Does Ireland Need a Referendum to Ratify EU Budget Rules?

There has been some debate following the release of the summit statement by the EU Heads of State on the 9th of December about the need for a referendum in Ireland to adopt the new rules. Minister Lucinda Creighton has been quoted as putting the odds of a referendum at "50-50" (no explanation as to how she got to those precise numbers). Tanaiste Eamon Gilmore stated in parliament last week that a referendum would be held "if needed." Today's Irish Times reports that the government is seeking legal advice on the issue and that it would take several months to arrive at a determination about the need for a referendum. The article also quotes one source stating a "hunch" that a referendum would be required.

I am not persuaded about the legal need for a referendum at this stage. The executive branch possesses exclusive competence to enter into international agreements in many consitutional democracies. Ireland is no different. The primary check on the abuse of this power is through the usual political process. But the Irish Supreme Court in Crotty v. An Taoiseach (1987) ruled that the "powers [to enter into international treaties etc] must be exercised in subordination to the applicable provisions of the Constitution. It is not within the competence of the Government, or indeed of the Oireachtas, to free themselves from the restraints of the Constitution or to transfer their powers to other bodies unless expressly empowered so to do by the Constitution. They are both creatures of the Constitution and are not empowered to act free from the restraints of the Constitution. To the judicial organ of government alone is given the power conclusively to decide if there has been a breach of constitutional restraints." Justice Walsh - one of the three judges in the majority - wrote further that  "[i]f it is ... desired to qualify, curtail or inhibit the existing sovereign power to formulate and to pursue such foreign policies as from time to time to the Government may seem proper, it is not within the power of the Government itself to do so. The foreign policy organ of the State cannot, within the terms of the Constitution, agree to impose upon itself, the State or upon the people the contemplated restrictions upon freedom of action."

One can argue, with some justification, that the judges in the majority are reaching too far into an area that is within the exclusive competence of the executive branch. Courts are not well placed to second guess executive decisions in the foreign relations area and it is preferable for judges to abstain from judicial review unless constitutional rights are clearly violated.

Still, even with this decision, it is not necessarily the case that a referendum is legally required in order to adopt the new EU rules. The judges in the majority seem to have limited the need for a referendum where there is a clear qualification, curtailment or inhibition of Irish sovereignty. It is perfectly sensible to argue that existing EU rules already occupy the field sought to be covered by the new rules and that there is no new curtailment of sovereignty. Rather, the new rules merely seek to operationalize the existing grant of sovereign power in favor of EU institutions by setting in place verifiable mechanisms with consequent sanctions for breach of treaty commitments. Under this view, a referendum is not necessary as there is no new transfer of sovereignty. In addition, one can argue that sovereignty in this area has also been transferred to the EU/IMF as part of the bailout agreement and nothing new is being done pursuant to the summit.

In conclusion, it is not clear that there is a legal necessity at this stage for a referendum in Ireland. The question will turn on the precise wording of the new treaty and it may be possible to draft it in a way that avoids the need for a referendum.

Shatter's "Arrogance" and The Eight Former AGs

Much has been written about Alan Shatter's dismissal of the eight AGs' opposition to the constitutional referendum proposals on cutting judicial pay and Oireachtas inquiries ("nonsense" and "simply wrong"). These pieces - mostly attacking the Minister (e.g. The Independent: "Alan Shatter, the star of the 'No' campaign, whose arrogance contributed to the defeat of the Oireachtas Inquiries referendum ...") - imply that the intervention by the AGs is owed some deference. That is, their status confers more weight to their views than those expressed by others. Some have even made references to the fact that Mr. Shatter is a "family law solicitor" setting it up as a marker of contrast to the AGs - as if that puts him at a disadvantage in the expertise stakes and therefore entitles their opinions to greater weight.

I am a bit bemused by this deference and by the severe condemnation of the Minister for labelling the former AGs' views as "nonsense." Why should the opinions of a group of eight former AGs be given any more weight than lay opinion? Note that I am not referring to the substance of the arguments advanced by the AGs at this time. My question is limited to whether their status as former AGs entitles their opinions to superior weight. This question might be posed in respect of the privilege granted to most kinds of expert opinion. However, there is a key difference here: expert privilege is usually earned in some form - e.g., a Ph.D. or some credential that is the product of sustained activity in a technical discipline. The AGs are in a slightly different position - they were appointed politically, and earned expertise of the same sort cannot be automatically assumed.

Setting aside this problem and assuming that they are experts, are their opinions entitled to any deference by virtue of status? It would be a mistake to grant anyone such deference. Experts can also be wrong. If the opinions of putative experts are taken at face value, with sole reliance upon their status, there is inadequate examination of the substantive arguments. Expertise becomes a device to chill debate by insulating opinions from scrutiny. It denies the same privileges to non-experts and seeks to denigrate and ultimately to exclude. We also erroneously substitute examination of the substantive arguments for a superficial evaluation of the purported expertise. To be sure, expertise might be rationally privileged when the issue is one of technical complexity and where the average person is unable to arrive at a sound decision following reasonable effort. However, the questions submitted by the referenda only involve political choices - not technical issues - and are not of a level of complexity that is beyond the average voter. The trend in modern societies is for elites to seek to transform simple political choices into complex technical arguments to exert disproportionate influence over the democratic process and advance their interests. Coevally, we might be seeing the substitution of deference in Ireland in favour of experts and away from institutions traditionally accorded such privilege - such as the Church. Whatever the reason, such deference is antithetical to a republic founded on equality, serves to promote herd-like behaviour, stymies robust debate, and fosters error.

