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Questions about Europe?Your Europe - The portal to on-line European and national public servicesTreaty of Lisbon

Decision of the European Ombudsman on complaint 1807/2006/MHZ against the European Investment Bank

Available languages: en
  • Case: 1807/2006/MHZ
    Opened on 13 Jul 2006 - Decision on 17 Dec 2007
  • Institution(s) concerned: European Investment Bank
  • Field(s) of law: Environment, consumers and health protection
  • Types of maladministration alleged – (i) breach of, or (ii) breach of duties relating to: Lawfulness (incorrect application of substantive and/or procedural rules) [Article 4 ECGAB],Requests for public access to documents [Article 23 ECGAB]

Strasbourg, 17 December 2007

Dear Mr W.,

On 17 June 2006, acting on behalf of Towarzystwo na rzecz Ziemi, you submitted a joint complaint together with Ms R., acting on behalf of Polska Zielona Siec, to the European Ombudsman against the European Investment Bank ("EIB")

On 13 July 2006, I forwarded the complaint to the President of the EIB.

On 26 October 2006, the EIB sent an opinion, which I forwarded to you with an invitation to make observations.

On 3 January 2007, I received your observations.

On 23 March 2007, I asked the EIB for further explanations.

On 9 May 2007, the EIB sent its reply to my above request which I forwarded to you with an invitation to submit observations.

On 3 July 2007, I received your observations.

I am writing now to let you know the results of the inquiries that have been made.


THE COMPLAINT

The complaint was twofold: first, it referred to the conditions related to the EIB's co-financing of the Project entitled "Flood Damage Reconstruction II" ("the Project") and to how the EIB monitored the Project; and second, it referred to access to documents.

The conditions for the EIB’s co-financing of the Project

According to the complainants, the relevant facts are, in summary, as follows:

In July 2001, widespread flooding devastated Poland. On 31 October 2001, the Polish authorities submitted to the EIB a project for co-financing the Project. The Project consisted of a number of technically independent and geographically dispersed schemes forming part of a programme of reconstruction covering public infrastructure damaged by the floods ("schemes").

On 20 December 2001, the EIB signed a framework loan with Poland for EUR 250 million to co-finance the Project ("Finance Contract"). The Promoters of the Project were the Polish Ministry of Agriculture and Rural Development and the Ministry of Environment. The implementing agencies were local offices of two State entities namely, Regionalne Zarzady Gospodarki Wodnej and Zarzady Melioracji i Urzadzen Wodnych.

According to the EIB's Environmental Statement ("the Statement"), all projects financed by the EIB in the EU, as well as in the Accession Countries (which Poland was at that time), should comply with both national and EU environmental law, including Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment(1), as amended by Council Directive 97/11/EC of 3 March 1997(2) ("the EIA Directive").

However, according to the complainants, a lot of schemes were carried out by the Polish authorities in such a way that they had a harmful effect on the environment. In this regard, the complainants referred to the following example: streams and small rivers were artificially straightened by destroying all natural surroundings and causing the extinction of the entire species of aquatic birds and fishes in the affected areas.

According to the complainants, however, none of the schemes that have been co-financed by the EIB and begun between 11 August 2001 and 31 July 2002 complied with the obligation resulting from the EIA Directive that they had to be subject to an Environmental Impact Assessment ("EIA") and that they should have received prior consent from the competent authority. Again according to the complainants, when agreeing to co-finance the Project, the EIB was aware that it would be carried out on the basis of the relevant Polish law but failed to check whether that Polish act complied with the EIA Directive. The complainants referred therefore to the following Polish law: (i) the so-called "flood law"(3), dated 11 August 2001 and the implementing provisions(4) dated 7 September 2001, and (ii) the order of the Council of Ministers of 24 September 2002 specifying the enterprises for which the EIA was required(5). That Polish law, which is no longer in force, permitted repairs to or improvements of canalisation and flood-relief reconstruction without the prior consent of any authority. As a consequence, no EIA had to be carried out under Polish law.

Therefore, in October 2004, the complainants, together with other environmental protection NGOs in Poland, informed the EIB of their above concerns on the occasion of the Bank's mission to Poland, which was conducted in order to monitor the carrying out of the Project.

In addition, on 25 November 2004, the complainants together with other NGOs addressed the EIB in writing. They stated that the schemes co-financed by the EIB were being conducted without the carrying out of an EIA and that they were harmful to the environment in that they caused the extinction of valuable habitats protected by EU Habitat and Bird Directives(6). They stated that they had, without effect, asked the relevant Polish authorities to stop the works and argued, in addition, that the EIB should have become involved in and evaluated carefully, the implementation of the Project, and should also have controlled the spending of the budget, required the Polish institutions carrying out the Project to perform EIAs, and insisted that the Polish borrower return funding in case of proven environmental damage.

On 21 January 2005, the EIB replied to one of the complainants, namely, Polska Zielona Siec. The Bank took the view that, on the basis of the findings of its monitoring mission to Poland, during which 14 schemes were checked, only three schemes, namely, the Chechlo, Kuznica and Wiory schemes, required an EIA, according to the EIA Directive. The EIB also explained that, in total, 726 schemes were undertaken and that the potential environmental impact of the remaining schemes financed under the EIB loan did not justify an EIA. Finally, the EIB stated that it did not find any violation of Polish or European law during its mission to Poland and that the environmental procedures applied were in line with the Finance Contract and the EIA Directive.

On 3 March 2005, in its further letter to the complainant, the EIB added that, although local NGOs questioned the rationale and standards of certain individual schemes, it could, on the basis of its mission to Poland, be confident in the overall quality of the carrying out of the Project. The EIB also confirmed that, in all its financing operations, it requires that Promoters obtain the legally required environmental authorisations and planning permissions and comply with relevant environmental legislation.

Afterwards, one of the complainants, Polska Zielona Siec, sought legal advice with respect to several of the schemes. The legal experts found that some of the schemes were not compliant with Polish law and/or the EIA Directive(7). In their opinion, the experts recalled the judgement of the Court of Justice in Case C-72/95 Kraaijeveld(8) and found it particularly important for the present case. On 7 December 2005, the same complainant, Polska Zielona Siec, addressed the EIB again about this matter and sent a copy of the above expertise. It mentioned details of six schemes in which, according to certain NGOs, national and European environmental law had been violated. It also asked the EIB further to evaluate the way the Project was being carried out.

The EIB replied on 23 February 2006. As regards the complainant's request, it stated that the conclusions of its 2004 mission to Poland, communicated to the complainant in the earlier correspondence, were still valid. As regards the complainant's concerns about the violation of Polish and/or European law, the EIB stated that it was not able to adjudicate on such issues and advised the complainant to turn to the relevant Polish authorities. It also stated that it was not aware of any court cases or infringement proceedings by the Commission in this regard.

Access to documents

As regards the issue of access to documents, the complainants stated in summary as follows:

On 26 March 2004, one of the complainants, Polska Zielona Siec, asked the EIB for access to the Finance Contract and to the documents concerning the loan.

On 4 June 2004, the EIB replied that it could not give access to the Finance Contract on the grounds that disclosure would undermine the protection of its obligation of professional secrecy and would be contrary to professional ethics, rules and practices applicable in the banking and financial sectors (pursuant to Article 4(1) of the EIB's "Rules on public access to documents"). However, the EIB also stated that it had no objection to the disclosure of the Finance Contract by the Promoter of the Project (the Polish Ministry of Agriculture and Rural Development and Polish Ministry of Finance) and the borrower (the Polish Ministry of Finance).

On 18 June 2004, Polska Zielona Siec submitted a formal complaint to the EIB's Secretary-General in which it challenged the above refusal and the quality of the answer. It pointed out that, in its letter of 26 March 2004, it had requested access to all the documents related to the loan (as non-technical EIA documents and progress reports) and not only to the loan contract. Therefore, it took the view that the EIB's answer to its request for access was insufficient.

On 8 October 2004, the EIB replied that (i) its services were in the process of preparing the survey of the documents concerned; (ii) on the basis of information received from the complainant to the effect that the Polish Ministry of Finance appeared to agree to the disclosure of the loan contract, it addressed the said Ministry in order to obtain authorisation for such disclosure; (iii) it would inform the complainant shortly about the outcome.

On 30 December 2004, the complainant turned to the EIB again, asking in addition for access to the report of the EIB mission to Poland. It also stated that it had not yet received a substantive answer to its complaint of 18 June 2004.

On 21 January 2005, the EIB replied to the complainant. First, it did not disclose the report of the mission to Poland as such but referred to the conclusions of that mission and described its background. Second, it disclosed one document (the non-technical summary of the EIA for one scheme in Kuznica) and stated that EIA summaries for two other schemes (Chechlo and Wiory) would be provided to the complainants once they were ready. Third, it stated that it had reviewed other documents related to the loan and, as they contained professional evaluations and opinions and were therefore part of the Bank's internal decision-making process, they could not be disclosed, in accordance with Article 4(viii) of the EIB's Rules on Public Access to documents. Fourth, as regards the loan contract, it invited the complainant to consult the Polish Ministry of Finance, with which the EIB had been in contact in this regard.

