Insight

Investors in Irish credit institutions, in addition to having to digest emergency legislation will now need to understand Irish constitutional law.

Possible referral to the Irish Supreme Court

Further to our update of 15th December with regard to the Credit Institutions (Stabilisation) Bill 2010 (the “Bill”) we wish to advise that the Bill passed both houses of Parliament last week and was then referred to the President for signature. Rather than signing the Bill into law the President has decided to consider whether she should refer the Bill to the Supreme Court using powers reserved to her under Article 26 of the Irish Constitution (”Article 26”)

Article 26 allows the President to refer any draft legislation which has been passed by both Houses of Parliament to the Supreme Court to determine its constitutionality. The President will consult with a constitutional body called the Council of State tomorrow, Tuesday 21 December. The President has sole discretion to decide whether to refer the Bill to the Supreme Court which she must do no later than the seventh day after the date she received it for signature. As she received the Bill on Friday, any referral would have to be made by 24 December 2010.She may decide not to refer it to the Supreme Court in which case if will be come law in a matter of days.

On receipt of a referral the Supreme Court must then pronounce on the constitutionality of the Bill no later than sixty days after such reference which would indicate a date no later than 22 or 23 February 2011. If the Bill is declared constitutional, the President must sign it into law 'as soon as may be' after this date. Once a bill is declared constitutional under the Article 26 procedure no further constitutional challenge of that legislation is possible in the future. Clearly if the Bill is declared unconstitutional it does not pass into law and a new legislative proposal must be introduced to parliament.

Opinion of the European Central Bank (“ECB”)

Separately the ECB has issued its opinion on the Bill after having been requested to do so by the Minister for Finance. The ECB while supporting many aspects of the Bill has expressed concern that it might interfere with the ECB’s operations to provide funds in support of the eurozone financial system. It expresses “serious concerns that the [Bill] is insufficiently legally certain on a number of critical issues for the Eurosystem.” In particular it highlights that the Bill might affect “the scope of collateral rights of central banks….”

The decision of the Minister for Finance to push the Bill through Parliament before the ECB had issued its formal opinion appears odd. As the Bill has passed both Houses of Parliament there is no scope for amendment at this stage. It is not clear at this early stage whether any changes to the legislation might be made at a later date. Whether and when any such changes may be made will be complicated by a reference of the Bill by the President to the Supreme Court.

We will provide updates as the position becomes clearer.

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© Matheson Ormsby Prentice 2010

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