David Stanton (Cork East, Fine Gael) | Oireachtas source

As Members of the House are aware, the Bill is being brought forward to give additional powers to the commission of investigation into the Irish Bank Resolution Corporation. These provisions are necessary, given the nature of the investigation involved, to ensure the commission can effectively perform its functions. I am presenting the Bill on behalf of the Tánaiste and Minister for Justice and Equality who has responsibility for the Commissions of Investigation Act 2004, under which the IBRC commission of investigation was established. I reiterate that the Government shares with the rest of the House a desire to ensure there will be an effective, efficient and timely investigation into the issues of significant public concern which have been raised in relation to IBRC. This shared determination across the Oireachtas has underpinned the extensive consultation at all stages with the Opposition, initially by the Minister for Finance and subsequently by the Taoiseach.

Before I outline the provisions of the Bill, I would like to set out the background to the commission of investigation and also mention some of the issues raised in the determinations and interim reports of the commission which have given rise to the provisions being considered.

The commission of investigation into certain transactions conducted by the Irish Bank Resolution Corporation was established in June 2015 following the approval of a draft order by both Houses of the Oireachtas. The commission is charged with investigating matters which are considered by the Government and affirmed by the Houses to be of significant public concern in respect of IBRC and making any report required under the Commissions of Investigation Act 2004 on its investigation. In accordance with its terms of reference, the commission is required to investigate certain transactions, activities and management decisions which occurred at IBRC between 21 January 2009, being the date of nationalisation of IBRC, and 7 February 2013, being the date of appointment of the special liquidators to IBRC, and which either resulted in a capital loss to IBRC of at least €10 million during that period, whether by consequence of a single transaction or a series of transactions relating to the same borrower or entities controlled by the same borrower; or are specifically identified by the commission as giving rise or likely to give rise to potential public concern about the ultimate returns to the taxpayer.

In November 2015 the sole member of the commission submitted an interim report. The report sets out in detail the substantial work undertaken by the commission up to that point and the outcome of the interaction between it and the special liquidators, the Department of Finance, the directors of IBRC, the Central Bank of Ireland and the Irish Stock Exchange. It is evident from the interactions, as detailed in the report, that a number of significant issues arose in the course of the commission’s work, in particular issues regarding the ability of the commission to obtain and admit certain information and documents into evidence. In the light of these concerns, the Taoiseach engaged with the leaders and representatives of the Opposition. On behalf of the Taoiseach and the Tánaiste, I thank those Members for their observations and contributions during that consultation process, on foot of which, a legislative solution was proposed. It was agreed, again with members of the Opposition, to further consult the sole member of the commission on the proposed legislative response. Following these consultations, the Taoiseach and the Opposition agreed on 2 June to proceed with the drafting of urgent legislation - the Bill before the House - to address the matters raised by the commission.

As I said, the first interim report of the commission from November 2015 outlined a number of significant issues which had arisen in the course of the commission’s work, including its view that the issue of confidentiality precluded it from admitting certain documents Into evidence; its view that the issue of legal professional privilege precluded it from admitting certain documents into evidence; its view that a duty of professional secrecy under section 118 of the Companies Act 1990 precluded it from receiving certain documents held by the Irish Stock Exchange; and the need to address matters relating to potential conflicts of interest and the management of the workload of the commission. These are all issues which are being addressed, to the greatest extent possible, in the Bill. As I said, there has been close consultation with the commission in the development of these provisions. The approach adopted in the Bill is to introduce bespoke legislation which effectively applies the Commissions of Investigation Act 2004 with specific provisions relating to the IBRC commission of investigation.

The Bill contains nine sections, of which sections 2, 3, 4, 6 and 7 provide for additional powers to be assigned to the IBRC commission of investigation which were identified as lacking under the Commissions of Investigation Act 2004 and consequently impeded the commission in performing its functions under the Act. The investigation into the transactions and other acts undertaken by IBRC during the specified period is of a nature which warrants these additional powers being given to the commission. Therefore, all of the provisions of the Bill provide for the IBRC commission of investigation solely and do not extend or in any way alter the application of the 2004 Act to other commissions of investigation, ongoing or otherwise. Sections 5 and 8 make provision to assist the management of the workload of the commission and ensure potential conflicts of interest are avoided.

