2011 Investment Climate Statement - Ireland
The Irish Government actively promotes foreign direct investment (FDI), a strategy that fueled robust economic growth from the mid-1990s . The principal goal of Ireland’s investment promotion has been employment creation, especially in technology-intensive and high-skill industries. More recently, the Government has focused on Ireland’s international competitiveness by encouraging foreign-invested companies to enhance research and development (R&D) activities and to deliver higher-value goods and services.
The Irish Government's actions have had considerable success in attracting U.S. investment over the years. In 2009, the U.S. investment stock in Ireland, a country of just 4.5 million, was worth USD 166 billion. There are over 600 U.S. firms in Ireland, directly employing approximately 100,000 workers and supporting work for another 250,000, out of a total labor force of 2 million. U.S. firms operate primarily in the following sectors: chemicals; bio-pharmaceuticals and medical devices; computer hardware and software; electronics; and, financial services. Ireland has become a magnet for U.S. Internet/digital media investment, with industry leaders Yahoo, Google, Amazon, eBay/Paypal and Blizzard making Ireland the hub of their respective European operations.
U.S. companies are attracted to Ireland as an exporting sales and support platform to the European Union (EU) and other global markets such as the Middle East and Africa. Other reasons for Ireland’s attractiveness as an FDI destination include: a 12.5 percent corporate tax rate for domestic and foreign firms; the quality and flexibility of the English-speaking workforce; availability of a multi-lingual labor force, cooperative labor relations; political stability; pro-business government policies; a transparent judicial system; and the pulling power of existing companies operating successfully in Ireland (a "clustering" effect). Factors that negatively affect Ireland’s ability to attract investment include: high labor costs, skilled-labor shortages, inadequate infrastructure (such as in transportation and Internet/broadband ), and absolute price levels that are among the highest in Europe. The Irish government has itself become concerned about the possibility of rising energy costs and the reliability of energy supply undermining Ireland’s attractiveness as an FDI destination.
Four state organizations promote inward investment into Ireland by foreign companies:
· The Industrial Development Authority of Ireland (IDA Ireland) has overall responsibility for promoting and facilitating FDI in all areas of the country, except the Shannon Free Zone. IDA Ireland is also responsible for attracting foreign companies to Dublin's International Financial Services Center (IFSC). IDA Ireland maintains six U.S. offices in New York, Boston, Chicago, Mountain View, Irvine, and Atlanta, as well as offices in Europe and Asia;
· Enterprise Ireland promotes joint ventures and strategic alliances between indigenous and foreign companies. The agency also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland;
· Shannon Free Airport Development Co. (SFADCO), or “Shannon Development,” handles FDI in the Shannon Free Zone (see description below) and owns properties in the Shannon region as potential investment greenfield sites. Under the 2006 Industrial Development Amendments Act, responsibility for investment by Irish firms in the Shannon region was transferred from Shannon Development to Enterprise Ireland. IDA Ireland remains responsible for FDI in the Shannon region outside the Shannon Free Zone;
· Udaras na Gaeltachta (Udaras) has responsibility for economic development in those areas of Ireland where Irish (Gaeilge) is the predominant language and works with IDA Ireland to promote overseas investment in these regions.
Major Laws/Rules/Taxation Policy
Ireland's judicial system is transparent and upholds the sanctity of contracts, as well as laws affecting foreign investment. These laws include:
· The Industrial Development Act of 1993, which outlines the functions of IDA Ireland;
· The Mergers, Takeovers and Monopolies Control Act of 1978, which sets out rules governing mergers and takeovers by foreign and domestic companies;
The Competition (Amendment) Act of 1996, which amends and extends the Competition Act of 1991 and the Mergers and Takeovers (Control) Acts of 1978 and 1987, and sets out the rules governing competitive behavior;
· The Companies Act of 1963, which contains the basic requirements for incorporation in Ireland (amended in 1990); and,
· The 2004 Finance Act, which introduced tax incentives to encourage firms to set up headquarters in Ireland and to conduct R&D.
In addition, there are numerous laws and regulations pertaining to employment, social security, environmental protection and taxation, with many of these keyed to EU Directives.
One of Ireland's most attractive features as an FDI destination is its low corporate tax rate. Since January 1, 2003, the corporate tax rate for both foreign and domestic firms has been 12.5 percent. Ireland's corporate tax rate is among the lowest in the EU, and the Irish Government continues to oppose proposals not only to harmonize taxes at a single EU rate, but also to standardize the accounting methods used by EU Member States to calculate corporate taxes.
