The Environmental Policy of the European Investment Bank: A Short Legal Survey

Luigi La Marca
Visiting Fellow, St. Antony's College, University of Oxford

Introductory Remarks
The European Investment Bank (EIB), the financial body of the European Union (EU), was created in 1957 by the Treaty of Rome instituting the European Economic Community. The EIB Statute, which forms an integral part of that treaty, contains many provisions linking its banking activity and its institutional mission to the policies of the EU. Differently from many other major international financial institutions, which provide finance only to projects situated in the territory of the members countries of the organization, the EIB grants loans for projects situated also outside the territory of the Members States participant to its capital. However, the greatest part of its lending is devoted to projects situated in the territories of its member states. This because of the special mission which has been conferred to the EIB which relates essentially to the historical function of institutional banking instrument of the European Community devoted to the development of its less favored regions. EIB members are exclusively (and compulsorily) the Member States of the European Community, which participate to its capital proportionally to the size of their national economy, although these percentages are weighted by some political factors.

The EIB enjoys a full financial autonomy in its operational activity. See Judgement of Mar. 3, 1988, case 85-86, Commission v. Board of Governors of the EIB, ECR p. 1281. Nevertheless, its scope of finance and lending targets are strictly connected with the overall policy decisions and orientations fixed by the European Community. The EIB has been granted by the EC Treaty the legal personality. See Article 266 of the EC Treaty. It has however been questioned by some scholars whether it enjoys a full international legal personality and which are the limits of its international legal capacity. The signature of loan contracts, which in the case of the EIB are not considered international agreements and are normally subject to the (private and/or commercial) law of a Member State, implements its lending activity. This legal policy, whose origin can be found in article 29 of the EIB Statute (the EIB Statute provides that "disputes between the Bank on one hand, and its creditors, debtors or any other person on the other, shall be decided by the competent national court, save where jurisdiction has been conferred on the Court of Justice"), has been in force since the beginning of its activity, which was at that time dedicated exclusively to the financing of projects located within the EC territory and, to a great extent, was the result of institutional legal constraints. This policy has also been successively followed for the lending activity for projects situated in non-EC countries and it has had, as well as it still has, many influences in the definition and in the implementation of its environmental policy.

One of the main particular features of the legal environment in which the EIB is placed and that characterizes the way by which it performs its lending activity in the various fields and sectors of the economy, is its full integration in the EU legal order. See Judgments of June 14, 1976, case 110/75, Mills v. EIB, ECR p. 955; case 85/86, Commission v. Board of Governors of the EIB, cit.; case C-370/89, SGEEM, cit. This aspect constitutes the basic element of its lending policies and forms a limit to its interventions, which must conform to the prescriptions of EC law and implement on the financial side the more general policies established by the European Community. The belonging of the EIB to the institutional framework of the European Union is the true financial raison d'être of its lending and, at the same time, the justification of the added value put in its financing considered as the accomplishment of a task which has been assigned to it by the EC Treaty.

The Definition of the EIB Environmental Policy
The EIB environmental policy dates back to the early '80s. During this period it has been also adopted the fundamental document of its environmental policy: the decision of the Board of Governors of 1984 establishing in general terms the different policies of the EIB for the several sectors of intervention, among which the environment. See Doc. 84/4, CG/53/84 of June 4, 1984, p. 8. As the Board of Governors has issued no further document on this matter afterwards, one can assume that this decision still now remains the text of reference for the definition of the EIB environmental policy. The other documents and decisions, produced by other lower managing organs of the EIB (the Board of Directors and the Management Committee) or delivered by its services, can therefore only constitute an application of the principles set out in that original decision, cannot contradict its assertions and should be construed at the lights of its statements.

In addition to the general principles governing the hierarchy of legal documents within the EC, in the case of the EIB some additional rules are of application: they concern the distribution of competences among the different internal organs of the EIB. However, the importance of the further texts successively adopted by the EIB should not be underestimated. As the decision of the Board of Governors is drafted in a very general way, it leaves great room to more detailed and specific provisions. The risk of inconsistencies between the basic document of the EIB's environmental policy and the other texts issued by it during these last twenty years on environmental-related issues, as well as the possibility of contradictions with its established environmental operational practice, is moreover very limited, as the fundamental declaration contained in that document states the basic principle that the EIB should follow in its lending, as far as the environment is concerned: the full compliance of the projects financed by it with the law and the policies of the European Community.

