Seanad Éireann - Volume 180 - 16 June, 2005

Air Navigation and Transport (Indemnities) Bill 2005: Second Stage.

Question proposed: “That the Bill be now read a Second Time.”

[1854]   Mr. Callely: I thank the House for agreeing to deal with this important emergency legislation at such short notice. The House will recall, following the appalling terrorist attacks in the United States on 11 September 2001, insurers withdrew cover for third party war and terrorism risks at short notice and it was then necessary for governments to provide cover so civil aviation could continue to operate.

In Ireland we enacted the Air Navigation and Transport (Indemnities) Act at short notice in December 2001. Due to the enormous liability being undertaken by the Exchequer under that Act, it was designed to expire after 12 months unless motions were passed by both Houses of the Oireachtas keeping it in place. Thankfully, commercial insurance became available by the second half of 2002 and it was possible to allow the Act to lapse.

Unfortunately, however, the problem has not gone away. During 2004 it became clear that insurers were very unhappy with the prospect of calamitous claims in the event of a terrorist attack involving the detonation of what is referred to as a “dirty bomb”. This is a bomb that has been deliberately contaminated with chemical, biological or radioactive material so as to cause widespread damage to people and property.

The problem for insurers is that an event involving one aircraft or airport would almost certainly give rise to claims under several, perhaps dozens, of insurance policies. Cover for “dirty bomb” risks is not normally provided in other areas of insurance, such as marine and property insurance. The international insurance industry believes this risk cannot be covered by insurance and must be dealt with at Government level, in the same way as natural catastrophes.

This matter was discussed on a number of occasions at meetings of the European Commission’s ad hoc group on aviation insurance. As might be expected, neither the Commission nor member states were anxious to give any premature signal to the insurers that they would be prepared to take over any part of the insurance risk. Consequently, no action was taken while it was not clear that insurance cover would actually be withdrawn. A key part of the strategy in 2001 had been to encourage the commercial insurers to go back to providing the cover that had been withdrawn.

At the most recent meeting of the ad hoc group, on 2 June 2005, member states were informed that insurers have now begun to withdraw cover for “dirty bomb” risks for aircraft hull insurance as renewals fall due. This has already affected the Spanish airline Iberia and the Department has been advised that it will also apply to the Irish cargo airline, Air Contractors, when its policy falls due on 1 July. As a result of this information, the Department immediately set about drafting new legislation to enable the Government to provide indemnities. This Bill is very closely based on the 2001 Act. However, some changes have been necessary to reflect our [1855] experience with that Act and to take account of developments in the intervening period.

The most significant change arises because this is expected to be a permanent change in insurance conditions. Insurers do not intend to go back to covering “dirty bomb” risks in the future. Therefore, it is not appropriate for the new Act to have a provision for it to lapse automatically. It is possible that the aviation industry in Europe will establish a mutual insurance fund that will, eventually, eliminate the need for Government support. However, that will take a number of years and may need some further legislation when the exact form of the scheme becomes clear. Also, in view of the fact that this will be a permanent change, the new Bill will allow Government orders and ministerial indemnities to be issued for 12 months at a time. This should significantly reduce the administrative burden for the aviation companies as well as for the Department.

The other important change is that in 2004 a new European regulation was adopted requiring all but the very smallest aircraft to have insurance, including insurance for war and terrorism risks. This regulation will come into effect on 30 April 2005. In 2001, it was only licensed airlines that were required to have insurance and the 2001 Act did not allow the issue of indemnities to private or corporate aircraft operators. Under the new Bill, it will be possible to issue indemnities for private and corporate aircraft registered in Ireland, as well as for the airlines, airports, ground handling and maintenance companies that received indemnities under the 2001 Act. If we did not extend the legislation in this way, it would be tantamount to a legislative decision to ban all private and corporate aviation. As a consequence of this change, the Bill extends the scope of airports to include all that are licensed for public use by the Irish Aviation Authority. The 2001 Act included only airports with commercial scheduled services. The extension of the definition will include the aerodromes at Connemara, Inisheer, Inishmaan, Inishmore and Weston.