All firms incorporated in Ireland are treated on an equal basis. With only a few exceptions, there are no constraints preventing foreign individuals or entities from ownership or participation in private firms/corporations. The most significant of these exceptions is that, as with other EU countries, Irish airlines must be at least 50 percent owned by EU residents in order to have full access to the single European aviation market. There are also requirements related to the purchase of agricultural lands (see below).
There are no barriers to participation by foreign institutions in the sale of state-owned Irish companies, as evident for example in the purchase by U.S. investors of shares of the formerly state-owned national airline Aer Lingus during its privatization. While Ireland does not have a formal privatization program, the Government privatized Aer Lingus in 2005 through a stock market flotation that valued the carrier at 1.2 billion euro. The Government retains about a one-quarter stake in the airline. Residents of Ireland, however, may be given priority in share allocations to retail investors, as was the case with the state-owned telecommunications company Eircom, privatized in 1998.
Citizens of countries other than Ireland and other EU member states can acquire land for private residential purposes and for industrial purposes. Under Section 45 of the Land Act, 1965, all non-EU nationals must obtain the written consent of the Land Commission before acquiring an interest in land zoned for agricultural use. There are many stud farms and racing facilities in Ireland that are owned by foreign nationals. No restrictions exist on the acquisition of urban land.
There is no formal screening process for foreign investment in Ireland, though investors looking to receive Government grants or assistance through one of the four state agencies responsible for promoting foreign investment in Ireland are often required to meet certain employment and investment criteria. These screening mechanisms are transparent and do not impede investment, limit competition, or protect domestic interests. Potential investors are also required to examine the environmental impact of the proposed project and to meet with Irish Environmental Protection Agency (EPA) officials.
Third Party Indicators:
TI Corruption Index
14 (out of 180)
Heritage Economic Freedom
5 (out of 138)
World Bank Doing Business
9 (out of 183)
Conversion and Transfer Policies
Ireland uses the euro as its national currency and enjoys full current and capital account liberalization. There are no restrictions or reported significant delays in the conversion or repatriation of investment capital, earnings, interest, or royalties, nor are there any plans to change remittance policies. Likewise, there are no limitations on the import of capital into Ireland. Foreign exchange is easily obtainable at market rates.
Expropriation and Compensation
Private property is normally expropriated only for public purposes in a non-discriminatory manner and in accordance with established principles of international law. State condemnations of private property are carried out in accordance with recognized principles of due process. Where there are disputes between owners of private property subject to a government taking, the Irish courts provide a system of judicial review and appeal.
There is no specific domestic body for handling investment disputes. The Irish legal system is based on common law, legislation and the Constitution. The Companies Act 1963 (amended 1990) is the most important body of law dealing with commercial and bankruptcy law and is applied consistently by the courts. Irish bankruptcy laws give creditors a strong degree of protection. The Department of Enterprise, Trade and Innovation has primary responsibility for drafting and enforcing company law. The judiciary is independent, and litigants are entitled to trial by jury in commercial disputes. Ireland is a member of the International Center for the Settlement of Investment Disputes, and the Irish Government has been willing to agree to binding international arbitration of investment disputes between foreign investors and the state. Ireland is also a party to the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Ireland has no specific domestic laws governing investment disputes that apply only to foreign firms. There is, however, a legal arbitration framework available to parties that opt to arbitrate a dispute, including investment disputes, rather than litigate the case. Currently, the Embassy is unaware of any disputes involving investments by U.S. firms either in arbitration or litigation. In recent years, however, U.S. business representatives have occasionally called into question the transparency of government tenders.
According to some U.S. firms, lengthy budgetary decisions delay procurements and the Government sometimes identifies preferred bidders before making a tender decision. Some U.S. firms also claim that unsuccessful bidders have had difficulty receiving information on the rationale behind the tender outcome. Conversely, successful bidders have experienced delays in finalizing contracts, commencing work on major projects, obtaining accurate project data, and receiving compensation for work completed, including through conciliation and arbitration processes. Successful bidders have also subsequently found that the original tenders do not accurately describe conditions on the ground.
Performance Requirements and Incentives
The Irish Government does not maintain any measures that it has notified to the WTO as being inconsistent with Trade-Related Investment Measures (TRIMs) requirements, nor have there been any allegations that the Government maintains such measures.
