Soft landing: New high-level EIB ‘revolving door’ revelations suggest systemic issue persists

For the million or so Budapest residents living in the shadow of Hungary’s largest international airport, unbearable noise and choking air pollution have been a reality for far too long. Turbulence and intense vibrations from landing and departing flights have also caused damage to many homes in nearby neighbourhoods. The prospects of the airport expanding with millions in EU public money from the European Investment Bank (EIB) got many worried residents up in arms, but the Bank, the airport operator and the Hungarian authorities have mostly shrugged off their concerns.  

On Thursday (Feb 29), Politico revealed that Vazil Hudák, the EIB Vice President who signed a EUR 200 million loan for the airport operator in December 2018, joined the Budapest airport’s board of directors mere three months after leaving the Bank and during his cooling-off period mandated by the Bank’s code of conduct. According to Politico, the EU’s anti-fraud office OLAF is currently investigating the connection between the EIB loan and Hudák’s positions as Vice President and then member of the board of the Budapest Airport company. 

The EIB loan is meant to enable the expansion of the Budapest airport to allow a 50 per cent growth in passenger traffic by 2030. Bankwatch and Friends of the Earth Hungary (MTVSZ), together with local activists from the Association for Civilized Air Transport, have for several years been warning that an unchecked rise in the number of flights will only mean an increase in greenhouse gas emissions, heightened noise and air pollution, and additional damage to neighbouring homes. The project’s environmental price tag will be even higher if the airport expansion goes ahead without ensuring it is fully in line with EIB standards and EU law – and without engaging local communities. As we have told the EIB’s board, this project is in breach of the Charter of the Fundamental Rights of the European Union. 

In fact, it has now been more than two years since the EIB’s Complaints Mechanism acknowledged that the preparation of the airport expansion project was fundamentally flawed. The Mechanism’s report confirmed concerns raised by civil society that the EIB had failed to properly evaluate the project’s compliance with the Bank’s own policies and to inform the public about the project and its ramifications. Among others, the Mechanism’s inquiry revealed that, despite legal requirements, the project had not undergone an environmental impact assessment. 

The fact that both the EIB and the airport operator have continued advancing this problematic project while failing to implement the Complaints Mechanism’s recommendations in itself casts serious doubts about their public integrity. 

In fact, the Bank told Politico it intends to continue disbursing the loan “as long as conditions attached to our contracts are fulfilled.” Yet, standard contract conditions require EIB-funded projects to comply with environmental law. And this project, as the Complaint Mechanism ruled, does not. 

The revelation that the EIB Vice President who signed off this dubious loan subsequently became part of the Budapest Airport leadership is set to deepen the lack of trust in this EU institution among those affected by this project, and likely well beyond. 

Precisely at a time when the rule of law is under assault in Hungary and Europe more widely, the EIB as a public institution must reaffirm its commitment to upholding EU law and especially to communities affected by projects it supports. 

It is therefore crucial that the EIB now acknowledges the gravity of the conflict of interest uncovered by Politico and publicly explains how Hudák’s appointment to the Budapest Airport board influenced the expansion project he had signed. 

We understand that the airport operator has recently submitted to the EIB a revised Stakeholder Engagement Plan, as stipulated by the Complaint Mechanism’s recommendations. In early February, in response to our inquiry, the Bank informed MTVSZ and Bankwatch that its client will publish the finalised documents on its website. But the airport operator has never shared the draft plan with the neighbouring communities affected by the project, as is mandated by EIB policy.  

Deciding about public engagement without engaging with the public is absurd and outrageous and further erodes the already shaky trust of affected communities in Budapest Airport and the Bank. In fact, even if the documents are made public, it has already been two wasted years to even start the process. It also remains the EIB’s responsibility to ensure ‘public engagement’ does not end with documents, but is followed by genuine, inclusive action on the ground. 

Public money should not be used for the expansion of climate-damaging air traffic at all, but rather for improving more sustainable transport. But at the very least, if the enlargement of the airport is to be completed, it must be brought in line with EIB standards and EU law, chiefly by assessing all of its environmental impacts. 

Now, the EIB and its client, the Budapest Airport company, must urgently implement the Complaints Mechanism’s recommendations in full and prioritise engaging the local community in a meaningful way. 

