The commission of inquiry into the State-owned Irish Bank Resolution Corporation, formerly Anglo Irish Bank, is at a standstill over the lack of access to crucial records on major loan writedowns provided to big borrowers.

Emergency legislation may yet be required to rectify the situation. But the problem should have been foreseen – and steps taken to circumvent it – at the very outset of Judge Brian Cregan’s investigation.

The inquiry followed prolonged disquiet over IBRC’s affairs. Serious claims were levelled at IBRC regarding its dealings with billionaire businessman Denis O’Brien, all of which were strenuously denied. Amid escalating controversy, however, the Government’s decision to proceed with the judge-led inquiry marked an effort to clear the air. The latest developments bring it to the fore again.

Sensitive aspects

At issue is the apparent refusal of IBRC’s special liquidator, KPMG, to generally waive banking and legal confidentiality over the institution’s loan arrangements with O’Brien and other IBRC borrowers. This cuts to the core of the inquiry’s work, which is centred on the most sensitive aspects of the banking relationship between IBRC and some of its biggest clients.

After all, the inquiry is obliged to examine processes, procedures and controls within IBRC regarding loan write-offs. It must assess whether there was prima facie evidence of material deficiencies within IBRC in respect of key transactions. It must also examine if any transactions were not commercially sound. Moreover, it must investigate whether the interest rates on loans or any interest rate or repayment extensions were unduly favourable to any borrower.

These obligations –and more besides – were set out clearly in the statutory instrument which established the commission of inquiry in mid-June. Note also the inquiry is under the responsibility of the Taoiseach’s department. It seems obvious enough the inquiry would not be able carry out its work without access to banking records. It follows that the commission should have been given sufficient powers to secure such records. That’s not what happened, however.

The problem has its root in the Commissions of Inquiry Act, the 2004 law under which the IBRC inquiry carries out its work. Championed by former minister for justice Michael McDowell, the legislation was cast to provide a less costly and speedier alternative to tribunals. The system has worked well in the past but Judge Cregan has run into trouble with the sections of the law on “confidentiality”. The word itself appears only 13 times in the Act but the provisions are sweeping in their scope.

The essence of it is that the Act cannot be used to compel disclosure of any information by a person who is “entitled under any rule of law or enactment” to refuse disclosure on grounds of privilege or a duty of confidentiality. It is open to an inquiry to compel the disclosure of information on foot of a ruling that privilege or confidentiality does not apply. However, an inquiry has no power to quash or override any duty of confidentiality where it properly applies.

Commission’s viability

In the IBRC inquiry, the commission has made a determination on privilege and confidentiality and the result is such that “it is not in a position to proceed with its investigation into any of the relevant ‘write-off’ transactions”. This is enough to threaten the very viability of the commission, prompting weekend moves by the Government to find a way out of the legal corner.

The question arises as to whether such difficulties were anticipated when the inquiry was being set up. Was the matter even contemplated behind the scenes? The requirements on Judge Cregan were unambiguous – yet so too were the limitations on his powers.

The question of banking confidentiality was central. The controversy developed in the shadow of O’Brien’s effort in the courts to prevent RTÉ from airing a report on his banking arrangements and his attempt to prevent a Dáil speech by Independent TD Catherine Murphy being reported. With all of that going on, it seems extraordinary that the inquiry’s right of access to IBRC’s records was not pinned down explicitly.

This is a mess. An interim report from the inquiry is imminent but the extent to which it provides – or can provide – real insight into in IBRC’s affairs is unclear. It will be a long time yet before a final report is produced.