Paul Kehoe (Wexford, Fine Gael) | Oireachtas source

I move:

That Dáil Éireann approves the following Order in draft:Commission of Investigation (National Asset Management Agency) Order 2017,copies of which Order in draft were laid before Dáil Éireann on 9 May 2017.

I will briefly summarise the matters that have led the Government to accept there is a need for a commission of investigation into matters of significant public concern in regard to NAMA’s sale of Project Eagle. Deputies are aware that NAMA was established as part of the response to the banking crisis that arose in 2008. Its objective was to acquire loans from eligible banks, hold and manage these loans and related collateral, which was mainly commercial property, and to achieve the best financial return for the State by disposing of those assets in an expeditious manner.

NAMA acquired the loans from the participating banks for a total of €31.8 billion. Reflecting the steep reduction in property values following the financial crisis, this represented 43% of the outstanding amount owed by debtors. NAMA’s purchase was funded predominantly through €30.2 billion of Government-guaranteed senior NAMA bonds, which was a large contingent liability for the State. At that time, there was no doubt that the repayment of this debt would be extremely challenging and vitally important to improving the creditworthiness of the State. To be successful, NAMA would have to make important and commercially-informed decisions at a time of great economic crisis.

It is important to note that since 2010, against all expectations, NAMA has redeemed 98% of its senior debt, thus reducing the State's contingent liability from the original €30.2 billion to just €500 million today. NAMA expects to redeem the remaining €500 million in 2017 and to ultimately deliver a surplus of over €2 billion to the State. The full repayment of NAMA's debt, let alone returning a surplus to the State, was considered unthinkable by most people at the time of NAMA’s inception. NAMA’s focus during the period from 2018 to 2020 will be on completing its objectives, include delivery of office space in the Dublin docklands and much-needed housing.

All Members of this House are now familiar with the fact that NAMA sold the Project Eagle portfolio to Cerberus in 2014. The sale represented NAMA's largest transaction up to that point. Issues relating to the sale of NAMA’s Project Eagle portfolio subsequently became the subject of much media and political debate, including in this House and in the Northern Ireland Assembly.

During 2016, the Comptroller and Auditor General carried out an investigation into the sale in order to ascertain if NAMA had obtained the best achievable financial return for the State. In September 2016, the Comptroller and Auditor General published a special report on NAMA’s sale of the Project Eagle portfolio which criticised elements of NAMA’s performance. The Comptroller and Auditor General concluded that the decision to sell the loans at a minimum price of £1.3 billion involved a significant probable loss of up to £190 million in terms of net present value, NPV. It also concluded that restrictions on the sales process, combined with the scope of Lazard's comfort letter, did not provide sufficient assurance that a different marketing strategy for the loans or different timing of the sale could not have resulted in NAMA achieving a higher price from the sale of the loans; and allegations of the involvement of a member of NAMA’s Northern Ireland advisory committee in an arrangement to share fees with law firms connected to the sale warranted more action by NAMA. Following publication of the report, NAMA indicated that it fundamentally disagreed with many of the conclusions reached by the Comptroller and Auditor General.

On 14 March 2017, the Committee of Public Accounts published a report on NAMA’s sale of Project Eagle. The report was completed following extensive public meetings at which many key witnesses gave evidence. I would like to acknowledge the contribution of the Chairman of that committee, Deputy Sean Fleming, and the other members of the committee, for their work in compiling this report. The conclusions in the report include that the Comptroller and Auditor General’s report was evidence-based, balanced and reasonable and that the Project Eagle sale was marked by inadequate record-keeping, weaknesses in regard to the management of conflicts of interest, a seriously deficient sales process and, ultimately, an inability by NAMA to demonstrate that it had obtained the best value for money for the State. The Committee of Public Accounts welcomed the proposal to establish a commission of investigation into the sale of NAMA’s Northern Ireland portfolio and was of the opinion that it should proceed.