The new Bill also deals with a problem that emerged under the 2001 Act. Under that Act indemnities could only be issued to businesses that had commercial insurance policies before the cover was withdrawn. In other words, no provision was made for new airlines, or other indemnified businesses, that might commence operation after the withdrawal of insurance. As a result, it was not possible for the Minister to provide an indemnity for a new airline, Skynet. As it happened, Skynet was able to obtain sufficient insurance to allow it to commence operations. As a precaution, and in view of the fact that the withdrawal of cover for “dirty bomb” risks is expected to be permanent, the new Bill will allow indemnities to be given to new businesses that otherwise meet the criteria for qualifying for indemnities.

In order to increase the protection for the State, the new Bill contains examples of reasons why the Minister may refuse to grant an indem[1856] nity or may issue a restricted indemnity. In the 2001 Act, while the Minister was under no obligation to issue indemnities, it was not clear why he might refuse an application. The reasons for refusal now include situations where an applicant has not or will not comply with conditions, whether an applicant has paid amounts due to the Minister under the Act, the applicant has all the necessary operating licences, the risk is excessive or it would not be in the public interest to provide indemnities for a particular class of activity, aircraft or applicant.

In order to avoid any future problems about collecting moneys, it is intended to require payment in advance for the indemnities to be issued under the new Bill. It is not clear at this stage how much revenue will be collected for indemnities under the Bill. Under the 2001 Act, approximately €5.4 million was collected and a further amount of about €2.6 million is the subject of a High Court claim between my Department and Ryanair.

Section 1 deals with interpretation. Three categories of aviation undertakings who will be able to obtain indemnities are identified, including airlines and operators of private and corporate aircraft airports, aerodromes which are licensed as public service aerodromes by the Irish Aviation Authority and other companies that provide essential aviation services, including baggage handling, maintenance, refuelling and security.

Section 2 deals with making a state of difficulty order. It and section 3 are the fundamental sections. Section 2 gives the Government power to make an order to declare that a state of difficulty affecting the supply of insurance — relating to air navigation services — exists. The requirement for the Government order reflects the enormous levels of indemnity required to provide enough cover to enable Irish aviation continue operation. The maximum period for such an order is 12 months and further orders can be made. It is anticipated that this change in insurance cover worldwide is permanent and this will mean orders must be made for the foreseeable future.

Section 3 empowers the Minister to give or renew indemnities during the course of an order under section 2. Section 4 provides that an indemnity may only be issued in a case where the undertaking requesting the indemnity had insurance immediately prior to the state of difficulty that gave rise to the order under section 2. However, where a new aviation undertaking starts business after the commencement of the state of difficulty order, which normally would have required this cover, an indemnity can be issued for it also.

Section 5 makes it clear that the Minister is not obliged to give an indemnity and provides that no liability will attach to the Minister if an indemnity is not given or is delayed or is in error. This section appeared as section 12 in the 2001 Act but has been moved in this Bill to make the order of the Bill more logical. While the 2001 Act did not give any examples of reasons the Minister might wish to refuse to issue or to renew an indemnity, [1857] this Bill cites some issues that the Minister may take into account including the following: failure to pay for previous indemnities issued under this Bill; whether the conditions of previous indemnities have been complied with; whether the Minister is satisfied that conditions in an indemnity to be issued will be complied with; whether the undertaking holds all the necessary licences to operate; or if it would not be in the public interest to issue an indemnity having regard to the overall liability under the Bill.

Section 6 allows the Minister to impose conditions when issuing an indemnity and he may declare an indemnity void if the conditions are not complied with. It is expected that the conditions will include a requirement to comply with whatever conditions were in the original insurance policy and to notify the Minister if an event arises that might give rise to a claim. This section has one additional feature over the 2001 Act. It specifically states in subsection (2) that the Minister may impose conditions for the purpose of reducing the risk of claims arising in connection with the indemnity.

