The Commission v Malta Judgment on Investor Citizenship: The Golden Age of Mutual Trust or the Seeds of a Reverse Luxembourg Compromise?

Table of Contents: 1. Introduction. – 2. The Maltese investor-citizenship scheme and the judgment of the CJEU. – 3. Analysis of the CJEU’s judgment. – 3.1. Doctrinal reception of the judgment. – 3.2. The nature of EU citizenship: status and substance. – 3.3. Mutual recognition of Member State citizenships. – 3.3.1. A special relationship based on loyalty and good faith. – 3.3.2. The requirement of a genuine link. – 3.3.3. Mutual trust. – 3.4. Division of competences. – 3.5. Practical implications. – 4. Conclusion.

Abstract: In its judgment in Commission v Malta, the Court of Justice of the European Union (CJEU) conceives of Union citizenship as embodying a ‘community ethos’, bounded by the Article 2 TEU values and the principle of mutual trust between Member States. Building on this conceptual shift – and contrary to the Advocate General’s opinion – the CJEU holds that the conferral of Member State citizenship is subject to EU-law limits: Member States must refrain from conduct that runs counter to the ‘nature’ of Union citizenship. It follows that the Maltese investor-citizenship program, to the extent that it reduces Member State citizenship – and thereby Union citizenship – to a transactional good, infringes the essence of Union citizenship. Early commentaries on the judgment (such as Ruairi O’Neill’s article in European Papers) explicitly approve of the emphasis on the principle of mutual trust in the judgment. This article, however, argues that the judgment (under the guise of the principle of mutual trust) gives the impression that a sort of ‘reverse Luxembourg compromise’ is emerging in EU law: rather than the textual interpretation of EU law, political interests packaged as the ‘spirit of the Treaties’ or ‘EU values’ become decisive, overriding the principles previously set by the Member States.

Keywords: Union citizenship – Investor Citizenship Program – mutual trust – Luxembourg compromise – genuine link – Commission v Malta.

1.   Introduction

The judgment of the Court of Justice of the European Union (CJEU) in Commission v Malta[1] – arguably the most hotly debated in recent years – marks a significant shift in the doctrine of Union citizenship. The case asked whether EU law may impose limits on Member States’ naturalization conditions, particularly where the citizenship of a Member State – and thus Union citizenship – can be acquired on a transactional basis without any requirement of a ‘genuine link’.

Traditionally, the CJEU has treated the grant and loss of citizenship as matters of exclusive Member State competence, allowing EU review only of decisions (e.g. withdrawal/loss) that engage EU citizenship rights (notably Rottmann,[2] Tjebbes,[3] JY[4]). In Commission v Malta, however, the CJEU – aligning with the Commission and diverging from the Advocate General – enters the field of Member States and imposes stringent EU control over citizenship regimes. By elevating the ‘special relationship of solidarity and good faith’ to the EU level and then asserting that the disputed golden-passport scheme undermines the mutual trust underpinning EU citizenship, the CJEU readily concludes that the commercialization of a status it deems fundamental conflicts with the Treaties’ principles and is therefore unlawful.

In this study, I argue that the judgment’s reasoning rests on fragile legal-normative foundations and that political considerations played a decisive role in shaping both its framing and its conclusions, with doctrinal argumentation operating largely as an ex post rationalisation of an integration-protective outcome. While prohibiting the ‘commercialization’ of Union citizenship may be politically attractive, the legal analysis is circular and self-justifying and contains several logical inconsistencies that together pose a serious risk to legal certainty. Firstly, the expansion of competences by the Union proceeds without it being clear that the Union may extend its powers to matters concerning the granting of citizenship by Member States. Secondly, there is no convincing proof of the alleged harm resulting from the contested national policy, nor any detailed demonstration of a breach of EU law.

I agree with the authors who read the judgment as an example of competence creep.[5] On that reading, it departs markedly from the EU’s constitutional order and from the rule of law.[6] Paradoxically, the CJEU does so by invoking Union objectives and interests, thereby creating a kind of ‘reverse Luxembourg compromise’: rather than relying on the letter of EU law, political interests cloaked in the ‘spirit’ of the Treaties become the guiding principle, enabling the EU to pursue its goals even where the law would not justify them.[7]

As is widely known, in the 1960s, the clash between France (under De Gaulle) and the Communities over Member State contributions – intertwined with federalist ambitions that De Gaulle opposed – prompted France’s ‘empty-chair’ policy, temporarily withdrawing its representatives and thereby paralyzing the Community institutions. The ensuing stalemate was addressed through the Luxembourg compromise. Its essence was that where the Treaties provided for majority voting, but a decision conflicted with a Member State’s vital national interests, the matter would be deferred until a negotiated agreement could be reached. Commission v Malta arguably inverts the logic: the ‘golden passport’ scheme is cast as offending the Union’s vital interests, and the Commission – backed by the CJEU – pursues its political objectives while disregarding limits of competence and jurisdiction. In short, although the matter belongs to exclusive Member State competence under the Treaties, Union interests are allowed to override the requirements of substantive law.

