial contribution alone is insufficient,
• A genuine link must be established, and
• Member States must exercise their nationality prerogative in a manner consistent with the values and obligations of the EU legal order.

This opens the door for a reimagined generation of CBI models built on:

• Actual residence, even if limited,
• Cultural, linguistic, or civic integration, and the already existing
• Transparent due diligence, aligning with both EU values and global best practice.

Strategic Takeaways for Member States and Stakeholders

• Citizenship by Investment is not dead in Europe — but it must now evolve.
• Programmes must be restructured around residence, integration, and genuine ties, not mere economic exchange.
• Member States like Malta can retain investor migration tools by shifting towards compliant naturalisation-by-investment models.
• Future-proof CBI frameworks may resemble tiered naturalisation schemes, combining investment, residence, and social participation over time.

Watch this space...