Gerard Dowling v. Minister for Finance - (22 Jun 2016)

Government intervention okay in dire economic circumstances: ECJ

Company

The European Court of Justice found in favour of the Irish government in a preliminary ruling that its act of taking control of an ailing credit institution were not in violation of European Union law.

At the height of the financial market crash circa 2008, Irish Life and Permanent Group Holdings plc was affected particularly adversely due to its exposure to real estate and construction projects. It was unable to raise sufficient regulatory capital and faced imminent collapse. Being a key financial institution, and with fears that it would set off a domino in the industry, the Irish government proposed subscribing to ordinary shares and providing contingency funds totalling €2.3 billion. Though accepted by ILPGH’ board, shareholders voted against the measure. Nevertheless, an ex parte application was granted by the High Court under the Credit Institutions (Stabilisation) Act 2010, by which the government obtained 99.2 per cent of the issued shares of ILPGH.

Subsequently, challenge was raised against the acts of the government and the High Court referred to the ECJ questions regarding rights of the shareholders. Essentially, the query raised was whether the Irish government was within its rights to increase share capital in the company without shareholder approval and whether the same was in compliance with the laws of the European Union.

The ECJ proffered, unequivocally, that the framework and safeguards in respect of public limited companies did not prevent member states from instituting legislation to prevent disruption to the economy. The company’s failure to adhere to prudent regulatory requirements only strengthened the case for government interference.

The question whether the government took the least invasive approach required to achieve its objectives of maintaining financial stability of the company and the economy was left open for determination of national courts.

Tags : ECJ IRELAND FINANCIAL CRASH 2008 BAILOUT