I emphasise there has been extensive consultation with all parties in the Oireachtas since last September about the establishment of this commission of investigation. The Taoiseach met Opposition leaders on a number of occasions, both before and after the Committee of Public Accounts report was published. At those meetings, all present acknowledged the limitations a commission of investigation will face due to the cross-jurisdictional nature of the issues, as well as ongoing criminal investigations. At those meetings, the Taoiseach also emphasised that it was unclear how much more information a commission would be able to provide beyond what the Committee of Public Accounts has already achieved. Nonetheless, in view of the consensus among Opposition representatives that a commission of investigation be established and despite its likely cost, the Government has agreed to establish the commission. I am pleased to confirm that Mr. Justice John Cooke, former High Court judge, has agreed to chair the commission of investigation.

The Taoiseach also consulted Opposition representatives on the terms of reference of the commission and a number of suggested amendments were taken on board in the final version laid before the Oireachtas on 9 May. Under its terms of reference the commission will, in the first module of its work, investigate NAMA’s sale of Project Eagle. As agreed with Opposition representatives, it will be possible to amend the terms of reference, in accordance with the Commissions of Investigation Act 2004, to provide for further modules at a future point. In particular, the commission is to investigate, having regard to NAMA’s statutory obligations under the National Asset Management Agency Act 2009 and appropriate commercial practice whether the disposal strategy for its Northern Ireland loan portfolio, including the timing of the disposal and sale as a single portfolio, was appropriate in the circumstances; whether the minimum price applied and how it was derived in respect of its Northern Ireland loan portfolio were appropriate in the circumstances; whether the management of the sales process by NAMA, including procedures and controls applied, timeframes, access to potential bidders and record keeping, was appropriate in the circumstances and demonstrated best corporate governance; and whether any conflicts of interest arising with regard to members of NAMA's Northern Ireland advisory committee were managed appropriately in the circumstances. The commission also is to investigate when and how NAMA became aware of fees allegedly payable to a former member of the Northern Ireland advisory committee by bidders on Project Eagle and whether this issue was managed appropriately by NAMA during the sale of the Northern Ireland loan portfolio and if decisions and actions of the Minister for Finance and the Department of Finance relating to the disposal of the Northern Ireland portfolio, including communications with members and officials of the Northern Ireland Executive and meetings with potential bidders, were appropriate in the circumstances.

The commission shall avail of appropriate and independent commercial and financial expertise to inform its investigation. The commission will provide a final report on this first module of its work by the end of June 2018, subject to section 6(6) of the Commissions of Investigation Act 2004.

I note Deputy Wallace has submitted an amendment to the Government motion today and I wish to point out the Government will not be accepting the amendment. Due to the constraints on my speaking time today, I cannot go into detail regarding all aspects of Deputy Wallace’s motion but I would like to comment briefly on a number of points. First, Deputy Wallace wishes to remove the provision authorising the Taoiseach to appoint members of the commission. It is not clear why this amendment is being proposed as under the Commissions of Investigation Act 2004, only the Government or the Taoiseach can make such an appointment. As for the commission's terms of reference, the Deputy has suggested a number of amendments. However, the Government believes the current wording, which reflects the consultation with Opposition representatives, including Deputy Wallace, is sufficient and appropriate. Deputy Wallace’s motion also calls for primary legislation to deal with potential claims of privilege and confidentiality that may arise for the commission in its work. While bespoke legislation was enacted in respect of the IBRC commission of investigation, the Government's view is this is not required for this commission. However, as agreed in discussions with the Opposition, the commission will provide an interim report within three months. At that point any specific obstacles identified, legislative or otherwise, can be dealt with. In addition, as all Deputies will be aware, primary legislation takes time and I do not believe the establishment of the commission should be delayed until bespoke legislation, that may well not be needed, is enacted. Finally, the Attorney General’s office has advised that the power of the Oireachtas is to approve or not approve the draft Government order. The Oireachtas cannot amend the draft Government order, which is an order of the Government under section 3 of the 2004 Act.

If this draft order is not approved, the Government will not be able to establish the commission without a new draft order being made and then passed by both Houses of the Oireachtas.

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