Promissory notes ‘unusual’ but not unlawful, court told

A senior official with the Department of Finance has told the High Court that promissory notes issued in 2010 by the Minister for Finance to recapitalise Anglo Irish Bank and other institutions for some €31 billion were "unusual" instruments but not unlawful.

Ann Nolan, second secretary in the department, said it was the view of the department in 2010 that it was necessary to provide unconditional financial support to the relevant banks.

The notes, issued under the provisions of the Credit Institutions Financial Stability Act 2008, were issued in circumstances where the EU-IMF troika was anxious there would be significant sums available for capitalisation of banks, she said. She agreed the troika was not involved when the 2008 Act providing for unconditional financial support to be given was passed by the Dáil.

Ms Nolan was giving evidence in the continuing hearing of the challenge by United Left TD Joan Collins to two promissory notes of 2010 under which the State agreed to pay some €31 billion to Anglo, INBS and EBS extending over a period of 15 years to 2025.

The notes allowed those institutions secure emergency liquidity assistance from the Central Bank and the Anglo note has since been converted into Irish government bonds.

Ms Collins claims the Minister had no power under the Constitution to issue the notes and their issuing was unlawful and “the most profound attack on the democratic nature of the State”. She contends public funds cannot lawfully be appropriated by the Minister as appropriation of public funds is a power vested exclusively in the members of the Dáil.

A a result of the Minister’s action, “vast sums” of taxpayers’ money “have been squandered in repaying foreign financial investors”, she said in her witness statement. Some €35 billion, including interest, would be required to repay the notes when, at the same time, the needs of our own people were not being met, she said.

Because the case raises important constitutional issues with implications for the basis of the State's finances, it is being heard by a three-judge court comprising Mr Justice Peter Kelly, Ms Justice Mary Finlay Geoghegan and Mr Justice Gerard Hogan.

In her witness statement, Ms Nolan said the promissory notes were a financial support given to selected institutions. In 2010, Irish financial institutions were subject to “a liquidity crisis squeeze” as well as “potential solvency” issues in some cases and it was important an “unconditional and flexible” mechanism be seen to be available to provide additional financial support to individual institutions should that be required.

The notes had to be seen in their wider context including Anglo being owned by the State from 2009 and the Minister in effect capitalising a State bank. Following the winding up this year of IBRC, Anglo’s successor in title, the Central Bank became the owner of the promissory notes later exchanged for government bonds.

Evidence has concluded in the case and John Rogers SC began legal submissions for Ms Collins later yesterday.

Her case, counsel argued, simply came down to her reliance on various Articles of the Constitution under which the Dáil is entitled to be consulted about, and must authorise, payments of public monies considered as “appropriations” within the meaning of the Constitution.

“Parliament does not write a blank cheque under our Constitution,” he argued.

The case resumes tomorrow.