It is a pity that the media blithely deferred to the opinions of the eight former AGs. Their opinions should be examined for substance - except that there is not much of it beyond urging rejection of the proposals upon pleas about independence etc. One assumes that the average voter was able to see this and did not place much importance to the AGs' views. Even if their views had any influence, it is likely that just as many - if not more - voters chose to vote against their advice, as did in favour, thereby not affecting the net result. This conclusion - admittedly, impressionistic and not empirically sound - is supported by the many hostile letters published in the major newspapers following the AGs' intervention. It is also consistent with the massive majority in favour of cutting judicial pay despite the AGs opposing the proposal. Equally, the defeat of the Oireachtas inquiries proposal might not have been influenced by their letter; rather it was probably becaused the government did not do enough to explain the issue to the public.

In any event, the defeat of the inquiries proposal is not a big deal. It was always going to be a poor mechanism for getting to the root of the banking crisis - one of the justifications offered by the government for adopting it. As I've argued before, here, here and here, an independent commission would be better suited to that task. For other types of matters of public importance, the Abbeylara case does not prevent Parliament from conducting inquiries, as I've argued here. This referendum was entirely unnecessary and the government need not have followed the ultra-conservative legal advice that canvassed for spending public money in this way.

Greeks Taking Money from Banks to Store in Garages: No End to EU Crisis

As I've argued before, EU leaders have shown very little evidence that they are capable of taking the bold steps necessary to contain the crisis. Italy and Spain's continuing troubles show that markets have no faith in these band-aid measures and that they next crisis is not too far off. A recent article in the Guardian about a silent bank run in Greece is scary:

In May alone, almost €5bn (£4.4bn) was pulled out of Greek deposits, as part of what analysts describe as a "silent bank run". This version is also disorderly and jittery, just not as obvious. Customers do not form long queues outside branches, they simply squirrel out as much as they can.

One senior investment banker [said]: "People are scared that the government doesn't know what the fuck it's doing." He tells a story about an acquaintance who took out €30,000, wrapped it in a bag and stashed it in his garage. "The bag had previously had some food inside," he says. "So it attracted rats, who ate the notes."

These sorts of stories remind one of the Great Depression and it is incredible to read about it happening so close to home in this day and age.

Ronaldo and Footballers as European Central Bank Collateral

Financial News reports that Bankia, the Spanish Bank, is offering Ronaldo and Kaka as collateral to the ECB for some financing. Ronaldo was supposedly acquired from Manchester United for GBP 80 million whereas Kaka was purchased for eur. 65 million.

The ECB has been accepting all sorts of junk as collateral lately but they might draw the line at Sepp Blatter and Irish footballers. Perhaps rugby players? Although seizing those muscular rugby chaps and taking physical custody in the event of default might be beyond the abilities of ECB personnel!

Is the Anglo Investigation Interminable?

The investigation into Anglo limps on as the court granted another extension and no charges are expected to be filed until next year:

Lawyers representing the Director of Public Prosecutions told the court that it expected to receive a file on financial transactions by Anglo directors within the next 14 days.

The file relates both to a suspected failure by the bank to maintain a register of directors’ dealings and a suspected withholding of information from auditors.

Predictably, the lawyers claimed that the transactions were "more complex than expected." I don't know how this claim can be repeated over and over again. It might have been more complex than expected the first time, but surely the complexity loses its unexpected quality thereafter and adequate steps to tackle it are in order? Better and more legal resources would help reduce the complexity and speed up the analysis? Moreover, one would have thought that the snail-like pace of the investigation would have changed after harsh remarks from the judge. But this snippet proves that little has changed: "A file concerning a loan to a particular Anglo director, sent to the DPP in December 2010, has been assessed by the DPP and is now being considered by its lawyers, while two other files on “back-to-back” deposits between Anglo and Irish Life and Permanent have also been sent to the DPP."

Seriously? You cannot make this stuff up. Some of my previous posts about the Anglo investigation are here, here, here, and here. At this rate it would take a miracle for any charges to be filed.

Anglo Wins Fraud Lawsuit

A fraud action brought by a group of high networth investors failed at the High Court: Mr Justice George Birmingham today found there was no evidence of fraud by Anglo in relation to how the investment was promoted and managed and also dismissed all other claims by Mr McCaughey concerning the investment.

The judge said Mr McCaughey clearly "now regrets his investment decision but investor remorse does not provide a basis for a successful legal action".

"Had the hotels been disposed of at a time when they had increased in value very substantially and had a profit been recorded, his attitude might well have been different," the judge added. "Unfortunately that didn't happen and it appears that the plaintiff is now facing a loss on his investment."

"However, that is sometimes the lot of those who participate in high risk investments," he said.

In the absence of evidence - typically smoking gun emails or other documents showing fraud - it is very difficult for investors to win these types of cases. A large number of similar cases are now in the courts in the United States against virtually every major financial institution including Goldman Sachs and Bank of America. Many of these will suffer a similar fate as mere loss is not sufficient to hold the institution liable.

Bank of Ireland Manages to Escape Grasp of Government

In a surprising bit of news, the markets put some faith in Bank of Ireland and helped it to stay out of state control. An investor group - located outside Ireland - is reported to have put about 1.12 billion euros into the bank. This is probably the best news the Irish banking sector has had in some time. It is also a relief for the taxpayer.

