IRISH GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT

UNCLAS DUBLIN 000045


STATE FOR EEB/IFD/OIA

E.O. 12958: N/A
TAGS: EINV EFIN ETRD ELAB OPIC KTDB USTR EI
SUBJECT: IRISH GOVERNMENT'S ATTITUDE TOWARDS FOREIGN INVESTMENT


1. The Irish Government actively promotes foreign direct investment
(FDI),a strategy that has fueled robust economic growth since the
"Celtic Tiger" period of the late 1990s. Ireland's pro-investment
climate saw total FDI stock grow from euro 53 billion in 1998 to
euro 131 billion in 2007. Traditionally, the principal goal of
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.


2. The Irish Government's actions have had considerable success in
attracting U.S. investment. In 2008, the U.S. investment stock in
Ireland, a country of just over 4 million, was worth USD 87 billion.
According to the Bureau of Economic Analysis (BEA),in 2007, U.S.
investment flows into Ireland reached USD 14.5 billion. Of this,
about one-half (USD 7.1 billion) came from the information and
scientific, professional and technical services sectors. 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 about 2 million people. 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, and Amazon making Dublin the hub of their respective
European operations.


3. U.S. companies are attracted to Ireland as an export platform to
the EU. In 2006, Irish-based U.S. firms exported roughly USD 57
billion worth of goods and services, mostly destined for the EU
market. 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 work 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:
increasing labor costs, skilled labor shortages, inadequate
infrastructure (such as in the transportation and internet/broadband
sectors),and absolute price levels that are among the highest in
Europe. The Irish government has become more concerned about the
possibility of rising energy costs and the reliability of energy
supply undermining Ireland's attractiveness as an FDI destination.



4. 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 offices in New York, Chicago, San Jose, and Atlanta, as
well as 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 para 61) 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 transferred from Shannon Development to Enterprise Ireland.
The IDA remains responsible for FDI in the Shannon region outside
the Shannon Free Zone;

- Udaras na Gaeltachta has responsibility for economic development
in those areas of Ireland where Irish (Gaelic) is the predominant
language, and works with IDA Ireland to promote overseas investment
in these regions.

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Major Laws/Rules/Taxation Policy
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5. 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. Further, the government of Ireland intends to enhance R&D
incentives during 2009.

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.


6. One of Ireland's most attractive features as an FDI destination
is the low corporate tax rate. Since January 1, 2003, the corporate
tax rate for both foreign and domestic firms has been 12.5 percent.
Foreign firms that established an Irish presence prior to this date
retain their entitlement to the "old" 10 percent rate until 2010 in
the case of manufacturing and certain internationally traded
services. 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.


7. 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 was eliminated on September 24, 2008 by EU Regulation
1008/2008, which did away with the requirement that Irish airlines
(and those from other EU countries) 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 para 9).


8. While Ireland does not have a formal privatization program, the
Government in September 2005 privatized the state-owned national
airline, Aer Lingus, through a stock market flotation that valued
the carrier at euro 1.2 billion. The Government retains about a
one-quarter stake in the airline. There are no barriers to
participation by foreign institutions in the sale of Irish
state-owned companies, as evident in the purchase of Aer Lingus
shares by U.S. investors. 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.


9. 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 agricultural land, though
there are many stud farms and racing facilities in Ireland that are
owned by foreign nationals. There are no restrictions on the
acquisition of urban land.


10. 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 (see section "D"). 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.

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Conversion and Transfer Policies
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11. 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.

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Expropriation and Compensation
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12. 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.


13. The only recent case of expropriatory action involved a dispute
over the disposition of the ownership rights to the Lusitania, the
ship that was sunk off Ireland's southern coast in 1915 by a German
submarine and which is owned by a U.S. citizen. In 2001, the U.S.
owner brought action against the Government in the Irish courts
after his applications for a license to dive to the vessel were
denied. In 2005, a High Court ruling in the case noted that "the
State simply cannot directly or indirectly expropriate this property
from (the owner),or totally, or even substantially deny him access
to or the use of his property or any part or parts of his property,
even under color of merely regulating that access or use for the
purpose of safeguarding a national asset, without paying appropriate
compensation." In March 2007, the Irish Supreme Court ruled in
favor of the U.S. citizen owner.

