The background to the complaint

1. On 22 July 2015, the European Bank for Reconstruction and Development's (’EBRD’)[1] Board of Directors took a decision to contribute EUR 416 million under a syndicated loan (’the loan’) for the Lukoil Shah Deniz II Project, an offshore gas exploration and production project in Azerbaijan. The European Union is represented on the ERBD’s Board of Directors by a representative from the European Commission (the ’EU Director’), who participated in the vote on the loan.

2. The complainant, Counter Balance, is a European coalition of NGOs which aims to “make European public finance a key driver of the transition towards socially and environmentally sustainable and equitable societies”[2]. On 27 July 2015, it requested public access[3] to the instructions given by the Commission’s Directorate-General for Economic and Financial Affairs (DG ECFIN) to the EU Director regarding the decision, as well as any official documents regarding the Commission's position on the loan.

3. On 13 August 2015, in response to the request, the Commission granted access to correspondence between a Member of the European Parliament (MEP) and the Director-General of DG ECFIN concerning the EBRD’s intention to grant the loan. The MEP had asked the Commission to vote against the loan, as the beneficiary company was registered in a country (Russia) against which the EU had imposed sanctions. DG ECFIN replied that the beneficiary was not currently on the list of companies subject to EU sanctions and that the Commission (through its representative in the EBRD Board of Directors) would, in any event, assess the full details of the project before reaching a position on the vote. 

4. On 25 August 2015, the complainant requested that the Commission review its decision on its request for access to documents related to the loan and disclose the instructions given to the EU Director.

5. On 11 September 2015, the Commission replied that it had given the EU Director no instruction concerning the decision on the loan.

6. On 6 October 2015, the complainant wrote to the Commission arguing that its failure to give instructions to the EU Director about the loan infringed the obligation to promote fundamental EU values in the EU’s relations with non-EU countries. The complainant stated that DG ECFIN is in charge of the EU’s relations with the European Investment Bank (EIB) and the EBRD. The complainant noted that DG ECFIN’s 2015 Management Plan mentions that it ensures, through its representation on the EBRD’s Board of Directors, that EBRD policies are aligned with EU policies.[4]

7. Based on the above, the complainant asked the Commission to provide clear answers on: (i) the procedures it uses to give instructions to the EU Director in the EBRD; (ii) the reasons why it had not done so in this case; (iii) the Commission’s official position on this loan, and how this complied with the EU’s human rights commitments, given concerns about the situation in Azerbaijan; and (iv) how, in the absence of instructions, the vote of the EU Director complied with the EU’s obligations under the Treaty of the European Union (TEU) to promote human rights in Azerbaijan.

8. On 26 November 2015, the Commission replied to the complainant. It stated that it was up to the EU Director, under the ultimate authority of the EU Governor and the EU Alternate Governor of the EBRD, to decide on the EU’s position. This was done on a case-by-case basis, in order to ensure that the EU position reflects the priorities of the EU as a whole, including compliance with Article 21 of the TEU. It stated that there was no formal Commission decision or instructions on voting in the Board of Directors regarding projects subject to EBRD votes. It stated that, with regard to the loan in question, the EU Director assessed the full details of the project before reaching a position. In doing so, he considered, among other issues, the status of the EU’s sanctions on Russia at the time, the environmental impact report[5] and the importance of the project for the Southern Gas Corridor. Finally, it stated that the EU continuously raises the precarious human rights situation in Azerbaijan with the Azerbaijani authorities at all levels, but that the EU did not consider that opposing the decision to provide financing to this project would have a favourable impact. While it did not say so explicitly, it seems clear that the EU Director voted in favour of granting the loan in question.

9. Dissatisfied with this response, the complainant turned to the European Ombudsman on 4 March 2016.

The inquiry

10. The European Ombudsman opened an inquiry into the complaint. She assessed the complainant’s claim that, by failing to take a formal position or give specific instructions to the EU Director regarding the vote on the loan, the Commission infringed the obligation to promote fundamental EU values in the EU’s relations with non-EU countries, as set out under the TEU and the Charter. The Ombudsman also assessed the complainant’s claims that the Commission should (1) establish an official procedure to systematically give instructions to the EU Director for voting at the EBRD Board of Directors and (2) systematically disclose to the public its position and the instructions given to the EU Director in the Board of Directors. The procedure to give instructions (according to the complainant) should a) include an ‘inter-service consultation’[6] process leading to the adoption of an opinion on a given project, and b) involve all the relevant departments of the Commission and the European External Action Service (EEAS), so that the instructions on voting comply with the EU’s external action principles, in particular concerning human rights.

