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The shocking death of Remi Fraisse triggered riots in several French cities.
The 21-year-old botany student died after being hit by the grenade during clashes between the police and opponents of a planned dam in Sivens, near the southwestern city of Toulouse.
The project — which opponents said threatened biodiversity but which backers said would help irrigate crops — was later shelved.
On Tuesday, the magistrates in charge of the investigation into Fraisse’s death declared that the officer who fired the grenade had no case to answer.
The officer’s lawyer, Jean Tamalet, said the investigation had shown that his use of force “had been proportionate to the situation” in which the police found themselves, and that he had not targeted Fraisse specifically.
Shortly after the incident the government banned the use of the grenades, which are designed to disorient people rather than to kill.
In 2014, a police oversight body had already cleared the authorities of any wrongdoing, saying the demonstrators had received sufficient warning to disperse before the grenade was fired.
Fraisse’s family said it would appeal the decision.
“The decision was taken at the highest level. The justice system does what it’s told, that’s all there is to it,” the deceased’s father Jean-Pierre Fraisse said.
The dismissal of the investigation comes days before the state is due to decide on another controversial infrastructure project that has sparked years of protests — a 580-million-euro ($690 million) airport on farmland near Nantes in western France.
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