The aim of this study is to expose the logical inconsistencies and blind spots in the CJEU’s reasoning and to show how circular argumentation can produce shifts – or distortions – in the doctrine on the division of competences, thereby jeopardizing legal certainty and undermining the rule of law.

2.   The Maltese investor-citizenship scheme and the judgment of the CJEU

In 2014, Malta introduced a Citizenship By Investment (CBI) scheme enabling foreigners to acquire Maltese citizenship in return for substantial financial investments and donations. By virtue of the ancillary nature of Union citizenship, those who obtained Maltese citizenship via a commercial transaction were automatically endowed with Union citizenship and the rights attached to it – including free movement and residence within the Member States, as well as certain political rights. From the outset, the European Parliament,[8] certain NGOs[9] and several Member States criticized the scheme, citing risks of corruption, money laundering and security, and decrying the ‘commercialization’ of Union citizenship. In 2020, the European Commission finally launched infringement proceedings against Malta, arguing that the program contradicts the ‘nature and values’ of EU citizenship, as it grants citizenship solely in return for financial consideration, without any genuine link between the state and the individual.[10]

In its judgment (contrary to the opinion of Advocate General Collins[11]) the CJEU concluded that by making it possible to acquire Member State citizenship – and thereby Union citizenship – on a commercial basis without requiring a ‘genuine link’, Malta has infringed Article 20 TFEU on the status of Union citizens and Article 4(3) TEU, which lays down the duty of sincere cooperation. According to the CJEU, Union citizenship constitutes the fundamental status of nationals of the Member States, which determines the relationship between the citizen and the Union.[12] This status is grounded in a comprehensive catalogue of rights that drive the integration process – the ‘raison d’être’ of the Union.[13] Consequently, EU citizenship is ‘one of the principal concrete expressions of the solidarity which forms the very basis of the process of integration’ and is ‘an integral part of the identity of the European Union’, hence, it cannot be treated as purely national’.[14] The Member States’ power to determine the conditions for naturalization is therefore not unlimited; they can’t use it in ways that conflict with the nature and purpose of EU citizenship. According to the judgment, ‘Union citizenship is based on the common values contained in Article 2 TEU and on the mutual trust between the Member States as regards the fact that none of them is to exercise that power in a way that is manifestly incompatible with the very nature of Union citizenship’.[15]

3.   Analysis of the CJEU’s judgment

The judgment now makes not only the loss of citizenship (Rottmann[16] and Tjebbes[17] cases) but also its acquisition subject to EU standards. While recognizing the Member States’ competence in the field of citizenship, it states that no Member State may exercise that competence in a manner that is ‘manifestly incompatible with the nature of EU citizenship’.[18] The CJEU thus places the limits on granting Member State citizenship for consideration within the very ‘nature of EU citizenship’. At the same time, the judgment redefines the relationship between Member State citizenship and EU citizenship: it elevates the ‘special relationship of solidarity and good faith’ that underpins Member State citizenship to a normative requirement at the EU level.[19] Member States may not depart from this concept in a manner that is manifestly contrary to it, as doing so would undermine the very nature of Member State citizenship – the necessary precondition for EU citizenship. Consequently, they cannot establish a naturalization regime that would deprive this relationship of its substance.

3.1.  Doctrinal reception of the judgment

In his study, Ruairi O’Neill agrees with the fact that the CJEU based its judgment fundamentally on the principle of mutual trust.[20] The CJEU did so despite the fact that the Press release of the Commission announcing the infringement proceedings against Malta made no mention of the principle of mutual trust,[21] and based the infringement proceedings exclusively on Article 20 TFEU and Article 4(3) TEU. It is interesting to note that Advocate General Collins, in his opinion, did also not refer to the principle of mutual trust, and O’Neill underlines that the CJEU could have reached the conclusion that Malta had breached its obligation under EU law through its CBI program even without invoking the principle of mutual trust.[22]

According to other views, the judgment is more political in nature than based on sound legal reasoning; and this fact raises serious concerns for the future.[23] According to Kochenov, the Commission v Malta judgment abandons the liberal conception of citizenship as a protective status linking individual and state, one that carries a presumption against challenges premised on the lack of a ‘genuine link’.[24] Van den Brink puts it this way: ‘[…] the Court happily discards constitutional guardrails when political expediency so demands’.[25] The paucity of reasoning accentuates the ruling’s political tenor, conveying a risk that considerations of expediency might eclipse legal and constitutional guarantees.