The complaint to the Ombudsman

In its complaint to the Ombudsman, the complainants allege that the EIB:

(1) failed to ensure compliance of the project "Flood Damage Reconstruction II Poland 2001" with the EIA Directive;

(2) failed to exercise due diligence in its monitoring mission to Poland (according to the complainants, the EIB relied during its monitoring mission to Poland on documents provided by the Polish implementing agencies without checking the information they contained); and

(3) failed to provide access to all the documents related to the Project.

The complainants claimed that, in the future, the EIB should ensure compliance with the EIA Directive of all projects that it agrees to finance in countries outside the EU.

The complainants also claimed that the EIB should give them access to all documents related to the Project.

THE INQUIRY

The opinion of the EIB

The EIB's opinion was, in summary, as follows:

As regards the first allegation concerning non-compliance with the EIA Directive, in summary, the EIB stated that, on 20 December 2001, it signed a framework loan (Finance Contract) with Poland for EUR 250 million to co-finance the Project, which consisted of 726 schemes to be carried out on different streams and rivers. The EIB funds could be used to finance up to 70% of project costs for eligible schemes including (i) the repair, rehabilitation and upgrading of flood defence and water management infrastructure, as well as (ii) new flood defence schemes which would reduce the risk of similar events in the future.

The individual schemes financed by the Finance Contract were approved following the strict procedures agreed between the EIB and the Polish authorities.

The EIB examined the Project with all due diligence. This included technical, environmental and economic appraisals.

During its evaluation of September 2001, the EIB found that the national EIA procedures applied by Polish authorities and the capacity of local promoters were acceptable. As part of this evaluation, the EIB's technical experts also visited a number of completed schemes financed under the earlier EIB loan concerning the damage caused by the 1997 floods and they found that the works were of a good technical standard with "appropriate use of environmentally sensitive design criteria".

The EIB's assessment of environmental compliance of the Project was based on: (i) the answers from the implementing agencies; (ii) site visits carried out by its technical staff; and (iii) information from NGOs. However, in this case, NGOs' complaints concerned only 1% of the schemes financed by the EIB. Given the very large scale of the Project, ultimate responsibility fell to the national implementing agencies, which were the ones to decide whether or not the special areas were designated as being "environmentally protected".

According to the loan contract, the Polish authorities were supposed to inform the EIB every six months of any schemes requiring an EIA and to send reports of EIAs, if any. However, only one scheme (Wiory) compulsorily required an EIA in accordance with European law because it was classified as being covered by Annex I of the EIA Directive. Therefore, the EIB asked for an independent review of the Wiory scheme, which included consultation with certain NGOs. This independent review found that the conditions of an EIA were met by the Polish authorities "in substance". However, given that some doubts persisted as regards the compatibility of the scheme with the Water Framework Directive(9), the EIB required a new environmental assessment of the operational rules, with a view to making them compatible with that Directive's objective of improving ecological water quality. The Commission's Directorate-General for Environment, which was consulted in this respect by the EIB, found that the Wiory scheme could be covered by the loan.

Almost all the other schemes were classified as falling under Annex II of the EIA Directive, which meant that the national authorities were required in such cases to determine, on the basis of national law, whether such projects required an EIA. Because the vast majority of schemes involved limited scale reconstruction of existing hydraulic infrastructure, full EIA procedures were not considered necessary by the Polish authorities.

As regards the second allegation concerning its due diligence in the monitoring mission, the EIB stated that, from 25 to 28 October 2004, the EIB sent a monitoring mission to Poland. In the course of that mission, the Bank heard the NGOs' concerns that the schemes were carried out in such a way that they had become harmful to the environment. In support of their concerns, the NGOs produced photographs of the locations in which work was undertaken as part of the Project. However, the NGOs failed to produce photographs of these locations before the work had started. Moreover, the Polish implementing agencies did not agree with the NGOs' concerns.

During the mission, the EIB's technical staff also conducted site visits of 14 schemes. The EIB's technical staff concluded that the quality of the schemes and the capacity of the implementing agencies were satisfactory, and the environmental procedures had been correctly applied. It went on to add that environmentally sensitive solutions were adopted by the implementing agencies, including the scope and timing of the works and materials used. The consultations with the public and local NGOs were also correctly conducted by implementing agencies. In this respect, the EIB stated that "[g]ood practice was the norm in terms of environmentally sensitive solutions (scope, materials, timing of woks), as was consultation with public and local NGOs". The implementing agencies provided complete documentation on the works performed. The EIB was therefore confident of the overall quality of the Project, even though local NGOs may have had concerns as regards some of the schemes that could not be visited during the mission. The key findings of the report on the monitoring mission were communicated to the complainants.

The EIB also stated that, in order to improve its procedures and disseminate EU best practice, it appointed an international consultant to carry out a review of "best practice in strategic planning, and implementation of flood defences, including environmental aspects" as regards the schemes which the EIB finances in the Czech Republic, Italy, Poland and Romania. The findings of that review would be published on the EIB's website. As regards the third allegation concerning disclosure of the Finance Contract and documents concerning the loan, the EIB stated that the confidentiality of the information contained in the Finance contract is protected by the EIB's rules. The Rules on Public Access to Documents, which were replaced on 28 March 2006 by the EIB's Public Disclosure Policy, require, as with any banking relationship, confidentiality of information contained in the finance contract in the interests of the customer. The customer normally retains the right to waive this protection. On the basis of 2002 Rules, disclosure of the loan contract could therefore undermine protection of professional secrecy and would be contrary to professional ethics, rules and practices applicable in the banking and financial sectors. The EIB's Public Disclosure Policy, in point 28, makes particular reference to the (non-)disclosure of finance contracts:

"[i]nformation typically forming part of the Bank's confidential relationship with its business partners includes the financing request by a project promoter, loan pricing information, and the Finance Contract. The Bank does not object to project promoters, borrowers, or other competent parties making information available on their relationship and arrangements with the EIB".

On 20 January 2005, the EIB sent the complainants a letter with detailed information concerning the documents related to the loan contract which were not subject to the exception on disclosure. On 10 July 2006, on its own initiative, the EIB sent the complainants the information about two schemes (Krzyworzeka and Stradomka). In their letter of 7 December 2005, the complainants contested the environmental aspects of the information sent by the EIB on the above two schemes.

THE COMPLAINANTS' OBSERVATIONS

In summary, the complainants maintained their original allegations and claims, and clarified their claim concerning the request for access to documents.

As regards their allegation concerning the EIB's mission to Poland of October 2004, they pointed out that, during that mission, only 1.9% of all schemes covered by the loan were visited by the EIB's technical staff.

Moreover, when visiting schemes and implementing agencies, the EIB failed to check carefully documents submitted by these implementing agencies.

For instance, it appears that, on the basis of such documents, the EIB took the view that the public consultation was made correctly by the implementing agencies. In fact, the public consultation was not addressed to the general public, but only to selected local NGOs.

In addition, in reference to the EIB’s statement that "the norm (...) was consultation with the public and local NGOs", the complainants noted that such consultation was not required by the Polish law in force at that time, and, that therefore, on 30 November 2004, the Polish Minister of Environment (the Promoter of the Project) sent a letter to all local administrative authorities suggesting that they should consult NGOs concerning all river canalisation works.

Furthermore, the EIB took the view that the implementing agencies carried out their EIA procedures correctly. However, in its letter to the complainants dated 20 January 2005, the Bank stated that EIAs were required for the Wiory, Kuznica and Chechlo schemes. However, an EIA for the Chechlo scheme was never conducted by the implementing agencies. In addition, t he EIB never sent the complainants the EIA for the Chechlo scheme, as promised in its letter of 20 January 2005.

The complainants also referred to the meeting with NGOs during the mission and stated that they were not satisfied with how the EIB carried out that meeting. They pointed out that NGOs suggested at that time that flood protection was not necessary in the forests or meadows and, if such works were conducted, they would always be harmful to the environment. The EIB never referred to that point. The EIB also wrongly stated in its opinion that, during that meeting, the NGOs questioned only 1% of the schemes, while in fact they questioned 130 out of a total of 726 schemes.

As regards the allegation concerning compliance with the EIA Directive, in summary, the complainants reiterated the view that the EIB failed to assess the Project in terms of environmental, economic and social effectiveness and planned results. In particular, the EIB failed to check whether Polish legal and procedural framework complied with the EIA Directive. In fact, the EIB financed the "wish list" sent by the Polish implementing agencies. Moreover, notwithstanding the EIB's statement to the contrary and bearing in mind (a) the very large scale of the Project and the fact that it was based on the framework loan, and (b) its Environmental Statement, it was the Bank and not national implementing agencies which retained ultimate responsibility for ensuring the proper procedural and legal framework.

