It is purely a drafting amendment.
Industrial Development (Encouragement of External Investment) Bill, 1957—Recommittal (Resumed).
Debate resumed on the following amendment:—
FIRST SCHEDULE.
In page 9, line 28, after "if" to insert "it then complies with both the following conditions".—(Minister for Industry and Commerce).
Amendment agreed to.
It would facilitate the House in recognising this Bill if it were called by its original Title.
We shall get used to the new one in time.
If only we knew what it meant. If the new Title meant what it was intended to mean, we would get used to it quicker. On behalf of Deputy McGilligan I move amendment No. 32:—
In page 10, line 6, before "shall" to insert "established after the date of the passing of this Act".
I am not at all clear what the Minister had in mind in this Schedule. It seems to me we are going back to the old story we had so much discussion over earlier, that is, the position between 1934 and the present time. The appointed date will be fixed by the Minister. I am not clear why the position arises there in respect of the first anniversary and not after the passing of the Act. Surely there must be certainty for companies that are going to operate under this section forthwith, that companies cannot be in the situation of being deferred, so to speak, in their operations by being pushed back for the year?
These Schedules are, in the main, intended to preserve the provisions of the 1932 or 1934 Control of Manufactures Acts and to ensure that any rights companies had under these Acts will be continued in the future. One of the effects of this Schedule is to provide that, in future, a company will not be deemed to conform with the requirements of the Act unless there is the prescribed relationship between its nominal capital liability and the fixed assets employed in the business. The effect of Deputy McGilligan's amendment would be to create that position for the future only whereas my proposal is that, in respect of companies formed heretofore on the £100 capital basis, they should be given a period of time in which to bring their capital structure into conformity with the requirements of the Bill. This does not apply to companies formed in full accordance with the requirements of the Control of Manufactures Acts but to companies which have secured a nominal conformity by the process of keeping their capital liability down to the £100 figure and financing themselves by loans, credits, and so on. In respect of these companies, it is proposed that they should be given a reasonable time in which to bring about the changes required to enable them to carry on in the future. As I understand the amendment, they need not make any changes but may still carry on in the future even though there——
That is as I understand the situation, namely, that the position under the Bill limits further the companies that can operate and that Deputy McGilligan's amendment would extend the basis on which existing companies can carry on. As I understand the Minister's explanation, it is that, under his provision in the Schedule, companies carrying on business at present within the law are now, under the Minister's provision, to take certain further steps before they can continue to carry on business. I did not think that was the explanation at all in relation to the Schedule and to the amendment. However, the Minister himself has given us his view.
If the effect of clause 3 of Part 1 of the First Schedule is a further limitation on existing businesses, then it is a highly undesirable one. I quite honestly admit that I did not so read clause 3. If the situation was that a company at present in business, before it could carry on other businesses and before it could expand, required a period in which to do certain things first, I could understand it, but I cannot see why any company legally complying with the law at present should be restricted in the way the Minister has just explained the First Schedule.
I want to be quite clear that by that I am not accepting that the Minister has correctly explained the First Schedule. I am merely taking up the Minister on his own explanation. Surely the whole purpose of this Bill, if there is a purpose other than window-dressing, is to make it easier for externs to invest here for the purpose of carrying on business and increasing our industrial potential? If the effect of clause 3 of the Schedule is to make it more difficult, then it seems to me to be contrary to the principle of the Bill, and if it is contrary to the principle of the Bill, relying on the analogy we had in relation to another measure, it should not be in order at all. I think the explanation which the Minister has just made is quite out of accord with what he said earlier. We may have an opportunity of considering the matter further between now and the next stage. If the position is as he said, then this clause must be amended, and the sooner the better.
As I understand, this change will impose retrospective obligations on a company. In other words, from now on or within a reasonable time, companies formerly not complying with the requirements of the Act will be required to do so. It is possible to argue in favour of that change, but, as this is an amending Bill designed to liberalise the arrangement, is it not reasonable to deduce that those who in the future propose to invest here will do so in the knowledge that subsequent legislation may impose disabilities on them which did not exist when they made the investment? People formerly evaded this Act by a variety of devices. Although this is a liberalising measure, it proposes to rectify that position by compelling them to comply within a reasonable time or on or after the appointed day.
"Avoid" would be a better word than "evade."
At any rate, if that is so, is it not likely that those who may in the future invest here will do so with notice that subsequent legislation may alter the position to their detriment, or alter it in a manner which they assumed would not be the case when they made the investment because of what is included in Section 3 of the Schedule?
I should like to ask the Minister why it is necessary to bring these within the scope of this new Bill. There has been considerable talk during the discussions on this Bill about evading the 1932 and 1934 Acts. I think that, possibly unwittingly, the impression was given that a big group of manufacturers in this country have done something dishonourable or dishonest in the methods by which they have financed a number of Irish manufactures. I do not think that is the case. I think that a number of these companies would not in the normal course of events be established at all and were enabled to be established because of these——
Devices.
——devices which, I think, possibly the Minister may even have had in mind when drafting the legislation in 1932 and 1934. Most Deputies could think of at least one instance and possibly more where manufactures have been set up in various parts of the country that would not have been set up if external capital, or loan capital, if you like, had not been made available. If the Minister goes ahead with the Schedule in its present form, it might cause serious embarrassment to genuinely established Irish industries.
A number of Deputies referred to the £100 companies with substantial loans, but there are companies, not £100 companies, with an issued capital up to the limit which permits the Irish interests to own a 51 per cent. share. Thereafter, their only hope of getting additional capital to provide plant and machinery and working capital was to get it by way of loan and the only way of getting the loan capital was to get outside loan capital. I do not think that is an undesirable development.
I am quite certain that, as in the case of every other piece of legislation, there have been deliberate attempts to evade the Act by companies which possibly we would rather not see set up in the State. I do not think that any form of legislation will exclude those companies. No matter what appears in the Bill and no matter what wording is used, you will always get a certain minority section of the commercial community, as well as any other community, who will try to evade.
I do not think we can avoid that. Even if the Bill goes through, as the Minister has set out, there will still be possibilities of evading it. There is nowhere in the Bill anything to stop an outside interest lending money to an Irish undertaking which, in turn, would lend it to a factory. Can the Munster and Leinster Bank with headquarters in Cork lend money—nobody knows whose money it is—to an Irish undertaking, the money being lodged from outside sources?
I should like to ask the Minister to consider this section because I do not think that, after 25 or 27 years, we should quickly interfere with a form of financing which has now become established practice. This loophole in the Act has been the means of providing a number of factories in the country that would not have otherwise been set up and giving considerable employment. If you interfere with that after a long number of years, you may create an unfavourable impression outside the country.
People may ask—it has been said to me and I do not mind repeating it in the House—that if a Government comes in and changes an Act or the provisions of an Act established 25 or 27 years, what is to stop another Government coming in after the next election and making other changes? We should avoid that. I personally, whether for good or for bad, would be against any retrospective legislation. It is a good idea in this case to leave well enough alone.
In framing this Bill, I should be quite content to rely on the Minister's wording at column 583 of the Official Report, Volume 165, No. 4. This is, to my mind, the principle that should condition the whole Bill:
"We should try to make these provisions as liberal as possible while at the same time maintaining a minimum of safeguards for the firms which are already established in our home market, and indeed we should aim at continuing the policy of favouring Irish controlled enterprises where home market sales alone are involved. Then we should, as we are amending the Control of Manufactures Act, take cognisance of the evasions which have been successfully attempted and while not attempting to go back over the past, make sure these evasions, if not impossible, will be at least less easy in the future."
I suggest that that is what we are doing, going back over the past, I think the mere fact of going back over the past will create an unfavourable impression on the very type of people whom we are trying to induce to invest capital, that is, the external capitalists.
Apart from the general question of the Bill, I think this is the one significant section in it which the Minister should amend. I do not think any useful purpose will be served by going back over the past 20 or 25 years. I hesitate to use the words—I think it was Deputy Norton who used them— a witch-hunt—but I should like the Minister to reconsider that whole section. I have myself put down an amendment which will be coming up shortly.
I do not think Deputies should discuss this particular paragraph as if it were the whole Bill. The Bill sets out, in Section 4, all the circumstances under which companies can carry on manufacturing operations here. A company that conforms with any one of the provisions in that section is entitled to carry on manufacturing operations. One provision is that it should have 51 per cent. of its capital owned by Irish citizens, and two-thirds of its voting shares—the previous provisions of the 1934 Act repeated. What do we mean by that? We mean that we are prepared to allow a company to engage in any manufacturing enterprise whatever, provided it conforms to these conditions, but when we come to take that decision, we must have regard to our experience.
We know that, under the 1934 Act, a person who complied with these shareholding and share-owning conditions was entitled to engage in any manufacturing operations and that that intention of the 1934 Act was met in some instances by the establishment of companies with a purely nominal capital which was held in accordance with the provisions of the Act, but the operations of which were financed entirely by external loans or credits of one kind or another.
Quite obviously, we do not intend that that should continue and nobody is proposing that it should, because it would be negativing the whole intention of the Bill to create a situation where any such company, provided it conformed in that nominal way to the terms of the Act, could engage in any manufacturing operation whatever. Let us think of those companies already established in that way, companies which were not genuinely entitled to manufacture under the Control of Manufactures Act, 1934, without a Control of Manufactures Act licence, but who, having been refused that licence or not wishing to apply, established themselves by this device.
