This belief may have led the Minister to adopt a more
^^ Interview with Tara official, 1 N o v e m b e r 1978 54
entrenched position after the mine closure occurred.
Two points must be made here. First, whether Keating's assessment of Noranda's position was correct or not, it is certain that Tara's management needed no encouragement to fight state participation tooth and nail. If its strategy was irrational, then this reflected the attitudes of the company's own staff. The second point is that, as mentioned above, Tara did not realise the importance of the participation issue to Keating. Obviously, a negotiator should never take it for granted that his opponent sees his point of view.
Rational or not, the strategy was implemented. On Monday 19 August, Tara Mines Limited instructed contractors on its Navan site to wind up their operations by the following Friday. The government took the view that Tara was engaging
in blackmail, and gave its full support to Keating in saying that as a result of the closure Tara would have to take the
initiative if talks were to reopen. The company duly approached the Minister, and meetings were held on 27 and 28 August.
But little common ground existed between the two parties,
and when the second meeting broke up, no date was arranged for further negotiations.
On 30 August Mr Keating delivered a forceful speech which was interpreted by the press as threatening Tara with
nationalisation if it did not come to an agreement.^^ Given
See, for example. The Irish Times, 31 August 1974. The
relevant passage was 'any attribution of the decision to suspend activities at the Navan mine to the lease terms which were
offered must be looked upon by the Minister as nothing more than an attempt to force him to grant a lease to Tara on terms
unacceptable to the government. The Minister will not bow to such pressure and must remain free...to safeguard the interests of the people as a whole The Minister is now considering as a matter of urgency what further action can be taken to protect
what was said above regarding Keating's attitude to
nationalisation (see p.108 ), it is unlikely that this option was seriously considered. In any case, Tara's legal advice was that nationalisation would be unconstitutional, whether compensation was paid or not.^^ The Minister may have
received a similar opinion; certainly, as mentioned above, he had been advised that com.pensation would have to be paid at the full commercial value of the deposit. An alternative course of action might have been to offer a mining lease to Tara on the government's terms (thus fulfilling the obligation arising from the undertaking given on 1 April 1971), and, if the company rejected those terms, to offer the lease to some other mining concern. A host of difficulties would have arisen as a result, however. First, Keating's legal advice was that the obligation was to offer a lease on 'reasonable' terms, and clearly Tara could have initiated endless litigation as to what constituted, or what did not constitute, 'reasonable' Secondly, Tara could have sued the Minister for compensation in lieu of its investment in the Navan mine, thereby placing him in an extremely awkward situation politically. (Once again the spectre of Avoca raised its headi) Thirdly, the Minister would have had to compulsorily acquire that portion of the Navan deposit privately held by Tara.^^ As noted earlier, the constitutionality of the 1940 Minerals Development Act under which the Minister would make such an acquisition was by
56
Interview with Tara official, 25 November 1978.
^^ Tara's part of the orebody has been described as 'a brack, with minerals in private ownership forming the currants'.
then in question, and Tara would certainly have gone to court on this issue had Keating attempted to obtain its minerals.
Thus Tara's judgment was proved correct in one sense. Keating was enmeshed in the legal and judicial constraints of the Irish constitutional system, and he in fact took the
only course of action open to him - he sat back and did nothing. By December, the Minister had countered Tara's legal
moves by himself asking for a High Court ruling on certain
questions of law pertaining to Tara's writ. Keating's principal motive in initiating this litigation seems to have been to
defer the hearing of Tara's case: as will become apparent, he had come to believe that the longer the Navan mine stayed closed, the better his bargaining position would become.
Clearly, the Irish legal system could work for the Minister as well as against him.
By this stage, Tara's position was weakening. In earlier years, assured of the Fianna Fail government's co-operation, Tara had spent freely on the Navan development. Tara's belief in its power to influence Irish decision-makers had backfired, because by late 1974 the company was deep in debt and going deeper with every month that passed. It therefore needed to reach an agreement very badly indeed. Apparently Tara's
management had made a fundamental miscalculation in believing that the Coalition government would break before the company did.
Keating claims that in late January 1975 Tara came to
. . 58 him and agreed to compromise on the issue of state participation.
Tara's viewpoint is of course different, and its officials
5 8
emphasise that Keating made important departures from his earlier position. This was in fact the case, and reflected the Minister's own weaknesses.
