The High Court has dismissed an application by four applicants to set aside a 2011 direction order used to recapitalise Irish Life and Permanent. The court held that they had not shown the Minister for Finance’s opinion that the order was necessary to be unreasonable or vitiated by legal error.
The application was brought under section 11 of the Credit Institutions (Stabilisation) Act 2010. The direction order, made by the High Court on 26 July 2011, enabled a State investment that gave the Minister 99.2% of Irish Life and Permanent Group Holdings’ shares. The applicants were Gerard Dowling, Padraig McManus, Piotr Skoczylas and Scotchstone Capital Fund Limited. Permanent TSB Group Holdings and Permanent TSB plc were notice parties.
This was the second substantive judgment in the case. In 2014, the court made findings about the bank’s need for €4 billion in capital, the risks if it was not recapitalised by the deadline, and the State’s compliance with the statutory process. It referred questions about EU company law to the Court of Justice of the European Union (CJEU), which ruled in 2016 that the Second Company Law Directive did not preclude an exceptional measure of this kind where a serious disturbance threatened the financial stability of the EU.
The applicants argued that the CJEU ruling depended on an incorrect understanding that the direction order was the only means of recapitalising the bank. They also said less restrictive options were available, including a higher share price, pre-emption rights for existing shareholders, or a different structure for the State investment. The judge rejected their reading of the CJEU ruling and said their alternatives did not engage with the evidence or the EU court’s reasoning. The evidence before the court included that a higher issue price was unlikely to receive European Commission approval and that the Board did not expect significant take-up of a rights offer.
The judgment also rejected challenges based on other EU directives, constitutional rights, the European Convention on Human Rights, and an allegation that the Minister’s existing shareholding had been concealed. The constitutional challenge to the legislation was being pursued in separate proceedings and was not determined in this application. The court also said it had no jurisdiction in these proceedings to consider an argument concerning the Commission’s decision on Apple’s tax treatment.
The court dismissed the application. It did not set aside the 2011 direction order.