Tuesday, 27 February 2018

Questions (17, 18)

Brendan Howlin

Question:

17. Deputy Brendan Howlin asked the Taoiseach the status of the commission of investigation into Irish Bank Resolution Corporation, IBRC; and the projected costs in that regard. [8221/18]

View answer

Mary Lou McDonald

Question:

18. Deputy Mary Lou McDonald asked the Taoiseach if he will report on the status of the commission of investigation into IBRC. [9667/18]

View answer

Oral answers (6 contributions) (Question to Taoiseach)

I propose to take Questions Nos. 17 and 18 together.

Following consultations with the Opposition parties by the then Minister for Finance, the commission of investigation into IBRC was established in June 2015. Mr. Justice Brian Cregan, a judge of the High Court, is the commission's sole member.

In November 2015 the commission made determinations that banker-client confidentiality and legal professional privilege applied to certain documents supplied to it. The commission also requested a number of changes to its terms of reference.

The then Taoiseach invited views from the Opposition parties on the issues arising. Following consultations with them, the Commission of Investigation (Irish Bank Resolution Corporation) Act 2016 was passed by the Oireachtas in July 2016. The Act is bespoke legislation giving a new legal basis to the commission's investigations.

Following consultations with the Opposition parties, the commission's terms of reference were also amended by the Oireachtas and now provide that the commission will, in its first module, investigate the Siteserv transaction which has been identified in Dáil Éireann as a matter of significant public concern.

The commission is entirely independent in its work. I have no information on the status of its investigation, other than on administrative matters, for which I am responsible as the specified Minister under the Act.

Last December, following a request from the commission and after consultation with the Opposition parties, I extended the timeframe for the final report on the first module of its investigation to the end of December 2018.

As of the end of January 2018, the commission had spent just over €3 million. This figure includes salaries for the commission's staff, legal fees for counsel engaged by the commission and the commission's administration requirements. However, it does not include the significant third party legal fees and costs incurred that will arise for payment in due course. In its fourth interim report which I published and laid before the Oireachtas in December 2017 the commission did not make any estimate of the likely cost of the first module of its investigation. However, during consultations with the Opposition parties last November my Department provided a tentative estimated final cost for the commission of between €20 million and €25 million, based on the current rate of expenditure, the extended timeframe for its work, the risk of further delays, as well as the significant third party legal and other costs that may arise.

I understand the commission is completely independent in its work, which is right and proper. I do not think, however, it is unacceptable that the House, through the Government, should ask for an indicative timeframe for completion of its work. That would be a reasonable expectation, whether it is long or short. When the Opposition was last briefed by the Government, there was an indication that there had been a request for a new fees regime to be agreed with barristers working for the commission. Has a revised fees regime been agreed to? Will the Taoiseach indicate what the revised fees are? Presumably, they have been accepted by the legal team. Does the Taoiseach have any indication from the commission when the first module determined by the Oireachtas in the revised Act, the Siteserv module, will be completed? The final report was due by the end of December 2017. Do we have any indication when the first module, at least, is due? If the Taoiseach does not know the answer, would it be in order for him to ask the Attorney General to seek an indicative timeframe to ensure he can inform the House accordingly?

Ba mhaith liom buíochas a ghabháil leis an Taoiseach as an gceist seo a fhreagairt.

As others said, the work of the commission of investigation has been painfully slow. The commission was originally intended to submit a final report no later than 31 December 2015. That date was revised to the end of April 2016, then to the end of June 2016 and then to the end of October 2016. We know that the commission's work during this period highlighted the need for the passage of bespoke legislation and an amendment to its terms of reference. That was done. At that point, we were told that its final report on the first module of its work would be completed by the end of 2017. That did not happen and the Government has extended the timeframe until the end of 2018. It is only fair and reasonable in the circumstances that we be given information and a time horizon for the completion of this work. Will the Taoiseach assure the House that the commission will complete its work by the end of 2018?

IBRC sold loans to vulture funds. After much campaigning by mortgage holders, this was the impetus which forced the Government to produce legislation to regulate the middlemen in the deals at the time. The issue has come to the fore again in recent weeks as a result of Permanent TSB and Ulster Bank flagging a massive sale of loans. AIB is also likely to look to make more sales. This all points to the banks consciously using vulture funds as a get-out clause and the Government refusing to shout “Stop”. I have raised before with the Taoiseach the need to regulate the vulture funds. I am not suggesting this is the silver bullet which would sort everything out. Actually, a ban on the sale of domestic mortgages to vulture funds would be in order. However, in the here and now, the Minister for Finance, Deputy Paschal Donohoe, must tell the banks, as their main shareholder, that he will refuse to permit any sale to a vulture fund. Is the Taoiseach prepared to make that call?

There is genuine concern about the length of time the investigation into IBRC's sale of Siteserv is taking. It has been ongoing and there were consultations prior to Christmas on the matter. The fourth interim report received was essentially a statement of process, with no clarity, even on when it would finish its first module. I thought the figure for the estimated cost of completion was lower than €25 million, but I will take the Taoiseach's word for it. However, €25 million is a significant sum. Does the Taoiseach have any sense from the commission, from an administrative perspective, when it will complete its work? Have there been legal attempts to undermine the investigation or legal challenges to it? If so, will he elaborate on them?

We want a factual account of what transpired. Did the taxpayer get value for money in the sale of State-owned assets? Were procedures followed? Were alternatives meaningfully considered? Was the full value received by the State? Given what happened before Christmas and our discussions, and in light of the subsequent engagement between the Department of the Taoiseach and the chairman of the commission, surely there must be some clarity as to the capacity of the chair to complete this investigation before the end of the year.

