Promissory note ruling may haunt future ministers

Government won legal case brought by Joan Collins but judgment underlined powers of Oireachtas

Independent TD Joan Collins: Had maintained the promissory notes were impermissibly issued without a Dáil vote. Video Colm Keena

 

At the end of every year the legislature gives the government a Christmas present. It passes the Appropriation Act to approve government spending. This year the Supreme Court got in on the act. It also gave the Government a Christmas present relating to appropriation.

In its decision in a case brought by Joan Collins TD, the court emphatically upheld the constitutionality of the 2008 legislation under which the minister for finance issued more than €30 billion worth of promissory notes to the Irish Bank Resolution Corporation and the Educational Business Society (EBS).

The Constitution does not say much about public finances, which gives the government a great deal of flexibility. In the Collins case the Supreme Court confirmed this leeway. No doubt the Government is delighted with this present.

However, this present is for life, not just for Christmas – and it may not prove so welcome in the future.

This is because the court also confirmed that the Oireachtas has an important role to play in the appropriation of government expenditure. And this may prove awkward for a government in the future. For example, if a minority government, faced with a global financial crisis or worldwide depression, wanted to pass legislation in response, the Collins judgment would mean that it could not act unilaterally, (without Oireachtas approval). This would make the judgment a less-than-welcome Christmas present for the government.

Double lock

The case is the first time that the courts have analysed the constitutional provisions relating to public finances. And the court emphasised those provisions provide for a double lock on valid State expenditure.

First, it must be recommended to the Dáil by a message from the government signed by the Taoiseach. Second, it must be accomplished by a law passed by the Oireachtas.

It is only when both locks are properly turned and unlocked – one by the government in making the recommendation to the Dáil, the other by the Oireachtas in passing the relevant law – that State funds can be validly spent.

Collins argued that since the Oireachtas has a separate and independent role in the financial process – that is, since it has a lock to be turned and unlocked – it was unconstitutional to allow the minister for finance to commit public money in support of Anglo and EBS without a financial cap being placed on the amount that could be committed.

In effect, she argued that the government had picked the lock for which the Oireachtas had the key.

The court unanimously held that the Constitution does not require such a limit, and that the government did not pick the lock for which the Oireachtas had the key. A financial cap may have been prudent; and its absence may have been unwise; but it was not, for that reason, unconstitutional. The legislation was clearly passed in the public interest to maintain the stability of the financial system at a time of financial crisis. And it contained many safeguards constraining the powers of the minister to provide financial support to unsound credit institutions.

Financial crisis

The government was entitled to take steps to protect the State from the financial crisis, and it did not illegitimately usurp the functions of the Oireachtas when it conferred on the minister the powers which Collins challenged.

Both the government and the Oireachtas turned the key in its own lock, and since both keys were properly turned in the double lock, the appropriation was valid.

The double lock means that the government asks the Oireachtas for an appropriation, and the Oireachtas grants it. The issue in the Collins case was whether the government could ask for a blank cheque, and whether the Oireachtas could grant it.

The Supreme Court held that they could – but only because of the magnitude of the financial crisis and the safeguards built into the legislation.

The court emphasised that the Oireachtas cannot give a blank cheque to a minister to make provision for day-to-day expenditure, and this will certainly constrain government action in the future.

Although Collins lost, her case establishes that the Oireachtas has a vital role to play in the processes relating to public finances. The court described this role as a lock. If the Oireachtas cannot or will not turn its key in its lock, the Collins case has established that the government cannot ignore or avoid the Oireachtas, or seek to pick the latter’s lock.

The Christmas present in the Collins judgment would not then be quite so welcome to the Government after all.

Dr Eoin O’Dell is associate professor of law at Trinity College Dublin

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