The European Investment Bank’s €1 billion lending operations to U.N. blacklisted enterprises in Israel

[Yussef Al Tamimi is an Assistant Professor of Law at the Central European University in Vienna. Yussef was involved in drafting the complaint to the European Investment Bank]

On 19 July 2024, the International Court of Justice held that, by virtue of the prohibition of the acquisition of territory by force, all States are under an obligation:

“to take steps to prevent trade or investment relations that assist in the maintenance of the illegal situation created by Israel in the Occupied Palestinian Territory.”

This finding was the basis for a complaint filed in June 2025 to the European Investment Bank (EIB) by the Hind Rajab Foundation (HRF). The EIB, the investment body of the European Union, with its €248.8 billion in subscribed capital and a balance sheet exceeding half a trillion euros, is the largest International Financial Institution (IFI) in the world (surpassing, among others, the World Bank). Pursuant to the Treaty on the Functioning of the European Union (TFEU), each EU Member State is a member and shareholder of the EIB .

Since 2022, the EIB has invested over €1 billion in four projects in Israel involving three entities – two Israeli (Bank Leumi and Electra Ltd) and one French (Alstom Transport SA) – listed by the United Nations Office of the High Commissioner for Human Rights (OHCHR) as business enterprises involved in illegal settlement activities in the Occupied Palestinian Territory (database updates in 2020, 2023, and in 2025). The four projects are a €500 million loan concluded with Bank Leumi, a €250 million investment in the Tel Aviv Light Rail network, and a further €250 and €11 million loan and guarantee, both also concluded with Bank Leumi.

The HRF complaint pointed to the unlawfulness of these lending operations in light of the EIB’s and its member states’ international legal obligations and urged the EIB to discontinue its partnerships with enterprises listed by the UN OHCHR, suspend further financial cooperation with these enterprises, conduct a full compliance review of its Israeli project partners, and align its operations with the EU’s stated commitments to international law and human rights. On 13 April 2026, the European Investment Bank Complaints Mechanism (EIB-CM) published its conclusions report on the complaint. Additionally, the EIB-CM held a conference call with the complainants (including the author of this blogpost) on 7 May 2026 to discuss the conclusions.

The EIB and the EIB Complaints Mechanism

The EIB was established in 1958 following the Treaty of Rome. In its current formation, the EIB Statute is annexed as Protocol No. 5 to the Treaty on European Union (TEU) and the Treaty on the Functioning of the European Union (TFEU). In accordance with Article 51 TEU, the EIB Statute forms an integral part of both Treaties. Pursuant to Article 308 TFEU, the EIB has legal personality, and the members and shareholders of the EIB are the Member States of the European Union. Pursuant to Article 309 TFEU, the task of the EIB is to contribute “to the balanced and steady development of the internal market in the interest of the Union.” .

The EIB has three decision-making bodies: the Board of Governors, the Board of Directors, and the Management Committee. The Board of Governors is comprised of (typically) finance ministers from all EU countries and defines the EIB’s general lending policy. The Board of Directors, chaired by the EIB President, takes decisions in respect of lending and borrowing operations. It is comprised of 27 directors appointed by the EU countries and one director appointed by the European Commission. The Management Committee supervises daily operations. The EIB has faced severe allegations of harassment, corruption, and favouritism in recent years. In 2024, the EU’s Public Prosecutor’s Office (EPPO) launched a corruption investigation into the former EIB Director. Concerns about conflicts of interests and revolving-door cases persisted in the European Parliament’s annual report adopted in April 2026.

The EIB Complaints Mechanism (EIB-CM), which dealt with HRF’s complaint, is the internal mechanism responsible for “complaints of alleged maladministration lodged against the EIB Group” (Article 1.1 of the EIB Complaints Mechanism Policy). The Policy further determines that the EIB-CM shall apply:

“the highest standards of objectiveness whilst safeguarding the interests of all internal and external stakeholders of the EIB Group” (Article 5.1.4).