Three Irish organizations -- IDA Ireland , SFADCO and Udaras -- have regulatory authority for administering grant aid to investors for capital equipment, land, buildings, training, R&D, etc. Foreign and domestic business enterprises that seek grant aid from these organizations must submit investment proposals. Typically, these proposals include information on fixed assets (capital), labor, and technology/R&D components, and establish targets using criteria such as sales, profitability, exports, and employment. This information is treated in confidence by the organizations, and each investment proposal is subject to an economic appraisal prior to approval for support.
Performance requirements are generally based on employment creation targets established between the state investment agencies and foreign investors. Grant aid is paid out only after externally audited performance targets have been attained. Generally, parent companies must guarantee repayment of the government grant if the company closes before an agreed period of time elapses, normally ten years after the grant has been paid. Grant agreements generally have a term of five years after the date on which the last grant is paid. There are no requirements that foreign investors purchase from local sources or allow nationals to own shares.
New EU Regional Aid Guidelines (RAGs) that apply to Ireland were announced in 2006 and became effective on January 1, 2007. The RAGs govern the amount of grant aid that the Irish Government can provide to companies, depending on their location. The differences in the aid ceilings reflect the less developed status of business/infrastructure in regions outside the greater Dublin area.
While investors are free, subject to planning considerations, to choose the location of their investment, IDA Ireland has encouraged investment in regions outside Dublin since the 1990s. This linkage is consistent with Irish government policy, adopted in 2001, of spreading investment more evenly around the country. The IDA’s “Ireland Horizon 2020” strategy has the stated goal of having 50 percent of all new FDI investments located outside Dublin and Cork by 2014. To encourage the location of firms outside Dublin, IDA Ireland has developed "magnets of attraction," including: a Cross Border Business Park linking Letterkenny in Ireland and Derry in Northern Ireland; a regional Data Center in Limerick; and the National Microelectronics Research Center in Cork. IDA Ireland has supported construction of business parks in Oranmore and Dundalk for the biotechnology sector.
There are no restrictions, de jure or de facto, on participation by foreign firms in government-financed and/or -subsidized R&D programs on a national basis. In fact, the government strongly encourages foreign companies to conduct R&D as part of a national strategy to build a more knowledge-intensive, innovation-based economy. Science Foundation Ireland (SFI), the state science agency, has been responsible for administering Ireland’s R&D funding since 2000. Under its current strategy, SFI is investing over $200 million annually in R&D activities. It is targeting leading researchers in Ireland and overseas to promote within Ireland the development of biotechnology, information and communications technology, and energy, as well as complementary worker skills. A key aspect of Government support is a flexible 25 percent tax credit on the cost of eligible Research Development and Innovation (RDI) activity and of any building with a 35 percent RDI activity level over four years. GlaxoSmithKline initiated a research and development collaboration on Alzheimer’s disease with the Institute of Neuroscience and Intel established the Technology Research for Independent Living (TRIL) Centre focused on the use of technology to support independent living for the elderly. Genzyme invested in new process-development facilities in Waterford.
Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. investors, generally liberal. There are no restrictions on the numbers and duration of employment of foreign managers brought in to supervise foreign investment projects, though their work permits must be renewed yearly. There are no discriminatory export policies or import policies affecting foreign investors.
Right to Private Ownership and Establishment
The most common form of business organization in Ireland is the incorporated company, limited by shares, registered under the Companies Act, 1963, or previous legislation. Irish law does not prevent foreign corporations from carrying on business in Ireland. Any company incorporated abroad that establishes a branch must, however, file certain papers with the Registrar of Companies. A foreign corporation with a branch in Ireland will have the same standing in Irish law for purposes of contracts, etc., as a company incorporated in Ireland. Private businesses are not at a competitive disadvantage to public enterprises with respect to access to markets, credit, and other business operations.
Protection of Property Rights
(I) Real Property
Secured interests in property, both chattel and real estate, are recognized and enforced. The Department of Justice and Law Reform administers a reliable system of recording such security interests through the Property Registration Authority (PRA) and Registry of Deeds. The PRA registers a person's interest in property on a public register. In certain cases, this ensures that an owner's interest in property is documented and protected (by a State guarantee). All property acquired beginning in January 2010 must be registered in the PRA. Ireland also operates a document registration system through the Registry of Deeds in which deeds (as distinct from titles) may be registered, priority obtained, and third parties placed on notice of the existence of documents of title. An efficient, non-discriminatory legal system is accessible to foreign investors to protect and facilitate acquisition and disposition of all property rights.
(II) Intellectual Property Rights
Ireland is a member of the World Intellectual Property Organization and a party to the International Convention for the Protection of Intellectual Property. Legislation enacted in 2000 brought Irish intellectual property rights (IPR) law into compliance with Ireland's obligations under the WTO Trade-Related Intellectual Property Treaty (TRIPs). The legislation gives Ireland one of the most comprehensive legal frameworks for IPR protection in Europe.
