THERE MAY be constitutional problems with the delegation to the Minister for Finance of the valuation of land under the Nama legislation, a conference on the legislation has been told.
The conference, on the Nama Act 2009, was organised by Round Hall publishers, and heard a number of legal experts discuss the implications of the legislation.
Garrett Simons SC said it was surprising that the one very important safeguard in the legislation – the fixing of a ceiling on the long-term economic value of an asset – had been delegated to the Minister, without any guidance from the Oireachtas.
The part of the legislation dealing with “long-term economic value” describes this as the value that the property could reasonably be expected to attain “when the crisis conditions prevailing at the passing of this Act are ameliorated,” he said.
However, he added, “it is not at all clear what the Oireachtas understands the nature of this financial crisis to be. The assumption seems to be that current property values are artificially low, and that the recent fall in property prices is attributable principally to difficulties in the international economy.
“The legislation does not appear to contemplate that the fall in property prices might be a necessary correction following on from a domestic property bubble.”
He also said that the legislation took as its starting point that the “serious threat to the economy” had arisen as a result of a “financial crisis”. “There is no suggestion in the legislation that the collapse in the current market value of property has been contributed to by bad planning decisions, or that urgent measures are necessary in order to ensure that future planning decisions are made on a more sustainable basis.”
Referring to the constitutionality of the legislation, he pointed out that article 15.2.1 of the Constitution provides that the sole and exclusive power of making laws is vested in the Oireachtas.
The courts have recognised that the reality of modern legislation was that the Oireachtas could not be expected to promulgate all legislation, so the framing of detailed rules through regulations was permissible provided that the “principles and policies” of the parent legislation could be identified from the Act passed by the Oireachtas, according to Mr Simons.
It was arguable whether the “principles and policies” of the Nama Act were sufficiently precise to ground the powers given to the Minister, especially as it was not at all clear what the Oireachtas considered the nature of the “financial crisis” requiring the creation of Nama to be, he said.
It was remarkable that the fixing of the ceiling on long-term economic value was not a matter for the Oireachtas, but was delegated to the Minister.
“There may well be good economic reasons for saying that an uplift of up to 25 per cent is justified, but there is no obligation on the Minister to explain this to the Oireachtas,” he said.
Gerard Hogan SC said he considered the prospect of a successful challenge to the core of Nama to be remote, though challenges to some specific portions of it could not be ruled out.
He said he considered the underlying purpose of Nama, the purchase of debt at a discount, to be constitutional in principle. He considered Nama to be “an ingenious solution to a very difficult problem”.
