Timmy Dooley (Fianna Fail)

I join my colleagues in welcoming the Minister of State to the House, particularly his officials who provided an excellent briefing document on this emergency legislation. It can often be difficult to try to get to grips with such legislation in the time available. Like Senator Feighan, I thank Mr. Ó Méalóid and his colleagues in the Department for being extremely helpful to us over the past day or so.

The speedy passage of the Bill is vital to ensure that commercial air transport, in particular, and private air transport to a lesser extent, will be allowed to operate in an environment where cover is available. This legislation will ensure their trading can continue as soon as the legislation is in place. It is also important to recognise it is retrospective and that the cargo business will be facilitated as quickly as possible. It is currently in a position where it may not be able to put in place the type of indemnities required to continue to operate. I hope the speedy passage of the legislation through both Houses will ensure this cloud of uncertainty is lifted.

The Bill is technical in nature. It provides a facility for the Minister and the Department to put in place the necessary orders required in respect of the indemnities. The airline business is a particularly difficult business in which to operate. Insurance is a crucial component in terms of the business model of airlines. It is a significant cost for them, which is no different from the price of oil. Like the price of oil, insurance has tended to fluctuate over the recent years, which can affect the viability of an airline. While a business model for an airline may have been developed over a prolonged period, a situation such as this which arises overnight whereby a reassessment of the risk is carried out by international insurance companies, could throw a particular airline's business model out the window and make it unviable to operate. This is something about which an island nation such as Ireland would have a real concern because we are more dependent on air transport than many European member states. Our colleagues in Europe do not have the same isolated island status we have. Anything that happens in the aviation sector that either has the potential to affect the viability of airlines or has the capability to increase air fares is of crucial importance to us, not just from the point of view of continuing to do business here but, more important, ensuring that our tourism sector, which is a vital component of our economy, is protected.

I was interested in the comments of the Minister of State on the previous incarnation of the Bill in 2001 in response to the atrocities in the United States and the fact that it is difficult to collect the premium that would accrue to the State as a result of the indemnities that were put in place at the time. I do not want to refer to this aspect because it is sub judice, but we must ensure there is some structure in place for payment in advance, because certain operators will use every possible means to frustrate the State in collecting fees. Certain airlines believe taxpayers should pay for services which contribute to these companies making vast profits. I am sure the Minister of State is well aware of this and he does not need to come to this House to hear about it, but it is worth putting it on the record.

Insurance companies have assessed the risk in this situation in a different way from what they did in the past. It is understandable in light of what happened in the United States, particularly in regard to the 9/11 atrocities. I am concerned that there has not been anything in terms of terrorist activities in the world in recent months, or in the past year — obviously we are not part of the information which is shared among police and military sources throughout the world — that would appear to suggest a background or reason for this decision, other than that the insurance companies assessed the risk and decided not to provide indemnity in this regard in the future. As time moves on, will insurance companies continue to take this approach to certain other identified risks they perceive would leave them open to large claims? Will what we understand to be insurance no longer be just that? Will they cover just certain risks which do not pose a great threat to them, thereby ensuring their profitability is guaranteed? We all understood the principle of insurance to be that insurance companies must also take a risk.

Obviously it is not a matter for the Minister of State's Department. He is responding to legislation to deal with a problem in regard to airlines, aircraft and companies that operate in and around airports, ground handling and so on. I hope his Department will contact the relevant Minister who has responsibility for the insurance sector. This is something that must be dealt with on the international stage, and probably within the European Commission. I am not clear why an insurance company is now prepared to move aside from this "dirty bomb" risk, which appears far-fetched compared to the standard risk of an explosion, which may not be a "dirty bomb." Given what we know about the materials available to different terrorist organisations throughout the world, it is far more likely a regular bomb would be used. Is it the case that within the next two to three years insurance companies will decide they are no longer prepared to provide this war on terrorism indemnity required under European legislation as a result of a directive which is referred to in the briefing document we received from Mr. Ó Méalóid? I hope the Government and the European Commission will act as quickly as possible to ensure this does not happen. There has been a period of relative stability in regard to terrorism around the world, which is why people are curious about the need for this decision by insurance companies.

The Minister of State addressed the issue of cost recovery. Obviously the charging out to airlines on a premium basis needs to be addressed. There is also a need to force insurance companies who are avoiding this risk to pass on the corresponding reduction in the premium to airlines. This must be investigated to ensure it is passed on to the airlines because no doubt the Minister of State will want to charge the airlines for the indemnities he is putting in place. The recovery of this cost must come from the insurance companies that no longer cover the risk. Someone must deal with this element. I hope the State will be provided with as much revenue as possible to ensure it deals with the potential liability of €9 billion, which is a huge figure in terms of overall Exchequer funds.

Section 15 addresses the reinsurance issue and the Minister of State referred to the possibility of member states coming together to pool resources to establish a fund in this regard. That is the credible way forward. The potential liability would have an enormous impact on an economy and, hopefully, the EU can expedite such a fund. The Union can expedite various crazy rules and regulations for which none of us has regard.

However, this is an important issue on which member states can come together to put in place a fund to ensure the risk is spread across the Union. That would give more credibility to what the Union is about and it would give people confidence. It would also go a long way towards giving people a reason to believe there is a need for Europe and help all of us to convince the public during the upcoming debate on the European constitution. Such an issue can highlight the benefits of Union membership, quite apart from the funding that has resulted over the years. Will the Minister of State comment on the timeframe in this regard?

Will all member states enact similar legislation? It would be a concern if one or two do not intend to do so because it could mean that private and small airlines could register their businesses in Ireland to benefit from the indemnities. Will the Minister of State make provision to prevent foreign airlines registering in Ireland to avail of the indemnities provided in the legislation or will a ministerial order suffice? The Minister of State set out a number of the reasons he might refuse to sign an order for an airline but it is not clear how he would deal with an airline wishing to fly the flag of convenience of a state to avail of the indemnities. It is unlikely that American Airlines or Alitalia would register in Ireland but private airlines could do so, which would ultimately lead to a greater burden on the State from operators outside the jurisdiction for whom the State should not have to provide indemnity.

I welcome the legislation. I compliment the Minister of State and the Department on implementing it before the summer and on identifying the issue early to ensure the problem is resolved. A deadline of 1 July has been set for large cargo airlines. I hope it will be quickly signed into law.