Ireland picks BNY Mellon to manage €14bn Apple escrow account

Contracts yet to be signed but move paves way for Apple to start transferring funds

The Government missed original deadline of January 2017 to collect the money from Apple.

The Government missed original deadline of January 2017 to collect the money from Apple.

 

The State has selected BNY Mellon as custodian to oversee the management of about €14 billion of back taxes and interest the Republic has been ordered to collect from US technology giant Apple, The Irish Times has learned.

This would help pave the way for California-based Apple to start transferring funds to an escrow account in the second quarter, according to the latest estimates from the Department of Finance – more than 15 months after an original deadline was missed.

While the Government and Apple moved in late 2016 to appeal a decision months earlier by the European Commission that the iPhone maker owed Ireland billions of euro of allegedly illegal state aid, the State has agreed to collect the amount, plus interest, in the meantime and hold it in escrow. The case is currently before the European Union’s general court in Luxembourg, and is expected to ultimately end up in the European Court of Justice.

The Government missed an original deadline of January 2017 to collect the money from Apple, as the logistics of setting up the biggest and most complicated escrow account in the history of European state-aid cases dragged on. Rather than transferring cash, Apple will mainly be moving bond investments, which will require careful management while held in the account.

Repeated delays

The commission, frustrated by repeated delays to an expected timeline for transfers, moved in October to refer Ireland to the European Court of Justice for failing to recoup the funds. At that time, it was envisaged that all of the money would have been handed over by March.

However, the latest estimate – outlined by Department of Finance officials to the Public Accounts Committee late last month – is that the funds will start moving in the second quarter.

Spokesmen for the Department of Finance and National Treasury Management Agency (NTMA), which is in charge of the procurement, declined to comment on the custodian appointment. A spokeswoman for Apple also declined to comment.

It is understood the final contracts have yet to be signed as parties involved are in the middle of a standard “cooling-off period” after the selection was made. Short-listed companies that failed to secure the lucrative gig are believed to have been informed.

Procurement process

The NTMA began the procurement process to find a custodian last July. It originally aimed to have a custodian in place by the middle of November. BNY Mellon will safeguard the money on behalf of Minister for Finance Paschal Donohoe as it is managed by investment managers.

A separate search to find investment managers, who will manage the underlying money being transferred, is expected to conclude in the coming weeks. Most of Apple’s $285 billion (€231.5 billion) cash pile is invested in government bonds, corporate securities and asset-backed bonds, such as debt issued by mortgage providers.

Market sources estimated last July that the custodians and investment managers responsible for the escrow account stand to make up to €15 million a year in fees for their services. The European appeals process may last up to four years.

The commission estimated in its original ruling in August 2016 that Apple owed Ireland €13 billion plus interest. The latest quarterly report from Apple, released in early February, said the interest bill is likely to come to €1 billion.