In Praise of Name-calling

The context of this post is discernible from this news-story in "The Journal". Notably, the website has disabled the "comments" feature for this page which is a very, very, unusual occurrence.

No, I cannot think of anything satisfactory to write in praise of name-calling in this situation.

How about you ?

Vot Fraud ?

It's 31 July. You are a managing director. Your company has no cash on hand, but in your confident opinion that is a temporary situation. In October, €5m will definitely come in.

The company owes a lot of money, including

€300k to Revenue for VAT collected. Due today.
€100k to employees for wages. Due today.
€400k to suppliers. €200k overdue (60 days+)
€1.7m to Bank A (current account overdraft)
€40m to Bank B. (€2 m overdue)

So, what do you do ? Why, you pay €300k to the Revenue with a cheque using the last €300k of your overdraft facility from Bank A, of course. What else ? After all, it was never your money.

When your employees come to you for their pay, and hear about your choice of how to use your last €300k, they call you a thief. You took their services for the month, but used the money which could have been paid to them to pay some-one else.

The suppliers of goods to you say the same and try to seize your stocks.

Bank B says: that was our money, never yours. You had the use of it on strict condition that you would repay in accordance with a schedule. You didn't. You are a thief.

How do you answer them ?

Charles Kickham on Debt Defaulters

Writing to a friend in 1881, Kickham, Chairman of the Irish Republican Brotherhood (better known as "the Fenians"):

Apropos of the banks - the Irish World wants to abolish credit - no power to recover debts, no interest, no gold or silver currency, merely green-backs issued by the State.

Some may think that this reform may be helped in Ireland by the refusal to pay debts. But people who refuse to pay lawful debts next take what they want. The law that is prevailing in the case of debts will be equally so a case of robbery.

'Tis no joke to appeal to the lower instincts of an enslaved people. That's what these Land agitators have been doing all along.

Disclosure: Kickham was a cousin of one of my great-great-grandfathers.

On "Getting Away With It"

Any resemblance of any hypothetical characters mentioned hereinafter to real persons, living or dead, is purely coincidental.

Consider this scenario:

It is a "stark and dormy" night. (Who said Bulwer-Lytton is forgotten ?) On an unlit road, a tanker's valve somehow spontaneously opens - nobody ever provides a satisfactory explanation as to how or why - and the road surface is soon covered in a black-ish, smelly, viscous liquid. Some minutes later, a motor-car encounters the liquid, the driver - whom I shall call Mr Cooper - loses control and a very nasty accident happens, resulting in several deaths.

Cooper survives, however.

Is he jailed ? Prosecuted ? Arrested, even ?

No. Instead, he lives on, a free man "without a (legal) stain on his character". As Pat Rabbitte once asked, though, is he happy ?

Many people consider this to be outrageous. Four years later, some - and not just the predictably ignorant or intemperate - still mutter about how "the crook got away with it" (and believe it).

Now, unless you are new here, you will not be surprised to learn that my natural inclination is to resist such talk. I will ask to know which crime the unfortunate Cooper is supposed to have committed, why his broken tail-light or out-of-date driving licence had anything to do with the tragedy, even though they were criminal offences - albeit very minor - and so on.

My guess is that, even if you did not "buy" similar arguments already made by me in this series, you might see some value in them in the context of the hypothetical Mr Cooper.

It's an interesting exercise to discuss - as I have done with some people - why "the Coopers" are likely to get more sympathy (and, in my view, more justice) than "the bankers". Let us not detain ourselves with that discussion now. (We can return to it if there is a desire to do so).

However, in this article, I am going to explore the other side of that argument.

Let's go back to Cooper, and make the picture painted of him a little less straightforward, and thus, arguably, more realistic.

Breathalysed at the scene, he tested positive and while the subsequent blood test showed the alcohol in his blood was well below illegal levels, it also showed traces of psychotropic substances. At the time, however, the law did not specifically make it a criminal offence to drive in this condition.