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Dispute Settlement
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14. Ireland has no specific domestic laws governing investment
disputes with 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, there are no 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, some of which have been won by
U.S. companies. 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.


15. 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 Employment is the state agency with 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. There is no specific domestic body for handling
investment disputes.

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Performance Requirements and Incentives
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16. The Irish Government does not maintain any measures that it has
notified the WTO to be inconsistent with Trade-Related Investment
Measures (TRIMs) requirements. Moreover, there have been no
allegations that the Government maintains measures that violate the
WTO's TRIMs text.


17. Three Irish organizations, SFADCO, IDA Ireland, 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. In 2007, IDA Ireland paid out Euro 78.5 million in grants
to foreign firms, as compared to Euro 96.6 million in 2006.


18. 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.


19. EU Regional Aid Guidelines (RAG) that apply to Ireland were
announced in 2006 and became effective on January 1, 2007. The RAG
govern the amount of grant aid that the Irish Government can provide
to companies, depending on their location. The differences in the
aid ceilings noted in the chart below reflect the less developed
status of business/infrastructure in regions outside the greater
Dublin area. For the period 2007-2008, the following ceilings
apply:

- Location
Maximum Grant Percent Allowed
(EE = eligible expenditure)

- Border, Midlands, West
30 percent on first euro 50 million of EE
15 percent on next euro 50 million of EE
10.2 percent of balance above euro 100 million of EE

- South East, Mid West, and South West
10 percent on first euro 50 million of EE
5 percent on next euro 50 million of EE
3.4 percent of balance above euro 100 million of EE

- East
NIL


20. 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 the National Spatial Strategy, which was adopted
in 2001 with the aim of spreading investment more evenly around the
country (an approach that was replicated in the 2007-2013 National
Development Plan, which was launched in early 2007). One of the
National Spatial Strategy's stated goals was to direct 50 percent of
all new jobs related to greenfield investment to the border,
midlands, and western (BMW) counties of Ireland, where the economy
is less developed. In 1999, roughly 25 percent of jobs related to
IDA-supported investment were located in the BMW region; by 2007,
this figure had grown to 39 percent. The 2007-2013 National
Development Plan continues to favor balanced regional investment,
but now focuses more on innovative and knowledge-based activities
than on the number of jobs generated per region. In 2006 and 2007,
nearly 60 percent of greenfield projects were located outside of
Dublin. To encourage client firms to locate outside Dublin, IDA
Ireland has developed "magnets of attraction," including: a Cross
Border Business Park linking Letterkenny and Derry, a regional Data
Center in Limerick, and the National Microelectronics Research
Center in Cork. The IDA has supported construction on business
parks in Oranmore and Dundalk.


21. 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, was responsible for administering a Euro 365 million R&D
fund under the 2000-2006 National Development Plan. The 2007-2013
National Development Plan envisions a significant ramp-up in such
funding. The fund has targeted leading researchers in Ireland and
overseas to promote within Ireland the development of biotechnology
and information/communications technology, as well as complementary
worker skills. Under the 2004 Finance Act, moreover, a credit of 20
percent of the incremental expenditure on revenue items, royalties,
plant, and machinery related to R&D can be offset against a
company's corporation tax liability in the year in which it is
incurred. In 2008, IDA Ireland supported 56 R&D investment
projects, involving a planned total investment of euro420 million.
Investments included: a euro 50 million R&D investment at Boston
Scientific in Galway; Oriflame Cosmetics' euro 2.4 million
investment in Co. Wicklow; and the DePuy part of the Johnson &
Johnson family decision to locate its new innovation centre in Cork
with 20 new jobs. Announcements in 2008 in ICT included a euro 29
million R&D investment in Dublin by Business Objects, an expansion
by Synopsis, the world leader in providing software and intellectual
property products, of its R&D operation in Dublin, and EMC's euro 20
million investment in R&D activities.


