Environmental Constitutionalism and Finance - Spain

Spain is one of the most advanced models of environmental constitutionalism in EU - it converts environment from policy into constitutional duty and links it to finance.

1. Constitutional Foundation - Article 45 Spanish Constitution 1978

Article 45 is in Chapter III - Principles governing social and economic policy [Principios rectores], not Chapter II fundamental rights. This distinction matters for enforceability.

Art 45.1: "Everyone has the right to enjoy an environment suitable for personal development, as well as the duty to preserve it."

Art 45.2: "The public authorities shall safeguard rational use of all natural resources with a view to protecting and improving the quality of life and preserving and restoring the environment, by relying on an indispensable collective solidarity."

Art 45.3: "For those who violate the provisions of the previous paragraph, under the terms established by law, there shall be criminal or administrative sanctions, as applicable, and they shall be obliged to repair the damage caused."

Doctrine: Spanish Constitutional Court [Tribunal Constitucional - TC] in STC 64/1982, 227/1988, 66/1991, 243/1993, 199/1996 held:

• Art 45 is formally a right but primarily a power/mandate to the legislator. It needs legislative development to be justiciable.
• It is not directly enforceable as amparo under Art 53.2, but enforceable via ordinary courts when law develops it [Ley 26/2007 Environmental Liability, Ley 27/2006 Access to Justice].
• It imposes non-regression principle - legislation cannot reduce existing protection level - affirmed in STC 233/2015.

Other Constitutional Articles for Finance:

• Art 132.2: Natural resources like coastal zone, maritime zone are public domain - basis for Mar Menor rights.
• Art 106.2: Liability of public authorities for environmental damage.
• Art 128: All wealth subordinate to general interest - basis for regulating finance.
• Art 45 + Art 130-131: Basis for sustainable finance regulation.

2. What is Environmental Constitutionalism in Spanish Finance?

It means finance must serve Art 45 mandate. This has 3 layers:

A. EU Layer - Transposed in Spain:

• EU Taxonomy Regulation 2020/852 - Defines green investment. Spain transposes via Law 7/2021 on Climate Change and Energy Transition.
• SFDR, CSRD - Banks must disclose environmental risks.

B. Spanish National Sustainable Finance Laws:

• Law 7/2021, 20 May, on Climate Change and Energy Transition: Art 29-32 - Financial institutions must disclose climate risks, publish decarbonization targets, Banco de España must stress test banks for climate.
• Law 7/2022 on Waste and Contaminated Soils: Promotes circular economy finance.
• Royal Decree 4/2021 & CNMV Circular: Green bonds must avoid greenwashing.
• Law 6/2022? Actually Pacto Verde - Spanish Strategy for Sustainable Finance 2020.

C. Principle: If a financial product claims to be green but harms environment, it violates Art 45.2 duty of rational use of resources and becomes unfair competition / greenwashing.

3. Landmark Case Laws - Spain

A. Constitutional Court Cases Defining Art 45:

1. STC 233/2015 - 5 November 2015 - Coastal Act [Ley de Costas]
Constitutionality appeal lodged in 2013 against Act 2/2013 amending Coastal Management Act 1988 which reduced protection.

Held: TC by unanimous decision upheld constitutionality of major part of 2013 Act, only declared unconstitutionality of some provisions. Court stated: Non-regression principle - Environmental legislation and case-law should not be revised if this would result in reduction in protection levels previously achieved. This is foundation for environmental constitutionalism in finance - you cannot finance project that regresses coastal protection.

2. Mar Menor Act 19/2022 - STC 20 November 2024 - The First Rights of Nature in Europe
Law 19/2022 was first national law in Europe to recognize ecosystem as legal person, granted legal rights to Mar Menor Lagoon and its basin due to pollution from intensive agriculture and finance.

Appellants argued nature should be object of protection under Art 45, not subject of rights, impossible to separate rights from dignity, conscience, will.

Constitutional Court ruling 20 Nov 2024: Upheld constitutionality. Dismissed claims based on Art 10.1, 24.1 and 45. Held Rights of Nature are fully compatible with Spanish Constitution. Art 45 ecocentric approach allows nature as subject of rights. Also grounded in Art 132.2 - natural public domain does not exclude other protection mechanisms.

Finance Impact: Banks financing agri-business in Mar Menor basin now have direct liability for ecosystem damage - must provision under Law 26/2007 Environmental Liability. Mar Menor can sue via guardians.

