I am pleased to introduce the Harbours (Amendment) Bill 2008 for the consideration of the House. The primary purpose of the Bill is to give effect to certain aspects of the Government's ports policy which was launched in January 2005. In line with the objectives of the ports policy, this Bill will underpin and enhance further the commercial freedom conferred on the State's port companies under the Harbours Act 1996 to better reflect the changing environment in which they operate.
As an island nation, Ireland is dependent upon seaborne trade and the economic significance and importance of our ports to the State's prosperity is self-evident. Given our open economy, Ireland's international competitiveness is central to overall economic performance.
Our ports are vital gateways for commercial freight and sea passengers. This is highlighted by the fact that nine of the ten commercial State port companies are located in areas identified as gateways in the national spatial strategy. It is estimated that in 2007 merchandise goods to the value of €135 billion were transported along the Irish maritime supply chain. That figure is equivalent to 75% of our gross domestic product at current market prices. One of the core objectives of my Department's Statement of Strategy 2008-2010 in relation to ports is to ensure "investment in ports meets capacity requirements and to facilitate the availability of commercial port services which are effective, competitive and cost efficient". I am confident this Bill will enhance the ability of my Department and the maritime sector to meet this objective.
The year 2003 saw publication of the high level review of the State commercial ports operating under the Harbours Acts 1996 to 2000. This review was the first to be undertaken since the enactment of the Harbours Act 1996. That Act changed the status of the State's ports from harbour authorities functioning under the Harbours Act 1946 to commercial port companies under the terms of the Harbours Act 1996 and gave them the commercial freedom to operate as modern customer-orientated service industries. The remit of the 2003 review was to examine critically the current model for the governance of the State commercial ports.
On foot of publication of the review, a comprehensive consultation process was initiated which involved interested parties making both written and oral submissions on future ports policy. The responses received fed into and informed the content and recommendations of the Government's ports policy statement in 2005. The principal aims of the ports policy statement were to better equip the port sector and its stakeholders to meet national and regional capacity and service needs through clearer and more focused commercial mandates for the ports and their boards, enhancing board performance through reform of the structure of port boards, encouragement of private sector investment and involvement, sanction for the use of non-core assets to fund new port development but not to mask inefficiencies, and encouragement of healthy competitive conditions within and also between ports.
Since the launch of the ports policy statement, the Department's strategy has been to focus on implementing the recommended actions contained therein. This Bill is another important step towards ensuring our commercial ports are equipped to meet the challenges ahead in the competitive economic climate within which they operate.
A number of the objectives contained within the ports policy statement require legislative change and the Harbours (Amendment) Bill 2008 is designed to incorporate these important recommendations into primary legislation. The Bill also addresses certain anomalies in respect of that Act, which have come to light since its enactment.
The provisions of the Bill are considered necessary in light of a period of considerable change undergone by Irish ports over the past decade. The Bill will help to ensure they are equipped to grow as an integral driver of our economic success in the future. In particular, it is considered critical that commercial ports are given the capacity to provide cost-effective and efficient services to meet the needs of their customers, the State and the national economy. These high level targets could be described as being the ultimate objectives of this Bill.
While the explanatory and financial memorandum which was circulated to Members of the House along with the Bill contains a brief explanation of all of the sections of the Bill, I will highlight some of the significant changes and discuss them in greater detail.
One of the key challenges facing our commercial State ports is the provision of adequate and efficient capacity to ensure our economy can continue to grow and prosper. Notwithstanding the changed economic environment the ports and, indeed, the country are in currently, the ability to respond to capacity needs remains a critical concern for our ports and our economy in general. In response to a national ports capacity study commissioned by the Department in 2005, a number of ports submitted significant development proposals to address potential capacity requirements identified by the study.
