The Maltese 'Golden Passport' program, which allowed individuals to purchase European Union (EU) nationality for approximately 1 billion won, is expected to come to an end.
The European Court of Justice (ECJ) ruled on the 29th (local time) that the investment citizenship program operated by Malta violates EU law.
This decision effectively puts an end to the practice of granting citizenship solely based on capital investment, with repercussions expected for other countries that have operated similar programs.
In its ruling, the ECJ stated, "Granting EU citizenship solely based on an investment without substantial ties undermines the essence of EU citizenship," and ordered the Maltese government to stop the program immediately.
Anna Müller, the ECJ spokesperson, emphasized in a press release, "EU citizenship is not a commodity and cannot be the subject of a transaction."
This effectively marks the end of investment citizenship programs at the EU level.
The investment immigration program, known as the 'Golden Visa' or 'Golden Passport,' grants residency or citizenship to foreigners who invest a certain amount in the country.
It dates back to the 1980s, when the Pacific island nation of Tonga became the first in the world to start selling nationalities in 1983. Canada implemented its investment immigration program in 1986, targeting wealthy Hong Kong citizens uneasy ahead of the 1997 handover.
In the aftermath, investment immigration programs spread to southern European countries during the global financial crisis of 2008. Spain (2013), Portugal (2012), and Greece (2013) were typical examples of countries suffering from financial crises that granted residence permits (Golden Visas) to foreigners purchasing properties worth around 500,000 euros (approximately 740 million won). This was intended to attract foreign capital to stimulate the sluggish economy.
Recently, Malta took it a step further by operating the 'Individual Investment Programme (MIIP·MEIN)' from 2014, granting EU citizenship directly in exchange for a contribution of approximately 700,000 euros (approximately 1 billion won) to government funds and investment in real estate. This was nearly the only avenue to buy citizenship from an EU member state directly.
Christine Surak, an immigration expert at the London School of Economics (LSE), stated in an interview with the Financial Times that "the Malta program was an extremely attractive 'backdoor' for wealthy individuals worldwide who wanted to move freely within the European Schengen Area without a visa."
Currently, about 60 countries around the world operate similar investment immigration programs. Within the EU, countries like Cyprus, Bulgaria, Austria, the Czech Republic, Italy, and Hungary have introduced various forms of such systems. Investment requirements vary greatly, from 250,000 euros in Greece to $9.5 million (approximately 1.3 billion won) in Austria.
These countries have reaped significant economic benefits through the programs. Over the past decade, Portugal attracted about 5.8 billion euros (approximately 86 trillion won) through its Golden Visa program. During its peak, this amount accounted for 10% to 15% of all foreign direct investment (FDI) in Portugal, according to the Financial Times.
Greece issued over 13,000 EU visas by 2019 under a minimum investment condition of 250,000 euros, the lowest requirement in the EU. Of the funds raised through visa sales, 90% flowed into real estate investments. This influx of money led to a revival of the southern European real estate market, which was parched for capital.
However, serious side effects followed these sweet fruits. As foreign capital poured in, property prices soared in major cities of the countries operating investment immigration programs. Local residents found it difficult to cope with skyrocketing monthly rents, let alone buy their own homes.
In Spain, property prices in major cities such as Madrid, Barcelona, and Seville soared by an average of 20% between 2013 and 2019 due to the impact of the Golden Visa investments.
Concerns also persisted that investment immigration could be exploited as a channel for money laundering or crime. The international advocacy group Transparency International has continuously warned that "Golden Visa programs can become laundering routes for corrupt or illicit funds."
The European Commission also criticized the Maltese government for increasing risks of money laundering, tax evasion, and organized crime due to lax screening.
Sophie Intveld, a member of the European Parliament, told Reuters that "the Golden Visa is highly susceptible to being abused by Russian oligarchs or corrupt officials."
It was revealed by Al Jazeera's investigative report that Cyprus illegally granted citizenship to unqualified applicants in 2020. As this issue came to light, the Cypriot government abruptly abolished its investment immigration program.
The issue of wealthy foreign investors monopolizing upscale neighborhoods, exacerbating social discord and inequality with local residents, also emerged.
While foreign capital dominated the luxury real estate market in Malta, infrastructure investments in local roads and water supply systems in areas where they did not reside lagged, leading to growing discontent among local residents.
Amid successive side effects and EU pressure, European countries have hastily moved to scale back or abolish the programs.
The Spanish government announced earlier this month that it would terminate the Golden Visa program starting in April next year, citing housing market stabilization. Portugal significantly reduced its program by abolishing the real estate investment option last year. Ireland suspended its investment immigration program earlier this year.
Experts predict that enthusiasm for Golden Visas in Europe will wane following this ruling. However, they added that the demand for investment immigration programs in other countries outside Europe will remain for the time being.
Christine Surak, an LSE professor, stated, "While the Golden Visa era is coming to an end in Europe, it still thrives in regions like the Caribbean or the United Arab Emirates (UAE)." She added, "Some emerging countries like Malaysia or Turkey have recently lowered the barriers for attracting investment and are strengthening their systems."