“MAL-TAming” – The Judgment of the Court of Justice in the case Commission v Malta (Citizenship by investment) and its effects on Austrian laws

Malta has been operating a scheme with preferential access to citizenship for quite some time. The otherwise strenuous path to citizenship can be eased if interested individuals make comparably high investments and/or payments. That is the idea behind “golden passports”.

In the case of Malta, the European Commission was not amused with the Maltese investor citizenship scheme. The dispute culminated at the Court of Justice of the European Union.

The judgment of the Court in Case C-181/23 (Commission v Malta)

On 29 April 2025, the Court held that the Maltese citizenship-by-investment (CIB) scheme is contrary to EU law. The main argumentation was as follows:

1. Every person holding the nationality of an EU member state is a citizen of the EU and Union citizenship constitutes the fundamental status of nationals of the EU member states. Union citizenship supplements and does not replace national citizenship.
2. Each EU member state is competent to define the conditions under which its nationality can be granted, lost or withdrawn. However, this national competence must be exercised having due regard to EU law, also when deciding upon the grant of nationality (Malta had argued that, in such constellations, only significant breaches of the Union values and objectives could constitute a breach of EU law).
3. The principle of mutual trust between the EU member states together with the principle of mutual recognition of national decisions are of fundamental importance. They allow to have created and maintained an area of freedom, security and justice without internal frontiers, in which every Union citizen can move and reside freely, can exercise the fundamental freedoms (work, right of establishment, right to provide services), can exercise political rights and can access diplomatic and consular authorities of other EU member states. Thus, the Court regards the provisions relating to Union citizenship as an integral part of the Union’s constitutional framework. Moreover, it is one of the concrete expressions of the solidarity which forms the vary basis of the process of integration and which is an integral part of the identity of the EU.
4. In turn, and in accordance with the principle of sincere cooperation (Art 4 para 3 TEU), each EU member state must refrain from any measure which could jeopardise the attainment of the Union’s objectives.
5. The bond of nationality with a Member State is based on a special relationship of solidarity and good faith characterised by the reciprocity of rights and duties between the State and its nationals. This special relationship between each EU member state and its nationals also forms the basis of the rights and obligations reserved to Union citizens under the Treaties.
6. An EU member state manifestly disregards the requirements for such a special relationship (EU member state – national) and thus breaks the mutual trust on which Union citizenship is based (violation of Art 20 TFEU and Art 4 para 3 TEU), if it establishes and implements a naturalisation scheme based on a transactional procedure at the end of which the nationality of that EU member state (and thus the status of EU citizen) is essentially granted in exchange for predetermined investments or payments. A programme of that sort amounts to the commercialisation of the status of national of an EU member state and by extension Union citizenship, which is incompatible with the basic concept of Union citizenship as defined by the Treaties.

Implications of the Court judgment

Interestingly, it is an open question of Union law and highly disputed in legal literature whether the ruling has an effect

• ex nunc: Malta may not grant new citizenships under the specific CIB scheme, or
• ex tunc: all Maltese citizenships granted under the specific CIB scheme must be rescinded by Malta.

This question mainly tackles the legal relationship of the “new Maltese citizens” with Malta itself.

However, the Court judgment may potentially also affect the legal relationship of the “new Maltese citizens” with other EU member states (e.g., Austria).

To take an example: Could the Republic of Austria deny the privileged status as EU citizens arguing that the affected individuals acquired the Maltese nationality (and thus Union citizenship) by means of a mere commercial transaction which breaches the principles of sincere cooperation and mutual trust between EU member states? This would effectively result in these “new Maltese citizens” being treated as foreigners denying them, amongst others,

• the fundamental freedoms (free movement for workers, freedom of establishment, freedom to provide services, etc.),
• the fundamental rights under the Charter of the European Union,
• the political rights (e.g., the right to vote and stand as a candidate in municipal elections) and
• other privileges linked to Union citizenship (e.g., right to purchase real estate without prior authorisation under land transaction laws of the Austrian provinces).

I strongly advocate to not let other EU member states erode the status of EU citizenship. We will see how the situation develops.

For a mere detailed outline, please see my Celis blog.

Please note: This blog is for general information purposes only and in no way constitutes legal advice from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal advice. Binder Grösswang Rechtsanwälte GmbH accepts no liability of any kind for the content and accuracy of the blog.