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Dáil Éireann debate -
Tuesday, 11 May 1971

Vol. 253 No. 10

Industrial Credit (Amendment) Bill, 1970: Committee and Final Stages.

Sections 1 and 2 agreed to.
SECTION 3.
Question proposed "That section 3 stand part of the Bill."

I am concerned in relation to the new paragraph (c) subsection (2). I gather the intent of the section is to set out again the objectives of the company and to incorporate in the powers of the company the right to finance or invest in a company or a person who is assisting a company operating inside the State and so to enlarge the lending powers of the Industrial Credit Corporation. I am somewhat concerned in relation to the words in the new paragraph (c), subsection (2):

Provided that every such acquisition, underwriting, holding, selling or other dealing is likely to be of benefit to a trade or industry in the State.

This also appears in relation to a person in subsection (4). May I ask the Minister, who determines whether it is likely to be of benefit to a trade or industry? It would seem to me that in the interests of efficiency this determination should be made by the company. I would suggest that subsections (2) and (4) would read better were they to provide for a certificate or expression from the company that the purpose was likely to be of benefit to a trade or industry inside the State. I can see questions arising as the section now is because nobody is designated to give that determination.

I think Deputy O'Higgins is correct in saying that the determination of whether or not a particular transaction is of benefit to a trade or industry inside the State would be for the company, and certainly for the board of the company. I do not think this could operate in any other way. As I would look at it, it would be in this way: that set out here in this section is, roughly speaking, what I might call the terms of reference of the company, certainly the terms within which the company may operate, the terms within which other parties may deal with the company. I would regard this phrase as being a limiting factor which would apply to any transaction which the Industrial Credit Company would propose to undertake.

I have already explained to the House the reasons why we wish to extend these powers. I gather that no one is objecting to that principle. I have also explained that the Industrial Credit Company is in competition with other companies who are not in any way restricted. For the reasons I have mentioned I am anxious to ensure that we do not restrict the Industrial Credit Company in this matter in any way that is avoidable. On the other hand, it seems clear to me that there could and, indeed, should be objections in this House if we were to leave complete freedom to the Industrial Credit Company with no limitation at all so that we could end up, in theory at any rate, with the Industrial Credit Company devoting the resources placed at its disposal for the benefit of a trade or industry in some other country rather than here. For this reason this overriding phrase is put in which would operate by force of law in relation to any transaction undertaken by the Industrial Credit Company and, therefore, in practical terms would be something to which the board of the Industrial Credit Company would have to have regard in any proposed transaction.

That is the intention behind the insertion of this phrase. I am not quite sure if I understand precisely what Deputy O'Higgins's problem is. I think he said he visualised that, perhaps, it would be necessary to have a certificate where a foreign transaction was taking place that this transaction was for the benefit of a trade or industry in the State. Offhand, I cannot see the reason for this because it seems to me that by inserting it here we are making it mandatory on the Industrial Credit Company to conform with that requirement. If there were a question of some confusion arising in a business deal in the absence of such a certificate, then I could understand the point made, but at the moment I do not see why such a certificate should be necessary since, as I say, this would be a mandatory statutory provision applying to any such transaction undertaken by the Industrial Credit Company.

The phrase used is not a usual phrase: "is likely to be of benefit to a trade or industry inside the State". This, in fact, is investment of our resources in a company outside the State so that we are lending money to some outside-based concern in which a company inside the State has a limited interest of one-fifth or more and it must be likely to be of benefit. That means somebody thinks this ought to be a good bet. Of course, I am assuming the worst case where, in fact, it is a very bad bet and the money is lost and continues to be lost, and the Industrial Credit Company continues to invest in a number of operations of the same kind. Where is the determining body? Who says: "This must stop"? There is no definition. For instance, no one is made responsible to this House to say who decides that this kind of operation is likely to be of benefit to the State. If it happened and I put down a question to the Minister for Finance asking who was doing this sort of thing the Minister would say: "That is within the internal operations of the Industrial Credit Company and it is a matter they have to decide".

He would do worse than that. He would say it is contained in the Bill.

