Dáil Éireann díospóireacht -
Wednesday, 14 Nov 1984

Vol. 353 No. 10

Irish Shipping Limited: Statement by Minister for Communications.

Minister for Communications (Mr. J. Mitchell)

The Government have been informed of the decision of Irish Shipping Limited to petition the High Court today to appoint a liquidator to the company on the grounds that they are unable to pay their debts, including both contingent and prospective liabilities.

In late September I received a report from the Chairman and Board of Irish Shipping Limited on the financial positon of the company. That report, which was given detailed consideration by the Government, showed that there has been a grave deterioration in the company's position since the enactment of the Irish Shipping Limited (Amendment) Bill, 1984. I explained to the House on 11 April the background to Irish Shipping's very difficult financial problems and stated that the Government had decided to accede to the board's request for limited financial support by way of Exchequer guarantees of borrowings.

I indicated at the time that the company required an Exchequer guarantee of $12.5 million towards the cost of purchasing two vessels, the Slaney Venture and the Celtic Venture as part of an arrangement with foreign shipowners to reduce to tolerable levels their extremely onerous financial commitments in respect of chartered-in vessels. That guarantee has been given since by the Minister for Finance.

In addition, the company was informed in February 1984, that the Minister for Finance would be prepared to guarantee additional borrowings of £12.253 million to meet the company's projected total cash deficit of £4.063 million in 1984 and £8.190 million in 1985. The Minister for Finance has since provided the necessary guarantees for the borrowing by the company of £4.063 million for 1984.

The latest report from Irish Shipping Limited indicated that the company would now require £20.675 million to keep it going until the end of 1985, which with the sum of £4.063 million already guaranteed by the Minister for Finance brought the company's total projected cash requirements for the years 1984 and 1985 up to £24.738 million. The position, therefore, was that the company required £12.485 million more than its original forecast. This was mainly due to the continuing recession in the deep-sea freight market, compounded by the decline in the punt vis-à-vis the US dollar during the current year and the increase in US interest rates which occurred over the past six months.

The report also showed that, on the basis of advice from reputable international shipbrokers obtained by the chairman, on the likely trend of freight rates over the period, Irish Shipping would require almost £108 million in order to keep going until the end of 1989. Taking account of current interest rates, a further £36.5 million approximately would be required to service ISL's funding needs for the period. Thus the total cost of keeping the company going for the next five years would amount to £144.5 million. Furthermore, even if the Exchequer met this enormous bill, the company would still have debts of £59 million at the end of 1989, and there is, at present, little reason to think that they would be in a position to service them from their own resources. This is in stark contrast with the earlier expectation of the board of Irish Shipping Limited that the deep-sea freight market would have recovered sufficiently by 1986 to enable the company to resume viable operations.

The present financial position of Irish Shipping Limited is such that the company are unable to service any more borrowings. They are in fact insolvent without further financial support. Consequently, the entire sum of £144.5 million which would be required in order to keep the company in operation in the period up to the end of 1989 would have had to be met by the Exchequer.

What are the reasons for the appalling financial situation of ISL? First, there has been a dramatic collapse of the world deep-sea tramp shipping market. The tramp market has always been subject to cyclical slumps, but the extent of the market decline during the past three years has been catastrophic and unprecedented, due primarily to the world economic recession and to the growing excess of shipping supply over demand. The market situation since 1982 has been one of worldwide losses by shipowners, resulting in bankruptcies in many cases.

Second, and even more important, the problems of Irish Shipping Limited were aggravated by the fact that during the period September 1979 to July 1981 the company entered into nine long term speculative charter agreements with companies in Hong Kong and Japan for foreign owned, foreign flagged and foreign crewed vessels amounting to 393,000 tons deadweight, a decision which I have already described as disastrous. Even if the activities of the company had been confined to the operation of its wholly-owned fleet of deep-sea vessels, then numbering four, the collapse of the freight market would have posed serious problems for Irish Shipping Limited. With the limited exposure involved in the smaller fleet, however, the company would have been in a position to ride out the recession without insurmountable losses as it had done on many other occasions in the past. As a result of the agreements entered into in respect of these additional ships, Irish Shipping Limited were left, when the market collapsed, with nine chartered-in vessels, foreign flagged, foreign crewed, and foreign owned, earning only a fraction of the cost to the company under the charter agreements.