More Details on Anglo Fraud Emerge in AIB Investigation

It appears that the alleged fraud being investigated by AIB in Anglo's deposit book is very much the plain vanilla sort: "around €3m of money previously held in Anglo was unaccounted for.
It is believed the sum was stolen from a number of deposit accounts at Anglo by a former official at the disgraced bank.
The Anglo official, who was based in Dublin, is suspected of moving large sums of money between accounts to cover the thefts.
It is suspected he avoided detection by ensuring that funds were available for accounts that matured.
The man at the centre of the allegations has since died ..."

Anglo will probably claim that this is just a rogue actor. However, this raises questions about its supervisory practices and internal controls. The article is available here.

Ireland Gets Lower Rates on Bailout in EU Deal on Greece, But Default Still Possible?

The Irish newsmedia is reporting that Ireland will benefit from the new bailout agreement being hammered out at the EU summit. These reports seem to have more finality than is discernible from the leaked draft of the announcement. I looked at the draft and here are some key provisions with my comments in blue:

We reaffirm our commitment to the euro and to do whatever is needed to ensure the financial stability of the euro area as a whole. We also reaffirm our determination to reinforce convergence, competitiveness and governance of the Euro area.

Nothing new here as a matter of policy, they've repeatedly stated a commitment to the euro. The real consequences will depend on follow up action in new legal instruments.

We have decided to lengthen the maturity of the EFSF loans to Greece to the maximum extent possible from the current 7.5 years to a minimum of 15 years. In this context, we will ensure adequate post programme monitoring. We will provide EFSF loans at lending rates equivalent to those of the Balance of Payment facility (currently approx. 3.5%) without going below the EFSF funding cost. This will be accompanied by a mechanism which ensures appropriate incentives to implement the programme, including through collateral arrangements where appropriate.

...

Structural funds should be re-allocated for competitiveness and growth under a European "Marshall Plan".

Greece is in a uniquely grave situation in the Euro area. This is the reason why it requires an exceptional solution. The financial sector has indicated its willingness to support Greece on a voluntary basis through a menu of options ...

EU leaders know that absent a bold plan, the contagion risk is very real. That might explain the Marshall Plan language. It is plainly a ploy to set up an exceptional situation to justify the extraordinary measures and to separate Greece from other countries like Ireland and Portugal. In the end it might be all talk and the markets may not be persuaded that Greece is all that different.

All other Euro countries solemnly reaffirm their inflexible determination to honour fully their own individual sovereign signature and all their commitments to sustainable fiscal conditions and structural reforms. The Euro area Heads of Statesor Government fully support this determination as the credibility of all their sovereign signatures is a decisive element for ensuring financial stability in the Euro area as a whole.

This is once again a ploy to allay contagion fears and to reassure markets that Ireland and Portugal will not default. Does a statement of this sort really mean that Ireland will not default? Or that the markets will discount the likelihood of that happening? Given recent experience, it will take a lot more than words and a selective default by Greece might well signal a likelihood of Ireland doing something similar notwithstanding this "inflexible determination" to honour its commitments. Words alone from a sovereign are worth very little, especially given the track record in this area.

We welcome the progress made on the implementation of the programmes in Ireland and Portugal and reiterate our strong commitment to the success of these programmes. The EFSF lending conditions we agreed upon for Greece will be applied also for Portugal and Ireland. In this context, we note Ireland's willingness to participate constructively in the discussions on the Consolidated Common Tax Base draft directive (CCTB) and in the structured discussions on tax policy issues in the framework of the Euro+ pact framework.

The troika's recent review said as much about Ireland, but the markets did not pay a lot of positive attention. And there is the recent downgrade to junk status suggesting that Ireland is not being rewarded for its belt-tightening. The CCTB language was probably to appease Sarkozy and signals that Ireland is continuing to receive pressure in this area despite its best efforts at resisting tax harmonization.

All euro area Member States will adhere strictly to the agreed fiscal targets, improve competitiveness and address macro-economic imbalances. Deficits in all countries except those under a programme will be brought below 3% by 2013 at the latest. In this context, we welcome the budgetary package recently presented by the Italian government which will enable it to bring the deficit below 3% in 2012 and to achieve balance budget in 2014.

These commitments are not new. The EU has looked away in the past when states including Ireland ran up deficits several times the permissible limit. What is needed is enforcement, and binding legal commitments that entail monitoring. One can expect the Germans to be more aggressive than they have been in the past as these mechanisms are fleshed out.

We look forward to the rapid finalization of the legislative package on the strengthening of the stability and growth pact and the new macro economic surveillance. Euro area members will do their utmost to help reaching agreement with the EP

We commit to introduce legally binding national fiscal frameworks as foreseen in the fiscal frameworks directive by the end of 2012.

As I wrote previously in the Wall Street Journal, the original Greek bailout is illegal. This summit statement is an acknowledgement of that reality. One hopes that the EU comes up with a legal framework that allows for transparent mechanisms to address such situations as they arise.

We agree that reliance on external credits ratings in the EU regulatory framework should be reduced, and look forward to the Commission proposals in this respect.

This is pure hogwash. The EU is living in la-la land if it thinks it can ignore market credit ratings and bully ratings agencies into hiding the truth. While the ratings system has many faults, these agencies have been willing to tell uncomfortable truths on sovereign credit. That might not please the politicians but it has kept them from selling us whoppers.

The full draft announcement is available here. My article calling for a hybrid conservatorship for Greece is available at Huffo here.

Anglo Fraud Could be Uncovered by AIB?

