Richard Bruton (Dublin North Central, Fine Gael)

I thank Senator Rónán Mullen for raising this issue and tabling the Bill. We all need to look at areas where, perhaps, the business environment can be improved. However, at a time when many enterprises are already complaining about excessive regulatory burdens, my Department must be extremely careful to ensure the imposition of a new regulatory burden is justified and proportionate. The basis for the regulatory regime outlined in the Bill has not been established and, unfortunately, I will not be able to support the Bill as a consequence.

The core provisions of the Bill are set out in section 2 which, first, provides that where an undertaking receives an overpayment of more than €25 from a business, it should furnish details of the overpayment to that business within 20 working days and seek its instructions as to how the overpayment should to be corrected. Second, the undertaking that has received the overpayment should make available to the business that has made the overpayment such additional information as it may reasonably request to investigate the overpayment. Third, the undertaking that has received the overpayment should comply in a timely manner with the reasonable instructions of the business that has made the overpayment regarding the return, offset or other disposal of the overpaid sum.

The Bill goes on to deal with the investigation and enforcement of alleged breaches of section 2. Section 3 provides that a person would be able to request the Minister for Jobs, Enterprise and Innovation to investigate alleged breaches of the provisions of section 2. Section 4 would empower the Minister to appoint authorised officers to investigate such breaches and sets out the powers of such officers and the requirement on persons under investigation to co-operate with authorised officers. Sections 5 and 6 deal with offences and penalties, including offences by corporate bodies, while section 7 outlines the defences that would be available to persons charged.

A regulatory architecture is being designed to deal with this problem. Our principal objection to the Bill is that it has not satisfied the most basic test of the principles of better regulation to demonstrate that it is necessary to create that architecture which would have both significant obligations in terms of tracking accountants and movements of cash and compliance requirements for the Department to set up procedures for investigation and enforcement, etc. That is the background against which I must view this issue at a time when we, as a nation, are seeking to reduce the regulatory burdens we impose on business, particularly small business. My Department has recently completed a process of reducing administrative burdens by 25%. We have recently reached that benchmark.

On the principles we are applying to new regulations, the first task is to establish convincingly the regulatory impact assessment or the benefit compared to the cost. In this case, no such need has been established. The explanatory memorandum asserts that there is an important regulatory gap, but no empirical evidence is produced of any such gap. I hear the Senator quoting United States data which, as I understand it, from our investigations, apply in different circumstances.

The explanatory memorandum argues that the multiplicity of trade payment transactions taking place daily and the often impersonal and system-driven nature of these transactions create what is called "a ready possibility" for overpayment. That may be the case, but it also demonstrates the significant tracking requirements that would be imposed in seeking to keep track and ensure none of these represented overpayments. We need to have proper evidence to show that new regulatory obligations are needed and would be proportionate. That is an important principle.

The explanatory memorandum goes on to state the absence of a more regulated environment has led to "unmistakable incidences" of retention and unilateral appropriation of trade overpayments and other credits, but it gives no information on either the scale or severity of such practices. While my Department has not had much time to research the matter, it has not come across evidence to date to suggest overpayment is a significant problem or a serious concern for businesses operating in Ireland. The Senator will recall that the Small Business Forum which reported in 2006 undertook a comprehensive review of the environment for small business in Ireland and that it made no mention of the matter, nor did its predecessor, the small business task force, which reported in 1994. As he will be aware, the Minister of State with responsibility for small business, Deputy John Perry, has an advisory group on small business established within the Department. Its action plan, produced in November 2011, made no reference to this issue. In contrast, it has sought to ensure we will take a number of measures to look at regulatory burdens in other areas. We are undertaking an audit of licences issued, the allegation being there are far too many licences issued, requiring compliance by persons in various trades in order to set up and become established. We are devoting resources, constrained as they are, to delivering on this agenda. The various inquiries have voiced concerns about all sorts of matters such as late payments, non-payments and underpayments but nothing in respect of overpayments. I must focus the resources available to my Department on investigating the capacity to reduce existing burdens. In reducing regulatory burdens, it is an onerous task for Departments to establish whether we can safely reduce certain burdens. That is the focus of my work.

Senators Ronán Mullen and Sean D. Barrett cited dormant accounts as an exemplar. In these cases there was a substantial amount of work done to establish that there was a serious problem. In the case of dormant accounts, there was clear evidence that the problem being addressed was substantial. Inquiries undertaken by the Department of Finance in advance of the introduction of the legislation in 2001 had established that the number of dormant accounts - defined as accounts in which there had been no customer-initiated transaction for 15 years - could be in excess of 840,000 and their value in the order of €130 million. These estimates have been broadly borne out by the fact that the transfers to the Dormant Accounts Fund, from the date of its establishment in April 2003 to February 2012, totalled €631 million, including earned interest of €36 million.

