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The European Court of Justice has ruled that Malta’s “golden passport” scheme violates EU law, in a decision set to force the island to scrap the commercialisation of EU citizenship.

“A Member State cannot grant its nationality — and indeed European citizenship — in exchange for pre-determined payments or investments, as this essentially amounts to rendering the acquisition of nationality a mere commercial transaction,” the court said.

The European Commission had referred Malta to the bloc’s top court in 2023 over its citizenship-for-investment scheme, arguing that the sale of EU passports undermined “the essence of EU citizenship”, which relies on mutual trust between the member states.

The Maltese scheme has implications for the entire bloc, as people who acquire Maltese citizenship enjoy the right to live and work anywhere in the bloc, and to vote in EU elections.

Cyprus and Bulgaria have abolished their paid-for citizenship schemes under pressure from Brussels, which has argued that such schemes pose risks of corruption, money laundering and tax evasion.

Malta overhauled its scheme in 2020, and the Maltese government says it has tightened due diligence requirements for applicants. People purchasing a Maltese passport have to make a one-off investment of at least €600,000, either purchase or rent a property, donate €10,000 to charity and live in the country for three years.

The residency requirement can be reduced to a single year for people investing €750,000.

An analysis by the Financial Times revealed that 16 people who received Maltese passports were politically exposed individuals, or were later subject to sanctions or convicted of crimes.

The commission had argued that the fact that only “legal residence” is required to receive a Maltese passport meant that the scheme was “incapable of creating a genuine link between the Republic of Malta and an applicant for citizenship”, according to a summary by the advocate general in a preliminary opinion on the case.

The court ruled that “by establishing and operating an institutionalised citizenship investment scheme”, Malta had “failed to fulfil its obligations” under the EU treaties.