The financial problems of Irish Shipping Limited have been compounded by the fact that their partners in a trading consortium, Celtic Bulk Carriers, Cardiff shipowners Reardon Smith Line Ltd., had themselves run into financial difficulties and were not in a position to meet their share of the joint commitments entered into with Irish Shipping Limited under the Celtic Bulk Carriers pooling agreement.

I want to repeat what I said in Dáil Éireann last April — the charter agreements were entered into on behalf of Irish Shipping Limited without the knowledge or consent of either the then Minister for Transport or the then Minister for Finance and have led to the destruction of what was, up to then, a viable and successful State enterprise with a very proud record of financial success in an industry that has always been marked by sharp fluctuations in trading conditions.

Earlier this year when Irish Shipping Limited were optimistic about an upturn in the world freight markets, the Government decided that the company should get the limited support then sought to keep it in operation. But on the basis of the company's own projections the financial commitment that would now be required from the Government and from the Exchequer to maintain it in operation is enormous and unsustainable. There are no grounds on which the Government could justify spending £144.5 million on Irish Shipping and still leaving debts of £59 million over the next five years with no guarantee that the company could operate on a viable basis thereafter.

The nation faces, as this House is aware, very serious financial and economic problems. The Government's determination to overcome these problems and the way we intend to do it are made clear in the national plan Building on Reality.

Any agreement by the Government to make the sums I have quoted available to Irish Shipping to enable it to meet liabilities entered into without the knowledge or approval of the Government would be a complete abdication of expenditure control.

The Government have therefore decided that they cannot go further than the decision of February 1984. The Government will, of course, discharge the State's responsibilities in respect of those of the company's liabilities which are guaranteed by the Minister for Finance. These liabilities can be met while respecting the levels of public expenditure envisaged in the national plan Building on Reality.

According to the latest estimate from Irish Shipping Ltd., based on a statement of affairs at 31 August 1984, there may be assets of approximately £23 million available to meet the estimated total liabilities of £117 million, of which £39.5 million are guaranteed. It will be a matter for the liquidator to dispose of the assets of the company to best advantage and to settle with unsecured creditors. The position in relation to the Irish Spruce requires separate consideration.

The Government have considered the position of Irish Continental Line. The position is that ICL is owned by Oceanbank Developments Limited in which Irish Shipping Ltd., hold a 75 per cent shareholding — the balance is held by AIB. While the disposal of the Irish Shipping Limited shareholding in Oceanbank is a matter for the liquidator, I see no reason why Irish Continental Line, which has traded profitably in the past, should not do so in the future.

The Government have given careful consideration to the question of a strategic fleet. This concept was last reviewed in 1963 when the strategic tonnage requirements were fixed at 155,000 tons deadweight. There are now substantially more vessels on the Irish register and, of course, we now also have the State-owned B&I Company. The Government are satisfied that the winding-up of Irish Shipping is not a cause for concern in terms of our current strategic needs.

The Government particularly regret the loss of jobs which the employees of Irish Shipping will now suffer. Over the years those employees have served Irish Shipping well and they and their families are the victims of these developments. This is one of the most unfortunate and tragic aspects of the liquidation of Irish Shipping.

The Government have given very detailed consideration to the financial problems of Irish Shipping Ltd. I am sorry that we could not find justification for the massive expenditure which would now be required to keep the company in operation.

Mr. Wilson

This is one of the saddest days since I came into this House in 1973. One cannot be sentimental in cases like this but it is pardonable to think about the origins of this company. When some of us were teenagers and Seán Lemass was in battle trying to get supplies for this country, he established a company which the Minister for Communications has come in here today to kill. That is why I say it is a sad day for this House and for the enterprise which was got underway in the most difficult of circumstances when supplies were at a minimum and when we had very few friends in a world at war.