22. In addition to the new RAGs, a new EU framework for research,
development, and innovation (RD&I) for the 2007-2013 period has also
come into force. The framework is geared toward achieving the

objectives of the Lisbon Agenda, and grant support is available
throughout all regions of Ireland. The table below shows grant
rates for each category of eligible RD&I.

Type of Research Grant Percent

-"Fundamental" (activity designed 100
to broaden scientific and technical knowledge not linked to
industrial or commercial objectives)

-"Industrial" (planned research 50
of critical investigation aimed at the acquisition of new knowledge,
the objective being that such knowledge
may be useful in developing new products, processes or services or
in bringing about a significant improvement in existing products,
processes or services)

-"Experimental" (shaping of the results 25
of industrial research into a plan of design for new, altered or
improved products, processes or services, whether they are intended
to be sold or used, including the creation of an initial prototype
which could not be used commercially)


23. 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.

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Right to Private Ownership and Establishment
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24. 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.


25. Before 1999, Irish company law differed from international norms
by allowing, for tax purposes, the registration of companies in
Ireland that were not actually resident in Ireland (so-called Irish
Registered Non-Resident companies (IRNRs)). In response to concern
that a large number of the estimated 40,000 IRNRs were engaged in
fraud, tax evasion, money laundering, and other illegal activities,
the 1999 Finance Act equated registration in Ireland with tax
residence and liability for all companies except in limited
circumstances. Exceptions include cases where the Irish company, or
a related parent company, is carrying on trade in Ireland, and the
company is ultimately controlled either by residents of an EU member
state or by residents of a country with which Ireland has a tax
treaty (including the United States). Nonetheless, all Irish-based
companies, including U.S. firms, claiming non-residence in Ireland
because of tax treaty provisions must identify the beneficial owners
of the company.


26. Similarly, the "Companies (Amendment) (No. 2) Act 1999" requires
that every application for company registration in Ireland show the
manner in which the proposed company will carry out activities in
Ireland. Section 43 of the legislation stipulates that a company
must either have a director resident in the State or provide a bond
in the event that the company commits an offense under the Companies
Act or tax legislation. Section 44 states that these requirements
may be waived when the Company obtains a certificate from the
Companies Office stating that the company has a real and continuous
link with one or more economic activities in Ireland. Like the 1999
Finance Act, the Companies Act is designed to prevent the use of
IRNRs for exclusively foreign activities without any connection to
Ireland.

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Protection of Property Rights
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(I) Real Property


27. Secured interests in property, both chattel and real estate, are
recognized and enforced. The Department of Justice administers a
reliable system of recording such security interests through the
Land Registry and Registry of Deeds. 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 Rihts


28. Ireland is a member of the World Intellctual Property
Organization and a party to the Iternational Convention for the
Protection of Intllectual Property. In July 2000, Irish President
Mary McAleese signed legislation bringing Irish inellectual
property rights (IR) law into compliance with Ireland's obligations
under the WTO Trade-Related Intellectual Property Treaty (TRIPs).
The legislation came into force on January 1, 2001, and gives
Ireland one of the most comprehensive legal frameworks for IPR
protection in Europe.


29. 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.


30. As part of this comprehensive copyright legislation, changes
were also made to revise 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.


31. DVD and CD piracy, however, continues to be a problem.
Industry representatives claim that the counterfeit DVD market is
almost 50 percent the size of the legitimate market. Industry
groups also believe that light penalties given to counterfeiters in
DVD piracy court cases serve no deterrent value and hamper industry
and police enforcement efforts. In mid-2006, the Government
responded to piracy problems by forming an inter-agency task force,
which begun a consultation process with industry on potential
countermeasures, resulting in a structured regional Multi Agency
Task Force enforcement regime. However with mandatory penalties
rejected by Government, deterrent sentencing remains an ongoing
issue. In addition to DVD and CD counterfeiting, industry sources
estimate that up to 37 percent of PC software used in Ireland is
pirated. The Business Software Alliance in Ireland estimates that
reducing this rate by ten percentage points would help the USD 2.6
billion domestic IT industry to grow to USD 4 billion by 2009.

