European Investment Bank Sued Over $69 Million Biomass Loan

(Bloomberg) -- The European Investment Bank is being sued in the region’s second-highest court over a Spanish loan that climate lawyers contend will damage the environment.

The suit is being brought by the not-for-profit environmental advocacy group ClientEarth, which wants European Union judges to determine whether the EIB breached its own renewable energy-financing criteria. The London-based group said it’s the first time an EU financial institution faces litigation over climate obligations and transparency.

The case, filed at the EU General Court in Luxembourg on Jan. 8., focuses on a loan for as much as 60 million euros ($69 million) to build a biomass power plant in Galicia, northern Spain. The Curtis-Teixeiro plant was appraised and deemed to be in line with our lending objectives and considered economically, financially, technically and environmentally sound, an EIB spokesperson said by email.

The bank refused to review its loan decision despite the project being labeled low efficiency and not meeting the EIB’s financing thresholds for renewable technologies, according to a statement by ClientEarth.

The non-governmental organization has had much success across Europe holding national and local governments to account over inadequate clean-air protection. The group won a decision at the U.K. Supreme Court by demonstrating that the government consistently breached EU clean-air regulations.

ClientEarth, along with German NGO Deutsche Umwelthilfe, also brought cases against governments in Europe’s biggest economy that resulted in the worst-polluting diesel cars being pulled off roads in some of the country’s most-congested cities.

“Despite using public money, the EIB provides only minimal information about its funding decisions, and refuses to subject those decisions to the scrutiny required by EU law,” said Anna Heslop, a ClientEarth lawyer. “We hope a positive judgment will open the way for NGOs to hold the EIB to account on its funding of all kinds of projects which affect the environment, such as those with a significant climate impact.”

By refusing to internally reexamine its financing of the biomass plant the EIB, the bank is alleged to have denied ClientEarth’s right to a review under what is known as the Aarhus Regulation, which allows NGOs to ask banks to review administrative decisions.

If ClientEarth’s bid for a review fails, it can still appeal to the EU Court of Justice.

“The bank does not share ClientEarth’s view that such approval is an administrative act subject to internal review, and therefore finds ClientEarth’s request inadmissible under the Aarhus Regulation,” the EIB said in its statement.

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