That is precisely the problem I want to raise. I do not want to go back over the past but even inside the State there have been notoriously bad investments. Investments were made, money was loaned and the company blew up a short time afterwards. It was considered a fair enough investment at the time, I assume, on the information available but, in fact, it represented a loss. I agree with the principle in the Bill that by reason of the developing situation in our economy we are now facilitating a position in which we can enlist outside aid, but we should be careful in relation to who will decide these things. I do not like adjectival phrases like this in regard to the power to invest which say that it is likely to be of benefit to the trade or industry inside the State without anyone being given the responsibility of so deciding or on what basis. I would suggest that the Minister might have a look at that again.

I think I understand a little more clearly now than I did what Deputy O'Higgins has in mind. It seems to me, first of all, that the risk which he contemplates, taking the worst possible view of what might happen, of investment of this kind in a company abroad which goes wrong, and a continuing investment of that kind, is a risk which, of course, exists but—and he touched on this towards the end of what he said—it is a risk without any investment abroad at all. It could happen entirely within the State as well as outside the State. Therefore, I do not think that any form of certificate or different form of words will change that risk because it is a risk which is inherent in the whole operations of the Industrial Credit Company in so far as it is investing in companies which may not be absolutely sure things.

All of us want to ensure that the Industrial Credit Company does not confine its activities simply to companies which are so strong and so well managed that they could get assistance anywhere. We want to ensure that, while the Industrial Credit Company is not investing wildly, it is prepared to take certain risks especially with Irish companies. Ultimately it boils down to the efficiency and effectiveness of the Industrial Credit Company in its day-to-day operations and in the perspicacity of the Board of the Industrial Credit Company.

The use of the word "likely" in the phrase "likely to be of benefit to a trade or industry in the State" is probably the only one possible in the circumstances. Any stronger word would mean that the Industrial Credit Company would have to say in effect before they invested in an outside company: "This investment cannot go wrong". Clearly, they could not say that. I think this wording is as good as we can get, granted the situation being as I have described.

Ultimately this rests on the effectiveness of the Industrial Credit Company in their operations. It seems to me that on the record of the ICC, the House can be assured they will not engage in a series of investments that will be unsuccessful and, in particular, are not likely to do so in regard to foreign companies. I would expect that the Industrial Credit Company would be quite wary about investments of this kind and would only engage in them when they were satisfied that it was a worthwhile investment.

Basically the problem is that if one engages in this kind of business certain risks are taken and ultimately one must depend on the judgment and good sense of the people concerned. I do not think any formula which we could devise in this House can get over or obviate that risk.

I agree with the Minister that in the various operations in our society there must be a certain amount of trust and that responsibility must be placed in different fields. However, experience shows that responsibility is more forthcoming if there is ultimate sanction and in our democracy sanction ultimately is in this House.

It is all very well for the Minister to say that the board, the general manager, or the people responsible for the Industrial Credit Company will not lend money to the first foreigner they meet simply because they like the colour of his eyes. They will be careful and responsible under the terms of the parent legislation and this legislation. However, they are human, they are fallible and may make mistakes. We all know that mistakes were made in the past and that nobody was responsible to this House for those mistakes. Nobody could be challenged at the bar of this House for what took place. Investments were made in companies here which, in retrospect and by hindsight—and I emphasise by hindsight—turned out to be foolish in vestments. Up to this the company was under no obligation except to assist an enterprise operating or proposing to carry out work in the State. Up to the present the board had not the statutory obligation of evaluating whether the proposed activity was going to be a commercial success. I have no doubt that it operated in that sense, but that was the position as regards investments in relation to the law.

We are now extending the powers in relation to companies outside the State who are interested in our domestic market. Since these companies are associated with a person or a company here they have a tie-up in relation to our domestic market. In this Bill the Minister very properly imposes an extra obligation on the board. The company have the added obligation of coming to a decision that the proposed investment is likely to be of benefit inside the State.

Who is going to be responsible to the representatives of the people here if the company makes a mistake, repeats a mistake or follows a policy which, in the opinion of the representatives of the people, is a wrong policy? I think someone ultimately should be responsible. I think the Minister should consent to this kind of activity so that at least the Minister can be answerable here if something goes wrong. Otherwise, once more we are handing over power to an entirely faceless group of people to invest our money in an activity they alone decide is proper.