Police investigation also revealed that Cooper's vehicle had at least two tyres marginally "bald", and that he had almost certainly been both driving too fast for the conditions and, worse, had been doing so with a telephone clamped to an ear with one hand.

All that said, the police had no doubt that none of these circumstances contributed to the tragedy, in which Cooper lost not only his only two children but several close friends who happened to be on the road at the unfortunate time. Even if Cooper's vehicle had been in perfect condition, even if he had had no alcohol or other intoxicants in his blood, had had his licence up to date, and had been driving with perfect care and attention, the people would have all died anyway.

Despite these circumstances, should the police charge Cooper with DDCD ("dangerous driving causing death") or less serious offences under the Road Traffic Acts because, otherwise, he will "get away with it" ?

Am I alone in wondering how a man involved in such a horrific scenario will ever get over it ? To me, the question of him getting away with it is out of place.

I would like to hear from those with a contrary view.

(We are not going to detain ourselves at this point with exploration of the culpability of Lehman Brothers, the haulage firm which owned the oil-tanker - imagine that ! - or of any other dei ex this particular machina. But don't forget the disclaimer above.)

More on the Troika and Bonds

My last post was found unconvincing, even - shockingly ! - by some lawyers . So, I need to elaborate further on my case.

Before I start, I should again attempt to make it clear what I am, and am not, saying.

I am not arguing that there is a term in the Troika documents which explicitly (or even implicitly) provides that any particular debt of any bank must be paid in full. To the contrary, there are a number of references to the option of not doing so.

What I am contending is that, under the Troika agreements, the decision on whether to pay is not for the Irish Government alone, and that the consent of the Troika fairly clearly was not forthcoming for anything less than a full payment of Anglo's "billion-dollar bond" last week.This news story from last June would appear to bear that out. Note in particular the last paragraph

On the issue of plans affecting senior bondholders at Anglo Irish Bank, Mr Van Rompuy said he 'took note of it' but this could happen only with consultation and negotiation

See also this story, also from June 2011, featuring a rather significant comment

The European Central Bank has opposed any moves to force losses onto senior bank bondholders and Ireland won’t act unilaterally, Deputy Prime Minister Eamon Gilmore said today.

In that sense - and that one only, I think - the payment is required by the "bail-out". Without the "bail-out", the Irish Government would have had a freer hand, although the fear of causing difficulties for the continuation of ECB liquidity support for the banking system would have been a significant constraint on that freedom.

I propose to elaborate further by way of some "big picture" points, followed by some detailed citation of the publicly available documentation.

Big Picture

1. If the "bail-out" deal does not give the Troika a veto over significant financial/economic decisions, just why were we all so upset at having to accept it ?
2. Specifically, why did the late Brian Lenihan express his disappointment with the deal vis-a-vis "burning the bondholders" ?
3. Although it is not a view universally shared, the deal explicitly names the banking crisis as the root problem of the economy. That being so, is it plausible that the Troika would not require a say in the detail of its resolution, and for this "say" to be written-in ?
4. The Troika is composed of the IMF, the ECB and the EFSF. While it is of course conceivable that the Troika could split, there is no sign that it has done, and there is reason (see my earlier post link) to believe that there is less disagreement on this issue than assumed by many
5. The ECB's view on the issue of "burning bondholders" hardly needs further discussion: to put it mildly, it is agin it. Is it conceivable that it would not write-in a veto (or something resembling it) ?
6. It has been suggested that the issue of bonds was, at best, peripheral to the "bail-out" negotiations. Au contraire, it was, I believe, the "elephant in the room", though perhaps not the only one. How else to explain Brian Lenihan's comment ?
7. Above all, the main obstacle to believing that the "bail-out" and the bond payment are unrelated is the lack of any credible alternative explanation for the failure to impose a "hair-cut" on the bondholders.

Deal Provisions

The version of the "bail-out agreement" from which I will be quoting is this one (PDF) from the Department of Finance website.