A chronic issue of revolving doors at the EIB 

Politico’s story also raises serious concerns about recurring cases of revolving doors at the EU’s financial arm. In November 2023, the European Ombudsman Emily O’Reilly concluded her latest investigation into a former EIB Vice President who made an unorthodox career move. 

In this case, Dario Scannapieco, after leaving his EIB post went to head Italy’s state lender Cassa Depositi & Prestiti SpA (CDP) that often works with the EIB as a financial intermediary. 

Concluding that the way the Bank had handled this case was “inadequate and constituted maladministration,” the Ombudsman reiterated her recommendations to allow the Bank’s Ethics and Compliance Committee “to impose measures to mitigate any potential conflicts of interest risks it identifies” and to make decisions on such measures public shortly afterwards. 

In fact, soon after launching this inquiry, the European Ombudsman concluded another one into high-level revolving doors at the EIB. In this case, Emma Navarro went to work for Spanish energy company Iberdrola in January 2021, just three months after having left her position as an EIB Vice President, where she signed loans worth billions of euros to the same company. 

“The EIB did not properly manage the risk of conflicts of interest, which arose from the request of the former VP to take up a position with the company during her cooling-off period,” the Ombudsman’s decision reads. To prevent future cases, she recommended the EIB takes “a more robust approach to revolving door moves of the members of its Management Committee to private sector jobs related to matters on which they worked while in the service of the EIB.” 

These cases should not have been allowed to happen. Even the changes later introduced to the Code of Conduct for the Management Committee are not likely to substantially address the issue, as they mainly lengthened the cooling-off period.  

Already in July 2016, Xavier Sol, then director of public finance watchdog Counter Balance, wrote: “For the EIB to work in the interest of European citizens, the EU bank needs to adopt stricter provisions to prevent conflicts of interest and ‘revolving doors’ practices by its high-level staff.” 

His comments came after Ombudsman O’Reilly had written to then EIB President Werner Hoyer specifically about the need for the Bank to address the risk of conflicts of interest in its governing bodies. “The EIB should not only continue to work towards preventing conflicts of interest, but also appearances of conflicts of interest, and should continue to be proactive in identifying and managing risks before, during and after the term-of-office of governing body members,” O’Reilly’s letter stated. 

In April 2017, the European Parliament joined the call for the EIB to tackle the risk of conflicts of interest. Its members (MEPs) were “strongly concerned with the identified shortcomings in the existing EIB mechanisms to prevent possible conflicts of interest within its governing bodies” and urged the Bank to consider the Ombudsman’s recommendations and revise its Code of Conduct “as soon as possible.” 

Nearly four years later, in June 2021, MEPs again called out the issue of conflicts of interest in the EIB, noting that “several former vice-presidents have taken up employment at entities associated with the EIB without respecting a cooling-off period”. They condemned “the fact that such practices are not strictly regulated and prohibited by the EIB’s code of conduct”. The European Parliament reiterated its call for the Bank to tighten up its post-employment policy to bring it into line with that of the European Commission and similar institutions. 

Two months later, the EIB introduced a new Code of Conduct for the Management Committee. This iteration prescribes a 24-month cooling-off period, during which EIB Vice Presidents “shall avoid all situations which may give rise to an actual, potential or apparent personal conflict of interest. If they cannot be avoided, these situations should be adequately and cautiously mitigated.” 

Yet, the three revolving door cases indicate that the issue might not be just the length of the cooling-off period, as the Vice Presidents involved all took up new posts within four months of leaving the EIB. Rather, it is the enforcement of the rules on conflicts of interest per se. The board’s Ethics and Compliance Committee must ensure that the cooling-off period is strictly observed, particularly among departing Vice Presidents. The rules should also be strengthened, so that members of the EIB Management Committee are not allowed to take up jobs in companies and institutions which benefit from the Bank’s financial support in regions and countries these Vice Presidents were responsible for. 

There is a direct line between the EIB’s failure to adhere to its environmental and social standards and EU law in the development of the Budapest airport project, and the failure to uphold critical ethics safeguards. Both endanger the Bank’s integrity. 

It is high time for the EIB to step up its efforts to eliminate conflicts of interest, particularly within its leadership. Nadia Calviño, the Bank’s President, has to ensure the European Ombudsman’s recommendations are followed to stem the phenomenon of revolving doors. EU finance ministers, in their role as EIB governors, need to see that this remains a priority if the Bank is to maintain public trust.