Refining transparency and responsible investment?: The case of EIB and sustainable finance

By Chrysa Alexandraki


On 8 January 2019, an action was brought before the Court of Justice of the European Union (hereafter CJEU) by an environmental law charity, ClientEarth (hereafter applicant) against a multilateral development bank (hereafter MDB) and European institution, the European Investment Bank (hereafter EIB). The case concerns the financing by the bank of a biomass energy generating project in Northern Spain – Galicia -, of the cost of 60 million euros, followed by the bank’s refusal to refine its decision to finance the aforementioned investment, regardless the applicant’s request for an internal review of this decision on April 2018. The applicant bases the request for an internal review on alleged ‘errors in the assessment of the financing combined with the provision of minimal information regarding the funding decision’. The main claim brought by the applicant involves the annulment of EIB’s refusal to conduct an internal review and subject its decision to scrutiny, as requested under Article 10 of the Aarhus Regulation (hereafter Regulation), bringing into discussion implementation issues of both International and European law.

The Aarhus regulatory framework

The Aarhus Regulation derives its existence from the Aarhus Convention (hereafter Convention), being the main international legal instrument dealing with and regulating the access to information, public participation in decision-making and access to justice in environmental matters on an international scale. The Regulation’s main objective is to ‘contribute to the implementation of the obligations’ established under the Convention, on an EU level. Article 10 of the Regulation, which presents the main legal basis of the discussed case, embodies the right to request an internal review of administrative acts. In particular, Article 10 establishes the main criteria under which such a request may be submitted, as well as the form and procedure of the internal review, the latter being one of the remedies available to individuals for ensuring compliance with EU environmental law. More specifically, the applicability of Article 10(1) is contingent upon the following criteria:

  1. the request for an internal review is initiated and submitted by a non-governmental organization (hereafter NGO), in accordance with the criteria for entitlement set out under Article 11 of the Regulation,
  2. the internal review concerns an administrative act or omission,
  3. the administrative act or omission derives from a European institution or body and
  4. the administrative act is adopted under environmental law.

Moreover, Article 10(2) establishes an obligation to act for the European institution in question, that is to take into consideration and provide a written reply to any such request on a timely manner, notably that of 12 weeks, with the exception of those requests being ‘clearly unsubstantiated’. In cases of non-compliance, Article 12 of the Regulation provides for the initiation of legal proceedings before the CJEU, stipulating the NGO as the mere beneficiary.

EIB function and self-regulation

The need to reconcile economic activities with sustainability concerns has been highly outlined by the financial sector, while numerous efforts and progress has been made in integrating environmental and social standards into the policy of financial institutions, that being also the case for international financial institutions, such as the MDBs. Especially with regards to climate change, great burden has been placed in increasing transparency and accountability within the financial sector, given the vast amounts of financial resources that are constantly being invested in combatting climate change, as required under the Paris Agreement.

Turning to the MDBs’ decision-making process, it is their joint practice to adopt and implement environmental and social policies and concerns within their decision-making, aiming to ensure that their activities are conducted in an environmentally and socially sustainable manner. EIB constitutes one such example, acknowledging sustainability as one of the main drivers for the provision of finance, throughout all of its priority areas. Its main mission is to foster sustainable growth within the EU and abroad. As the main European development bank, EIB exercises sustainability due diligence within its strategy for financing projects. In particular, the bank applies environmental and social standards and principles during various phases, such as the appraisal of investment projects before approval, as well as the monitoring of the financed projects, in order to verify the environmental and social impact of such projects based on sustainability credentials. Only projects that satisfy both environmental and social standards pass the economic appraisal phase and are financed, while those not aligned with the EIB environmental and social standards are excluded.