The veil of secrecy that has protected the key players in Anglo might be beginning to part as the restructuring process yields more information about transactions at the failed bank. As the Irish Times reports, AIB has commenced an investigation into allegedly fraudulent transactions involving Anglo's deposit book:

"The bank said the investigation was triggered by a customer inquiry and concerned certain discrete funds.

"In the event that fraudulent activity has occurred, AIB confirms any such transactions will be for the account of the bank," it said. The Garda Bureau of Fraud Investigation and the Central Bank have been informed of the matter. Some €7.1 billion in deposits held in Anglo Irish Bank were transferred to AIB..."

The Independent also has a report on the investigation, stating that "a complaint from a customer who believes money was missing from an account sparked the probe."

This investigation might shed light on Anglo's banking practices with implications beyond these transactions.

Ban on Repossessions Delaying Inevitable?

Repossession orders are down according to the latest figures in the Independent, dropping from 985 to 583 during 2010. The Irish Times also has a report on the topic noting "an increase of 65 per cent in applications for judgment mortgages" in the Circuit Court over 2009. Similar actions increased 128% in the High Court.
Unsurprisingly, there were 13,613 debt judgments in the Circuit Court during 2010 (up 25%), and 30,000 in the District Court.
The report also notes that "[t]he High Court dealt with 3,207 debt-recovery cases, up 28 per cent on 2009. The District Court issued 1,564 ejectment orders last year, up 76 per cent on the previous year. There has also been a trebling in bankruptcy cases in the last two years, with 29 bankruptcies granted in 2010 compared to eight in 2008."

Given the state of the economy, how many of those currently in arrears are likely to avoid repossession after the 12 month moratorium? This policy is just kicking the can down the road and preventing the market from achieving the necessary correction. No one wants to see neighborhoods blighted by empty repossessed homes but setting up this artificial situation with a repossession embargo cannot be a good idea.

More Delays in Anglo Investigation

Will this ever end? Justice Kelly's deadline seems set to expire without any discernible action as the investigation has not moved beyond the 90% mark. Via the Independent:
The ODCE and the gardai have indicated that they will not be in a position to complete their files for the Director of Public Prosecutions, James Hamilton, until at least the end of the year.
Although 90pc of the files have been completed, witnesses are still being interviewed in connection with the rest of their inquiries.
Some 200 people have already co-operated with the investigation but more than 40 other witnesses have yet to be seen.

I posted previously about reading speed in this investigation. Other posts on the investigation can be found here, here, here and here.

Amidst all this, the DPP is quitting to protect his pension.

Ridiculous "Golden Goodbyes" at Permanent TSB and Irish Nationwide

As a long-time observer and researcher of CEO compensation issues, I am used to seeing fat sums offered to corporate executives in the form of golden parachutes. But this report about "golden goodbyes" in the Irish Independent made my jaw drop:
[More] than 500 staff at Government-guaranteed Permanent TSB are to get a bonanza pay-off ...[this] is also available to the 245 Irish Nationwide Building Society staff who earlier this year transferred into Permanent TSB as part of a forced merger of Nationwide with the Anglo Irish zombie bank.

The €38m package will see staff walk away with an average pay-off of €120,000 -- but some managers will be in line for pay-offs of more than €300,000.


This is simply unbelievable. There is an argument to be made for CEO golden parachutes based on expertise, risk exposure etc., when they have performed adequately, but paying such sums to what seem like mid-tier staff in a bank that would have gone bust but for the bail-out seems ridiculously excessive. This is clearly pay for non-performance and failure and a complete waste of taxpayer money. The minister must intervene and stop this nonsense.

British Pensioners v. Bank of Ireland

The Independent is reporting that British pensioners are taking legal proceedings against the Bank of Ireland's restructuring proposal:
One part of that restructuring relates to permanent interest bearing shares (PIBS) issued by Bank of Ireland subsidiary Bristol & West worth £75m.

Under the bank's restructuring plan investors in the PIBS will be offered just 20p out of every pound invested in the shares.

I would imagine that those shares were issued under English law. There might be some interesting conflicts of law issues if the English court hears the case. Still, it looks like an uphill battle for the pensioners!

No Prosecution in Sight for Anglo Irish Bank Executives

The Independent reports that "Significant delays in the Anglo investigation were revealed in the High Court yesterday. The blame for the hold-up was partly attributed to the refusal of certain key figures to be interviewed or provide witness statements."
This protracted saga does not seem to be nearing an end anytime soon. Most observers cannot fathom the delay and it seems the judge is losing patience too:
Mr Justice Peter Kelly expressed concern about the delay in completing an investigation that began more than two years ago when millions of files were seized during a raid on the bank's St Stephen's Green headquarters.
The judge was hearing an application that would allow the investigation to continue for another six months.
He is due to make a decision on the matter next Tuesday.
Lawyers for the ODCE told Mr Justice Kelly that "every effort" would be made to complete it by the end of this year.

Justice Kelly is absolutely right to express concern. We are not dealing with opaque CDOs and other exotic transactions here. What happened in these banks is relatively straightforward, the only question is whether there is enough evidence to back up criminal charges. You would think that there were millions of complex documents and hundreds of people to interview - as would be typical in major litigation but even that does not appear to be the case here:
The court heard files and reports running to 12,000 pages and related to three of the five issues being investigated were sent to the Director of Public Prosecutions in December 2010 and March of this year.

12,000 pages in 5 months?  Assuming one person only works 20 days/month on this material that's just 120 pages a day.
The average person probably reads no slower than 50 pages/hour, and with a lazy 8 hour work day could read 400 pages. So they must be very slow at reading there.