Section 7 limits the State’s liability to whatever limit previously existed under the original insurance cover before the state of difficulty order came into force. Furthermore, when all indemnities are taken together, the State’s liability will be limited to €9 billion, the same as in the 2001 Act. The Bill proposes that if the total claims from indemnified undertakings were to exceed €9 billion, the payments from the Exchequer would be a proportion of the claims made. This section complements the provisions of the 2001 Act by providing for the issuing of indemnities for undertakings which were not in business before the state of difficulty order came into force, but which would normally have required this insurance cover if it were available in the market. This lacuna in the 2001 Act became evident when a new airline was established during the period of a state of difficulty order. There was no legal basis for issuing the new airline with an indemnity. As the insurance market was recovering at that time, fortunately, the airline was able to acquire sufficient insurance. As this withdrawal of insurance cover is expected to be permanent, that solution may not be available to newcomers to the market from now on.

Section 8 limits the period of a single indemnity to 12 months, as I have mentioned. An indemnity may be shorter than 12 months if that is considered appropriate. The period of validation was limited to 31 days in the 2001 Act because the indemnities were seen as a temporary measure. I have said on many occasions that this withdrawal of insurance cover is likely to be permanent. Therefore, the administrative burden faced by the aviation sector and the Department of Transport will decrease because indemnities can be issued every 12 months. It has been deemed appropriate to proceed in this fashion. The Bill will extend the retrospective period back to today’s date, 16 June 2005, if charges need to be applied to cover the period of validation of any letters of comfort [1858] issued by the Minister for the period prior to the enactment of the Bill.

Section 9 allows the Minister to impose charges for indemnities. The charges to be applied for indemnities under the Bill have not been set. Guidelines for charges for indemnities were put in place by the European Council after the passing of the 2001 Act. It is likely that the European Commission will review the guidelines in light of the current situation. Commission officials have indicated that the issuing of indemnities by Governments will not be deemed to contravene the restrictions on state aid. Legislation to that effect is expected to be initiated by the Commission, possibly before the end of July.

Section 10 provides that the Minister may issue indemnities to Irish licensed airlines, to private and corporate aircraft and to airports and service providers which offer services which are essential to support civil air services. A new provision in this section enables indemnities to be issued to private and corporate aircraft. As recent EU legislation requires such operations to have war and terrorism risk cover, they cannot fly without such cover. They were not previously statutorily required to have such cover, although many of them did have it.

Section 11 gives the Minister the defences against claims which would have been available to insurance companies if the insurance cover system had remained in place. Section 11(2) ensures that the issue of an indemnity by the Minister does not give additional rights to a person, compared to the rights they would have had if the insurance cover system had continued in force. As I mentioned earlier, this Bill, unlike the 2001 Act, caters for cases in which indemnities are issued for undertakings which were not in business before the state of difficulty order came into operation, but which would normally have required such insurance cover if it were available in the market. Such undertakings would not have had previous insurance on which to base the Minister’s defences. In such cases, the Minister’s defences are based on the forms of insurance which are normally held by such undertakings in their policies.

Section 12 requires applications for indemnities to be in the form required by the Minister. It also requires undertakings to provide relevant information to the Minister. Section 13 provides that the insurance Acts do not apply. The application of the Acts would mean that various statutory requirements could arise, which would not be relevant or appropriate for the matters with which this Bill is concerned.

Section 14 allows the Minister to terminate or suspend indemnities at any time. An indemnity in respect of an aircraft in flight will not be terminated until the aircraft lands safely. If indemnities are terminated, airlines must get their aircraft to land at the nearest airport as soon as possible, unless they are given specific permission from the Minister to fly to another airport. That is another key element in limiting the exposure of the Exchequer.

[1859] Section 15 allows the Minister to reinsure all or part of the liabilities associated with the indemnities, if such reinsurance cover becomes available. Section 16 gives the Minister the power to make payments in respect of claims under the indemnities. Some minor textual changes have been made to the 2001 Act to clarify how claims are to be presented to the Minister. Section 17 provides for the Minister’s expenses for the administration of this legislation to be met from the Exchequer. Section 18 provides for the payment to the Exchequer of moneys received under the Bill. Section 19 provides for the Short Title of the Act. I am happy to commend the Bill to the House.

  Mr. Feighan: I welcome the Minister of State to the House. That it is necessary to introduce a Bill of this nature is a reflection of recent developments. I thank Mr. Micheál Ó Méalóid of the aviation regulation and international relations division of the Department of Transport for giving Members some helpful briefing documents. Such advance information is welcome when one is speaking on a technical matter such as the Bill before the House. I thank the officials from the Department of Transport for their assistance.

