ECJ ruling puts EU house bank on the spot: deliver on development role or stop lending outside Europe

A decision from the European Court of Justice (ECJ) to annul the External Lending Mandate (ELM) of the European Investment Bank (EIB) has been warmly welcomed by Counter Balance, the Europe-wide campaign coalition advocating systemic reform of the EIB.

The ECJ decision of November 6, which applies to the EIB’s lending activities in EU accession and neighborhood countries as well as Asia and Latin America, gives the EIB and the defendants in the ruling – the European Commission and the European Council – 12 months to redesign a new ELM in co-decision with the European Parliament, which brought the case. If the parties fail to reach an accord in that time the EIB will lose its Community guarantee, worth EUR 27.8 billion for the 2007-2013 period.

Desislava Stoyanova, coordinator of Counter Balance, said: “This ECJ decision is hugely significant. Although framed as a procedural challenge, the political result is that, for the first time, the democratically elected European Parliament is given some jurisdiction over the parameters of policy and lending practices in the EIB. This is a crucial extension of elected authority over the otherwise democratically unaccountable heart of the EU, and is a crucial blow to the EIB’s consistent efforts to keep itself free of such democratic obligations, as exemplified by the arguments put forward on its behalf by the Council during the ECJ hearing. [1]

“Just as importantly, the ruling confirms that the current mandate given by the European Council to the EIB does oblige the EU’s house bank to meet European development policy objectives, as has repeatedly been requested by the European Parliament but nevertheless contested by the EIB in recent years. The decision is thus also an implicit recognition that the EIB has failed to meet those objectives.” [2]

Antonio Tricarico, of Rome-based Campagna per la Riforma della Banca Mondiale, one of the NGOs involved in the Counter Balance coalition, said: “This judgment vindicates our decade-long struggle to bring about democratic accountability at the European Investment Bank. The Court seems to us to have found fairly unequivocally that the EIB must start to take account of public opinion, democratic institutions and EU development goals in its lending outside Europe.

“In the context of a systemic global economic crisis, there is no more opportune moment to question the public benefit that is supposed to result from the operations of public financial institutions such as the EIB which continue to foster corporate welfare at the expense of the environment, the poor and European development goals.”

Anders Lustgarten, of Counter Balance, said: “We urge the European Parliament to strictly condition the approval of any renewed external mandate for the EIB on concrete evidence that its lending to developing countries will effectively and measurably contribute to poverty reduction through sustainable development. As long as the EIB is unable to demonstrably meet this public interest request, no new mandate should be issued.”

Notes for editors:

[1] In the words of the Court, “participation by the Parliament in that process [co-deciding the new mandate] is a reflection, at the Community level, of the fundamental democratic principle that the people should participate in the exercise of power through the intermediary of a representative assembly.”

[2] The Court notes that “the EIB’s involvement in the context of financial co-operation with third countries forms an integral part of development co-operation,” and that “the grant of the Community guarantee pursues objectives going beyond a measure which is directed merely incidentally at development co-operation.” The defendants “have not been able to establish how economic, financial and technical co-operation [being the more limited definition for lending preferred by the EIB] between the Community and third countries which are developing countries is so alien to development co-operation [that it is] unrelated to development co-operation.”