Seán Fleming (Laois-Offaly, Fianna Fail)
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52. To ask the Minister for Finance his views on whether sufficient progress is being made in reducing the State's legal bill in his Department and any State agencies under his aegis; and if he will make a statement on the matter. [25167/13]

Michael Noonan (Limerick City, Fine Gael)
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In response to the Deputy's question my Department has developed in house legal capacity which manages a portion of the Department of Finance legal work and seeks to minimise the use of external counsel for general matters.

With effect from 5 August 2011 the functions of the Banking Unit of the National Treasury Management Agency were transferred to the Department of Finance. Prior to transferring to the Department, the Banking Unit had put in place a legal panel of three external law firms using a competitive tendering process. When the functions of the Banking Unit were transferred, the contract for legal services with those external law firms was novated to the Department. It is intended that the Department of Finance will re-tender for a panel of external law firms and it is expected that further savings will be made through this tender process.

Counsels fees in relation to litigation in which the Department of Finance is involved are regularly reviewed by the Office of the Attorney General and the Chief State Solicitors Office to ensure that costs are minimised and duplication is avoided.

State Agencies under the remit of my Department have provided me with the following information:

Financial Services Ombudsman's Bureau

The Financial Services Ombudsman's Bureau tendered for legal services in 2012. They now have three legal firms working with the Bureau which will lead to better value being achieved going forward.

National Assets Management Agency (NAMA)

Since its establishment, NAMA has sought to minimise legal costs to the greatest extent possible. It has established panels of legal firms and runs mini-tenders in order to ensure that pricing for any work assignment is as competitive as possible. In 2010 and 2011, NAMA incurred legal costs arising from the requirement to carry out legal due diligence on its acquired loans; these costs were part of overall due diligence costs which were largely recovered from the participating institutions. As regards on-going legal costs incurred by NAMA in the management of its acquired portfolio of loans, these fell from €9.5 million in 2011 to €4.6 million in 2012. The higher level of legal costs in 2011 reflected costs associated with NAMA's establishment. NAMA legal costs include costs incurred in defending litigation initiated by debtors who NAMA has to defend to protect the taxpayers interest and this element of cost is therefore outside of the Agency’s control. In addition, some of the legal costs incurred by NAMA are recoverable from debtors and, in the case of enforcement, from the proceeds of asset disposals by receivers.

National Treasury Management Agency (NTMA)

The NTMA has a range of functions providing asset and liability management services to Government. These include borrowing for the Exchequer and management of the National Debt, the State Claims Agency (SCA), the New Economy and Recovery Authority (NewERA), the National Pensions Reserve Fund (NPRF), the National Development Finance Agency (NDFA) and National Asset Management Agency (NAMA). The NTMA assigns staff to NAMA and also provides it with business and support services and systems. NAMA reimburses the NTMA for the cost of these staff and services from its operations. NAMA is responsible for its own legal costs.

The NTMA typically sources legal advice in-house and, apart from exceptional matters such as implementation of the various Government responses to the economic and financial issues facing the State, expenditure on external law firms and barristers by the NTMA has generally been limited. The NTMA recently conducted a competitive tender for the appointment of a panel of external legal advisers in relation to Irish law and it is expected that the panel appointments will take effect in June 2013. The panel will operate for a period of three years (with an option for the NTMA to extend it for a further 2 year period) and the fees rates will be fixed for the initial three year period. The legal panel will also cover the NPRF and NewERA.

The NDFA incurs external legal fees on behalf of State Authorities principally associated with its mandate for procuring public private partnerships projects. All appointments of external legal advisers in respect of such projects are by competitive tender.

The NDFA is designated as the State Claims Agency when performing the claims management and risk management functions delegated to it under the National Treasury Management Agency (Amendment) Act 2000.

Following a competitive tender process, legal fees paid to defence solicitors relating to CIS* and ELPLPD** claims were capped at 40% of the plaintiffs’ professional legal fees down from the previous figure of 50%. Some tenderers accepted fee levels of less than the 40% cap. The combined impact of the tendering process and the 8% government reduction*** has reduced solicitors' legal fees by as much as 20% in some instances.

* Clinical Indemnity Scheme (CIS) relates to the management of all clinical claims taken against health enterprises/hospitals and clinical, nursing and allied healthcare practitioners covered by the Scheme.

** Employer Liability (EL) means the liability of an employer to its employees for its negligent acts or omissions, and those of its employees. Public Liability (PL) means the liability of an owner/occupier of premises for its negligent acts or omissions affecting members of the public. Property Damage (PD) Liability means the liability of an owner/occupier for its negligent acts or omissions leading to damage to a third party’s property.