Please note these provisions

• The Irish authorities ... will stay in close contact and consult with...the ECB... on the adoption of these measures and in advance of revisions (page 4, paragraph 10)
• To this end, by end-January 2011, we will submit to the European Commission a revised proposal developed in collaboration with IMF, to resolve Anglo and INBS (page 11 paragraph 10)
• The quarterly disbursement of financial assistance from the European Financial Stabilisation Mechanism (EFSM) will be subject to quarterly reviews of conditionality for the duration of the programme.(page 22, second paragraph)
• In the context of the above strategy, a specific plan for the resolution of Anglo Irish Bank and Irish Nationwide Building Society will be established and submitted to the European Commission ... This plan will seek to minimise capital losses arising from the working out of these non-viable credit institutions.(Page 25)

I think that the cumulative effect of these provisions is clear enough. Yes, I agree that the language is not very strong, or particularly "tight", but it is the same tone throughout the documents, on all areas of policy. The Troika can speak quietly because it carries a big stick.

Footnote

An interesting consequence of the repayment of this unguaranteed bond issue is to undermine the importance of the infamous "Bank Guarantee" of September 2008 in the evolution of the Irish bank crisis. One is prompted by recent events to doubt whether the ECB would have permitted bank defaults, even without the Guarantee.

A Gimlet Eye on the Troika Agreements

(Don't shoot this messenger again, please ! I am describing, not defending, the "bail-out deal")

This post is written in response to the continued suggestions from members of the Irish media, political class and economists (e.g. Namawinelake, Professor Brian Lucey, Stephen Donnelly T.D.) that the redemption at par of the senior bonds - neither secured nor guaranteed, be it noted - issued by Anglo-Irish Bank was not required by the terms of the so-called "IMF bail-out".

Before showing (as I hope)that this view is grievously mistaken, I must observe that I find the prevalence of this view, and the vehemence with which it is held, rather surprising. It seemed to me - even before I read the documents - that nothing could explain the Government's persistence with the payment, other than external compulsion. It also was my impression that submission to the bail-out terms was widely accepted, and indeed lamented, in the same quarters, as removing our freedom of decision in such matters.

The Agreement

Ireland's agreement with the Troika - commonly mis-described as "our IMF bail-out" - gives the latter, of which the ECB is one member, a veto over any plans to "burn bondholders".

See paragraph 10 et seq. of the first attachment to this letter (it's on page 5 of the PDF) sent by Lenihan & Honohan on December 3,2010. It is a crucial part of the "bail-out deal" architecture. By it, Ireland has committed to agreeing its plans in the relevant respects, including "burden-sharing" with bank creditors, with the Troika.

The word "veto" is not used. It does not have to be. Failure to approve has the same effect.

Now, there are those who are suggesting that our government has not tried, and that if they only tried hard enough, the ECB would "cave-in" and agree to "burden-sharing" a.k.a "burning the bond-holders".

I have no personal knowledge of whether such suggestions have any basis in reality, but I have noticed that Messrs Kenny, Gilmore and Noonan have claimed to have discussed the question with M. Trichet. I have also noticed a lot of abuse directed at Trichet because of his alleged obdurate refusal to countenance any suggestions that the ECB should relax its opposition to bond "haircuts".

I also note that, contrary to views expressed in many quarters, the IMF is none too keen, either. See p.23 of this PDF at paragraph 34, third bullet point (and especially the last sentence).

It does not look to me as if the necessary approval is available from the Troika just now, whatever the future may bring. What leverage do we have to persuade them to a change of mind ? As long as our borrowing requirement is circa €15 billion, not a lot, in my view.

But what do I know ?

Update on Monday, November 7, 2011 at 06:11PM by Fergus O'Rourke

I repeat that I am not defending the "bail-out" terms. I share the views of Martin Wolf.(Gavyn Davies says the same thing in a different way).

Update on Sunday, November 13, 2011 at 12:04PM by Fergus O'Rourke

I have elaborated further later post here

One for the IMF ?