Has the Taoiseach a revised estimate of the final cost of the tribunal, which seems to be becoming expensive in the way that tribunals do in Ireland? Has the Taoiseach a revised completion date? At this stage and without an interim report, it is difficult to know how the tribunal could finish its work by the end of this year. Has the Taoiseach revised the timeline for the report?

According to reports in the public domain, the lawyers involved in the tribunal are seeking a renegotiation of their fees in terms of daily rates and so on. I do not know whether it is a matter for the Taoiseach or the Minister for Justice and Equality to decide if the fees will be reviewed. Is the Government examining this proposal? Has it accepted or rejected the demand for additional fees?

If work has been done at the tribunal regarding some of the issues that have affected people with mortgage difficulties, does the Taoiseach believe that, in the public interest, there should be an assessment or early report on those issues, given that many families are still struggling with mortgage debt? A series of banks are now suggesting that they will sell off their mortgage books. I am happy to say Bank of Ireland has indicated that it does not propose to do that, which is a relief to those who have loans in respect of which they have reached arrangements with the bank.

For clarity, I will restate the fact that the commission is an independent commission of inquiry. My Department has an administrative role but does not run the commission. It is not operating as our creature in any way, so I am not in a position to answer questions that can only be answered by Mr. Justice Cregan, who is heading up the commission.

It is, as Deputies will be aware, investigating first of all the Siteserv transaction module which, to the best of my recollection, does not involve any mortgage. The commission, when it was set up and as we will all recall, was very much a demand of the Opposition. Government parties at the time warned about the difficulties that could arise from asking a commission of investigation to investigate commercial transactions. The nature of asset prices, just like houses, just like shares and just like everything else, can go up and go down. It will be very difficult to determine whether or not the best price has been secured for any asset. Asset prices, by their very nature, fluctuate over time.

It is estimated that it may cost between €20 million and €25 million for the commission of inquiry to do its work.

In terms of the timeline, I will make inquiries into whether I can request an indicative timeline. I do not see why it would not be permissible for me to ask that question, but I will ask it, if it is permissible for me to ask it. Obviously, I cannot give any assurance to anyone on a timeline because that will depend on how the inquiry goes and it would be very much in the hands of the judge in that regard.

The commission has requested an increase in fees that it pays to its counsel. Under the rates agreed by the Government for counsel engaged by any commission of investigation, a senior counsel is paid €788.27 per diem and a junior counsel is paid €394.14 per diem, excluding VAT. The commission requested that the fees be almost doubled to €1,500 per diem for a senior counsel and €800 per diem for a junior counsel. The commission maintained that the current rates were inadequate and becoming problematic for it, in that they were not sufficient to attract and retain counsel with the relevant commercial law experience and expertise to analyse the financial issues and enormous volumes of documentation involved in this complex investigation. In support of its view, the commission drew a comparison with the higher rates that were paid to counsel currently engaged in the disclosures tribunal.

I consulted representatives of other parties in the Oireachtas about the commission's request at a meeting on 14 November. At the meeting, concerns were expressed about the impact on the cost of this and the knock-on impact on the cost of other commissions of investigation if the request were to be granted. Reflecting on the views that I heard at the meeting, my Department subsequently wrote to Mr. Justice Cregan and informed him that it was not intended to agree to his request for an increase in fees in light of the concerns about the impacts on cost. I do not accept that the work involved in a commission is the same as a tribunal. For example, a commission's hearings are held in private while a tribunal's are held in public. That is a very different nature.

Since it was established to the end of January this year, the commission has spent €1.23 million on legal fees in respect of two senior counsel and six junior counsel. It should be noted that the counsel work for the commission as required rather than on a full-time basis. As required under the Commissions of Investigation Act 2004, the IBRC commission's legal cost guidelines were prepared at the outset by the commission and the Taoiseach as specified by the Minister, with the consent of the Minister for Public Expenditure and Reform in consultation with the commission.

In its fourth interim report last December, the commission stated its view that the guidelines were inadequate and there needed to be proper consultation between the commission, the Department of the Taoiseach and the Department of Public Expenditure and Reform in order to establish supplemental guidelines to meet the particular needs of persons involved in the commission. The commission also stated that various witnesses had made submissions to it and were concerned that they would be out of pocket in respect of the legal expenses incurred by them in order to comply with the commission's directions and protect their own good names and reputations.

My Department has recently offered to meet the commission to discuss its proposal for supplemental guidelines and understand what the implications might be. However, reflecting the outcome of my meeting with the Opposition last November, it is not intended to agree to an increase in the level of fees payable to senior and junior counsel.

The commission is independent in its work and it would not be possible or appropriate for me to interfere with its work in any way. However, my Department did convey concerns raised at the meeting with other political leaders and, in its interim report last December, the commission stated that it was open to discussion with the Department of the Taoiseach as to how to conduct its work in the most efficient manner possible, consistent with the applicable legislative and constitutional requirements of due process, and how the duration of its investigation might be shortened. My Department, along with the Attorney General's office, has offered to explore these issues further with the commission.

In the fourth interim report in December 2017, the commission stated that it did not have details of the amount of third party legal costs incurred to date. However, in view of the large and complex nature of the investigation, I think it can be assumed that the costs arising will be substantial. To illustrate this point, I would point to the second interim report in April 2016. The commission stated that the special liquidators had informed it that the costs incurred by them in assisting the commission were €2.78 million, comprising their costs up to 31 January of €2.3 million, exclusive of VAT, and legal costs up to 15 March of €456,000. The Department of Finance had informed the commission that its external legal costs were €246,000. Third party costs were also likely to be claimed by the former directors of IBRC and some other parties. The costs are likely to have increased very substantially since that report in April 2016. It will, of course, be a matter for the commission to make a determination on the validity of claims for third party legal costs at the end of its investigation.