Several strands of criticism have emerged. According to Kochenov, the judgment’s most notable feature is the marked brevity of its legal reasoning.[26] Several authors deem the reasoning not simply unconvincing,[27] but essentially lacking.[28] Peers, for his part, ventures that the arguments on offer would scarcely rise above a pass in an EU law examination.[29]

Yet, like O’Neill’s standpoint, the CJEU has its defenders. Spieker maintains that, despite reasoning that is at points ambiguous – indeed, almost cryptic – the judgment is a bold and genuinely groundbreaking step.[30] In his view, the ruling reinforces a republican conception of citizenship – one centred on active participation in the political community and the sharing of burdens. It thereby adds further substance to Union citizenship; it is not just a ‘legal ticket’ to the Union; it is a community bond and active membership, which cannot be squared with naturalization granted on financial grounds alone. Finally, Chamon sees the judgment as a necessary development of Union citizenship case-law: in his view, a decision to the contrary would have undermined the coherence of previous case-law, which is based on the fundamental status of Union citizenship and its central role in integration.[31]

As is apparent, critics approach the judgment from the vantage of the EU legal order and the CJEU’s role (as defined by the written law), whereas supporters start from the significance of Union citizenship and a commitment to the further development of EU law. There is no doubt that the CJEU’s landmark judgments often leave room for interpretation – one need only recall Ruiz Zambrano.[32] Nevertheless, I share the criticism that the judgment against Malta is not only incomplete and at points opaque in its reasoning but also comes close to acting ultra vires (if not crossing that line). In Weiler’s words, it is ‘an egregious exercise of jurisdictional creep and circumvention of constitutionally correct procedures’.[33]

Below, I examine the logically questionable premises and reasoning flaws that, in my view, led the CJEU to the wrong conclusion in finding that Malta infringed EU law in relation to the contested investor-citizenship program.

The backbone of the analysis is Chamon’s dilemma – or rather, trilemma – which the CJEU was bound to confront in its judgment. As Chamon (tellingly) frames it, the trilemma turns on three propositions: i) whether Union citizenship has real substance independent of Member State citizenship (meaningful EU citizenship), or whether it is merely symbolic; ii) whether Member States must unconditionally accept one another’s citizenship decisions; and iii) whether Member States can sovereignly decide on who their nationals are. The essence of the trilemma is that the three propositions cannot all be sustained at once. If Union citizenship has real substance and Member States must unconditionally recognize one another’s citizenship decisions, then naturalization cannot remain subject to unfettered Member State discretion. By the same token, unfettered Member State discretion presupposes that Union citizenship has no real substance distinct from Member State citizenship. The following examination looks at these three issues.

3.2.  The nature of EU citizenship: status and substance

One central question is whether Union citizenship has real, independent added value vis-à-vis Member State citizenship, or whether it remains largely symbolic. To answer this question (and ultimately to reinforce EU citizenship), the CJEU invokes the principle of mutual trust. Mutual trust is based on the assumption that, despite differences in national laws and procedures, Member States are equally committed to the common values and principles enshrined in Article 2 TEU, such as the rule of law, democracy, and respect for fundamental rights.[34] This trust ultimately forms the basis of the single market, the realization of which is embodied not only in the free movement of goods, people, services, and capital, but also in every other achievement of EU law, including Union citizenship itself.

The CJEU begins from the premise that Union citizenship is a fundamental status of Member State citizens, justified by its derivative nature – every Member State citizen is ipso iure a Union citizen – and by the wide range of rights it confers. Van den Brink calls this a ‘rhetorical device without a basis in EU law’:[35] the CJEU inflates a derivative status into a quasi-constitutional category to support a value-centred argument. The cornerstone of the argument is that Union citizenship is anchored in the Article 2 TEU values and in mutual trust, and this anchoring arguably entails a normative constraint: Member States must exercise their powers only in ways compatible with the nature of Union citizenship.[36] Put differently, while the CJEU leaves the ancillary nature of Union citizenship intact, it attributes autonomous legal status and substantive added value to Union citizenship, effectively placing it on at least equal footing with Member State citizenship. Framed by Chamon’s trilemma, if Member States enjoy sovereign discretion over citizenship conferrals and mutual recognition operates unconditionally, Union citizenship becomes, at most, a ‘fig leaf’[37] concealing a market-citizenship model.

In my view, it is difficult to speak of meaningful citizenship and rights while secondary law conditions free movement on strict financial means (having sufficient resources not to become a burden on the social assistance system of the host Member State).[38] In practice, the exercise of Union-citizenship rights depends on whether the individual is regarded as ‘economically valuable’ (or at least economically active). In the early stages of Union citizenship, the CJEU deliberately read the rights broadly. Today, however, the protection of Member States’ budgetary interests often takes precedence over giving full effect to free movement. Dano[39] exemplifies the shift: in the field of social assistance, equal treatment applies only to EU citizens whose residence fully complies with the conditions of Directive 2004/38/EC. While fiscal considerations are quite understandable, the resulting practice runs counter to the value-based account of ‘meaningful Union citizenship’[40] that the CJEU emphasized in Commission v Malta.

