Mr. Pat Mangan:

The Chartered Institute of Logistics and Transport welcomes the opportunity to make a presentation to the committee in respect of the general scheme of the Harbours (Amendment) Bill 2014. We also appreciate the earlier invitation we received in the context of making a written submission to the committee.

The institute has no issue of principle with regard to the proposal to transfer a number of regional ports to local authority ownership and control.

The purpose of our written submission to the committee was to air some practical concerns and raise some matters of detail concerning the general scheme.
The regional ports are currently commercial State bodies which have a large degree of commercial freedom and are not subject to the detailed controls on staffing, pay and finances which apply to non-commercial State bodies. The ports being transferred, and particularly those that will remain as independent companies under head 7, should continue to have the commercial freedom afforded to other State commercial companies. The bigger regional ports in particular must be able to compete for business on a level playing field without unnecessary constraints being placed on them and they should be subject to no greater State control than the larger tier 1 and tier 2 ports with which they compete.
The regulatory impact assessment accompanying the general scheme indicates that it has already been agreed that Drogheda, Dún Laoghaire and Galway should continue as port companies in the ownership of the relevant local authorities - that is the head 7 transfer process. If this decision has already been taken - we would support it - the Bill should be amended to explicitly provide for it. We suggest a form of wording in our written submission.
It is not clear which, if any, of the provisions of Part 2 of the Harbours Act 1996 will apply once the port companies are transferred to local authority ownership. These provisions relate to the corporate governance of port companies and cover matters such as the contents of the memorandum and articles of association, the composition of the board, the appointment of the chief executive, borrowing, accounts and audit. The institute is anxious to ensure that the commercial mandate of these companies is protected and enhanced, that they will operate at arm’s length from their local authority owners and that they will be structured and governed in a way that does not act as an impediment to potential future private investment.
It is also important to ensure continuing good corporate governance and effective performance oversight of these companies. For example, section 30 of the Harbours Act 1996 relating to the composition of the board might continue to apply together with the modifications proposed in head 19(2). The power of the board to appoint the chief executive should also be retained. Where port companies are dissolved and absorbed into local authorities, it will also be important that arrangements be put in place to enable port operations to continue on a commercial basis.
Head 11 proposes to give the Minister very wide general powers of direction in respect of port companies transferred to local authority ownership. These powers could potentially be used to impose substantial financial obligations on the companies and their local authority owners - for example, in a direction relating to the development of harbours, or safety, security or navigation. Exchequer financial support is unlikely to be available in those circumstances as there is a long-standing policy of not providing State financial aid to port companies.
The proposed power of direction is a significant policy departure because it will give the Minister for Transport, Tourism and Sport, as distinct from the Minister for the Environment, Community and Local Government, power to issue a direction to a body which is owned by a local authority or to the local authority itself. If the Minister for Transport, Tourism and Sport was to issue a direction at present, he would be doing so as the de factoowner of the port companies and would therefore have a direct concern for the financial or other consequences. However, he will have no such constraint when these companies are in local authority ownership. At a minimum, the head should be amended to require the Minister to consider the potential financial consequences of any proposed direction, to consult with the port company before making a direction and to obtain the consent of the Minister for the Environment, Community and Local Government to any direction he proposes to make.
Head 8 prevents the disposal of shares in a local-authority-owned port without the prior written approval of the Minister. However, there is nothing in the proposed law which would prevent a local authority from deciding to cease the provision of port services. It could, for example, decide to cease the handling of commercial cargo and operate a port as a leisure facility. This could have potential implications for national ports policy. Perhaps the Minister should retain some residual powers in this regard, as the powers of direction under head 11 cannot be used in such circumstances. Subhead (4) states that the Minister's power of direction cannot be exercised in respect of the performance of functions in particular circumstances. The exercise of any residual power should, of course, have to take account of the commercial and financial realities faced by a local authority in reaching a decision on the future of a port.
The proposal to limit directors to a maximum of two terms is unduly restrictive and should be reconsidered. The Minister currently has discretion to appoint directors for a maximum term of five years, but there is nothing to stop the Minister from making appointments for shorter terms, and this is sometimes done for public appointments. There is also a commitment in the national ports policy to the staggering of board appointments to provide for a more managed turnover of directors. This means that, initially at least, some directors will have to be appointed for shorter terms of, say, three or four years. If it is proposed to include limits on the length of service of board members, we strongly suggest that they be expressed in years rather than terms. It is desirable that chairpersons should have served on the board for a period before assuming the chair, and we therefore suggest that any limits imposed on chairpersons should take this into account. The limits should apply to worker directors in the same way as all other board members.
Subhead 19(6) should be much more clearly expressed. It appears from the explanatory notes that it is intended to address potential conflicts of interest for board members and to preclude membership of boards by persons or employees of persons who provided a significant commercial service to a port company within the previous three years. While we support measures to prevent board members with material conflicts of interest from being appointed, the existing provisions in section 11 of the Harbours (Amendment) Act 2009 are ill-conceived and should not be retained in the new legislation. For example, it is generally accepted that 12 months is an appropriate maximum period to preclude former employees from taking up a new employment which involves a material conflict of interest. A similar term would be appropriate for directors. Yet under the existing provisions in the 2009 Act, somebody no longer employed by a company which provided significant commercial services to a port company would be precluded from board membership for three years. Any employee or former employee of a company which provided significant commercial services to a port company would be precluded from board membership even if that person had no direct working relationship with that port company or potentially even if he or she worked in another jurisdiction. It is also significant that one could have port users that are very significant players but there is no restriction on, for example, somebody who provides 20% or 30% of the trade of a particular port from being involved in the directorship, so I think the provisions relating to a conflict of interest need to be rethought.
We suggest that a more appropriate approach be adopted which relates directly to the individual being considered for appointment to the board. The test should be whether the person being considered for appointment has or could be perceived to have a material conflict of interest if appointed to the board. This is a more appropriate test and will avoid the unnecessary exclusion of persons well qualified to serve on the board.
The regulatory impact assessment gives no real consideration to the financial circumstances of both the port companies to be transferred and the local authorities to which they are to be transferred. Will the ports be a financial burden on the local authorities? Have the local authorities the capacity to provide or generate from other sources any investment finance that might be required for the future development of these ports or to cover pre-existing deficits? This is particularly important since it is Government policy not to provide funding to commercial ports and because the ports to be transferred may not be in sufficiently robust financial health to generate the necessary investment finance from internal resources alone. It is noteworthy from appendix A of the regulatory impact assessment that four of the five ports to be transferred incurred net losses in recent years.
The ministerial statement accompanying the publication of the draft general scheme stated that the Bill would not affect Rosslare Europort as it is not subject to the Harbours Acts. The 2013 ports policy statement undertook to publish a pathway for the port by the end of last year following receipt of advice from an external consultancy study. The joint committee might explore with the Department what, if any, conclusions have been reached in respect of the future ownership and development of Rosslare Europort.
Do any of the recommendations of the Competition Authority's recent study of competition in the ports sector require a legislative response? For example, recommendation 4 of that study suggests that the Department of Transport, Tourism and Sport "should mandate the promotion of effective intra-port competition as a key objective for port authorities that is imposed by legislation or regulation as appropriate". How is it proposed to give effect to this recommendation?
Some other more detailed points are raised in our written submission, but I do not propose to comment on them here, although I will be happy to answer any questions in respect of them or any aspect of my oral presentation.