This principle, which sounds quite obvious these days for anyone studying the nature and the role of the EIB, was not so evident at that time for many scholars and professionals relying upon the theory of the absolute independence of the EIB - conceived, more than a genuine Community body, as a separate international organization (with all the consequences that such idea could engender on the various operational aspects of the EIB's activity) even if belonging lato sensu to the Community family. See also the recent EIB Annual Press Conference of Feb. 7, 2002 and, in particular, the introductory remarks of EIB President Ph. Maystadt, available at www.eib.org. This principle deserves however, even today, a lot of precisions as it can be implemented in a great variety of ways, according (a) to the degree of integration with the European Community that one is ready to recognize in the case of the EIB, (b) the definition of what is in reality the environmental policy of the EC and (c) the binding character (for themselves and with regard to the EIB - the two aspects are not always identical) of certain policy documents and of the administrative practice of the European Community, in particular those of the EC Commission, concerning the environment.

Further to the Document issued in 1984 by the Board of Governors, some other basic texts concerning the EIB environmental policy have been issued afterwards and should retain a particular attention: the Environmental Policy Statement of 1996, the Environmental Guidelines of 1997, the Environmental Statement of 2001 and the Environmental Guidelines of 2001. The 1996 Environmental Policy Statement contains a brief summary of the different aspects of the EIB current practice in dealing with the environment. As it was explained in its preamble ("the substance is not new. […] What is new, however is a comprehensive public statement on the subject"), the purpose of that document is to provide general information in broad terms to the public.

Although this document has not been written to serve as an operational guideline, it contains, however, a lot of indications on the internal procedure concerning the environment and constitutes, also for the EIB's internal services, a clear framework of easy and quick reference for the everyday work of the staff about the EIB environmental policy. The Environmental Guidelines, a document mainly conceived to serve as an internal instruction for the EIB's technical department in assessing the environmental aspects of projects, complete the EIB efforts of mid '90s to dispose of a full set of documents on its environmental policy. The Environmental Policy document of 2001 and the Environmental Guideline of 2001 are an update of the corresponding documents issued in1996/97 that take into account the developments of the EU environmental legislation and establish the basis for a closer coordination between the EIB evaluation process and the EC institutional framework.

The Content of the EIB Environmental Policy
The term "environmental policy" of the EIB has, like for any other international financial institution, two basic meanings. The first relates to the lending policy of the EIB in favor of projects contributing specifically to the protection or the improvement of the environment or to the reduction of the negative impact on it of some industrial or infrastructure factors. In this first meaning, the environmental policy sets out the scope of certain priority criteria of intervention in the lending activity of the EIB. The principal legal questions that the EIB had to face in the definition of its environmental policy were (a) the identification of an adequate legal basis for the interventions of the EIB in this sector, (b) the consistency of the EIB policy with the Community policies on the environment and (c) the definition of what can be considered an "environmental" project that could justify this special EIB environmental lending. See Points 4, 5, 9, 10, and 24 to 27 of the 1996 Environmental Statement. Although all these issues have been discussed in the EIB Environmental statements, it has been pointed out by some scholars (See J. R. Salter, Environmental Assessment Law and the Role of the Development Banks, EUR. ENVT.L L. REV., 1995, p. 175; T. Gutner, Banking on the Environment: Multilateral Development Banks and Environmental Performance in Central and Eastern Europe, Boston, 2002) and by a certain number of NGOs (See the latest statements issued by some NGOs at the London meeting organized by the EIB on Nov. 23, 2001, "European Investment Bank: Necessary Areas of Reform" and that issued for the campaign "No Reform - No Money," both available at www.bankwatch.org, for the aspects concerning the environmental policy of the EIB) that the answers provided by the EIB are not always adequate to address completely and in a full satisfactory manner the matter, if compared, for example, to the more extensive efforts deployed by major international finance organizations, like the World Bank and, even if in a less courageous way, the EBRD in the conception of full range and systematic environmental policy able to provide clear environmental indicators.

Notwithstanding these external comments, it is important to recall that EIB environmental lending is directly linked to the definition of the EC environmental policy and, at the same time, must remain within the limits of the statutory provisions of the EIB and in the wider framework of the EC treaty. The rather limited roles played by the EIB in definition of the projects financed by it, if compared to the greater power of intervention in the identification and description of the projects applied by the World Bank and, to a lesser extent, by the EBRD, can be in fact explained as the consequence of the institutional place of the EIB within the EC legal order and of its submission to the system of liabilities and possible legal challenges before the EC Court of Justice which characterize the legal framework of its financial activity. This judicial control, from which are, on the contrary, totally exempted the World Bank and the EBRD, constitutes a peculiar element of the EIB's specific legal nature and of its statutory mission. As a matter of fact, the EIB environmental lending in the recent years has experienced a spectacular growth and the environment is a sector for which the official lending programs of the EIB dedicate a particular commitment for the next years. See EIB's Corporate Operational Plan for 2002-2004, available at www.eib.org.

