ClientEarth wins first-ever NGO challenge against the European Investment Bank

 Legal analysis by Sebastian Bechtel, Environmental Democracy Lead

Joined Cases C‑212/21 P and C‑223/21 P, EIB and Commission v ClientEarth

The European Investment Bank (EIB) is the world’s largest multilateral lender and the biggest provider of climate finance, having proclaimed itself the EU’s Climate Bank. Being such a crucial actor in the fight against climate change, it is of central importance that civil society is able to scrutinize its actions.

In a first-ever legal challenge by an NGO (ClientEarth) against the EIB, on 6 July 2023 the Court of Justice confirmed that NGOs can request the EIB to review its financing decisions where they breach environmental laws and appeal to the Court of Justice, if the Bank fails to do so. The judgement is a great win for accountability but leaves some open questions regarding the exact delimitation of the Court’s jurisdiction.

Background

In April 2018, the EIB decided to grant a EUR 60 million loan to finance the construction of a biomass power generation plant in Curtis (Galicia, Spain). In August 2018, we (ClientEarth) sent a request for internal review under the Aarhus Regulation (1367/2006) to the EIB asking it to reconsider this decision. We argued that the Bank’s decision contravened environmental law for various reasons (see the request here).

The EIB rejected the request as inadmissible on the ground that the decision of the EIB Board of Directors to approve the loan was not an act that could be the subject of an internal review request under the Aarhus Regulation. In January 2019, we challenged that inadmissibility decision before the EU General Court. In January 2021, the General Court decided in our favour, annulling the EIB’s decision. However, both the EIB and the Commission appealed to the Court of Justice of the EU.

The judgement

On appeal, the EIB and the Commission raised 4 grounds, all of which were ultimately rejected by the Court. The Court confirmed that the decision of the EIB Board of Directors to approve the loan is a challengeable act under the Aarhus Regulation, having legally binding and external effects and being adopted under environmental law. The Court further confirmed that the Aarhus Regulation must be interpreted consistently with the Aarhus Convention and that nothing in the Convention suggests that the EIB’s decisions should be exempt from review.

Finally, the Court examined on its own motion whether Art. 271(c) TFEU prevented it from having jurisdiction in this dispute, due to the fact that the EIB and the Commission had failed to argue this point in the first instance proceedings. Essentially, Art. 271(c) TFEU limits the jurisdiction of the Court, so that it may only hear actions against the decisions of the EIB Board of Directors that have been brought by the Member States and the Commission to protect their own procedural rights under the EIB Statute. The Court held that this provision did not exclude jurisdiction in the present case, which concerned only the admissibility of the internal review request. However, the Court concurred with the Advocate General that it bars “indirectly review[ing] the merits” of an EIB Board of Directors’ decision.

Comment

The judgement brings much helpful clarity regarding the interpretation of the Aarhus Regulation. It clarifies that the same acts are considered “legally binding” for the Aarhus Regulation as for a direct action to the CJEU. And, perhaps most importantly, that not only contraventions of EU legislative acts but also of other regulatory acts of general application can be challenged. In relation to the EIB, this means that contraventions of internal rules from which the EIB cannot depart without justification, such as the EIB’s Statement on Environmental and Social Principles and Standards or its climate strategy, can be the subject of an internal review request. This may also be relevant for other EU institutions or bodies, for instance when the Commission adopts guidelines that bind itself, such as in the state aid context (note though that state aid decisions are currently still excluded from internal review, more on that here).

However, Art. 271(c) TFEU is bound to create a different standard of review in cases against the EIB, as opposed to internal reviews directed against other EU institutions and bodies. In cases against, for example, the European Commission, the Court has shown willingness to review the merits of decisions that are indirectly challenged by way of an internal review requests (see for example the Court’s assessment in Case T-108/17 ClientEarth vs Commission). While the Court left no doubt that the EIB is required to reply to requests for internal review, it would appear that the Court would give more deference to the EIB’s discretion to determine the merits of its financing decisions.

It will therefore be on the judges in a future case to determine the appropriate balance to be struck between Art. 271(c) TFEU on the one hand, and the rule of law (Art. 2 TEU) and effective judicial protection (Art. 19(1) TEU., Art. 47 Charter of Fundamental Rights) on the other, because neither a right without judicial protection, nor an institution without judicial oversight, may exist in a democratic society.