Dáil Éireann díospóireacht -
Wednesday, 2 Nov 1988

Vol. 383 No. 6

Private Members' Business. - Multilateral Investment Guarantee Agency Bill, 1988: Committee Stage.

SECTION 1.

Mr. Noonan

(Limerick East): I move amendment No. 1.

In page 2, line 20, to delete "Finance" and substitute "Foreign Affairs".

This amendment relates to the definitions section and is put down to suggest that the appropriate Minister, as defined in the definitions section, should be changed from the Minister for Finance to the Minister for Foreign Affairs. I do this because, as the Minister for Finance has said on Second Stage, the paid-in element will be classified as official development assistance and will be payable from Central Fund services. Since the Department of Foreign Affairs have responsibility for our official development assistance programme I think it is more appropriate that the Minister, in the definitions section, should be the Minister for Foreign Affairs and that consequential changes should be made in the Bill to make the appropriate Minister the Minister for Foreign Affairs. The Minister in his reply has not clarified whether a separate allocation will be moved in the budget when the Estimates are amended, including a sum of at least £275,000 in the Vote for the Office of the Minister for Finance to cover this aid.

Many of the contributions here today seem to take it for granted that the 10 per cent payable in cash initially would be drawn from the official development assistance subhead in the Vote of the Department of Foreign Affairs. If this is so and the Minister has not yet clarified it I think that is another reason for suggesting that the appropriate Minister is the Minister for Foreign Affairs and not the Minister for Finance. I can appreciate how it ended up within the remit of the Minister for Finance, as MIGA is a subsidiary agency of the World Bank and the Minister is a governor of the World Bank and Finance Ministers are the Ministers who are responsible for World Bank activities in their capacity as governors of the international body. In our particular circumstances there is an argument to be made for centralising control of aid and of MIGA in the Department of Foreign Affairs.

Mr. MacSharry

I take the point about the money. It is not coming out of the Foreign Affairs Vote, it is coming out of the Central Fund and there will be provision made for it in the budget.

Mr. Noonan

(Limerick East): Is it in the 1989 budget?

Mr. MacSharry

Yes, £275,000 is the amount that will be involved and will be paid next year. It is a capital item.

Mr. Noonan

(Limerick East): Will it be an extra capital item on what is already in the ODA subhead of the Vote for Foreign Affairs?

Mr. MacSharry

It is not in the Vote for Foreign Affairs, it is coming from the Central Fund. We cannot accept this amendment because under the Bretton Woods Agreement Acts, 1957, which established Ireland's membership of the World Bank and the IMF, the Minister for Finance was assigned responsibility for all payments to the bank. This procedure was followed in 1960 when Ireland became a member of the International Development Association, an affiliate of the World Bank. As MIGA is in exactly the same position, that is the way we have got to proceed. I have no alternative but to oppose the suggested amendment.

Mr. Noonan

(Limerick East): I put down the amendment to give a certain point to the argument I was putting forward. I accept the difficulty that once MIGA is a subsidiary agency of the World Bank, it puts the Minister for Finance in the primary position. In the light of the Minister's reply and in particular his commitment that an extra sum of £275,000 will be provided in the capital vote from the Central Fund I withdraw the amendment.

Amendment, by leave, withdrawn.

Section 1 put and agreed to.

SECTION 2.

Question proposed: "That section 2 stand part of the Bill".

Mr. M. Higgins

The section states that: "The terms of the Convention are hereby approved." I hope the Minister will strive not to be too emotional or too ideological in his reply. Everything I have said so far in my contribution has been based on experience from inside the developing world rather than inside a Department of State. In relation to section 2 I want to make a point about this Dáil and about the Seanad and the mechanism by which conventions that affect legislation are more or less drafted into legislation in one swoop. I am not making this point about the Minister's particular use of it this evening. It is the fourth time in this Dáil session that an intercomplicated convention has been attached to legislation without the Oireachtas having the opportunity of debating the convention in detail as existed in other parliamentary assemblies of the European Community. It is a different political parliamentary practice and on which I might say, without being emotional, I deplore. With regard to section 2, in so far as it makes reference to the basic convention, I should like the Minister to clarify some points in the convention.