The complainants also noted the EIB's statement that "[the EIB] is confident in the overall quality of the program." However, the complainants argued that, on 24 March 2004, the Polish Minister of Environment issued a statement that the canalisation of inflows in a specific region of Jura Krakowsko-Czestochowska (covered by the loan) was made in violation of environmental standards. In addition, on 5 May 2005, the same Minister launched the publication "Good practice in mountain rivers and streams maintenance in order to change existing practice in rivers´ canalisations". Therefore, the EIB considered that the environmental quality of the Project was acceptable while the Polish authorities alone contested that quality.

The complainants agreed that the majority of schemes fell under Annex II of the EIA Directive and therefore the national authorities should have first conducted the screening procedure, and afterwards decided whether or not an EIA was necessary according to national law. However, at that time, the Polish law did not require the screening procedure for "repairs or maintenance" and the majority of schemes of the Project qualified as such. Moreover, according to Polish law "maintenance or reconstruction" of the canalisation and flood relief works were excluded from any environmental procedure. In this regard, the complainants noted that, in June 2006, the European Commission opened an infringement procedure against Poland regarding the lack of transposition of the relevant environmental Directives and, in its formal notice, noted that the "maintenance and reconstruction" of the canalisation and flood relief works should , according to European law, be subject to an EIA.

The complainants also specified their claim for access to documents related to the loan contract. They did not agree with the reasons given by the EIB for its refusal. In particular, they noted that, in its letter to the complainants dated 21 January 2005, the EIB stated that "it could not disclose the documents related to the loan as those concerned professional evaluation and opinions, pursuant to Article 4(viii) of the EIB Rules on Public Access to Documents (2002 version)". However the above article excluded disclosure of documents concerning "the legitimate interests of the Bank in organising its internal management, notably with respect to human resources."

The complainants also noted that, in its letter of 21 January 2005, the EIB stated that, on the basis of available information, only three schemes required an EIA. However, the EIB did not state why the remaining schemes did not justify an EIA. The complainants also stated that they would like to know what the justification for not having carried out the EIA was. In this respect, they noted that they had, in the first instance, turned to the Polish implementing agencies which refused to provide them with this information.

FURTHER INQUIRIES

After careful consideration of the EIB's opinion and of the complainants' observations , it appeared that further inquiries were necessary.

The Ombudsman's letter to the EIB dated 23 March 2007

In his letter, the Ombudsman stated that it appeared that, as regards some type of works carried out under the loan, an EIA was not required by Polish law. Therefore, the Ombudsman asked the EIB to explain, first, whether it instructed the Polish implementing agencies as to what they had to do in order to act in accordance with European law?

Second, the Ombudsman asked the EIB how many site visits and monitoring meetings (apart from the October 2004 mission) it held in Poland and on the basis of which criteria the 14 schemes visited in October 2004 were chosen.

Third, the Ombudsman specifically asked whether EIAs were carried out for the Wiory, Kuznica and Chochlo schemes, or only for the Wiory scheme, and, on what basis the EIB accepted that an EIA was not required as regards any of the remaining schemes. The Ombudsman also wanted to know the details of relevant justifications, if any, provided by the implementing agencies in this respect.

Fourth, the Ombudsman asked the EIB about the follow-up it gave to the concerns expressed by the NGOs during their meeting with its representatives in October 2004 concerning 130 schemes referred to by the complainants. In this respect, the Ombudsman also asked the EIB to explain on the basis of what evidence it came to the conclusion that, in the Polish implementing agencies' activities relating to the Project, "the norm (...) was consultation with the public and local NGOs".

Fifth, the Ombudsman asked whether the EIB had ever requested additional explanations than those contained in the reports sent to it every six months by the Polish authorities, with respect to the overall implementation of the Project (apart from the Wiory scheme report).

Fifth, the Ombudsman asked the EIB to comment on the point made by the complainant that the Polish Minister of Environment himself appeared to have had doubts as to whether environmental protection was guaranteed locally.

Finally, the Ombudsman asked the EIB to consider whether it would be possible to give at least partial access to the specific documents required by the complainants, namely: (i) the Finance Contract (subject to the removal of "confidential information", if any; (ii) the Bank's Appraisal Report of the Project; (iii) the Bank's report on the monitoring mission of 25-28 October 2004 and on others missions, if any; and (iv) the independent review report concerning the Wiory scheme, mentioned in the Bank's opinion . The Ombudsman also asked (v) for an explanation as regards the EIB's point of view, as expressed in its opinion in relation to the complaint, that its Rules must be interpreted as allowing limitations on access to information "in the interest of the customer (as in any banking relationship)" (emphasis added), and (vi) how this point of view could be reconciled with the role of the EIB as a "public" institution (rather than as a "commercial" bank) and its stated objective of achieving a high level of transparency in its activities and communicate effectively with all stakeholders.

The EIB’s reply of 9 May 2007

The EIB referred to the Ombudsman’s statement in his letter opening this inquiry that the alleged non-compliance of the Polish environmental legislation with the European law was excluded from his inquiry.

The EIB pointed out, in summary, that the responsibility for compliance with the relevant Community law remains within the competence of national authorities and that the EIB is not in a position to give them authoritative guidance in this respect.

Notwithstanding this and in view of the fact that, at the relevant time, Poland was an accession country, the EIB discussed these issues with its Polish counterparts during the Project appraisal as part of its normal due diligence. These same concerns were also reflected in the Finance Contract which states that new flood control measures would be subject to EIA procedures equivalent to those described in the EIA Directive and that appropriate steps would be taken for the protection of any environmentally sensitive (in the sense of Directive 92/43/EEC(10)) area that might be affected by the implementation of schemes included in the Project.

According to the technical description of the Finance Contract, the Borrower shall, at the EIB's request, furnish satisfactory evidence to the Bank in order to demonstrate that all location and environmental authorisations which are required for the implementation of the Project have been issued.

The EIB took the view that, in accordance with its standard procedures, it proceeded with appropriate due diligence in the present case. Such diligence included the carrying out of a technical, environmental and economic appraisal prior to financing. In the present case, during the appraisal visit by the EIB's technical experts in September 2001, the national EIA procedures and the capacity of local Promoters were assessed and found to be "acceptable". This assessment was in part based on the positive experience acquired from previous loan operations carried out by the EIB in Poland. Most of the schemes funded by the EIB under the Finance Contract were covered by the Polish Environmental Protection Law. The EIB attached to its reply the Technical Appraisal Report For the Project and took the view that this document was proof of "due diligence applied in this case".

The EIB also stated that it noted the recent concerns expressed by the Polish Minister of Environment, the European Commission and NGOs about various aspects of EIA in Poland. The EIB is "proactively engaged with the Polish authorities to see what lessons can be learnt for future flood defence projects in terms of EU best practice." Therefore, in October 2006, the EIB commissioned a British consultant (HR Wallingford) to prepare "a review of best practice in EU flood risk management including planning, design and implementation, as part of the EIB's on-going commitment to reviewing its procedures and promoting best practice at the EU level. The review is specifically focussing on the current practice in Poland. The consultant met with NGOs concerned about the Project as well as with the Polish Ministry of Environment and implementing agencies, whose views would be included in the final report. The report should be finalised by the end of July 2007 and the EIB asked Polish authorities whether they had any objections to disclosing it to NGOs in the context of the Ombudsman's ongoing investigation of the Project. The review study would form part of the EIB's Project Completion Report for the Project and of a forthcoming "Guide for EIB funded Flood Defence Projects in the EU".

As regards the point concerning the EIB’s missions, visits and criteria used for chosen schemes, the EIB stated that its staff visited Poland in September 2001 to review the situation after the July 2001 floods and appraise the potential lending operation. In September 2001, the EIB visited a sample of completed schemes and also conducted surveys of newly damaged areas. However, this was the second loan financed by the EIB in Poland. The first loan was co-financed with the Word Bank after the floods in the Odra river basin in 1997 ("Odra operation loan"). The implementing agencies for flood defence works, agricultural drainage schemes and repairs to hydraulic infrastructure were the same as under the previous Odra loan, namely, the State entities Regionalne Zarzady Gospodarki Wodnej under the Ministry of Environment and the Zarzady Melioracji i Urzadzen Wodnych under the Ministry of Agriculture. No complaints were received as regards the Odra operation loan.

After the September 2001 visit, a relevant Finance Contract was signed with the Republic of Poland for EUR 250 million.

Eligibility criteria for the types of schemes to be financed under the loan were set out in the technical description to the Finance Contract but the selection and prioritisation of schemes remained the responsibility of national authorities and was co-ordinated by the Office for Flood Damage Recovery in the Office of the Polish Prime Minister. Every six months, the Polish authorities sent monitoring reports on the implementation of the overall programme.

