Lithium, Law, and the Limits of EU Sustainability

In July 2024, the European Commission entered into a strategic partnership on critical raw materials with Serbia by signing a Memorandum of Understanding (MoU) on sustainable raw materials and battery value chains. Three days before signing the MoU, the Serbian government had decided to renew the spatial plan for the realization of the “Jadar” project, which includes the exploitation of the mineral Jadarite in western Serbia. These two events have signaled the readiness of the Serbian regime to allow lithium mining in western Serbia and the EU’s commitment to exploit a source of critical raw material (CRM) in its neighborhood, particularly in the Western Balkans. Although the MoU highlighted not only the need for critical raw materials in the European Union but also the normative commitments to obtain them in a sustainable way, this commitment to mining caused outrage and protests from Serbian citizens and nongovernmental organizations. Even the analysts who are friendly towards Serbia’s European integrations have accused the Commission of engaging in dealmaking with a regime that is undemocratic and unfriendly towards the rule of law, and has a poor track record of environmental protection. In this blog post, we explore the normative commitments of promoting environmental standards through the EU’s external action and the challenges faced in the case of Serbia and the exploitation of CRMs. We argue that the corporate sustainability framework of the European Union does not provide adequate guarantees for the exploitation of critical raw materials in non-EU countries.

Lithium Triangle

The signing of the MoU was preceded by two decades of exploration and negotiation activities. At the beginning of this century, the Serbian government granted Rio Tinto permission to conduct geological studies at the site Jadar in western Serbia. In a move aimed at stimulating interest in exploration activities, the Serbian government amended the law on geological exploration, establishing that the default rule is that the right to exploit ore belongs to the companies that discover it. Rio Tinto’s primary interest was not lithium, but another mineral, boron. However, as global demand for lithium increased, along with the growing investment appetite of major powers to secure it, the company’s strategy gradually shifted towards lithium exploration and exploitation. In 2017, the Serbian government entered into an MoU with Rio Tinto, guaranteeing, essentially, that it will not prevent them from lithium exploitation. Strong public pressure, manifested through demonstrations and a successful political and legal mobilization against the project, which the majority of Serbian citizens oppose, led the government to backtrack on its commitment and suspend the spatial plan that enabled lithium exploitation. However, due to the EU’s support for the project and the commitments towards Rio Tinto, the government returned to the project in 2024, following a Constitutional Court decision finding that its 2022 suspension of Rio Tinto’s project was unlawful.

This maneuvering also illustrates the interests and complexity of the three major actors in the situation: the Serbian government, the EU, and Rio Tinto. For the Serbian government, this endeavor will enhance its reputation among its Western partners, securing an important source of revenue and foreign investment and providing it with significant political leverage. The agreement would help Serbia alleviate some of the pressures it faces from the EU concerning its rule of law commitments and obligations to align with the external affairs policy of the EU. For the EU, this action aims to bring two significant results. Firstly, in positioning the EU in the region heavily influenced by the US and Russia, by enhancing and diversifying its influence. More importantly, this could help the EU engage in the green transition and limit its dependency on non-European lithium suppliers, who currently supply almost all of Europe’s lithium demands. For Rio Tinto, the project is important as it strengthens its strategy to become a world-leading provider of lithium. However, it would be the first time that the company would work under the strict legal regime of environmental regulations. The high political stakes of the project and the strong and organized opposition it faces make the normative strength of the corporate sustainability framework critical to its future.

EU corporate sustainability framework and lithium mining in Serbia

The EU-Serbia MoU establishes basic principles under which the EU collaborates with resource-rich countries: integration of value chains, cooperation on research and development, the standards of environmental protection, the mobilization of financial instruments, and the development of necessary skills. As the EU and its member states seem prepared to invest in the research and development and building of factories that would produce batteries, it appears that the project operates in accordance with the basic principles of the MoU.

Besides the MoU, since Rio Tinto registered as a project promoter under the Critical Raw Materials Act (CRMA), commitments enshrined in this act also form the corporate sustainability framework governing the project. Under Art. 6.1.c, of the CRMA, the sustainability of strategic projects is achieved if the projects a) monitor, prevent and minimize the environmental impacts, b) prevent and minimize socially adverse impacts through the use of socially responsible practices including respect for human rights, indigenous peoples and labour rights, in particular in the case of involuntary resettlement, potential for quality job creation and meaningful engagement with local communities and relevant social partners, and c) the use of transparent business practices with adequate compliance policies to prevent and minimise risks of adverse impacts on the proper functioning of public administration, including corruption and bribery.

In addition, the CRMA in its Annex III refers to European and international instruments that aim to guide project promoters according to the above-mentioned requirements. Based on different OECD guidelines, the UN Guiding Principles on Business and Human Rights (UNGP) and the EU’s own corporate sustainability directives, these documents put the guarantees of sustainability at the highest level, making this project arguably one of the most regulated mining projects ever, at least in terms of environmental and human rights protection.