By this legal device. It is a perfectly legal device. It is not suggested that any of these companies——
That does not arise.
I wanted to get it out of the way. They were not acting illegally.
If they were, there would be no problem.
I agree.
If they established manufacturing operations here, even though they had not got a licence under the 1934 Act or, in effect, their capital was not held in accordance with the Act——
Even though they did not comply with what the Minister wanted to put in the Act but failed.
It is obvious——
They conformed with the law.
Now what are we going to do about it? Are we going——
As long as the Minister will agree with me that they conformed with the law.
The Deputy is missing the point. There are these companies, some quite substantial in size, with a capital structure of that peculiar kind—£100 share capital divided among the shareholders in accordance with the provisions of the 1934 Act in such a way as to qualify them to operate without a licence. Are we to allow these companies in the future to engage in any manufacturing operation they like? I am trying in this Bill to remove all limitations and restrictions upon new companies engaged in manufacturing operations which add something worth while to the industrial organisation of this country. We are not prepared to give that liberal treatment to a company which is not going to add to the industrial organisation of the country, which is merely coming in to invade the home market with goods already produced by existing companies in adequate quantities for the requirements of the home market. That is, in effect, what the effect of this amendment would be. Even though the financial structure remains as it is, even though they have this £100 nominal capital and are financed by external loans, they can still engage in any manufacturing operation they like.
The effect of this clause is that certain manufacturing concerns have either got to do something new or close down.
Or come looking for a licence. They have either to conform with the requirements of this section, which means that their paid-up share capital——
That is one thing that will kill anybody who is coming in.
We are not talking about anybody coming in, but about the people here already. It is completely irrelevant.
Nonsense.
The only companies which arise in connection with this amendment are companies already established in this country on the basis I have illustrated.
The Minister has had many discussions with people as Minister, but I have had them with people acting in my professional capacity, and the first thing they ask is: "Can these conditions be changed by a subsequent Government?" That is the first thing they always ask. The Minister is providing a precedent——
The Deputy may have had public meetings for all I know, but this particular amendment relates only to companies already in existence here.
The Minister is entitled to make his statement.
I am sorry, Sir.
The proposal is that these companies without any alteration in their capital arrangements should nevertheless continue in perpetuity to have the right to engage in any manufacturing operation without restriction. I do not think that is desirable. I think we should favour either their bringing themselves into conformity with the requirements of the Act, that is to say, that they must have paid-up share capital of not less than half the value of the fixed assets which they are employing, as defined in this paragraph, or their seeking to obtain the authority to proceed under one or other of the paragraphs in Section 4 of the Bill.
I certainly do not visualise any circumstance in which a company, genuinely established here and engaged in manufacturing operations now, is likely to be refused a Control of Manufactures Act licence, if it applies for it, but it would be given a licence to engage only in the operations in which it is now engaged. I do not see any circumstances in which a Minister would say to such a company: "Whether you engage in export trade or not, whether you add anything to the country's trade development or not, whether you conform with anything in the law or not——"
The Minister has admitted they conform with the law.
I am talking about the Bill before the House now. Where they conform with paragraph (3) of the Schedule of the Bill, of the new law, I do not think that would be detrimental to our industrial progress.
The Minister refers to a case under the new law, to a company established after the Act is passed.
What Deputy McGilligan is trying to secure here is that an existing company, irrespective of its present capital structure, can in future engage in any manufacturing operations it likes.
There is an argument about that. It is quite clear that the amendment is to ensure that any company at present carrying on business within the law can continue to carry on in that business, without having to ask for leave or licence. If that principle is not conceded, let me say this flatly—we may not have put this in a perfect way before the House; it may not be perfectly drafted—I can assure the Minister he will not get one single extern to come into this country as a result of the Bill. One of the things they always ask is: "Is there any danger of a succeeding Minister changing this Bill?" And one of the things they are always told, and I have always felt up to the moment, rightly told, is that "as long as you act within the law as it stands at the moment, then, though the laws may be changed in the future, even so as long as you are within the law at the date you operate, you can be assured that we are a fair-minded people and we will not change the law to affect you in any way retrospectively."
This clause does violence for the first time in the history of the State to that principle and it is a vital principle. If the Minister wants to make the point that this clause enables people who are carrying on one type of business to jump into an entirely new type of business, that is a matter which would be taken in the same way as if they were a new business starting off. But it is absolutely vital that we get it across to everybody within and without the country that once they come in and establish a business legally, within the law on the date on which they establish it, as long as they keep to that business or to its normal ancillaries, we will not go back on our word as a people. As this section is phrased, we do go back on our word, and it would be quite disastrous to our reputation as a country if we gave anybody the opportunity of saying that.
Perhaps the amendment does not completely meet the case on its phraseology. Quite frankly, I admit that until the Minister spoke first this evening, I did not realise the full significance of it. The full significance is now quite apparent to me and the full significance of it is something I shudder to contemplate. We often had similar discussions here on the provisions of Finance Acts. If there is a flaw in a Finance Act when it is passed, certain steps are taken arising out of that flaw. We never go back and legislate retrospectively. We may seek to see that the gap is closed for the future and I do not quarrel with the Minister in closing the gap for the future. That is a matter of policy of Governments from time to time and everybody must accept that, if there is a gap in any legislation, or if the legislation is wrong, if a succeeding Government decides that an earlier Government were wrong and they want to reverse it completely, that is within the province of Government.
It must be accepted and held out, however, that it must not be in any way possible for people who propose to set up industries here—and these people are bound to be more suspicious than our own people—to believe that if they come in and establish themselves under one set of laws, if they act within those laws—I am not concerned with people outside the law— any succeeding Government can say: "We do not like your way of complying with the laws and if you do not change yourselves and come within new laws, you must close down your existing investment and everything you have spent up to the present date will be confiscated."
That is just nonsense.
That is what it comes to as far as any new concern coming in and any extension of an existing business are concerned. The Minister and the House are perfectly entitled to determine what conditions they want for it, but, for an existing business set up within the law, if we do not preserve the position that that business can carry on as it was within the law, then we have no hope of establishing that confidence which we need.
As I said on the Second Reading, there is a whole lot of cry but very little wool from the point of view of the development of Irish industries, that in fact the same effect could be got in a much better way by allowing the existing Control of Manufactures Act to run its course, but to use a new manufactures licence provision whereby licences could be granted to people who are coming in here to make goods for the export market, or to fill a very substantial void in our own industrial production. If we had taken that line, the line I would have taken, we could have blazoned forth to the world that we welcome all new industrialists coming here, that all these new financial facilities will be here for them, that they will get irrevocable licences to operate these new industries here and, as long as they comply with the terms of the licences, there will be no likelihood of their revocation. As I said on the Second Stage, this is a lawyer's Bill. There will be more misunderstandings about this law than there are about the workmen's compensation law——
Which was designed to keep away from lawyers' language.
And which has finally built up a volume of case law that is nearly the equivalent of a bible. Why do we not take the direct and short course? What are the reasons for our taking this line instead of the more simplified line? I asked the Minister on the Second Stage did it mean under the provisions of the new Bill that he was going to inaugurate a witch hunt of those who got through the meshes of the Control of Manufactures Acts, 1932 and 1934, and try, as it were, to unscramble the egg which was scrambled when they managed to get through the meshes of the 1932 and 1934 Acts and registered under those Acts, £100 and £1,000 companies.
There is no doubt in the world that all the companies which have got through the 1932 and 1934 Acts complied with the law, and many of them have been in existence for more than 20 years. Nobody is attempting to prosecute them. You cannot induce the Department of Industry and Commerce or the Attorney-General to prosecute them. Nobody wants to have anything to do with them. Everyone is rather doubtful as to the thickness of the ice on which they are skating, if they attempt a prosecution under the Control of Manufactures Acts of 1932 or 1934 in respect of these £100 companies. I think it must be assumed that they all complied with the law at the time, but they complied with the law because the law was so clumsy; they complied with the law because there were dozens of loopholes in the law.
So far as complying with the Acts is concerned, nobody has attempted, since the Act was passed in 1932 or 1934, to challenge the legality of these companies under those Acts, whether they were formed on the basis of a £100 or £500 capital. Therefore, so far as this House is concerned, this House which is the dispenser of legislation for conversion into law, these people have complied with the Acts. They are still innocent of any offence until they have been convicted of an offence. Nobody wants to convict them; nobody wants to prosecute them. Nobody wants to look at a file in Industry and Commerce or in the Attorney-General's Office, where the question of prosecution under the Control of Manufactures Act is concerned.
That being the real position, what, at this stage, is the value of churning up and throwing into the melting pot all that has happened, and happened legally, under the 1932 and 1934 Acts? No doubt, if somebody goes out head hunting or witch hunting, he will find that firms did not comply with the law of 1932 or 1934 but with what was intended to be the law of 1932 and 1934, but which in fact was not the law of 1932 or 1934. The Minister might approach this from the standpoint of leaving well enough alone in so far as the activities of these companies can be confined to what they have been doing purposefully and constructively since they were established.
It ought to be possible, if they want to break out into new activities, to see whether they could not be fenced in in some way against entering these new activities or whether they could not be corralled against neglect in regard to these new activities without being required to secure permission in some way from the Minister, from the Department or from some such body. But to contemplate, as this section does, that they must now completely reorganise themselves is to approach this matter from the most mischievous possible angle.
