The Credit Institutions (Stabilisation) Act 2010 (the Act) has been passed into Irish law. The Act is primarily designed to provide wide sweeping powers to the Minister for Finance (the Minister) to stabilise the banking system. From an employment law perspective, it contains some interesting and novel powers.
The Act contains provisions for the Minister to make a special management order which enables him appoint a suitably qualified person as a special manager over the management of the business and run it as a going concern. This is one of the most significant powers under the legislation as the special manager can remove any director without notice as well as any employee or consultant. There is no right to reinstatement but claims to compensation are preserved. Clearly the powers of the special manager are draconian in their application to traditional employment law protection and limit the reliefs available to senior bank executives. The right to obtain injunctive relief is also severely curtailed. The Minister can also, in the absence of the appointment of a special manager, remove any director or officer or employee of a relevant institution without notice.
The Act also includes provisions to make further state funding to banks conditional on non payment of bank bonuses.
The background to this controversial provision was the fallout from a High Court judgment obtained by a capital trader in Allied Irish Bank (AIB) that he was entitled to sums due to him on foot of a deferred bonus which he was contractually entitled to. A number of other claims had also been initiated and AIB responded by indicating that it would honour payments due. This announcement caused considerable public outcry and prompted the government to include the provision making further state support conditional on certain terms and conditions concerning non payment of bonuses.
The inclusion of the provision raises interesting questions regarding the entitlement of the claimants who have already lodged their claims in court. There is legal precedent to the effect that the Oireachtas cannot intervene once court proceedings have commenced. On the other hand the banks could argue that their contract has been frustrated by the intervening act of government intervention. We have also seen the courts willing to consider and accept the submission that in times of economic crisis unprecedented measures may be justified. The fate of the claims already initiated remains to be seen.
The extensive range and scope of new powers given to the Minister under the Act is likely to come under scrutiny by the Irish banks, their shareholders, directors, employees and creditors. It will be interesting to see how these new measures are implemented and also how they are interpreted by the courts.