I repeat that the time available to my Department to research the issue has been limited, but we have come across no example of comparable legislation in other jurisdictions. The apparent absence of such legislation in other countries supports the view that there is no evidence of a regulatory deficit regarding overpayments that needs to be addressed by statutory means. At a time when our overriding concern must be to enhance the competitiveness of Irish enterprises, we need to look critically at the imposition of regulatory burdens on enterprise which, to the best of our knowledge, have no counterparts in the economies with which we trade and compete. While there are legislative provisions governing the disclosure of significant overpayments in the United States, these apply to the award or performance of government contracts or sub-contracts. The enactment of these provisions appears to have been prompted by concerns that government agencies were overpaying private contractors for goods and services and that these overpayments were not being reported by some contractors. The Bill before the House, however, would not appear to cover overpayments by public service bodies as it defines an "overpayment" as one received by an undertaking "from a person in the course of trade".

It is also questionable whether a problem of this nature should be tackled by means of legislative provisions along the lines proposed. It would also need to be shown that the existing remedies available to businesses where they had made an overpayment were inadequate. As the explanatory memorandum notes, the common law provides a ready restitutionary remedy for money paid under a mistake of fact. As Lord Wright observed in the leading English case, Fibrosa v. Fairbairn Lawson: "It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from, another which it is against conscience that he should keep."

There is no suggestion in the explanatory memorandum that the existing legal remedies are inadequate or unsatisfactory. Even if the Bill were to be adopted, it would be up to the business that had made the overpayment to take a civil action to recover it. The Bill's enforcement provisions deal only with criminal penalties for persons found guilty of breaches of the obligations to disclose and correct overpayments.

Senator Rónán Mullen referred to rules such as accountancy rules and auditing practice. Rather than creating statutory penalties or large enforcement regimes, the route proposed in the legislation, there may be more fruitful avenues for ensuring good practice prevails across the system. Even if there were evidence to show that inadvertent overpayments occurred on a significant scale, it would not necessarily justify the introduction of statutory provisions along the lines proposed. If the business that makes the overpayment acts in error, it is not unreasonable to assume that the business that receives the overpayment may also do so in error. Subject to the defences provided for in section 7, the effect of the Bill would be arguably to require a higher level of administrative and accounting competence and diligence from the payee than from the payer. A case can reasonably be made that the obligation to ensure payment is made in the correct amount rests in the first instance with the payer. In many cases, for example, in the case of a supermarket chain paying a small supplier, the business making the payment will be larger and better resourced than the business receiving it. Should we expect a small business with no developed finance function to apprehend and correct a payment error made by a supermarket chain with a large accounts department?

This is not consumer legislation designed to protect vulnerable consumers dealing with businesses possessed of superior knowledge and resources. Its focus is solely on overpayments in business to business transactions. It is a well established policy precept in this and other jurisdictions that the threshold for regulatory intervention is substantially and justifiably higher for business to business transactions than for business to consumer transactions.

I have referred to the need to ensure additional unnecessary obligations are not placed on businesses in the current difficult economic and trading climate. It is no less important to ensure additional financial burdens are not placed on the Exchequer in the current difficult budgetary conditions. The proposed legislation would require the Minister for Jobs, Enterprise and Innovation to appoint authorised officers to investigate complaints of non-compliance with its provisions and, where required, initiate court proceedings in respect of such breaches. Another inspectorate is not something enterprises are seeking or would happily embrace. While an estimate of the cost of the additional posts is not provided, it would not be insignificant. In a context where every aspect of public expenditure has to be examined and justified, it is reasonable to ask whether the State should be expected to meet the costs arising from the failure of private businesses to make the correct payments to the businesses with which they deal. Even if the public finances were in robust health, the case for such expenditure would be open to question. In the current extremely difficult budgetary climate additional expenditure for this purpose cannot be justified.

While I commend the Senator for taking the initiative to bring forward this measure, I ask the House to oppose the Bill. No evidence has been produced to show that the problem it seeks to address is significant and no other jurisdiction of which we are aware has seen fit to introduce similar legislative provisions. There are adequate remedies for businesses that wish to retrieve overpayments of which they become aware. Businesses that make overpayments of which they remain unaware should seek to improve their payments systems rather than look to the State to correct their negligence.

While I recognise that the Bill has been introduced in good faith and addresses an area in which regrettable cases of people having lost out have come to light, the correct approach is not statutory and does not involve inspectorates and regulatory requirements. If the Senator is to develop the legislation further, perhaps it should be done on the basis of codes of practice for the accountancy profession and improving the payment systems of private companies to track such payments. The bread and butter of business are keeping track of cash inflows and outflows. This, as opposed to establishing a legally onerous infrastructure or architecture, is the way to tackle the issue under discussion. The Senator's case has not been justified.