Section 2 addresses certain powers of the commission. Subsection (1) confirms that the commission may make such orders and determinations and give such directions as are necessary for the performance of its functions. For that purpose the commission shall have all such powers, rights and privileges as are vested in the High Court or a judge of that court. The need for such an amendment is set out in the determinations published by the commission - for instance, sections 7.90 to 7.94 of determination 1. A similar provision is also available to tribunals of inquiry under the Tribunals of Inquiry (Evidence) Act 1921, as amended. One issue which arose during consultations and the drafting of the Bill is the extent to which this would draw the commission closer to the tribunals of inquiry model. However, the commission format remains distinct in terms of its regular review and reporting back to the Government.

Subsection (2) addresses the finding of the commission of investigation set out in its determinations and chapter 6 of the first interim report to the effect that the commission lacked the necessary statutory powers under the Commissions of Investigation Act 2004 to engage in a balancing of interests which may trigger the public interest exception to what is otherwise a duty of confidentiality. This arose as the relevant section of the 2004 Act - section 21 - expressly stated nothing in that Act "shall compel any person to disclose information or documents over which a duty of confidentiality is asserted and found by the Commission to apply". Subsection (2), therefore, confirms that the commission may admit documents in relation to which a duty of confidentiality is claimed.

Subsection (2)(b) refers to Article 27 of the EU market abuse regulation. Article 27 provides for the non-disclosure, on grounds of professional secrecy, of information received pursuant to that regulation. This would apply to information received by the Irish Stock Exchange and is similar to the obligation in respect of professional secrecy under section 118 of the Companies Act 1990 and which is to be disapplied in respect of the disclosure of information by the Irish Stock Exchange under section 7 of the Bill. The sole member of the commission has confirmed that there may be circumstances where he may request information which may fall under the provisions of the EU regulation. Again, I reiterate that these provisions are introduced solely for the purpose of this investigation and the particular circumstances identified by the commission. Without the introduction of these provisions, the commission is clear that it’s ability to carry out its work would be severely limited.

A definition of "document" is introduced in section 2(3) so as to include tapes, discs and sound recordings, as well as written material. Again, this is to ensure the commission will have access to all information needed to effectively conduct the investigation.

Sections 3 and 4 are introduced to ensure the commission may seek the directions of the High Court or refer any question of law to that court on the performance of its functions. It is clear from the determinations published by the commission that it had considered seeking the directions of the courts on certain matters but that the 2004 Act does not provide any mechanism for a commission to seek such directions. Sections 3 and 4 make the necessary provisions.

Section 5 is an important section and addresses two concerns identified by the commission. The first relates to the efficient management of the workload of the commission. As the House is aware, one aspect of the terms of reference for this commission is the investigation of transactions during the relevant period which involved capital losses to IBRC of more than €10 million. As noted In the interim report, 38 such transactions have been identified by the special liquidators to IBRC. Effectively, this would involve up to 38 investigations. I understand it has been agreed in consultation with the Opposition that the terms of reference for the commission will be amended so as to adopt a modular approach to these investigations. However, in the light of the potential for a large number of investigations, the commission has recommended - it certainly appears prudent - the appointment of additional members to it. While the appointment of more than one member to the commission is possible under the 2004 Act, the Act does not permit those members to operate in divisions or panels; rather, the members operate together as a single commission. Therefore, this section of the Bill proposes that where an additional member or members are appointed to the commission, they operate in divisions and, importantly, that the report and findings of any single division be a report and findings of the commission as a whole.

While it is not intended to appoint an additional member at this stage, this provision recognises and responds to the range of transactions potentially to be investigated by the commission. Permitting it to sit in divisions will also mean that the concerns identified by it in its first interim report about a possible conflict of interest between a member of the commission in relation to any particular transaction can be avoided by allowing that transaction to be investigated without the involvement of that member, should the need arise.

Section 6 addresses the disclosure of information by the special liquidators to IBRC to the commission of investigation. Determination 1 of the commission addresses the assertions of a duty of confidentiality and legal professional privilege which have been asserted by the special liquidators and which the commission has found to apply.The issues regarding the duty of confidentiality have been addressed through section 2 of the Bill, in respect of which I have spoken. However, in its determination, the commission further found that it had no power under the 2004 Act to admit into evidence documents over which a claim of legal professional privilege was asserted and found to apply. While it is understood that the special liquidators offered a limited waiver of legal privilege for certain transactions to the commission, none the less the commission considered that it could not proceed further or admit into evidence such documents.

