(CN) — Malta’s scheme that allows wealthy individuals to buy citizenship, or so-called “golden passports,” is illegal and must end, the European Union’s high court ruled Tuesday.
The European Court of Justice found that commercializing citizenship runs counter to the “basic concept” of EU citizenship and undermines the “mutual trust” at the heart of the 27-nation bloc.
Malta’s “golden passports” scheme is highly controversial not only because it allows wealthy non-EU individuals to buy their way into the EU, but also because unsavory figures — such as international money launderers and sanctioned Russian oligarchs — have taken advantage of it. At a cost of about $1 million, Malta offered people citizenship.
Malta said it was studying “the legal implications of this judgment” and that it would bring its citizenship rules “in line with the principles outlined in the judgment.”
Still, it defended the scheme, saying it had generated 1.4 billion euros ($1.6 billion) in revenues that were spent on “beneficial projects and investments.” It said those funds went into public housing, a hospice, a car racing track and hospital equipment.
Watchdog groups, including Transparency International, hailed the ruling as a big win against corruption.
“Countless cases have shown how these schemes have granted safe haven to corrupt actors from around the world and other suspicious individuals in the EU,” said Maíra Martini, Transparency International’s chief executive officer. “The ruling stops not only Malta from selling EU citizenship, but will also prevent other member states from doing the same.”
In a Grand Chamber ruling, the Court of Justice sided with the European Commission, the EU’s executive branch, and said the cash-for-citizenship program amounted to “transactional naturalization” that was “contrary to the principle of sincere cooperation” between EU states.
The commission took Malta to court in 2020 to stop the program, pressuring Bulgaria and Cyprus into ending similar schemes. Malta, though, refused to shut down its scheme, arguing that Brussels cannot dictate how national governments determine who is and isn’t eligible for citizenship.
But the high court said that while states are empowered to “lay down the conditions for the grant and loss of nationality,” they must not compromise or undermine “the essence, value and integrity of Union citizenship in order to preserve the mutual trust which underpins that status.”
The court faulted Malta for promoting the cash-for-citizenship program as a way to obtain the “right to reside, study and work in any of the 27 countries of the European Union” and to extend EU citizenship to other family members, including financially dependent and unmarried children under the age of 29 and parents over the age of 55.
“That presentation helps to establish that, by means of that scheme, that Member State established a transactional procedure which amounts to the commercialization of the grant of the nationality of a Member State,” the ruling said.
Malta argued that applicants undergo vigorous background checks and that they are required to establish strong links to Malta, including through residency and financial investments.
It also argued it had tightened citizenship rules. For instance, it barred citizens from Russia and Belarus from applying following Russia’s invasion of Ukraine in February 2022. It also did not accept applications from people from other troubled countries, including Afghanistan, the Democratic Republic of Congo, Iran, North Korea, Somalia, South Sudan, Sudan, Syria, Venezuela and Yemen.
Malta is a small island nation of about 469,700 people in the Mediterranean Sea lying between Sicily and North Africa. It became an EU member in 2004 and came up with the investor citizenship scheme in 2014 as a way to bring in much-needed cash following the 2008 financial collapse.
The Maltese government’s public affairs office did not reply to a query from Courthouse News about how many citizenships were granted under the program and how many applications are pending.
In its statement, Malta said passports granted under the scheme “remain valid.”
Under the program, applicants gained citizenship by making a large payment of 600,000 euros ($683,000) and establishing residency for three years, though the residency requirement could be shortened to one year by paying 750,000 euros ($854,000). Applicants also had to buy a house worth at least 700,000 euros ($797,000) or pay an annual rent of at least 16,000 euros ($18,200) for at least five years. Additionally, they were required to donate a minimum of 10,000 euros ($11,400) to a philanthropic cause.
Malta said the program brought in more than 10 million euros ($11.4 million) in philanthropic donations, spurred 339 million euros ($386 million) from property purchases and generated 158 million euros ($180 million) from property rentals.
But Matthew Caruana Galizia, the son of Daphne Caruana Galizia, a Maltese investigative journalist killed by a car bomb in 2017, argued the program brought “little benefit to Malta.”
In a statement, he said the ruling was “a win for the people of Malta and for all EU residents who have been unfairly exposed to the whims of money launderers and corrupt criminals buying their way into the EU.”
Courthouse News reporter Cain Burdeau is based in the European Union.