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Transparency of Regulatory System
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32. The Irish Government generally employs a transparent and
effective policy framework that fosters competition between private
businesses in a non-discriminatory fashion. While ongoing Irish
judicial "tribunals" are investigating possible links between
indigenous Irish companies' political donations in the late 1980s
and favorable government decisions, U.S. businesses can, in general,
expect to receive national treatment in their dealings with the
Government. There is no report of any U.S. firm or investor having
being required or forced to make payments during that period.


33. 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.


34. The Competition (Amendment) Act 1996 amends and extends the
Competition Act 1991, strengthens the enforcement power of the
Competition Authority, 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.

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Efficient Capital Markets and Portfolio Investment
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35. 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, although the Irish Competition
Authority found in 2004 that the banking sector's lack of
competition 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.


36. In late 2008, the Irish banking system began to buckle under
the combined weight of the global economic downturn and the collapse
in the Irish property market. The loan book of the leading banks is
heavily weighted toward property and house prices have fallen
significantly in 2008 - in some places by as much as 30 - 40
percent. The banks, as a result, have required significant
government support. In September 2008, the Irish government
announced that it would guarantee all deposits at the six leading
Irish banks. This offer was extended to foreign-domiciled banks
with a "significant" presence in Ireland but none of these
institutions took part in the guarantee. In December 2008, the
government announced that it would provide up to USD 10 billion in
new capital to the three largest banks - Allied Irish Bank (AIB),
Bank of Ireland, and Anglo Irish Bank. As of January 2009, the plan
to transfer the funds had not yet been put in place. The chief of
the financial regulator announced his retirement following the
revelation that the former Anglo Irish Bank chairman had improperly
transferred funds out of the bank over a period of several years in
an attempt to conceal the true state of the bank's books.


37. The estimated total assets of all licensed credit institutions
at the end of November 2008 was approximately euro 1.4 trillion,
with the Bank of Ireland and Allied Irish Banks holding a combined
25 percent of total assets. U.S. banks operating in Ireland include
Citigroup and Chase Manhattan.


38. As of end-December 2008, equity market capitalization in the
Irish Stock Exchange (ISE) was euro 31.3 billion, down from an
end-2007 figure of euro 90.4 billion. In terms of market weight,
the stocks of four companies are predominant: Allied Irish Bank,
Bank of Ireland, CRH (a construction industry supplier),Elan (a
pharmaceuticals firm),Aer Lingus, and Ryanair. Until 2007, the
Irish stock market had seen a steady recovery since plummeting in
2002 following the global economic slowdown and management problems
at several major Irish companies. From 2002 to 2006, ISE delivered
returns of between 19 and 28 percent each year. However, driven in
part by concerns over possible spillover from the sub-prime crisis
in the United States, the market capitalization fell by almost nine
percent through the first 11 months of 2007 and, as can be seen from
the numbers above, the market cap at the end of 2008 was 1/3 of what
it was at the end of 2007. In 2005, ISEQ opened up a secondary
market, the Irish Enterprise Exchange (IEX),which caters to smaller
firms with a minimum market cap of euro 5 million.


39. In May 2003, the Central Bank of Ireland was reorganized into
the Central Bank and Financial Services Authority of Ireland
(CBFSAI),in accord with the Central Bank and Financial Services
Authority of Ireland Act 2003. Under the legislation, the Governor
of the CBFSAI has responsibility for the overall stability of the
Irish financial system. The legislation also established the Irish
Financial Services Regulatory Authority (IFSRA),which is an
autonomous but constituent part of CBFSAI that regulates financial
services institutions in Ireland and, since 2006, the Irish Stock
Exchange. IFSRA took over this responsibility from a mix of
government bodies, including: the Central Bank, the Department of
Trade, Enterprise, and Employment (DETE),the Office of Director of
Consumer Affairs, and Registrar of Friendly Societies. The
legislation also enhanced the regulatory powers given to IFSRA,
particularly in consumer protection.