The stated commitments to objectivity and impartiality appear to be under strain at the EIB-CM. In its annual report on the EIB adopted in April 2026, the European Parliament stressed that:

“the complaints mechanism remains a self-referential dispute-solving process fully embedded in the EIB’s structure, at the cost of its independence, whose findings are subject to review and approval by the same management structures that it is supposed to scrutinise”

and it “notes that appointments are made internally without external oversight”. Following HRF’s complaint submission, a complaint was submitted to the European Ombudsman on 3 June 2025 by EIB staff concerning how the EIB dealt with “concerns about EIB financed projects involving Israeli entities involved in activities in the occupied territories”. A case was subsequently opened by the European Ombudsman on 2 October 2025. The Ombudsman’s inquiry is currently ongoing.

EIB’s Obligations Under International Law

The EIB-CM conclusions report of 13 April 2026 makes several claims about the relationship between the EIB and international law. In the context of rejecting the bindingness of the ICJ Advisory Opinion of 19 July 2024, the report observes that:

“resolutions or decisions adopted within the system of the United Nations do not produce any direct legal effect on the European Union”

(para. 3.1.12).

However, this representation is a simplified version of a more complicated relationship. It is well established, including in Cecilia Rizcallah’s recent book, that international organizations derive obligations both from their internal constitution and international law more generally. From the perspective of international law, the EU, as an intergovernmental organization, is subject to international law. The EU, of course, explicitly recognizes this interrelatedness in Article 3(5) TEU (respect for the principles of the UN Charter and international law) and in the ECJ’s case law (see, e.g., Poulsen and Diva Navigation, Racke, and Kadi).

In the case at hand, the Member States of the EU are subject to a wide range of obligations derived from the UN Charter and UN human rights treaties, including the International Covenant on Civil and Political Rights (ICCPR), the International Covenant on Economic, Social and Cultural Rights (ICESCR), and the International Convention on the Elimination of All Forms of Racial Discrimination (ICERD). As noted by the OHCHR, EU law and policy should be rendered compatible with the UN Charter in order to avoid a conflict of obligations. Article 103 obliges an EU Member State to take measures to give full effect to its international obligations and, by the same token, Article 103 (as well as Article 30 VCLT) prevents a Member State from relying on its obligations under EU law to justify a failure to take measures to implement human rights guarantees. This is of particular significance to the present case, as the obligations laid out in the ICJ Advisory Opinion of 19 July 2024 draw on the UN Charter, the decisions of the Security Council, international human rights law, international humanitarian law, and the law of State responsibility, of which the obligations are binding on all EU Member States based on agreements and as a matter of customary international law.

It is accepted that international legal obligations for intergovernmental organizations may derive from customary international law, including rules of jus cogens status. The ECJ has expressly acknowledged the applicability of customary international law to the actions of the EU in their internal and external relations (Racke, para. 46). In the present case, the ICJ reiterated that the right to self-determination constitutes a peremptory norm of international law, and that the prohibition of the acquisition of territory by threat or use of force, the right of peoples to self-determination, the prohibition of discrimination, the principle of permanent sovereignty over natural resources, and the right to territorial integrity all form part of customary international law. The ICJ also held that the obligations violated by Israel include obligations erga omnes, including:

“the obligation to respect the right of the Palestinian people to self-determination and the obligation arising from the prohibition of the use of force to acquire territory as well as certain of its obligations under international humanitarian law and international human rights law”

(ICJ AO, paras. 233 and 274)

EIB actions that conflicts with customary international law, especially rules of jus cogens status, violate its obligations under international law. That the EIB has a separate legal personality from the EU pursuant to Article 308 TFEU does not negate this, as principles that have jus cogens status remain binding on the EIB as an IFI (per Bradlow, p. 83, citing Crawford).

The Questionable Distinction Between Intermediaries and Final Beneficiaries

Two of the projects (total worth of €750 million) are Multiple Beneficiary Intermediated Loans (MBILs) to the financial intermediary Bank Leumi Le-Israel BM. Bank Leumi is one of the largest banks in Israel. The bank provides, in violation of international law, financial foundation and services for settlement activities and settlement expansion, and benefits from financial activity in illegal Israeli settlements in Palestine. Bank Leumi has financed numerous small and medium-sized enterprises and green transition projects in settlements in violation of international law since receiving funding for these purposes by the EIB.