One such proposal was that submitted by Drogheda Port Company on the development of a new port at Bremore. To facilitate this development it was proposed to alter the harbour limits of Drogheda Port Company. However, advice received from the Attorney General indicated that section 9 of the Harbours Act 1996 does not contain sufficient principles and policies to allow such an alteration under section 9(2)(a) and that the change proposed was not sufficiently technical to allow the limits of the harbour, listed in the Third Schedule of the 1996 Act, to be changed by secondary legislation. I have no doubt Senators will be aware that this advice is in line with the rulings given in the City View Press and Mulcreevy judgments.
Therefore, section 3 of this Bill will amend section 9 of the Principal Act and will allow a Minister to make an order that may either extend or move a company's harbour limits as defined in Part I of the Third Schedule to the 1996 Act. Any extension to a company's harbour limits is not restricted to an area contiguous to a company's existing harbour limits; it may be an extension to include any area irrespective of location. However, in accordance with the legal advice received, there are a number of specific principles and policies a Minister must consider when making any order under this section. These include planning applications or planning permissions under the Planning and Development Acts 2000 to 2006, various regulatory processes under the Foreshore Act 1933, navigational safety and also the present and expected capacity of the harbour. This amendment will facilitate a port company's growth either by expanding its existing harbour limits or designating additional areas as within the port company's harbour limits.
The amendments contained within section 9 will allow port companies or a subsidiary, or either of them, to borrow up to €200 million or 50% of the value of their fixed assets, dependent upon whichever is the higher. The borrowings will remain subject to the consent both of the Minister for Transport and the Minister for Finance. Additionally, the Bill specifies the principles and policies to which a Minister should have regard, should an order varying the 50% limit be made.
Another key focus of the ports policy statement was to enhance the commercial mandate of the port companies and to facilitate improved port company board performance through the reform of their board structure. The Bill sets out to achieve this aim through a number of important amendments.
Sections 4 and 5 seek to expand the commercial freedom of the port companies by providing a clear legislative basis to underpin investment by port companies outside their current harbour limits, as defined in the 1996 Act. The sections also allow for port company investment outside the State where a port company views such investment to be desirable and appropriate from a business perspective, subject to the approval of the Minister of Transport and the Minister for Finance.
Previously, port companies were restricted under section 11(4)(d) from investing outside the State unless such investment would “promote the interests of trade or tourism in the State”. Section 4 deletes this restrictive section. Section 5 provides that port companies may invest outside their harbour limits, which includes investment opportunities outside the State, provided that ministerial consent from both the Minister for Transport and the Minister for Finance has been granted.
This provision regarding investment outside a company's harbour limits is considered appropriate to underpin and enhance the commercial freedom conferred on port companies under the 1996 Act and is one that is available to other commercial State bodies such as the Dublin Airport Authority and the ESB.
This Bill also contains a number of amendments designed to enhance board performance through reform of the structure of port boards. Currently, boards consist of 12 members and their membership is comprised of three directors appointed on the nomination of the local authority; one or two employee directors, depending on the size of the company, either elected by the employees or appointed by the Minister to represent their interests; the chief executive officer; and the remaining board members who are appointed at the discretion of the Minister.
Twelve directors is considered excessive for the State port companies. In the case of some of the smaller companies, the number of directors is greater than the number of employees. Therefore, section 8 amends the articles of association of the companies to provide that the number of directors shall not exceed eight. This reduction will be achieved by the abolition of the statutory appointment of local authority directors and a standardisation of employee board membership in order that all port companies will in future have not more than one employee director. Notwithstanding these changes, it is intended that all current directors will serve their full terms of office.
I wish to outline in greater detail the rationale behind these amendments and the context in which they are being made. With regard to local authority membership of port boards, a performance audit of the companies in 2001-02, undertaken by Jonathan Packer, recommended that the statutory provision for local authority directors be abolished. The 2003 high-level review of the State commercial ports concurred with this recommendation and concluded that the practise of appointing port users, local councillors and those without relevant experience should cease.