Out of ten standards applied for the financing of investment projects, four of them are associated with environmental concerns, namely the (i) assessment and management of environmental impacts and risks, (ii) pollution prevention and abatement, (iii) biodiversity and ecosystems, and (iv) the climate, underscoring the entire life of an EIB financed project. The main core of these standards ensures an effective environmental management and reporting system reflecting the precautionary principle, the minimization and avoidance of pollution reflecting the pollution prevention principle, the promotion of the biodiversity protection integrated in the beneficiary’s activities, and the alignment with EU climate policy within the project cycle. With regards to the climate-related standards, these reflect obligations binding upon the bank, intermediaries and the project developer (hereafter promoter), including, amongst others, a carbon footprint calculation conducted by the bank, in accordance with the EIB project carbon footprint methodologies, as well as the provision of information on the emissions levels throughout the project cycle on behalf of the promoter. A common environmental approach is followed to all projects, where all of them are examined for their compliance with the EU law (including the EIA directive 2014/52/EU amending the EIA Directive 2011/92/EU), reflected in the bank’s environmental guidelines, throughout the planning and pre-appraisal phase, the appraisal and approval phase, and finally, the monitoring and evaluation phase.

Finally, EIB has in place a transparency policy that comprises guiding principles, such as openness, ensuring trust and safeguarding sensitive information, as well as willingness to listen and engage. These principles concern the publication of information, also including project information and environmental data related to project implementation, the disclosure of information upon request, providing for exemptions, as well as a complaints mechanism and the referral of complaints to the European Ombudsman.

Case law

The implementation of the Regulation does not come without interpretative ambiguities. In particular, the Regulation follows a rather restrictive and narrow interpretation of the concept of ‘administrative act’, limiting it by definition only to ‘measures of individual scope’, while excluding those measures taken under the Institution’s capacity as ‘an administrative review body’, in accordance with Article 2(2) of the Regulation. More conceptual ambiguities also exist concerning the broad definition of ‘environmental law’ under Article 2(1)(f) of the Regulation, the status of a NGO and that of a community institution or body, the legal status of the administrative act as legally binding following Article 2(1)(g) of the Regulation, as well as the interpretation of the ‘written reply’ under Article 10 of the Regulation in light of Article 263 of the Treaty of Function of the European Union.

The above-mentioned legal issues have concerned the CJEU in several cases resulting in the crystallization of a precedent. The most significant jurisprudence dealing with Article 10 of the Regulation concerns case T-338/08 Stichting Natuur en Milieu, Pesticide Action Network Europe v Commission (hereafter Stichting Natuur), as well as case T-12/17 Mellifera eV, Vereinigung für wesensgemäße Bienenhaltung v European Commission (hereafter Mellifera). Both cases dealt with actions brought by NGOs requesting CJEU to annul European Commission decisions, raised under Article 10 of the Regulation. The claims brought by the respective applicants focus on the interpretation of the definition of an administrative act as a ‘measure of individual scope’ under Article 10 and 2(1)(g) of the Regulation, as well as the illegality of Article 10 of the Regulation with Article 9(3) of the Convention.

More precisely, the Stichting Natuur case concerns an action for annulment before the General Court (hereafter GC) of a European Commission decision to reject the NGO’s request for internal review over a certain EU Regulation. The GC annulled the decision on the ground of incorrect implementation of Article 9(3) of the Convention by the Regulation. First, the GC held that the act in question did not qualify as an ‘administrative act’ as defined under Article 2(1)(g) of the Regulation due to its general scope (Stichting Natuur, paras 39, 48), and thus, Article 10(1) of the Regulation was not applicable in this case. Additionally, the GC examined the legality of Article 10(1) of the Regulation with Article 9(3) of the Convention (Stichting Natuur , para 50) outlining that the concluded international agreements are binding upon the EU (Stichting Natuur , para 51), invoking the Court’s case law on the examination of the validity of a provision of a regulation based on certain criteria (Stichting Natuur , para 53)[1], as well as concluding that the exemption of Article 2(2) of the Convention placed on ‘institutions acting in a judicial or legislative capacity’ is not applicable in the current case, since the European Commission did not act on a legislative capacity, but rather exercised its implementing powers (Stichting Natuur , paras 63, 65). Based on the above reasoning, the Court interpreted the validity of Article 10(1) of the Regulation in light of the Convention and concluded that Article 9(3) of the Convention cannot be interpreted as limiting its scope to measures of individual scope (Stichting Natuur, para 79).