If we had considered the state of the aviation industry four years ago, we would have been sure that the days of aircraft being hijacked were over. That was before thousands of people were killed in the horrific attacks in the United States on 11 September 2001. The harrowing scenes we saw on television that day made clear to everyone the dangers of international terrorism. Many insurance providers stopped offering indemnities as a consequence of the events of that day. The Government, like its counterparts in many other EU member states, introduced a system of indemnity to compensate for the failure of the insurance industry to offer such a system.

The insurance industry often demonstrates its importance and strength by picking and choosing the forms of insurance cover it wishes to provide. In this instance, insurance companies decided to withhold cover because they were worried about becoming bankrupt. We sometimes worry about the simple things in life. It would be very serious if a “dirty bomb” were to spread toxins, etc., and kill many people. We should bear in mind that such an event could also bankrupt the State and many other countries. This is a serious issue. I commend the Minister of State on bringing this legislation to the House. I would like him to give specific details in response to my questions about some aspects of the Bill.

The Air Navigation and Transport (Indemnities) Act 2001 related to airports with commercial scheduled services. I welcome the extended definition in this Bill, which will include the aerodromes at Connemara, Inis Oírr, Inis Meáin, Inis Mór and Weston. Airlines would not be allowed to use such aerodromes if the indemnity was not extended to them. The decision of many insurers to withdraw cover for aircraft hulls will cause many aircraft to be grounded. The [1860] Government had Hobson’s choice — it had to pursue this course of action to provide insurance cover in the interests of the safety of passengers and third parties.

The Minister of State has indicated that a small levy — a certain percentage of the cost of a flight — will be imposed on passengers. How expensive will the levy be? What will be the additional cost to passengers? While one cannot put a cost on passenger safety, we need to be given details of the extra levy that will be placed on an average airline ticket. The Minister of State also referred to a sinking fund of €9 billion. I wonder, without having gone through the figures closely, whether it is enough. Will that fund cover all the indemnity? If a “dirty bomb” explodes over Ireland and leads to damages of over €9 billion, will the Government be able to keep its costs below that level? If we found ourselves in a situation where we could not afford it, would other EU countries, or other countries around the world, help us? It is a serious situation which is more likely to happen in other countries, and we may have to help them.

  Mr. Callely: It would be proportional, but I will respond to the Senator later.

  Mr. Feighan: I welcome the Bill although it is regrettable that we must introduce such legislation. I hope the fund will generate sufficient capital and there will not be serious liabilities. I hope this situation never occurs. We should try to ensure that the war on terrorism, and the awful atrocities that took place, will be a thing of the past. I thank the Minister of State for introducing the Bill, which we will support.

  Mr. Dooley: 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 [1861] 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.

[1862] 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 [1863] 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.

  Mr. Morrissey: I welcome the Minister of State and I commend him for acting quickly and comprehensively by bringing the legislation before the House. We have had many debates on aviation over the past years and the risks to the aviation sector have been highlighted because of its cyclical nature and the problems associated with investment. However, without the indemnities provided for in the legislation, flights in and out of Ireland could come to a halt. As an island nation, the aviation sector is important. More importantly, we are fortunate that two of the most profitable and successful airlines in Europe operate out of Ireland.

This legislation is necessary from the point of view of both business and tourism. It is regrettable that it must be brought forward because of the times in which we live. The Government responded responsibly and quickly, given the repercussions of 11 September, when it introduced similar legislation in 2001. I welcome the updating of that Act through the extension of indemnities from one to 12 months, the sunset clause and the extension of its provisions to cover aerodromes, corporate and civil aviation.

This is a technical Bill and its scope and content is comprehensive in dealing with the challenges set out by the Minister of State. I support it and I hope it will have a speedy passage through the House.