With regard to Article 11 in Chapter III of the Bill I want the Minister to give me some explanation of the usage of the words "any legislative action or administrative action or omission attributable to the host government which has the effect of depriving the holder of a guarantee of his ownership or control of", and these are the important words, "or of a substantial benefit from, his investment...". What exactly is meant by the words "or a substantial benefit from his investment"? With regard to Article 11 (a) (iv), what is meant by the term, "any military action or civil disturbance in any territory of the host country to which this Convention shall be applicable as provided in Article 66"? A number of the signatory countries, particularly those in Part II of Schedule A, for example, El Salvador, are countries in which there is civil disturbance. What is the meaning of this term?

It is late and I am anxious not to discommode the House in any way but I want to say that I do not like the idea of conventions which are binding being discussed in an almost en passant way prior to the passing of legislation. What we have here is a very short Bill with a brief number of sections and attached to it a major convention which expresses our relationship to the international community and to other countries. These are points which immediately occurred to me because they are not met by the argument in another part of the convention that the host country has to be satisfied by the terms of the convention. If language is used it should be specific and I would appreciate it if the Minister would advise the House as to what is meant by the use of the language I have referred to.

Mr. Noonan

(Limerick East): I want you, a Cheann Comhairle, to give me some procedural advice. Section 2 of the Bill simply says that the terms of the convention are hereby approved. I have some questions, on which I want clarification, on the terms of the convention which is added to the Bill by way of a Schedule. Is now the appropriate time to discuss the terms of the Schedule or will we have an opportunity to discuss the Schedule separately?

An Ceann Comhairle

I shall be putting the Schedule separately at a later stage.

Mr. MacSharry

A couple of points were raised by Deputy Higgins in relation to Article 11 (a) (ii). The term "substantial benefit" means profits. In other words, a person will be in a position to repatriate his profits. With regard to Article 11 (a) (iv), War and Civil Disturbance, the term "any military action" means exactly what it says here.

Mr. M. Higgins

No. I am sorry, but that does not meet my point. My point is that the listed countries include countries such as the Philippines, El Salvador and so forth. Are we talking about new civil disturbances directly affecting the investment projects or are we talking about the general use of the term? A good six of these countries are in the throes of civil war. Are we talking about new civil disturbances affecting the conditions of the investment or are we talking about general conditions of civil disturbance at the time of signing? It is a very simple question. I presume we knew what it meant when we signed the convention.

Mr. MacSharry

Article 11 (a) (iv) encompasses the risk of war and civil disturbance. It is intended to include revolutions, insurrections, coups d'étât and civil or political events which are typically outside the control of the host government. Acts of terrorism and similar activities which are specifically directed against the holder of a guarantee are, however, not intended to be covered by this provision but may be covered under Article 11 (b) which is discussed further on. In relation to the exact points raised by the Deputy, I think Article 66 is relevant in so far as territorial applications are concerned. Article 66 states:

This Convention shall apply to all territories under the jurisdiction of a member including the territories for whose international relations a member is responsible, except those which are excluded by such member by written notice to the depository of this Convention either at the time of ratification, acceptance or approval or subsequently.

Mr. M. Higgins

I am very grateful to the Minister for clarifying that very important matter. Otherwise the usage of the language would have been entirely loose and the House would have been misled.

Question put and agreed to.

SECTION 3.

Question proposed: "That section 3 stand part of the Bill".

