The European Bank for Reconstruction and Development (“EBRD”l was created in 1990 by multilateral agreement for the nations of Central and Eastern Europe, to ease the transition from centrally dominated economies to private market systems. As the newest multilateral development bank (“MOB”), the EBRD presents a great opportunity to challenge existing lending practices of MOBs and to develop a new model for MOBs. The EBRD immediately set itself apart from other MOBs by establishing in its Articles of Agreement two unique goals. First, the EBRD will limit its role as the facilitator of market economy transition to those member states “committed to and applying the principles of multiparty democracy, pluralism, and market economies. ” The EBRD itself is committed to principles of democracy in its own banking activities. Second, unlike any other bank charter, the EBRD agreement expressly promotes environmentally sound and sustainable development.
Other multilateral development banks have been criticized for supporting projects with destructive environmental, cultural, and even economic impacts. Until recently, the World Bank rationalized its practices by claiming that it is solely a financial institution and therefore not accountable for the destructive impacts of its investments. By contrast, the EBRD expressly mandates that it will involve itself in environmental and political issues.6 Despite its laudable goals, with investments in full swing, the EBRD’s present institutions do not provide the mechanisms necessary to achieve its goals. To effectively insert itself into a democratic process and achieve environmentally sound and sustainable development, the EBRD must create a mechanism which empowers citizens to review projects for consistency with the EBRD’s functions and purposes, thereby enabling them to protect their environment against ill-advised projects.
This article suggests that the EBRD can best meet the demands of promoting environmentally sound projects in a democratic system through the creation of an independent review board. The history of other MOBs and the present environmental problems in Central and Eastern Europe demonstrate the need for an institution that grants individuals, particularly local residents, a means to challenge environmentally harmful projects. Not only have many prior MOB projects devastated the environment and indigenous populations, but bank policies designed to remedy these problems remain unenforced or ignored.