National Bank of Malta revisited | A Republic built on injustice?

The saga of the National Bank of Malta has been associated with the maxim 'justice delayed is justice denied' for so long now, that the words no longer seem to have any impact.

What few pause to consider, though, is that it is not necessarily just the original shareholders who can claim to be 'victims' of the bank's forced take-over in 1974.

There is a sense in which the wider population as a whole can also be termed a 'victim': having been forced to acknowledge that the country they call home is one in which the rule of law - on which the very principles of democracy are supposedly rooted - can be suspended with impunity at the mere whim of the government of the day... with little or no prospect of justice ever being meted in future, regardless how many times the administration of government may change in the background.

The people of Malta can also claim to have been 'robbed' on another level, too: robbed of their piece of mind that justice is indeed blind and equitable to all parties, irrespective of third-party interests. 

With legal action on this issue having been diverted into a judicial limbo for over 35 years, the National Bank of Malta saga continues to emphatically illustrate how the local justice system can, on occasion, simply fail to deliver any justice at all.... especially in cases where (coincidentally, no doubt) the government of the day may have a clear vested interest in avoiding closure.

Incredibly, almost four decades after a profitable and financially solid private bank was nationalised on the basis of its presumed 'insolvency' - following an exercise in creative accounting which somehow managed to nullify virtually all the capital of the same bank's private investors - surviving National Bank of Malta shareholders and their heirs are still battling for their rights in three court-cases: the earliest filed by Peter Cassar Torregiani in September 1977; the other two by Vincent Curmi and Philip Attard Montalto, both in September 1992.

In a bid to 'speed up' proceedings, the three cases have since been amalgamated into one. But the resulting acceleration of proceedings was not very noticeable.

Indeed it seems the machine of Maltese justice has meanwhile come to a complete standstill. On April 23 of this year, Mr Justice Joseph R. Micallef (who presides over all three cases) once again deferred the final session, this time to September 27.

As previous sessions of all three cases had similarly ended in deferments, individual shareholders were heard voicing their suspicions that there was more than mere legal bureaucracy and inefficiency at work behind an astounding four-decade delay.

On paper at least, the government has traditionally always shared their exasperation. In December 2008, Finance Minister Tonio Fenech assured parliament that "the government had every interest in the cases being decided without delay" and "without any more time wasted on procedures".

And yet, if a future ruling goes against government, not only would the resulting compensation have to be paid out of the government's coffers... but Malta's only locally owned bank - the Bank of Valletta, to which NBM's seized assets had been transferred in 1973 - would effectively have been confirmed as the offspring of a state-sponsored act of theft.

Evidence that something is indeed rotten at the very heart of Malta's financial system was separately forthcoming in 2009, when a corporate history of BOV - commissioned by the bank itself - was mysteriously withheld for publication.

Historian Henry Frendo had been commissioned to write the 200-year history of the illustrious bank from its inception as the 'Anglo Maltese Bank' in 1809 all the way down to the present; but though the book was duly completed, it has yet to see the light of day... ostensibly, for fear of "influencing ongoing court proceedings".

According to legal advice given to BOV at the time, some of the claims reportedly made in interviews with former shareholders could be interpreted as having a direct bearing on the ongoing case. Either way, even just by drawing attention to these claims, the book would in a sense achieve the opposite result of that intended: casting further doubt on the 'official' version of the Bank Of Valletta's murky origins. 

Similar concerns had already derailed plans to fully privatise BOV in recent years, when - after a last-minute judicial protest had been filed by NBM shareholders, literally at the eleventh hour before the case became time-barred - the bank apparently failed to satisfy due diligence criteria.

Viewed from this perspective, the ongoing battle of the National Bank of Malta can be seen to transcend its declared aims of 'justice for shareholders' alone. For apart from the right to fair compensation for their expropriated assets, the plaintiffs are also demanding an official acknowledgement that what happened to the National Bank of Malta in 1973 was, in effect, a grave injustice perpetrated by the State - quite possibly, an injustice upon which the entire edifice of the Republic of Malta was subsequently built.

Failure to redress this injustice, they argue, will only further compound an existing impression that the rule of law, in this country, can simply be subverted at will.

Even without this disquieting impression, the implications of a court ruling in the shareholders' favour would separately raise serious, far-reaching questions concerning some of Malta's most profitable private companies, which were initially financed through NBM loans.

Not only have some of these companies proved immensely successful since their inception in the early 1970s; but their success in some cases parallels the success of the Maltese economy as a whole.

Examples include former and present tourism lynchpins such as the Corinthia Group of Companies and the Preluna Hotel.

Ironically, the selfsame loans that permitted the initial launch of these enterprises were themselves cited as evidence of the bank's 'insolvency' in 1973.

When setting up the Council of Administration  to oversee the bank's operations, Mintoff's government had cited a specially-commissioned property index which determined that the value of property in Malta had fallen by 40%. As a result, the provision of bad and doubtful debts arbitrarily increased by 300%, to effectively erode the bank's capital base.

Years later, the courts would appoint an auditing firm KPMG to investigate the status of a number of 'questionable' NBM loans dating back 1973. KPMG duly discovered that the vast majority of supposed 'bad debts' had in fact been repaid in full; and perhaps more significantly still, other loans dating back to this period returned the enigmatic answer: 'file not found'.

Such wildly contradictory findings were consistent with similar contrasts between the NBM's supposedly precarious state in 1973, and the fact that its reincarnation as BOV got off to a financially impressive start the following year: registering a pre-tax profit of LM400,000 in its first eight months of operations.

Tellingly, the exact same figure had earlier been predicted by the National Bank Group in its financial forecast for the same period.

These considerations alone may justify serious doubts as to the real cause of what appears to be an endemic reluctance to allow this case to run its full course.

They may also help explain the curious political contradiction, whereby an injustice allegedly perpetrated by a former Labour administration under Dom Mintoff, would be sustained and in a sense compounded by every administration of government since: including successive Nationalist governments led by Eddie Fenech Adami between 1987 and 1996: when, despite earlier promises of 'justice', the government not only failed to restore the National Bank of Malta to its previous proprietors (or at least, compensate them for their loss); but it also sold its own majority shareholding to the general public... thus effectively placing out of reach any hope of final reparation.