A LAW giving the Minister for Finance "unusual" power to create €31bn sovereign debt via promissory notes did not amount to an unlawful "blank chequebook" to spend public money, the State argued in the High Court today.
The law must be seen in the context of the financial crisis then engulfing Ireland, it was argued on the final day of a TD's challenge to the promissory notes.
When Mr Justice Gerard Hogan said the promissory notes have imposed an "enormous cost" on the taxpayer for years into the future, Michael McDowell SC, for the State, accepted that but rejected arguments the notes were unconstitutional.
Counsel was making submissions for the Minister and State in a hearing, lasting four days, of a challenge by United Left TD Joan Collins to the issuing of the notes in favour of Anglo, the Educational Building Society (EBS) and the Irish Nationwide Building Society (INBS).
The case involves issues of major importance affecting the entire basis of the State's finances and was heard by a three judge court comprising Mr Justice Peter Kelly, Ms Justice Mary Finlay Geoghegan and Mr Justice Hogan.
The court said judgment would be delivered at a later date.
The promissory notes were issued by the Minister in 2010 under the
2008 Credit Institutions Financial Support Act, enacted that year to provide for up to €440bn public funds to financial institutions via the State's "bank guarantee".
Section 6 of the Act provides the Minster may provide "financial support" to credit institutions. Ms Collins argued the power given to the Minister under Section 6 is impermissibly vague and unconstitutional in that it encroaches on the exclusive power of the Dail to appropriate public funds for expenditure.
Today, Mr McDowell denied Section 6 allows the Minister power to create public liabilities with no time or amount limits.
The Minister had to issue the €31bn promissory notes in 2010 to recapitalise Anglo and the other institutions because that was vital for the financial stability of the State and to avoid a possible banking collapse, he said. Because Anglo was by 2010 in State ownership, it was the State's "problem" and allowing it collapse was "not an option".
While the 2008 Act gave the Minister "unusual" power to create sovereign debt, it did not give him freedom to do what he liked or "throw money" at the problem.
The State was facing an "unprecedented" financial crisis threatening to collapse the banking sector and economy and it was imperative the Minister take swift and decisive action.
The Act required the Minister to consider whether there was a threat to the stability of the financial system necessitating him to take steps.
The steps taken were necessary in the public interest to remedy a serious disturbance in the economy and the issuing of the promissory notes under Section 6 constituted "financial support" within the meaning of that Section.
There was no impermissible delegation of legislative power and the State did not accept the term "appropriation" in the Constitution involved a policing by the Dail of spending of public monies.
Mr McDowell also argued Ms Collins's challenge to the Anglo note was "moot" or pointless because that note, following the liquidation of Irish Bank Resolution Corporation (formerly Anglo) earlier this year, had been converted into Government bonds and was in a different position to the note issued in favour of EBS in 2010.
The case was now effectively a judicial review of the powers of the Minister to act under the 2008 Act but Ms Collins was out of time to challenge that, counsel said.