The developments that have occurred in the sector since the Harbours Act 1996 have resulted in a major organisational and cultural change within the ports. While there have been substantial and valuable inputs from local authority directors through the years, the rationale for such statutory representation on the boards of State bodies, operating under a statutory commercial remit, is no longer compelling. No similar practice exists in other commercial State companies, such as the airports.
Notwithstanding that, it is my intention to continue to appoint a local authority director from among my own statutory nominees. This decision is consistent with the principles set out in the ports policy statement. It will help to alleviate the understandable concerns of those who feel that this removal of the statutory provision represents an unwelcome break from tradition. The appointment of port users to boards of the commercial State port companies can lead to conflicts of interest and, in line with the port policy statement, this practice will cease with regard to all future appointments.
Section 11 provides that no person may be recommended for appointment to a board if that person, within the three years preceding the recommendation, had a charge imposed upon him or her by that company under section 13 of the Act, was an employee of a person who had a charge so imposed, had provided a significant commercial service to that port company, or was an employee of a person who had provided such a service. The section also provides for a recommending person who is unsure if a service provided to a company would constitute a significant service to advise the Minister of the facts and the Minister may decide whether the service provided constitutes a significant commercial service. While this section will prevent directors who have close commercial connections with a particular port being appointed to that board, it will not prevent the appointment of individuals with valuable industry expertise who do not have commercial connections to the port in question.
As I mentioned earlier, the reduction in board sizes will see employee representation set at one employee director, irrespective of port company size. Currently, a system applies whereby those companies with more than 50 employees appoint two employee directors following a ballot as per regulations set out in the Fifth Schedule to the Act. Companies with between 30 and 50 employees appoint one director following a similar ballot. However, the practice of holding elections, as prescribed in section 30 of the 1996 Act, can lead to practical difficulties in its application, as there are companies whose employee numbers are subject to fluctuation during any given year. This can lead to companies exceeding the threshold level for an election, which leads to a ballot being triggered under section 30 of the 1996 Act, only for the numbers to fall later below the threshold level — for example, due to retirement.
Such a scenario can lead to unnecessary expense for port companies and, therefore, section 11 proposes to address this matter by introducing an "averaging" system similar to that enacted in the Companies (Amendment) Act 1986, relating to the calculation of the average number of employees of a company during any given year. Elections for employee directors will be held in companies where the average number of employees will exceed 30. All references in the Act to the threshold of 50 employees will be removed, as all companies will now appoint only one employee director. In the case of companies with less than 30 employees, the Minister will continue to appoint a person who, in his or her opinion, is representative of the interests of the company.
Turning to regional harbours, the ports policy statement made a number of points in respect of the harbour authorities operating under the Harbours Act 1946. It stated that the continued operation of many of the regional harbours under the outdated provisions of the Harbours Act 1946 is unsustainable on the grounds of good governance. The statement reiterated the view that most of these harbours would best achieve their potential through their transfer to local control in cases where there is little or no commercial traffic and, in harbours where significant commercial traffic exists, consideration will be given to bringing them under the control of a nearby port company. The Bill underpins these statements by providing the necessary legislative base to enable these options to be fully realised. A number of amendments in sections 17 and 18 provide this necessary legislative change.
In 1996, consideration was given to establishing a commercial port company in respect of Arklow harbour. Accordingly, it was not included in the list of harbours in section 87(2) of the Harbours Act 1996, which could, subject to a ministerial order, be transferred to a relevant local authority. Due to the fact that Arklow harbour now has no significant commercial traffic, it is considered appropriate that it should appear in this list, which will permit its transfer to local authority control along with other similar harbours across the country. Section 17 will, therefore, delete Arklow harbour from the list of harbours to be established as port companies and include it in the list of harbours in section 87(2), which may be transferred to local authority control subject to a ministerial order.
As I mentioned earlier, the ports policy statement provided that in the case of harbour authorities where significant commercial traffic exists, consideration would be given to bringing such harbours under the control of a port company. As significant commercial traffic exists only at Bantry Bay and Tralee and Fenit pier and harbour, it is not considered necessary to introduce a general provision allowing for such a transfer. Section 18 deals specifically with these two harbours.