This discussion on Irish industry and on our law is the worst piece of propaganda I have heard for selling abroad the simplicity and the ease with which you can establish an industry in Ireland. Anybody reading this discussion to-day will come to the conclusion that if there is one thing muddy in Ireland, it is the law and the intentions of the legislature, so far as the legal status of a company formed in Ireland is concerned.
In any case, is this the right time to start to do this spring cleaning which ought to have been done 25 or 30 years ago? We had a speech from the Minister for Health and Social Welfare recently in which he said that if this country does not get into the Free Trade Area, the mainland of this country will be as denuded of population as the Blasket Islands are. I do not know whether the Minister for Industry and Commerce approves of that oration by his colleague, but one must assume the Minister for Health is still a normal person, that he still has the confidence of the Minister for Industry and Commerce, that he was sent to speak on the subject of free trade and that he was giving the point of view of the Government.
If it is true that we must get into the Free Trade Area with the haste that the Minister for Health and Social Welfare says, is an entirely new situation not opened up for us? If we get into the Free Trade Area, manufacturers from the six countries in the common market and those who join the Free Trade Area, manufacturers from Greece, from Turkey, from Iceland, will all be entitled to send their goods in here with the label "Made in Turkey", "Made in Greece", "Made in Iceland" or made in any part of Central Europe. If we are in the Free Trade Area, we must pay for these goods and let them in here free of duty.
Contrasting that situation with the situation in which a man complied legally with the Control of Manufactures Acts of 1932 or 1934, but did not comply with the intentions of the Minister in 1932 and 1934, is it not better to allow that industry to run along here, making goods in Ireland, employing Irish workers in the production of these goods, in the utilisation of Irish raw materials and giving a livelihood to our people here, many of whom would not have that livelihood if these people had not established these companies in the unusual way in which they were legally permitted to do it, under the Acts of 1932 and 1934?
The Minister has got into the role of industrial moralist under this Bill. He thinks these people have been living in sin too long. He now intends to correct them, to bring them back to the path of industrial rectitude. The way in which he intends to do that is to compel them to do this, that and the other. I do not know who will do the compelling under the Bill; I do not see any provision in the Bill where anybody is to be the prosecutor in a case of this kind.
The Minister is.
Maybe the Minister, but even if there is to be a prosecutor in the form of the Minister, even if the constitutionality of the 1932 and 1934 Acts is all right—which some people doubt-is it desirable that we should have cases in which the legal validity of companies is questioned by the Minister for Industry and Commerce, acting on behalf of the Government, at a time when we are appealing to the industrialists of the world to come in here and establish industries for the production of goods to supply our own home market, goods which are not produced here at present, or in the production of goods for export?
It seems to me the Minister has got a hammer in this to deal with a problem which by no means calls for instruments of that kind in order to remedy the situation. I would strongly urge the Minister to find some way of getting over whatever are the real difficulties, instead of the imaginary difficulties he says exist, in a way that is not calculated to have our industrial legislation made the subject of case after case in the courts. It would be bad propaganda for our industries and I know of no more effective way of frightening away people from establishing industries. The Minister should take advantage of the time between now and the discussion of this Bill in the Seanad to see whether he might find another and less mischievous way of dealing with this matter. If his attitude is an indication of his intentions, then I am afraid that existing people who complied with the law even though it was not the law as the Minister thought it would be when he was introducing the 1932 and the 1934 control of Manufactures Acts, will have cause for a good deal of disquiet. This is a matter for caution.
To some extent I agree with what Deputy Sweetman has said. We ought to put our industrial legislation, particularly in relation to non-Irish firms, on the basis that everybody will feel that a change of Government will not bring about a change in the basic law. That situation would be fatal from the point of view of encouraging people to establish new industries here, situated as we are—an outpost of Western Europe. There are enough difficulties already in trying to induce people to come in here without bedevilling the whole situation by taking a course of action calculated to bring about misunderstanding.
99.9 per cent. of what Deputy Norton has said is completely irrelevant to this amendment. If we are to discuss the attractions to be held out to foreign firms to establish industries here, may I make it quite clear that we are not interested in foreign firms coming in to establish £100 companies to supply the home market with goods with which that market is already supplied?
I did not defend that.
That is the only question that arises here. Deputy Norton says these existing £100 companies were established in accordance with the law. I am not accepting that. I am accepting that under the provisions of the 1934 Act a successful prosecution would have been very difficult.
What are these companies? They are in the main, so far as I know, companies that were established here to carry on operations on behalf of foreign interests where these foreign interests had already been refused a Control of Manufactures Act licence on the grounds that their advent into Ireland would add nothing to the industrial organisation of the country and that the goods that they were proposing to make were already being made by existing home concerns in adequate degree. It was always a threat of foreign companies succeeding in getting in after Irish companies had established themselves in the home market, exploiting well-known trade names, or previously established connections with the market, to the detriment of the Irish companies which was the main deterrent to greater development by Irish enterprise in the past.
I could not tell you how many times in my period as Minister I was discussing with some group the possibility of establishing an industry of a particular kind to produce a particular range of goods in which I was met by that group with the objection that, if they did succeed in making a "go" of the industry and getting into production to supply these goods to the home market, some well-known foreign firms, which had previously been supplying the market, would get in to compete with them by one method or another; and, on the files of the Department, there are hundreds of letters written officially in the name of the Minister giving to particular firms about to embark on new enterprises an assurance that, if they did embark upon that enterprise, a new Manufactures Act licence would not be given to a foreign-owned firm to produce the same goods. In some cases, however, that assurance proved to be fallacious because the firms that it was intended should not be encouraged to come in, after somebody else had already started to supply the market, succeeded in getting in by this device of setting up a purely nominal company here with a nominal capital held in accordance with the Control of Manufactures Act but financed in the main by extended credits or loans. That happened.
What are we going to do about these companies in the future? That is the only question that arises on this amendment. Are we going to say to these companies established in that way that, now that they are here, not merely can they continue to operate as they are now doing, but they can engage in any other manufacturing operation they like without restriction? We may decide to do that in a particular case but surely there should be an examination of the case and a decision taken by somebody that to give that freedom of action to some of these £100 companies would not be a further deterrent to industrial progress here, because it is still true, in relation to the production of goods for the home market at any rate, that that fear is operating as a deterrent to the establishment of new undertakings here—the fear that if they are established a determined attempt to put them out of business again will be made by some external concern which previously had an established position in our market.
We must be able in those cases to give reasonable protection against that possibility and the protection we give is to enact legislation of this kind which sets out in precise form the conditions under which people can engage in manufacture here. Of course if there is to be a privileged class of people, a small group of companies established on this £100 capital basis, which will in future have the right to engage in manufacturing operations here, even though they are foreign-owned, if they can be acquired by some other interests with all these privileges and rights, then of course this legislation is of no protection whatsoever and we may as well go the whole hog and repeal the Control of Manufactures Acts altogether and ignore all the undertakings we gave to these existing companies in the past.
I do not think that would be good policy and I do not think there is anything in the argument that, by enacting this section as it stands, we are doing something which will in future induce firms establishing new industries here to fear that the conditions under which they will be allowed to engage in manufacture may be altered to their detriment.
I point out once more that in Section 4 there are set out all the conditions under which companies can engage in manufacture here. A company that complies with any single one of these conditions will be entitled to engage in manufacturing operations here. One of these conditions is that provided 51 per cent. of the capital is owned by Irish citizens or companies in which Irish citizens have a controlling interest; if that condition is met, any manufacturing operation can be engaged in. But we want to make that real, too, and that is why we say to the existing companies: "You have to conform to that condition" or, if not to that condition, to some one of these conditions in that section. The £5,000 fixed asset provision, Section 4, paragraph (h), will put many of them outside the Act anyhow. If the others want to get into business here, it will be no trouble to them to conform to the requirements of one or other of these paragraphs. By doing that, we maintain the position that we think it is necessary to maintain in order to inspire the confidence we must build up if we are going to get industrial progress at all by Irish interests in the future.
That is why I would be opposed to this amendment which gives not merely forgiveness for any past acts by these companies but unlimited rights of operation in the future. That amendment could not be accepted. I have stated my recognition of the fact that in the case of an existing concern of that £100 character which, for any reason, finds itself unable to conform with the requirements of paragraph (3) or qualify under Section 4 it is unlikely they would be refused a licence if they applied for it. They should be in the position that they should be expected to seek a licence and to be confined by that licence to the particular operations in which it is thought that they should be allowed to engage having regard to the existing industrial organisation of the State. They should be in no different position in that regard than any new company formed in which foreign interests wanted to have control and which were not able to comply with any of the other paragraphs of Section 4. Such an organisation would be given a licence and such an organisation would be welcomed into our industrial set-up provided they were doing something which was adding to the industrial organisation of the State. These companies should be in the same position. That is the whole object of the section.
Does the Minister travel this far? Where a company has complied with the Control of Manufactures Acts, even though the Minister thinks that they rather improperly complied, would he now be prepared to say to these companies: "If you are not willing to comply with the terms of this Bill, I, nevertheless, will on application from you, grant you a new manufacture licence to do what you have been doing"?
Not quite. The Bill should be so framed that they should be under an obligation to try to conform. They should not be told: "You need not make any effort; you will get a licence". They should be asked to try to conform with the requirements of the section. If there was a good reason why they could not, I cannot see their being refused a licence.