In Ireland, female employees who are pregnant are entitled to 42 weeks maternity leave (26 weeks of which are compulsory). The timing is at the employee's option, but at least two weeks must be before the birth, and four weeks after. This applies to all categories of employees, whether permanent or temporary, up to and including the chief executive officer.

Recently, leading Dublin solicitors William Fry tell me, an employer sought to engage someone on a temporary contract basis in order to do the work of an employee taking such leave. A candidate was selected, who, like all candidates, had been informed of the reason for the employment, and had explicitly confirmed that she envisaged no difficulty in working for the required period of 42 weeks.

On being offered the position, however, she disclosed that she was herself 18 weeks' pregnant. Note that she was already within the period that could form part of her maternity leave, so that after one day's work she could legally demand to be given leave.

The job offer was withdrawn. The offeree complained to The Equality Tribunal, following which an Equality Officer, determined that she had been the victim of illegal discrimination on the grounds of sex was entitled to compensation of €12,697, the equivalent of approximately 18 weeks' pay at the Average Industrial Wage.

A fuller account is here. A hat-tip for informing me via Twitter of this story goes to Rossa McMahon.

Update on Wednesday, May 11, 2011 at 07:40AM by Fergus O'Rourke

Amended to delete reference to The Equality Authority

La Trahison du...peuple?

I am prompted to write this by a recent post by Professor Eoin O'Dell, for whom I have considerable respect.

Notwithstanding that respect, we have many disagreements. For our latest, see the comment I made to the said recent post.

The issue is linked to the on-going discussion about how we in Ireland got ourselves into our current economic mess. Many commentators believe that a)there are identifiable culprits (many of whom are criminally liable), and b)all are members of the property developer, political, higher civil servant, financial regulator, banker or estate agent classes. (I propose to restrict myself in this post to the domestic targets - I may discuss the foreign scapegoats another time). I have even heard bankers, property developers and estate agents express the view that their own excesses should have been prevented by one or more of the other groups.

The link I see is this: both narratives posit that Irish adults cannot discover value or its absence without top-down guidance.

Supposedly, property buyers cannot divine, unassisted, that properties selling at 30 times annual rental value - the multiple reached much crazier levels in the supposedly more sophisticated areas - are over-priced and/or that there are times in every market when the market price is a signal not to buy. Similarly, clients of lawyers are allegedly incapable of understanding that a charge of €300 per hour to handle a straightforward probate matter is an offer which should be refused.

It is not that I don't see a real problem. There is a thorough-going failure of society here. Even property investors with millions at stake and bankers with billions at risk, to my personal knowledge, still resist the notion, ignorance of which has cost all of us so dear, that capital values of property relate to other variables such as market rent levels and trends.

And, though it is sometimes exaggerated, there is considerable reluctance among end-users of legal services - even ones who are otherwise sophisticated - to adopt a rational approach to selecting and paying their lawyers.

I suppose that another variety of the same thing is the commonplace reaction to reports that petrol station A is charging 10 cents per litre less than petrol station B: "B is a price-gouger", it will be said. The next day, or sooner, the same people will say of a report that stations C and D charge exactly the same price that it is clear evidence of illegal collusion.

Along the same lines, one constantly encounters people who bitterly complain that Tesco will not reduce their prices - all of them - to the same level as Lidl or Aldi, but who will not actually switch their custom from the former to the latter. (Yes, I know that for some, it is not an available option. And, one must exclude those who will not patronise Aldi or Lidl because they are "full of immigrants".)

How to characterise this ? "Irrational" seems too mild. Is "juvenile" too harsh ?

Whatever, it seems to me that the answer cannot be for government to attempt to put "crutches" in place so that adults are protected from their refusal/failure to use their brains when buying legal or financial services. Apart from anything else, recent experience has confirmed that the people who will be implementing such measures are no better at using their brains than the rest of us.

(None of that means that I oppose all regulation of the financial or legal services markets, and I do not.)

Lawyers Against Lisbon (Press Release)

We, the undersigned, have decided to vote "No" on Friday and recommend that our fellow voters do so as well.