This legislation addressed several TRIPs inconsistencies in previous Irish IPR law that had concerned foreign investors, including the absence of a rental right for sound recordings, the lack of an "anti-bootlegging" provision, and low criminal penalties that failed to deter piracy. The legislation provides for stronger penalties on both the civil and criminal sides but does not include minimum mandatory sentencing for IPR violations.
As part of this comprehensive copyright legislation, revisions were also made to the non-TRIPs conforming sections of Irish patent law. Specifically, the IPR legislation addresses two concerns of many foreign investors in the previous legislation:
· the compulsory licensing provisions of the previous 1992 Patent Law were inconsistent with the "working" requirement prohibition of TRIPs Articles 27.1 and the general compulsory licensing provisions of Article 31; and,
· applications processed after December 20, 1991, did not conform to the non-discrimination requirement of TRIPs Article 27.1.
DVD and CD piracy continues to be a problem, with claims from industry groups that up to 50 percent of all DVDs sold in Ireland are counterfeit, costing retailers 80 million euro in lost sales each year. Industry groups also believe that light penalties given to counterfeiters in DVD piracy court cases hamper police enforcement efforts. In mid-2006, the Government responded to piracy problems by forming an inter-agency task force, which is working with industry on countermeasures.
In addition to DVD and CD counterfeiting, industry sources estimate that up to 35 percent of PC software used in Ireland is pirated and resulted in a $125 million loss to the industry in 2009.
During 2010, the Irish High Court ruled that Ireland does not recognize any laws that would allow Internet services providers (ISPs) to suspend service to customers suspected of Internet piracy. The judgment was issued after the Irish recording industry attempted to have an injunction brought against UPC Ireland to force the provider to block service to customers engaged in illegal music downloading. UPC Ireland in its defense said that while it does not condone Internet piracy, it could not be held responsible for content transmitted across its network. In his decision, the judge stated that Irish legislation made “no proper provision for the blocking, diverting or interrupting of Internet communications intent on breaching copyright”. Another ISP, Eircom, operates a “threestrikes and you’re out” policy that suspends Internet access for customers who attempt to access websites that are identified as illegal file-sharers.
Transparency of Regulatory System
The Irish Government employs a transparent and effective policy framework that fosters competition between private businesses in a non-discriminatory fashion. U.S. businesses can, in general, expect to receive national treatment in their dealings with the Government.
In recent years, independent bodies have taken over regulatory powers from Cabinet departments in key economic sectors. The Commission for Communications Regulation and the Commission for Energy Regulation are responsible for regulating the communications and energy sectors, respectively. Both are independent bodies with institutional links to the Department of Communications, Energy and Natural Resources. The Commission for Aviation Regulation is an independent body that regulates the aviation sector. It is institutionally linked to the Department of Transport, which has direct regulatory powers over other segments of the transportation sector.
The Competition Act of 2002, subsequently amended and extended by the Competition Act 2006, strengthens the enforcement power of the independent statutory agency, the Competition Authority. The act also introduces criminal liability, increases corporate liability, and outlines available defenses. Most tax, labor, environment, health and safety, and other laws are compatible with European Union regulations, and they do not adversely affect investment. Proposed laws and regulations are published in draft form for public comment, including by foreign firms and their representative associations. Bureaucratic procedures are transparent and reasonably efficient, in line with a general pro-business climate espoused by the Government.
Efficient Capital Markets and Portfolio Investment
Capital markets and portfolio investments operate freely, and there is no discrimination between Irish and foreign firms. In some instances, development authorities and banks are able to facilitate loan packages to foreign firms with favorable credit terms. Credit is allocated on market terms; however the ongoing banking crisis has limited the amount of credit available to small and medium-sized firms. Irish legal, regulatory, and accounting systems are transparent and consistent with international norms and provide a secure environment for portfolio investment. The capital gains tax rate is 20 percent.