I intended to ask how many people are concerned. The Minister has answered by saying a small group. In his argument the Minister says a small group of £100 companies. As the debate proceeded it looked as if the country was full of these £100 companies. I do not know any of them. The Minister says a small group.
We are setting a very bad example outside to people who were inviting or trying to induce people to come here. We are doing so in order to get hold of a small group of people. The Minister is talking about £100 companies. I want to ask, may a £100 company complying with the arrangements in Section 3 be an excluded company? I see nothing to prevent it. We cannot be against the £100 company as such. It seems to me as if the £100 company is only to be derided when one is considering those who have come in here and have complied with the 1932 and 1934 Acts.
My intention in putting down this has been queried. My intention was perfectly simple. It has become complicated. I intended to avoid retrospective legislation. If we are to make arrangements for any companies, very good. The share capital must not be less than a particular sum set down here. Do what you like about these new companies. The argument can be adduced, of course, that it is an unwise procedure in legislation which is suggested to be primarily for the purpose of liberalisation. To that legislation in regard to future companies nobody can complain. We are entitled in this State through this legislative body to make arrangements to deal with any company which comes in.
I want to see any company established after the date of the passing of the Act having to comply with whatever conditions are in this Schedule. That is fair. Of course, I could argue against it. If nobody can say: "you are breaking faith with people who came in here already"—but then turn to Section 3, the excluded companies section. If a company complies with certain conditions set out in Section 3, it has not to bother about a licence or going to the Department of Industry and Commerce or anybody in the way of authority. It can bypass all those and is free to set up.
One of the conditions is that the memorandum of association and every prospectus provide that the carrying on of a manufacturing process in relation to a commodity intended for export is a principal object. I queried that when we were last dealing with this. If it is meant as it is made, it is not very much of a condition to impose. Then I thought there might be something hidden in it. But I was told very explicitly by the Minister that what that clause says is intended.
Suppose in a year or two hence we have been able to induce a few foreign companies to come in here who intended to do their business and certainly did make it a principal object that they should export, but who found that they could not export. But they have become excluded companies. As far as I can read the measure, once an excluded company you are an excluded company for all time and for any manufacturing process, not the manufacturing process for which exclusion is gained. You are in exactly the same position as is alleged to be that of the £100 companies and which are now, according to the Minister, allowed to operate and are able to engage in any manufacturing process.
Is it conceivable that in a year or two the Minister will be coming in here and imposing new conditions, not on companies looking in the future to become excluded companies, but companies which have already gained the status of excluded companies? Certainly if you go to America and tell the Americans that under this excluded company section they are quite free, but if you are asked what is the prospect of the Minister coming in and making a change, you can say that up to this particular date such a prospect was nil. But, referring to this debate, they will say: "Are you not doing that exact thing which I fear in regard to companies that have already in some way or other managed to comply with the conditions of the 1932 and 1934 Acts and apparently have been enabled to operate here for 25 or 26 years?" It is a bad example.
Similarly with regard to the certificates of exemption. It is rather more restricted but the Minister is entitled to give certificates of exemption. One of the things the Minister boasted of when last dealing with the matter was that once a certificate of exemption has been given it cannot be revoked by any circumstances. It may be impossible, if we follow along the tracks we are marking out for ourselves at this particular moment. I ask is it worth while creating a bad precedent, giving something which will certainly be pointed to as a danger to any manufacturers intending to come in here for the purpose of exporting. They will be told: "The trap is there set for you. It is fine legislation, but do not forget that, in the passing of that very piece of legislation, the Minister showed his hand. He showed an inclination to get after certain people who had got through too easily. They had complied with the Acts on any legal interpretation but did not comply with what the Minister thought the Acts should have said, but apparently did not say."
It is a very bad precedent. It there was a great deal of damage being done to the country by these companies that have scrambled in in some other way under the Acts, there certainly would be an argument to be used in the economic circumstances of the country. But the Minister referred to a small group. I would ask people to have a balanced mind. Is it worth while to do this great wrong, to have this retrospective legislation, order to rectify something small that is operating?
The Minister says that if my amendments were carried it would mean that any company here at the moment, without meeting the requirement of the share capital being of a certain type, could engage in any manufacturing process. Deputy Norton has said that it is not for me to do that. I say we want to prevent retrospective legislation. The Minister said: "Very good, we will accept that. We take it that this section will apply only to the future but I have to look after the people who are here. They have got in here and, although I do not want them, they are here and they are doing certain work". Although it still would be something in the way of retrospective legislation, it would be less harmful for the Minister to provide that those who are here and are engaging in manufacturing process, although they do not comply with the capital requirements of Section 3, will be entitled to carry on but only in the manufacturing process in which they are at present engaged or—and I take the words from the Act of 1932—something that forms part of that business or is a reasonable extension of it.
As the Minister must have realised when we were arguing here the last day, I had possibly paid too much attention to that phrase where it occurs in many sub-sections of Section 2 of the Act of 1932 and I had thought that the way this matter ran was in the main—I know there are exceptions—that if you fix the particular manufacturing company with a particular manufacturing business or, when you look to the relevant extension of that, something that forms part of that business or is a reasonable extension of it, that is only limited in its application and I suggest, if the Minister wants it, that is a possible way out of this. Again I want to say that I do not think he would be entirely free from the criticism that he is imposing new conditions on people who have already complied with conditions if he says to people who are here: "I will allow you to stay on without meeting the requirements of share capital but you will legally be carrying on that business only if you are engaging in the business that we find you at the moment in or whatever is a reasonable extension of it." That would be a less disreputable attempt to amend the law retrospectively than what is being done now.
Let people clear their minds of this. We have our arguments here. We know the home circumstances. We have now been told that this is not really a very big matter at all. Let this discussion here or any synopsis of it be sent off to any group of foreign industrialists who attempt to come in here and let it be marked to them that in this year, 1958, we have decided to amend back to catch companies who have been here since 1932 or 1934, that we are doing that in 1958, imposing new conditions. Will that induce people to come in here? Will they have any idea of stability of government, that a succeeding Government, because it was properly done, will agree with what was done by a predecessor? Once, so to speak, the exception is made and you break through all this, and you are imposing a new condition—it is recognised that this is the imposition of a new condition—on people who are already here, I think you have done irreparable harm.
Personally, I would prefer what Deputy Norton said was the alternative-abolish the Control of Manufactures Acts altogether. If they had any purpose to serve at any stage, they have served it, and if they are here, let them continue here.
Apparently, our whole future depends on having this enlargement of manufacturing production in the country, whether it is to be for export or for the home market, and the export markets offering are supposed to be better and, certainly, under the system of no protection, are likely to be much better than anything we can offer at home. The fears, the doubts, as to any more companies coming in here to clutter up an already satisfied manufacturing organisation ought to be very remote. We are away from the days of 1932 and 1934 when there were economic aspects of the whole matter. We are turning our backs on all that, clearing away from it, and the whole Continent which we hope to rejoin is doing the same.
Taking it in a balanced way, in the circumstances in which we find ourselves, so many years after the first of these Acts was passed, if we do find that people have come in legally, even although it may have been by certain ingenious devices, we should at least say to them: "Since you came in here, we will not impose any new condition but, for the future, anyone who comes in will have to meet this requirement with regard to share capital."
As I said before, if this was a very serious matter, if the people whom the Control of Manufactures Act was intended to protect and safeguard in regard to their capital involvement were very seriously impeded and affected by a mass of people operating as £100 companies, the argument would be weightier, although it would not at all meet the principle stated. The Minister said that it is a small group. Let them alone or at least put the hobble on them that they will continue in the manufacturing process in which they are at present engaged or some reasonable extension of it but, for the sake of getting your own back on a small group of companies which came in here, do not work harm, very serious harm, in the future by causing doubts in people's minds as to whether there was any stability in the view held here. Are we open, as I think we will be open, to the criticism if this is passed in its present form that we pass a piece of legislation one day and then find out that the law has not been carried out, and amend—you are entitled to do that—but amend backwards, looking back, when you involve and penalise people who have got in properly under the existing law?
I want to say, to avoid misunderstanding, that I am completely in sympathy with the Minister's desire to protect the efficient Irish manufacturer who is doing a good job in the home market. I have no sympathy whatever for the inefficient Irish manufacturer and personally, if the device of the £100 factory will get a better job done with the assistance of outside capital, I would rather see it done. The Minister's argument in that regard is unanswerable by anybody in this Dáil who wants to protect the efficient manufacturer who is doing a good job but, in order to do that, the Minister is doing a disservice to two other sections. One is the section I mentioned when I spoke a few minutes ago, that is, the industry that was set up with the assistance of outside capital because the home investor or capitalist, as the case may be, did not have sufficient capital to start the industry.
Such industries have been in existence for various periods over the past 25 years. It is not good policy at this stage to say to them: "We want to bring you within the scope of this section. We know you have been there for 20 or 25 years. We think you have evaded the 1932 and 1934 Acts. Now is the time to bring you within the scope of this section." If anything was to be done, the time to do it was when the Irish home market was vulnerable, when it was not completely catered for. As the Minister himself has said on a number of occasions, the home market is well and efficiently catered for and it is in respect of exports that any expansion in industry must be looked for.