However, significant uncertainties regarding sustainability remain:

1. The first concerns the urgency attached to the environmental impact assessment (EIA). As Kampourakis notes, strategic projects are often fast-tracked because of their status, which can lead to the relaxation of legal requirements in the name of overriding public interest. In this vein, the CRMA (Articles 9–11) stresses that permitting and public consultation procedures in EIA cases should be completed within 90 days. Yet to properly monitor environmental impacts, it is crucial to determine carefully what levels of pollution and habitat destruction the government considers acceptable before an EIA is approved. Given the strong incentives for all parties to accelerate lithium exploitation, every aspect of the EIA must be handled with due diligence and not rushed.
2. While it is positive that, through the CRMA, project promoters in Serbia, such as Rio Tinto, are required to comply with international standards like the UN Guiding Principles (UNGP) and the OECD Guidelines, the domestic framework remains weak. Serbia has neither adopted a national action plan for implementing the UNGP nor, as a non-OECD member, established robust mechanisms to monitor companies’ compliance with OECD practices. Consequently, central elements of the OECD framework are currently missing, such as the National Contact Points – government-backed offices that allow stakeholders to raise concerns, request advice, and resolve disputes. By contrast, the picture is somewhat more positive regarding social inclusion: the ILO MNE Declaration, with its guarantees, together with Serbian government initiatives to promote inclusive and non-discriminatory environments, provides a stronger basis for ensuring respect for fair labor practices.
3. Beyond the aspects covered in paragraph b), the OECD’s Due Diligence Guidance for Responsible Business Conduct also emphasizes sustainability through internal corporate monitoring and compliance mechanisms aimed at combating corruption. While these measures are beneficial, they have significant limitations: internal whistleblowing and compliance channels are effective only when supported by robust institutions, such as an independent judiciary and a professional civil service. Given the low institutional trust and widespread corruption in Serbia, relying solely on OECD tools is unlikely to secure fully sustainable corporate behavior.

Many of these concerns could be less pressing if the EU had adopted a clearer stance on environmental conditionality within its enlargement criteria. Since 2020, environmental engagement, especially in sustainability, has gained prominence as EU policy in the Western Balkans promotes investments that foster the green transition. To this end, the EU created the “green agenda and connectivity” negotiation cluster with Serbia, as part of the EU accession process Serbia is currently undergoing, to strengthen oversight of its sustainability commitments. While this cluster brought environmental issues more firmly onto the enlargement agenda, it did not lead to stronger monitoring of Serbia’s compliance with specific environmental standards or procedural safeguards.

This is evident in the EU’s Rule of Law reports. Serbia has been included since 2024, yet environmental governance is largely absent. The reports continue to focus on judicial independence, prosecutorial capacity, and anti-corruption, while neglecting environmental rule of law. Consequently, the sustainability commitments promoted through the negotiation cluster are not reinforced by the broader rule-of-law framework, something that would be necessary to signal to candidate states that they must adopt and enforce environmental standards as part of EU accession. The country’s progress reports issued by the European Commission highlighted the need to adopt legislation in line with the EU environmental and climate acquis, yet without following up on implementation. Ultimately, the process appears to be driven more by the EU’s pursuit of mineral independence and its ambivalent approach to extraterritorial corporate sustainability than by consistent legal oversight.

The one success story that the Serbian experience can offer was achieved through a focus on a new mode of environmental governance. This approach involved modestly funding organisations to encourage popular action that would promote and embed environmental standards among future member states.  The EU and its member states have also provided funding to some of the organisations and activists involved in demonstrations against lithium exploitation. By empowering these actors, the EU has strengthened capacities for monitoring and mobilising in favour of environmental governance standards across the region. Paradoxically, supporting environmental nongovernmental organisations has led to grassroots mobilisation, with the greatest achievement being opposition to projects that the EU deems strategic for achieving a just and sustainable transition.

Way forward

When the EU enacted the CRMA and other strategic documents that were to support green transition, it did not simultaneously align its enlargement conditionality with them. The oversight of environmental conditionality, which was often lacking, loose, or not followed through, left the candidate countries unprepared for a critical raw materials exploitation project that carries significant environmental risk. Citizens who perceive their government as incapable or unwilling to protect the environment will struggle to trust the EU if they see that it doesn’t act as a normative power but a resource thief.

A way forward would be to amend the enlargement conditionality so that obligations on corporate sustainability are aligned with the standards existing in EU member states. This would complement the EU’s “green agenda and connectivity cluster” by signaling clear expectations for Serbia and other candidate states to strengthen corporate responsibility and adopt corresponding legislation. In the meantime, the best we can hope for is the increased monitoring and alarm-raising from the NGO watchdogs.