The Irish banking sector, like many worldwide, came under intense pressure in 2007 and 2008 following the collapse of Ireland’s construction industry and an end to Ireland’s property boom. Subsequently, it was determined that a number of Ireland’s financial lenders were severely under-capitalized and required government intervention to survive. The government introduced temporary guarantees to personal depositors in 2008 to ensure that deposits remained in Ireland and has so far continued these guarantees. One of the main banks involved in property lending, Anglo Irish Bank, was nationalized and the Government has taken majority stakes in several others, some of which have now become effectively nationalized as a result. The Irish government also created the National Asset Management Agency -- a government-run organization -- into which the Irish banks have transferred most of their property-related loan books. With increased exposure to bank debts, the Government found it difficult to place sovereign debt on international bond markets and had to seek IMF and EU intervention in November 2010. A rescue package of €85 billion was agreed to cover government deficits and costs related to the bank bailout. Following further Government capitalization of Allied Irish Banks, the effective control of the bank transferred to the Irish government by the end of 2010. Irish Nationwide Building Society and EBS have also been taken into state control. The government has also helped re-capitalize Bank of Ireland, and it is anticipated that Government may have to increase its shareholding in Bank of Ireland further in 2011.
Many U.S. banks have operations in Ireland in Dublin’s International Financial Services Center and provide a range of financial services to clients in Europe and worldwide. Among these are State Street, Citigroup, Merrill Lynch, JP Morgan and Northern Trust.
At the end of September 2010, equity market capitalization in the Irish Stock Exchange (ISE) was €45 billion, almost unchanged from the end-2009 level. In terms of market weight, the stocks of CRH (a construction industry supplier), Ryanair (a low-cost airline) and Kerry Group (a food and ingredient firm) are dominant. From 2002 to 2006, the ISE delivered returns of between 19 and 28 percent each year. However, driven in part by concerns over possible spillover effects from the sub-prime crisis in the United States, its market capitalization started to fall in 2007. This continued through 2009 as the Irish banking crisis evolved and the market capitalization of bank stocks plummeted. In 2005, the ISE opened up a secondary market - the Irish Enterprise Exchange (IEX), which caters to smaller firms with a minimum market cap of 5 million euro.
The Central Bank Reform Act, 2010, created a single unitary body – the Central Bank of Ireland - responsible for both central banking and financial regulation. The new structure replaces the previous related entities, the Central Bank and the Financial Services Authority of Ireland, and the Financial Regulator.
The Central Bank of Ireland is a member of the European System of Central Banks (ECB), whose primary objective is to maintain price stability in the euro area. Ireland no longer operates an independent monetary policy. Rather, ECB formulates and implements monetary policy for the Eurozone and the Central Bank implements that policy at the national level. The Governor of the Central Bank is a member of the Governing Council for the ECB and has an equal say in the formulation of monetary and interest rate policy. The other main tasks of the Central Bank include: issuing euro currency in Ireland; acting as manager of the official external reserves of gold and foreign currency; conducting research and analysis on economic and financial matters; overseeing the domestic payment and settlement systems; and managing investment assets on behalf of the State.
The Irish Takeover Panel Act of 1997 governs company takeovers. Under the Act, the “Takeover Panel” issues guidelines, or "Takeover Rules," which aim to regulate commercial behavior in the context of mergers and takeovers. According to minority “squeeze-out” provisions in the legislation, a bidder who holds 80 percent of the shares of the target firm (or 90 percent for firms with securities on a regulated market) can compel the remaining minority shareholders to sell their shares.
There are no reports that the Irish Takeover Panel Act has been used to prevent foreign takeovers specifically, and, in fact, there have been several high-profile foreign takeovers of Irish companies in the banking and telecommunications sectors in recent years. In 2006, for example, an Australian investment group, Babcock & Brown, acquired the former national telephone company, Eircom, and subsequently sold it to Singapore Technologies Telemedia in 2009. The EU Directive on Takeovers provides a framework of common principles for cross-border takeover bids, creates a level playing field for shareholders, and establishes disclosure obligations throughout the EU. The Directive was fully implemented through Irish legislation in May 2006, though many of its principles had already been enacted in the Irish Takeover Panel Act 1997.
Competition from State-Owned Enterprises (SOEs)
There are a number of state-owned enterprises (SOE) in Ireland in the energy, broadcasting and transportation sectors. The two energy SOEs are the Electricity Supply Board (ESB) and Bord Gais (BG), while Raidió Teilifís Éireann (RTE) operates the national broadcasting service, and Bus Éireann provides bus transportation throughout the country. Éircom, the national telecommunication service, and Aer Lingus, the national airline, were privatized by the government in the recent past.
All of Ireland’s SOEs are open to competition for market share and can, as in the case of ESB and BG, compete with one another. The SOEs do not discriminate against, or place unfair burdens, on foreign investors or foreign-owned investments.