We each have slightly different reasons for our position but are agreed on what now follows.

Contrary to a common argument from our opponents, the Treaty is about much more than improving decision-making, but even if it was

The North Korean parliament is a marvel of efficient decision-making, as is a torch-wielding lynch mob. Neither is an attractive model for the EU

(The quotation is from "The Economist")

The Referendum Commission's work, while valuable, at best clarifies what is in this treaty. Given its complexity, there is an understandable tendency to conclude that, having reached some understanding of its contents and having failed to confirm one's worst fears, it is safe to vote for it. This is, sadly, no way to decide on the rules for our government. The treaty must also be seen in a larger context, especially that of its genesis.

None of the other groups opposed to the Treaty represent us adequately, and in the case of some, do not represent us at all. Nor, as is absolutely clear from polls and from last June's elections, do they represent the majority of "No" voters.

In deciding how to vote, the bad reasons on either side are irrelevant.

Some say that Lisbon is a bad deal for Ireland: we don't agree with this formulation of the problem at all. Our negotiators did a reasonable job.

C'est Magnifique! Mais C'est Ne Pas la Democratie

The EU's Constitution (for that is what the Treaties culminating in Lisbon amount to) has been developed, and continues to develop, without adequate democratic participation. Most regrettably, Lisbon was deliberately written to further preclude this. "The Economist", whose Europhile credentials are impeccable, had the integrity to note this as drafting proceeded. The titles of the relevant articles - Hee-hee Voters Fooled Again and Journalists for a Cover-up - must make any genuine democrat's blood run cold.

Public opinion in the EU states has not been able to arrive at an informed view on the merits of the Treaty because of the way in which it was written. Even to us, as lawyers accustomed to dealing with abstruse documents, the Treaty as signed is well-nigh unreadable. We recognise that some of this arose from the inherent difficulty of arriving at an agreement, but it is clear beyond dispute that the form in which the Treaty was signed was a function of the perceived necessity to disguise, or at least to "cosmetise", some aspects which would cause difficulty, especially for the people of the UK.

Voting "No" is Not Rejecting Everything

We acknowledge some good things in the Treaty, but cannot support further extension of Union competences while the ethos of democratic exclusion continues to hold sway. The Union leadership has now developed the habit of discarding democratic methods reflexively, if they do not produce the right answer.

Indeed, we fear that the Union may already have gone further than is inherently possible while remaining politically legitimate. The choice now is either to go fully federal or to revert to a community of more or less equal states. Lisbon is an unsatisfactory mish-mash from this perspective.

The Commission's sole power to initiate legislation, including repealing measures, is increasingly anachronistic in democratic terms now that so many of the laws governing us are made in this way.

We don't accept that non-ratification will lead to "the sky falling in". The ECB, for example, is not helping us as a reward or a bribe. (But if it is , it will stop on Monday whether we vote "Yes" or "No").

Whether "Yes" or "No", Ireland will still be near the top of the table of countries supportive of the EU. Even "No" voters are 2-to-1 in favour of membership.

Some "Yes" people want an EU government instead of an Irish one, arguing that native rule has failed. That is a dangerous fantasy and one which the EU itself will not indulge.

The apparent requirement on EU Commission staff from top to bottom to be not merely functionaries but enthusiasts and proselytisers for "the project" is worrying for an ostensibly democratic entity.

Brendan Nix S.C., Joe Noonan, Solicitor, Fergus O'Rourke B.L., John McGuiggan B.L.

[ends]

An End to Imprisonment for Debt ?

In a note written in 2006 (you'll find it here) I confidently asserted

No-one in Ireland goes to prison because they cannot pay a debt

Though correct as to the position in law, arguably I was wrong because of the failure to observe due process by some judges.

Earlier this year, it was reported that the relevant legislation was to be challenged on constitutional grounds, with the Irish Human Rights Commission supporting the challenge.