Paradoxically, the CJEU places particular emphasis on strengthening Union citizenship – even at the expense of Member State citizenship – yet in practice it applies this approach mainly to ‘economically valuable’ Union citizens[41] and consistently shifts full responsibility for vulnerable citizens back to their state of origin.[42] In light of this, it is particularly ironic that in Commission v Malta the CJEU behaves as if it has only just realized that the exercise of Union-citizenship rights in fact depends on meeting financial conditions – acceptable, it seems, when set at EU level, but not when a Member State expects them of a person seeking naturalization.[43] This is noteworthy insofar as applicants who can satisfy Malta’s financial thresholds would typically qualify as ‘economically valuable’ in EU-law terms; accordingly, it seems unlikely that, after naturalization, they would seek social benefits in another Member State.

In his study, O’Neill endorses the linking of the principle of Union citizenship to the principle of mutual trust from a different perspective by looking beyond the institution of Union citizenship and taking EU law as the basis of the argument. Endowing Article 2 TEU with quasi-normative content could further strengthen the enforcement of rule of law requirements before the CJEU, particularly in the context of infringement proceedings.[44] This remains true even if Article 2 TEU (like Commission v Malta) is not the exclusive legal basis for establishing an infringement, but merely an interpretive framework reinforcing it. According to O’Neill, this could ultimately lead to a situation where a lack of mutual trust toward a particular Member State could result in other Member States refusing to recognize that Member State’s measures.[45] While this approach may be acceptable in terms of international law (primarily based on the principle of reciprocity), in practice, this would result in other Member States imposing adverse legal consequences on a Member State without the express authorization of the CJEU or the EU legislature – consequences that would primarily affect the citizens of that Member State, i.e., a group of Union citizens. For this very reason, I agree with the approach of those authors who argue that the incorporation of the principle of mutual trust into the CJEU’s reasoning has no real legal significance but rather has a political nature.

3.3.  Mutual Recognition of Member State Citizenships

The case also raises the question of whether Member States must unconditionally accept citizenship granted by other Member States. The CJEU’s answer is plainly yes. In its view, conferring citizenship for financial consideration undermines the special bond of solidarity and good faith between a state and its nationals, and thus breaks mutual trust among Member States, given that others are obliged to recognize such status - even where it is acquired without any genuine link.[46] In other words, the CJEU affirms that the principle of mutual recognition continues to apply to Member State citizenship under EU law. In this view, it is precisely the mutual recognition of rules on the granting of citizenship that gives them their significance in EU law.

The reasoning of the judgment does not identify any specific EU-law provision as having been infringed. That is unsurprising, as in my view no such provision exists;[47] instead of identifying a specific provision, the CJEU rests its reasoning on value-oriented principles, notably sincere cooperation, solidarity, and mutual trust.

It contends that acquisition of citizenship brings the person into the Union’s community of solidarity, together with the rights and obligations associated with free movement, equality, and political participation, such that the ‘inflation’ of Union citizenship – by extending it to a wider set of persons – constitutes a violation of EU law. Accordingly, the ‘marketisation’ of citizenship in the absence of a genuine connection empties the foundation of that solidarity and is incompatible with the EU legal order. If this approach is correct, a further question arises: to what extent does the non-grant of citizenship – particularly in Member States that prohibit multiple citizenship – undermine the basis of solidarity? At a minimum, the judgment seems to invite the question whether it does not, in effect, imply an obligation to harmonize Member States’ citizenship laws. This question is particularly interesting in light of the fact that Member States’ citizenship regimes are considered, from the perspective of both EU law and public international law, to fall exclusively within the competence of the Member States – or can be considered as a part of internal affairs.

3.3.1.   A special relationship based on loyalty and good faith

As a first step, the CJEU anchors Union citizenship in the special relationship of solidarity and good faith that underpins Member State citizenship – no small conceptual feat.[48] Van den Brink considers this a textbook example of ‘selective’ reference to precedent: the transposition of earlier rulings from the CJEU’s case-law with a normative shift.[49] If a Member State plainly disregards this special relationship – for example by ‘selling’ citizenship – it breaches the principles of solidarity and sincere cooperation. The difficulty is that, whereas in the CJEU’s previous case-law the ‘special relationship’ functioned mainly as a justification for Member State restrictions (e.g. withdrawal of citizenship entailing loss of Union citizenship),[50] the judgment now recasts it as a binding standard – a positive obligation – governing all state action. Citizenship may be granted only in a manner consistent with Union values and the nature of Union citizenship. It will be interesting to see whether the CJEU carries this new approach into the traditional domain of the ‘special relationship’ – internal market law – thereby reworking milestones in some sixty years of EU jurisprudence. O’Neill sees the significance of the CJEU’s judgment precisely in this approach, namely that by taking the principle of mutual trust as its basis, it enables an even more consistent enforcement of the values stemming from EU law.[51] However, all of this can only be true if the CJEU applies it consistently and without exception to all Member States, including, above all, those Member States that traditionally carry significant political and economic weight within the EU.