The EIB’s first monitoring mission took place on 7 and 8 May 2002, and involved discussion on scheme selection and allocation procedures.

According to the EIB, "[f]ollowing the Polish NGOs complaints", it carried out a second monitoring visit from 25 to 28 October 2004. During this visit, the EIB organised site visits to 14 schemes, including three of the eight schemes identified by the NGOs before that mission took place. The selection of the other 11 schemes was agreed with the Project implementing agencies, which were responsible for the organisation of the EIB's monitoring visit. The choice of the above 11 schemes was made with an eye to reflecting the different types of works, the different implementing agencies and, as far as practicable in view of the time constraints, the geographical spread. In this regard, the 14 schemes were carried out by over five implementing agencies in four different regions. The key findings of the mission were communicated to the Polish authorities and the NGOs concerned.

The EIB stated that the national authorities had discretion as to whether to review the need to carry out EIAs, the criteria used being their likely significant impact on the environment, in the event that the schemes qualified as Annex II projects under the relevant environmental directives. Given that most of the schemes concerned limited scale reconstruction to existing hydraulic infrastructure, the Polish authorities did not consider full EIA procedures necessary.

As regards the EIA for the Wiory scheme, the EIB stated that the scheme started in 1993 and was almost completed by the time of the 2001 floods. At the time when the Wiory scheme was planned and authorised, and its construction started, Polish law did not require an EIA. However, this scheme could be classified as an Annex I Project in terms of the EIA Directive and Directive 2003/35/EC(11) and therefore the EIB considered that it should order a review of the EIA. The review was covered by the loan and carried out by a firm of environmentally experienced consulting engineers, namely, ILF from Austria. The review took place from September to December 2003 and a final report was issued on 12 February 2004. The Wiory Reservoir Report sought opinions on the Project from all major environmental NGOs in Poland including WWF(12) and OTOP(13), which are summarised in the report. No significant impact was identified but further environmental studies were recommended to cover the operational phase of the reservoir. As a result, the EIB requested that the Polish authorities carry out an EIA of the operation l phase. This environmental study report is not yet finalised.

As regards the Kuznica scheme, in January 2005, the EIB sent the summary and the conclusions of the EIA to the complainant. As regards the Chechlo scheme, the EIB admitted that, in its 20 January 2005 letter to the complainant, it mentioned that the summary and conclusions of the EIA for the Chechlo scheme would be sent to the complainant. However, while at the time of the 2004 EIB mission to Poland, the Polish Ministry of Agriculture had no information as to whether an EIA was required, after the mission had taken place, it appeared that an EIA was not required. The Chechlo scheme is an Annex II project and the Polish authorities decided that an EIA was not required. The EIB apologised for the confusion about the status of this scheme.

In May 2002, during the first monitoring mission, the EIB required that the Ministry of Environment and the Ministry of Agriculture prepare summary reports on the EIA of the overall programme, including the screening mechanism applied at the time. The EIB's Environment Unit reviewed them and the procedures were considered acceptable. The EIB included these reports in its reply. As regards the monitoring reports sent by the Polish implementing agencies, the EIB stated that it received regular monitoring reports on the progress of the schemes and also that it received a summary report on tendering procedures as well as a summary report on environmental screening procedures applied to the overall programme, which was sent by the Ministries concerned. The EIB was satisfied with the information provided.

The EIB also pointed out that the amendment to the 2001 Polish Environmental Law came into effect on 1 July 2005, and that these modifications occurred subsequent to the EIB's approval of the loan and to the funding allocation to individual schemes.

As regards the follow up given by the EIB to the concerns of the complainants and other NGOs expressed in the October 2004 meeting, the EIB stated that, during the said meeting, the NGOs presented a list of eight projects three of which were included in the monitoring visit in October 2004. On 21 January 2005, the EIB sent a detailed letter to certain NGOs, including the complainants, concerning the monitoring visit. This was complemented by a further letter of 3 March 2005. In these communications, the EIB informed the complainants that, for reasons of sound management, it could not discuss each of the 726 schemes involved and, instead, invited the complainants to put forward their specific concerns as regards concrete schemes.

In its 7 December 2005 reply, the complainants stated that, in the case of four schemes, Polish law was not respected. In July 2006, the EIB forwarded to the complainants the information it received from the implementing agencies as regards two of the above four projects, namely, the Krzyworzeka and Stradomka schemes.

As regards the stance of the Polish Ministry of Environment, the EIB stated that it was not aware of it. It also appears that such a stance was taken after the EIB's appraisals and the conclusion of the Finance Contract. The said Ministry did not mention anything in its monitoring reports sent to the EIB which could suggest such a stance. The EIB was surprised by it given that the Ministry of Environment was the responsible ministry for several agencies implementing the projects, such as RZGWs. Therefore, the EIB was not in a position to comment on that issue.

As regards access to the Finance Contract, the EIB reiterated its position that, in view of its normal banking practices and in accordance with its Public Disclosure Policy (in its versions of 2002 and 2006), it could not disclose a finance contract. The EIB considers that even partial disclosure of the Finance Contract would be contrary to its obligations towards its clients. The EIB left the potential disclosure of the Finance Contract to the discretion of its counterparts (Polish interlocutors). In this regard, the EIB explained that, in its Public Disclosure Policy of 2006, it stated that it does not object to the disclosure of finance contracts by the other parties. On the basis of the letter of Zielona Siec dated 19 July 2004, the EIB understood that the Polish Ministry of Finance did not give its consent to the disclosure of the Finance Contract. However, the EIB took a proactive stance and asked the Ministry of Finance in Poland whether the complainants could have access to the Finance contract and, as a result, was informed by the latter that it had invited the complainants to consult the Finance Contract in the Ministry's offices. Following the complainants' further request, the EIB again contacted the Ministry of Finance regarding disclosure of the Finance Contract. The EIB suggested therefore that the complainants accept the invitation of the Ministry of Finance to consult the Finance Contract.

The EIB attached to its reply the following documents, from which, according to it, it had removed all confidential information: (i) its Appraisal Report on the Project (framework loan of 9 October 2001), (ii) its Project Progress Report-Monitoring Mission, 25-28 October 2004, (iii) two reports drafted by the Polish ministries, namely, Report on environmental impact of the works realised within Flood Damage Reconstruction Project II and the Summary Report on the Environmental Impact and Mitigation, as well as (iv) an independent review report on the Wiory Reservoir scheme.

The EIB also referred to its dual role and stated that, due to its status as a financial institution, it must ensure mutual trust with its counterparts in the banking sector by respecting banking secrecy and the confidentiality of market sensitive information in compliance with European and national regulations and banking sector standards. The EIB must also respect the legal provisions on banking secrecy of the states where it operates. The EIB's counterparts have the legitimate expectation that it will act within the established legal framework and that it will not divulge information protected by the obligation of banking confidentiality. The EIB's approach is to strike a balance between its objective to be transparent and to provide as much information as possible to all interested third parties and its duty as a bank to protect, where appropriate, the private commercial and market sensitive interests of its business counterparts, that is, without compromising its raison d'être, namely, its lending and borrowing activity.

The complainants' observations on the EIB´s reply of 9 May 2007

The complainants referred, again, to the EIB "Environmental Statement" of May 2001, according to which the Bank applies a common environmental approach to all projects, and that,

"when weighing the environmental applicability of the project for its financing, it takes into account (...) the presence/absence of any legal compliance issues", and that

"[i]n the EU, as well as in general in the accession countries, all projects financed by the EIB should comply with both national and EU environmental law, including the EIA directive".

The complainants emphasised therefore that, at the relevant time, Poland was an accession country and the EIB should have taken into account whether the Project complied with the EIA Directive. According to the complainants, in the Appraisal Report attached to the EIB's reply, the compliance issue was not addressed.

Moreover, in the Finance Contract, the EIB agreed that the Project could be carried out on the basis of Polish law which, at the relevant time, allowed all canalisation and flood works carried out between 11 August 2001 and 31 July 2002 to be exempt from EIA.

The EIB accepted without proper consideration the conclusions of the comparative study of Polish environmental law and Directive 97/11/EC made and presented in the relevant documents, namely, the Report on environmental impact of the works realised within Flood Damage Reconstruction Project II and Summary Report on the Environmental Impact and Mitigation. These conclusions had been sent to the EIB by the Polish project promoters and implementing agencies. The above conclusions state that the Council of Ministers Decree of 24 September 2002 defined the kind of works that may significantly influence the environment. Moreover, the Decree came into force in October 2002, that is, one year after the project was approved, so it could not serve as a basis for any legal compliance analysis at the appraisal stage. The complainants state that they took up the invitation of the Polish Ministry of Finance and saw the Finance Contract in July 2005 in the Ministry offices. In the complainants' view, the Finance Contract, which covers flood damage reconstruction, is of great public interest and should be disclosed. Moreover, the Finance Contract included important environmental information to the extent that it stataed that the Project should comply with the EIA procedures equivalent to those contained in the EIA Directive. The complainants noted that the refusal for access was contrary to European standards on access to information about the environment, including the Aarhus Convention(14). The complainants considered that the EIB was able to disclose the Finance Contract on the basis of its Public Disclosure Policy in force at the time of the Project's approval and also at the time the complainants requested that information. The EIB was not only a financial institution but also a public EU institution. The EIB did not provide any justification as regards why it was important for the Republic of Poland to keep the Finance Contract confidential. The Finance Contract in question did not contain any private or market sensitive information but covered the financial support to recover from a natural disaster.

