Who decides EU citizenship? Passport schemes after Commission v Malta

In December 2020, as the European Commission opened infringement proceedings against Cyprus and Malta over their investor citizenship programmes, JuriSpectrum's founding partner argued in a piece for the Cyprus Mail and Mondaq that the question of who owns the right to grant a passport deserved to be fought on legal rather than political grounds. Nationality, he noted, is a matter the Treaties leave to the Member States; the Commission's case rested on the duty of sincere cooperation and on the consequences that a national naturalisation produces for every other Member State. Five years later the Court of Justice has given its answer. It is worth reading carefully, because the judgment is narrower, and in some respects bolder, than it is often presented.

The judgment of 29 April 2025

In Case C-181/23 Commission v Malta, decided by the Grand Chamber on 29 April 2025, the Court held that by establishing and operating its 2020 scheme of naturalisation for exceptional services by direct investment, Malta had failed to fulfil its obligations under Article 20 TFEU and Article 4(3) TEU. The scheme, adopted in November 2020 under the amended Maltese Citizenship Act, allowed foreign investors to be naturalised on conditions that the Court described as principally financial in nature.

Two features of the reasoning matter for practitioners. First, the Court restated the orthodox position: each Member State remains free to lay down the conditions for acquiring and losing its nationality. Nothing in the wording or scheme of the Treaties suggests that their authors intended to carve out an exception to the general duty to comply with EU law when exercising that competence, but the competence itself is not transferred. Second, the Court identified what EU law requires of that exercise. Nationality of a Member State, and with it Union citizenship, is founded on a special relationship of solidarity and good faith, and on the reciprocity of rights and duties between the State and its citizens. A procedure which grants nationality in direct exchange for predetermined payments or investments is, in the Court's words, a commercial transaction. Such commercialisation of the status is incompatible with the concept of Union citizenship in the Treaties, undermines the mutual trust on which the free-movement area depends, and therefore breaches the principle of sincere cooperation.

A Member State cannot grant its nationality, and indeed European citizenship, in exchange for predetermined payments or investments, as this essentially amounts to rendering the acquisition of nationality a mere commercial transaction.

The Court departed from the Opinion of its Advocate General, who had concluded that the Commission had not established a breach. That divergence is itself a signal: the Grand Chamber chose to state a principle rather than to decide the case on the narrowest available ground.

What the Court did not decide

Three points deserve emphasis. The judgment does not require a genuine link in the sense of a minimum period of residence before naturalisation. The Commission had pleaded the absence of such a link; the Court's operative reasoning turns on the transactional character of the scheme, not on a residence threshold. Member States therefore retain wide discretion over ordinary naturalisation, naturalisation on grounds of merit, descent-based citizenship and the treatment of dual nationals.

Nor does the judgment revisit the earlier case law on loss of nationality. Rottmann and Tjebbes concerned withdrawal of nationality and the proportionality review that EU law imposes where Union citizenship would be lost. Commission v Malta extends the same premise, that national competence is exercised within the framework of EU law, to the grant of nationality, but it does so through the lens of Article 4(3) TEU and mutual trust rather than through an individual rights analysis.

Finally, the judgment says nothing about residence-by-investment. So-called golden visas confer a national residence permit, not Union citizenship, and their compatibility with EU law is governed by different rules. Pressure on those schemes is political and regulatory, not the direct consequence of this ruling.

The Cyprus sequel

Cyprus had already abolished its programme in late 2020, in the wake of domestic and international criticism, and subsequently revoked a number of naturalisations. In March 2026 the Commission closed the infringement procedure against Cyprus, recording that the corrective measures taken restored compliance. The point made in 2020 stands: the argument was worth having on legal grounds, and the outcome has been a clarification of the constitutional boundary rather than an assertion of Union competence over nationality.

Practical consequences

• Naturalisations already granted under the Maltese or Cypriot schemes are not automatically void. Revocation is a matter for national law, subject to the proportionality safeguards developed in the loss-of-nationality case law and to national administrative and constitutional guarantees.
• Investors who hold such citizenship should review their exposure, in particular where the underlying application involved misrepresentation or where national authorities have opened review procedures.
• Businesses that structured advisory or real-estate activity around investor citizenship should treat the model as closed within the Union. Malta was required to comply with the judgment without delay, and a further action for financial penalties is available to the Commission if it does not.
• For Member States, the judgment leaves intact naturalisation for exceptional merit, provided the decision is not the predetermined counterpart of a payment.

The deeper lesson is institutional. The Court did not need to find a new Union competence to reach its result. It relied on the oldest tool in the Treaties, the duty of sincere cooperation, to police a national decision whose effects are felt in twenty-six other capitals. That reasoning will not stop at passports.

This article is provided for general information only and does not constitute legal advice. It reflects the law and the authors' views at the date of publication. For advice on a specific situation, please contact the firm.