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Legal Dispute Between the European Commission and Malta Concerning the “Golden Passport”

 

Citizenship and residence by investment schemes allow third-country nationals to obtain residence or citizenship in a host country in exchange for financial contribution.In the European Union (EU), at least 130,000 people have taken advantage of these schemes, which have generated more than €21.8 billion in revenue for the countries concerned.

 

For potential applicants, the allure of these schemes lies in the faster or easier transition to a new residence, the provision of a safety net against political or economic instability for high-net-worth families, and the immediate access to visa-free travel that may not be available with their original nationality.In return, member countries benefit from increased government revenues and employment opportunities as a result of the investments made by these individuals.

 

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However, the European Commission has voiced concerns that these schemes may have a range of negative impacts on EU member states and their citizens, including economic, social, and political dimensions:

Economic: While they contribute positively to foreign direct investment (FDI), the long-term effects are debatable.

Social: They may drive up prices and make housing less accessible.

Political: They risk devaluing the concept of EU citizenship.

 

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Controversy of Malta Cash-for-Citizenship Program

Malta is among the few EU member states that continue to offer a Citizenship by Investment Program (CIP). In October 2020, the European Commission formally requested that Malta and Cyprus terminate their CIPs, arguing that the acquisition of Maltese citizenship through an investment of approximately 1 million euros was incompatible with the EU citizenship concept under the Treaty on the Functioning of the European Union (TFEU). The Commission also claimed that this practice violated the principle of sincere cooperation and amounted to the sale of EU citizenship without establishing a genuine connection to Malta.

 

Legal Dispute

In 2021, the European Commission issued two formal notifications to Malta, urging the termination of its CIP. The Maltese government, however, did not provide a substantive response to these requests. In April 2022, the Commission escalated its efforts by sending a Reasons Opinion to Malta, which was the final call for compliance before the matter would be taken to the European Court of Justice (ECJ). Malta rejected the Reasons Opinion on the day it was received.

 

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After repeated warnings, the European Commission referred Malta’s Investor Citizenship Program, also known as the “Golden Passport,” to the Court of Justice of the European Union (CJEU) on September 29, 2022. In March 2023, the Commission formally filed a lawsuit against the Maltese government, with the case set to be heard by the ECJ.

 

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Ongoing Litigation

On June 17, 2024, the first public hearing in the proceedings between the European Commission and Malta took place at the Grand Chamber of the European Court of Justice in Luxembourg. Both parties presented their oral arguments and delivered closing statements.

 

The European Commission reiterated its stance that Malta’s investment-based naturalization scheme undermines the reputation of EU citizenship and breaches the principle of sincere cooperation. Malta defended its scheme, emphasizing its transparency and rigor, and argued that it was a legitimate exercise of national prerogative and of significant economic interest.

 

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Future Outlook

The Court’s decision will set a precedent for the regulation of investment schemes across the EU, balancing national interests with the collective principle of EU citizenship. The Advocate General (AG) is expected to issue an opinion on October 3, 2024, after which the Court will deliberate and issue a final, binding judgment.

 

It is noteworthy that regardless of the litigation’s outcome, there is a high likelihood that the program will be discontinued in 2025. Under current circumstances, prospective applicants are advised to act promptly.

 

Globevisa and its affiliated law firms have confirmed with the Immigration Department that, irrespective of the outcome of the future litigation between Malta and the European Union, applicants who have already submitted their applications or successfully obtained their passports will not be affected.

 

As long as applicants register and submit their applications through Globevisa and ensure that their citizenship cases are at the review stage, they will be able to avoid any retroactive effects. Therefore, the most urgent task for prospective applicants is to initiate the EU Naturalization Program as soon as possible to secure an EU passport.

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