The complainants also stated that the EIAs carried out for the Wiory and Kuznica schemes do not concern the issues raised in their original complaint.

The complainants reiterated that the EIB failed to provide them with documents and information related to the Finance Contract which they requested, such as information about the costs of the foreseen schemes, building permits, EIA, water analysis, the evaluation documentation concerning damage caused by the flood of 2001, as well as information regarding which schemes were intended to fund reconstruction and which represented new investments. According to the complainants, the EIB possessed that information but in 2005 disclosed only a non-technical summary with regard to the Kuznica reservoir and a summary of the report for the EIB's monitoring mission. The complainants noted that it was only in the course of the present inquiry that the EIB submitted the information in question to the complainants, through the Ombudsman, but failed to reveal it previously when it appeared to adopt a policy of "disclos[ing] as little information as possible".

The complainants further took the view that all projects from Annex II of the EIA Directive should undergo a environmental screening procedure (and not only new flood control measures). They also argued that the competent national authorities should decide whether an EIA was necessary for a particular project only after such a screening had taken place. However, their decision must be based on the criteria or thresholds listed in Annex III of the EIA Directive. Such a decision should also be made available to the public. When the EIB project was implemented in Poland, Polish law did not require any environmental screenings in the sense of the EIA Directive. The complainants noted the EIB´s statement that, because most of the schemes, such as the Chechlo scheme, were Annex II projects, it was not able to provide the complainants with formal screening decisions on EIA. In fact, Polish implementing agencies and direct investors classified the same schemes, including Chechlo, as repairs, in order to exempt them from the environmental screening which, in the case of repairs amounting to reconstruction, was not needed under Polish law. The complainants took the view that the Polish authorities were wrong in that "rivers cannot be repaired but only regulated or canalised."

The complainant underlined that there is no divergence between them and the EIB as regards the classification of the schemes in terms of the EIA Directive, since most of them are indeed Annex II projects, but there is a misunderstanding between the Polish authorities and the EIB in this respect, which was due to the fact that the EIA Directive was not properly transposed into Polish law and the EIB did not carry out enough verifications as regards this aspect.

THE DECISION

1 Failure to ensure compliance with the EIA Directive and namely failure in monitoring the EIA procedure carried out in Poland

1.1 Following the 2001 disastrous floods in Poland, the EIB signed on 20 December 2001, the Finance Contract with the Polish Government to cover the "Flood Damage Reconstruction II" project (the "Project"), which consisted of a very high number of schemes to be carried out on different streams and rivers (726 schemes in total). The Promoters of the Project were the Polish Ministry of Agriculture and Rural Development and the Polish Ministry of Environment. The implementing agencies were the local offices of the Regional Water Development Authorities and Provincial Boards of Land Improvement and Water Facilities.

The complainants, two Polish environmental NGOs, alleged that the EIB failed to ensure the Project's compliance with Council Directive 85/337/EEC of 27 June 1985 on the assessment of the effects of certain public and private projects on the environment(15), as amended by Council Directive 97/11/EC of 3 March 1997 amending Directive 85/337/EEC on the assessment of the effects of certain public and private projects on the environment (the "EIA Directive"). ("first allegation")

In support of their allegation, the complainants referred to the May 2001 EIB Environmental Statement, according to which all projects financed by the EIB in the EU as well as in the then Accession Countries were obliged to comply with both national and EU environmental law concerning environmental impact assessment ("EIA"), including the EIA Directive.

They also alleged that the EIB failed to exercise due diligence in its October 2004 monitoring mission to Poland. ("second allegation")

The complainants claimed that, in the future, the EIB should ensure that all projects that it agrees to finance in non-Member States comply with the EIA Directive. ("first claim")

1.2 In its opinion on the complaint, the EIB took the view, in summary, that it checked diligently the Project's compliance with the EIA Directive, and that it correctly made its technical, environmental and economic appraisals. The EIB carried out the introductory mission to Poland in September 2001, before signing the Finance Contract, and conducted monitoring missions in the course of the Project's operation, namely, in May 2002 and in October 2004. The EIB found that the EIA procedures applied by the Polish authorities were acceptable. Moreover, according to the Finance Contract, the Polish authorities informed the EIB every six months of any schemes requiring an EIA and sent reports of EIAs, if any. However, according to European law, only one scheme (Wiory) required an EIA because it was classified as an Annex I scheme under the EIA Directive. Almost all the other schemes were classified as being covered by Annex II of the EIA Directive, which meant that it was the national authorities which were required to determine, on the basis of national law, whether such projects required an EIA. Because the vast majority of schemes involved limited scale reconstruction of existing hydraulic infrastructure, full EIA procedures were not considered necessary by the Polish authorities. The EIB also assessed the reports on the execution of the project sent by the Polish authorities.

During the October 2004 mission, the EIB met with the Polish authorities and its technical staff conducted site visits of 14 schemes and found that the environmental procedures were correctly applied.

The EIB also stated that, in order to improve its procedure and disseminate EU best practice, it appointed an international consultant to carry out a review of "best practice in strategic planning, and implementation of flood defences, including environmental aspects" as regards the schemes which the Bank finances in the Czech Republic, Italy, Poland and Romania.

1.3 At the outset, the European Ombudsman understands that the complainants wished to refer to the above schemes of the Project which were carried out between 11 August 2001 and 31 July 2002, and which were classified as Annex II schemes under the EIA Directive. The complainants took the view that, as regards these schemes, the Polish authorities did not carry out the EIA procedure but that this was in accordance with the then applicable Polish law which introduced exceptions to the execution of an EIA procedure, namely, (i) the so-called "flood law"(16), dated 11 August 2001, (ii) the flood law's executing provisions(17) dated 7 September 2001, and (iii) the order of the Council of Ministers of 24 September 2002 specifying the enterprises for which an EIA was required(18). However, the complainants argue that these exceptions did not comply with the EIA Directive. According to the complainants, the provision in the Polish law excluding the need of an EIA for works classified as conservation and reconstruction works as a result of the flood law is in conflict with European law. When signing the Finance Contract, the EIB should have known about this.

In this respect, the Ombudsman recalls that, according to Article 195 of the EC Treaty, the Ombudsman has the power to receive and examine complaints about maladministration in the activities of the Community institutions and bodies. No action by another authority or person may therefore be the subject of a complaint to the Ombudsman. It is not the task of the Ombudsman to examine the merits of Community legislation or national legislation and whether the national authorities correctly applied the national or European law.

For the above reason, the Ombudsman's inquiry into the present complaint deals exclusively with possible maladministration on the part of the EIB.

1.4 Further, the Ombudsman notes that, in May 2001, the EIB issued a document entitled "European Investment Bank Environmental Statement - The EIB and the environment objectives, operations and approach", which, according its first paragraph "Policy objectives" outlines the Bank's approach to environmental issues when financing projects.

The part of the above EIB document entitled "A Common environmental approach to all projects" provides, inter alia, as follows:

(i) "When weighing up the environmental applicability of a project for bank financing the following considerations are taken into account: (...) the presence/absence of any legal compliance issues".

(ii) "In the EU, as well as in general in the accession countries, all projects financed by the EIB should comply with both national and EU environmental law, including the EIA Directive. (...)".

(iii) "The Promoter is responsible for legal compliance, whereas regulatory and enforcement tasks lie with the competent authorities." (Emphasis added).

1.5 Although the above EIB document is not a source of legal obligations, it is an important declaration of EIB policy with which it has declared it wishes to comply. On the basis of the above document, the Ombudsman understands that, in the accession countries, the EIB limited itself to financing only the works which were compliant at the same time with national environmental law and with the EIA Directive. It appears that the EIB decided to require that all projects submitted for its financing and likely to have a significant effect on the environment be subject to the EIA procedure as set out in the EIA Directive. Furthermore, the outcome of such an EIA determines the acceptability of a project for financing, and, once co-financed, requires that the project must be monitored from the environmental perspective.

1.6 The Ombudsman points out, however, that, in order to act in accordance with its above Environmental Statement, the EIB appears to be largely dependent on information provided by national authorities, when it comes to checking whether the environmental legal provisions have been applied to any project financed by the EIB and operating in the territory of the country concerned.