There has been a statutory transfer of responsibility for the regulatory functions for the energy sector from the government to the Commission for Energy Regulation – a statutory body that is required not to discriminate unfairly between participants in the sector, while protecting the end-user. In general, SOEs aspire to pay their own way, financing their operations and funding further expansion through profits generated from their own operations. Some pay an annual dividend to the government. The SOEs themselves are governed usually by a board of directors, often chosen by the government.
The National Treasury Management Agency (NTMA) is the asset management bureau of the Irish government. In good economic times, the NTMA invested Irish government funds such as the national pension funds in financial instruments worldwide. Since the onset of economic difficulties, the NTMA is responsible for funding day-to-day government operations through the sale of sovereign debt worldwide. It also has oversight of the National Asset Management Agency (NAMA), the agency charged with the disposal of bad bank debt.
All SOEs must present annual reports to the government.
Corporate Social Responsibility (CSR)
In Ireland, there is a growing awareness of corporate social responsibility, mainly driven by a number of independent organizations. According to “Business in the Community – Ireland”, an organization at the forefront of promoting CSR in Ireland, many of the participant firms believe that corporate responsibility can play a major role in rebuilding Ireland's corporate reputation. Companies advertise their participation in such programs as the Fairtrade Certification Mark.
(I) Impact of Northern Ireland Instability
There was no significant spillover of violence from Northern Ireland in the 1970s and 1980s, nor since the cease-fires of 1994. Indeed, the growth of business investment and confidence in Northern Ireland following the cessation of widespread violence has also benefited the Republic of Ireland. The 2007-2013 National Development Plan earmarks funding to develop cross-border cooperation on R&D collaboration, energy and transportation infrastructure linkages, and joint trade missions. No violence related to the situation in Northern Ireland has been specifically directed at U.S. citizens or firms located in the South.
The 1998 ratification of the Good Friday Agreement by large majorities in both Ireland and Northern Ireland further diminished the potential for violence. Although some groups in both Northern Ireland and the Republic of Ireland opposed to the peace process have continued to commit infrequent acts of criminality, there have been no serious incidents in the south. In May 2007, the Northern Ireland Assembly was restored and local government resumed, a key milestone in the successful peace process in Northern Ireland that commenced with the Good Friday Agreement in 1998.
(II) Other Acts of Political Violence
There have been no recent incidents involving politically motivated damage to foreign investment projects and/or installations in Ireland. In 2003, several Irish citizens opposed to the Iraq War, damaged U.S. military assets at Shannon Airport. One of these citizens was convicted in an Irish court and given a suspended sentence. In late 2005, a group of opposition and independent Irish parliamentarians said publicly that they would not oppose further attacks on U.S. military aircraft transiting Ireland. In 2006, five other Irish citizens involved in the damage of U.S. military assets in 2003 were acquitted by a jury decision in an Irish court. The jury accepted arguments by the defendants, the so-called “Shannon Five,” that they had acted to prevent loss of life and property damage in Iraq. Nonetheless, these anti-military acts have not found expression in acts against U.S. firms and private interests in Ireland.
Corruption is not a serious problem for foreign investors in Ireland. The principal Irish legislation relating to anti-bribery and corruption includes the Public Bodies Corrupt Practices Act 1889, the Prevention of Corruption Act 1906, the Prevention of Corruption Act 1916, and the Prevention of Corruption (Amendment) Act 2001. This body of law makes it illegal for Irish public servants to accept bribes. The Ethics in Public Office Act 1995 provides for the written annual disclosure of interests of people holding public office or employment.
The law on corruption in Ireland was strengthened following the enactment of the Prevention of Corruption (Amendment) Act, 2001, which gave effect in domestic law to the OECD Convention and two other conventions concerning criminal corruption and corruption involving officials of the European Communities and officials of EU member states. The legislation has ensured that there are strong penalties in place, of up to 10 years imprisonment and an unlimited fine, for those found guilty of offences under the Act, including convictions of bribery of foreign public officials by Irish nationals and companies. Ireland signed the UN Convention on Corruption in December 2003, and ratification is pending a review of the legal measures required for implementation.
The Irish police investigate allegations of corruption. If sufficient evidence of criminal activity is found, the Director of Public Prosecutions prepares a file for prosecution. A small number of public officials have been convicted of corruption and/or bribery in the past, although it is not a common occurrence.