We were all proud of that company's growth and success in the market place. For 50 years up to 1982 every year that company made a profit. It carried our flag, the symbol of our State, into all the trading ports of the world and carried that flag with pride. We were, perhaps a little complacently, proud of what it had achieved.

The company was conceived and born in dangerous times. No one can say with certainty that at present we do not need a company like Irish Shipping. No one can say that peace is assured or what tomorrow will bring. Every thinking person at present is dedicating himself or herself to a philosophy of peace mainly because they are afraid that war will come. This is the time the Government have chosen to kill one of the semi-State bodies which was the pride of the country. We may need it again.

The reputation of the company was high in shipping circles. Those employed in it can tell you that there was no trouble in getting credit in any of the ports or harbours which our ships visited. The Minister comes in now and tells us that he is killing off the company and he thinks he is giving it a decent burial. We will have something to say about that before this debate concludes.

I have had representations from the unions involved in this company over the last six months and they were worried. One should never underestimate the combined wisdom of working men whose livelihood depends on a company or corporation. I want to know whether the Minister even thought of them when he was making his demand for the appointment of a liquidator today in the courts or when he came into the House and said it was kaputt for the company. Admittedly some of the ships under the aegis of Irish Shipping are not crewed by Irishmen. However, there are still a substantial number of members of the Seamen's Union and the FWUI who are employed by the company and whose livelihood is at stake as a result of the action of the Minister and the Government. This is little short of national sabotage. Without making any rash commitments in any way or pinning our faith in any kind of rash future financial commitment, Fianna Fáil will reverse this decision when they return to office, and the sooner the better.

There is more in this than merely the sloughing off of responsibility for certain debts. A great deal has to do with the credit and the credit-worthiness of this country. Again and again in this House Ministers for Finance and Taoisigh from various parties have stated that our credit-worthiness was something of which we could be proud. This kind of action can only damage that credit-worthiness and indicate that there are times when the Government walks away from something to which they have been fully committed in the past. The exercise of democracy would have required that some opportunity be given to the House to debate this serious problem and that we would not have a furtive rushing in at 5 p.m. to deal with an important topic like this.

Yesterday, I tried to get a promise from the Taoiseach that there would be a debate in the House on this matter before a decision which could not be reversed was taken. I did not succeed in getting that — I know you are bound by Standing Orders — and that is another legitimate cause for complaint. It shows a certain disrespect and lack of confidence in this House to put forward suggestions with regard to the maintenance of this company.

Mr. S. Brennan

Why did they not wait for the report of the all-party committee?

Mr. Wilson

I will be referring to that later. Under the heading of democracy I also want to call the attention of the House to the fact that there was a committee appointed to deal with semi-State bodies which come under the control of this House. The Minister did not wait to find out what the committee's suggestions were even though they had studied the problem over a long period, had heard witnesses and had paid consultants to advise them. Surely it would have been commonsense to await the result of this investment of energy, brains and money in this committee before a decision was taken?

The Minister referred to the chartering of the nine vessels. This was a disastrous, corporate judgment, there is no doubt about that. I do not know what would have happened if that decision had not been taken when it was taken. I should like to know how much of the responsibility for the financial situation can be attributed to the partnership of Reardon Smith in Celtic Bulk Carriers.

In his speech on the Irish Shipping Limited (Amendment) Bill, 1984, the Minister said:

Faced, therefore, with an increasingly critical financial situation, Irish Shipping Limited recently entered into negotiations with the foreign owners of the nine chartered-in vessels with a view to seeking some reduction in the financial burdens of the long term charters. I am glad to be able to say that as a result of the negotiations, significant concessions have been obtained from the owners concerned.

From that day to this, the House has not been told what those concessions were. According to the tone of his speech, those concessions seem to be something that would have put Irish Shipping in a proper position vis-à-vis those nine chartered vessels.