The report also notes that "the judge was told there was no indication yet what view the DPP had taken on the material and that it could take another two years to complete any criminal prosecution.

In response, the judge asked if the investigation was "ever going to come to an end". He noted the investigation had been adjourned and extended six times by the court and said he was not "a rubber stamp".
The whole saga does not inspire much faith in the system.

Portugal follows Ireland into bailout

As expected, Portugal has reached a deal with the EU and the IMF for a bailout. The deal is for $116 billion over three years. The Portugese PM, Jose Socrates, keen to avoid the mistakes of the then Irish government appears to be selling the deal to his local constituents as a limited victory in a dire situation. As the WSJ reports:
... José Sócrates described as friendlier than what other rescued euro-zone economies received.

Mr. Sócrates, whose government quit in March but is running the country ahead of a June 5 election, said in a televised statement the accord reached Tuesday won't require the privatization of social security.
Other key details, such as how much the country will have to pay in interest rates for the loans, haven't been disclosed yet, but Mr. Sócrates said the agreement includes a more relaxed deadline for the government to meet budget deficit goals.
Mr. Sócrates said the deal won't include cuts in the minimum wage or in public-sector jobs, measures Ireland and Greece were forced to take. Employees will still receive the extra 13th and 14th months of salary, Mr. Sócrates said.
...
Negotiations have been taking place in Lisbon for almost three weeks, much longer than the talks held in Greece and Ireland for their respective bailout programs.

"The international institutions recognize that the Portuguese situation isn't like the situation of other countries," Mr. Sócrates said during the address. "The government has managed a good agreement. It is an agreement that defends Portugal," he said.

Under the bailout package, the country will have to reach a budget deficit of 5.9% of its gross domestic product this year, 4.5% in 2012, and 3% in 2013.

That represents a relaxation of current targets where the country had committed to bring its spiraling deficit down to 4.6% of GDP this year, 3% next, and 2% in 2013.
Changes in the budget deficit targets were expected after the Portuguese government said recently its deficit for 2010 was 9.1% of GDP, compared with the 7.3% it had targeted for the year.

Whatever else one might say about Mr. Socrates, he has engaged in a bit of smart negotiating by setting up a situation where he is only a caretaker, thus constraining the ability of the other side to exact costly concessions. The EU and IMF had to factor in enforcement costs post bailout - if the rest of the political spectrum saw the deal as being too harsh there is the risk of renegotiation after a new government is formed. This required some sort of soft agreement to be reached with the likely participants in a new government and the greater range of negotiating positions such an effort required would probably have favoured Portugal's interests. There was also the risk that an unduly onerous bailout agreement would affect electoral preferences with adverse consequences for Portugal in the long term.

Now we can all turn our attention to Spain.

Vincent Browne on Oireachtas Inquiry into Banking Crisis

Vincent Browne has an interesting op-ed in the Irish Times today arguing against an Oireachtas inquiry into the banking crisis. I've had plenty to say on this topic in the past on this blog and in the media, and I am in substantial agreement with many of Vincent's arguments. I disagree with his prescription for a judicial inquiry. Based on previous experience in the U.S., I think an independent commission would be superior to a judicial inquiry. This commission, as I've previously argued, should have a set timetable - 1 year for instance - and be given a fixed budget. It should be comprised of experts - some with a strong legal/prosecutorial background - and be manifestly free of conflicts of interest. It should be mandated to produce a report in that time-frame.

In the light of prevailing fears about the unconstitutionality of Oireachtas inquiry powers, it might be useful to have a close look at the language in the Abbeylara case. Chief Justice Keane wrote a superb dissent that is well reasoned and scholarly in its analysis of comparative constitutional law. Some extracts:

The Oireachtas, like any other body or person in the country, is entitled to keep itself informed and, for that purpose, to initiate inquiries, provided that, in so doing, it does not infringe the law. That is not in any way in dispute in this case. Nor was it seriously contended on behalf of the applicants that the Oireachtas was precluded from establishing a fact-finding committee to investigate and reach conclusions on particular matters which might be relevant to the exercise by them of their legislative function. Thus, it was conceded that there could be no legal inhibition on their establishing a committee to investigate and report to them on a particular topic of scientific controversy in order that they might consider the possibility of and, if thought appropriate, enact, legislation dealing with the topic. The challenge in these proceedings is to the establishment of a body, such as the sub-committee, charged with what the Divisional Court and the written submissions on behalf of the applicants describe as "adjudicative functions", the conclusions of which may affect the good name and reputation of persons, such as the applicants, who are not members of either House of the Oireachtas. The description of those functions as an "adjudication" is, in my view, inappropriate and calculated to mislead. The latin root of the word and the definition to be found in the Oxford English Dictionary (Vol. 1), make it clear that one of its primary meanings is "a judicial sentence or award". The report of a body such as the sub-committee is, however, entirely devoid of any legal effect (that is not say, of course, that it is devoid of factual effect. If I drive my car carefully down the street but injure a pedestrian who walks in front of it, my driving will have serious factual consequences. It will remain devoid of legal effect.) Its findings do not determine any legal rights or obligations and represent no more than the opinions its members have formed on the material placed before them, whether in documentary or oral form. Unlike the orders of courts established under the Constitution or awards and determinations of the many tribunals which are not courts but exercise quasi-judicial functions, the findings of a body such as the sub-committee can be wholly ignored or disregarded by persons referred to in their report without the slightest possibility of any legal sanction being imposed upon them as a result.