In the past we have had much of this kind of legislation and in my view it is not desirable. It may be that a particular procedure may eventually be evolved for supervision. "Likely to be of benefit" is what is suggested to be the test. Someone should be answerable if the investment turns out not to be of benefit. The person who should stand up in the Dáil and give the reasons is the Minister for Finance or some member of the Government.

The case Deputy O'Higgins is making now is somewhat different from what he made originally or at least I understand it differently.

I agree with the Minister. That is the benefit of discussion.

If the phrase "likely to be of benefit to a trade or industry in the State" is left as it stands, there will be a limitation on the operations of the company. Therefore, it follows that in the case of any transaction entered into by the Industrial Credit Company of the nature contemplated in this section, the board of the ICC will be responsible for determining whether the transaction is likely to be of benefit to a trade or industry in the State. I do not think anyone would contest this on the interpretation of the section as it stands.

What Deputy O'Higgins has raised now relates to this and to the various operations of the Industrial Credit Company. The point that the ICC as such are not responsible to this House and that the Minister is not responsible for the day-to-day operations of the company is a major point and the Deputy touched on possible solutions. I do not think it is quite true to say that the Minister is not responsible at all. It would be true to say that he is not responsible for the day-to-day operations but if the kind of situation developed in which the company were making a series of bad investments either at home or abroad, this would seem to me ipso facto to be evidence of bad judgment and inability on the part of the board of the Industrial Credit Company. A consistent performance of that nature by the board would also seem to me to indicate that the Minister who was responsible for their appointment, or failure to move them if they persisted in doing this, would thereby become responsible to Dáil Éireann in the conduct or failure to conduct his own duties as Minister for Finance.

I think the Chair would hold otherwise.

The Deputy will appreciate that I am taking this further than day to day operations. I am referring to clearly persistent failure on the part of the board. I may say, and I am sure Deputy O'Higgins would agree with me, that I contemplate no such thing in relation to the board of the Industrial Credit Corporation, as at present constituted. I agree it is a point which would have to be considered in the House—the possibility that such a thing could happen and what action is open to this House. As I say, I do not think this House is without resources in dealing with a situation of that kind. Apart from what may arise under the legislation, there are various methods under the Standing Orders by which the House may deal with a situation of that kind by resolution or otherwise. The point now being raised is of very general application and one which does not arise specifically on this section but in relation to the activities of most State companies. I do not profess to say that the ultimate solution to this problem has been discovered, either in this country or abroad, but I say that I do not think it is a problem which can be remedied by any amendment of this particular section.

There is a point which has not been made by the Minister and I think without saying it Deputy O'Higgins was adverting to it, that is, when a mistake is made by the board of a semi-State company, if the mistake is big enough the fact is that it becomes quite wrongly in my view, a political thing. You find there are criticisms across the House because errors were made. There is one classical example we need not go into in this regard.

We have avoided all examples.

We have and this is right in this case. There is the point that when mistakes are made this House may have plenty of power, may have the machinery simply through the division lobby of changing legislation and may be able to examine things but there may be no desire on the part of a Government to do this. My great worry about this is that very soon this will be our position as things go at the moment.

Do not let it keep you awake at night.

A Government might be extremely reluctant to use these very powers which the Minister has mentioned and, in fact, it might, indeed, be quite wrong that criticism would redound on a Government because of a decision made by a State board. The Government being political animals—I do not mean that in a derogatory way —might decide: "We will not do this because if we do it, it does not matter what the facts are, the worker in Ballyfermot or Drogheda or Mornington who lost his job will relate this mistake not to those who made the mistake, not to the recommendation of the executive to that board but to the Government." It might well be that Deputy O'Higgins is very much on target in relation to this—that while the House might have rights and powers there might be a reluctance on the part of this House, whatever Government was in power, to use them.