For obvious commercial reasons, the details cannot be disclosed but I can say that they mean very substantial cash savings to Irish Shipping in the period up to 31 December 1985.

The Slaney Venture, which was a Panamex vessel and the Celtic Venture, a “handisize” vessel, were the two ships which were negotiated on at that time. Would the Minister tell the House the precise details of the repurchase of those ships? What were the concessions and how much money was saved to the company by that deal? The Minister also said:

When things get back to normality, however, the company's intention is that Irish crews will be employed on the vessels.

What kind of information is this House getting when we can be talking about the re-employment of Irish crews early in 1984 and killing the company without decent burial before the end of 1984?

The Minister also said:

Following the negotiations with the foreign shipowners the Board of Irish Shipping Limited submitted a report to me in relation to the company's overall financial situation and, having taken account of the substantial concessions secured from the shipowners, have requested limited support from the Government by way of Exchequer guarantees of borrowings. As already indicated, the company requires an Exchequer guarantee of $12.5 million, or about £10.7 million at current exchange rates, towards the cost of purchasing the two vessels. In addition, the company estimates that it will need further guaranteed borrowings of slightly more than £12 million to meet their projected cash deficit in the period up to the end of 1985.

If that was the best judgment that could be given to the Minister of what would take the company up to the end of 1985, what happened before the end of 1984? The Minister said:

A recovery of the shipping market in the meantime would, of course, reduce the size of the projected cash deficit.

In the same speech the Minister said:

Irish Shipping Limited has an enviable record of profitable operation in the past in one of the world's most competitive market places. The company is now facing the most serious challenge in its history and the Government believe that it should be given the limited Exchequer support it is now seeking.

Where there is a will there is a way and I contend that certain slimming operations are necessary in Irish Shipping arising mainly from their disastrous chartering operation. The Minister said that he thought the company should be given the limited Exchequer support it is now seeking. If the Minister and the Government wanted to find a way to sustain this company, even in a slimmed down version, they could have done it. I am charging them with not making the effort to do so and not facing up to their responsibilities in this regard.

In his speech the Minister did not emphasise the importance of the fleet from a strategic point of view. I said that one does not know how soon we might be in the kind of situation we were in before. Are we going to be left unclothed in the shipping sense, are we going to be on our own and at the mercy of other powers? This House knows the implications of that, when you are totally at the mercy of somebody else with regard to supplies.

I should like a full debate, with the full power of this House and with all the expertise developed in the subcommittee brought to bear on this problem before any final decision is taken. In his speech the Minister said:

The Government have therefore decided that they cannot go further than the decision of February 1984. The Government will, of course, discharge the State's responsibilities in respect of those of the company's liabilities which are guaranteed by the Minister for Finance.

I should like an expansion of that statement. Does it mean that the Government are walking away from other debts incurred by Irish Shipping, a company that is known throughout the world as the Government's shipping company? Are they taking away from the company an opportunity of ever dealing with that matter themselves? Are they taking from the directors the power to have any impact in the future on clearing debts and discharging them honourably? Are the Government saying that all the debt for which they are responsible is the sum of $12½ million and £4 million mentioned in the Minister's speech earlier this year?

On behalf of Fianna Fáil, out of whose philosophy this company and similar companies sprung, on behalf of Fianna Fáil who sustained this company when it needed sustenance at the beginning and who were proud of the development of the company in the profit-making period of 15 years, I wish to state we are totally opposed to what the Government have done. I appeal to the Chair and to the House to provide an opportunity for a full debate. I am moving the suspension of Standing Orders in accordance with Standing Order No. 139 so that the House may have that opportunity.

An Ceann Comhairle

In relation to the last remarks of Deputy Wilson regarding Standing Order 139, I got a message over the telephone around 5 p.m. this afternoon that it was proposed to move the suspension of Standing Orders under Standing Order 139. Until now I have not been told the purpose for which it was proposed to suspend Standing Orders. I gather it is for the purpose of having debate other than statements under Standing Order 38. Standing Order 139 reads:

Any Standing Order or Orders of the Dáil may be suspended or modified in effect for the day's sitting, and for a particular purpose, upon motion made after notice.