40. The Central Bank is a member of the European System of Central
Banks (ESCB),whose primary objective is to maintain price stability
in the euro area. Ireland no longer operates an independent
monetary policy. Rather, ESCB formulates and implements monetary
policy for the euro-zone, and the Central Bank implements that
policy at the national level. The Governor of the Central Bank is
one of 18 members 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.


41. 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 behaviour 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 company can compel the remaining minority shareholders to
sell their shares. There are no reports that the legislation 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, the Australian investment group,
Babcock & Brown, acquired the former national telephone company,
Eircom. 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 implemented
through Irish legislation in May 2006, though many of its principles
had already been enacted in the Irish Takeover Panel Act 1997.

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Political Violence
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(I) Impact of Northern Ireland Instability


42. The growth of business investment and confidence in Northern
Ireland following the cessation of widespread violence has benefited
the Republic of Ireland. In 2006, the Irish and British Governments
launched a report on potential areas for cross-border economic
cooperation, such as R&D collaboration, energy and transportation
infrastructure linkages, and joint trade missions. The 2007-2013
National Development Plan earmarks funding to develop these
linkages. No violence related to the situation in Northern Ireland
has been specifically directed at U.S. citizens or firms located in
the South.


43. The 1998 ratification of the Good Friday Agreement by large
majorities in both Ireland and Northern Ireland further diminished
the potential for violence. Although groups in Northern Ireland
opposed to the peace process have continued to commit infrequent
acts of criminality, there have been no serious incidents in the
Republic of Ireland. In May 2007, the Northern Ireland Assembly was
restored and local government resumed; a key landmark in the
successful peace process in Northern Ireland that commenced with the
Good Friday Agreement. In November 2008, Sinn Fein and the
Democratic Unionist Party, former combatants, announced they had
struck a deal to devolve policing and justice functions from
national control to the Northern Ireland Assembly. This resolved
the last major political hurdle to full resumption of normal local
government in Northern Ireland and represented significant
maturation of the Northern Ireland peace process.

(II) Other Acts of Political Violence


44. On September 16, 2008 a bomb was found outside of the Dublin
offices of Royal Dutch Shell. Shell is developing an offshore gas
field off the coast of Mayo. Part of the project involves laying an
on-shore pipeline to connect the field to the national gas grid.
This work has been opposed by a vocal minority in the local
community. The protests have been mainly confined to the area
around the site for the pipeline. In 2003, several Irish citizens
opposed to the Iraq War damaged U.S. military assets at Shannon
Airport. In 2004, 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.

--------------
Corruption
--------------


45. 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.


46. Ireland signed the UN Convention on Corruption in December
2003, and ratification is pending a review of the legal measures
required for implementation. In January 2000, the GOI introduced to
Parliament the "Prevention of Corruption (Amendment) Act, 2001," to
ratify and implement the OECD Convention on Bribery. The
legislation, which enabled Ireland to ratify a number of conventions
dealing with corruption drawn up by the European Union, the Council
of Europe, and the OECD, came fully into force as law in November

2002. Ireland formally ratified the OECD Convention in September

2003. Ireland is also a member of the OECD Working Group on Bribery
and the Group of States Against Corruption (GRECO). Under the
Prevention of Corruption Act, the bribery of foreign officials is a
criminal offense. Bribery of foreign officials may also invalidate
a contract that a party is seeking to enforce in Ireland.


47. A number of ongoing judicial tribunals are seeking to establish
whether political donations by certain Irish companies in the late
1980s and early 1990s can be linked to favorable government
decisions, mostly at the local level, in zoning and tax matters.
There is also media and public concern that business interests may
have compromised Irish politics in the late 1980s and early 1990s.
Despite these reports of payments to political parties and figures
in the 1980s and early 1990s, there remains no indication that
foreign businesses or investors have had to make such payments or
been approached to make such payments to conduct business during the
period in question or in years since.