The second meaning of "environmental policy" relates to its horizontal (or, better, transversal) application. It denotes in general the ability of a project, whose eligibility for the EIB financing can be the environment, but which could be also based on other criteria like the regional development or the external EC cooperation and/or development policy, to satisfy some environmental minimum standards and therefore to be acceptable for the EIB financing from an environmental point of view. This aspect of the EIB environmental policy is as well strictly connected with the developments of the EC environmental legislation and with the limits of its geographical application outside the EC. In particular, the EIB bases its evaluations of the projects from the environmental point of view on the existing EC legislation and, to a more limited extent, on the national environmental legislation. In the EC Member States financing the role of the national legislation is of course a complementary one. Based on the doctrine of the superiority of EC law on the national laws, the application of EC law cannot in any event be put in question by any contrary rule enacted at national level. The Member States legislation, at national, regional or municipal level, can therefore only fill the gaps of the existing EC law in the environmental field and serve as an implementation tool of the EC law in that country.

As the international agreements concluded by the EC form an integral part of EC law, the international treaties and other equivalent instruments concluded by the EC on environmental matters constitute as well a full reference for the evaluation of the environmental acceptability of a project proposed for finance to the EIB in the EC Member States. This methodology applies as well to all projects located in the EC Accession Countries where the respect of the "Community acquis" in the environmental field is deemed an essential part of the acceptability of the project by the EIB. A slightly different approach is followed in the case of project situated in non-EC countries. The rather problematic question of the application of EC law outside the EU brings the EIB to a more balanced approach in the evaluation of the environmental aspects of a project situated in a non-EC Member State. Although some environmental acceptability limits of objective nature remain unaltered in the EIB's evaluation of these projects, some other requirements, in particular those of procedural or administrative nature usually applied in the EC, must therefore be adapted to the prevailing local conditions and take into account the specificities of the national legislation. In these cases, where projects are placed outside the geographical area of application of EC law and therefore deprived of enforcement tools provided by the EC treaty put at the disposal of the EC Commission under the supervision of the EC Court of Justice via the infringement procedure, "the ultimate sanction at the disposal of the EIB is to refuse a request of finance." See Ph. Maystadt, The Role and the Experience of the European Investment Bank in the Field of Environment, speech delivered to FIEC Conference on "A Europe building efficiently for the environment and employment," May 2000.

The External "Checks and Balances" in the Application of the EIB Environmental Policy
The main difference which characterizes the EIB from the other major international financial institutions is its belonging to the EC legal framework. This implies not only the existence of a specific EC environmental policy, which is binding for the operational activity of the EIB and for the definition of its own environmental policy, but also the application to its lending activity of a system of institutional balances and controls in conformity with the rules applicable to all the institutions and bodies of the European Communities. The participation of the EC Commission in the EIB procedure which leads to the decision of granting a loan - a two-fold participation which takes place (a) in the appointment of a member of the Board of directors and his alternate and (b) in the procedure of the opinion on the prospective loans foreseen by Article 21 of the Statute - is a typical example of how the EIB Statute has settled the issue of an EC institutional balance of the wide operational autonomy granted to the EIB. Article 21 of the EIB Statute plays a prominent role in the coordination of the day-to-day EIB environmental policy and practice with the EC environmental policy.

This article provides, inter alia, for an opinion to be delivered by the EC Commission to the EIB in relation to the financing of each project, prior to its submission to the Board of Directors for approval of the loan. This consultation mechanism creates a privileged dialog channel between the EC Commission and the EIB and permits a continuous exchange of information and points of view on some general environmental issues as well as some punctual interventions of the EC Commission in the environmental assessment of particular projects giving rise to specific concerns. The participation of the EC Commission in the Article 21 procedure, although highly appreciated and fundamental from an institutional perspective in the statutory design of the cooperation between the EC Commission and the EIB, remains, however, only an external support in the decision-making process of the EIB: an advice to be taken into account which could also have some legal consequences in the final decision of the EIB, but which cannot in any event replace the autonomous evaluation of the environmental aspects of the project and modify the decision structure of the EIB organs and their accountability for the finance decisions. The EC Treaty further provides for two additional systems of institutional control on the EIB: the jurisdiction of the EC Court of Justice and the intervention of the European Ombudsman.