11. On 4 July 2016, the Ombudsman inspected the Commission’s files dealing with decisions on loans by the EBRD, in general, and on this loan, in particular. The Ombudsman also asked the Commission to explain whether it had a procedure in place similar to the procedure it has for board meetings of the EIB (where the Commission prepares briefings for the Director and the Alternate Director). Subsequently, the Ombudsman received the Commission’s reply and the complainant’s comments on the Commission’s reply.

12. In conducting the inquiry, the Ombudsman has taken into account the arguments and opinions put forward by the parties.

Failure of the Commission to provide formal instructions to the EU Director and to do so transparently

Arguments made by the complainant and the institution

13. The complainant argued that, in accordance with the TEU and the Charter, the Commission is obliged to ensure the promotion of core EU values in its relations with non-EU countries. To this end, the Commission should ensure that the EU representative on the Board of Directors must support only those projects that are in line with these values. The complainant argued that the Commission should have a procedure for EBRD board meetings similar to the one it has for EIB board meetings, where the Commission formally issues opinions for each project under consideration after carrying out ‘inter-service consultations’. The complainant considered that the Commission should also provide such an opinion for EBRD board meetings, together with instructions to the EU Director on how to vote.

14. In its reply, the Commission argued that although it does not adopt a formal position or provide instructions to the EU Director, a process is in place for the relevant Commission and EEAS departments to provide advice to the EU Director.

15. It said that its procedures for preparing for EBRD and EIB board meetings were different due to the different nature of the EU’s relationship with these institutions. It noted that the EBRD is a multilateral institution in which its 67 “shareholders” have voting rights corresponding to the shareholdings. The EU holds a share of 3.05% of the capital, has corresponding voting rights and is bound by the same rules as all other EBRD members[7]. The EIB on the other hand is established under the Treaty on the Functioning of the EU (TFEU), and the Commission is consulted on its financing of projects in accordance with Article 19 of the EIB Statute. The Commission further noted that, according to the rules governing the EU’s membership of the EBRD[8], in voting on behalf of the EU at EBRD board meetings, the EU Director must comply with the approach that has been agreed by all the Directors of the EU Member States[9].

16. The Commission stated that, before each EBRD board meeting, the EU Director attends a regular EU coordination meeting at which directors from the EU Member States discuss the project proposals on the agenda of the board meeting. The EU Director also consults with the relevant Commission and EEAS departments on all the aspects of the projects being considered by the EBRD’s Board of Directors[10]. It noted that DG ECFIN supports the EU Director in preparing the EU position by coordinating the consultations on EBRD strategies, policies and projects between the Commission departments and the EU Director’s office. The EU Director determines the EU voting position on a case-by-case basis taking into account the Member States' views, as well as advice received by the Commission and EEAS departments, with the aim of reflecting the priorities of the EU as a whole. This wide consultation process was followed for the loan in question.

17. Regarding the complainant’s claim that the Commission should systematically disclose to the public the Commission's position and the instructions given to the EU Director, the Commission stated that the advice it provides to the EU Director constitutes internal opinions. Any disclosure of documents related to the activities of the EBRD Board of Directors would have to comply with the EBRD's Public Information Policy and the confidentiality requirements arising from the EBRD’s ‘Code of Conduct for Board Officials’. For these reasons, the Commission could not systematically disclose to the public its advice to the EU Director. However, it pointed out that it has now improved the publicly-available information on its website regarding the procedure it follows for advising the EU Director[11].

18. The complainant argued that the Commission is bound by Article 21 of the TEU in the context of EU external operations regardless of how the individual Member States act. It acknowledged the process in place to provide advice to the EU Director and thanked the Commission for publishing this information on its website. However, the complainant considered that this procedure was not sufficient to ensure that the EU Director’s decisions are in line with EU law. It argued that the consultation process put in place does not ensure that the EU Director’s position, once taken, respects EU law.

19. The complainant also acknowledged that the legal framework for EU participation in the EBRD is of a different nature to that of the EIB. It stated that while the Commission may not be required to issue a formal opinion on the projects financed by the EBRD, as it is obliged to do with the EIB, it should nevertheless give instructions to the EU Director.

20. The complainant argued that it is in the public interest that the Commission discloses the instructions it gives to the EU Director as well as the EU Director’s voting position[12]. It noted that the Commission is, for instance, bound to disclose environmental information under the Aarhus Convention[13], which should include the Commission’s instructions to the EU Director and the EU Director’s voting position on projects having environmental consequences.

The Ombudsman's assessment

21. The Ombudsman notes that DG ECFIN’s Management Plan for 2015[14] and its Strategic Plan 2016-2020[15] commit it to ensuring that the EBRD’s policies are increasingly aligned with EU policies. It aims to do so through its representation on the Board of Directors of the EBRD.

