Committee Reports > List of Committees > Dáil > 1990 > Committee of Public Accounts > Interim Report No. 02 - Appropriation Accounts 1987

COMMITTEE OF PUBLIC ACCOUNTS

APPROPRIATION ACCOUNTS FOR 1987

FINAL REPORT

Introduction

1.The Committee has made progress in the matters referred to it and has agreed to the following interim Report:-

Paragraph 69 of the Report of the Comptroller and Auditor General on the Appropriation Accounts for the year ended 31st December 1987 read as follows:-

“Subhead Q - Appropriations in Aid

69. I referred in paragraph 82 of my 1983 Report to a mining lease granted by the Minister for Industry and Energy to Tara Mines Limited on foot of an agreement dated 19 September 1975. Under the terms of the lease the company is liable to pay royalties at a rate of 4.5% of the company’s annual profits, if any, calculated in accordance with the law relating to Corporation Profits Tax as it existed on 6 April 1974. Although Corporation Profits Tax was abolished with effect from 6 April 1976, the company’s liability for royalties continues to be payable on that basis. The terms of the lease also provide that, in the event of a dispute arising between the Minister and the company relating to the lease or its provisions, including the computation of royalties, the matter will be referred to arbitration.

On 6 March 1987 the Department requested payment of 4,788,970m in outstanding royalties in respect of estimated company profits totalling 107,071,000m for the years 1978 to 1984.

Following on the company’s rejection of the Department’s claim the process of referral to arbitration was initiated immediately by the Department and agreement on the appointment of an arbitrator was reached with the company on 11 September 1987.

As no date for an arbitration hearing had been set by July 1988, I asked the Accounting Officer what was the reason for the delay and when it was expected that the arbitration hearing would take place.

The Accounting Officer informed me that the matters at issue involved a number of complex points in relation to the computation of the company’s profits for royalty purposes and it was essential in those circumstances that the best expertise available should be engaged to advise the Minister and that he should be represented at the arbitration proceedings by Counsel with special competence in the field of computation of profits for royalty purposes. Consultations for this purpose had been initiated with the Revenue Commissioners after the agreement on the appointment of an arbitrator and were still continuing with the Attorney General’s Office which had been urged to expedite the matter. He stated that the company would be approached to agree on a date for the commencement of the arbitration hearing as soon as possible after Counsel had been appointed and fully briefed.

The Accounting Officer also said that the Department shared my anxiety to have this matter disposed of as quickly as possible but it was necessary to ensure that the interests of the State were adequately safeguarded in the proceedings. He assured me that the State’s entitlement to royalties is not affected by the passing of time.”

2.At its initial examination of the Accounting Officer on this paragraph on 11 May 1989 the Committee heard in evidence that the matter of the amount of royalties payable had been overtaken by a Government decision to sell the State’s stake in Tara Mines Ltd to the majority shareholder for $50 million. This price included an element of settlement for past unpaid royalties and the waiving of any future royalties.

3.Subsequently, in December 1989, the Committee visited Tara Mines to see at first hand the scale of operation and to gain an appreciation of the extent of the resources on which the sale price was based and the royalties were waived.

Sale of State’s Shareholding and Royalty Entitlement

4.At its February meetings the Committee heard in evidence that NCB Corporate Finance Ltd. was engaged as consultants by the Department of Energy to advise on the sale for which they were paid a fee of £661,885 including VAT. The Accounting Officer acknowledged the professional competence and expertise of N.C.B Corporate Finance Ltd. The Accounting Officer contended that he was precluded from furnishing the Consultants Report because of a confidentiality clause in a Shareholders’ Agreement signed on 19 September 1975 on behalf of Tara Mines Ltd. and the Minister for Industry and Commerce, and a similar covenant in the State mining lease.

5.The relevant clause and covenant entitled the Minister to obtain certain information from Tara Mines Limited and to have access to their books, property and records, subject, however, to an obligation to treat as confidential any material so obtained. In the preparation of the NCB Report the clause and covenant were invoked, so as to obtain information and access to books and records.

6.The Accounting Officer sought the advice of the Attorney General, who was of the opinion that, to the extent that the NCB Report contains such information obtained in this manner, its publication to any person other than the Minister or officers of his Department would amount to a breach of contract and of the covenant of the lease. The Attorney General has advised that the Minister and through him, the State, could be liable to damages for loss or injury sustained as a result of such a breach of contract or covenant.

7.The Accounting Officer at the Committee meeting on 22 February 1990, did, however, reveal certain information pertaining to the sale. He also intimated that the price realised, $50m, exceeded the point forecast of little over $40m, the level at which the consultants would have been prepared to recommend a sale.

Views of the Committee

8.The Committee considers that the signing of the 1975 Shareholders’ Agreement and Covenant L of the State mining lease has precluded the proper discharge of the duty placed on it under Standing Orders. The Committee, while not impugning the explanations given by the Accounting Officer, wishes to bring to the notice of the DÁil the fact that this agreement and the Covenant have prevented the proper examination of whether the State obtained full value for the eventual sale of its shareholding and for accrued and future royalties.

9.The Committee is of the opinion that no future agreements should be signed on behalf of the State, that may impinge on procedures for public accountability.

10.The Committee is gravely concerned at the implications of the Accounting Officer’s statement that, even if there were no legal prohibition of the disclosure of information in this case, he would still have difficulty in disclosing it, or indeed, any other commercially sensitive information held by the Department. To assist the Committee in securing information relative to its functions, the terms of reference of the Committee should be amended along the lines proposed in the Committee’s Special Report dated 18 May, 1988 on “The future role of the Comptroller and Auditor General and the Committee of Public Accounts”.

11.The Committee requests that this Report be debated in the Dáil as a matter of urgency.

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Gay Mitchell T. D.

Chairman

22 March 1990