The submission of the EIB to the jurisdiction of the EC Court of Justice is explicitly established in the EC treaty only for some specific kinds of institutional litigations pertaining to the relationships among its organs as well as between the EIB and the Commission or the Member States. However, Article 237 does not provide for the possibility that private parties could initiate a proceeding before the EC Court against the EIB based on this specific article. No clear provision is however contained in the EC treaty concerning the other actions (annulment, failure to act, damages, arbitration clause, staff relations) which could be also used in the case of the EIB. It is commonly accepted by the legal doctrine and confirmed by some judgements of the EC Court of Justice that these actions can be brought before the EC Court against the EIB, as a direct consequence of its belonging to the EC institutional legal system and in compliance with the fundamental principle of right to an effective remedy and a fair trial. See Article 47 of the Charter of Fundamental Rights of the European Union and the previous jurisprudence of the EC Court in judgement of Apr. 23, 1986, case 294/83, Les Verts, ECR p. 1339.

As far as the question of the environmental policy of the EIB is concerned, the most important kind of actions is certainly that for compensation of damages in case of non-contractual liability foreseen by Article 235 and by Article 288, second paragraph, of the EC Treaty. It is manifest that any intervention of the EIB in the definition, scope and structure of the projects financed by it must remain within the limits of its institutional competence and, more in general, pay full respect to the EC legality. It is as well of utmost importance that the separation of roles between the EIB and the promoter of the project would be assured along the entire life of the financial operation avoiding any confusion among the respective tasks and responsibilities to be assumed by the investor and by the lender in the implementation of their distinct activities. Any action undertaken by the EIB that should prove not to be in compliance with the above principles could therefore lead to its non-contractual liability, once damages would have been arisen as a direct consequence of its illegal behaviour. Any private person could be then entitled to suit the EIB before the EC Court for compensation of the damages suffered. This peculiarity - and the enormous financial risks involved in its activity - differentiates fundamentally the legal position of the EIB from those of the other major international development or financial organizations, which normally enjoy full immunity in accordance with the relevant provisions of their founding agreements, usually enacted in the form of international treaties. These specific characteristics of the EIB legal position explain why in its involvement in the financing of projects, while assuring their environmental acceptability, the EIB cannot assume, to certain extents, the role of a project manager imposing on the promoter modifications of the project structure or functions that are not strictly the direct consequence of the application of a rule of law binding upon it and within the limits of its institutional lending mission.

The European Ombudsman represents one of the most recent and innovative developments in the institutional structure of the European Community. According to Article 195 of the EC Treaty, the European Ombudsman is empowered to "conduct enquiries for which he finds grounds, either on his initiative or on the basis of complaints" concerning instances of maladministration in the activities of the Community institutions or bodies (with the exception of the Court of Justice and the Court of First Instance acting in their judicial role) submitted to him by any citizen of the European Union or any natural or legal person residing or having its registered office in a member state of the EU. The EIB is included among the Community bodies on which the European Ombudsman can exercise his power of enquiry. The competence of the European Ombudsman naturally covers the environmental aspects of the EIB lending activity. The European Ombudsman has already had some occasions to enquiry on EIB loans in order to ascertain whether the specific EIB internal procedures for evaluating the environmental acceptability of a project in view of its financing have been fully complied with in these cases.

The European Ombudsman constitutes, from an institutional point of view and in the framework of the external checks and balances on the EIB activity created by the EC treaty, a verification body to many extents similar to Inspection Panel established with the World Bank. The correspondence between the European Ombudsman and the Inspection Panel in the control of the environmental lending of these two international finance institutions cannot however pushed too far: the wider scope of inquiry and the larger criteria for admissibility of complaints (and even the possibility to decide by his initiative to commence an enquiry) of the European Ombudsman, in comparison with the more limited investigation role allocated to the World Bank Inspection Panel, distinguish in fact the two bodies. The consequences of the inquiry of the European Ombudsman are as well different from those of the investigation of the Inspection Panel: as a part of a certain political control exercised by the European Parliament on the overall activity of the European Community, to which the EIB - notwithstanding its peculiarity and autonomy - belongs, the European Parliament can take some strong political measures in order to ensure that the findings of the European Ombudsman can receive from the EIB a consequent attention and a positive answer.