The EIB-CM acknowledges, in its final report, several flaws in the allocation process of the loans. For example, it admits that the list of ineligible postal codes was based on an outdated list from 2022 (para. 3.2.38). The report identifies further serious shortcomings in the checks performed by the EIB to ensure that European funds were not disbursed to final beneficiaries in breach of its own guidelines. The EIB confirmed that, as a result of HRF’s complaint, several changes were made to the internal allocation of funds to final beneficiaries. However, the changes contribute little toward guaranteeing the EIB’s disengagement from grave international law breaches. The EIB requires Bank Leumi to submit a declaration on honour stating that, in allocating the loans to the final beneficiaries, it complies with EC Guidelines No. C 205/05, which “implies” (para. 3.2.44) that Bank Leumi will not allocate loans to final beneficiaries who operate in the OPT. Subsequently, the final beneficiary submits a declaration to Bank Leumi stating that it complies with the EC Guidelines, again implying that it does not operate in the OPT. “This mechanism,” the EIB-CM’s final report observes, “indirectly reassures the EIB that the final beneficiaries do not operate in the OPT” (para. 3.2.51). This ‘indirect reassurance’-standard does not seem to meet the prerequisite due diligence standards, particularly not under the high-risk circumstances of the present case.

Two significant aspects of the allocation of EIB public funds remain, without adequate justification, unavailable to the public. First, the extent to which Bank Leumi benefits financially from the arrangements is not publicly known. While the EIB emphasises that, although European funds may pass through enterprises included in the U.N. database, such funds do not ultimately ‘end up’ with those enterprises, the EIB has not disclosed the proportion of funds retained by Bank Leumi under the €750 million MBIL agreements. Upon inquiry, the EIB-CM states that it has not verified the amount committed to Bank Leumi pursuant to the agreements.

Second, the public is not informed of the identities of the ultimate beneficiaries of the EIB loans. According to the final report (para. 3.2.32), by the report’s cut-off date €124 million had been allocated through 39 operations involving 38 beneficiaries, averaging approximately €3 million per project. The identities of those final beneficiaries remain undisclosed. The EIB-CM indicated that the complainant could submit an access to information request to obtain this information, but that such a request would likely be denied by the EIB on grounds of the “protection of commercial interests.”

Funds to Israeli Manufacturers of Weapons and Ammunition

The EIB maintains a list of “Excluded Activies”, i.e. activities deemed ineligible for financing under EIB lending operations. The list includes activities related to weapons and ammunition, prisons, certain forms of mining, the sex industry, and gambling. The document further states that:

“for the avoidance of doubt, final beneficiaries of EIB Group operations may be involved in weapons and ammunitions, provided that EIB Group financing does not support these activities.”

This formulation suggests that, in relation to weapons and ammunition, the EIB distinguishes between the final beneficiary and its activities, and permits financing arrangements with beneficiaries who are involved in weapons manufacturing. As the identities of the financial beneficiaries are not publicly disclosed, whether EIB funds may have been used by final beneficiaries in Israel involved in the manufacture of weapons and ammunitions cannot be independently verified.

The ambiguity related to the possible involvement of EIB funds with beneficiaries in Israel engaged in the manufacture of weapons and ammunitions significantly changes the risk calculus for EU Member States. The Nicaragua v. Germany proceedings at the ICJ indicate that States maintaining arms relations with Israel may be liable for breaches of obligations under the Genocide Convention by failing to prevent genocide against Palestinians in Gaza and under the Fourth Geneva Convention and customary international humanitarian law to ensure respect for their rules in Gaza. As U.N. Special Rapporteur Albanese stressed in a recent report:

“corporate interests underpin the Israeli settler-colonial twofold logic of displacement and replacement aimed at dispossessing and erasing Palestinians from their lands.”

Photo by Bharath Kumar on Unsplash