  Mr. Wilson: I also welcome the Minister of State and his officials. This is important legislation. Since 11 September 2001, airplanes have become potential bombs. As a result, they have become a major risk for insurance companies, [1864] which have been sent diving for cover. The legislation will enable the Minister for Transport to issue indemnities to airlines, airports and essential service providers in the wake of the withdrawal by the worldwide insurance market of aviation insurance for damage caused by terrorist activities and “dirty bombs”, which comprise chemical, biological and radioactive substances and electromagnetic pulses. Since the beginning of June 2005 the insurance industry worldwide has begun to withdraw cover from aircraft hull and it is, therefore, necessary for the Government to enact this emergency legislation to enable aircraft to continue flying.

1 o’clock

I have a number of concerns. The Minister of State said the State’s liability is limited to €9 billion, which is an enormous amount for a small State such as ours. He also said it is possible the aviation industry in Europe will establish a mutual insurance fund, which will eventually eliminate the need for state support. This should be pursued by the Government as a matter of urgency. This represents too large a risk for the State to undertake and I urge the Minister of State to work with his colleagues in Europe to establish this fund as speedily as possible.

I thank the Minister of State and his officials for the work they have put into the legislation. I support its passage through the House.

  Mr. Daly: I am glad to welcome the Minister of State. I appreciate the work he is doing on aviation generally. What is the European view on this issue? In the maritime area, a similar scenario occurred and an international fund has been long established. Ireland has had to pursue a number of claims and, although the claims process is slow, the fund is important. An application was made for substantial funding following the Kowloon Bridge incident. I am not sure whether the full amount was received but that is a matter for another day. The EU is contemplating a new directive later this year. Where will this legislation fit in that context? It would be important to keep in mind what the EU will do in this area. The Union might establish an international fund that could be drawn from in the event of large claims, such as those contemplated here.

It is not my wish that the State would take over responsibilities undertaken by insurance companies until now, to which Senator Dooley referred earlier. It would not be proper to expect taxpayers to deal with a situation where insurance companies that have been gaining substantial funding under these policies for many years would now have taxpayers’ money substituted for theirs. We have seen some such activity regarding consultants in another Department within which the Minister of State had some responsibility not so long ago. The State was expected to step in and pick up a bill where premia had already been paid to companies.

  Mr. Callely: That is right.

[1865]   Mr. Daly: The Minister of State is fully aware that the reason I am raising this matter is because we do not want a similar situation to occur here. It would be important to have a response from the communities concerned rather than an individual State in this regard.

  Mr. Callely: That is a fair point.

  Mr. Daly: I have a second point. If this type of insurance existed at the time of the Air India disaster off the south-west coast, who would have responsibility for the large insurance bill rising from that incident? I do not wish to anticipate anything but international terrorism has been mentioned. If there were to be a tragic incident between here and the United States through a bombing or mishap, where would Ireland’s jurisdiction start and finish? What would be the State’s responsibility if something such as this happened within the Irish air navigation system?

These are some of the issues that must be discussed and dealt with, not at a national but at international level, especially in the aviation business. I strongly recommend that the Department examines funding in the maritime area in this regard to determine how the matter is being addressed there, as it has been dealt with by the International Maritime Organisation for many decades. I am sure the Department has already examined the issue. An international response would minimise the €9 billion burden as we could receive a claim of almost that amount after one incident alone.

Does this legislation mean in effect that some of the private jets owned by people in Ireland would be covered by insurance provided by the taxpayer? From reading the Bill, I am not sure, as I only glanced through it quickly. I do not want to name any particular individuals and draw the Cathaoirleach’s rebuke but I could name quite a few wealthy business people who own private jets. From my interpretation of the legislation, would the taxpayers pick up the bill for these indemnities?

  Mr. Callely: I would say that——

  An Cathaoirleach: The Minister of State must wait. Senator Daly without interruption.

  Mr. Daly: The Minister of State might be able to enlighten me and help me along.

  An Cathaoirleach: The Minister of State can help the Senator when he is replying.

  Mr. Callely: I would do so if the Cathaoirleach allowed me to. We will leave it for later.

  Mr. Daly: I am apprehensive about section 13.

  Mr. Dooley: Remove it.

  Mr. Daly: It is in the legislation.

  Mr. Callely: We will resolve the matter for the Senator.

[1866]   Mr. Daly: If the Minister of State would clear my mind on these issues, I will not delay the Bill any longer. We can proceed to navigate——

  Mr. Dooley: The Minister of State would be some boy if he could do that.