The most significant of these was probably the lack of support for his position among members of his own Labour party in Cabinet. This lack of support had, with the exception of one individual, nothing to do with the policy issues involved. Keating was constantly at loggerheads with the Minister for Posts and Telegraphs, Connor Cruise O'Brien, who opposed every major initiative undertaken by Keating. O'Brien had known Keating from childhood, and according to the latter O'Brien had always had, and still did have, a personal dislike for him. In addition, Keating had clashed head on with O'Brien on
government policy towards civil rights in the face of threats to law and order posed by the Irish Republican Army (IRA)
5 9
campaign in Northern Ireland. Mr O'Leary, the Minister for Labour, was ambitious for the party leadership, which was expected to fall vacant in the near future, and he used every opportunity to undermine Keating's position as he saw the Minister for Industry and Commerce as his most formidable opponent. Most importantly of all, the sympathy of Mr Tully, the Minister for Local Government, lay with Tara, and Keating believed that Tully, through his son, John, Secretary of Tara Mines Limited, was keeping the company informed of all relevant discussions and decisions in Cabinet.^^ This
O'Brien was in favour of curtailing civil rights to deal with the threat, Keating felt that such a policy was exactly what the IRA wished to see and that it would play straight into the
IRA's hands.
represented a tremendous weakness from Keating's point of view, as he felt there could be no secrecy from Tara regarding any matter which had to go before Cabinet. Keating would not,
for example, have his minimum acceptable position endorsed by Cabinet, as he believed Tara would learn of it, placing the company in a very strong bargaining position.
As we have seen, another major constraint facing Keating arose from the nature of the Irish Constitution and the
weaknesses inherent in the 194 0 Minerals Development Act. In effect, Keating could not pose nationalisation even as an
ultimate sanction, a situation different from that of most host country governments. Neither could he take compulsory acquisition measures, because of the political restraint
represented by the need to pay very large sums in compensation. In combination, these constraints meant that if Tara did not work the Navan mine, nobody would. And while Keating might be able to achieve delays, he could not hold up a development on the scale of that mine indefinitely.
Both parties were therefore in weakening positions, and it was likely that a compromise would be reached. A few days before the Supreme Court was to give its ruling on the Minister's writ, it was announced that an agreement had been concluded
between Tara and the Irish government.
The Tara Agreement
The terms of the arrangement, contained in two documents, an Agreement and a Mining Lease, were as follows. The State would receive, free of charge, 25 per cent of the shares of Tara Mines Limited, the operating company, but there would be
no purchase of shares as there had been in the case of Bula Limited. Royalties would be charged on pre-tax profits at a
rate of per cent [Mining Lease, p.16), and profits would be
subject to corporation tax (then 50 per cent) after deduction of royalty payments, exploration expenditure, and allowances permitted under the Finance (Taxation of Profits of Certain Mines) Act 1974. Tara would turn over to the state, free of charge, that portion of the Navan minerals (about 6 million
tons ore) in its possession {Agreement, B). As in the Bula
Agreement, a provision regarding the payment of dividends was included, though its terms were less stringent: not less than 50 per cent of the accumulated balance on the Profit and Loss Account would be distributed in each year. It was left to the discretion of the Minister, rather than to the company's
auditors (as in Bula's case) to determine circumstances in which it would not be advisable to so distribute profits
{Mining Lease, p.17) .
The Minister would appoint two directors to the Tara Mines Limited Board, or 25 per cent of its members, whichever is
greater {Agreement, 3.03). As in the Bula Agreement, clauses
were inserted guaranteeing Ministerial access to Tara Mines Limited's 'property, books, and records', and also requiring the company to provide such 'additional financial and operating data and other information as to the business and properties of the Company as the Minister may from time to time request'
{Agreement, 6.06: Mining Lease, p.5). These requirements apply to the operating company only, and the Minister will have no guarantee of access to information relating to or held by the parent company, Tara Exploration and Development
Company Limited.
As in Bula's case, Tara agreed to supply concentrates to an Irish zinc refinery 'on reasonable terms', if requested to do so. Tara would be offered an equity holding in any such refinery, but would not be compelled to take it up.
The overall State 'take' under these arrangements will
stand at a nominal rate of 64 per cent. Because of the operation of the 1974 Act, the real level of State revenue will be
significantly lower.