I can see the problem that in legislation of this sort, which is terribly important in relation to the State, it would be desirable to see it developing without the shackles of Civil Service control, without any red tape of any sort. Possibly, if one were always sure that the judgment of fallible people was always the right judgment this is the way things might more easily develop. The trouble is that somebody sooner or later will goof. There will be some wrong decision and if this House is to function in the way in which conviction can be carried to the people there must be a situation in which some Member of the Government, whether he personally is involved or not—generally he is not—must be available to answer Deputies in this House for what occurred and to take full responsibility for it on behalf of the Government.

The more legislation we pass here in which we give a carte blanche to an ad hoc body, and we give them the power to borrow or we give them the money belonging to the people and tell them: “Go out, we trust you, carry out your statutory obligations and provided you operate within the powers we give you no one inside this House can question you”, the more we deviate from democracy in this House. There was a great need around 1933—indeed, I should imagine it was the late Mr. Seán Lemass who first introduced the first Industrial Credit Act in 1933—for the provision of credit for industrial development and it was appropriate that you did not hamstring the efforts to providing credit, that you gave people the job and you hoped, even though there might be bad investments or investments that were a little bit doubtful, by giving this credit that we would be able to develop our industrial arm.

This is recognised in the Bill, section 3 of which restates the objects of the company. So far as the company are operating within the State full discretion is given to the board of the Industrial Credit Company in relation to what they do. Now we are enlisting outside aid. The Minister has even recognised this by providing that the aid must be such as likely to benefit a trade or industry inside the State. This is something new. Somebody has got to make that decision. The person who makes that decision should in some way be responsible inside this House. I will not press this matter or delay the Bill but I raise it because I think we should bear this in mind in relation to this kind of legislation. I hope it may be looked at between this and the time the Minister brings it to the Seanad and that he may consider the desirability, even in relation to that kind of loan when we are more and more involved in foreign borrowing and to this extent in foreign investment, that somebody should be responsible in a supervisory way so that he may be answerable on behalf of the activities of the board in this House.

I do not want to delay the House further on this but Deputy O'Higgins made a suggestion that I would look at this between now and taking the Bill in the Seanad. I will certainly undertake to do that but I do not want to mislead him or the House on this. I do not see any way by which I can do it. I gather that what he has in mind is some provision whereby in the event of investment of this kind in a company abroad, the Minister would certify that such investment was likely to benefit trade or industry in the State so that if something went wrong the matter, on foot of that certificate from the Minister, could be raised in the House.

Surely it is more simple than that. It will be the company who will be doing it anyway. Deputy O'Higgins is correct in that, while nobody wishes to interfere with the day-to-day workings, there should be a right to raise the matter here in the event of something not appearing to be right. Surely three words would have covered this?

That is a separate issue. If we are to do this by means of some device whereby the Minister certifies, that will bring the Minister directly into each one of these transactions.

That is not what we are seeking. We want the right to raise the matter in the House.

My contention is that there is machinery whereby this can be done.

How—by a Private Members' Bill?

By motion, next year.

Yes, on a motion on the annual report. Assuming that it would not be given time by the Government, it could be dealt with by way of Private Members' Motion.

If say, there is an investment of £100,000 in a company in England in any one week and if that company should go into liquidation at the end of the week, there is no way by which the matter could be raised here.

We can only hope that any companies concerned will not crash as quickly as that.

If questions are put down to the Minister, the Chair will rule that the Minister has no function in the matter. We could table a Private Members' Resolution and depending on priorities on this side of the House—these change from time to time—it could be months before the matter would arise.

It could be many months before it would come up.

In England such a matter could be raised in the House of Commons on the Monday following the event.

In regard to any State company?

In regard to any investment of State funds. There is appropriate machinery for this. This was used in the case of Rolls Royce, for instance.

I am not adverse at all to this whole concept of the function of the House in relation to such matters and I shall certainly have another look at the section with a view to trying to achieve something of that nature.

Question put and agreed to.
Sections 4 to 6, inclusive, agreed to.
SECTION 7.