Mr. Noonan

(Limerick East): Section 3 (3) says: “The Minister may create and issue to the Agency...”. I sought to move an amendment to this section whereby I would have substituted the word “shall” for the word “may” in an attempt to make this section mandatory on the Minister. I got a very kind letter from you, a Cheann Comhairle, saying that my amendment was out of order because if I was to make this section mandatory by way of an amendment it would impose a potential charge on the Revenue Commissioners. But, of course, the Minister may change the word “may” to “shall” because there is no constitutional inhibition on him imposing a charge on the Revenue Commissioners. Since I cannot change this word by way of an amendment can the Minister tell me why it is “may” rather than “shall”?

Mr. MacSharry

To give us discretion as to how we might do it.

Mr. Noonan

(Limerick East): Why does the Minister need discretion when the House has decided to subscribe to the terms of the convention as laid before the House? Having done that does the Minister still want to make this a matter of ministerial choice? I do not think that is an appropriate way to proceed. Once the House passes the convention it should be mandatory on the Minister to proceed. This subsection still gives the Minister discretion not to proceed and we may not, at the discretion of the Minister or one of his successors, subscribe to the convention.

Mr. MacSharry

I have just been told that it is exactly the same language that is used in the Bretton Woods Acts. Section 3 (3) of the Bill states:

The Minister may create and issue to the Agency, in such form as he thinks fit, such non-interest-bearing and non-negotiable notes or other obligations as are provided for in paragraph (i) of Article 7 of the Convention, and any payments in respect of any such notes...

That is the way a Minister may do it but other ways might be devised whereby he could do it. Therefore, he should not be stuck to those ways; there may be other ways.

Mr. Noonan

(Limerick East): That is not the issue I am raising. I accept what the Minister said about the Bretton Woods Acts because obviously one would need discretion and discretion was deliberately written into the Acts. With regard to this Bill before the House, and the attached Schedule, it is the intention of the House to subscribe to the convention — if that is the appropriate term to use — but from an Irish point of view, the convention will become inoperable if we do not subscribe our 10 per cent in cash and subsequently our 10 per cent in promissory notes. This section allows the Minister the discretion not to proceed. It is not a question of discretion in the manner or the form he thinks fit; he can refuse to go ahead. If the section read “The Minister shall create and issue to the Agency, in such form as he thinks fit, such non-interest-bearing and non-negotiable notes or other obligations...” then the Minister would maintain the discretion which he suggested he needs. The way the section is drafted at present would allow the Minister or his successor to leave the convention on the shelf in Merrion Street.

Mr. MacSharry

I do not think that is going to happen to this convention. In fact, this form of words is the one used on all such occasions. There is no difference between them.

Mr. Noonan

(Limerick East): This happens quite frequently on Committee Stage when the advice is that this is the way it is always done if anybody seeks to raise an objection. If the Minister may do something he also may not do something, so there is a discretion there. We are told that this is the way it is always done but if we look at section 3(4) it says:

Any moneys received by the State from the Agency shall be placed to the credit of the account.

It does not say "may" there. Section 3(5) says that the Central Bank of Ireland shall act as a depository. The word is "shall" and not "may". That is the way it is always done when one wants to make it mandatory. The word "may" is always used when one wants to allow a discretion.

Mr. MacSharry

That is the form of words used in all such circumstances. I would refer the Deputy to article 7 where it says that:

The initial subscription of each member shall be paid as follows:

Within ninety days from the date on which this Convention enters into force with respect to such member, ten per cent of the price of each share shall be paid in cash as stipulated in Section (a) of Article 8.

Mr. Noonan

(Limerick East): Exactly.

Mr. MacSharry

That is from the convention. These are the forms of words used in all such circumstances and that is why they have been used here.

