Unapproved deals disastrous for Irish Shipping

Irish Shipping, the State-owned shipping group, entered into financially disastrous charter deals without the approval of the government, cabinet papers from 1983 reveal.

Jim Mitchell, the transport minister, claimed the long-term lease of nine vessels from Hong Kong ship owners was inexplicable, given how Irish Shipping had operated so successfully over many years.

Mitchell said it was even more inexplicable why the company’s management had not sought approval from either his department or the finance minister for such an arrangement.

Both Mitchell and Alan Dukes, the finance minister, who had disagreed over the future of another shipping firm, B&I Ferries, jointly recommended the appointment of a liquidator to Irish Shipping in Dec 1983.

“The situation is so serious that if Irish Shipping were a company in the private sector it would have no choice but to go into liquidation,” said Mitchell.

Irish Shipping, which was established in 1941 to keep vital supply lines open during the Second World War, fell into serious financial difficulty in 1983 after 15 consecutive years of profit.

It incurred net losses of £14m in 1983 with projected loses of around £20m over each of the following three years largely due to the collapse of the world, deep-sea freight market.

State papers show Irish Shipping’s decision to charter nine vessels on a long-term basis from Hong Kong ship owners without seeking the consent of the government had proven disastrous. At the time, the daily charter hire cost was $11,846, while average daily freight rates were just $4,000.

Irish Shipping reported to Mitchell that the ships’ owners were “most inflexible” about any attempt to renegotiate the charter contracts and it believed such a course provided no realistic prospect of success.

Irish Shipping proposed a rescue plan which would see the government provide funding to buy out five of the chartered vessels at a cost of up to £107m. However, Mitchell observed that it represented “an unjustified gamble on an entirely unpredictable conclusion” while the State’s return would also be minimal.

The government claimed the cost to the taxpayer of liquidating the company with all liabilities discharged was £67.5m.

However, it received advice from the Attorney General that it could be liquidated with the State just liable for the cost of its guaranteed loans (£14m).

Dukes claimed there was no realistic alternative to liquidation of Irish Shipping due to its insolvency. However, Mitchell expressed concern about the effect the company’s liquidation could have on the creditworthiness of Ireland and other State bodies.

Irish Shipping was eventually dissolved in Nov 1984 with the loss of around 490 jobs.