3. STC on Marina Isla de Valdecañas Tourist Complex - 2023
TC suspended demolition of tourist complex due to irreparable economic harm. Shows tension - TC considers suspension as exceptional measure without conditioning to bond, but no verdict on environmental harm of suspension. Shows finance vs environment balancing.

B. Climate Finance Cases:

4. Greenpeace v. Spain II - Climate Case - Before Supreme Court & ECtHR
NGOs argued Spain's climate plan [PNIEC] insufficient to meet Paris Agreement, violates Art 2 and 8 ECHR and Art 45 SC.

Spanish Supreme Court did not examine adequately alleged human rights violations, alleged violation of Art 24 Constitution - right to fair trial. Case escalated to ECtHR. Shows justiciability of climate finance - State must finance enough decarbonization.

5. Kingdom of Spain v. Infrastructure Services Luxembourg S.a.r.l. & Others - Solar Subsidies Revocation [2012-2014]
From 1997 Spain subsidized solar projects. Investors relied and invested billions. Between 2012-2014 during debt crisis, Spain revoked incentives under Royal Decree.

ICSID Tribunals: In Mathias Kruck and others v. Kingdom of Spain, ICSID ARB/15/23 and others, tribunal found Spain violated legitimate expectations under ECT Art 10(1) FET standard - breach of fair and equitable treatment.

Spain's defence: Art 45 and financial sustainability required rational use of resources - cannot maintain unsustainable subsidies.

Outcome: Spain ordered to pay billions, but 2024 Spain won landmark victory in some cases - International Centre for Settlement of Investment Disputes ruled cuts justified by economic crisis and constitutional duty to protect public finances under Art 40, 128.

Lesson for Finance: Green finance incentives are not irrevocable if they conflict with constitutional financial stability.

C. Greenwashing Finance - First Case in Spain:

6. Iberdrola vs Repsol - Judgment No. 12/2025 of Commercial Court No. 2 of Santander - 21 February 2025
First ruling examining greenwashing in context of unfair competition claim under Spanish Unfair Competition Act Law 3/1991.

Iberdrola claimed Repsol misled customers over environmental policies, advertising fuels as sustainable, green.

Court examined: Whether environmental claims in financial marketing breach EU Taxonomy and Art 45 duty.

This case defines limits for green claims in energy finance - banks financing Repsol must verify taxonomy alignment or face greenwashing liability.

D. Regional Constitutional Environmental Rights:

7. High Court of Justice of Galicia - STSJ Galicia 313/2025 - 11 July 2025
Upheld infringement of fundamental rights resulting from inactivity of public administration in case of pollution caused by intensive livestock farming financed by rural banks.

Held: Declared violation of:

• Right to life Art 15 SC and Art 2 ECHR
• Right to respect for private life and home inviolability Art 18 SC and Art 8 ECHR

Due to administration failure to control nitrate pollution financed projects. Establishes that inaction in environmental finance regulation = breach of fundamental rights, not just Art 45 guiding principle.

8. Supreme Court STS 1308/2017 - Environmental Taxation - Aragon
Spanish electric company demanded money paid for regional tax to protect environment from polluting emissions under Royal Decree 1/2007 Aragon environmental taxation.

Court linked Art 31 SC fair tax system with Art 45 - environmental taxes are constitutional if they finance rational use of resources. Validates green fiscal finance.

9. Spain / Supreme Court 2019 - Aarhus Costs
Supreme Court held environmental organizations are exempt from paying legal costs under Aarhus Law 27/2006. Access to justice in environmental matters - non-profit environmental org not obliged to pay costs. Encourages climate litigation against financiers.

4. How Finance is Enforced via Environmental Constitutionalism

For a bank in Spain, you must:

1. Under Law 7/2021 Art 32: Publish climate risk report, alignment with EU Taxonomy - If you finance fossil fuel without disclosure, CNMV can sanction under Art 45.3.
2. Under Law 26/2007 Environmental Liability: If you finance project that causes damage to Mar Menor or coastal zone, you are jointly liable to repair - strict liability, not fault-based.
3. Green Bond Framework: Must have Second Party Opinion - If not, considered greenwashing under Law 3/1991 as per Iberdrola vs Repsol 2025.
4. Stress Test: Banco de España 2024 Climate Stress Test - If bank fails to provision for stranded assets, violates Art 45.2 duty to preserve resources.

If you are analyzing a banking fraud where finance was given to polluting project without EDD, Spanish model says it is double breach - breach of banking due diligence + breach of constitutional Art 45.