  Mr. Daly: ——or aviate from here without making any more queries. From my brief examination of the Bill, I believe the public should not be saddled with responsibility and liability for private persons and businesses.

  An Cathaoirleach: The Senator has one minute.

  Mr. Daly: We should move cautiously, keeping in mind what the communities have done in the absence of European legislation and considering whether we should press this matter at the present time pending whatever initiatives the communities take. I recommend to the Minister of State to go to the European Union in his official capacity on the Council of Ministers and suggest to his counterparts that they might consider introducing an international fund, such as exists in the maritime area, which would indemnify carriers. Many claims could have significant consequences for taxpayers here and could be dealt with at the international rather than national level.

  Mr. Callely: I thank Senators for their contributions and will try to respond to the questions as they raised. Senator Feighan asked what would be the charge on the airlines and would it be in euro or cent. The charge in 2001 was 30 cent per passenger. No decision has been made but this guideline is in place for the 2005 charge. A question was asked about the figure of €9 billion. The Bill limits the Government’s exposure to this amount. If the cost incurred were greater, there would be an international reaction and decisions would then have to be made. No arrangements are in place for other countries to help us. As I indicated and as has been witnessed in the past, there is usually a natural international reaction.

Senator Dooley asked a range of questions. On the matter of insurers, they have been renewing their risks and monitoring the market since 2001. They have concluded that so called “dirty bombs” present a risk they cannot sustain because so many people would be affected. The insurers’ exposure would be too great. Both Senators Dooley and Morrissey asked about ordinary insurance. There is no indication that insurers are considering withdrawing ordinary aviation insurance. The regulation of the insurance industry is undertaken by IFSRA.

I thank my good friend Senator Wilson for his kind comments on the Bill and for raising a number of issues. I intend to respond to his and Senators Daly and Morrissey’s questions together, as they all concern the same issue, namely, the fund itself. From the country’s point [1867] of view, the total exposure will be in the amount of €9 billion.

Senator Daly made some interesting comments and I may take the opportunity to discuss the matter further with the Senator because I am aware that he has an enormous fund of knowledge and experience relating to the marine fund. This is something that we can explore further at a later date. However, there is no aviation fund that would reflect or mirror the marine fund.

In response to Senator Wilson’s question, when the EU pooling scheme commences it may develop along the lines alluded to by Senator Daly. At present the is that the aviation industry will pay for the establishment of the fund, with Government guarantees, until it is large enough to cover the 2001 charge of 30 cent per passenger.

We will also examine the wider international issues that may have an impact in this area. The Bill allows for indemnity for private aviators but no decision has been made on whether this should be available and in any case, the indemnity will only apply to a small part of the aviation aspect of their insurance.

Senator Daly made a point relating to a private jet and I wish to clarify the situation in that regard. We must examine the impact that one aircraft may have on an airport, for example, Shannon Airport. We all want to ensure that Shannon Airport continues to operate, develop and accommodate all of the necessary components to make it a viable operation. We cannot debar anyone and we must ensure that appropriate insurance is in place for all who wish to utilise the airport. Should there be a disaster, everybody would then be covered and would be in a position to continue to operate.

We are dealing with legislation that addresses an important area, given where we are on the world stage, enjoying the fruits of the 21st century and playing such a pivotal role in the global economy. It is important to ensure that the aviation business continues to grow and develop and I know that it is the wish of Members of the Oireachtas that Ireland continues to play a pivotal role, as we have done in the past, in the development of aviation. There are obvious reasons for this wish, not least the fact that we are an island nation.

I hope that I will not be back in this House explaining the application of this legislation. However, I would welcome the opportunity to return to deal with other issues, including the scourge of international terrorism. It is to be hoped that I, my colleagues in Government and Members of this House will show the courage and strength required to address the course of conflict and the evils that have created some of the concerns that exist regarding international terrorism, as experienced, for example on September 11. Hopefully, such events will never be witnessed or experienced again. Ideally, we will never be in a position where we have to apply the provisions we are putting in place through this emergency legislation. This legislation is a safety net that will [1868] ensure our aviation industry can continue to operate.

Question put and agreed to.