Joan Collins loses Supreme Court appeal on promissory notes

Independent TD Joan Collins has lost a Supreme Court appeal over the minister for finance's issuing of €31 billion in promissory notes in 2009 for Anglo Irish Bank and other financial institutions.

The six-judge court unanimously dismissed Ms Collins arguments that the 2008 law under which the notes were issued was unconstitutional because it permitted the minister to issue unlimited public funds without a Dáil vote.

The Credit Institutions (Financial Support) Act 2008 was enacted with the aim of averting a banking collapse. The notes were essentially IOUs from the State to ensure the continuation of Central Bank funding for Anglo Irish Bank, Irish Nationwide Building Society and Educational Building Society after the September 2008 bank guarantee.

Anglo and INBS were later nationalised and, after their successor in title, Irish Bank Resolution Corporation (IBRC), was wound up in 2013, the Anglo note, on which €25 billion was then outstanding, was converted into long-term Irish government bonds. The EBS note no longer exists following the reorganisation of the finances of its owner, Allied Irish Banks.

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Giving the court’s judgment, to which all six judges contributed, Chief Justice Ms Justice Susan Denham said the Act was “undoubtedly exceptional” in every sense but was “a permissible constitutional response to an exceptional situation”.

While it did not include a cap beyond which the financial support could not extend, the Constitution did not require, either expressly or by implication, such a limit, she held.

The Act cannot be considered to be “a template for broader ministerial power on other occasions”, she added.

While it was unlikely the Oireachtas would concede such “wide ranging power” in less pressing circumstances, if a minister or other body was permitted to provide unlimited financial support without a limit in time or object to another commercial entity, it would not follow from this case that was constitutionally permissible.

Exposure

In this case, the State’s potential exposure as a result of the notes was “enormous”, the amount involved was “vast” and the impact on the State’s finances was “significant.

Those factors, “whatever their merit in public discourse”, did not render the Act unconstitutional if it was designed to meet an “exceptional” situation, addressing “an extraordinary risk” to the State’s economy.

It was entirely conceivable the crisis which might be faced might require provision of unlimited financial support, whether by guarantee or otherwise, she said. If Ms Collins was correct there had to be a cap on the support, that would be a severe limitation on the Oireachtas’ power and the court did not accept the Oireachtas was so constrained.

A financial limit was also unpersuasive at a practical and theoretical levels as, for example, the Finance Act imposes no limit on the amount the State can borrow. In the “extraordinary circumstances” that were the backdrop to the 2008 Act, it was permissible to confer such power on the minister, she ruled.

She also noted all expenditure, whether under legislation charging it to the Central Fund or by annual appropriation, is subject to the same constitutional constraint – it must be provided for “by law”.

No challenge was made to the fact the 2008 Act permits the minister provide financial support in an individual case, rather than have such support provided directly by the legislature or approved by the Oireachtas, she said.

This Act was originally intended as an emergency and temporary provision for two years. While that time provision was amended, that was done solely to let the minister extend the period when he was of the opinion emergency conditions continue to exist. It could be said, at every stage, the Act and the powers under it were “limited in time”.

Recovered

The Act prescribed conditions for providing financial support and included a specific obligation, “so far as possible”, for that support to be recovered from the institution involved. It also obliged the minister to review the support, withdraw it if satisfied it was no longer necessary and put an annual report before the Oireachtas, facilitating Oireachtas review and control.

All this meant the minister’s powers to provide financial support were “significantly constrained” by the Act and it could not be said the minister was given “free rein”.

This case illustrated that choices made by past and current Oireachtas have consequences for the present and the future, she said. The court’s only function function was to ensure the constitutional organ which has responsibility to make such decisions, “whether they be wise or foolish, trivial or far reaching”, was allowed to do so within the limits of the Constitution.

“The momentous nature of the decisions made in relation to the crisis which the Irish economy has experienced in recent years, including those made in this case, highlights the importance of each organ of government respecting the field of operation of the other branches, and performing its own functions conscientiously and carefully.”

Speaking afterwards, Ms Collins said the ruling meant that the minister for finance could spend unlimited amounts of money, without a vote in the Dáil, and that she believed this meant that Article 11 of the Constitution was “deeply flawed and we have to change that”.

Article 11 states that Revenues collected by the State shall go into one fund and be appropriated for purposes determined by law.

The court’s ruling in her challenge to the use by the minister for finance of the The Credit Institutions (Financial Support) Act 2008, meant “a minister for finance can spend any amount of money they deem necessary in an emergency without going back to the Dáil and we will be challenging that in the Dáil itself”.