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Wednesday 4 October 2023 Dublin: 12°C
Julien Behal/PA Wire/Press Association Images
Column Legal uncertainty of promissory notes is a powerful bargaining tool
The looming payment deadline for the next €3.06 billion promissory note instalment is at the centre of discussions – but the legality of this debt is not being properly considered, writes Andy Storey.

THE CONTROVERSIAL PROMISSORY note debt is very much in the news this week with a Private Members motion in the Dáil, backed by independent TDs from across the ideological spectrum, calling for a suspension and write-down of the debt, and with reports that failure to reduce the debt burden might see the coalition government collapse.

Obviously the 31 March deadline for payment of the next €3.06 billion instalment of this debt is focusing minds – but when it comes to finding out how we got ourselves saddled with this debt in the first place, official attitudes seem to be much more relaxed.

Investigating causes of banking crisis

The Sunday Independent of 3 February had a headline that read “Howlin expects bank crisis inquiry to begin this year”. Given that it has been five years since the crisis erupted, one could conclude that there is a certain lack of urgency at work here.  The same applies to criminal prosecutions.

In January 2012, High Court Justice Peter Kelly said he was “taken aback” to hear that there were just 11 Gardaí working for the Office of the Director of Corporate Enforcement (ODCE) on potentially the biggest and gravest case of corporate crime in the history of the state. Justice Kelly granted the ODCE an extension before deciding what charges might be brought against senior executives of the former Anglo Irish Bank, but he was dismissive of claims that the investigation was “substantially complete”, pointing out that he had been told several times of “substantial progress” being made over the previous three years (the investigation began back in 2008).

Three former Anglo executives have since been charged with various offences. In January 2013, Justice Mary Ellen Ring in the Circuit Court set a provisional trial date for the three of January 2014. Why is this investigation proceeding at such an extraordinarily slow speed?  And why has the ODCE not requested additional resources to expedite it?  Even in a period of cut-backs it would be politically difficult for a government to deny it such resources given the public demand to see those allegedly responsible for the Irish financial crisis brought to book.

Is the deal in breach of Constitution?

Meanwhile, also in January 2013, the legacy of the Anglo-led financial disaster was being discussed in another court. The government’s system of covering the debts of Anglo (and Irish Nationwide Building Society) through the promissory notes was challenged by businessman David Hall on the grounds that he had “grave reservations about the manner and way the public finances of the country have been run. The Irish people, having never been consulted about this, and in circumstances where its representatives were bypassed, were being asked to honour a deal made in flagrant breach of the Constitution, with no democratic legitimacy and in breach of the Treaty on the Functioning of the EU”.

Specifically, Dáil Eireann never approved the promissory notes – as Mr Hall says is required by the Irish Constitution.  The High Court turned him down on the grounds that such an argument could really only be made by a TD if it was the Dáil that was bypassed, but Mr Hall is appealing to the Supreme Court.

As predicted in the Sunday Independent,  “The case [is]… profoundly embarrassing for the Government, which [finds] itself defending a promissory note system that it is trying to persuade Europe to either abolish or reform.”  Except that the government is not trying to abolish the promissory notes, it is trying to ‘restructure’ the debt rather than challenge its fundamental illegitimacy and immorality (based on the fact that ordinary citizens are making good the gambling debts of those who lent to Anglo and propping up a zombie bank that is in breach of the terms of its own banking licence).

If the government does succeed in some such restructuring, two Independent TDs – Shane Ross and Stephen Donnelly – have warned the Minister for Finance that they will consider a further High Court challenge unless the ‘deal’ is brought before the Dáil for debate and deliberation.

Why is the Government contesting Hall’s case?

So, in summary, we have a situation where Ireland is due to pay out another €3.06 billion as a promissory note on 31 March 2013, arising from the nationalised debts of a bank, some of whose senior executives are charged with having acted illegally and under a payment system that is subject to a plausible challenge on the grounds that it is unconstitutional and in breach of EU treaties.  Why is the government doing this?

It might seem a bit of a stretch for the government to suddenly say that “we strongly suspect these debts are illegitimate by virtue of the fact that some senior bank executives may have behaved illegally”. Given what we have long known and suspected about Anglo, this might be akin to the famous scene in Casablanca where Captain Renaud closes Rick’s café because he is “shocked, shocked to find that gambling is going on in here”  – before being handed his own winnings. But remember that Renaud keeps a straight face and he does close the café.

And why is the government contesting Mr Hall’s case at all? Surely it could instead be going to the European Central Bank (ECB) and other powers-that-be and saying that the scheduled 31 March payment might actually be in breach of our Constitution (and of EU treaties), and we are going to have to suspend it at least until that is clarified. If Mr Hall is successful in his appeal, or if a successful case is taken by a TD, the government then has choices available to it.

The choice the government most definitely should not make, as some sources indicate it might, is introduce a bill in the Dáil that would try to retrospectively legalise the promissory notes: this would not only express contempt for the courts and the Constitution, it would be a squandered opportunity.

A powerful negotiating tool

Instead, it can suspend the Anglo payments on the basis of their unconstitutionality. As Deputy Donnelly has put it, “The [government] could go to the European Central Bank and say, ‘We’d love to pay you the €31bn [the total amount of the promissory notes] but we have these things called the courts, a Constitution and a parliament and they say we can’t’.” Or it can explain to the people that the arrangement entered into by the previous government has been found to be unconstitutional, and offer the people the chance in a referendum to determine whether they want to alter the Constitution to legitimise this arrangement.  The outcome of such a vote is predictable (the referendum question might read: “would you like to burn €3.06 billion of our money every year for each of the next ten years”?).

Either way, the legal issues concerning the promissory notes constitute potentially powerful weapons that the government could deploy in negotiations with the ECB and others.

Andy Storey is a spokesperson for the Anglo: Not Our Debt Campaign, coordinated by Debt Justice Action (

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