In 2021 the European Investment Bank Group (EIB Group) – consisting of the European Investment Bank (EIB) and the European Investment Fund (EIF) – provided a total of €94.89bn in financing to companies and governments.
The EIB Group, as the “financing body” of the European Union (EU), is itself financed by EU Member States so must ensure its activities and operations are fully compliant and free from prohibited conduct, such as bribery, fraud and money laundering.
Compared to the enforcement activities of the “non-European” Multilateral Development Banks (MDBs, see our latest blogpost here), the EIB Group does not yet seem to swing the big stick yet: In 2022 alone, the World Bank has already debarred over 30 companies and individuals from World-Bank-financed contracts (see here), while the EIB Group blacklisted only one in the whole of 2021 (see here).
However, this lack of enforcement could be about to change. In 2019, a report published by Counter Balance (see here) indicated that “a functioning EPPO could be an important development” to fight prohibited conduct in EIB Groups’ activities and operations.
In December 2021, the EIB Group and the European Public Prosecutor’s Office (EPPO) signed a working agreement “to make the fight against fraud, corruption, money laundering and any other criminal offences affecting the Union’s financial interests, as efficient as possible avoiding duplication of efforts” (see here).
The winds of change
With the EPPO now on board, the EIB Group is well-equipped to conduct criminal investigations and prosecute both companies and individuals. The EPPO is the first and up to now only supranational public prosecution office of the EU.
The working agreement aims to facilitate cooperation between the EPPO and the EIB Group within the existing limits of their respective legal frameworks and mandates, through the exchange of information, including personal data, and other cooperative activities. Article 4 of the working agreement contains general provisions how to share information between the parties, including personal data, which might be relevant for the purpose of the working agreement and the exercise of the EIB Groups’ and EPPO’s mandates. The EIB Group shall report to the EPPO without undue delay any suspected criminal conduct that falls within the EPPO’s competence. The working agreement does not require a certain level of suspicion for the exchange of information, including personal data, and/or the EIB Group’s duty to report to the EPPO.
While the EPPO prepares to make a decision on whether to open an investigation, the EIB Group is not permitted to report suspicions or the involvement of the EPPO to any other party, except when required by the EIB Group reporting obligations. At the same time, EIB Group members must refrain from any investigation measures, unless requested to do so by the EPPO. According to Article 9 of the working agreement, while an EPPO investigation is pending, the EPPO can request the EIB Group support the investigation by:
- providing staff from the EIB Group members as experts, expert witnesses, advisers or in any other equivalent capacity;
- conducting analyses (including forensic analyses) of documents and data in any format, acquired by the EPPO or the EIB Group in the course of their investigations;
- providing the EPPO with information and expertise in relation to projects and activities of the EIB Group of relevance to the EPPO investigation, as well as the application of EU rules and procedures in such projects and activities;
- conducting administrative investigations, as applicable; and
- any other activity, relevant to EPPO investigations, which the EIB Group may perform in accordance with its mandate.
And the EIB Group did not stop here: in October 2021, it signed a working agreement with Europol. On 1 February 2022 one of the two sessions at the EIB Board of Directors’ Seminar with Civil Society was devoted to the integrity, and proactive fraud and corruption detection activities of EIB Group members. Among other things, EIB presented the automated data-driven proactive fraud and corruption detection tools it has developed since 2018. It remains to be seen to what extent this new tool will have an impact on the investigation activities of the EIB Group going forward.
What’s next
There can be no doubt about the direction of travel so companies associated with EIB-financed activities should carefully consider wider enforcement risks. The EIB Group 2022-24 Operational Plan includes states: “The EIB Group will work to strengthen its relationship with the EPPO in 2022 and beyond.” (see here).
EIB Group investigations may start with a suspicion of a potential breach of internal policies, like the recently published Environmental and Social Policy of the EIB Group (see here), or with a report from the automated data-driven proactive fraud and corruption detection tool. EIB Group investigations may suddenly lead to criminal investigations and, ultimately, prosecution by the EPPO, eg for providing false information in the application process for an EIB Group project. Besides the risk of criminal liability, there is a significant reputational risk associated with any criminal investigation by the EPPO.
Freshfields will continue to monitor the partnership between the EIB Group and the EPPO in its Risk and Compliance publications. Watch this space.
