Thursday, January 31, 2013

31/1/2013: Summary of David Hall's Case on Anglo Promo Notes

With the latest twist in David Hall's case on IBRC Promo Notes constitutionality, I decided to post, at last, the summary of David's case as was read out (note - this is not an exact transcript, but darn close to it) in the court earlier this week.

Needless to say, I am disappointed with the ruling issued today, in so far as it simply rejected consideration of the merits of the case, and thus, the case remain outstanding.

Here are the main points of the High Court action taken by David Hall against the legality/constitutionality of the IBRC and EBS promo notes that was presented this week in the court by the Plaintiff. I could not attend the defence statement due to ill health.

Please note, I am no legal expert, so will try to offer the below without a comment on the constitutional or legal issues.

Per Plaintiff's presentation, in a statement made by the Minister for Finance to Dail Eireann on the 30th of March 2010, the Minister announced provision of capital support by the State to the Anglo Irish Bank. The announcement referenced capital injection during that week in the specific form of the Promissory Note payable over the period of 10-15 years. The Minister for Finance, therefore, supplied capital of EUR31 billion to 3 financial institutions: ca EUR25.3 billion to Anglo, EUR5.4 billion to INBS (split as EUR5.3bn in Promissory Note and EUR100mln as a Special Investment Scheme) and EUR350mln to EBS (split as EUR250mln in Promissory Note and EUR100mln in Special Investment Scheme).

The Minister for Finance has also provided the Central Bank of Ireland with the letters of comfort, confirming that the Government of Ireland would indemnify the CBofI in the case of any losses arising from the ELA provision to the Anglo, INBS and EBS. The above financial institutions were thus enabled to borrow, using the Promissory Note as collateral, from the Emergency Liquidity Assistance funds (ELA) of the Central Bank of Ireland.

The key point of this is that the Promo Notes and SIS measures were entered into the General Government Deficit in 2010, raising the headline figure to 32% of GDP and adding to the General Government Debt in 2010, however, since the requirement for these payments did not arise until during the course of 2010, none of these expenditures estimates appeared in the forecasts made in Budget 2010 that were prepared back in December 2009. The next point it that the Government, pursuant to Article 28 of Bunreacht na hEireann, prepared and presented to Dail Eireann the 2011 Estimates of Receipts and Expenditure for the year ending 31st December 2011. Payment of the Promissory Notes was contained in Note 6 under 'Non-Voted Capital Expenditure'. Non-Voted Capital Expenditure means that the Dail did not vote on the expenditure.

Key points: The Dail Eireann did not vote in the Promissory Note expenditure in Budget 2010 or Budget 2011.

The case taken is based on the constitutional argument relating to:

Article 28.4.4 of Bunreacht na hEireann: The Government shall prepare Estimates of the Receipts and Estimates of the Expenditure of the State for each financial year, and shall present them to Dail Eireann for consideration.

Article 17.1 of Bunreacht na hEireann: 1. As soon as possible after the presentation to Dail Eireann under Article 28 of this Constittution of the Estimates of receipts and Estimates of expenditure of the State for any financial year, Dail Eireann shall consider such Estimates. 2. Save in so far as may be provided by specific enactment in each case, the legislation to give effect to the Financial Resolution of each year shall be enacted within that year.

Article 17.2 of Bunreacht na hEireann: Dail Eireann shall not pass any vote or resolution, and no law shall be enacted, for the appropriation of revenue or other public monies unless the purpose of the appropriation shall have been recommended to Dail Eireann by a message from the government signed by the Taoiseach.

Article 21.1.1 of Bunreacht na hEireann: Money Bills shall be initiated in Dail Eireann only.

Thus, Bunreacht na hEireann gives to Dail Eireann a constitutional primacy in the area of State finances and mandate the actual, real and continued involvement of Dail Eireann in the appropriation of revenue and/or public monies. Central to the democratic nature of the State is the oversight of public expenditure by the elected representatives of the People who under Article 6 of Bunreacht na hEireann are sovereign and from whom all power is derived.

As Plaintiff stated, the Promissory Notes were created and funds for their financing were allocated by the Minister for Finance, including the related letters of comfort without involving the elected legislators. Furthermore, the issue of letters of comfort purported to appropriate and has appropriated public funds in an unspecified and unlimited amount in relation to the provision of liquidity assistance in the banking sector.