... they clearly considered themselves entitled to reach a conclusion ... which, in a court of law, might support a verdict of unlawful killing. But the fact that the sub-committee could arrive at such a finding does not mean that they would be "adjudicating" on the issue, as that expression is properly understood, still less that they were arriving at a finding which was in any way whatever equivalent to the verdict of a court in criminal proceedings or, for that matter, the judgment of a court in civil proceedings arising out of the same event.
...
What seems to have been entirely lost sight of, however, is that a finding of fact - or more accurately, an opinion arrived at by a body such as the sub-committee on the oral or documentary evidence placed before it - is no more than that: it cannot as a matter of law be equated with the verdict of a court of competent criminal jurisdiction or the judgment of a court of competent civil jurisdiction. Such judgments and orders are, under the Constitution, the exclusive prerogative of the courts established under the Constitution, save for those limited matters of a non-criminal nature in respect of which what are normally described as quasi-judicial determinations may be made by bodies other than courts under Article 37 of the Constitution.

The right of persons in the position of the applicants to their good name must be balanced against the right, and indeed the duty, of the Oireachtas to inquire into and inform themselves as to matters which are relevant to the discharge by them of their constitutional functions. It is accepted by the Attorney General that not merely must the inquiry proposed to be conducted by the Oireachtas relate to the discharge by it of its constitutional function: the employment of this instrument, affecting as it may the constitutional rights of persons outside the Oireachtas, must be proportionate to the objective to be achieved. 

The chief justice quoted Costello J. in Goodman International v. Mr. Justice Hamilton  [1992] 2 I.R. 542:
"The terms of reference in this case require the Tribunal to inquire into the truth or falsity of a number of allegations of wrongdoing including assertions that the criminal law has been breached. But in inquiring into these allegations and in reporting its opinion on them theTribunal is not imposing any liabilities or affecting any rights. It is not deciding any controversy as to the existence of any legal right. It is not making any determination of any rights or liabilities. It is not imposing any penalties. It may come to the conclusion that some or all of the allegations of wrongdoing are true,but this opinion is devoid of legal consequences . Its functions of inquiring, reporting and recommending cannot therefore be regarded as the 'administration of justice'."
...
Goodman International v. Mr. Justice Hamilton  [1992] 2 I.R. 542 is put beyond any doubt by the judgments in this court. Finlay C.J., in addition to upholding the view of Costello J. as did the other members of the court, that such an inquiry was in no sense a "trial" but was rather a "simple fact finding operation reporting to the legislature", also referred to the resolution as one which "directed the tribunal" to inquire into the specified matters. Even more emphatically, if that were possible, the same view was expressed by Hederman J who said at p. 597:-

"While Article 15, s. 10 of the Constitution provides that each House of the Oireachtas shall make its own rules and standing orders, with power to attach penalties for their infringement, and provides that each house shall have power to ensure freedom of debate, to protect its official documents and the private papers of its members and to protect itself and its members against any person or persons interfering with, molesting or attempting to corrupt its members in the exercise of their duties, it does not provide for the establishment of parliamentary tribunals. But in any parliamentary democracy it is essential that the parliament should have powers to initiate inquiries…" [emphasis added]

Hederman J. also cited at p. 598  Watkins v. United States  (1957) 354 U.S. 178 as authority for the proposition that:-

"The [United States] Supreme Court has held that the power to conduct investigations 'is inherent in the legislative process'."

The High Court's treatment of very persuasive U.S. authority holding that congress has the power to conduct inquiries had been thoroughly baffling. Keane CJ was of the same view:

Counsel for the applicants sought to distinguish this powerful current of authority in the Unites States Supreme Court on two grounds. First, they argued that, as in England, the cases proceeded on the basis that the power to inquire which was inherent in the legislative process could not exist without the consequential power to secure the attendance of witnesses and the production of documentary evidence. Since that consequential power was not inherent in, or expressly conferred, on the Oireachtas, they urged, the power of inquiry, to which it was consequential, could not exist either.

The Divisional Court was impressed by this argument: I have to say, with respect, that I find it bafflingly illogical. If the power to inquire is pointless and meaningless without the consequential power (and it is highly debatable whether that is so - if a civil servant of any rank had been requested to appear before an inquiry being conducted by the Committee of Public Accounts before the passage of the Act of 1997, could it be seriously suggested that he or she would have fearlessly refused to do so?), the consequence should be either a finding by the courts that it exists as a necessary consequence of the inherent power (as in England and the United States) or the enactment of legislation conferring it (as in Ireland). To treat it as a ground for supposing that the bare power to inquire does not exist in the first place is, to put it mildly, mystifying.