Bilateral Investment Agreements
Ireland is a member of the EU and has taken the position that bilateral investment agreements are no longer useful. Ireland's only bilateral investment protection agreement, with the Czech Republic, will be formally ended in 2011, as both parties are EU members. Ireland has comprehensive double taxation agreements in place with a vast number of countries. The agreements generally cover corporate tax, income tax, and capital gains tax (direct taxes). The current list of agreements in effect, as of September 2010, is as follows: Australia, Austria, Belarus, Belgium, Bulgaria, Canada, Chile, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, India, Israel, Italy, Japan, Korea (Republic of), Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Mexico, Netherlands, New Zealand, Norway, Pakistan, Poland, Portugal, Romania, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, United Kingdom, United States, Vietnam and Zambia.
These agreements serve to promote trade and investment between Ireland and the partner countries that would otherwise be discouraged by the possibility of double taxation. In the absence of a bilateral tax treaty, provisions within the Irish Taxes Act allow unilateral credit relief against Irish tax for tax paid in the other country with respect to certain types of income, e.g., dividends and interest.
OPIC and Other Investment Insurance Programs
Since 1986 the U.S. Overseas Private Investment Corporation (OPIC) has been authorized to operate in Ireland as part of the U.S. effort to support the process of peace and reconciliation in Northern Ireland. There is some potential in Ireland for OPIC's credit guarantee programs, such as aircraft purchases. No other countries have an investment insurance program in Ireland. Ireland is a member of the Multilateral Investment Guarantee Agency (MIGA).
The estimated annual U.S. dollar value of local currency likely to be used by the U.S. Embassy in Ireland during 2011 is approximately USD 16 million. The Embassy purchases local currency through centralized bulk purchasing arrangements at a competitive market rate. Prospects for Eurozone economic growth and for the U.S. trade and budget deficit positions will likely determine USD and euro currency movements through 2011.
The total number of persons employed in June 2010 was 1.86 million, a decrease of 79,000 persons from June 2009. After a number of years of sometimes dramatic growth in employment levels, and a resulting decline in unemployment levels, the downturn in the global and national economies began to take its toll on the Irish labor market in 2008. By the end of 2010, the unemployment rate in Ireland reached 13.4 percent. The collapse of the Irish construction industry led to this sector being severely hit. Employment opportunities in the early part of this century attracted unprecedented inward migration levels, particularly from Eastern Europe. Following the downturn, many such economic migrants have left Ireland, either to return home or search for employment opportunities elsewhere.
Irish emigration has also restarted following a period of net immigration during the height of Ireland’s boom period. There has also been an increase in the numbers of newly graduated, as well as newly unemployed, Irish who have opted to leave Ireland in search of employment and better opportunities.
Ireland has been an attractive destination for foreign investment due to its availability of a young, highly educated young workforce. The educational system in Ireland ranks among the best in the world. The removal of tuition fees for third-level education in 1995 resulted in a rapid growth in the number of individuals who hold third level qualifications. The growing availability of highly educated and qualified potential employees has made Ireland an even more attractive place to do business. This has been a significant factor in attracting the large number of multinationals that have located operations in Ireland. Over 60 percent of new entrants to third level education in Ireland undertake business, engineering, computer science or science courses. To ensure that the availability of an educated workforce continues, the focus of government strategy has shifted to upgrading skills and increasing the number of workers in technology-intensive, high-value sectors.
Irish labor force regulation is less restrictive compared with most continental EU countries. The Irish workforce is characterized by a high degree of flexibility, mobility, and education. There is a relative gender balance in the workforce, with 995,000 males and 857,000 females employed as of September 2010. This gender balance reflects a change in social mores that has facilitated a surge in female employment since the mid-1980s.
While overall private sector wages declined marginally in the year to September 2010, average industrial earnings per worker rose by five percent to 822 euro per week. The Government, as part of its Four-Year Economic Recovery Plan, cut the minimum wage in December 2010 by 12 percent to 7.65 euro per hour.
The Irish system of industrial relations is a voluntary one. Pay levels and conditions of employment are generally agreed through collective bargaining between employers and employees. Since the late 1980’s, collective bargaining has taken place under the framework of a series of national economic programs, negotiated by representatives of employers, trade unions, farmers, and the government. Over the years, employers have generally implemented the benchmarks for pay and employee benefits established by the national economic programs, even though the benchmarks do not have legal force. This consensual "Social Partnership" approach has been a major factor in improving Ireland’s industrial relations climate since the mid-1980s. With Ireland’s ongoing economic recession and the resulting job losses, there has been a dramatic decline in the number of industrial disputes in 2010. Figures from the Central Statistics Office show that up to the end of September 2010, 6,575 days were lost through industrial disputes, compared to 81,442 days (most of them in the public sector) in the same period in 2009. The implementation of the 2010 Government/public sector agreement on pay and conditions (known as the Croke Park Agreement) resulted in no public service unrest in 2010.
