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CONTENTS
Australian National Railways Commission Sale Bill
1997
Date Introduced: 14 May 1997
House: House of Representatives
Portfolio: Transport and Regional
Development
Commencement: On the day on which the Act receives
the Royal Assent, but certain aspects of the legislation, such as
variations to Railway Agreements with South Australia and Tasmania,
will commence on a date to be fixed by Proclamation.
The purpose of the Bill is to allow the sale of the
non-interstate mainline track rail assets of Australian
National.Australian National operates SA Freight and Tasrail within
the States of South Australia and Tasmania, respectively, the Seat
of Government Railway, contract rail and engineering services, and
the Indian-Pacific, the Ghan and The
Overland passenger trains.
The importance of rail in the development of Australia is
noteworthy.It was the lure of a rail connection across Australia
which largely drew Western Australia into the Federation.The Trans
Australian Railway was completed in 1917.Commonwealth Railways was
established to run the system.The scope for combining State
railways into one national system is reflected in specific heads of
power in the Constitution (sections 51(xxxiii) and 51(xxxiv)).
The move towards a national system of rail was revived under the
Whitlam Labor Government (1972-75) with the combining of the
State-owned non-metropolitan rail system in South Australia with
the Commonwealth inter-State rail system, and the transfer of the
State-owned railways in Tasmania to Commonwealth control.The
Australian National Railways Commission was formed in 1975 to take
control of the amalgamated system which it has operated under the
name of Australian National.
In the 1990s there were two distinct moves to reform and
restructure the Australian rail industry.One was the establishment
of National Rail to provide all inter-State
freight services on the Australian mainland.The National Rail
Corporation Limited (National Rail) was formed in 1991 with
shareholding held by the Commonwealth, the State of New South Wales
and the State of Victoria.National Rail commenced commercial
operations in February 1993.The other development was the
completion of the inter-State standard gauge rail network with the
construction of the Melbourne to Adelaide standard gauge link which
was completed in 1995.
More recently, the implementation of the National Competition
Policy (which impacts on nearly all businesses in all) has
opened-up rail operations to third party access.Associated with the
introduction of the National Competition Policy, the former Labor
Government had proposed the establishment of a national rail
authority, to be known as Track Australia, to manage all
inter-State rail infrastructure and access, including those tracks
currently owned by Australian National.This approach has been
generally endorsed by the present Coalition Government but the
authority is yet to be formally established.
As a consequence of the formation of National Rail, Australian
National has been obliged to hand over all of its inter-State
freight operations to National Rail.Australian National has,
however, retained its ownership of and is responsible for the rail
infrastructure between Melbourne and Adelaide, Adelaide and
Kalgoorlie, Adelaide and Broken Hill and Adelaide and Alice
Springs.In short, Australian National has lost the revenue derived
from these freight services but carries the responsibility for the
infrastructure.
The Commonwealth's remaining rail system (including the
Indian-Pacific, the Ghan, The
Overland passenger services, Tasrail, SA Freight and the
Seat of Government Railway) has been retained as Australian
National.Australian National also has a range of other
responsibility such as railway workshops at Adelaide, Port Augusta
and Launceston.Australian National also provides other services
such as motor power (locomotives) for other rail operators.The
operation of this system is subject to agreements between the
Commonwealth and the States of South Australia and Tasmania
pursuant to Commonwealth statutes, primarily the Railways
Agreement (South Australia) Act 1975 and the Railways
(Tasmania) Act 1975.Overall control of Australian National
rests with the Australian National Railways Commission.
The loss of primary business (albeit Government-sanctioned) from
Australian National to the freight carrier National Rail has
impacted heavily on Australian National to the point that debt
levels and the structure of Australian National had to be
addressed.In 1996, the Government conducted a major review and the
results of that review were released as the Brew Report
(1) in September 1996.Key recommendations in the Brew
Report included the sale of the whole system, or,
alternatively, the sale of certain operations to private short line
operators or transfer of lines back to State Governments, or
failing that, the closure of unprofitable lines.
An assessment of the Brew Report was carried out by the
Senate Rural and Regional Affairs and Transport References
Committee in its Report on the Brew Report and the Continuing
Role of the Commonwealth in the Australian Rail Industry (May
1997).The Senate Committee concluded that, while the Brew Report is
an adequate financial analysis, there are other issues other than
financial performance which should be taken into consideration in
examining the role of rail in the Australian transport system.The
Senate Committee suggested various options, including transforming
the inter-State passenger services into a national tourist asset,
and the elimination of debt attaching to Tasrail with the return of
that service to the State of Tasmania.
The Government has introduced the Australian National Railways
Commission Sale Bill 1997 to authorise the sale of the
non-inter-State mainline track assets of Australian National in
whole or in part.In fact, formal calls for expressions of interest
in the purchase of the business of the Australian National Railways
Commission were publicly announced in the national print media on
19 March 1996.Early media speculation indicated that the British
transport company Stagecoach was tipped to be the successful bidder
with a suggested price tag of about $120 million. (2)Subsequently,
a number of other players including US and Australian companies
have also been identified as being potential bidders.
Note: The provisions in the Bill are implemented by way of
Schedules to the Bill.The terminology used will therefore be Items
in the Schedule and not Clauses in the Bill.
Schedule 1
Item 1 inserts a new Part VA-Transfer of
assets of Commission into the Australian National Railways
Commission Act 1983.Under proposed new section 67AD, the
Minister for Finance may direct the Australian National Railways
Commission (the Commission) to sell or transfer assets.The
direction may state that assets must be sold to a specified person,
within a specified time and within a specified price range.Proposed
section 67AH contains an appropriation power to support the
transfer of Commission liabilities, declared by the Minister for
Finance, to be guaranteed liabilities of the Commonwealth.Proposed
new section 67AS provides an exemption from stamp duty and taxes
otherwise payable in relation to the transfer or sale of any of the
Commission assets (unless the Minister for Finance declares in
writing that the exemption is not to apply to a particular
matter).