As other Deputies have said, and as I have previously said, this piece of legislation will create a bad impression. The good the Minister will do, to prevent this real or alleged hornet's nest of £100 factories, he will more than undo by the damage he will do to the established genuine companies that could not have been financed except by the assistance of some outside capital and he will certainly create a bad impression outside the country. I have reason to know that because I have sent a draft of this Bill outside the country to get observations on it and that was the impression. The main dissatisfaction expressed was because of the fact that here is an Irish Government, 25 years after enacting certain legislation, going back over it and creating a new set of conditions. I do not think it is outside the Minister's competence to contain the £100 factory that he was talking about.
Like Deputy McGilligan, I did not appreciate the significance of the fact that once a £100 factory is in they can jump from one type of manufacture to another. I do not know how many £100 factories have done that. I have no information on that point. If that is a serious danger to the established and efficient Irish manufacturer, it should not be outside the wit of the Minister to devise a section to cater for that. I say: do not do it at the expense of genuinely established companies, companies established with the assistance of outside capital, and certainly not at the expense of the good name of the Government by interfering with legislation enacted over the past 25 years. Whether we like to admit it or not, the loopholes were availed of to create factories that have given employment and that is the best answer to the complaint that these loopholes have been there. I may be completely wrong but I should think that successive Ministers have shut their eyes to the fact that these loopholes were there.
The type of case Deputy Russell refers to is different from that which we have been discussing. I am not by any means clear in my mind as to how it could be met, on the one hand, or as to the need to meet it on the other. The Deputy is not thinking of the case where an external company was refused a manufacturing licence but nevertheless got into manufacturing here either by the process of establishing an under-capitalised company of which 51 per cent. of shares were held here, or some device like that——
No.
The Deputy is thinking of the case where a Control of Manufactures Act licence would have been given if applied for but where the Irish shareholders did not want to apply for it because they wanted to retain the position in which control of the company would be in their hands. I do not know whether there are any of these cases where this requirement, that the paid-up capital should be not less than half the value of the fixed assets with all the deductions set out here, could not be fulfilled. That is a matter I would have to look into.
My trouble in dealing with the argument put forward by Deputy McGilligan is this. I cannot see circumstances in which a Control of Manufactures Act licence would be refused to a company which was formed in that way in the past and which was actually engaged in manufacturing operations now and which had good reason for not making the changes which would be required by the provisions of this paragraph——
Does not that mean driving the people back to the Minister?
Regardless of what our own people may say outsiders will not take that line.
All that talk is so much special pleading in this matter. It does not arise. 99.9 per cent. of the outside companies that come in here or consider the possibility of establishing themselves here ask: "What is the rate of taxation? What is the rate of wages? What is the factories legislation like or the conditions of employment legislation?" If you reply to these questions you are not committing yourself never to change these laws in the future——
But they also ask what is the structure of your company law.
Very well. So far as these companies we are discussing are concerned there is no question of good faith—none whatever. These are companies which established themselves here——
Within the law.
——within the law but without any question of good faith being involved. There is no question of breaking faith——
There is every question because the Minister is putting himself up as a judge of faith and I suggest the Minister is not entitled to do that nor am I, on this side of the House, entitled to do it, nor would I be if I became Minister again. The law is there and it is compliance with the law that should be the test.
We are talking here only about companies that were given no undertaking of any kind what-ever——
But is there not an undertaking for all of us that if we keep the laws within the Constitution we shall be all right?
Indeed we have a number of companies here to whom it was made quite clear that they were not merely regarded as detrimental to Irish industrial progress but which were at some time—perhaps irregularly, but nevertheless for long periods—under various Governments refused facilities which were at the discretion of the Minister, as evidence that they had established themselves here in conflict with official policy in that respect.
I do not think this is very attractive for outsiders.
That may be a good argument but it has nothing to do with this case. So far as the law is concerned it is set out in Section 4 of this Bill, and any company that complies with any one of those paragraphs is entitled to engage in manufacturing here or provided it is owned by Irish citizens. If it cannot comply with any other conditions it can manufacture if it complies with that condition. But what do we mean by that? We mean in a bona fide way that the company is an Irish company in the sense that the majority of its shares are held by Irish citizens.
We now come to the case of the company which is set up with £100 capital the larger part of which is held by Irish citizens but which is actually employing say £100,000 in its operations, obtained by loan from external partners or in the form of extended credit for supplies of materials or something like that. We say to these companies: "In order to become respectable in the future there are certain things you must do. You must either change your ownership so as to conform with the requirements of this Act or you must get a licence to carry on the process of manufacture in which you are engaged or in some other way qualify under Section 4 to carry on. If you cannot do that then you are in conflict with the Act." In the case of existing companies actually carrying on operations now, I cannot see a licence being refused, but there was a multitude of these companies formed over the years which are not carrying on operations now. Are we to create in respect of them that privilege by which they can in the future carry on, or by which any external companies that acquire a controlling interest in them are now exempt from the provisions of this Bill?
No. I am not arguing that at all.
How then are we to get a way out of it? This method which Deputy McGilligan has suggested, and which admittedly is not perfect, would have the effect of giving such companies the privilege of engaging in any manufacturing operations in the future without restriction——
No.
——here, whether their ownership remained in the hands of those who established such concerns or whether it has been transferred to any other ownership whatever. We cannot have that. Now, can we devise a system under which we can put on these companies the onus of trying to conform with the requirements of the section and recognise that if for any reason they cannot do it we will still give a licence provided they are actually manufacturing now, provided they are not defunct companies and are in business now, and secondly, can we limit their operations to the type of work they are doing now with some reasonable freedom of action in respect of normal extensions of their operation?
I would not object to putting into the section another paragraph instead of paragraph (4) which says that the Minister may extend the time during which they must conform, a paragraph to say that the Minister must give, provided he is satisfied with the bona fides, a licence under the Control of Manufacturers Act to enable them to carry on. But what Deputies want is some automatic provision which will not involve recourse to the Minister. I do not see how we can get it. As an indication of policy the paragraph I have suggested might suit.
No.
A company is entitled to expect a Control of Manufactures Act licence provided it conforms to these conditions: that it is actually in operation, is going to continue in operation in general in the same lines as heretofore, and is for some good reason unable to conform to the requirements of the Bill, but I do not think we could make that an automatic provision. I think there must be a provision which to some extent would involve the use of discretion by the Minister.
What I am interested in is simply where a company at present complies with the law—and I want to stress that.
That is begging the question in some cases.
Now, wait. I want to ensure that nothing we do in respect of that company can possibly be termed a breach of faith.
That is begging the question for me. I think a number of these companies do not comply with the law.
If they do not comply with the law, the law is there to prosecute them
That is the real defect of the 1934 Act. The real defect was the inability to get proof which would stand up in court.
The Minister believes there was non-compliance, but he cannot prove it. That is a bad weakness in your legislation.
I admit that. It answers the point that these companies are complying with the law.
If a company complies with the law as it is at present and is carrying on business in compliance with the law, we have no business to pass legislation in relation to that company which will change the terms under which it must comply. We can pass legislation for the future. Certainly we can say in respect of the future that people must do certain things. We can say that for the future, to comply with the law, they must do a, b, c, d, e, f and g, or any terms you like. That is all right for anybody starting up in the future, but once you take the line that a company complies with the law at present and the law with which it has to comply is changed and may disqualify them, you are cutting across the whole root of confidence.
I accept—Deputy McGilligan has already accepted—that, perhaps, the exact wording of this amendment may not meet the case which is being thrashed out here. Neither I nor Deputy McGilligan is interested in the exact wording of the amendment. It is the principle that, once people comply with the law, they are not to be put, because of that compliance, in a different condition after it. If they do not comply with the law, then I have nothing whatever to say in favour.
Let me put this to the Minister Suppose, for example, a firm comes to him and says: "We propose to do this. That is our scheme of operation. We think it is in compliance with the 1932 and 1934 Acts." We know the Minister would be bound officially to take the line that it is not for us to lay down what is or is not in compliance with the law. Excluding that, if the Minister were an outside business industrial adviser—or both of us were—and said: "Yes, I think that scheme is in compliance with the 1932 and 1934 Acts", and they set up on that basis and are carrying on that business on that line and, assuming the advice tendered by both of us was right and the judges in the courts were there to determine we were right, it would be most improper for us to change what was the legal and judicial definition of compliance with the law. That is, in fact, what the Schedule does.
A lot of this trouble arises because people are inclined to read the word "evasion" as meaning the same thing as "avoidance". I have no sympathy with anybody who evades. I think the word "evasion" connotes a breach, whether deliberate or not, of the law. I have no sympathy with anybody who breaks the law. If a person avoids one legal pitfall by legally taking another course which he is legally entitled to take, then we have no right to go back to him and say: "What you did before, though it was perfectly legal at time A, at time B is illegal." That is a matter of principle.
I think the Minister is quite wrong when he says that the only things that people are coming here to look at are the terms of employment, the supply of raw materials, the supply of employees, and suitability of sites, suitable services, and so on. I have experience of meeting them on the Minister's side of the House, as well as professionally. Invariably, they all ask the same question: "Is that the law and is there any likelihood that the law would be changed retrospectively after we invested our money here?" The answer has always been, on both sides of the House, "Frankly, no", that whatever new policies we might adopt, it would be unthinkable that a Government would penalise restrospectively people who would come in here.
