Does the ECB’s quantitative easing programme fuel climate change? NGO ClientEarth goes back to court after the dismissal of its claims

As we reported in a previous post, the NGO ClientEarth filed on 13 April 2021 a landmark legal action in Belgium against the National Bank of Belgian (“NBB”)’s implementation of the European Central Bank (“ECB”)’s Corporate Sector Purchase Programme (“CSPP”), “to stop “quantitative easing” from European central banks flowing to fossil fuel companies and polluting firms that are exacerbating the climate crisis”. After the dismissal of its claims at first instance in December of last year, the NGO recently announced that it appealed the decision with the Brussels Court of Appeal.

Background and ClientEarth’s claims

The CSPP is a corporate bond purchase programme established by the ECB in 2016 to improve financing conditions for Eurozone businesses as a form of quantitative easing. This programme is implemented by the central banks of Belgium, Germany, France, Spain, Italy and Finland.

According to ClientEarth, the ECB’s decision to establish the CSPP in 2016 would be invalid, and the NBB’s implementation of this decision thus illegal, because the ECB would have failed to assess the climate impact of buying corporate assets through this programme, despite its legal obligations to do so.

ClientEarth requested the Brussels’ French-Speaking Court of First Instance, before which it lodged its claim, to refer the matter for preliminary ruling to the Court of Justice of the European Union, competent for the interpretation of EU law and the review of the validity of EU law acts. If the CSPP were to be ruled invalid, ClientEarth requested the Court to order the NBB to cease purchasing assets under the programme.  

Brussels Court of First Instance dismisses ClientEarth’s environmental cease-and-desist action

ClientEarth lodged its claim on the basis of the Belgian Act of 12 January 1993 regarding claims for the protection of the environment (“Environmental Protection Act”), which allows environmental NGOs to lodge cease-and-desist actions in order to stop operations that are deemed to breach environmental laws.

ClientEarth argued, in substance, that the purchase of assets on the basis of an invalid ECB’s decision to establish the CSPP would constitute a clear violation of European environmental law which should be ordered to cease.

The Court of First Instance rendered its decision on 1 December 2021, dismissing the NGO’s claims. Despite ClientEarth announcing that its arguments would have been dismissed on mere procedural grounds, the Court rather found ClientEarth’s claims unfounded on the merits because it failed to establish that the asset purchases made by the NBB, insofar as they are based on an allegedly invalid decision of the ECB, would constitute a clear violation of directly applicable provisions of Belgian or EU law relating to the protection of the environment:  

• First, the Court found that most provisions invoked by ClientEarth are not “environmental laws” in the meaning of the Environmental Protection Act. Articles 127 and 296(2) of the Treaty on the Functioning of the European Union (“TFEU”) set out general principles on the European system of central banks and the motivation of legal acts and, according to the Court, do not relate to the protection of the environment. As to Articles 2 and 7 of the European Charter of Fundamental Rights (“EU Charter”) and Articles 2 and 8 of the European Convention on Human Rights (“ECHR”), the Court noted that, insofar as they protect the rights to life and to private and family life, these Articles are not “environmental laws”, even though obligations on the EU, Member States or third parties to protect the environment could arise therefrom. The Court reached the opposing conclusion for Article 11 TFEU and Article 37 of the European Charter (which impose on EU institutions and agencies to ensure a high level of environmental protection in their policies and activities) and thus pursued its analysis as to these two provisions.
• Second, the Court assessed whether Article 11 TFEU and Article 37 of the EU Charter would be directly applicable by private persons. The Court found that these provisions are not, as they only lay down principles of action and goals, which would need to be further implemented in concrete and precise rules (through further regulations, directives or decisions).
• Third, the Court found that – in any case, and even if these provisions had direct effect – ClientEarth did not demonstrate that the asset purchase programme would “clearly violate” provisions relating to the protection of the environment (which is a legal requirement under the Environmental Protection Act).

The Court noted that, beyond the general principle of integrating environmental protection into the policies of the EU enshrined in Article 11 TFEU and Article 37 of the EU Charter, there is no specific requirement for the ECB or the NBB to take environmental considerations into account in their decision-making process. The Court’s finding thus conflicts with ClientEarth’s argument that the ECB and the NBB would have the legal duty to assess the climate impact of buying corporate assets through the CSPP.

In addition, the Court indicated that, on the basis of the Environmental Protection Act, the act whose cessation is sought must be sufficiently proven to negatively impact the environment. In the Court’s opinion, the purchase of assets by the NBB does not, in itself, harm the environment and does not directly contribute to global warming. The Court found that the purchase by the NBB of assets emitted by polluting companies only indirectly impacts the environment, in the way that the NBB supplies these companies with funds and thus help them to obtain financing and continue or develop their polluting activities. According to the Court, however, indirect harm to the environment is not sufficient to justify ClientEarth’s cease-and-desist action on the basis of the Environmental Protection Act.  

ClientEarth to appeal the decision

On 31 January 2022, ClientEarth announced that it appealed the first instance decision and maintains its request to have Belgian courts referring the question of the validity of the CSPP to the CJEU. Cease-and-desist actions are usually heard in expedite proceedings, but – if the Brussels Court of Appeal would grant the NGO’s request – the average time to obtain a ruling from the CJEU on a request for a preliminary reference is 15 to 18 months.