ClientEarth withdraws lawsuit against the Belgian National Bank

On 13 April 2021, ClientEarth filed a landmark action in Belgium against the Belgian National Bank (the BNB). ClientEarth argued that the BNB was breaching climate and human rights laws when engaging in the European Central Bank's (ECB) Corporate Sector Purchase Programme (CSPP). It was the first case to be brought against a central bank in relation to alleged climate failings.  Now, over 18 months later, ClientEarth has withdrawn its lawsuit.  This post examines the rationale behind the action, as well as ClientEarth's decision to withdraw its legal proceedings.

What motivated ClientEarth's lawsuit?

Our April 2021 blog post sets out more background on the rationale for ClientEarth's lawsuit.

In brief, the CSPP was introduced in 2016 by the ECB as a form of quantitative easing to improve the financing landscape for Eurozone businesses. The CSPP was implemented by the central banks of Belgium, France, Finland, Germany, Italy and Spain, with the BNB holding the largest number of bonds under the programme.

ClientEarth argued that the CSPP was unfairly platforming and promoting the fossil-fuel industry given that, according to its research, over half of the EUR 266bn worth of assets purchased under it were issued by companies operating within that sector. As a result, the legal argument formulated by ClientEarth was that the BNB's participation in CSPP breached both Article 11 TFEU and Article 37 of the EU Charter of Fundamental Rights (both of which concern ensuring environmental protection requirements are integrated into the European Union's activities and policies). With regards to the ECB, a second prong of ClientEarth's argument was that the ECB has an obligation to mitigate climate-related financial risks and failed to do so in establishing the CSPP.

Subsequent events

On 1 December 2021, the Brussels Tribunal of First Instance rejected ClientEarth's arguments, ruling that there had been no breach of European or Belgian law as it could not be demonstrated that the purchasing of the bonds was a violation of the applicable statutory provisions. In January 2022, ClientEarth issued a statement vowing to appeal the verdict at the Brussels Court of Appeal, wishing to obtain certainty on the 'key question' of whether the CSPP is 'legally valid'.

On its website, ClientEarth set out its intention 'to stop these purchases from impeding further on the economic transition, we will again ask for a question on the validity of the corporate bond purchase policy to be referred to the EU's top court.'

Current status

On 29 November 2022, ClientEarth announced that it was withdrawing its case, citing the ECB's acceptance of its legal obligations to incorporate climate change into its monetary policy operations as its reason for doing so.

ClientEarth referenced 'the reforms introduced by the ECB in September [including] adjusting corporate bond holdings within the Eurosystem's monetary policy portfolios and its collateral framework' in the rationale behind its decision. ClientEarth said that these changes had addressed the specific illegality it had alleged in its claim.

The reforms in question saw the ECB pledge to gradually decarbonise the corporate bond holdings in its monetary policy portfolios to be better aligned with the Paris Agreement. It followed on from the Governing Council's decision in July 2022 to introduce climate-related disclosure requirements within its monetary policy framework and to enhance its risk management practices to 'support the green transition of the economy in line with the EU's climate neutrality objectives.'

President of the ECB, Christine Lagarde, said of these decisions that '[the ECB is] turning [its] commitment to fighting climate change into real action.'

ClientEarth has refused to eliminate the possibility of taking further legal action in the future, arguing that while the specific illegality it alleged may have been addressed, more must be done to prevent the promotion and success of fossil-fuel companies within Eurosystem corporate bond portfolios.