48. In 2006, the Irish media disclosed information leaked from the
Mahon Tribunal that Prime Minister (Taoiseach) Bertie Ahern had, as
Finance Minister in the 1990s, accepted the equivalent of roughly
euro 50,000 in loans from associates. Following the disclosure, the
Prime Minister made public statements about the incident, noting
that his actions had not been illegal and that political favors had
been neither sought nor granted in connection with the loans. The
Mahon Tribunal continued to meet on occasion in 2007 and 2008
without reaching any determination. Its deliberations will continue
in 2009. Prime Minister Ahern resigned in May 2008, stating, in
part, that the Mahon Tribunal investigation was distracting the
government from its business. In 2006, the Moriarty Tribunal found
that former Prime Minister Charles Haughey had accepted the
equivalent of roughly euro 12 million in payments between 1979 and
1996 in return for political favors, such as tax reductions for
associates and the procurement of a passport. Haughey died in

2006.


49. 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.

--------------
Bilateral Investment Agreements
--------------


50. Ireland's only bilateral investment protection agreement is
with the Czech Republic. In addition, Ireland has bilateral tax
treaties with a wide range of countries, most importantly with the
United States and the U.K. 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 in respect of certain types of income,
e.g., dividends and interest.

--------------
OPIC and Other Investment Insurance Programs
--------------


51. 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 in regard to aircraft purchases.
No other countries have an investment insurance program in Ireland.
Ireland is a member of the Multilateral Investment Guarantee Agency
(MIGA).

--------------
Labor
--------------


52. In 2008, the economy fell into recession resulting in a fall in
the level of employment. Levels in Ireland reached historical
highs, the result of continued strong economic growth. As of May
2008 (the latest available official figures),the number of persons
employed was roughly 2.1 million, unchanged year-on-year. However,
the job losses began to hit after May and the end-December 2008
unemployment rate figure stood at 8.3 percent. Those claiming some
type of unemployment benefit jumped to 293,500 people in December
2008 from 172,400 at the same time one year ago. Between 1994 and
the middle of 2008, employment growth averaged over 4.0 percent,

with lower rates recorded in 2002 and 2003 following the post 9/11
global economic slowdown. Prior to the labor market contraction in
mid-2008, Ireland had one of the lowest unemployment rates among EU
Member States at roughly half the EU average. Local economists are
predicting that the rate of unemployment may reach as high as 12
percent in 2009. There is a worry that unemployment among the young
will be significantly higher and that this may have broader
implications, especially with regard to criminal activity.


53. Recent immigrants to Ireland, principally from Poland and the
Baltic countries, are beginning to leave Ireland in search of work
elsewhere in the EU. This has alleviated some of the downward
pressure on wages but the harder issue to fix is labor demand, which
is falling due to the contraction of the Irish economy. In spite of
the labor market turmoil, the focus of government strategy continues
to be on upgrading skills and increasing the number of workers in
technology-intensive, high-value sectors.


54. 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 1.162 million males
and 850,700 females employed as of end 2007 (there is no official
data for 2008 yet). This gender balance reflects a change in social
mores that has facilitated a surge in female employment since the
mid-1980s


55. Until 2008, wages remain on an upward growth curve. As of the
end of the second quarter 2008 (the latest available official data),
average industrial earnings per worker were euro641 per week, a 2.1
percent increase year-on-year. Between 1998 and 2003, compensation
per employee increased by 37.1 percent, compared to an increase of
8.7 percent in Germany over the same period. The minimum wage was
euro 5.20 when it was first introduced in 2000 and rose to euro 8.65
in July 2007.