After notice means after notice given under Standing Order 28, which is four days' notice. I have not got that notice.

Mr. Haughey

Paragraph (2).

An Ceann Comhairle

Paragraph (2) states:

Provided that in cases of urgent necessity, of which the Ceann Comhairle shall be the judge, any Standing Order or Orders may be suspended upon motion made without notice. If such motion be opposed the Ceann Comhairle shall permit an explanatory statement from the Member who moves it and a statement from a Member who opposes it before he puts the question thereon.

I have to decide whether I should permit that motion to be moved, the effect of which would be to use Government time for a debate on no notice. Having considered the matter, I am not prepared to accept the motion.

Mr. Haughey

I know I have had cause to differ from the Chair on the Chair's interpretation of Standing Orders from time to time but I have to confess I find this decision quite extraordinary. May I point out that under Standing Order 139 (2), the sole function of the Chair in this matter is to judge on the urgency of the question. I submit that no reasonable man sitting in the Chair could not but accept that this is a very urgent matter. For a moment may I briefly outline what is at stake——

An Ceann Comhairle

If I may interrupt the Deputy for a moment. I have not even got a bit of paper before me. I have not a motion before me.

Mr. Haughey

The Chair is at no more disadvantage than the Opposition in this regard. The notice to us was very brief. As soon as we heard about the matter I asked our Chief Whip to communicate with the Chair because I anticipated that exactly this would happen. Sir, if you recall, yesterday Deputy Wilson asked that this matter——

An Ceann Comhairle

A copy of the motion which Deputy Wilson proposes to move under Standing Order 139——

Mr. Haughey

We are moving the suspension of Standing Orders from this side of the House to enable us to discuss the statement of the Minister for Communications, and in particular the liquidation of Irish Shipping. I wish to point out very briefly that this is one of our major shipping companies, that the amount of money we are talking about is between £24 million and £144 million and that it is a matter of the most serious, far-reaching economic consequences. It is to make a mockery, a farce and a laughing stock of the procedures of this House if a matter of this momentous and historic proportions is to be dealt with by way of statement and counter-statement. I am urging the Chair very strongly in the best interests of parliamentary procedures and parliamentary democracy to accept this very reasonable proposal from this side of the House. Because of this catastrophic announcement, I ask that Standing Orders be suspended as a matter of extreme urgency in order to debate this matter and see whether any way can be found to reverse this proposal to liquidate one of the most important economic and commercial institutions of this State.

An Ceann Comhairle

Until Deputy Wilson concluded I did not know — although of course I suspected — the purpose of suspending Standing Orders. I am asking the Deputy's side of the House, even at this stage, to give me a formal motion.

Proinsias De Rossa

On a point of order,

An Ceann Comhairle

I am calling a member of The Workers' Party. Deputy Mac Giolla.

Tomás Mac Giolla

It is unfortunate that this cannot be debated because it is such a tremendous shock to everybody. There have been rumours about this for some time but I do not think that anyone thought that a Government would liquidate a State Company of such immense prestige and importance as Irish Shipping Limited. The whole House should debate it because nothing of this nature has ever happened previously. Apart from its affects on Irish Shipping, what will be its effect on the credibility of every State company, and which State company is going to be next? This is going to be a weapon used by this Government in other State companies. It will undermine the whole confidence of financial institutions in the borrowing of other State companies in either the short term of the long term. It will have a tremendous effect on both the public sector and the private sector and it will shake the confidence and the morale of the nation generally as well as the workers in other State companies.

The Minister in his speech has given only four lines to the effect on 1,300 workers in Irish Shipping Limited. It is all on questions of protection of money etc. and he has given four lines to what effect it will have on the workers and how sad it is going to be. He has given us no idea of what he is going to do with them or what provision he is going to make for them. Surely the Labour Party will not stand by this statement of the Minister in this case. All of these things should be debated at length in this House. This has been worrying and stirring the minds of many people who have been discussing and thinking about it for months. I do not think that anyone really expected that the Government would come up with this shock announcement today.