1.7 In this respect, the Ombudsman notes the complainants' statement in their observations that the EIB and not national implementing agencies retained ultimate responsibility for ensuring proper procedural and legal framework as regards the EIA.

1.8 It should be noted however that the EIA procedure as required by the EIA Directive should be carried out by national authorities(19).

1.9 In this respect, the Ombudsman considers it useful to recall the principle of mutual duty of sincere co-operation imposed on the Community institutions and its Member States by Article 10(2) of the EC Treaty. Furthermore, the above principle has been invoked by the Community Courts in the context of the infringement procedure under Article 226 of the EC Treaty(20). Both Articles provide that Member States shall abstain from any measure which could jeopardise the attainment of the Treaty's objectives.

1.10 The Ombudsman notes that, at the time when the EIB was to take a decision as to whether to finance the Project, that is, in 2001, Poland was an accession country and, as such, not yet bound by European law in general or the EIA Directive in particular. However, according to the EIB Environmental Statement, the EIB's decision with regard to the financing of the Project could only be positive if the Project proposed for its financing complied with the EIA Directive. Taking into account the above mentioned principle of sincere co-operation by analogy to the present case, the following question arises: Could the EIB legitimately expect the Polish authorities to carry out, with the greatest of care, the obligations laid down in the EIA Directive?

1.11 The Ombudsman points out that, on 16 December 1991, Poland signed the Europe Agreement with the Community(21), whose scope and objectives comprised practically all the areas of Community activity, including environmental protection and which recognised that the economic integration of Poland depended essentially on the approximation of the present and future laws of that country to Community law.

The Ombudsman therefore considers that the EIB could reasonably expect that the Polish authorities would act according to the spirit of the Europe Agreement and would not apply the national EIA procedure in a manner not consistent with Community law(22).

1.12 In this respect, the Ombudsman recalls Case C-72/95 Kraaijeveld(23), which, as was also underlined by the complainants in their original complaint, is of great importance in respect to the interpretation of the EIA Directive. In the above case, the Court held, in summary, that not only the new flood control measures but also those which modify the old, already existing, flood control measures should be subject to an EIA. The Court also stated that the scope of EIA Directive should be interpreted widely and its purpose very broadly, in the sense that any works which are likely to have significant effects on the environment should undergo an EIA. The Court stated, in particular, that

"a member state which establishes the criteria or thresholds necessary to classify projects relating to dykes at a level such that, in practice, all such projects are exempted in advance from the requirement of an impact assessment exceeds the limits of its discretion under article 2(1) and 4(2) of the directive unless all projects excluded could, when viewed as a whole, be regarded as not being likely to have significant effects on the environment"(24).

1.13 With respect to the above case-law, the Ombudsman points out that, on the basis of the information provided by the EIB, it appears that the EIB was ensuring compliance with the EIA Directive of the environmental screening mechanisms applied by the Polish authorities by, mainly, (i) checking the periodic monitoring and summary reports of the overall programme submitted by Polish authorities, and (ii) by conducting missions in loco.

1.14 Therefore, the Ombudsman himself has examined two Polish reports apparently assessed by the EIB, namely, the "Report on environmental impact of the works realised within the Flood Damage Reconstruction Project II" ("the 2002 Polish Report") drafted in December 2002 by the Polish Ministry of Environment (Regional Water Management Authorities in Gliwice, Krakow, Warszawa and Gdansk), and the "Summary Report on the Environmental Impact and Mitigation", drafted by the Polish Ministry of Agriculture and Rural Development in March 2003 ("the 2003 Polish Report"). These two reports were submitted to the EIB by their authors and attached by the EIB to its reply to the Ombudsman's further questions.

The Ombudsman notes that the 2002 Polish Report referred, to a large extent, to the issue of comparing the Polish law with Directive 97/11/EC. According to that Report "[r]iver training and flood protection structures, excluding their maintenance and reconstruction (...) are qualified as the enterpriseswhich may require [EIA] Report elaboration." (Emphasis added). Moreover, the Ombudsman notes that, in the specific paragraph of the 2002 Polish Report entitled "Works scope description - impact on environment", it is stated, as regards the repairing works, that "works of that type do not cause changes of [sic] the environment".

The Ombudsman also notes that, on page 12 of the 2003 Polish Report, in the part entitled "The Characteristics of the main types of works performed and their effects on the environment", it is stated, as regards "the repair, reconstruction and modernisation works performed on [the] basic [sic] of water drainage and flood control installations (...)" that "the works performed on such installations and the subsequent use thereof have no effect on the climate and air, as the installations concerned existed before." Furthermore, on page 25, in the part entitled "Conclusions", it is stated that "[t]he effects of the works involved on animals and plants are harmful during the performance thereof. However, once complete, these works will have only small effects on animals and plants".

1.15 However, the Ombudsman further notes that, in its Appraisal Report, issued before the Finance Contract had been concluded and the above Polish reports made, the EIB stated that "[its] loan will be used to finance urgent schemes forming part of an overall programme of reconstruction, rehabilitation and modernisation of Poland existing flood management infrastructure" and that "national procedures require an EIA for all works affecting main rivers (...)." (Emphasis added).

1.16 The Ombudsman takes note of the discrepancy between the EIB's finding in its Appraisal Report of 2001 and the statements contained in subsequent Polish Reports of 2002 and 2003 concerning the EIA for the reconstructions/maintenance works and also of the above-quoted Case C-72/95 Kraaijeveld. In this respect, the Ombudsman considers that, when checking the Polish 2002 and 2003 Reports, the EIB could have reasonably became aware, on the basis of statements quoted in point 1.14 above, that there was a serious possibility that the interpretation given to the EIA Directive by the Court, referred in point 1.12 above, could not have been followed by the Polish authorities. It would therefore have been reasonable for the EIB to seek clarification from the Polish authorities as whether they were aware of such interpretation and eventually instruct them with respect to its content and implications. Moreover, it could have been reasonable for the EIB to check and try to clarify the above mentioned discrepancy between the EIB's finding in its Appraisal Report of 2001 and the statements contained in subsequent Polish Reports concerning EIAs needed for the reconstructions/maintenance works.

On the basis of the available evidence, it appears however that there was no reaction whatsoever on the part of the EIB towards the Polish authorities in respect to the lack of environmental screening for the reconstructions and repairs works until 2004, when the Polish NGOs complained to the EIB that the Polish authorities abusively classified flood measures as reconstruction or repairs, that is to say, as old flood measures, in order to avoid the environmental screening which Polish law required for such kinds of works.

Moreover, the EIB did not answer the Ombudsman's further question as to whether the Bank had ever requested additional explanations as regards the reports, sent to it by the Polish authorities (except Wiory) but only stated that it was satisfied with the reports. In addition, the EIB´s answer to the Ombudsman's further question as to whether it instructed the Polish implementing agencies as to what they had to do in order to act in accordance with European law was not precise, since the EIB only referred to some "discussions" with the Polish authorities during the appraisal phase but did not give more details concerning their content.

On the basis of the above considerations the Ombudsman concludes that the EIB failed to react to the 2002 and 2003 Polish Reports, on the basis of which it appeared that the Polish authorities did not consider the EIA Directive procedure necessary for the flood reconstructions and repairs works. These views of the Polish authorities appeared to be contrary to the interpretation given by the Court to the EIA Directive. By its above failure, the EIB committed an instance of maladministration and a critical remark will be made in this respect. Given that this issue relates to events which took place in the past, the Ombudsman does not propose a friendly solution to this aspect of the case.

1.17 As regards the missions in loco, the Ombudsman notes that the EIB's first mission to verify the Project's compliance with European environmental standards took place in September 2001, that is, three months before the Finance Contract was signed. Its timing reasonably suggests that the results of the mission could have had an impact on the EIB's decision as to whether to finance the Project or not. According to the EIB, during the mission, its technical experts assessed the national EIA procedures and the capacity of local Promoters and found that they were "acceptable". It appears however that the EIB’s positive experience with the Polish counterparts from the previous loan operation concerning another flood reconstruction programme, the 1997 "Odra operation loan", was decisive as regards the Bank's conclusion on the Project's compliance with the environmental standards. In the Ombudsman’s view, the apparently short period taken to decide about the loan in the urgent post-flood situation justifies such an approach.

Moreover, the Ombudsman notes that, according to the Appraisal Report dated 9 October 2001, special conditions for the loan are specified, including the following condition: "in the Allocations Requests the Polish authorities will clarify how the requirements of the Directive 97/11 EC will be met."

1.18 As regards the further monitoring missions of May 2002 and October 2004, the Ombudsman notes that, according to the EIB, it visited the schemes which had previously been chosen by the Polish authorities as being representative of the character of works performed, the implementing agencies involved and their geographical location. Such an approach appears to be reasonable. The Ombudsman notes the complainants' remark that, in the course of 2004 mission, only 1.9%, that is 14 out of 726 schemes were seen by the EIB. However, he does not see how the EIB could have made better use of its human resources, apart from checking some representative examples of the schemes in the first place and then, in the event that the results were to prove to be negative (which does not appear to be the case), repeating its mission later and checking more schemes.