56. Unprecedented inward migration levels, particularly from Eastern
Europe, have added a new dynamic to the Irish labor market. For
example, of the 83,000 new workers added to the labor force between
the third quarters of 2005 and 2006, roughly 40,500 were non-Irish
nationals, working mostly in the construction and lower-end services
sectors. According to Ireland's Central Statistical Office (CSO),
the number of non-nationals residing in Ireland has more than
doubled between since 2002 to roughly 420,000, or roughly 10 percent
of the total population. Irish labor unions and Labor Party
politicians have expressed concern over the possibility of
displacement of Irish workers by non-nationals. Until the 2008
economic slowdown, however, yearly job creation in Ireland was
sufficient to accommodate both Irish and non-Irish workers and that
there was no evidence of downward pressure on wages. However, with
the slowdown, anecdotal evidence suggests that Ireland is
experiencing job losses rather than net job creation for this first
time in more than a decade.


57. 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 1987,
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 thought the benchmarks do not have legal force. This
consensual "Social Partnership" approach has been a major factor in
improving the industrial relations climate since the mid-1980s. In
2007, the number of working days lost as a result of industrial
disputes was 6,038, as compared to 130,000 in 1995.


58. In September 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
agreement followed a nine-month negotiation that centered on the
increasingly significant role of foreign workers in the Irish
economy. The national economic program sets out consensus positions
on wide-ranging social policies over a 10-year period and includes a
10-percent pay increase for workers over the first 3 years. The
package encompasses measures to protect employment standards, such
as the establishment of a new 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. In
response to the economic slowdown, the social partners in late 2008
agreed to an 18-month "transition" agreement that contained an
accord on wage hikes. As of January 2009, it looks likely that this
deal will be amended to roll back the agreed-to wage increases.



59. 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, roughly 33 percent of workers in the private sector are
unionized, compared to 95 percent in the public sector. 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
--------------


60. 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;
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. At the end of 2008, there were about 100 foreign
manufacturing and service companies established in the Shannon Free
Zone, employing roughly 7,000 workers. Also in 2007, trade from the
Shannon Free Zone amounted to euro 3.3 billion. U.S. companies,
which make up 57 percent of the firms operating out of Shannon,
include GE Capital, Bristol Myers Squibb, UPS, FedEx, Pfizer, Intel,
and Symantec. The Shannon Free Zone is technically an asset of
Shannon Development.


61. 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
--------------


62. According to Ireland's Central Statistical Office (CSO),the
stock of FDI in Ireland for end-year 2006 stood at euro 118 billion,
a euro 23 billion drop from 2005. (Note: The most recent FDI
available from the CSO is 2006. 63. In the past, CSO and U.S.
Commerce Department figures for U.S. FDI in Ireland have differed,
due to different calculation methods.)


63. During 2008, IDA Ireland negotiated 130 new business projects
with new and existing clients, which involved a total investment
commitment of euro 2 billion over the coming years and 8800 new
jobs. The average salary of jobs at these new investments was in
excess of euro 45,000. IDA Ireland announced 84 new and expansion
projects with U.S. companies during 2008.

--------------
Major U.S. Investments in Ireland
--------------

Company - Location

Apple Computers - Cork

AIG Europe - Dublin

Amazon - Dublin

Bausch & Lomb - Waterford

Berlitz - Dublin

BISYS - Waterford

Boston Scientific - Galway, Cork, Wexford

Bristol Myers Squib - Limerick, Dublin

HP-Compaq Computers - Galway, Dublin

Citigroup - Dublin

Conoco Phillips - Whitegate, Midleton, Co. Cork

Dell Computers - Limerick, Dublin

Eastman Kodak - Limerick, Cork

eBay - Dublin

Fidelity - Dublin

Gartner Group - Limerick

Google - Dublin

Hertz - Dublin

Hewlett-Packard - Leixlip, Kildare

IBM Ireland - Dublin

Intel Ireland - Dublin, Leixlip

Johnson & Johnson - Dublin

Millipore Ireland BV - Cork

Motorola - Cork

Netscape Communications - Dublin

Novartis - Cork

Pfizer - Cork

PFPC - Navan, Wexford

Prudential Insurance of America - Letterkenny

3Com - Dublin

United Airlines - Dublin

US Robotics - Dublin

Woodchester Investments - Dublin

Wyeth Biopharma - Dublin

Yahoo - Dublin