Issue Papers
[Issue paper] European Investment Bank's loan to SCP Ruzomberok paper mill in Slovakia. Have environmental concerns and public opinion been disregarded?
The project
The plans to modernise and increase the production capacity of the Neusiedler SCP paper mill company in the town of Ruzomberok in the Slovak Republic are not new. The International Finance Corporation (IFC) considered providing a loan of approximately USD 41 million for this project in 1999. Local citizens have been pointing out the serious deficiencies in assessments of the environmental and health impacts of SCP's activities since then. It has been asserted by a representative of SCP that a local NGO's activities in 1999 resulted in the failure to receive the IFC loan, which in turn prevented the realisation of environmental improvements by the SCP company. When new efforts to find co-financing for this project recommenced in 2001, local citizens were unaware that the European Investment Bank (EIB), the public financial institution of the European Union, had emerged as the main financial institution willing to provide a favourable loan to SCP for this controversial project.
The EIB loan
The EIB made public its approval of a EUR 64 million loan for this project only after the loan request was approved by its Board of Directors on July 26, 2003. The information was disclosed only on the bank's website, but not in the Ruzomberok region. Local citizens learned of the EIB's involvement in this project only through the Slovak coordinator of CEE Bankwatch. The EIB approved this loan before the authorities in the Slovak Republic had completed the processing of several appeals submitted by representatives of affected local citizens regarding possible violations of their rights to public participation in the project related permit processes.
EIB information policy - the reality check
On September 1, 2003, the Slovak Bankwatch coordinator submitted a request for information to the EIB, asking three very specific and "short-to-answer" questions relating to the non-transparency of the loan request approval process. The EIB confirmed receipt of this request on September 8. There was a subsequent silence until only a few days before the end of the two month deadline which the EIB's information policy grants its staff for replying to requests. This initial response stated that it will not be possible to send a reply as required by Article 13 of the Bank's "Code of good administrative behaviour for the staff of the EIB in its relations with the public."
The reply that the EIB finally sent on November 7 directly answered only one out of the three questions asked, and in addition contained only general phrases and excerpts from EIB's information policy. In short, there was a complete lack of relevant and pertinent information that would have been useful for explaining the case in question. At the present time of writing (February 4, 2004), the Slovak Bankwatch coordinator's follow-up email of December 18, 2003 remains unanswered.
Environmental concerns
The environmental pollution in Ruzomberok caused by the SCP plant - the main source of pollution in the town - was one of the main reasons for Ruzomberok being declared an area highly exposed to environmental pollution. In 1999, more than 3000 inhabitants signed a "Citizens" petition against the long-term polluting of the environment of Ruzomberok and its vicinity from the production processes of the SCP company. Local citizens were not the only ones to point out that in spite of the serious health problems in the town and surrounding areas, the health risks arising from the pollution emitted by SCP were never rigorously assessed. Ruzomberok and surrounding areas are also well known throughout the Slovak Republic for the unbearable stench caused by the TRS emissions discharged by SCP.
Approach of the company
Since 1997 SCP has been exceeding the maximum limit of pulp production laid down for it. In 1999, when SCP was asking the IFC for a loan for a project whose aim was in fact also to increase its pulp and paper production capacities, the company informed concerned citizens that "in the development strategy of the SCP company for the future, plans to increase production of pulp are not being considered". Also, the company's promise to unhappy citizens to bring the levels of TRS down was not fulfilled as promised according to some estimates the company exceeded TRS emission limits some 400-1000 times over. Also a letter of July 24, 2001 to the Vienna headquarters of Neusiedler AG remains unanswered.
EIB view on the environmental issues versus the views of affected citizens
According to the relevant EIB press release, "the entire project (involving a pulp production capacity increase of a further 70 per cent) and in particular the reconstruction of the pulp line and the new boiler, involving modern technology, will also bring significant environmental improvements in terms of atmospheric and liquid emissions". In general, local citizens are not against the project as such, but they request that such claims as the EIB has made be fulfilled through the installation of air emissions monitoring systems as well as a thoroughgoing analysis of the health situation of affected inhabitants before and after the realisation of the project.
Deficiencies in the project permit processes
An official claim of July 12, 2003 from an NGO representing affected citizens from Ruzomberok clearly details the deficiencies pertaining to the public participation in the project permit processes. After reviewing this claim, the court suspended the execution of the project's construction permit until the court properly investigates the concerns raised by the local NGO and decides on the validity of this construction permit. This interlocutory court judgment acknowledges the seriousness of and justification for these complaints regarding the formal deficiencies in the project permit processes raised by the local NGO.
Conclusion
This case demonstrates that the EIB has no qualms about approving, in a completely non-transparent manner, a loan request for a project where, it can be reasonably argued, local citizens rights to participate in the project permit processes have been disregarded. EIB approved the loan request just when several challenges raised by the local NGO were still to be legally settled. Despite serious concerns raised by the affected community concerning the possible negative environmental impacts of this project, the EIB officially presents the project as an unambiguously positive one.
The attached correspondence which accompanies this paper provides evidence showing that in such cases the EIB is unwilling to disseminate meaningful information, but provides only phrases, instead. This Slovak case illustrates the urgent need for the EIB to formulate at least minimal standards to ensure improved transparency and accountability for its activities. The NGOs which have for some time been monitoring the EIB's activities believe that these problems can only be resolved if EU bodies such as the European Commission and the European Parliament pro-actively take the lead in reforming the EIB.
For more information:
Peter Mihok
Center for Environmental Public Advocacy
mihok at changenet.sk
(+421) 905 746 884
CEE Bankwatch Network gratefully acknowledges EU funding support.