The End of the Celtic Tiger : An Irish Case Study Presenting an Initial Analysis of the Failure of Corporate Governance and Company Law

This article considers the effect, if any, which company law and corporate governance law had on the phenomenon of excessive lending occurring in the Irish economy towards the end of the Celtic Tiger era (1990-2006). As most Irish readers will know, the Celtic Tiger was a phrase coined to describe a particular period of spectacular growth in the Irish economy. Towards the end of that period, which included a period of real economic growth in the initial years, an event of unprecedented proportions, namely the growth and collapse of the Irish property bubble, fueled by lending of ‘cheap’ money by Irish banks and borrowing by indigenous Irish property development companies has led to ongoing significant consequences for Ireland. This chain of events culminated in a state guarantee and bailout of the Irish banking sector which was overexposed to the property market. This guarantee has led to significant damage to Ireland and its economy, the full consequences of which are continuing to be manifest. What is clear is that excessive risk-taking in both banks as lenders and property development companies as borrowers led to the collapse of both. The Irish property bubble and this pattern of behaviour which caused it, is used here as a case study to raise questions as to why corporate governance law and company law seem to have failed to curtail excessive risk taking during this period. In describing these events from a legal perspective the paper also raises a number of questions about the inter-relationship between law and non- legal norms, the latter seeming to be more powerful and with the ability to trump the rule of law in certain circumstances and contexts. It is hoped that this analysis will be of interest to a multidisciplinary audience. This analysis of the role of non legal norms is not intended to suggest that legal frameworks do not matter, but more to illustrate that where they have failed to deliver stated goals, other factors must be understood so that the law can address the causes and drivers of this failure