Tara's senior management did not accept the new situation with good grace. By March 1978, it was believed that Hughes, McCarthy, and Gilroy had almost completely liquidated their personal shareholdings in Tara. Hughes resigned from the Tara Mines Limited Board before the government-appointed directors took up their positions.^^
The conduct and outcome of negotiations
Two interlocked but separate issues were at stake in the negotiations between Tara and the Irish authorities. The
first involved the percentage of Tara's profits which would accrue to the Irish government, the second related to the degree to which that government would participate in, and exercise influence or control over, Tara's corporate decision- making process. These issues were interrelated for two reasons. First, the Irish government saw equity participation in the
operating company as a means of exercising influence and/or control, but such participation would of course increase the
61
proportion of Tara's profits accruing as government revenue. Secondly, Keating believed that the Irish Exchequer would suffer financial loss in the longer term if a measure of control were not obtained.
Mr Keating achieved his principal objective by obtaining a 25 per cent equity participation in Tara Mines Limited. In addition, he gained acceptance of government-appointed
directors on the company's Board, and of guaranteed Ministerial access to Tara Mines Limited's records and files. However, he gained no such privileges in relation to the parent company. Tara officials saw this as an important concession to the
62
company, but the practical significance of the distinction appears to be limited. The Minister might be prevented from obtaining relevant corporate information, but as all payments of profits, royalties and dividends will be assessed on the
income of Tara Mines Limited, and as significant transfers of goods and services do not occur between Tara Mines Limited
c o
and its parent, this limitation is unlikely to have important financial implications for Ireland.
The Tara Agreement also gave the Irish government considerable influence over the distribution and use of corporate funds, as a result of the provisions which demand payment of dividends at a certain level and allow the Minister discretion in determining when dividends should not be paid. In this regard, the position of Tara Mines Limited will be 6 2
Interview with Tara official, 1 November 1978.
^^ Tara Mines Ltd's output is sold to independent smelters while its parent does not produce, or supply it with, mining
quite different from that of Northgate Exploration Limited's Irish subsidiary, IBM. IBM's use of funds was entirely at the discretion of Northgate's Board of Directors, located in Toronto. Tara's parent company will of course be free of government influence in this area. In other words, while the investing company remains free to use the funds it receives as it wishes, the Minister can play a significant role in determining the extent of these funds at any given time.
The Irish government made important concessions in the area of financial returns to the state. First it yielded on the issue of a purchased shareholding. From the Minister's point of view, this was a financial concession, though Tara viewed it as a diminution of potential Ministerial control over the company. If, as seems certain, Keating would have
agreed to forego the voting rights of the purchased shares, as he did in Bula's case, the concession does seem essentially, financial.^^
The Minister made another important concession by reducing the royalty rate from 10 per cent (the figure he originally sought) to per cent. Department of Industry and Commerce officials have claimed that this reduction was a trade-off against Tara's granting to the State its mineral rights
at Navan. Royalties could not, of course, have been charged on those minerals while they remained in private ownership.
^^ It is impossible to express this concession in monetary terms, as one cannot predict what Tara's profit margins will be. If metal prices are high they will probably be substantial, as will, therefore, the dividends payable on 24 per cent of
H o w e v e r t h e m i n e r a l r i g h t s i n v o l v e d r e l a t e d to o n l y 6 m i l l i o n tons of o r e , and a s i m p l e n u m e r i c a l c a l c u l a t i o n w i l l q u i c k l y show t h a t t h e M i n i s t e r w a s v e r y m u c h the l o s e r by t h i s b a r g a i n . ^ ^ T u r n i n g to the c o n d u c t of n e g o t i a t i o n s , a n u m b e r of p o i n t s e m e r g e . F i r s t , the p e r c e p t i o n s of the p a r t i e s i n v o l v e d of o n e a n o t h e r p l a y e d a c e n t r a l r o l e in s h a p i n g e v e n t s . T a r a w a s c o n v i n c e d t h a t K e a t i n g w o u l d n o t c o m p r o m i s e on the issue of f i n a n c i a l r e t u r n s to the S t a t e , and p a r t l y in c o n s e q u e n c e it a d o p t e d an a g g r e s s i v e s t r a t e g y d e s i g n e d to force his h a n d . K e a t i n g e v e n t u a l l y m a d e s u b s t a n t i a l f i n a n c i a l c o n c e s s i o n s , but c l a i m s t h a t T a r a c o u l d h a v e w o n t h e m w i t h o u t c o n f r o n t a t i o n . It is a p p a r e n t t h a t , had T a r a b a s e d its a p p r o a c h on the