In 2006, Ireland’s major unions and the employers’ representative body agreed to the latest national economic program, "Toward 2016," under the Social Partnership framework. The ten-year agreement followed a nine-month negotiation that centered on the increasingly significant role of foreign workers in the Irish economy. The national economic program set out consensus positions on wide-ranging social policies over a 10-year period and included a 10 percent pay increase for workers over the first three years. The package encompasses measures to protect employment standards, such as the establishment of a new watchdog agency (the Office of the Director of Employment Rights Compliance), a tripling of the Labor Inspectorate, and tougher penalties for employers who exploit foreign workers. The deal also calls on the government to engage with unions and employers in drawing up a comprehensive policy on pensions.
Employers typically resist trade union demands for mandatory trade union recognition in the workplace. While the Irish constitution guarantees the right of citizens to form associations and unions, Irish law also affirms the right of employers not to recognize unions and to deal with employees on an individual basis. Currently, around one-third of all workers are unionized; however, there is much higher participation in unions by public sector workers. Among foreign-owned firms, roughly 80 percent of workers do not belong to unions, although pay and benefits are usually more attractive compared with domestic firms.
Foreign-Trade Zones/Free Ports
The Shannon duty-free Processing Zone (SDFPZ) was established by legislation in 1957. Under the legislation, eligible companies operating in the Shannon Free Zone are entitled to the following benefits: goods imported from non-EU countries for storage, handling or processing are duty-free; no duty on goods exported from Shannon to non-EU countries; no time limit on disposal of goods held duty-free; minimum customs documentation and formalities; no Value Added Tax (VAT) on imported goods, including capital equipment; and a choice of having import duty on non-EU product calculated on its landing value or selling-out price. Qualifying criteria for eligible companies include employment creation and export-orientation.
Foreign-owned firms in the Shannon Free Zone have the same investment opportunities as indigenous Irish companies. There are over 100 companies operating within the 254 hectare business park, including the following U.S. companies: Benex (Becton Dickinson), Connor-Winfield, Digital River, Enterasys Networks, Extrude Hone, GE Capital Aviation Services, GE Money GE Sensin, Genworth Financial, Hamilton Sundtrand (United Technologies), Intel, Illinois Tool Works, Kwik-Lok, Lawrence Laboratories (Bristol Myers Squibb), Le Bas International, Magellan Aviation Services, Maidenform, Melcut Cutting Tools (SGS Carbide Tools), Mentor Graphics, Molex, Phoenix American Financial Services, RSA Security, Shannon Engine Support (CFM International), SPS International/Hi-Life Tools (Precision Castparts Corp), Sykes Enterprises, Symantec , Travelsavers Corp, Viking Pump, Western Well Tool, Xerox, and Zimmer. The Shannon Free Zone is technically an asset of Shannon Development.
Duty-free exemptions are available also to companies operating in Ireland's major deep-water port at Ringaskiddy in County Cork, although these have been used infrequently in recent years.
Foreign Direct Investment Statistics
According to Ireland's Central Statistics Office (CSO), the year-end stock of FDI in Ireland for 2009 rose to over 169 billion euro, compared with 139 billion euro in 2008. (Note: direct comparison of Irish government and USG FDI statistics is not possible because the CSO and U.S. Commerce Department utilize different base figures.) Earnings of foreign-owned direct investment enterprises increased from 30.7 billion euro in 2008 to 34.7 billion euro in 2009. European-owned companies’ earnings were up in 2009 almost 2.3 billion euro to 21.3 billion euro, with earnings of U.S.-owned companies increasing to 4.6 billion euro, compared with 3.7 billion euro in 2008.
During 2010, IDA Ireland negotiated 126 new business projects with new and existing clients involving investments in research, development and innovation of more than 500 euro million. Also in 2010, IDA-assisted firms created almost 11,000 new jobs and accounted for over 75 percent of Irish exports (goods and services).
U.S. and foreign companies with major foreign direct investments in Ireland include HP, SAP, Google, PayPal, eBay, AOL, Facebook, Kellogg’s, Eli Lilly, MSD, McAfee, Stream Global Services, ServiceSource, Salesforce.com, Accenture, Zurich, Axa, Citi, State Street, UnitedHealth Group, Allianz, Generali, Intel, Analog Devices, EMC, Abbott, Medtronic, Merck, Boston Scientific, Liebherr, Pfizer, IBM (Smarter Cities), United Technologies Research Centre (Renewable Energies), Alcatel-Lucent /Bell Labs, and Biotrin.