EU Pressure Fuels Drop in Malta's Citizenship by Investment Sales

Key Takeaways

The European Parliament passed a draft directive on February 28, 2024, calling for a ban on “golden passport” programs.
Malta’s Citizenship by Investment program faces a hearing at the CJEU’s Grand Chamber, with a ruling expected in late 2024/early 2025.
Applications for Malta’s CBI program have significantly declined amid legal challenges and uncertainty about its future viability.

Malta’s Citizenship by Investment (CBI) program, often referred to as the “golden passport” scheme, has experienced a decline in applications due to mounting legal and political pressures from the European Union (EU). This program, which allows individuals to acquire Maltese citizenship by making substantial investments in the country, has long been criticized by EU institutions for its potential risks, including money laundering, security threats, and concerns about the integrity of EU citizenship itself.

In September 2022, the European Commission escalated its opposition to the scheme by referring Malta to the Court of Justice of the European Union (CJEU). The Commission’s primary argument is that the program undermines the principle of genuine cooperation among EU member states. Further, it alleges that the scheme allows individuals to acquire EU citizenship without demonstrating any genuine connection to Malta 🇲🇹, thereby weakening the broader EU citizenship framework.

EU Pressure Fuels Drop in Malta’s Citizenship by Investment Sales

In defense of its program, Malta argues that the right to grant citizenship is a national prerogative that does not fall under the jurisdiction of the EU. The Maltese government has emphasized that the CBI program includes strict due diligence processes to ensure applicants meet high ethical and security standards. These measures, it argues, ensure that citizenship is granted responsibly, posing no risk to Malta 🇲🇹 or the EU.

Key Legal Developments

The legal battle gained significant attention when the European Commission formalized its case against Malta 🇲🇹 by taking it to the CJEU. The case was heard in the CJEU’s Grand Chamber on June 18, 2024. During this hearing, the Commission reiterated its stance that Malta’s program violates EU law, emphasizing that the lack of a genuine connection between applicants and Malta 🇲🇹 is incompatible with EU principles.

Malta’s legal representatives countered by asserting that granting citizenship is a matter of national sovereignty, protected under the Treaty on European Union (TEU). These legal protections, Malta argued, grant member states exclusive control over determining who qualifies for citizenship within their borders. Malta 🇲🇹 also pointed out that its program is designed with rigorous due diligence and anti-corruption measures, ensuring applicants are thoroughly vetted before citizenship is granted.

Adding pressure to Malta’s position, on February 28, 2024, the European Parliament passed a draft anti-corruption directive that called for a ban on all EU member states offering so-called golden passport programs. The directive specifically targeted Malta 🇲🇹, highlighting it as the only EU country that still permits the acquisition of citizenship through investment.

Adjustments and Challenges

Malta has taken steps to address the increasing scrutiny from the EU. For example, in March 2022, it announced the suspension of CBI applications from Russian and Belarusian nationals in response to geopolitical tensions and ethical concerns. Despite these adjustments, Maltese authorities have firmly stated that the country has no intention of discontinuing the program entirely. They maintain that granting citizenship is both a sovereign right and a critical element of national independence.

However, the legal and political pressures are having clear consequences. According to statements from Maltese regulators, there has been a significant reduction in citizenship sales under the program. While precise figures have not been publicly disclosed, analysts attribute this decline directly to the looming legal battle and the uncertainty surrounding the program’s long-term viability. This reduction comes in stark contrast to earlier in 2024, when Maltese lawyers reported a surge in applications as investors rushed to secure citizenship before any potential termination of the program.

Broader EU Context

Malta’s CBI program is now the last of its kind in the EU. Other member states, such as Bulgaria 🇧🇬 and Cyprus 🇨🇾, have already closed their own citizenship-by-investment schemes following criticism from EU bodies and controversies surrounding their operation. This isolation has increased the focus on Malta’s program and amplified the pressure from the EU.