We have all held that view on both sides of the House, but the clause in this section would have that effect. I am saying quite categorically it would have that effect, and if this clause is passed in its present condition, any solicitor, acting for any business concern, if he is asked whether the projected scheme is in compliance with the law, must say: "I think it is. I think a judge will uphold my opinion at the moment that it is, but I am afraid that, having regard to the manner in which the First Schedule of the Industrial Development (Encouragement of External Investment) Bill, 1957, alias the Control of Manufactures Bill, 1957, was passed, even if the judge gives you a decision, there is a danger that the Oireachtas might legislate against you retrospectively. Therefore, you cannot be sure whether the interpretation of existing legislation is that."
We cannot possibly get to that position to secure any results under this Bill. I am not very sanguine in regard to the methods adopted in relation to this Bill. That is another day's work. We all want to ensure, whether we agree with the methods or not, that we get some results under this Bill. We cannot get any results, unless, if I may use the phrase, we exude confidence in relation to those who come in and comply with the law. As the Schedule is at present, we do not do that.
Like the Minister, I am not interested in the case of a "dud" company being operated for the purposes of this Bill in the same way as a "dud" company would operate for the purposes of the Finance Act, 1937. I am perfectly prepared to concede that they can be easily covered in the Bill by a suitable phrase. It is a matter of drafting and it is not beyond the with of the draftsman to get something to cover it.
We can cover it without any difficulty at all in the Schedule if there is the wish to do it. I am vehement in my argument that we must exude confidence that no Government in power here, having got people to believe they were complying with the law, would afterwards tell them they have to do something else and that they are to be denied the protection of the courts in relation to existing contracts vis-á-vis Governments. It should be quite easy to meet that. If the Minister indicates he is prepared to endeavour to get a form of words, on his side, that prevents the dud company being bought or utilised by other people, on the one hand, and to preserve the existing undertakings and to preserve faith and to protect confidence in our administration, I think we, on this side of the House, would equally exercise our minds to see if we could find some method that would ensure that the genuine case would be protected and that the necessity to protect that genuine case would not be abused.
I am rather disappointed at the references to the £100 companies, especially when the Minister states he does not wish to put them in the position where they will get free forgiveness—I think that is the word he used—for what they had done.
I did not say that.
It is very hard to forgive a person for obeying the law.
I said it was an entirely different matter to give them forgiveness for what they had done in the past to giving them complete freedom of action in the future. That is the position I am trying to safeguard.
If that was the Minister's intention, I am delighted. I was afraid he was trying to forgive them for disagreeing with him. I am still unconvinced that these £100 companies have done any considerable harm and I should like further information in that respect. I gather from the debate this afternoon that there is only a comparatively small number involved. I am not at all aware of any evidence that these £100 companies have acted detrimentally to the industrial development of the country. If they have done so I am surprised, and I should like to know something more about it. I get the impression that the Department, as such, and the various Ministers have always been frightened of these companies but have been unable to control them and, being unable to control them, have built up a phobia about them and, I think, an unnecessary one.
I appreciate that the Minister states it is not his intention to close down a company simply because it finds itself unable to comply with Section 3 of Part I of the Schedule to the Bill. There, again, a new external investor will not be impressed by what the Minister now states his intention will probably be in the future. I am absolutely prepared, myself, to accept that it is not the Minister's intention to close down a company. However, you cannot expect an outsider to accept that assurance or to be as confident as we, on this side of the House, might be of the Minister's benevolence on the matter. Once you preserve the power to do it, the damage has been done.
The Minister referred to the danger that, if this section is not retained, a new privileged group of businesses will be set up who have been acting prior to the appointed day. However, even that does not seem to me to be a fully valid reason as there is already a privileged group of businesses operating here since prior to 1932 which does not appear to have done any great harm to anyone. The Minister stated he would be prepared, possibly, to put the onus on companies to try to comply with the Bill. There, again, if you are trying to interest a foreign investor he will insist on some definite ruling on the law. If he is told: "You may or may not comply now or at a later date but if at any stage you do not comply it is probable that the Minister will ask you to try and it is also probable that if you can satisfy the Minister you are trying he will grant you a new manufacturer's licence," no businessman is prepared to act on that basis.
I am sorry there seems to be a feeling in the Minister's mind that anyone who has avoided some of the restrictions of the Control of Manufactures Act has done something improper. I do not think that that is so. We have to regard the matter cold-bloodedly—if you comply with the law, that is the end of it. Once you comply with the law, there must be nothing but goodwill towards you, even if you disagree with the particular way in which a man is doing it. I know it is most disappointing to someone who has prepared legislation and who wants it to go a certain way and finds it going slightly contrary to his wishes. Compliance with the law is all that can be enforced by any Government or court. Once you introduce further restrictions, I feel you are undoubtedly inviting avoidance or evasion. Avoidance of the provisions even of Section 3 of Part I of the Schedule would be quite legal. I am already assured by some of the leading solicitors in Dublin that they are fully prepared to avoid most, if not all, of the provisions of this Bill. We have to face the fact that any control invites avoidance or evasion. I think this Bill will undoubtedly do so and that ways under it, over it or through it will be found. I do not believe the Minister's wishes will be carried out. I see what he is trying to do but I do not think it will turn out as he desires.
This insistence on control and protection is not really to the benefit of our economy. I will quote an extract which I have already quoted to the Minister from the Journal of the Irish Management Institute, September-October, 1957, which refers to an article by a gentleman named Eugene R. Black, President of the International Bank.
That has nothing whatever to do with the amendment.
The Deputy seems to be wandering from the amendment.
Here is the significance of the amendment, as I see it. Some of us here are trying to establish a principle that controls can be made retrospective. If I have wandered too far away from that, I apologise. However, I feel it is inevitable that, once you make a retrospective control, the whole purpose of the Act will be confounded. I am not fully in agreement with the suggested amendment but, at the same time, I feel it is trying to meet this point—the point being that a legal company can now, if the Bill is passed, become an illegal company. If the Minister could get it into his head that a company which has done something which he did not like in the past is still a fully legal company I feel we might be able to make some progress. In all his contributions this afternoon, the Minister appears to feel that the fact that a company has got round him in the past means it is illegal and that he will catch it out in the future. That would be an unfortunate precedent. Possibly I have misinterpreted the Minister but I cannot see that any other interpretation would be given to it by anyone else.
I think the difficulty of the House in this matter is that it does not know how many companies are supposed to have transgressed the 1932 and 1934 Control of Manufactures Acts or how many companies avoided the provisions of those Acts. The Minister for Industry and Commerce cannot say that a company is avoiding or evading the Control of Manufactures Act. He has no qualifications whatever to pronounce on whether a company is complying with or abrogating the law. No one on these benches has any such power. The Attorney-General himself cannot say that the company has transgressed the law. That can be done only by the courts. We cannot pass legislation and set ourselves up as a judiciary as well to say who has complied with the law after it has been passed. The courts have not yet pronounced judgment on a single case under the Control of Manufactures Acts of 1932 and 1934, so far as I know. Therefore, nobody has been declared to be an offender under those two Acts and the presumption must be that everybody has complied with the law, at least until the court determines otherwise.
Nobody knows, either, how many companies might be suspected of avoiding or evading the law. I do not think there is any record in the Department of Industry and Commerce as to the number of companies which are regarded in the official view of the Department as borderline cases or suspect cases. Now and again one heard of cases, perhaps, of a shady kind of company running its business in a way that did not excite admiration or commendation in the Department, a company that perhaps was financing itself through small capital, the rest coming through the conduit pipe of a loan or extended credit. So far as I know, there is no list there. Certainly, no list was ever shown to me and I do not believe there is any official list, nor do I believe there is anyone in the Department qualified to express a view as to whether a company has complied with the law or is complying with it, whether it has avoided or evaded the Act. All these rumours floating round here in connection with this matter are very largely unreal because we cannot ascertain the extent of the problem with which we have to deal.
If it is true—as the Minister says, and I am willing to take his word on it as I think it represents roughly the position—that there is a handful, perhaps a big handful, of "hundred-pounders" who have got through the wide and clumsy machine of the 1932 and 1934 Acts, I ask him is it worth while, is the game worth the candle, that we should introduce a Bill of this kind, with the discussion we have had, in order to try to make these companies, which got through the previous two Acts, comply now with the 1957 Act?
Against the background of what is to come in the Free Trade Area, it might be good policy to say: "Let us leave well enough alone, it is our fault that they were able to do this; this legislation was passed by the House and they were able to comply with it in doing what they did." We cannot help that now. In any case we are in an entirely new era and it looks a bit thick, 25 years after these Acts were passed, that we should seek now to amend them. That is not good public policy and it is not good propaganda when dealing with foreigners, many of whom do not even know the language, much less the method by which we make legislation in our parliamentary institutions.
The Minister might well take the view that while there is some problem to be dealt with it is not a serious one. In any case, no Minister could contemplate closing down an industry to-day—we have too few of them already—merely because it did not comply, in his view, with the provisions of those two Acts. If that is not going to happen, surely there is some other method of regularising the position? I think the Minister can get what regularisation he wants if he takes this Bill back and sits on it for a further period.
