Mintoff’s forcible take-over violated National Bank shareholders’ rights

A court has ruled for the second time, that the forcible take-over of shares from National Bank of Malta shareholders in 1973 had violated the owner's rights.

30 shareholders who back in 1973 had refused to sign over their shares to the government in the aftermath of the December run on the deposits of the NBM, claimed they had been forcibly deprived of their shares without compensation, and that their right to freedom of association had been violated.

At the time, it had been declared in parliament during the short debate on the National Bank of Malta take-over, that shareholders were to cede their shares to the State without compensation.

Mr Justice Joseph R Micallef stated this case - ongoing for 30 years since 1974 - differed from other cases as these shareholders, mainly bank owners, had not transferred their shares to the government. The shares were the property of the shareholders and the forceful transfer to the NBM successor Bank of Valletta had deprived them from enjoying what was legally theirs. Moreover, at the time the law did not contemplate the calculation of damages.

The court said that the shareholders' right to enjoyment of property had been violated, but that the forced transfer of shares did not breach their right of association.

In December 1973, the NBM suffered a run on its banking deposits, culminating at the end of a week of withdrawals with Lm500,000 withdrawn in a single day on 10 December 1973, leaving the bank with only 30% of liquid assets out of its total deposits - 5% more than the minimum required by law.

The Central Bank had refused to act as a lender of last resort, and the government stepped in to take over the bank before the Barclays Bank and Midlands Bank could extend finance.

NBM Shareholders from the Scicluna, Cassar Torregiani and Tagliaferro families - whose respective banks formed the private conglomeration - argued that this trategy was specifically engineered to weaken the National Bank so that it could be nationalized.

The Labour government of the day offered no compensation to its 274 shareholders.

The National and Tagliaferro Banks Act 1973 was hurriedly passed through parliament and on 22 March 1974, the Bank of Valletta took over, with Lm43 million in assets and after nine months declaing a Lm1 million profit.

In 1992 shareholders filed a constitutional application against the Prime Minister, the Finance Minister and curators representing the Council for the Administration of the National Bank of Malta.

Last month, the court upheld the application of another group of shareholders claiming their human rights were breached. In both cases the government has the right to appeal.

The court has still to conclude over the amount of damages to be awarded to the shareholders.

Lawyers Max Ganado, Ian Refalo and Evelyn Caruana Demajo appeared for the plaintiffs.