At the same time, it must be recognized that, today, acquisition of citizenship by derivative means is often closely tied to the economic interests of one – and usually both – parties and presupposes an economic relationship between the state and the prospective national. It is hardly accidental that doctrinal writings describe acquisition of citizenship on an economic-interest basis, as distinct from ius sanguinis and ius soli, as ius pecuniae (‘the right of money’).[52]

Several Member States maintain citizenship regimes that allow the granting of citizenship to outstanding artists or even elite athletes.[53] One could say merit-based naturalizations are too few to ‘inflate’ Union citizenship. Even so, it is questionable whether solidarity and sincere cooperation sit easily with a Member State winning a world championship or Olympic title thanks to a naturalized star – perhaps occasionally at the expense of another Member State. Does it violate the principle of mutual trust for a Member State to make such individual decisions in an area of importance to it that advance its own interests to the detriment of other Member States?

But one may also consider acquisition by descent (ius sanguinis): descendants of European emigrants who have never lived in the Union and who, apart from historical and familial ties, have no real connection to the Member State concerned, nevertheless enjoy full Union-citizenship rights under the Treaties.[54] For example, well over a million persons in Latin America of Italian descent have acquired Italian citizenship jure sanguinis on the basis of remote ancestry, without ever having known the relevant ancestors. As Kochenov pointedly asks: are they ‘fake’ or ‘real’ EU citizens?[55] Is there, in their case, a genuine link with the state whose citizenship they hold?

Most Member States do not require actual physical presence as a condition for the grant of citizenship[56] – contrary to what the CJEU (erroneously) suggests in the case at hand.[57] Assuming, as the CJEU suggests, that physical presence constitutes an essential precondition of the special relationship of solidarity and good faith between a state and its nationals, what follows for citizenship grants made without that condition? In this regard, O’Neill argues that although citizenship granted under Malta’s CBI program was not contrary to EU law prior to the CJEU’s judgment (i.e., individuals acquired Maltese citizenship and, consequently, Union citizenship in good faith), one might still expect Malta to indicate in passports that certain Maltese citizens acquired Maltese citizenship through the investor citizenship program – which could ultimately result in the deprivation of the ability to exercise the rights and obligations arising from Union citizenship.[58] In my view, however, such a scenario would not reinforce the significance of the EU as a community of values, but would rather be a step toward the fragmentation of the EU’s single market.

It is worth mentioning here that, under the applicable rules of international law, the granting of citizenship is fundamentally a matter for the Member States,[59] which is only influenced by international law insofar as it follows from an express provision of an international treaty.[60] The Nottebohm case, cited several times in this study, did not question the existence of Nottebohm’s Liechtenstein citizenship. Rather, it concerned the effectiveness of that citizenship for the purpose of diplomatic protection – i.e. whether Guatemala had to accept it in that context. Even today, international law regulates the conferral of citizenship only in limited respects – most notably to prevent statelessness. EU law, however, still stands as ‘a new legal order of international law’, as the CJEU declared in Van Gend en Loos (1963).[61]

3.3.2.   The requirement of a genuine link

The question arises – raised by several authors in the legal literature – whether the international-law ‘genuine link’ requirement has been incorporated into EU law in the wake of the CJEU’s judgment.[62] The ‘genuineness’ of citizenship acquired on a commercial basis may be open to question in some cases. In this respect, the debate recalls elements of Nottebohm before the International Court of Justice (ICJ) – namely the concern with a thin personal connection to the conferring state – though the facts of Nottebohm were not simply a purchase of citizenship for money.[63]

However, under EU law, following Micheletti,[64] individual Member States are not entitled to take a position on the validity of citizenship granted by other Member States; they must recognize it without imposing a ‘genuine link’ requirement. In this respect, the CJEU expressly declined to import the Nottebohm approach from general international law. The CJEU appears cognizant of this and, prudently, avoids reliance on the ‘genuine link’ notion.[65] Thus, no positive test of ‘genuineness’ is laid down[66] – indeed, none could be. The decision does not entail an obligation on Member States to perform a classic genuine-link test in every naturalization case.

Nevertheless, in assessing the Maltese scheme the CJEU expressly criticizes the absence of any substantive inquiry into the existence and intensity of an applicant’s ties to Malta[67] – an approach that can read as if it were requiring the Member State to establish a ‘genuine link’.[68] However, this does not mean that the CJEU has overruled the Micheletti decision.[69] The likely reason is that Micheletti addresses only recognition by other Member States, not the substance of the conferring state’s decision. In other words, it precludes host-state review but does not prescribe how a Member State must decide whom to naturalize. Given that, under EU law, the validity of Maltese citizenship acquired through investment cannot be called into question, the European Commission could only proceed in its infringement proceedings against Malta on the basis that Malta’s citizenship rules breached the principle of sincere cooperation.