22. The Ombudsman further notes that under the rules governing the EU’s membership of the EBRD[16], the EU Director and the representatives of the Member States should hold regular “consultations” before adopting positions within the EBRD. This is particularly the case for issues “having important political or financial implications for the Community or the Member States”. The rules also provide that the EU Director “will comply with the approach which has been agreed to by all representatives of the Member States.” If there is no consensus between the Member States, the EU Director may decide either to comply with the approach agreed by a qualified majority or by a simple majority of the Member States or to abstain. Under the rules, the Commission can also chose to submit “any question it may consider important for the functioning of the Bank” to the ECOFIN Council.

23. The Ombudsman notes that there is a procedure in place for the relevant Commission and EEAS departments to provide advice to the EU Director before the meetings of the EBRD Board of Directors take place. The EU Director’s office consults the relevant Commission and EEAS departments, a process that is coordinated by DG ECFIN. In the context of that process the Commission also takes into account the impact of any such project on fundamental rights and values. Moreover, the EU Director also participates in EU coordination meetings with Board Directors from the EU Member States prior to every EBRD Board. The Ombudsman notes that, as confirmed by the inspection, this procedure was followed in relation to the voting on the project in question.

24. It is clear, however, that the EU Director is not free to act of his own volition in terms of exercising his vote at EBRD Board meetings. Under the relevant rules (see para. 22 above), the EU Director is required to vote in accordance with an approach “agreed to by all representatives of the Member States”. It is clear from the rules that the EU Director may vote in accordance with the position of either a qualified majority, or a simple majority, of the representatives of the Member States; but is not clear that the EU Director can vote contrary to the position of a majority (qualified or simple) of representatives of the Member States. This was confirmed by the Commission at the inspection meeting. The advice provided to the EU Director by the Commission/EEAS must certainly be useful for the purposes of the discussion which takes place with the representatives of the Member States. It may be reasonable to assume that the positions put forward by the EU Director may influence his Member State colleagues with the aim of reflecting the priorities of the EU as a whole, including the EU’s obligations under Article 21 of the TEU and the Charter.

25. Having regard to the process in place, and in particular to the constraints placed on the EU Director by the relevant rules, the Ombudsman finds that there was no maladministration by the Commission in not adopting a formal position or giving specific written instructions to the EU Director about how to vote on this loan.

26. Regarding the complainant’s claim that the Commission should systematically disclose its position and the instructions given to the EU Director, the Commission argued that its advice to the EU Director relates to activities of the EBRD Board of Directors, which is covered by the EBRD’s Public Information Policy regarding access to documents. The Ombudsman notes that this is also the case for the EU Director’s voting position prior to a vote at the EBRD. Disclosure of this information would thus need to comply with the confidentiality requirements of the EBRD’s Public Information Policy[17] and its Code of Conduct for Board Officials[18]. Complying with these procedures is likely to make difficult any attempt to systematically publish such information.

27. While the General Court has found that institutions are under no obligation to actively make available information to which they are entitled to refuse access[19], the requirements of transparency and good administration will, in some cases, support the active disclosure of such information. However, the Ombudsman is satisfied that this is not a case in which the active, systematic disclosure of information is warranted.

28. Rather, the Ombudsman considers that the disclosure by the Commission of specific documents relating to EBRD loan votes is best dealt with within the context  of the EU’s Access to Documents Regulation[20]. This allows for a case-by-case examination of whether a document can be disclosed to the public or whether there is some good reason why it should not. Accordingly, the Ombudsman finds no maladministration by the Commission arising from its failure to systematically disclose such information.

29.  However, the Ombudsman suggests that the Commission should publish information on its website on EBRD projects after they have been approved by the EBRD Board of Directors, similar to the information available on EIB projects on the website of the EIB. This should also include information on how the EU Director voted on those projects. 

Conclusion

On the basis of the inquiry into this complaint, the Ombudsman closes it with the following conclusion[21]:

There was no maladministration by the Commission in relation to the issues raised by the complainant in this case.

 

Suggestion for improvement

The Ombudsman makes the following suggestion for improvement to the European Commission:

The Commission should publish information on its website on EBRD projects after they have been approved by the EBRD Board of Directors, similar to the practice of the EIB in the case of its projects. The  information published should include information on how the EU Director voted on those projects.

The complainant and the European Commission will be informed of this decision.

 

Emily O'Reilly
European Ombudsman

 

Strasbourg, 14/12/2017

 

[1] The EBRD is owned by 65 countries, the EU and the European Investment Bank. Each shareholder is represented individually on the Board of Governors of the EBRD, which has overall authority over the Bank. The Board of Governors has delegated the exercise of most of its powers to the Board of Directors, including the power to take decisions concerning loans. All matters before the Board of Directors are decided by a majority vote of those members voting.