1.19 It also appears that, while the 2002 mission was a "regular" one, in the sense that it was meant to discuss the selection of the schemes and the allocation procedure, the 2004 mission was organised in response to the complaints submitted to the EIB by certain NGOs, including the complainants. For that reason, in the Ombudsman's view, the EIB could be reasonably expected to be particularly careful in relation to the following: (i) checking whether there was clear proof of diligence in the steps taken by national authorities; (ii) checking in particular that national EIA procedure complied with the EIA Directive; and (iii) checking that the schemes that were likely to have an EIA had been the object of a public consultation before any consent for works was given.

The Ombudsman analysed therefore the report of the 2004 mission which the EIB attached to its further reply. The Ombudsman notes that, as regards all 14 schemes questioned by the NGOs during their meeting with the EIB, the latter asked the implementing agencies for an explanation and that such explanation was given (except for the Chochlo scheme, but an explanation in relation to this scheme was indeed submitted at a later stage). Moreover, in its report on the mission, the EIB referred, in point 8.2, to the "consultation procedures" and stated that:

"For the schemes visited by the Bank, stakeholder consultation prior to starting works was the norm but not universal. Under Polish environmental procedures, public consultation through a consultation committee is required for new river engineering schemes and schemes in known sensitive areas. For all works requiring a water permit NGOs can comment on the schemes. However, local NGOs do not necessarily know about the schemes before they start. It also appears that works classified as "renovation/reconstruction" of existing infrastructure can proceed without such consultation. NGOs can play a valuable role in representing nature conversation interests, even when local residents may be more concerned about increasing flood flow capacity and protecting infrastructure." (Emphasis added)

The above conclusion concerning the participation of NGOs in the consultation process appears to be accurate and, considered in the entire context, more exhaustive than the reference made in the EIB's opinion on the complaint that "the norm (...) was consultation with the public and local NGOs."

In this respect, the Ombudsman notes that, on 7 December 2004, the EIB wrote a letter to the Chancellery of the Polish Prime Minister, in which it stated that

"all schemes involving in-river works shall be subject to a rapid baseline ecological survey to identify protected species or habitats even if works are classified as "restoration/reconstruction" and

"the river basin management plan prepared under the Water Framework Directive (...) offers an opportunity to review the balance between nature conversation and flood defence through improved dialogue between management authorities and all representatives of civil society." (Emphasis added).

The Ombudsman notes that the above letter appears to be a follow up given to the NGO complaints submitted during the EIB monitoring visit to Poland in 2004, which alleged that the Polish authorities abusively classified the flood measures as reconstruction or the repairs that is to say, as old flood measures, in order to avoid the environmental screening which was required by Polish law. This letter also corresponds to the conclusions contained in the Report on the 2004 mission drafted on 6 December 2004 (see point 9 "Lessons learned, Ecological screening" of the Report on the 2004 mission).

The Ombudsman considers such a follow up to be reasonable and does not find therefore that further inquiries are necessary as regards the complainants´ second allegation that the EIB failed to exercise due diligence in its October 2004 monitoring mission to Poland.

1.20 The complainants claim that, in the future, the EIB should ensure compliance with the EIA Directive of all projects that it agrees to finance in non-Member States. In this regard, the Ombudsman notes that the EIB did not specifically address this claim in its replies made in the course of the inquiry but referred to its initiative to improve its procedure and disseminate EU best practice. The EIB also stated that it commissioned a British consultant to prepare a review of best practice in EU flood risk management, including planning, design and implementation, "as part of the EIB`s on-going commitment to reviewing its procedures and promoting best practice at the EU level" and that the review is specifically focussing on the current practice in Poland. The Ombudsman also notes that, according to the EIB, the review study will be relevant for the EIB's forthcoming "Guide for EIB funded Flood Defence Projects in the EU". Moreover, the Ombudsman notes the EIB's statement in its reply to the Ombudsman's further question that it is "proactively engaged with the Polish authorities to see what lessons can be learnt for future flood defence projects in terms of EU best practice."

In light of the above, the Ombudsman does not find that further inquiries are necessary as regards the complainants' claim.

The Ombudsman trusts that the EIB could also take into account the results of the present inquiry in its further co-financing of similar projects in the non-Member States and will make a further remark in this respect below.

2 Access to documents

2.1 The complainants alleged that the EIB failed to provide access to all the documents related to the Project ("third allegation") and claimed that it should provide such access. ("second claim")

The complainants referred to the (i) Finance Contract signed between the EIB and the Polish Government in 2001; and (ii) documents related to the Finance Contract, such as non-technical EIA documents and progress reports; documents containing information on the costs of the foreseen schemes, building permits, water analysis; and the evaluation documentation regarding damage by the 2001 flood and seeking to establish which schemes involved reconstructions and which represented new investments.

2.2 As regards the Finance Contract, the EIB, in its direct contacts with the complainants prior to the Ombudsman's inquiry, the EIB maintained that it could not give access to it on the grounds that disclosure would undermine the protection of its obligation of banking professional secrecy and would be contrary to professional ethics, rules and practices applicable in the banking and financial sector, pursuant to Article 4(1)(vii) of the EIB's "Rules on public access to documents" in its version of 2002. However, the EIB added that it had no objection to a decision by the Promoters of the Project, that is, the Polish Ministry of Agriculture and Rural Development and Polish Ministry of Environment and of the borrower, namely, the Polish Ministry of Finance, to provide the complainant with the information contained in the Finance Contract. In the course of the inquiry, the EIB referred to Article 28 of its recent rules on access to documents dated 2006(25) and stated, in summary, that it cannot disclose any finance contract and that even partial disclosure to a finance contract would go against the EIB's obligations towards its clients(26). The EIB also informed the Ombudsman that it had taken a proactive stance and asked the Ministry of Finance in Poland whether the complainants could have access to the Finance Contract and, as a result, was informed by the said Ministry that it had invited the complainants to consult the Finance Contract in its offices.

As regards the documents referring to the Finance Contract, the EIB, in its letter dated 21 January 2005, refused to disclose them on the ground that "[a]s these concern the professional evaluations and opinions, they form part of the Bank's internal decision making process" and "[a]s such are not available to the public in accordance with Article 4viii of the EIB's Rules on Public Access." On that date, the EIB only disclosed the non-technical summary of the Kuznice scheme and the summarised conclusions of the EIB's 2004 mission to Poland.

In the course of the inquiry, the EIB disclosed (i) the EIB Appraisal Report Flood Damage Reconstruction Project II of 9 October 2001; (ii) the EIB Project progress report on the 2004 monitoring mission; (iii) the Report on the EIA with respect to the works carried out as part of the Project, drafted by the Polish Ministry of the Environment and dated December 2002, and (iv) the Summary Report on environmental impact and mitigation drafted by the Polish Ministry of Agriculture and Rural Development and dated March 2003.

Finance Contract

2.3 The Ombudsman notes that Article 4(1)(vii) of the EIB's "Rules on public access to documents" states that

"[a]ccess to all or part of a document shall be refused where its disclosure would undermine (...) the protection of the obligation of professional secrecy where such disclosure were to be contrary to professional ethics, rules and practices applicable in the banking and financial sector" (emphasis added).

The EIB also implied, by referring to its newest rules on public access to documents, dated 2006, that finance contracts are covered by professional secrecy as a matter of principle. The EIB further clarified that, in their banking relationship with it, its counterparts have the legitimate right to expect that, as a bank, it will act within the established legal framework and will not divulge information protected by the obligation of banking confidentiality.

2.4 The Ombudsman recalls therefore that, in his earlier decision concerning a request for access to a finance contract signed by the EIB with national authorities (case 948/2006/BU)(27), he considered it reasonable to accept that the EIB, in its role as a standard banking institution, is obliged to respect banking professional secrecy. In the same case, the Ombudsman also considered that it is the EIB's prerogative to decide whether or not a document contains confidential information(28), and that, in that case, it had adequately relied on Article 4(1)(vii) of its rules on public access to documents and therefore provided adequate reasons for rejecting the complainant's request for access.

Moreover, in the present case, the Ombudsman notes the EIB's " proactive stance" in asking the Ministry of Finance in Poland whether the complainants could have access to the Finance Contract and that, as they themselves confirmed in their observations, the complainants had been able to consult that contract in the premises of the above Polish Ministry.

The Ombudsman does not therefore find any instance of maladministration as regards this aspect of the complaint.

Documents related to the Finance Contract

2.5 The Ombudsman notes that, when replying in substance, on 21 January 2005, to the complainants request for access submitted to the EIB on 26 March 2004, the Bank refused to disclose the majority of the documents related to the Finance Contract, on the grounds that they concerned the professional evaluation and opinions forming part of the EIB's internal decision-making process.