The CJEU took a similar course when, in Van den Brink’s words, it freed itself from the Nottebohm argument trap, grounding its judgment not in the international-law notion of a ‘genuine link’ but in internal EU principles such as sincere cooperation and mutual trust.

It should therefore be emphasized that Commission v Malta was not handed down in opposition to Micheletti. Rather, the CJEU intervened at a different level: by imposing a kind of negative minimum requirement, it prevents a Member State from emptying the concept of Member State citizenship (and thus Union citizenship) of its content, while mutual recognition between Member States remains intact. In summary, the decision does not, on the CJEU’s own approach, introduce a positive requirement of a classic ‘genuine link’. Rather, it articulates a negative minimum standard: regardless of how a Member State defines its ‘special relationship’ with its nationals, it may not undermine the EU values enshrined in Article 2 TEU.

3.3.3.   Mutual trust

As noted, mutual recognition of citizenship – grounded in mutual trust – is a precondition for the effective enforcement of free movement. Since investor citizenship can, by its very nature, erode that trust, it jeopardizes the Union’s objectives and is contrary to EU law.[70] However, as Van den Brink rightly notes, mutual trust and the ‘bond of solidarity’ do not necessarily ‘correlate’.[71] If, for example, certain Member States objected that a significant proportion of Moldovan citizens were acquiring Romanian citizenship through a simplified procedure, would that, in itself, constitute a breach of EU law by Romania? Is it acceptable that the legality of Member State citizenship rules should hinge on other Member States’ subjective assessments of ‘trust’? Hardly: that would plainly conflict with the principle in Micheletti that Member States may not review one another’s citizenship decisions. If this is right, the reference to ‘mutual trust’ arguably functions as a proxy for excluding investor models, reflecting the lack of stronger, normatively anchored arguments. If we did not proceed in this way, all decisions on citizenship rules in the Member States – including cases of original acquisition – would have to be taken in accordance with EU law.

On Chamon’s account, the Treaties’ silence does not per se preclude Member States from, at least in theory, examining whether another Member State’s naturalization practices accord with the ‘civic ethos’ of Union citizenship. This approach seems difficult to reconcile with the principle of conferral (Article 5(2) of the Treaty on the European Union (TEU)) and the treaty-based nature of the Union’s legal order: EU law operates only within the limits of the competences conferred by the Treaties, while all remaining powers are retained by the Member States. As noted in this study, Declaration No 2 annexed to the Maastricht Treaty indicates the very opposite intention on the part of the Member States. Accepting that Member States’ naturalization practices are open to question would require a rethinking of Micheletti and – more troublingly – could pave the way for case-by-case, or even differentiated, denial of recognition of citizenship, for example based on economic activity.[72]

On the practical side, the pertinent question is what evidence exists that the investor program has undermined mutual trust. To our knowledge, no Member State has refused – nor threatened to refuse – recognition of Maltese passports. Accordingly, the asserted ‘loss of confidence’ remains speculative rather than substantiated.[73] In EU law, recourse to such hypotheticals as a sufficient ground has been recognized mostly in the field of environmental law, under the precautionary principle.

3.4.  Division of competences

On Chamon’s ‘trilemma’, if Member States mutually recognize one another’s citizenship decisions – as they do –[74] and if Union citizenship is to have real substance, Member States cannot retain completely autonomous control over who qualifies as a national and thus as a Union citizen. Horizontal recognition between Member States can remain unconditional precisely because Member States may place vertical trust in the EU institutions to ensure that all Member States respect certain minimum requirements when conferring citizenship. Although this idea is in line with the Maastricht vision of political union and with the value-based conception of Union citizenship under Article 2 TEU, it sits uneasily with Declaration No 2 to the Maastricht Treaty,[75] the Edinburgh Decision and Article 20 itself.[76] This brings us to the judgment’s central issue: the division of competences. The CJEU reaffirms Micheletti and Rottmann, namely that ‘[…] while it is for each Member State, having due regard to international law, to lay down the conditions for the grant and loss of the nationality of a Member State, those powers must be exercised having due regard to EU law’.[77]

However, the Treaties impose no EU-level restriction on Member States’ right to determine citizenship. Indeed, as noted, Declaration No 2 annexed to the Maastricht Treaty and the Edinburgh Decision make clear that the determination of Member State citizenship lies entirely within national competence. In Peers’ words, the CJEU is ‘reframing reality’ – a kind of ‘judicial gaslighting’: it treats the Treaties’ silence as leaving room for EU legal control, notwithstanding the principle of conferral and, in this instance, the contrary indications in the instruments annexed to the Treaties.[78] Thus, without an explicit Treaty mandate – and indeed contrary to the reading that follows from documents reflecting the Member States’ intentions – the CJEU expands EU law, without legal basis, to the acquisition of Member State citizenship.