The European Commission has continued to express concerns that such initiatives, including Malta’s 🇲🇹, undermine trust between EU member states. There are fears that individuals who lack a genuine link to a member state could misuse the advantages of EU citizenship—such as the ability to live and work anywhere in the bloc—without contributing meaningfully to the member state that granted them citizenship. Additional concerns focus on risks of corruption, tax evasion, and money laundering linked to investment-based citizenship schemes. These issues were notably highlighted in investigations such as the “Cyprus Papers” published in 2020.

The European Parliament’s push to ban citizenship-by-investment programs entirely reflects a growing consensus in EU governance. The draft directive adopted in February 2024 signals the EU’s intention to eliminate such practices, ensuring that EU citizenship remains tied to genuine residency and integration into a member state’s society. This directive, however, has not been finalized as EU policymaking often involves lengthy negotiations and potential amendments.

Economic and Political Considerations

Beyond the legal implications, Malta 🇲🇹 faces significant economic challenges if the CBI program is ultimately shut down. The program has been a valuable source of revenue, contributing to infrastructure projects and public services within the country. The Maltese government has argued that ending the program could deprive the island nation of an important economic tool, particularly as it seeks to attract high-net-worth individuals to support its economy.

Despite these risks, Malta’s economy is projected to grow at a healthy pace. The International Monetary Fund (IMF) has forecast a 4% growth rate for Malta 🇲🇹 in the medium term, higher than the EU average. This robust growth may provide some reassurance to policymakers facing the prospect of losing the revenue generated by the CBI program.

However, the stakes are high. If the CJEU rules against Malta 🇲🇹, other member states may also face scrutiny over residency-based investment programs (RBIs), which are distinct from CBIs but share similar criticisms from EU institutions. The outcome of this case could set a precedent, potentially reshaping the landscape of investment-based mobility in Europe.

What Comes Next?

The next major step in the legal proceedings will come on October 3, 2024, when the CJEU’s Advocate General is expected to deliver an advisory opinion on the case. While the Advocate General’s opinion is not binding, it often influences the court’s eventual judgment. A ruling is anticipated to follow in late 2024 or early 2025.

The impending judgment represents a critical crossroads for Malta’s CBI program. If the CJEU sides with the European Commission, Malta 🇲🇹 may be forced to suspend or significantly modify its program. Conversely, a favorable ruling for Malta could reinforce its sovereignty over citizenship policies but may still leave the program vulnerable to continued political criticism and economic consequences.

Conclusion

Malta 🇲🇹 finds itself in a complicated position as it navigates tensions between maintaining a highly contested national program and responding to pressure from the European Commission, the European Parliament, and broader EU governance. The decline in applications for Malta’s Citizenship by Investment program highlights the effects of political and legal uncertainty. This legal battle underscores fundamental questions about sovereignty, unity, and the integrity of EU citizenship.

Looking ahead, all eyes remain on the CJEU, which will ultimately determine the fate of one of Europe’s last golden passport schemes. Interested readers can stay updated through official resources, such as the European Commission’s press releases, available here. For detailed coverage, VisaVerge.com has been closely monitoring this topic, offering in-depth analysis and timely updates. The coming months will likely define not only the future of Malta’s CBI program but also the broader European perspective on investment-based citizenship.

Learn Today

Citizenship by Investment (CBI) → A program allowing individuals to obtain citizenship in exchange for significant financial investments in a country.
European Commission → The executive body of the European Union responsible for proposing legislation and enforcing EU laws and policies.
Court of Justice of the European Union (CJEU) → The EU’s highest court that interprets EU laws and resolves disputes between EU member states and institutions.
Genuine Connection → A legal principle requiring demonstrable ties, such as residency or integration, to justify granting citizenship or rights.
Golden Passport → A term for citizenship-by-investment programs allowing wealthy individuals to gain citizenship in exchange for investments.

This Article in a Nutshell

Malta’s controversial Citizenship by Investment (CBI) program faces decline amid EU legal challenges. Criticized for undermining EU principles, it’s the bloc’s last “golden passport” scheme. Malta defends it as a sovereign right, citing strict vetting. The CJEU’s upcoming ruling could redefine EU citizenship policies, balancing national sovereignty and European unity.
— By VisaVerge.com