HEI NRI CH BOELL FOUNDAT I ON EU-Policy Paper No. 1 The European Investment Bank: Accountable Only to the Market? A Report by the CEE Bankwatch Network in cooperation with the Heinrich Böll Foundation, Brussels Office December 1999 The European Investment Bank: Accountable Only to the Market? A Report by the CEE Bankwatch Network1 in co-operation with the Heinrich Böll Foundation, Brussels Office Published by the Heinrich Böll Foundation, Brussels Office 1 Jozsef Feiler and Magda Stoczkiewicz are the co-authors of this report. They are the Policy Coordinator and EU Coordinator for the CEE Bankwatch Network, which is an independent foundation legally registered in the Czech Republic. It monitors the activities of International Financial Institutions and Export Credit Agencies that are making loans in the Central and Eastern Europe (CEE), and is active in the following countries: Belorussia, Bulgaria, Czech Republic, Estonia, Georgia, Hungary, Lithuania, Macedonia, Poland, Romania, Slovakia and Ukraine. The authors would like to acknowledge the assistance of Jim Barnes (Friends of the Earth International) in preparing this report, and thanks Friends of the Earth-Europe for providing office space and support for the CEE Bankwatch EU Coordinator in Brussels. Acknowledgement The CEE Bankwatch Network gratefully acknowledges the support of the Heinrich Böll Foundation in the production of this policy paper. Responsibility for the contents and any errors remains, of course, solely with the authors. The Heinrich Böll Foundation, affiliated with the Green Party and headquartered in Berlin, Germany, is a legally independent political foundation working in the spirit of political openness. Its activities are guided by the fundamental political values of ecology, democracy, solidarity, and non-violence. In 1998 the Heinrich Böll Foundation opened its European office in Brussels. Heinrich Böll Foundation Director: Frieder Wolf-Buchert Brussels Office Tel.: +32-2-7434100 28, rue le Titien Fax: +32-2-7434109 B-1000 Brussels e-mail: [email protected] http://www.boell.de CEE Bankwatch Network Krowoderska 5/3 Tel/Fax: +48 12 429 11 01 31-141 Krakow Tel: +48 12 430 03 20 Poland e-mail: [email protected] http://www.bankwatch.org EU-Policy Paper, No. 1: The European Investment Bank: Accountable Only to the Market? A policy paper by CEE Bankwatch Network Published by the Heinrich Böll Foundation, Brussels Office Printed in Prague on recycled paper Ó 1999 Heinrich Böll Foundation, Brussels Office and CEE Bankwatch Network, Prague Can be used and quoted as long as acknowledging the source This paper does not necessarily represent the views of the Heinrich Böll Foundation. To order this publication: Heinrich Böll Foundation, Brussels Office, rue le Titien 28, B-1000 Brussels, Belgium or CEE Bankwatch Network, Kratka 26, 100 00 Praha 10, Czech Republic 3 The EIB: Accountable Only to the Market? 1. Preface Founded in 1958 under the Treaty of Rome, the European Investment Bank (EIB) is the official financing institution of the European Union and thus committed to the European Treaties and their principles of representation, participation, public accountability and sustainable development. However, there seems to be little public knowledge of the Bank’s existence and operations, although it is a public institution that lends more money every year than, for example, the better-known World Bank. More importantly, the EIB lags far behind its sister development banks (such as the World Bank) in terms of its transparency, accountability, and the ways it addresses environmental and issues in its work. With a growing percentage of loans and guarantees being provided for projects outside the European Union, the question of public accountability becomes even more important. Environmental NGOs, especially from Central and Eastern Europe and the Mediterranean region, have taken the lead in monitoring activities of the EIB and advocating for a more transparent and sustainable lending policy. What used to work behind an almost impermeable screen is gradually being revealed as a leading international financing institution that pays lip service to rather than actually taking into account environmental concerns. Its internal environmental policies and decision making procedures are weaker than those of other multilateral development banks (MDBs). While other MDBs have responded, to varying degrees, to campaigns by NGOs and some major shareholders to improve these policies and procedures, the EIB remains “uninvolved,” behaving like a development bank of the late fifties. Although the EIB likes to think of itself as being different from institutions such as the World Bank, European Bank for Reconstruction and Development (EBRD) and other regional development banks, in reality its lending is virtually indistinguishable from the others. In many cases the EIB co-finances projects with these other international financing institutions. On the other hand the EIB does significantly differ from the other international financing institutions in terms of its secrecy, non-transparent behavior and weak environmental performance. The case studies published in this booklet illustrate some recent projects financed by the EIB. One common point in all these cases is that the EIB’s involvement occurred without careful consideration of the environmental, social and domestic legal circumstances of the project in question. Another common thread is that the EIB refuses to provide locally affected citizens any specific information even when formal inquiries or complaints are made. A third key aspect is the EIB’s lack of knowledge concerning relevant national standards, laws and required procedures; even when court proceedings are involved, with apparent indifference, the EIB pushes ahead with its plans. A fourth point that emerges in several of the cases is that the EIB will give its support even when other international financing institutions have decided not to do so on environmental or social grounds. Fifth, all of these case studies demonstrate the unwillingness of the EIB to respond to specific critiques made by local NGOs or communities concerning violations of relevant laws and consideration of alternatives. With this policy paper the HEINRICH BÖLL FOUNDATION and CEE BANKWATCH NETWORK wish to raise public awareness about the European Investment Bank, its legal basis, institutional context and current financing policies, and to contribute to the political dialogue on how to reform the EIB so it can better meet environmental and public accountability standards it is legally and politically bound to existing European law, namely the Article 6 of the Amsterdam Treaty and the Aarhus Convention on Access to Information, Public Participation in Environmental Decision Making and Access to Justice in Environmental Matters. Decision makers in the Member States and the Union itself are the ones who have the responsibility and chance to move the EIB along the road of democracy, transparency, accountability and sustainable development, thereby properly integrating it with the present structures and standards of the European Union. We hope that this report will also be useful to members of the European Parliament, the European Commission, other EU public bodies and European NGO networks, as they consider a new “code of conduct” for the EIB that is appropriate for a new millennium. The report concludes with a number of specific recommendations for changes in how the EIB operates, which should contribute to a necessary and timely debate about this important institution. Brussels and Krakow, December 1999 Frieder Wolf-Buchert Tomasz Terlecki Heinrich Böll Foundation Executive Director Brussels Office CEE Bankwatch Network The EIB: Accountable Only to the Market? 4 Contents 1. PREFACE......................................................................................................................................................................3 2. EXECUTIVE SUMMARY...........................................................................................................................................5 3. EIB AS PART OF THE EUROPEAN COMMUNITY..............................................................................................8 4. EIB VERSUS THE WORLD BANK AND EBRD ...................................................................................................11 5. THE STRUCTURE OF EIB.......................................................................................................................................14 5.1 BOARD OF GOVERNORS ...........................................................................................................................................14 5.2 BOARD OF DIRECTORS.............................................................................................................................................14 5.3 MANAGEMENT AND AUDIT COMMITTEES ................................................................................................................14 5.4 PROJECT DIRECTORATE ...........................................................................................................................................14 5.5 LOAN PROCESS - PROJECT CYCLE ...........................................................................................................................16 5.6 ENVIRONMENTAL POLICY STATEMENT....................................................................................................................18 5.7 GLOBAL LOANS .......................................................................................................................................................20