A non-institutional role in the overall system of checks and balances on the EIB is played as well by the activity of NGOs. Although it has experienced a rather difficult start, the dialogue between the NGOs and the EIB has seen in the recent years a tremendous improvement, both in the quality and in the quantity of contacts and exchange of information. The position of the EIB towards the NGOs is now that of considering these associations as important external civil and social partners with which the EIB is sincerely interested to promote a fruitful relation. However, these contacts do not seem, up to now, able to further upgrade and receive an institutional characterization: based on rules of Community law, the activity of the EIB and of its internal organs must follow strictly the criteria of allocation of competences provided by the EC Treaty and the EIB Statute and respect its internal institutional equilibrium. These principles have been therefore interpreted by the EIB as to impede any official or institutional involvement of the NGOs in its own decision-making process.

The EIB Information Policy on Environmental Matters
The last aspect of the environmental policy of the EIB concerns its Information Policy, in particular that concerning the environmental issues. The EIB's first, quite restrictive, Information Policy Statement dates from 1997. This document, now obsolete, is presently under revision in order to make the EIB Information Policy compatible with the provisions of the more generous EC Regulation 1049/2001 and the relevant case law of the EC Court of Justice, with the aim to produce a new Information Policy Document in line with the current legal and political trends now prevailing in the European Community. In the meantime, waiting for the approval by its internal organs of its new Information Policy Document, the EIB has decided, by interim measure, to apply to it, mutatis mutandis, the provisions of EC Regulation 1049/2001 on a case-by-case basis. Of course, the Information Policy of the EIB covers equally the environmental aspects of the EIB, even if, similarly to the case of other lending institutions, the production of own environmental documents is rather limited for the case of the EIB. The bulk of the environmental documentation kept by the EIB is in fact constituted by documents submitted by promoters of projects and other acts concerning environmental effects of prospective projects as building and operation studies, assessments and permits, usually issued or detained by national authorities.

Access of the public to these documents is generally allowed, by virtue of application of the Directive 90/313/EEC (and, once approved, by the proposal of new directive on public access to environmental information), directly to the national authorities, which have produced or hold them. Therefore the recourse to the EIB for getting the documents in question is redundant, at least for many cases, as these documents can normally and more easily be obtained by the interested public from the competent national authorities dealing with the environmental aspects of the projects. In this context the question of access to environmental information with regard to the possible application of the Aarhus Convention to the EIB deserves a particular mention. This international treaty at European level (in its lager geographical meaning), which has been signed but not yet ratified by many of the EC member states (at the present only Denmark and Italy, among the EC member states, have ratified the Aarhus Convention. The European Community has signed the Convention but not yet ratified it) and Accession Countries, would, in addition, facilitate the access of the public to environmental information in the countries parties to it.

The European Community, in the perspective of its ratification, is adopting the new proposal of directive on access to environmental information in order to fully comply with the provisions of the Aarhus Convention, in accordance with the competences assigned to it by the EC treaty in the field of the environment. This Convention, however, is not at present per se applicable to the institutions of the EC or to the EIB. In particular, the Aarhus Convention has not been yet ratified by all EC Member States and by the European Community: consequently, even if already entered into force for the countries that have already proceeded to its ratification, it is not a legal act binding upon the various components of the EC institutional system among which the EIB. Furthermore, it is manifest that the EIB does not enter in the scope of application of the Aarhus Convention as the latter concerns primarily the national authorities producing or detaining environmental information. As a matter of fact, the EIB is not comprised in the notion of public authorities, as defined in the Aarhus Convention, upon which the provisions of that Convention are binding and which have the duty to implement the relevant rules in their statutory activity. In any case, once the European Community will ratify the Aarhus Convention, its text will form an integrant part of Community law applicable in the EC member states, as well as it will constitute a binding legal act in the other European countries which would have ratified it. See Judgement of the EC Court of justice of June 16, 1998, case C-162/96, Racke, ECR p. I-3655. The EIB, as a part of its general commitment to full respect of the environmental legislation in its lending activity, will henceforth ensure that the promoters falling in the field of application of the Aarhus Convention would apply its provisions as far as the relevant projects are concerned.

Luigi La Marca is a Visiting Fellow, St. Antony's College, University of Oxford; Chief Counsel for EU Law matters, Legal Directorate, EIB. The views expressed in this article are the author's alone and do not necessarily reflect the official views of the EIB.