Court told promissory note "irreversable"

Updated: Wednesday, 23 Jan 2013 17:05

The High Court has been told that the issuing of promissory notes to help refinance some banks was irreversible.

Lawyers for the State said any declaration by the court that the notes were null and void would impugn the status of the Central Bank as a conduit of European funding and would be very far reaching.

The submission was made by Senior Counsel Michael McDowell on behalf of the State on the second day of a legal challenge by Dublin businessman David Hall.

Mr Hall claims the promissory notes are invalid under the Constitution as they should have been approved by a Dail vote.

The High Court has been told that the issuing of promissory notes to help refinance some banks was irreversible.

Lawyers for the State said any declaration by the court that the notes were null and void would impugn the status of the Central Bank as a conduit of European funding and would be very far reaching.

The submission was made by Senior Counsel Michael McDowell on behalf of the State on the second day of a legal challenge by Dublin businessman David Hall.

Mr Hall claims the promissory notes are invalid under the Constitution as they should have been approved by a Dail vote.

He said the 2010 Act which established the notes required the Minister for Finance to secure a Dail vote in respect of the promissory notes issued although this was not done.

He also said the Act only provided for financial assistance of this type until 2017 but the notes are due to pay out what he called "substantial tranches of billions" until 2031.

However Mr McDowell said the case made by Mr Hall was fundamentally flawed in that it was confusing voted and non voted expenditure.

He said the Constitution clearly envisaged non voted expenditure which is authorised by statute. It was open to the Oireachtas to enact a law that provided monies in the central fund could be spent without a Dail vote.

A glaringly obvious example was the power of the Minister for Finance to raise funds on international markets by issuing bonds, thereby creating a liability on behalf of the State.

He said the legislation allowing for the promissory notes was not being described as emergency legislation but was brought in to deal with a financial crisis.

There was nothing unconstitutional about the Oireachtas giving the Minister power of this kind. It was necessary and reasonable. He said while it had been controversial, no one in the Dail had taken a court challenge to say their power had been infringed in this respect. Any challenge should come from that quarter rather than from a citizen and none had, he said.

He said challenging the timeframe for the payment of the notes was a complete misunderstanding of the time timing of the assistance.

The assistance was given when Anglo and other institutions used the note to get emergency liquidity from the Central Bank. He said an example was if a person's son was in financial difficulty and you took out a mortgage to help him pay bills. The assistance to him took place at that time and did not continue over the 20 years you were repaying the mortgage.

To maintain international confidence in the Irish banking system the Minister had to be given the power to judge whether the time over which the financial support can be afforded needed to be extended beyond the original horizon.