Irish Shipping Limited have given pride and confidence to our country. We recognised that they would be there in time of emergency. Anyone who remembers the last war will know the difficulties we have as an island nation in time of war in having supplies brought in or out, and there was recognition that this was one of the primary functions of Irish Shipping Limited. That is why they were allowed to go around tramping to keep going because we wanted to maintain the shipping to have it available in time of emergency. They were highly successful and made profits. The year before last was the first time they made a loss in 15 years. I do not think that the Minister has counted up the profits made by this company over that length of time against only two years' losses as well as the third year.

All of the Minister's statement is based on projections and he puts this frightening figure of £144 million in front of us, but if you consider his speech you will see that £108 million of that is a projection on the basis of advice from reputable international shipbrokers, whoever they may be. They gave an estimate on the likely trend in freight rates to 1989, over the next five years. On the basis of these reputable international shipbrokers' projections of freight rates to 1989 the Minister says that the State will have to pay £108 million. That is £108 million out of the £144 million figure which he gave. The £36.5 million is the funding required for Irish Shipping Limited for that period of five years. Therefore, the decision has been made by the Government on the basis of projections of reputable international shipbrokers who probably would be delighted to see Irish Shipping Limited out of their way in the competitive freight market which exists at the moment. On the basis of those projections he liquidates this State company and puts 1,300 people out of a job without giving any indication of what he is going to do with them.

This company have stood by every Government directive. For instance, they were directed by the Government three or four years ago to buy a bulk carrier from Verolme Dockyard to keep the shipyard in business. They did so although they did not require it, and of course that is not put down to their credit now. The things they have done for this country and for the State and the foreign currency which they have earned are not taken into account by the Minister. It is a question of the Minister evading his responsibilty in this.

The Minister has been saying that they knew nothing about these charter agreements by Irish Shipping Limited, the Minister was not informed at any stage, the Minister did not know a thing about it. That is amazing, because Ministers can know every little fiddle-faddle, everything that goes on in the semi-State companies under their Departments if they want to. If it is CIE, the ESB or anything else they know almost everything that happens on a day-to-day basis, but in this case they did not know a thing. They are telling us now about these decisions made by Irish Shipping Limited which were a disaster and have led to great problems.

I refer again particularly to the workforce and the effect which this decision will have on them. If a debate and full discussion by the House is allowed on this, I hope that decision will be reversed. I hope that Deputies will take a very serious view and a closer look at what this £144 million means and not be frightened by a non-existent figure being thrown before them. It is merely a projection. I hope that following such a debate the Minister's decision will be reversed.

The Taoiseach

On a point of order, I must intervene to say that the Government recognise that a matter of this gravity should be debated in this House and in Government time. We have not had an approach from the Opposition Whip, as is understandable at such short notice. We will be happy to enter into discussion with the Opposition to arrange for a full debate in Government time or whatever time the Opposition may require if it would help in the present situation.

Mr. Haughey

Am I right in understanding that the Taoiseach is offering Government time to be arranged by the Whips?

An Ceann Comhairle

Yes.

Mr. Haughey

That offer is acceptable to us.

An Ceann Comhairle

What about Private Members' Business? Are the Whips to get together now to discuss this and also to discuss what happens to Private Members' time and come in here with proposals?

Mr. Haughey

We had visualised Private Members' Business going ahead in the ordinary way, but we suggest that the Whips get together immediately now to make the necessary arrangements.

Mr. V. Brady

On a point of order, may I have the point clarified? You, Sir, indicated that your office was informed at 5 p.m. that we would be moving this motion. I was in touch with your office at 4.20 p.m. immediately on hearing that an announcement would be made at 5 p.m. and I was not informed between then and 5 p.m. that the matter was not in order.

An Ceann Comhairle

The time may be a few minutes here or there. I am not sure. I was told that you would be moving suspension of Standing Order 139. Anyway it is resolved now.