The GC’s judgement in the Stichting Natuur case was jointly appealed by the Council and the European Commission under the joined cases C-404/12P and C-405/12P Council of the European Union and European Commission v Stichting Natuur en Milieu and Pesticide Action Network Europe (hereafter C-404/12P and C-405/12P), where the Court’s Grand Chamber overturned the GC’s ruling. The Court’s Grand Chamber pronounced the binding status of international agreements upon EU institutions, as well as the prevalence of international law over their acts (C-404/12P and C-405/12P, para 44). It did, however, insist to its jurisprudence that ‘the provisions of an international agreement to which the European Union is a party can be relied on in support of an action for annulment of an act of secondary EU legislation or an exception based on the illegality of such an act only where, first, the nature and the broad logic of that agreement do not preclude it and, secondly, those provisions appear, as regards their content, to be unconditional and sufficiently precise’ (C-404/12P and C-405/12P, paras 46-7). Given that these conditions were not met at the present case, the Court’s Grand Chamber dismissed the applicant’s action.

The Court also confirmed its jurisprudence in the Mellifera case, where the applicant asked the GC to annul a European Commission’s decision to justifiably reject the NGO’s request for an internal review of an EU regulation. First, the GC dismissed the applicant’s claim that the act in question qualified as an ‘administrative act’, as its scope was of a general nature. Second, the GC held that the duty of consistent interpretation of EU law with international agreements applies only to cases where the Regulation allows for such an interpretation, while the Court rejected the applicant’s argument regarding the direct effect of Article 9(3) of the Convention in the EU legal order (Mellifera, para 87).


The significance of the present case is reflected in a potential overturn of the Court’s jurisprudence regarding the interpretation of Article 10(1) in combination with Article 2(1)(g) of the Regulation. The narrow interpretation of the definition of ‘administrative act’ has heavily contributed so far to the dismissal of claims dealing with Articles 10 and 2(1)(g) of the Regulation. Indeed, such a turn could signify the use of international law to amend Union law with the objective of enforcing the Aarhus Convention. A shift in the CJEU case law could lead to a broader interpretation of what qualifies as an ‘administrative act’, without such an act being confined merely to measures of individual scope.

Moreover, a progressive interpretation of the Court could strengthen the role of civil society in the implementation of EU law, intensify stakeholder engagement, as well as contribute to potential changes to the EU legal order through the use of international law.

The most significant, however, contribution of the present case relates to the transparency policy and environmental standards implemented by development banks, such as EIB, during the project cycle. The progress in due diligence practices demonstrated so far by the financial actors is already considerable, while EIB is at the forefront of such developments, as one of the largest financiers of sustainable projects. However, the present case could significantly contribute to strengthening such policies, identifying potential legal and governance gaps, as well as pushing for adjustments and amendments to the related frameworks within the project cycle, aimed at the efficient allocation of the funds and the effective implementation of EU law in alignment with international law. Considering that EIB launched an energy lending public consultation, expressly after the action was submitted before the CJEU, a win for the applicant could raise public awareness and put pressure on banks to strengthen the engagement with stakeholders throughout their decision-making, while strengthening their transparency and environmental and social policies within their financing decisions.

To conclude, it is not the first time that an NGO seeks to address legal issues arising out of the Regulation and its interpretation in light of the Aarhus Convention. The CJEU has dealt in various occasions with claims associated with the application and interpretation of the Regulation, while the applicant has sought, before, to challenge the lack of transparency in the EU administration using alternative quasi-judicial means, such as the European Ombudsman. However, what is noteworthy is that the present case presents the first time that an NGO raises claims before the CJEU against EIB for breaching EU law, which could lead to a paradigm shift in the bank’s transparency framework, especially when it comes to environmental considerations. Such a shift could prove to be a challenging and ambitious task, especially considering the culture of secrecy traditionally demonstrated by the bank, backed by the partly justified reluctance to the emergence of precedent over disputes concerning the bank.  The main question and novelty of the present case, however, lies with whether the Court could influence and play a significant role in shaping EIB’s institutional policies, while paving the way to a more transparent and less secretive lending decision-making process, by addressing EU law infringements and going beyond a restrictive EU law interpretation.

[1]According to case-law, the Courts of the European Union may examine the validity of a provision of a regulation in the light of an international treaty only where the nature and the broad logic of the latter do not preclude this and where, in addition, the provisions of that treaty appear, as regards their content, to be unconditional and sufficiently precise’.