It grounds its reasoning in Article 20 of the Treaty on the Functioning of the European Union (TFEU) (Union citizenship), Article 4(3) TEU (sincere cooperation) and a ‘pre-emptive’ reading of the primacy of EU law – under which primacy operates not only at the point of application, in cases of conflict between EU and national law, but also ex ante, precluding the valid adoption of national norms that run counter to EU law. In my view, this interpretation cannot be reinforced by invoking the principle of mutual trust, because the argument itself appears to be contra legem in that it does not simply concern an area on which EU law (and the Member States) are silent, but rather an area regarding which the Member States have expressly stated their legal position.

However, it is important to note that the principle of the primacy of EU law is merely a means of giving effect to EU law: in the event of a conflict with national law, it ensures that EU law prevails. Primacy does not determine the material scope or content of EU law – that is, it does not decide whether EU law applies to the acquisition of Member State citizenship and, if so, what restrictions it imposes. Primacy can therefore be invoked only where EU law is applicable – which is precisely what is in dispute. Put differently, the principle of primacy can operate only in fields where EU law exists (or at least could exist). Where EU law is excluded, primacy is conceptually beside the point.

In Rottmann which concerned withdrawal of citizenship,[79] the CJEU did indeed confirm that Member States’ powers to withdraw citizenship cannot be unlimited. Where such decisions affect rights protected by EU law[80] – most notably through loss of Union citizenship – they are subject to review under EU law, including proportionality.[81] This is because the decision affects a status of Union citizenship that is necessarily already governed by EU law. Consequently, following Rottmann, the case-law on loss of citizenship[82] generally leaves Member States a wide margin of discretion in withdrawing citizenship, but within strict limits: the deprivation must pursue a legitimate aim (e.g. serious crime, prolonged absence, situations linked to dual citizenship), comply with the principle of proportionality, and respect procedural safeguards.

In my view, there is a significant difference between the grant and the withdrawal of citizenship: the latter typically carries serious, adverse consequences for the individual, whereas the former does not. Except for original acquisition (and measures to avoid statelessness), acquisition of citizenship is not a ‘right’ but rests on the state’s discretion; individuals cannot claim it as an entitlement. For this reason, decisions on citizenship have traditionally fallen outside the scope of judicial review. At the same time, international law recognizes several guarantee-type rules concerning loss of citizenship (including the prohibition of arbitrary deprivation), in relation to which violations of fundamental human rights may arise. This helps explain why the CJEU has shifted away from its earlier, more liberal, individual-centred, rights-protective approach to citizenship.

In the withdrawal cases (Rottmann, Tjebbes),[83] the CJEU has consistently examined the individual consequences of losing Union citizenship, particularly for free movement, while adopting a distinctly light-touch approach to the review of withdrawal decisions. By contrast, Commission v Malta does not centre on the applicant’s situation in the acquisition context – somewhat at odds with the ‘fundamental status’ narrative – but instead emphasizes the impact on the Union as a whole. However, the objective – political integration – cannot be pursued through Union citizenship as a justification for the means. The CJEU cannot intrude into an area of exclusive Member State competence merely to recast Union citizenship as a political status in the name of Euro-federalism – not even out of concern that Malta’s practice could be emulated elsewhere, triggering a ‘race to the bottom’ and, in the long term, diluting Union citizenship. Nor can this approach be justified by invoking the principle of mutual trust, as that principle can only be applied within the framework of EU law and cannot serve to extend the scope of EU law.

Overall, for this very reason, the Commission v Malta judgment can be viewed much more as a kind of ‘reverse Luxembourg compromise’ than as a judgment based on specific legal provisions. The conflict that emerged in the 1960s between France (President De Gaulle) and the European Communities regarding Member State contributions (which was driven by federalist aspirations opposed by De Gaulle) led to France temporarily withdrawing its representatives from Community institutions by adopting the so-called ‘empty chairs’ policy, thereby paralyzing the functioning of the Communities’ institutions. The Luxembourg compromise resolved the deadlock. The essence of the compromise is that in cases where the founding treaties prescribed majority decision-making but the decision conflicts with a Member State’s fundamental national interest, the decision is postponed until an agreement is reached through negotiations. With the Commission v Malta judgment, the situation essentially reverses: the Maltese CBI program infringes upon the fundamental interests of the EU, and the Commission – with the support of the CJEU – seeks to enforce political objectives of the EU’s institutional and legal system that deviate from the text of the Treaties, disregarding legal limits. In other words, although in this specific case the matter falls within the exclusive competence of the Member State under the founding Treaties, EU interests may nevertheless override the requirements arising from substantive law.