Justice Murphy's dissent also deserves quotation:
... the right of members of the Oireachtas, whether individually or collectively, to obtain information is implicit in the Constitution and the right, in certain circumstances, to compel members of the public to provide such information under oath is expressly conferred by statute. The real concern, as I see it, relates to the power or duty of a sub-committee of the Oireachtas "to make a finding of fact"....
The Oireachtas cannot usurp the functions of the courts (see Buckley and others (Sinn Féin) v. Attorney General and another  [1950] I.R. 67). Neither can any other person or body exercise the judicial function which the Constitution exclusively vested in the judiciary (see  In re Solicitors Act, 1954  [1960] I.R. 239). Similarly the courts have no jurisdiction to substitute for impugned legislation a form of enactment which it considers desirable or to indicate to the Oireachtas the appropriate form of enactment which should be substituted for the condemned legislation (see  Somjee v. Minister for Justice  [1981] I.L.R.M. 324 and  MacMathúna v. Attorney General  [1995] 1 I.R. 484. The legislature cannot confer on itself, or any other person or body, a power or duty, in whatever terms expressed, which would amount to the exercise of the judicial function.
...
If, for example, the Committee of Public Accounts continued with the inquiry which, on the 1st December, 1970, Dáil Éireann éireann had directed it to undertake, and upheld the contention of Chief Superintendent John P. Fleming to the effect that Mr. Padraig Haughey was guilty of a criminal offence, that conclusion would not have enabled the committee, or indeed any court of law, to impose any penalty by reference to that finding or conclusion.
...
I would readily infer that the Oireachtas had power to confer on a sub-committee a power to make findings of fact in the sense that those findings represented the views of the committee or a majority of them on any matter which might be in controversy. The fact that the findings might of themselves have serious repercussions, or that the publication thereof might cause damage to the reputation of witnesses or other members of the public, is regrettable but unavoidable. This contingency is adequately provided for by the well established requirement that any such witness must be afforded such protection as the circumstances require extending if necessary to what is described as "the full panoply of the  Haughey  rights ( re Haughey  [1971] I.R. 217)". I accept therefore that a sub-committee of the Oireachtas may be empowered to gather information, compel witnesses to attend before it and to make findings of fact on any issue properly raised before it. More particularly I am satisfied that such power can be exercised without the enactment of further legislation. It is not challenged by the applicants that a right to conduct an inquiry challenged in these proceedings could be validly taken or conferred by legislation enacted in that behalf.

Justice Murray's judgment, part of the majority of the court, provides support for the view that an appropriately limited inquiry by an Oireachtas committee might be constitutional:

I think the Attorney General is correct when he submits that there is nothing in the Constitution to inhibit or prohibit the Oireachtas from conducting or initiating inquiries as such . The fact that the Houses of the Oireachtas may conduct or initiate inquiries to obtain information or ascertain facts does not derive from an inherent power peculiar to its role and function as a representative democratic parliament, although its desire to do so in any particular case would indeed be related to such functions. But once an inquiry is conducted within the law and the Constitution, it seems to me it is axiomatic that the national parliament, like many other even private bodies, may conduct an inquiry for their own purposes. It is not restricted from doing so.

 ...
It is difficult to envisage then that the Constitution of 1922 or that of 1937 would, silently, ordain that the Oireachtas should have power to establish and conduct inquiries and make findings as to the personal culpability of individual citizens for serious wrongdoing. As I have pointed out earlier, when the Constitution gave specific and special powers to the Oireachtas to adjudicate on the conduct of its own members and on other persons and office holders who were not members, it did so explicitly. I think it can be fairly said that if the Constitution intended to confer far reaching powers on the Oireachtas to inquire and make findings of fact or express opinions as to the personal culpability of individual citizens for serious wrongdoing, it would have also done so in an explicit manner.
...
In the circumstances of this case, we are only concerned with an inquiry which may make findings of personal culpability impugning the good name of an individual citizen. I do not see any reason why the Oireachtas cannot conduct inquiries of the nature which they have, for practical purposes, traditionally done, including inquiries into matters concerning the competency and efficiency in departmental or public administration as well as such matters as those concerning the proper or effective implementation of policy and to make findings accordingly. Also, in the case of a particular office holder, such as the chief executive of a semi-state body, who is by virtue of his appointment, whether by statute or contract, answerable to the Houses of the Oireachtas, different considerations arise and I do not consider that the order proposed to be made by this court affects such a situation.

Furthermore, as Hardiman J. illustrates in his judgment in considering the New Zealand experience, it is possible for a parliamentary committee to conduct an in-depth investigation of a large police operation and make extensive findings and recommendations of great public and legislative import without the necessity of making findings of personal culpability of individual police officers.

Justice Hardiman's opinion seems to be animated largely by the secondary or collateral consequences of any findings made by the parliamentary committee. He repeatedly cites the inquiry by the US House Un-American Activities Committee in this regard. His chief concern seems to be that even though the committee's conclusions are "legally sterile" - in the sense that they carry no legal consequences in terms of punishment - they nevertheless have the potential to destroy individuals' lives. In other words, the findings are expressively overdetermined and different audiences might impose collateral sanctions upon those held to be "guilty." Surely, this risk exists even in the case of judicial findings of guilt? While a convict's judicially imposed punishment might terminate upon the expiry of the sentence, is it not the case that the convict bears the stigma of conviction and collateral consequences for the remainder of his life? I am not persuaded that Justice Hardiman's argument does the job. In any case, this does not rule out an inqury if it makes no "findings" about culpability? Deposing individuals in public serves an informational purpose and could educate parliament about responses to the financial crisis. Surely that is permissble and very necessary for the conduct of the legislative function? After all good public policy and a sound system of financial regulation can only be formulated upon the basis of evidence?

Some extracts from Hardiman J.'s opinion:
(on the phrase "findings of fact") I have no doubt that the phrase, according to its ordinary and natural meaning, describes a rigorous analytical process leading to factual conclusions, conducted by a body uniquely equipped or authorised to do so. It is the diametric opposite, in my view, of the sort of opinion expressed about a work of art or music: matters of taste and artistic impression are known to vary from person to person and not to be susceptible of rigorous, objectively justifiable, demonstration. When it is recalled that the hypothetical finding of fact in this case might involve a finding as serious as "unlawful killing", made by a parliamentary sub-committee acting under the authority of both Houses, I believe that it is quite fanciful to consider that a reasonable man or woman in the street would not regard a report so phrased as a solemn finding of demonstrated wrongdoing. If, in relation to one of the applicants, it was found as a fact by this parliamentary group that he or she had unlawfully killed the deceased man, I do not believe that the alleged technical status of such finding as being (contrary to its obvious and natural meaning) merely an opinion would at all avail him or her in the eyes of the ordinary reasonable member of the community. 