I move amendment No. 1:

To delete paragraph (a) and substitute the following paragraph:

"(a) in subsection (1)—

(i) ‘and in such money (including money in a currency other than the currency of the State)' shall be inserted after ‘in such form and manner', and

(ii) ‘and any such guarantee may include guarantee of payment by the Company of incidental expenses arising in connection with the borrowing' shall be added after ‘payment of such interest',"

As I explained on Second Stage, this is an amendment that is required to meet the requirements of the World Bank conditions. The amendment empowers the Minister for Finance to guarantee incidental expenses with which the Industrial Credit Company may be charged in relation to their borrowing, that is, to guarantee incidental expenses in addition to guaranteeing the actual amount of the loan. The types of expenses that are envisaged are possible commitment fees. In dealing with the World Bank there is laid down a schedule of the times at which portions of the loan will be paid and failure to take them up at that time involves the payment of a commitment fee or, even to take them up on the schedule agreed, might involve a commitment fee. This is a payment made to the World Bank in return for holding available that money to pay to us at a certain time. An alternative kind of liability that could arise would be in the case of our repaying the loan ahead of schedule—certain dates will be laid down for repayment—and we would then have to pay a fee to the World Bank in compensation. This is normal practice in relation to loans. However, the only circumstances that I can envisage in this respect would be in the case of a landslide in interest rates where it might be worth our while to repay ahead of schedule. It is to meet such requirements that I move this amendment.

I gather that what the Minister is providing for in addition to the obligations to repay the interest involved is repayment for fees in relation to the borrowing?

So that the obligation is to pay such interest and pay whatever incidental expenses there may be which would be in respect of whoever carried out the dealings and so on?

The factors I have mentioned are contemplated in connection with the World Bank loan but, of course, the amendment is not confined to the World Bank loan and could cover other foreign borrowing by the Industrial Credit Company.

I take it this is foreseen to be a liability that must arise?

It certainly is in relation to the World Bank.

Why was it necessary to have amendment (a) (i)?

We could have made it a, b, c, d but it was decided to subdivide (a). In other words, the original (a) is being subdivided.

I think this is a waste of three perfectly good lines.

Deputy Tully will have to join the draftsman's office.

Amendment agreed to.
Section 7, as amended, agreed to.
SECTION 8.

I move amendment No. 2:

To delete paragraph (c) of subsection (2).

As I indicated, this amendment was put down because I have had second thoughts about the provisions which we put in relating to possible membership of the Dáil or Seanad by a director officer or servant of the Industrial Credit Company. The section is similar to the provisions we have in a number of other enactments relating to State companies but there is a loophole in it in so far as somebody could be elected, say, to the Dáil, and not have sufficient service as a Member to qualify for the contributory pension to which a Deputy becomes entitled after eight years. Therefore, he would lose out on the pension here but could not get service in the ICC either. The best way I can deal with this is to delete paragraph (c) of subsection (2). As I indicated earlier, a general Bill is in preparation to standardise the provisions in this regard in relation to all State companies. I have indicated, also, the general lines on which we are proceeding. This is probably the best way to deal with this particular matter at this time in this Bill.

Can the Minister say if there is anybody in the Dáil at the moment who might be thinking of going over to the ICC?

I am not aware of any such case.

We did have a similar section in the ESB Act of 1927. This provided, speaking from recollection, that any employee or officer of the Electricity Supply Board could neither be nominated for nor be elected to either House of the Oireachtas. It transpired some years afterwards that after a particular general election there was inside the House a Deputy who had been at the time of his nomination and election an officer or employee of the ESB. As a result of discussions across the House an amendment was introduced which changed the law with relation to the ESB. I take it the change is in accordance with this kind of change? As I understand what the Constitution implies, no legislation here can prevent any citizen who is qualified otherwise from standing for election to Dáil Éireann. Our legislation may provide that a Member of Dáil Éireann as such, may not hold a particular post and I take it that is the bent of legislation now. No member of the ICC can be prevented from standing for or being elected to Dáil Éireann but, being a Member of the House, he may be disqualified for that post which he held before or might like to hold. Is not that the purpose?

If that is so I am a little bothered by subsection (3) which says that a person who is for the time being entitled under the Standing Orders of either House of the Oireachtas to sit therein shall, while so entitled, be disqualified from becoming a director of the company. Our Standing Orders provide that people who are entitled to come in beyond the Bar of this House must first have signed the Roll. At one time they had to take an oath.

Sorry I thought it was the one above that.