It should be possible to draft an amendment whereby whatever has happened can be allowed to rest where it is, but whereby those who got through the Acts, complying as they did with the Acts then extant, will be contained within their existing activities, or immediately associated activities, and whereby nobody will be permitted to revive a dud company which is not, in fact, a company, or to use a company which is not now operating, for the purpose of arranging, because of its £100 capital, to carry on a new company into the activities of the old company, or still wider activities. It ought to be possible to arrange things in that way and then the views of all sides of the House would be met. What I am afraid of is the bad propaganda which is involved in this Bill and in this discussion.
The Minister says that the people who come to him in future and ask what the law is will be told all this. These people will not all go to the Minister; they will go to solicitors, lawyers and friends. They will ask what the law is in relation to the control of companies here. They will have copies of the Dáil Debates handed to them which they can read for themselves. Does anybody think that the reading of this debate is calculated to inspire terrific confidence in the immutability of the legislation we pass from the point of view of controlling companies, or is it calculated to create in the mind of someone who is suspicious: "Well, that is the law to-day but you cannot be sure that will be the law if there is a change of Government"? That would be a fatal impression to give any potential industrialist from afar.
Again, one may have this situation arising. Supposing that by an inquisition in the Department, the Minister does establish the fact that there are 15 or 20 industries which are not complying with the law; and then this Bill is passed in the form suggested by the Minister. Suppose those people come to the Minister and say: "We have read your Bill, we have taken legal advice, and the advice is that our company is within the provisions of the 1932 and 1934 Acts or we have made some very slight change which has brought it within that." The Minister will consult the Attorney-General, who will say: "No, I do not think they are within the Acts." The companies say: "That is interesting because we have the best lawyers we can buy and their advice to us is that we comply with the law and there is no doubt whatever on it." The Minister is still advised by the Attorney-General that that is wrong, that they do not comply with the law. What is contemplated then; who wins? Is the Minister to take the case into court and to institute proceedings against the company and say it does not comply with the law and have a heavyweight battery of lawyers on both sides for three or four days arguing in court as to whether such and such a firm complies with the law; and after a decision perhaps an appeal to another court?
That is the first signs of battle to establish the legality of companies under those Acts. Then there are 14 or 15 still in the background and the same process has to be gone through in each of those cases. As a result, suppose you get half a dozen or ten cases thrown into the courts, the courts being asked to pronounce as between the views of the companies' legal advisers on the one hand and the Minister's legal advisers on the other hand; and all this gets publicity, is that the best kind of atmosphere in which we think we can ask for an industrialist to come here to manufacture goods for export or to supply our home market where it is not at present supplied?
Whatever has happened is not worth all this risk and danger. We have taken a clumsy way of dealing with the problem of inviting people in. However, let us take the situation such as it is. The Minister would be well advised to try to forget what has happened, annoyed though he may be about the matter. He should endeavour to contain all those who complied with the existing defective law not merely from extending their activities into new and unrelated domains and he should prevent others from using silent or obviously dud companies which have obviously got through the meshes of the 1932 and 1934 Acts.
I think that course is preferable to throwing all this business into the melting pot, with all the criticism we are going to get from potential industrialists at a time when we cannot take that risk. There is no question of a difference of political approach in this matter. It is a question of industrial wisdom and sagacity as to what to do in the best interests of the nation. The Minister would be well advised to have another look at this matter and bring back an amendment to this House which will meet whatever needs should be met.
The Minister has said that he would consider an amendment along certain lines. I agree with Deputies who have already spoken that that does not offer much to industrialists. The Minister has referred to Section 4 and pointed out that a company complying with any of the relevant paragraphs may qualify and carry on business, and it would be lawful for them to do so. I dealt with this on the last occasion. I said, and I think it may be repeated, that there are really only two paragraphs in this section which give liberalisation. The first one is that it is quite lawful for a company to carry on business, if it carries on solely for export, and the second one is where the company is an excluded company. Everything else means either something approaching the old conditions of control in the two earlier Acts or else going to the Minister to get a certificate of exemption.
Consistently I have taken the line that people are not going to come in here, if they have to go to a Government Department to get leave to carry on business here. The Minister brings us back to Section 4 of the Schedule and speaks of an extension of that. I have moved to cut out that section because I think it is bad, once we have established the law, to give the Minister power to remit in respect of certain people the conditions of the law and to enforce them in respect of other people. That gives room for favouritism, and, whether there is favouritism or not, there will be suspicion. I should prefer to have the sub-section omitted altogether.
The Minister says that he would not mind extending it, so that there would be some extension of time to allow companies to comply with the share capital conditions set out in the first part of Section 3. I do not see any great difficulty there. I am not pretending to put in a finished draft now, but the section might well run, at the end, "provided always that company shall be a qualified company, if notwithstanding its non-compliance with share capital provisions, it is carrying on business at the time of the passing of the Act, and is then complying with all the conditions specified in Part II and continues in compliance with the said conditions to carry on such business or do anything which is part of or a reasonable extension of it".
That would mean that you would say: "We regard you as a qualified company, although you do not comply with the share capital requirements, if you carried on business at the date of the passing of the Act, and complied with the conditions of the earlier Acts and continue to comply with them." It would mean that you would stop these people from running wild and getting into new manufacturing business where the market was already satisfied.
That is just something I have drafted here while the argument was going on. It could be improved and possibly there are some points which I have missed. Personally, I still think it is a piece of retrospective legislation, but it is not so open or so blatant a piece of retrospective legislation as this is here. I think what Deputy Norton asked was material to the argument. We have been told that it is a small group of companies and we take it that the Minister regards them as inconsiderable. I think that the fact that the company is on the basis of £100 capital does not mean that it has not necessarily got very heavy commitments in relation to capital. I do not know the number but certainly some companies with considerable capital involved are operating on the basis of £100.
In regard to the Minister's offer to do something in respect of Section 4, he may not appreciate the point of view, but there is a point of view which does not like this idea of having to go to the Minister for a certificate for any sort of exemption and therefore to give him wider power in Section 4 is making the thing worse and adding greater chances of favouritism than those already there. I suggest the Minister should adopt some amendment on the lines I suggest: have his new conditions for the new companies and then in regard to the companies already here say to them: "You crept in in a way we do not like. We have got to keep our own honour and we will let you stay here, but we will restrict you to any business you are doing at the time of the passing of the Act."
Is amendment No. 32 withdrawn?
No, Sir.
Would the Minister consider the question?
I said I was trying to meet the problem, but there is a real problem.
Do not make it worse by getting more annoyed.
Will this come back to the Dáil?
There will be the Report Stage.
Could we have this recommitted on Report Stage?
What about my amendment?
The Deputy's amendment covers the same point. To meet one, you meet the other.
I thought it was an entirely different matter.
Is the Minister correct in that statement?
Let us get rid of one amendment first, anyway.
Amendment put.
The Committee divided: Tá, 28; Níl, 56.
Tá
- Blowick, Joseph.
- Burke, James.
- Byrne, Tom.
- Coburn, George.
- Corish, Brendan.
- Cosgrave, Liam.
- Costello, Declan D.
- Costello, John A.
- Crotty, Patrick J.
- Esmonde, Anthony C.
- Fagan, Charles.
- Giles, Patrick.
- Kenny, Henry.
- Kyne, Thomas A.
- Lynch, Thaddeus.
- McGilligan, Patrick.
- Manley, Timothy.
- Mulcahy, Richard.
- Norton, William.
- O'Donnell, Patrick.
- O'Higgins, Michael J.
- O'Higgins, Thomas F.
- O'Sullivan, Denis J.
- Palmer, Patrick W.
- Rooney, Eamonn.
- Russell, George E.
- Sweetman, Gerard.
- Wycherley, Florence.
Níl
- Aiken, Frank.
- Allen, Denis.
- Bartley, Gerald.
- Blaney, Neal T.
- Boland, Kevin.
- Booth, Lionel.
- Brady, Philip A.
- Brady, Seán.
- Brennan, Paudge.
- Breslin, Cormac.
- Browne, Seán.
- Burke, Patrick.
- Calleary, Phelim A.
- Carty, Michael.
- Childers, Erskine.
- Clohessy, Patrick.
- Collins, James J.
- Crowley, Honor M.
- Davern, Mick.
- de Valera, Eamon.
- de Valera, Vivion.
- Dooley, Patrick.
- Egan, Kieran P.
- Egan, Nicholas.
- Faulkner, Padraig.
- Flynn, Stephen.
- Geoghegan, John.
- Gilbride, Eugene.
- Gogan, Richard P.
- Griffin, James.
- Haughey, Charles.
- Healy, Augustine A.
- Hilliard, Michael.
- Humphreys, Francis.
- Kenneally, William.
- Killilea, Mark.
- Lemass, Noel T.
- Lemass, Seán.
- Lynch, Celia.
- Lynch, Jack.
- MacCarthy, Seán.
- McEllistrim, Thomas.
- MacEntee, Seán.
- Maher, Peadar.
- Medlar, Martin.
- Moher, John W.
- Moloney, Daniel J.
- Mooney, Patrick.
- Moran, Michael.
- Ó Briain, Donnchadh.
- O'Malley, Donogh.
- O'Toole, James.
- Ryan, James.
- Sheridan, Michael.
- Smith, Patrick.
- Traynor, Oscar.
Tellers:—Tá: Deputies O'Sullivan and Crotty; Níl: Deputies Ó Briain and Mrs. Lynch.
Amendment, by leave, withdrawn.
Amendment negatived.