Mr. Noonan

(Limerick East): The Minister is making my point. The Convention says they “shall” be paid and yet in drafting the Bill to put the Convention into effect the people who drafted the Bill changed the word to “may”. I accept the Minister's bona fides but it is typical of the belt and brace approach which we frequently have to our international obligations. In the text of the convention and in the text of section 3 there is a number of examples of where “shall” is used rather than “may” and once “may” is put in it is an attempt to give a discretion, whether or not the Minister accepts it. There is nothing I can do about this because my amendment has been ruled out of order. It is impossible for anybody in Opposition to move an amendment which might involve a potential charge on the Revenue, so I am prepared to leave the argument there but I am dissatisfied with it and I do not believe that people who draft legislation and who advise on the method of its drafting should always look for a potential out, just in case. It shows an uncertainty, especially in things like this.

Mr. MacSharry

I will check it out further with the draftsman and I will communicate with the Deputy, but I am advised that that is the way it should be.

Question put and agreed to.

SECTION 4.

Question proposed: "That section 4 stand part of the Bill."

Mr. Noonan

(Limerick East): I had put down an amendment to oppose this section because when I cross checked with Article 18 of the convention there were a couple of things in it that were not immediately clear. I accept that subrogation is a normal part of insurance convention and activity but here when we go to Article 18, line 12, it says that the contract of guarantee shall provide the terms and conditions of such subrogation. Will the Minister cast some light on that? It also goes on to suggest at paragraph (c):

Amounts in the currency of the host country acquired by the Agency as subrogee pursuant to Section (a) above shall be accorded, with respect to use and conversion, treatment by the host country as favourable as the treatment to which such funds would be entitled in the hands of the holder of the guarantee...

The Agency shall also seek to enter into arrangements with host countries on other uses of such currencies to the extent that they are not freely usable.

That is couched in great generalities. Will the Minister enlighten us as to what was in the minds of the people who drafted that section?

Mr. MacSharry

Article 18 (b) says:

The rights of the Agency pursuant to section (a) above shall be recognised by all members.

This section requires our legislation to recognise the agency's subrogation rights. Article 18 of the convention requires that MIGA's subrogation rights be recognised by all members of the agency. This means that in the event of compensation being paid by the agency to an investor the agency would be entitled to assume all the rights of the investor against the host country in which the event giving rise to the claim originally occurred. This section makes a necessary provision for the recognition of MIGA's subrogation rights should an Irish firm be involved in a compensation claim.

Mr. M. Higgins

Looking at related legislation I have not encountered the term "subrogation" in Irish statutes before. Why did it not figure in the definitions? Will the Minister explain the term, for the record of the Dail?

Mr. MacSharry

It is in the convention, and that is why it is used.

Mr. M. Higgins

We do not have to understand it?

Mr. MacSharry

The Deputy understands it, he does not need it defined.

Question put and agreed to.

Section 5 agreed to.

SCHEDULE.

Question proposed: "That the schedule be the schedule to the Bill."

Mr. Noonan

(Limerick East): The preamble says:

Considering the need to strengthen international cooperation for economic development and to foster the contribution to such development of foreign investment in general and private foreign investment in particular.

There is an indication that this will apply to private foreign investment in particular. This runs right through the schedule subsequently. What would be the position of an Irish semi-State company who wished to invest in a Third World country? I understand that the test of "private" is to be prepared to trade on commercial criteria. There is also a suggestion later in the preamble in Chapter 1 that the Agency will encourage third parties to carry out appropriate complementary activities to promote the flow of investment. It seems that agencies such as the IDA or SFADCo in the provision of consultancy services to Third World countries would fall within the terms of the preamble. Would such activities be removed from the benefits of the insurance guarantee provided in the convention on the grounds that they were not involved in private investment and are in effect State companies?

Mr. MacSharry

I do not have the answer to that. It is something that the executive directors will have to decide. They are not ruled out at this stage. We have to wait and see if such commercial semi-State companies come along and have such possibilities of investment in some of these countries and obviously where the host country were anxious that they should, then such a proposal would go to the executive directors of the MIGA board who would ultimately have to decide whether they qualified under MIGA. We do not have the answer at the top of our heads.

Question put and agreed to.

Title agreed to.

Bill reported without amendment and passed.