2.6 The Ombudsman further notes and welcomes the fact that the EIB disclosed a number of these documents while replying to the Ombudsman’s request for further information in May 2007. The Ombudsman also notes that in their observations, the complainants appeared to consider that these documents corresponded to their original request but were not satisfied that the EIB did not disclose them before.

2.7 The Ombudsman understands the complainants' dissatisfaction.

The Ombudsman notes that, in the course of the present inquiry, the EIB disclosed (i) the EIB Appraisal Report dated 9 October 2001; (ii) the EIB Project progress report on the 2004 monitoring mission, dated 6 December 2004; (iii) the Report on the EIA of the works carried out as part of the Project drafted by the Polish Ministry of the Environment and dated December 2002, and (iv) the Summary Report on the environmental impact and mitigation drafted by the Polish Ministry of Agriculture and Rural Development and dated March 2003. The Ombudsman does not understand why the above documents could be disclosed in 2007 and not in 2004.

Should the Appraisal Report of 9 October 2001 be related to the EIB's decision on co-financing the Project and concluding the Finance Contract, which took place in December 2001, that decision was taken three years before the complainants' original request for access to that document. Should the Reports issued by the Polish authorities and the EIB's Project Progress report on the 2004 mission be related to the EIB's (final) Project Completion Report, according to the EIB, that (final) Project Completion Report was not yet ended in May 2007, when the EIB disclosed the Polish Reports.

In addition, as correctly noted by the complainants in their observations, Article 4(viii) of the EIB's Rules on Public Access to Documents (2002 version) excluded disclosure of documents concerning "the legitimate interests of the Bank in organising its internal management, notably with respect to human resources."

2.8 However, given that the EIB has in fact given access to the documents which the complainants considered to cover their original request for access, the Ombudsman considers that no further inquiries are justified as regards this aspect of the complaint.

3 Conclusion

As regards the complainant's first allegation, the Ombudsman makes the following critical remark:

"By failing to react to the 2002 and 2003 Polish Reports, on the basis of which it appeared that the Polish authorities did not consider that the EIA Directive procedure was necessary for the flood reconstruction and repair works -- an interpretation which appears to be contrary to the one given by the Court of Justice to the EIA Directive -- the EIB committed an instance of maladministration."

Given that this issue relates to the events which took place in the past, the Ombudsman does not propose a friendly solution to this aspect of the case.

As regards the complainant's second allegation, the Ombudsman considers that no further inquires are justified on the basis of his findings in point 1.19 above.

As regards the complainants' first claim, the Ombudsman considers that no further inquires are justified on the basis of his findings in point 1.20 above.

As regards the specific aspect of the complainant's third allegation and of the related second claim concerning access to the Finance Contract, the Ombudsman does not find any instance of maladministration on the basis of his findings in point 2.4 above.

As regards the specific aspect of the complainant's third allegation and of the related second claim concerning access to other documents, the Ombudsman considers that no further inquires are justified on the basis of his findings in point 2.8 above.

The Ombudsman therefore closes the case.

The President of the EIB will be informed of this decision.

FURTHER REMARK

The Ombudsman considers that the NGOs in this case have played a valuable role in bringing to the EIB's knowledge relevant elements which the Bank was previously unaware of. The Ombudsman trusts that the EIB will in the future consider continuing to engage constructively with NGOs in the different Member Countries and also outside the EU.

Yours sincerely,

 

P. Nikiforos DIAMANDOUROS


(1) OJ 1985 L 175, p. 40.

(2) OJ 1997 L 73, p. 5.

(3) Dz.U. Nr 84, poz. 906: Ustawa o szczególnych zasadach odbudowy, remontów i rozbiórek obiektów budowlanych zniszczonych lub uszkodzonych w wyniku działania żywiołu.

(4) Dz.U. Nr 96, poz. 1047: Rozporządzenie Prezesa Rady Ministrów w sprawie ustalenia wykazu gmin, i miejscowości, w których stosuje sie szczególne zasady odbudowy, remontów i rozbiórek obiektów budowlanych zniszczonych lub uszkodzonych w wyniku działania żywiołu.

(5) Dz.U. Nr 179, poz. 1490. Rozporządzenie Rady Ministrów w sprawie określenia rodzajów przedsięwzięć mogących znacząco oddziaływać na środowisko oraz szczegóły kryteriów związanych z kwalifikowaniem przedsięwzięć do sporządzenia raportu o oddziaływaniu na środowisko.

(6) Respectively, Directive 97/62/EEC (OJ L 206), and Directive 79/409/EEC (OJ L 103).

(7) The legal opinion of Polish experts was attached to the complaint.

(8) Case C-72/95 Kraaijeveld [1996] ECR I-5403, paragraphs 32 and 49.

(9) Directive 2000/60/EC (OJ 2000 L 327 p.1).

(10) Directive 92/43/EEC on the conservations of natural habitats and of wild fauna and flora (OJ .1992 L 206 p. 7.)

(11) Directive 2003/35/EC of the European Parliament and of the Council of 26 May 2003 providing for public participation in respect of the drawing up of certain plans and programmes relating to the environment and amending with regard to public participation and access to justice Council Directives 85/337/EEC and 96/61/EC, OJ 2003 L 156, p. 17.

(12) World Wide Fund for Nature.

(13) Ogólnopolskie Towarzystwo Ochrony Ptaków.

(14) UNECE (United Nations Economic Commission for Europe) Convention on access to information, public participation in decision-making and access to justice in environmental matters, done at Aarhus, Denmark on 25 June 1998, published in OJ 2005 L 124, p. 4. The Aarhus Convention was approved, on behalf of the European Community, by Council Decision 2005/370/EC of 17 February 2005 on the conclusion, on behalf of the European Community, of the Convention on access to information, public participation in decision-making and access to justice in environmental matters, OJ 2005 L 124, p. 1.

(15) See note 1.

(16) See note 2.

(17) See note 3.

(18) See note 4.

(19) The Ombudsman notes that, according to the fifth recital in the preamble thereto, Directive 85/337 is intended to establish general principles for the assessment of environmental effects with a view to supplementing and co-ordinating development consent procedures governing public and private projects which are likely to have an effect on the environment.

For this purpose, Article 1(2) of Directive 85/337 defines development consent as the decision of the competent authority or authorities which entitles the developer to proceed with a project.

Article 2(1) of the Directive states: "Member states shall adopt all measures necessary to ensure that, before consent is given, projects likely to have significant effects on the environment by virtue inter alia of their nature, size or location are made subject to an assessment with regard to their effects. These projects are defined in article 4."

Article 4 of the Directive provides:

1. Subject to article 2(3) projects of the classes listed in annex I shall be made subject to an assessment in accordance with articles 5 and 10.

2. Projects of the classes listed in Annex II shall be made subject to an assessment in accordance with articles 5 to 10, where Member States consider that their characteristics so require.

To this end Member States may inter alia specify certain types of projects as being subject to an assessment of or may establish the criteria and/or thresholds necessary to determine which of the projects listed in Annex II are to be subject to an assessment in accordance with Articles 5 to 10 [emphasis added].

(20) See Case C-10/00 Commission v Italy [2002] ECR I-2357, paragraph 88.

(21) Europe Agreement establishing an association between the European Communities and their Member States, on the one part, and the Republic of Poland, on the other part, concluded and approved on behalf of the Community by Decision 93/743/Euratom, ECSC, EC of the Council and the Commission of 13 December 1993 (OJ 1993 L 348, p. 1).

(22) As regards the legal implications of the Europe Agreements, see Case C-63/99 Gloszczuk [2001] ECR I‑6369; Case C-235/99 Kondova [2001] ECR I-6427; and Case C-257/99 Barkoci and Malik [2001] ECR I-6557, and the judgment of 12 February 2002 of the Polish Supreme Administrative Court (V SA 305/00 Lex Nr 51327).

(23) C-72/95 Kraaijeveld [1996] ECR I-5403, paragraphs 32 and 49.

(24) C-72/95 Kraaijeveld, cite above, paragraphs 31, 32 and 39.

(25) The 2006 Rules are available on the EIB's website (http://www.eib.org/Attachments/strategies/public_disclosure_policy_en.pdf).

(26) In point 28, under the heading "Constraints", the New Rules contain the following exception to the principle of disclosure: "Information typically forming part of the Bank's confidential relationship with its business partners includes the financing request by a project promoter, loan pricing information, and the Finance Contract. The Bank does not object to project promoters, borrowers, or other competent parties making information available on their relationship and arrangements with the EIB."

(27) The Ombudsman's decision on the above case is available on his website (http://www.ombudsman.europa.eu).

(28) Case 53/85 Akzo Chemie v Commission [1986] ECR 1965, paragraph 29.