A decision reported in "The Irish Times" this morning (See follow-up note dated 26 October 2013 below) suggests that this may not be necessary.

The report is, as is normal, written for the general audience and is not necessarily complete as to what lawyers would regard as the relevant details, or the detailed ratio decidendi. (I note that Eoin O'Dell has recently repeated his criticism of the delay in publishing the full judgments of the Irish superior courts.) That said, O'Neill J.'s decision as reported seems to me to admirably set out the standards which ought to apply when a creditor applies to a court to have someone imprisoned for failure to pay.

(As an aside: why are so many of the cases which get publicity initiated by credit unions ? Does it reflect sub-normal attention to public relations ?)

Note that a failure to pay by itself is not a ground for such an application: the failure must be to comply with a previous order by the court that the debtor pay a specific amount. Now, it may not be generally realised, but in Ireland, when such a failure occurs, the creditor may realistically have very little legal option but to apply for such an order, even if putting the debtor in prison is of no use, and indeed may be counter-productive. The creditor may not be unreasonable in believing that to apply is the only way to get the debtor's attention.

However, this is by no means always the explanation for the application, or if it is, something is going wrong on a regular basis, because yesterday's case, as well as the case referenced here (and here), all appear to be cases of "can't pay" rather than "won't pay". In all of the latter cases, and, I suspect, in virtually all cases of this kind, the debtor has failed to turn up in court, or, as it is often censoriously expressed, has ignored the summons to attend.

Judges are invariably wont to take umbrage at this, and my sympathy for debtors notwithstanding, I tend to agree with this, at least up to a point. I cannot agree, though, that, as has happened, it is appropriate to sentence someone - in absentia - to prison for up to three months because the judge is annoyed with failure to turn up.

It appears likely, as well, that creditors are either encouraging judges to do this, or failing to suggest more suitable alternatives such as adjournments.

Presumably encouraged by Conor Devally S.C., the debtor's counsel, O'Neill J. has now made such inappropriate happenings much more unlikely, if not completely impossible, by interpreting section 6 of The Enforcement of Court Orders Act,1940 in a new way.

The said Section 6 reads as follows

• ( a ) where a debtor is liable, by virtue of an instalment order, to pay a debt and costs either in one payment or by instalments and such debtor fails to make such payment or fails to pay any one or more of such instalments accruing due while such order is in force at the time or times appointed in that behalf by such order, the creditor may, at any time while such order is in force or within twelve months after it has ceased to be in force, apply to a Justice of the District Court for the arrest and imprisonment of such debtor;
• (b) on the hearing of an application under the next preceding paragraph of this section, the Justice may, if he so thinks proper but subject to the next following paragraph of this section, order the arrest and imprisonment of the debtor for any period not exceeding three months, and thereupon the debtor shall be arrested and imprisoned accordingly;
• ( c ) the Justice shall not order the arrest and imprisonment of the debtor under the next preceding paragraph of this section if the debtor (if he appears) shows, to the satisfaction of such Justice, that his failure to pay was due neither to his wilful refusal nor to his culpable neglect;
• ( d ) on the hearing of an application under paragraph (a) of this section, the Justice, if he so thinks proper, may, in lieu of ordering the arrest and imprisonment of the debtor, treat such application as an application under the next preceding section of this Act for the variation of the said instalment order and thereupon the said next preceding section shall apply as if such application were an application thereunder;

O'Neill J. appears to have decided that section 6(c) may not be interpreted so as to place the onus on the debtor to satisfy the court as to his or her inability, as has been the practice - in accordance, to be fair, with the most obvious meaning of the words - but that it must be shown beyond reasonable doubt that s/he is either wilfully refusing, or is culpably neglecting, to pay. This, the standard of proof in criminal cases, is appropriate because the criminal sanction of imprisonment is involved.

Update on Saturday, October 26, 2013 at 09:51AM by Fergus O'Rourke

Unfortunately, I can no longer find the original 2009 links, but for those seeking more detail this one and this will, I think, prove useful further reading