It is clear from the commission’s decision on legal advice privilege set out in determination 1 that the commission was only seeking to obtain those documents that the directors of IBRC have received in the past, which relate to legal advice they may have received in respect of the write-offs of certain loans by IBRC and are the subject of the current investigation. While the special liquidators were willing to disclose the documents to the commission for the purpose of the investigation, they did not consent to the documents being provided to any third parties, although the special liquidators agreed to consider waiving privilege on a case by case basis. The inability to forward such documents to the former directors of IBRC would, in the view of the commission, deprive them of their right to fair procedures and to respond to the commission in a meaningful way.

Section 6 addresses the concerns raised by the commission. First, subsection (1) introduces a general requirement on the special liquidators to comply with all directions by the commission under the 2004 Act. With respect to the assertion of legal privilege by the special liquidators in respect of documents previously received by the directors of IBRC, subsection (2) will amend the Irish Bank Resolution Corporation Act 2013 to insert a new provision Into section 9 of that Act.

Section 9 provides for the Minister for Finance to issue instructions and directions to the special liquidators and the new subsection (2A) to be inserted by the Bill will provide that the Minister may, for the purpose of enabling the commission of investigation to perform its functions, give a direction to the special liquidator to do or refrain from doing a specified act. This may include a direction from the Minister to the special liquidators to waive legal professional privilege. There is no obligation on the Minister to issue such a direction and it will only arise where the commission requests the Minister to do so and informs the Minister, in writing, that the direction is necessary to enable the commission to perform its functions and it is in the public Interest to do so. The basis for issuing such a direction would be the connection to the purposes of the IBRC Act, as set out under section 3 of that Act and which, I remind this House, include "to protect the interests of the taxpayer".

Section 7 will disapply section 118 of the Companies Act 1990 to enable the Irish Stock Exchange to provide confidential information to the IBRC commission, which may admit it into evidence. Determination 3 of the commission, published in April, concluded that certain documents sought from the Stock Exchange were confidential pursuant to section 118 which provides for professional secrecy in respect of documents obtained by the Stock Exchange in pursuance of its functions under Part V of the 1990 Act in relation to insider dealing. As this is effectively a statutory duty of confidentiality, section 7 of the Bill will disapply it in respect of the disclosure of information to the commission.

In terms of the substantive provisions of the Bill, section 8 will amend the Commissions of Investigation Act 2004 but only in so far as it applies to the IBRC commission of investigation. Paragraph (a) amends the definition of "document" under the 2004 Act so that it replicates the definition under section 2 of this Bill. Paragraph (b) amends section 34 of the 2004 Act, again only in so far as it applies to the IBRC commission.

Under section 34, a draft of any report by a commission of investigation must be distributed, in advance of submission to the specified Minister, to any person who is identified or identifiable in that report. The provision in section 8(b) will limit the distribution of the report to persons in respect of whom there is an adverse finding. This has been specifically requested by the commission to reduce the level of distribution which would otherwise be required on the basis that there is a strong likelihood of many persons being identified in the report but in respect of whom there would be no adverse finding.

Section 9 deals with the commencement of the legislation. Senators will agree that although this is not a long Bill, it will provide significant additional powers to the commission of investigation into IBRC. Given the conclusions and recommendations reached by the commission in the determinations and interim reports published to date, and following consultation with the Opposition and commission of investigation during the drafting of the Bill, all of these provisions are proposed to ensure the task set by the House in June 2015 is conducted as effectively as possible.

I remind Senators that the very significant public concerns regarding certain transactions carried out by IBRC, which were recognised and acknowledged by this House, must be addressed in a comprehensive manner.

I would like to return to a matter I briefly mentioned. Given the number of transactions undertaken by IBRC, which have been identified and involve losses of greater than €10 million, I know that amended terms of reference are being brought forward which propose a modular approach to the investigation with a focus in the first phase on the Siteserv transaction, being an issue of significant public concern raised in the House. This is a pragmatic approach which will allow the commission to focus its efforts in the first phase. A draft order with the revised terms of reference will be brought before the Houses later this week for approval. I also understand that, as requested by the commission under section 6(6) of the 2004 Act, the Taoiseach has recently agreed to extend the timeframe for the commission until the end of October 2016. This will allow the commission to continue its preparatory work while the legislation is being enacted and the terms of reference amended as I have outlined.

I thank the leaders and members of the Opposition for their contribution in reaching a solution to the issues raised by the commission which would, if unresolved, have undermined the ability of the commission to reach findings in the investigations involved. I look forward to hearing the contributions of Members.