High Court seeks European ruling on recapitalisation of Irish Life and Permanent

Friday 15 August 2014 14.18
The State's guarantees in respect of Irish Life and Permanent amounted to €26 billion
The State's guarantees in respect of Irish Life and Permanent amounted to €26 billion

The High Court  is to seek a preliminary ruling from the European Court of Justice on a law used by the State to facilitate the €4 billion recapitalisation of Permanent TSB. 

Shareholders of Irish Life and Permanent Group Holdings (ILPGH) challenged the constitutionality of laws permitting the Minister for Finance to inject the money into the bank in 2011. 

In her ruling today, Ms Justice Iseult O'Malley said the High Court was not in a position to say definitely whether the "Court of Justice would resile from, qualify or affirm" the law as outlined on the Credit Institutions (Stabilisation) Act used by the Minster.  

Piotr Skoczylas, his company Scotchstone Capital Fund, Gerard Dowling and Padraig McManus have challenged the 2011 direction of the Minister to inject €2.7 billion into the former Irish Life & Permanent, which is now Permanent TSB.  

Ms Justice O'Malley said from 2008 onwards Irish Life and Permanent, along with other banks, became increasingly reliant upon State and EU financial support and by late 2010 it was apparent that there was a serious threat to the financial stability of the State.  

She said this was partly due  to the State's commitments to the banks. The State's guarantees in respect of ILP amounted to €26 billion.

The Judge said in entering into the Programme of Support in November 2010, the Irish State entered into binding legal commitments to the European Commission, the European Central Bank and the International Monetary Fund, including a commitment to recapitalise viable Irish banks. 

The Governor of the Central Bank then directed ILP to raise regulatory capital of €4 billion. 

Ms Justice O Malley said on the balance of probabilities this money could not have been raised from private investors or existing shareholders. 

She continued "on the balance of probabilities, failure to recapitalise by the deadlines would have led to the failure of the bank".

She said this would probably have worsened the threat to the financial stability of other member states and of the European Union. 

She said the decision by the State to invest in the recapitalisation had been made "in fulfillment of its legal obligations and in the interests of the State's financial system, the citizens of the State and the citizens of the European Union".

She said there was no breach of duty to the court on the part of the Minister or his legal representative in the making of the application. 

One result of the order was that the Minister obtained 99.2% of the issued shares of Irish life and Permanent Group Holdings.