Upon enactment of this Bill, the Minister for Transport will have the necessary authority, under section 87A(2), to make an order transferring Bantry Bay harbour to the Port of Cork Company and to transfer Tralee and Fenit pier and harbour to Shannon Foynes Port Company. Such a provision is consistent with the recommendations of the Ports Policy Statement and ensures that each of these harbour authorities has access to the best regional port management expertise, marketing skills and strategic development planning.
The Bill also contains a number of amendments to the Harbours Act 1996 in relation to pilotage and pilotage services. These changes address a number of issues identified since the original Act was passed and also changes that are required on foot of other amendments I have already discussed, such as the provision to alter harbour limits.
Sections 12 and 16 contain useful amendments to the powers of a Minister to alter the limits of a pilotage district. These amendments mirror the proposed changes contained in section 3 relating to harbour limits and allow for a ministerial order to alter the limits of a pilotage district having regard to certain principles and policies.
Section 16 also corrects an anomaly that has arisen with regard to the provision of pilotage services by harbour authorities. The Pilotage Act 1913 was repealed in its entirety by virtue of a statutory instrument made under the Harbours Act 1996. While a saving clause was included in the Harbours Act regarding by-laws made under the Pilotage Act 1913 with regard to the pilotage districts of port companies, no such clause was included for those of harbour authorities.
Therefore, this section empowers the Minister for Transport to not only re-organise pilotage services as outlined previously, but to also confer on a specified person the function of organising and ensuring the provision of pilotage services in the particular pilotage district. This will enable a Minister for Transport to designate the relevant harbour authority or local authority, as the case may be, to be that specified person and will address the issue caused by the repeal of the Pilotage Act 1913.
Sections 13, 14 and 15 make further changes to the pilotage provisions contained in the 1996 Act by harmonising elements of the regulations regarding pilotage charges with those of harbour charges, re-adjusting the bond payable by a pilot in terms of limiting his liability and updating the regulations around pilotage exemption certificates. These changes ensure that the Act is updated to take into account the changes that have occurred since its enactment in 1996.
The final element of this Bill I propose to highlight is section 7, which pertains to the transfer of certain ministerial responsibility regarding the compulsory purchase of land by port companies to An Bord Pleanála. Currently, port companies seeking to make a compulsory purchase order must apply for a ministerial acquisition order under the Fourth Schedule to the Harbours Act 1996. While this function has only been exercised once since its enactment, it is felt more appropriate that this power be transferred to An Bord Pleanála given its role, pursuant to the Planning and Development (Strategic Infrastructure) Act 2006, as the determining body in respect of planning consent for strategic infrastructure developments at commercial ports.
With this new role conferred on the board since 2006 with regard to strategic infrastructure, it is anticipated that An Bord Pleanála will over time acquire and build up a body of expertise and experience on the planning aspects of major infrastructural development generally and particularly, in this case, in port projects. In these circumstances, a strong case can be made that the board would be better placed to adjudicate on port company applications for the compulsory acquisition of land rather than the Minister of the day. In light of the above, and the fact that similar functions with regard to the compulsory acquisition of land by Aer Rianta — now the Dublin Airport Authority — were transferred to the board under the Air Navigation and Transport (Amendment) Act 1998, I believe that this proposal is the correct approach to take with regard to the State commercial ports.
I am confident that the Bill will further underpin the commercial ethos introduced into our ports sector by the Harbours Act 1996. With the enactment of the Bill, our State commercial ports will be better placed to respond to the challenges posed by the demanding environment in which they operate. It is evident to all of us that one of the cornerstones of our economic success is the ability of our ports to adapt to changing markets and to have the commercial ability to build upon their success for the future. I am confident the Bill will help accommodate those objectives and I commend this Bill to the House.