[2] http://www.counter-balance.org/about/

[3] Under Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001

regarding public access to European Parliament, Council and Commission documents

[4] Moreover, the complainant referred to various legislative and official documents, which it argued set out the EU’s policy on Azerbaijan: Decision No 1219/2011/EU of the European Parliament and of the Council of 16 November 2011, Recital 12 and Article 3; Decision No 602/2012/EU of the European Parliament and of the Council of 4 July 2012, recital 6; European Parliament resolution of 8 October 2013 (2013/2074(INI)), point 15; statements by the European External Action Service (EEAS) and the Organisation for Security and Co-operation in Europe (OSCE) on the independence of the judicial system, the obstacles to democratic elections and the human rights situation in Azerbaijan (see https://eeas.europa.eu/headquarters/headquarters-homepage/3398/statement-spokesperson-sentencing-mr-intigam-aliyev-prominent-human-rights-lawyer-azerbaijan_en (24 April 2015), http://www.osce.org/odihr/elections/azerbaijan/181611 (11 September 2015) and http://www.osce.org/pc/153811?download=true (23 April 2015)); and European Parliament resolution of 10 September 2015 on Azerbaijan (2015/2840(RSP)), points 15 and 16.

[5] The Environmental and Socio-Economic Impact Assessment for the project.

[6] An ‘inter-service consultation’ is a procedure to request the formal opinion of Directorate-Generals of the Commission on the content of a proposal.

[7] For more information on the EU’s relationship with the EBRD, see https://ec.europa.eu/info/business-economy-euro/growth-and-investment/coordination-european-financial-institutions/coordination-european-bank-reconstruction-and-development_en#euebrd-co-operation

[8] In particular, the Joint Council/Commission Statement accompanying the Council Decision of 19 November 1990 on the conclusion of the Agreement establishing the European Bank for Reconstruction and Development (90/674/EEC).

[9] If there is no consensus among EU Member States, the EU Director may decide either to comply with the approach agreed by a qualified majority or by a simple majority of the Member States or to abstain.

[10] During the inspection, the Commission explained that this consultation process is undertaken by the London Office of the EU Director of the EBRD, which then prepares briefings for the EU Director prior to the board meetings.

[11] https://ec.europa.eu/info/business-economy-euro/growth-and-investment/coordination-european-financial-institutions/coordination-european-bank-reconstruction-and-development_en

[12] The complainant referred to paragraph 19 of an opinion of the Committee on Constitutional Affairs to the Committee on Economic and Monetary Affairs of the European Parliament which “Stresses the need to ensure the full transparency, democratic accountability and legitimacy of the Union’s participation in existing economic and financial institutions” (2015/2060(INI).

[13] The United Nations Economic Commission for Europe (UNECE) Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, to which the EU acceded in 2006: Regulation (EC) No 1367/2006 of the European Parliament and of the Council of 6 September 2006 on the application of the provisions of the Aarhus Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters to Community

institutions and bodies.

[14] Management Plan 2015, DG Economic and Financial Affairs, Mid-Term Review, p. 12.

[15] https://ec.europa.eu/info/sites/info/files/strategic-plan-2016-2020-dg-ecfin_april2016_en.pdf, p. 8.

[16] In particular, the Joint Council and Commission statement to the Council Decision of 19 November 1990 on the conclusion of the Agreement establishing the European Bank for Reconstruction and Development (90/674/EEC).

[17] The Public Information Policy states under ‘E Information considered confidential’ that “the Bank will not disclose documents relating to the Bank’s own decision-making processes and related internal documents, memoranda and other communications that are prepared for, exchanged in connection with, or derived from the Bank’s deliberative or decision-making processes, including any internal documents, memoranda, or other communications that are issued by or between members of the Bank’s Board of Directors, the advisers and staff employed in the offices of the Bank’s Board members, members of the Bank’s management, its staff, or its consultants, attorneys, or agents.”

[18] Rule 10 of the Code of Conduct for Officials of the Board of Directors of the EBRD provides “(a) Board Officials may not disclose Confidential Information to anyone internal or external to the Bank who is not authorised to receive such information (...) (c) (...) “Confidential information” means information that is considered as such by the Bank under the Bank’s Public Information Policy (...)”.

[19] Judgment of the General Court of 13 September 2013, Case T-111/11, ClientEarth v Commission, ECLI:EU:T:2013:482, paragraph 128.

[20] Regulation (EC) No 1049/2001 of the European Parliament and of the Council of 30 May 2001

regarding public access to European Parliament, Council and Commission documents

[21] Information on the review procedure can be found on the Ombudsman’s website: https://www.ombudsman.europa.eu/en/atyourservice/complainantsrights.faces