Is this just a quibble as Justice Hardiman suggests? Surely there is a difference between a "finding" in such a context and a conviction for unlawful killing?

Justice Hardiman goes on to rule:
It is not disputed by the garda applicants that the findings of the sub-committee, no matter how adverse, could not bind another tribunal or in themselves impose civil or criminal legal liability. But in light of the grave consequences which I am satisfied a finding of responsibility in any degree for Mr. Carthy's death would carry, I believe that the proposed inquiry can fairly be described as an adjudicatory one.
...
To be brought by compulsory process before a committee claiming those powers and to be on risk of that parliamentary committee making a "finding of fact" that a particular person shot the deceased man and that such shooting was an unlawful killing, in my view, can only be regarded as a form of accountability.
 ...
The salient lesson from the Houses Un-American Activities Committee cases is that a person can be ruined simply by exposure and condemnation as much as by conviction. This, indeed, according to the minority in  Barenblatt v. Unites States  (1958) 360 U.S. 109 was the principal purpose and effect of the committee's activities. It is important, I believe, to realise that a body making findings of fact and authoritative pronouncements, but without the power to make actual orders or impose penalties, has its being and its effects wholly in the sphere of public opinion and private reputation. Black J.'s dissenting judgment contains a detailed prospectus of how a pronouncement that is "legally sterile" can destroy the life of a citizen. And yet, Black J. lamented, "The court still sits". The same point has been recently made by the distinguished scholar Ronald Dworkin (Dworkin: New York Review of Books 28th February, 2002). Looking back at these events from a safe distance, but also seeking to find some lessons for the post-September 11th world, Dworkin reflected that after the Second World War the United States had created "… A red scare that destroyed the lives of many of its citizens because their political opinions were unpopular. Much of this was unconstitutional but the Supreme Court tolerated almost all of it. We are ashamed now of what we did then: we count the court's past tolerance of … McCarthyism as amongst the worst stains on its record".
Justice Hardiman also left open the possibility that parliament could pass a law allowing it to conduct an inquiry:
It was said many times on behalf of the respondents that, even if the applicants were correct in law in saying that there was no inherent power to hold this inquiry, their proceedings were nonetheless in some sense futile because that position could be rectified by the passing of "a two section Act". I wish emphatically to express my agreement with the judgment of Geoghegan J. in this regard. That point is quite irrelevant to the case made on behalf of the gardaí which must necessarily be based on the state of the law as it now is. If the court were to be influenced by the possibility of future legislation it would, ironically, be trespassing into the legislative area by assuming that the Oireachtas would legislate in some particular fashion. A statutorily conferred power to hold an inquiry such as that proposed might raise quite different issues to those raised by the claimed inherent power: it is quite impossible to anticipate what issues might arise under legislation which does not exist, and it is improper to attempt to do so.
This is already a post that has gone on for too long. I'll save comments on Justice Geoghegan's judgment for another occasion.

In conclusion, I think an inquiry by the Oireachtas would be sub-optimal. An independent commission of inquiry would be a superior alternative.

Nyberg Report Released

It's available here.

Previewing the Banking Inquiry Report

If the Irish Times is correct in its reporting about what's in the Nyberg report into the causes of the financial crisis, the inquiry might well have been a waste of time. According to the newspaper, the "report is expected to criticise the “herd mentality” that prevailed in banking and among the regulatory authorities, where there was a strong culture of consensus and where any challenge to this was strongly discouraged.
The investigation is understood to have severely criticised the lack of governance in banks (especially Irish Nationwide Building Society), serious systemic failures and shortcomings in the Central Bank and in the former financial regulator’s office, as well as in the Department of Finance."

Did we need another inquiry to tell us that? A survey of the newspapers here over the last few years would have said as much.

This is exactly why I repeatedly emphasized the need for someone with a prosecutorial background to lead the inquiry. In any case, I'll reserve more comment until a full reading of the report.

New Irish govt. to Introduce Anti-corruption Law

The Independent reports that "Tougher laws to tackle rogue bankers and extra powers for the Criminal Assets Bureau (CAB) are two key planks of the new Government's strategy to combat crime.

A new anti-corruption law is to be introduced to punish white-collar crime and end what Fine Gael and Labour described as the impunity from consequences for corporate behaviour that threatens the economy.
It is also intended to take steps to prevent convicted white collar criminals from transferring their assets to spouses and other family members and to give power to the CAB to pursue them for any financial gains or benefits deriving from the proceeds of their illegal activities."

The new law must also contain provisions for whistle-blower protection and create a hotline for tips. It is not sufficient to merely pass legislation. As the various reports into the performance of the Dept. of Finance and regulatory bodies have conclusively demonstrated, the problem is poor enforcement even of existing law. Poor technical capability has been a significant contributing factor to the under-enforcement problem. So, any new legislation must provide for appropriately skilled staff and resources. White collar criminals are not going to be lacking in good legal representation. Expecting the same old departments to fight them just with new laws that look good on the books is a bridge too far.