No, subsection (3): "A person who is for the time being entitled under the Standing Orders of either House..."

I think Deputy O'Higgins is on the section.

Sorry. I am not on the amendment. Am I out of order?

Could we not dispose of the amendment?

Amendment agreed to.
Question proposed: "That section 8, as amended, stand part of the Bill."

Perhaps I am reading this incorrectly but subsection (3) of the section brings in the disqualification in relation to a lawfully elected Member of the House, a person who is for the time being entitled under the Standing Orders to sit in either House shall, while so entitled, be disqualified from becoming a director of the company, or an officer or servant. There is a distinction inferentially drawn there between a person who is elected as a result of a declaration of poll in a general election or a by-election and the person who comes into the House, signs the Roll and takes his seat. Does it mean that those who do not wish to come in, who refuse to recognise the authority of the House, will be put in a preferential position? I do not understand why we propose to provide that "A person who is for the time being entitled under the Standing Orders of either House. ..." A Deputy may be ejected from this House for a day, a week or a month. This has happened. Can he then become a director of a company or an officer or servant? Why is it proposed to use these terms? It would be much better to say "A person elected as a Member of either House of the Oireachtas shall be disqualified from being a director or an officer or servant of the Company".

I am a little confused because section 8 (1) says:

Where a director of the Company is nominated either as a candidate for election to either House of the Oireachtas or as a member of Seanad Éireann, he shall thereupon cease to be a director of the Company.

How could he then be a Member of the House and be asked to resign if, in fact, he can become a Member of the House while holding such a post? Either one or the other is superfluous. Does the Minister see what I mean? Section 8 (3) says:

A person who is for the time being entitled under the Standing Orders of either House of the Oireachtas to sit therein shall, while so entitled, be disqualified from becoming a director of the Company or an officer or servant of the Company.

If he is disqualified as soon as he is nominated, from being a director of the Company how then does subsection (3) apply?

First of all, you have the case in which a man who is a director of the company is nominated either for election or nominated by the Taoiseach as a Senator—

He goes out under subsection (1)?

Yes, but you have another case in which a person who is a Member of either House of the Oireachtas could be nominated as a director of the Industrial Credit Company if we did not have subsection (3). Subsection (1) would not preclude the nomination of a Member of either House of the Oireachtas who is already in.

All right.

Take subsection (3) "... under the Standing Orders of either House of the Oireachtas..."?

I confess I cannot say why this particular form of wording is used as against, "a person who has been elected..."; it is a form of wording that has been used in quite a number of Acts and it has been incorporated holusbolus into this. I can only surmise that the reason is probably that the objective is to ensure that a person who is acting as a Member of this House or as a Member of Seanad Éireann will not, at the same time, be either a director or officer or servant of the company. I think Deputy O'Higgins has probably touched on the reason for this particular wording: you could have a situation in which somebody would be elected but would not take his seat If you did not have the section worded in this way that person, by becoming elected and not taking his seat, would be deprived of any way of earning his living. I am surmising that is why the subsection is worded in that way.

The Minister is shooting a bird most efficiently with each barrel.

I wonder if "under Standing Orders" is necessary. Nobody is normally nominated as a candidate for the Houses of the Oireachtas wearing blinkers; presumably if he stands for election he wants to be elected.

But if a man were to stand for election on a policy which he put before the electorate of not coming into the House and if he were elected on that, if we alter the wording of this we would in effect be saying: "You cannot do this unless you are prepared to give up your job and your right to come into the House."

And rightly so. Why should we countenance people disowning the House or not recognising it?

The right of abstention is a democratic right as well as the right to vote for or against.

I doubt if it is a democratic right. Perhaps the Minister will have a look at the section?

Yes, I shall do that, but I hope to have the Bill before the Seanad tomorrow.

The Minister circulated amendments here. He can do that in the Seanad as well.

Certain developments which have taken place may prevent this, but I hope to have it before the Seanad tomorrow. I shall certainly have a look at the point raised by the Deputy but as I indicated at the time I think it is probably broader than I can remedy in this Bill.

Question put and agreed to.
Section 9 agreed to.
Bill received for final consideration, reported with amendments and passed.
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