Collins v Minister for Finance: €31 billion promissory note was a permissible constitutional response to an exceptional situation

In this judgment (here), the Supreme Court dismissed Joan Collins TD’s appeal of the Divisional High Court’s rejection of her claim that s 6 of the Credit Institutions (Financial Support) Act 2008 (here) is unconstitutional in permitting the Minister for Finance to provide unlimited financial support to credit institutions. The Court stated:

This case illustrates clearly therefore that choices now made have consequences both for the present and the future. Decisions made or approved by the current Oireachtas can significantly constrain the freedom of action of future Oireachtas, just as decisions made in the past may continue to constrain the present. This Court has no function, however, in considering the wisdom of decisions taken by the other branches of government, only the limited capacity to review that judicial review constitutes. It is this Court’s function to ensure that the constitutional organ which has responsibility to make such decisions, whether they be wise or foolish, trivial or far reaching, is allowed to do so within the limits imposed by the Constitution. The momentous nature of the decisions which have been made in relation to the crisis which the Irish economy experienced in recent years, including those made in this case, highlights the importance of each organ of government respecting the field of operation of the other branches, and performing its own functions conscientiously and carefully.

 

Background

In 2011, under s 6 of the 2008 Act, the Minister for Finance issued promissory notes to the value of €31 billion to two financial institutions, the Irish Bank Resolution Corporation (IBRC) and the Educational Building Society (EBS). That imposed a repayment liability of €3 billion per year from the State’s budgetary expenditure. Joan Collins TD took judicial review proceedings in the High Court seeking a declaration that the Minister’s decision was beyond his power and that s 6 of the 2008 Act  was an unconstitutional delegation of the Óireachtas’s power to approve expenditure to the Minister. Collins argued that the issue of the promissory notes should have been subject to a Dáil vote. The Divisional High Court rejected that claim. Collins appealed to the Supreme Court.

 

The Constitution

Article 11:

All revenues of the State from whatever source arising shall, subject to such exception as may be provided by law, form one fund, and shall be appropriated for the purposes and in the manner and subject to the charges and liabilities determined and imposed by law.

Article 17:

1 1° As soon as possible after the presentation to Dáil Éireann under Article 28 of this Constitution of the Estimates of receipts and the Estimates of expenditure of the State for any financial year, Dáil Éireann shall consider such Estimates.

1 2° Save in so far as may be provided by specific enactment in each case, the legislation required to give effect to the Financial Resolutions of each year shall be enacted within that year.

2 Dáil Éireann shall not pass any vote or resolution, and no law shall be enacted, for the appropriation of revenue or other public moneys unless the purpose of the appropriation shall have been recommended to Dáil Éireann by a message from the Government signed by the Taoiseach.

Article 28:

4.4° 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 Dáil Éireann for consideration.

 

Supreme Court

This case was heard by a seven judge panel. However, due to the death of Justice Adrian Hardiman earlier this year, the judgment was deliver by a unanimous six judge panel who each contributed to the single judgment. The Court agreed with the High Court’s assessment that the issues should be examined with a similar approach as the courts have taken when dealing with the impermissible delegation of the legislative function. But the Court made the distinction that the Constitution expressly provides that the sole and exclusive power to make law is vested in the Óireachtas. No similar statement is made in respect of financial matters [66].

The Court’s summary of the Constitution’s delegation of power in financial matters is set out in paragraph 62:

It might be said that the Constitution provides something of a double lock on expenditure. The Dáil is not permitted to require expenditure by vote or resolution, and the Oireachtas is not permitted to enact a law providing for public expenditure except on the formal recommendation of the Government and signed by the Taoiseach (Article 17.2). Likewise, the Government is not entitled to expend monies which are not authorised “by law”, both as to purpose and manner of expenditure (Article 11). That in turn requires that there be a lawful measure passed by the Oireachtas or a vote by the Dáil authorising the expenditure concerned. Neither the Government, nor the Dáil, nor the Oireachtas can, therefore, validly authorise the expenditure of public monies without the approval of the other branch. It is important to recognise that this is the Irish constitutional model. Statements of general principle as to what might be considered desirable as a model for governing public expenditure may be of interest, but must yield to an analysis of what the Constitution itself says about the manner in which Irish public expenditure can be permitted.

 

On analysis of the facts surrounding the issue of the promissory notes, the Court found that the technical requirements of the 2008 Act were met. What was at issue is whether the powers that the 2008 Act delegated to the Minister are consistent with the Constitution [63]. The Court found that the 2008 Act provided sufficient limitations on the Minister’s power to grant financial assistance to be constitutionally valid:

76 The opinion formed by the Minister after consultation with the Governor and the Regulatory Authority, and necessarily endorsed by the Oireachtas, is threefold, and requires three related opinions in ascending order of seriousness: first, that there is a serious threat to the stability of credit institutions in the State generally, or that there would be such a threat if the functions under the Act were not performed; second, that the performance of those statutory functions is necessary for maintaining the stability of the financial system in the State; and third, that the performance of those functions is necessary to remedy a serious disturbance in the economy of the State. Significantly, under s. 2(2) it is envisaged that the Minister may continue to consult with Governor and Regulatory Authority in the continuing performance of the functions under this Act.

On the issue that the 2008 Act did not limit the financial assistance that the Minister could provide, the Court stated the Constitution does not “expressly or by implication require such a limit”[82]. That the potential exposure was enormous does not render the Act unconstitutional. And the situation surrounding the issue of the promissory notes was itself exceptional [83]. Although the Act is exceptional “it was a permissible constitutional response to an exceptional situation. It cannot therefore be considered to be a template for broader Ministerial power on other occasions” [84]. And the Court found the argument that the lack of a financial limit in the Act impermissible under the Constitution unpersuasive: s 54 of the Finance Act 1970 imposes no limit on the amount of national debt that State can accrue, “even though such borrowings may burden present and future generations, and constrain present and future decisions in relation to the economy” [85].

For those reasons, the Court dismissed Collins’ appeal.

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