A financial center is a whole. A favorable regulatory and fiscal environment is necessary. Good professionals and expertise. But the judiciary must also be up to the same standards and expectations – and resolve disputes in a timely manner when there are some. In Ireland, the Irish Funds Industry Association continues to attractively market Ireland for investment funds. The words sound well: Unrivalled expertise in establishing and servicing funds, robust regulatory environment, transparency, efficiency, leadership. But if you have to sue your Irish services providers, your journey will be less friendly and will take years and cost you enormous amounts of money – upfront. In the wake of the Madoff fraud in New York, the investors and investment fund suing an HSBC entity before the Commercial Court in Dublin are nowhere even near the trial in first instance more than three years after their suits were filed and three years and a half after the Madoff fraud was uncovered. The Commercial Court seems totally unable to address and handle a serie of proceedings on this. The Irish Regulator is not either performing: no report was rendered at all. There is only one message arising out of all this and it is a disastrous one: Come to Ireland to have your investment funds managed there, invest your money here – but don’t count on our judiciary if anything goes wrong it won’t that’ll take ages and cost you a third of what you’ve been defrauded upfront. And Luxembourg is alas no better.
In Luxembourg there is among other slow dragging suits one crucial prejudicial issue: can investors sue directly the service providers of the investment fund they invested in – or can only the fund do this. That is a simple here civil law issue prejudicial to some of those suits. After a first instance judgment was handed down on this on March 4, 2010, turning down those investors’ right, the Luxembourg Court of Appeal has not yet ruled on this… more than two years after the first instance judgment – on an issue which is not even yet down to the merits of the suit. That is unacceptable, and once again gives the same disastrous image of Luxembourg being totally unable to resolve disputes related to money invested there. That is unacceptable because three and a half years after the Madoff fraud investors still don’t know in Luxembourg who has standing to sue the service providers there. This is unacceptable because this issue which is not resolved in appeal two years after the first instance judgment would take any scholar less than ten, twenty hours of work to the max to be studied in full depth. And this inevitably brings on the next question: what is wrong with this judiciary? Is it so badly organized that they can’t do in two years what would take a week in the private economy? Do those appeal judges want to stall the matter? Don’t they care about what they have taken oath for: serving and resolving disputes – meaning with some efficency and timely?
Shortly after the Madoff fraud Luxembourg Minister Luc Frieden said vigorously in the press that if so the liability of Luxembourg service providers will be established rapidly. That was fine – but he was politely reminded that the judiciary was independent and that he could not talk in the name of the law courts. Three years later, the Luxembourg government and legislature have reason to be concerned and must really ask themselves this: is our judiciary up to expectations, are the judges appropriate and competent, is the justice system disposing of enough funding and resources? The three powers are independent but this is not a wild card for a dysfunctional courts system. What the Luxembourg and Irish judiciaries are doing to the reputation of their financial center, and thus hurting their own economy, in not being able to address those situations and handle those litigations, is mind boggling and disappointing.