*** All fees for external legal services provided to the SCA are subject to the 8% reduction as implemented by Government Decision S180/20/10/0964C of 3 February, 2009 which came into effect from 1 March 2009 for services rendered after that date.

The State Claims Agency (SCA) has also imposed caps on the levels of the fees paid to its panel solicitors in District, Circuit and High Courts and in respect of catastrophic injury.

In August 2012, the SCA announced a new procurement structure requiring barristers to engage in a competitive tendering process under which their fees were capped at up to 25% below prior levels. This was the first time a State agency had procured barristers for personal injury claims in this way.

Under the new procurement arrangements, barristers were required to set out their fees and compete with each other, subject to the respective caps specified by the SCA, for a wide range of legal services in respect of the High Court, District Court and Circuit Court. The Invitation to Tender was posted on the State’s public procurement website, www.etenders.gov.ie and closed in October 2012. The barrister panels will be announced in June. In total the SCA received approximately 1,000 responses to the invitation to tender. The new procurement structure also contained a provision that for the first time enabled barristers who have been in practice for less than five years to supply their services to the Agency. It is expected that this initiative will reduce the overall level of fees paid to barristers by as much as 35%.

The SCA endeavours wherever possible to reduce defence legal costs. Only a proportion of the claims managed result in defence legal costs as a significant volume of these are managed by the SCA's in-house legal team or due to their nature can be managed directly by the SCA's claims management team without resort to legal services thereby limiting the use of external legal services.

Revenue Commissioners

I am advised by the Revenue Commissioners that the Revenue Solicitor provides legal services for Revenue and in that capacity engages external barristers in circumstances that require specific legal advices and legal opinions in Tax, Customs and general litigation, for advising proofs for Court and Administrative Tribunal cases and for providing full advocacy services in the conduct on Tax, Customs and general litigation (both civil and criminal) before the District, Circuit, High and Supreme Courts, Appeal Commissioners and other administrative tribunals. External solicitors are engaged for debt collection and recovery. These are key components of Revenue's care and management of tax and duties.

Enhanced procedures governing the payment of professional fees to the panel of Counsel instructed by the Revenue Solicitor's Division were introduced in 2011 and further augmented and strengthened in 2012. The Revenue Solicitor and Deputy Revenue Solicitor manage the approval, selection and payment of Counsel. The procedures are designed to achieve the objectives of transparency, good governance and value for money

Indicative capped fees have been fixed for Counsel briefs and other items relating to Revenue litigation. Advisory work provided by Counsel will be paid on the basis of hours worked by Counsel subject to capped fees. The panel has also been expanded to ensure the utilisation of the appropriate level of counsel and to ensure value for money.

In addition to internal procedures to ensure value for money, all brief fees paid to counsel in excess of €10,000 exclusive of VAT, are considered and advised on by the Office of the Attorney General and then considered and sanctioned by the Department of Public Expenditure and Reform. Revenue also consults with the Chief State Solicitor's Office and the Attorney General's Office on fees paid to counsel to ensure consistency across State agencies.

The total fees paid in the years 2008, 2009, 2010, 2011, 2012 are shown in Table 1.

Table 1

Total fees paid to Counsel in respect of services provided to Revenue Commissioners, including VAT.

Revenue has contracts with six firms of solicitor to provide legal services associated with debt collection and recovery. These contracts were entered into following an open tendering process undertaken in 2009. The contract came into operation on 1 January 2010 and will remain in place for six years.

A Value for Money Policy Review (VFMPR) on the "Use of External Solicitor Enforcement to Recover Tax Debt" was undertaken to as part of the Revenue Commissioners' programme of review under the VFMPR initiative. The object of the evaluation was to assess whether the expenditure by Revenue on the use of external solicitors to pursue tax debts represented value for money. The overall conclusion was that such expenditure did represent value for money.

The report, which was laid before the Houses of the Oireachtas in March 2012 can be accessed through the following link:

http://www.revenue.ie/en/about/publications/vfmpr-external-solicitor-enforcement.pdf

The total fees paid in the years 2008, 2009, 2010, 2011, 2012 are shown in Table 2.

Table 2

Total fees paid to External Solicitors in respect of services provided to Revenue Commissioners.

While Tables 1 and 2 show increased expenditure, this is attributable to significant volumes of work, I am satisfied that the underlying trend in costs is downward.