3.5.  Practical implications

Of course, the judgment raises practical as well as theoretical questions – above all concerning its temporal scope. As a rule, CJEU judgments take effect ex tunc, which prompts the question whether citizenship already granted must be withdrawn following a finding of infringement. In some cases, this could even risk statelessness – an irony, given that the judgment purports to safeguard ‘solidarity and mutual trust’. It is beyond doubt that Malta might have requested a limitation of temporal effect; nevertheless, a court acting with appropriate diligence should, in my view, have addressed that matter ex officio. At the very least, it is contestable whether Malta discharges its obligations by leaving existing grants of citizenship undisturbed and legislating solely for the future. Furthermore, if Malta were to adopt a requirement evidencing a link between the state and its (future) nationals, it remains uncertain whether the CJEU could scrutinize that measure – e.g. via infringement proceedings – or whether EU law merely insists upon the existence of such a requirement.

Although no one has yet been deprived of Maltese citizenship acquired by naturalization,[84] if that were to occur, it would at least raise the question of reverse vertical direct effect: may the consequences of a Member State’s EU-law-infringing rules be visited upon an individual who, in good faith, applied for Maltese citizenship in reliance on the rules then in force? The revocation of a grant of citizenship that fully complied with the rules in force at the time of acquisition could, in certain cases, raise concerns of arbitrary deprivation of citizenship. Moreover, if the individuals concerned fell within the scope of EU law solely by virtue of their Maltese citizenship, the question arises whether, upon revocation, the EU-law requirements identified in Rottmann, Tjebbes and JY apply to that decision – particularly the proportionality assessment and related procedural safeguards.

The foregoing questions are legal; there is also a practical dilemma of identification. How are the Maltese citizens concerned to be identified, given that their passports are not, after all, gold-coloured? Peers’ ironic suggestion – that ‘one could profile Maltese citizens wearing the biggest Rolexes and arriving with young escorts’ – is as apposite as satire, but provides no real solution.[85] O’Neill also raises the possibility of adding a note to Maltese official documents indicating whether the person in question has obtained citizenship through investment.[86] However, this would necessarily lead to the requirement to indicate all citizenship decisions beyond cases of ius sanguinis and ius soli, and would fundamentally undermine the principles of mutual recognition and mutual trust emphasized by the CJEU, thereby excluding certain Member State nationals from the possibility of enjoying the rights arising from Union citizenship.

Finally, the tenor of the judgment plainly signals a rejection of the commercialization of Union citizenship: the CJEU rejects ‘citizenship for sale’, i.e. the commodification of Union citizenship. At the same time, it leaves one avenue open: an ‘investor’ scheme linked to genuine settlement requirements (actual residence, local ties, elements of integration) may, in principle, be compatible with EU law.

However, the CJEU did not specify what counts as ‘sufficient ties’: how long a stay in Malta – months, years – would avert an infringement. Nor is it clear which integration factors (social or economic) would evidence genuine ties. Finally, if Union citizenship is a ‘value’ rather than a commodity, it remains unclear how distinctions among Union citizens who possess that value can be reconciled with making certain Union-citizenship rights conditional upon an individual’s economic activity.

4.   Conclusion

It is indisputable that Malta’s ‘golden passport’ scheme carries risks – particularly as regards money laundering, tax evasion, corruption, and national security – which it is for each state to mitigate. At the same time, the solution adopted by the CJEU exceeded the division of competences between the Member States and the Union: a clear ultra vires step that even concerns about ‘constitutional (judicial) passivity’ cannot excuse. In this context, it is also significant that, although the Member States are in law equal, in practice some are at times ‘more equal’ than others. It is scarcely coincidental that the Commission brought infringement proceedings against a ‘small’ Member State on a point it disputed without a clear legal basis in EU law – perhaps mindful of the German Constitutional Court’s ultra vires decision.[87] These concerns are reinforced by the judgment’s failure to substantiate the infringement with coherent legal reasoning: the analysis is predominantly political and largely circular. The CJEU first offers a descriptive account of Member State citizenship (loyalty, solidarity, good faith), then elevates it to a normative standard on which it subsequently bases the finding of infringement. The principle of sincere cooperation and the political claim that naturalized citizens enjoy the same rights as other citizens (and Union citizens) are, within a model of integration through law, insufficient: while true, they point to no concrete course of action. Given that harmonized EU-level regulation of naturalization is unlikely in the foreseeable future, a realistic prospect is that the CJEU will shape the rules incrementally through activist adjudication. The core difficulty lies in the precedent it sets. If generalized, the principles articulated could enable infringement proceedings against any Member State whose citizenship regime is deemed – by the Commission and endorsed by the CJEU – to unjustifiably restrict the essence of Union citizenship or contravene Union values. Moreover, based on the principle of mutual trust, any measure by a Member State may give rise to a potential infringement, subject to the Commission’s discretionary assessment – as O’Neill also points out in his study.[88] However, I am convinced that this should be viewed as a danger rather than a great opportunity.

Read this way, the judgment approximates a reverse ‘Luxembourg compromise’, permitting, where EU political interests prevail, an overstepping of the Treaties’ division of competences.