Bill highlights dire nature of banking sector collapse
The Irish Bank Resolution Corporation Bill 2013 contains some very impressive descriptions outlining the purpose of the legislation. The language used brings home the catastrophic nature of the collapse of the Irish banking sector. The ideas expressed are a function of the scandalous fact of the transfer of the massive losses of a small number of private businesses pursuing profit on to the shoulders of the general population.
According to the law’s preamble, “it is necessary, in the public interest, to provide for the orderly winding up of the affairs of IBRC to help address the continuing serious disturbance in the economy of the State” where “the maintenance of the functioning of the IBRC is no longer necessary to support the financial stability of the state or the stability of the Irish financial system”.
There is a lot of this type of comment, but the one that is arguably the most arresting is the following: “And whereas in the achievement of the winding up of the IBRC, the common good may require permanent or temporary interference with the rights, including the property rights, of persons.”
Thereafter, the body of the Bill* contains the type of lawyer’s English that could cause a body to want to bang his or her head off a wall. Putting that aside, however, the content is pretty striking.
Much attention has already been given to section 6, which says there will be an immediate stay on all actions against the IBRC. As most people know, these include the action being taken by the Quinn family. The family wants to argue that €2.4 billion the bank says it is owed by them was issued illegally by the bank (then Anglo Irish Bank) as part of a scheme aimed at shoring up the Anglo share price.
Condemned to bankruptcy
Now, it seems, the Oireachtas has told the family it can’t make its claim before the courts. Given the size of the claimed debt, it would appear the Quinns are condemned to bankruptcy. Meanwhile, the Oireachtas is allowing the bank to continue to pursue its claim against the family. The issue here is the bank’s claim it has valid security over the Quinns’ international property group, security that is linked to the disputed loans.
Section 12 of the Bill says any security created by the bank “shall be taken to be valid” and shall “not be invalidated or rendered void” by a listed series of sections of the Companies Acts, including section 60. The latter is the section that prohibits a company from giving out loans to support its own shares. In other words, the Oireachtas, in the course of its night-time sitting last week, appears to have told the Quinns to shove off.
How that fits in with the concept of the separation of powers is something a lawyer would be best qualified to explain. However, as the box containing this column has not yet been filled, it is my intention to continue and to throw in my twopenceworth.
The reason the authors of the Bill were driven to introducing into law the type of provisions outlined, is because of the seriousness of the imposition that occurred when the debts of the banks were transferred to the citizenry. That is certainly a substantial argument. The debt transferred to the public from the banking sector, according to some economists, is akin to the type of burden usually associated with a war. In times of war, a lot of the rights a western society takes for granted can be temporarily suspended.
The law also brings to mind the late Brian Lenihan’s letter to the board of AIB in December 2010, and his introduction into general usage of the phrase, a “supervening event”. The bank – which has cost the general public more than €20 billion to date – was going to pay €40 million in bonuses to staff because, it said, it was contractually obliged to do so. The then minister for finance, in his letter, said the bank’s existential crisis, post the contractual agreements, was a “supervening event” that nullified those contracts. The bank backed down.
A supervening event is an event that occurs later and changes what had previously been supposed. The banking disaster is a supervening event of war-like proportions and arguably allows for the measures in the IBRC liquidation law.
This begs the question, however: why the powers-that-be think upward-only rent reviews should still hold, or why pensions agreed – to, among others, senior bankers and ministers in the period 1997 to 2008 – are legitimate expectations that are protected by law.
*The Act is to be published today.