Development in Reverse - Episode 1: Ombudsman bashes EIB for mishandling a mining fiasco

The Ombudsman was called to investigate after the bank took more than six years to close the case of the complaints received on the serious environmental and social impacts of the Ambatovy mega mining project in Madagascar.

Indeed, the nickel-cobalt mine financed by the EIB in 2007 through a €215 million loan failed to bring economic growth to the region, and rather provoked serious social and environmental problems to the surrounding areas and the local communities, as a group of investigative journalists exposed in 2017.

Such issues made the object of a complaint filed in 2012 to the EIB’s Complaints Mechanism, an internal body meant to ensure that the institution complies with its own policies. But the handling of this case got stuck, and the bank wouldn’t publish its conclusion report. According to the Ombudsman, '"there are other cases where the EIB-CM has exceeded the timelines set out in its rules on handling complaints and the Ombudsman has received a number of complaints. As such, delays in the EIB’s complaint-handling process appear to be systemic."

In addition, the conclusions of the Complaints Mechanism – finally published in April 2018 - ended up being relatively weak, concluding that most allegations of the complainant were not valid or had been properly addressed by the promoter. In particular, the accusation pointing to a conflict of interest of the company in charge of carrying out environmental and social evaluations on the ground were completely dismissed in the bank’s office report.

Still, the report by the Complaints Mechanism did highlight several problematic aspects of the project, such as its shortfalls in complying with the applicable standards in relation to water contamination and sulphur dioxide leaks. It also indicated that the EIB did not include the project in its implementation problem list, although there were sufficient grounds to do it. It therefore recommended that the EIB prepare an action plan to address outstanding environmental, health and safety issues and follow up on its implementation.

Unfortunately, the disastrous impacts of the project are not so surprising, given the poor monitoring of the EIB on this project – as confirmed by the Ombudsman’s ruling of maladministration against the bank. According to O’ Reilly, the bank did not provide convincing reasons to prove the complainant’s conflict of interest concerns wrong. Indeed, the project’s assessment was performed by a consulting company whose fees and expenses were paid by the very mining company in charge of the project, which compromised its independent judgement.

As the Ombudsman states, "As the EU’s bank financing projects within and outside the Union, the EIB’s activities have an impact on the EU’s reputation. Given its monitoring activities are based, in part, on reports prepared by private companies, it is important that these companies are perceived to be acting independently from the promoters whose activities they monitor. If their fees and expenses are paid by those promoters from the project’s budget, appropriate safeguards need to be in place to deal with any risks arising from this situation. This is essential for the EIB to maintain public trust."

Xavier Sol, Director of Counter Balance, said:

"The EIB is portraying itself as reliable development institution contributing to the external action and policies of the European Union. But this type of harmful investment - and the way the bank handled its impacts - cast serious doubts on how the EIB is really fulfilling the development mandates awarded by the EU. We call the bank to help mitigate the harmful impacts of the Ambatovy mine that it financed in the name of development. It is the Bank’s duty to take its responsibilities towards the complainants and above all the communities affected by this major mining complex."

Check out the other 'Development in Reverse' episodes:

Episode 2: The Mombasa Road
Episode 3: The Nepal Marsyangdi Corridor
Episode 4: MHP agri-food in Ukraine

Read more:

• Complaint to the EIB on the Ambatovy mine: http://www.eib.org/en/about/accountability/complaints/cases/sg-e-2012-04-ambatovy-nickel-project and Conclusions report: http://www.eib.org/attachments/complaints/2018-03-19-sg-e-2012-04-ambatovy-conclusions-report-en.pdf
• Final recommendations of the European Ombudsman, December 2018: https://www.ombudsman.europa.eu/fr/recommendation/en/107214
• The Ambatovy mine in Madagascar - How the EIB is sweeping a development fiasco under the rug, Counter Balance, July 2017
• A tale of reverse development, by Laurence Soustras and Riana Raymonde Randrianarisoa, June 2017 https://www.eibinafrica.eu/a-tale-of-reverse-development/