I move amendment No. 32a:—
In page 10, between lines 32 and 33, to insert the following:—
(g) the amount of any other loans made to it and outstanding at 1st March, 1958, in so far as such loans have been used for the purchase of fixed assets.
This amendment is in substitution for amendment No. 33.
Yes. I think the arguments that have already been advanced by myself and other Deputies on this subject are sufficient in support of this amendment without going over the whole case again. However, the case about which I am particularly concerned—and I think the Minister, unless I am mistaken, promised to consider the point—is that of bona fide companies with limited Irish capital who were not in a position to provide all the necessary funds particularly, or specifically, as my amendment suggests, for capital assets, and had to avail of outside loans.
Take the case of a company with a nominal capital of £50,000. The Irish directors wish to maintain control of the company. They can advance only, say, £5,100 to make it 51 per cent. The other interests, maybe outside interests, advance £4,900. The cost of the factory buildings, plant, machinery, equipment comes to another £20,000 or £30,000, and that can only be supplied by loan capital. I do not think they could be put into the category of the £100 companies we were discussing a short while ago, with some of which I have very little sympathy. This is a genuine industry and it is rather hard on a company to insist on its bringing itself within the conditions set out in Section 3 of the First Schedule. If loan capital is put up or provided for the purchase of capital assets, it is an addition to the country and should receive sympathetic treatment. If the money was purely to be provided, say, for working capital or for purposes other than fixed unmovable assets, I would not be so sympathetic, but where such capital has provided a valuable addition to the country's fixed assets the case should be considered sympathetically.
I do not want to go over all the arguments already advanced because it would be largely repetition but I do feel that this would be a genuine case where a company failed to get sufficient Irish capital and genuinely availed of loans from outside sources. It would be very hard to ask them, whether it is one year or 20 years later, to bring themselves within the scope of what is set out in the Bill. It might cause serious embarrassment not so much to the outside interests as to the Irish interests. It might mean that special arrangements would have to be made to dispose of their interest.
I know that provision is made whereby such people can go to the Minister but they may not wish to go to the Minister. Taking the liberal intent of this Bill, I believe it is better—and I am sure the Minister will agree—to exclude, as far as possible, the necessity of going to the Minister. The Minister himself said that. He wants to make it as easy as possible for people to establish industries. One way of doing that in the case of industries already established, genuine, bona fide industries, giving employment, having built factories and holding capital assets by way of plant and equipment, would be by giving them all the protection they need and there should be no question of conditions being altered now in relation to such industries, irrespective of whether they have been established for a year, two years or 25 years. I would ask the Minister to accept the amendment on those grounds and on the grounds advanced in the discussion on the section.
I take it the Deputy has in mind some company which would have got a Control of Manufactures Act licence under the 1934 Act if they had applied for it, but where the Irish interests decided not to apply in order to force a situation in which they would have control of the ordinary shares of the company. If the Deputy has in mind a company which would not have got a licence and which was formed under circumstances which would have precluded the possibility of its getting a licence, then I have not much sympathy with it. But, if it is the other type of case, then I would like to try to meet it. I do not think the Deputy's amendment meets it. The Deputy's amendment is unworkable. I cannot see any circumstances in which it would be possible to prove that a loan obtained from external associates for that company had been used for the purchase of fixed assets as distinct from any other purpose.
This is the same problem as that which we have discussed already and if we find a way of solving the former then we shall have found a way of solving this particular problem also, namely, allowing a bona fide company in existence as a manufacturing undertaking at this moment, even though it would not be a qualified company assuming paragraph (3) of this Schedule were in effect, to continue to manufacture, doing the same class of business as it is doing now, as if the section had not been passed. That is a provision I shall try to devise with the safeguards necessary to prevent a reemergence of a whole lot of companies of the £100 kind which were started and are now defunct, but which could be revived as a means of getting out of the provisions of this Bill, when it becomes law, by those who wish to do so. It may be possible to devise a method and, if I do devise a method, it will cover the particular case the Deputy has in mind.
The Minister referred to people who did not apply for a licence under the Control of Manufactures Act. What about the case of a company set up to manufacture a commodity that was already being manufactured but not manufactured efficiently or in accordance with the required standards?
I can only assume that in that case a Control of Manufactures Act licence would not be given. That might not be the case, of course. However, if the Deputy will leave his amendment stand over until the next stage, I shall see whether what I produce will meet his case.
A case has occurred to me since we discussed the situation earlier in which a man is not a qualified person but his wife is. He set up a factory here. He was advised that if he chose to give beneficially the moneys for the shareholding to his wife he would qualify completely on the basis of full shareholding. There were certain obvious objections to that—it might create difficulties—and the shareholding was organised not on the £100 scale but on a fairly nominal scale. That man has put a great deal of money into the building of a factory and establishing a certain line of business. He has never taken a penny out of it in any shape or form—dividends, directors' fees or anything else. Recently he decided that in order to expand he would go into another line of country for export purposes. That was about six or 12 months ago and the company is being developed along those lines. He has got a fair distance. The actual process of manufacturing to the prototype has not yet come in.
A certificate of exemption would cover that case.
It would, and it would not, because they have done the trial work for this new departure. They have set up certain separate parts of their factory premises, and so forth and they have got their prototypes but they have not yet come to manufacturing. I think the Minister should consider that type of case, too, where a bona fide attempt had already been made to go into a new line.
He does not actually have to start export in order to get a certificate of exemption.
No, but I think he has had to start the manufacturing. What he has done in this case is that he has got his prototypes made, but he has not started manufacturing.
So long as the Minister is satisfied that he intends to do that, there is no reason why he should not be covered.
But what happens? He will be in a 50-50 position. He will be partly doing what he was doing before and partly doing an export business and the type of use that he had his home business for was as a method of experimenting so that he could utilise the results of those experiments in relation to business abroad. Without having some method of ensuring that he can get his machinery in working order, he does not know whether or not his new line will work. The Minister should bear that type of case in mind.
Amendment No. 33 not moved.
I move amendment No.34:—
In page 10, to delete lines 55 to 57, inclusive.
I want to repeat my objection here. When we are establishing new legislation, we should establish it as a complete break. I do not want to give the Minister this power to suspend. We ought to get away from all this. I mentioned this on Second Reading. This is something the Kings of England had at one time, the power of dispensing and the power of suspending. A king could operate the laws against his friends or he could dispense with the operation of the laws in relation to a few selected people. It is wrong that that principle should persist in modern times. It is a pity to have these conditions in modern legislation.
I do not regard it as a safeguard for the Minister to have power to suspend for (a) but not for (b). The Minister is in a certain mood, but it is not the mood of the public. The Minister should revise this. "Nobody shall manufacture unless he operates under a licence from the Minister"—that might be a simple way of doing it. That would mean the Minister could control. You go a bit better when you lay down certain legal conditions and say these may be exempted. You may have a new section and then you say the Minister may suspend the operation of it in regard to certain companies. I am satisfied so long as there is a chance of selection—there is no publicity in regard to this—and I would like to avoid favouritism.
The sole object of this was to give discretion to meet the exceptional case where adjustment of the constitution of the company might take longer than the year provided.
The Minister may suspend it for any company and refuse it to any other. There are no conditions laid down.
It is better to have some safeguards rather than an absolute provision involving the complete exclusion of companies that have not conformed within the year.
The general system of law is that you lay down the law and allow possible applications through courts to grant in public certificates the required dispensations.
That clearly would not be application in this case. If we amend that section to grant licences otherwise, Section 4 would not be required.
I would rather have Section 3 with its retrospective effect applicable to everybody rather than have it applicable to such people as the Minister does not suspend.
Amendment, by leave, withdrawn.
Amendments Nos. 35 and 36 not moved.
Question proposed: "That the First Schedule, as amended, be the First Schedule to the Bill."
How did the Minister arrive at the figure in paragraph I of 50 per cent. of the assets?
That is the existing law. We are just carrying over the provisions of the 1934 Act.
The reduction in that 50 per cent. will partly meet my point.
Question put and agreed to.
SECOND SCHEDULE.
I move amendment No. 37:—
In page 13, line 1, before "individuals" to insert "the individual or all, some or one of the".
This is a verbal point. It is taken from the other Acts. It is a business "owned by a company, the issued shares of which are beneficially owned to an extent exceeding one-half (in nominal value) by the individuals by whom such business was beneficially owned on the 1st day of June 1932." Suppose a business was owned by A, B and C on the 1st June, 1932 and A died. Then the company cannot comply with this section. The shares will not be owned by the individuals by whom they were owned on the 1st June.
I shall accept the amendment.
It is from the Minister's own Act.
Amendment agreed to.
Amendment No. 38 not moved.
Second Schedule, as amended, agreed to.
THIRD SCHEDULE.
I move amendment No. 39:—
In page 13, column 3, opposite the references to "Control of Manufactures Act, 1932" and "Control of Manufactures Act, 1934" to delete all references therein and substitute in each case "the whole Act".
I do not know whether this is regarded as consequential or not. The point in it has been mentioned several times in the debate. I want to abolish the Control of Manufactures Acts 1932 and 1934 so that when we came to the repeal section, the extent of the repeal would not be certain paragraphs in the sections but the whole Act.
Amendment, by leave, withdrawn.
Third Schedule agreed to.
Title agreed to.
Bill reported with amendments.
Report Stage ordered for Tuesday, 6th May, 1958.