Per key points 1 & 2 above, the members of Dail Eireann did not consider the making of the Promissory Notes and/or the giving of letters of comfort, did not vote on whether or not to make the Promissory Notes and/or grant such an indemnity; and did not mandate or otherwise authorise the Promissory Notes and/or letters of comfort.

Considering that the Promissory Notes and letters of comfort were extended funding commitments over the time horizon of originally envisioned 10-15 years, the making or provision by the Minister for Finance of Promissory Notes, extending over such a long period of time and over such enormous sums of public funds and/or provision of a purported indemnity to CBofI constituted an attack on the democratic nature of the State and was unlawful and is unconstitutional being contrary to Articles 6 and/or 15 and/or 17 and/or 22 and/or 28 of Bunreacht na hEireann.

As I'd say, Bang! Up to 6 articles of Constitution potentially violated by the previous Government.

Plaintiff requested in the case for the Minister for Finance to identify the precise statutory or other legal basis authorising then provision of the Promissory Note. Alas, to-date there has been no response to this request. Two acts potentially can be argued provide such basis: 
-- Credit Institutions (Financial Support) Act, 2008 and/or
-- Anglo Irish Bank Corporation Act 2009
However, per Plaintiff statement in court, neither makes adequate legal provision for the financial assistance of the extent and/or nature and/or duration committed to by the Minister for Finance. Here are the reasons - as argued by the Plaintiff - for this.

Regarding the Credit Institutions Act 2008:
-- In 2010, the provisions of the Section 6 of the Act prohibited the giving of financial support beyond the 31st of December 2015 and from the 23rd of November 2010 beyond the 20th of June 2016. Of course, the promissory Notes extend to 2025 and thus, could not therefore have been authorised by the said Act.
-- The above provisions cannot be construed as authorising the making of Promissory Notes appropriating public monies, absent a requirement for a resolution of Dail Eireann prior to the provision of same having regard to the requirements of Bunreacht na hEireann.
-- The provisions of section 6(1) Credit Insitutions Act, 2008 do not provide for or allow or permit the Minister to make such large scale and long term financial support to a third party credit institution and did not permit for the provision of support equally a sum in excess of EUR31 billion to the Notice Parties herein.

Regarding the Anglo Irish Bank Corporation Act 2009:
-- There is no lawful basis for provision of financial support through the Promissory Notes to continue to 2025 or at all and the making and provision of such Promissory Notes was ultra fires the power of the Minister of Finance with the consequence that the said Promissory Notes are null and void.
-- Neither the 2009 nor 2008 Acts can act to excuse the absence of a resolution providing for Promissory Notes voted upon by Dail Eireann in accordance with Article 17 of Bunreacht na hEireann.

The implications of the case are massive. The Plaintiff actually argues that
-- The Promissory Notes and the associated letters of comfort are unconstitutional and, if that is proven to be the case, these instruments are illegal and have no real validity. 
-- The repayment of the Notes in March 2011 was illegal
-- The swap for direct Government debt of the note in March 2012 was illegal
-- The Minister for Finance actions constitute the unlawful delegation or transfer of constitutional power from Dail Eireann to the Minister.

Beyond this, the Plaintiff case argues that the creation of the Notes was in contravention of the Article 123 of the Treaty of the Functioning of the European Union by:
-- Extending financing from the public purse to third parties (as prohibited by Article 123 (2) of the Treaty) and clarified by the Council Regulation (EC) No 3603/93 of 13 December 1993.
-- Violation of Article 123 in provision by the Central Bank of Ireland of ELA to the IBRC.
-- Absence of lawful basis for the issue of the letters of comfort

The Plaintiff stated in court that in the absence of the Promissory Notes, the Irish Central Bank has accepted that the IBRC is insolvent and that the provision of ELA to an insolvent credit institution is illegal. Thus, the provision of Promissory Notes to the Anglo Irish Bank was an unlawful ruse to create the pretence of solvency so as to enable the provision of ELA. Fighting words these are. But there's more. The provision of ELA was in turn used to repay third party liabilities of Anglo Irish Bank. Further it was intended by the Minister for Finance and by the Central Bank of Ireland that the Irish people would in effect, over the period of the Promissory Notes, repay the ELA on behalf of Anglo Irish Bank. The members of Dail Eireann were expressly removed from and denied any involvement in this decision which was an egregious attack on the democratic nature of the State.

I hope to provide a summary of the State responses to the statement as delivered in court.
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