Joan Collins appeals High Court rejection of promissory note case

A law enacted at the height of the financial crisis in 2008 gave the Minister for Finance power to give financial support to credit institutions and to decide the form and manner of that support, the State has told the Supreme Court.

That power, granted under the 2008 Credit Institutions (Financial Stabilisation) Act, was not “unlimited” power to simply appropriate public funds without any duty attached, Michael McDowell SC, for the State, argued.

The power was “very definitely” limited in terms of time and to “retrieve the situation” as far as that was possible, counsel said.

At the time, it was considered the problem facing the banks was liquidity rather than insolvency, he added. There was an "express power" to create public debt to finance the funding of Anglo, he said.

In issuing the promissory note for Anglo, the Minister was essentially capitalising what was then effectively a State bank and a promissory note was issued rather than government bonds so as to avoid flooding the market with those bonds and therefore diluting their value.

Mr McDowell has begun his arguments opposing the appeal by Independent TD Joan Collins against a three judge High Court's rejection of her challenge to the issuing of some €31bn promissory notes to Anglo, Irish Nationwide Building Society and Educational Building Society.

The appeal is being heard by a seven judge Supreme Court due to the importance of the constitutional and other issues raised.

In submissions, Mr McDowell said the State disputed two core argments being advanced by Ms Collins.

He disagreed that a statutory power to charge the central fund was unconstitutional unless that charge is pre-quantified or there is an outer limit on it. He also rejected arguments it was unconstitutional for the Minister to exercise a power of charging a public fund under a statute unless the imposition of the charge has been considered in advance by the Dáil.

The State argued the 2008 Act was passed by the Oireachtas in particular economic circumstances to deal with a crisis in the economic system and the persistent turbulence existing in international capital markets at the time.

By 2009, the Oireachtas had endorsed powers to the Minister to maintain Anglo as a going concern, Mr McDowell said. That was “no longer the view of the Oireachtas”.

Earlier, in arguments for Ms Collins, John Rogers SC said she had a right, as a citizen and TD, to have the democratic process adhered to when the Minister decided to provide €31bn in promissory notes to Anglo and other financial institutions.

An “empty shell of an Act” - the 2008 Act - had relinquished the budgetary control of the Dáil, he argued. Neither Ms Collins nor any other TD in the Dáil had any opportunity to query the decision to issue promissory notes, he said.

The relevant amending act was passed on December 21st 2010 and the promissory note was sanctioned the next day, he said.

No one was advised in advance a €30bn promissory note was about to be issued and there was no right to annul that, Mr Rogers said.

Ms Collins was deprived of any role in the payment of a €3.1bn instalment of the promissory notes in March 2011 and of another €3.1bn to be paid in March 2012, he said.

The absence of Dáil control over the appropriation of some €31bn public monies via promissory notes rendered the decision to issue them unconstitutional, it was submitted.

There is a direct linkage between the right to vote and elect a parliament and public expenditure, he argued.

When parliament does not have control over public expenditure, that is a derogation of the constitutionally given the right to vote.

Ms Collins was in court for the continuing hearing of her appeal. It is expected to conclude later on Monday with judgment reserved.

The case concerns promissory notes under which the State agreed to pay some €31bn to Anglo, Irish Nationwide Building Society and Educational Building Society over 15 years to 2025.

The notes allowed the institutions get emergency liquidity assistance from the Central Bank. After the winding up in 2013 of Irish Bank Resolution Corporation, successor in title of Anglo/INBS, the Anglo note, on which €25bn was then outstanding, was converted into long-term Irish government bonds.

The Supreme Court has heard, following reorganisation of the finances of Allied Irish Banks (owner of EBS), the EBS note is no longer in existence.