Proposed section 67AW is an open-ended appropriation to support
payments by the Treasurer of any contractual rights, obligations
and other liabilities which the Commonwealth accepts in relation to
the sale or transfer of assets of the Commission.The Explanatory
Memorandum to the Bill indicates that the estimated Commission debt
and other financial obligations to be assumed by the Commonwealth
is in the order of $1 billion (page 2).Proposed
section 67AZB authorises persons employed by, or acting on behalf
of, the Commonwealth or the Commission to use what might be
protected or commercial-in-confidence information in connection
with the sale or transfer of Commission assets.The Minister for
Finance may contract with a person as to how commercially sensitive
information is to be protected.
Proposed section 67AZD authorises the Minister for Finance to
apply to the Federal Court for injunctions to restrain conduct
which is inconsistent with the sale or transfer of the Commission's
assets or, alternatively, compel action which assists the sale or
transfer process.This appears to be a fairly exceptional injunction
power to the extent that it can result in the issue of an
injunction even though the person who is the subject of the
injunction was only involved in an one-off action and is unlikely
to continue or repeat that action.Courts are usually reluctant to
grant injunctions when the action complained of may only be
isolated and unlikely to be repeated (see the wording of proposed
section 67AZG(1)(a)).
Proposed section 67AZN empowers the Minister for Finance to sell
shares in any Commonwealth company which has been established to
facilitate the sale or transfer of the Commission's assets.
Digest Comment:
This is a very flexible sale process in that it provides very
broad powers for the Minister for Finance to carry out the sale or
transfer of the Commission's assets.On one level, this is desirable
to achieve a prompt resolution of the problems facing Australian
National.It is noted, however, that proposed section 67AZP
specifically exempts the sale process from the Legislative
Instruments Act 1997 (still before the Senate).This means that
the directions issued by the Minister for Finance in relation to
the sale process will not be disallowable by the Parliament.
Proposed section 67AZR is a key provision in the Bill.This
proposed section recognises that the Minister for Finance may need
to enter into written agreements with both the State of South
Australia and the State of Tasmania to either terminate or vary the
Railway Agreements (5 in all, which were entered into in
the decade 1970 to 1980).These agreements covered the transfer of
those State rail services (non-metropolitan in South Australia) to
the Commonwealth.The Railway Agreements contain important
provisions including those dealing with the standards of operation
of railways, line closures and reduction in services.In South
Australia, there is a reciprocal right for the State and the
Commonwealth to use each other lines.Also, there is the issue of
land.The primary Railways Agreement (1975) for South
Australia contains the following clauses:
11 (6) The Commission will not use the land and minerals within
the State to be vested in the Commission pursuant to this agreement
for other than railways purposes without the approval of the State
Minister.
...
11 (8) The Commission will transfer to the State free of charge
land within the State which is vested in the Commission pursuant to
this agreement and is no longer required for railways purposes.
It would appear that the track (6118 km) and land are not
included in the sale process but some of the fixtures on the land
may be sold or transferred.The track is likely to be controlled by
a new National Track Authority.(3)
On the important issue of levels of railway employment, the
South Australian Railways Agreement (1975) contains the
following clause:
17. The Australian Minister will obtain the prior agreement of
the State Minister to the implementation of any proposals for
reducing, by reason of redundancy, the general level of employment
at railway workshops to be vested in the Commission pursuant to
this agreement, and failing agreement the matter shall be
determined by arbitration.
The Explanatory Memorandum at page 14 indicates that the
Minister's power to negotiate amendments to the Railways
Agreements is confined to land and asset matters.It is
suggested that proposed section 67AZR(1)(a), just on its simple
language, appears to be a broader power to amend than just
amendments concerning land matters.
Digest Comment:
Amendments to the Railways Agreements are a
disallowable instrument (see proposed section 67AZR(3).
Proposed new section 67AZS provides a constitutional safety-net
to allow compensation to be paid if the sale or transfer of the
Commission's assets would otherwise result in an acquisition of
property by the Commonwealth other than on just terms, as required
by the Constitution (section 51(xxxi)).
Schedule 2
This Schedule contains proposed amendments which will enable the
Minister for Transport (and, where necessary, the Minister for
Finance) to direct the Commission to progressively wind-down its
operations.These directions include the power to re-structure the
Board of the Commission.The appointees will hold office during the
pleasure of the Minister (see Item 10).
An interesting provision is the proposed new section 74A (Item
23) which will enable, if necessary, the Minister for Transport to
exempt a new operator (of a former Commonwealth controlled line)
from State or Territory laws for a period of 6 months after the
operation of the line passes from the Commonwealth.
Schedule 3
This Schedule contains the repeal provisions for the
Australian National Railways Act 1983, Seat of
Government Railway Act 1928 and the various South Australian
and Tasmanian Railways Agreements Acts together with some
transitional provisions (see Items 3,
4 and 5).
Digest Comment:
It is important to note Clause 2 of the Bill
which contains qualifications on the repeal of the Railways
Agreements legislation.Proclamation for the commencement of
the repeals is not to be made until the Minister for Transport
issues a certificate to the Governor-
General confirming that the State Ministers for South Australia
and Tasmania, respectively, have agreed to the repeals.
Schedule 4
This Schedule simply contains consequential amendments to other
Commonwealth statutes.These amendments are necessary once the
Commission is wound-down.
Schedule 5
This Schedule contains provisions to enable the Minister for
Finance to declare an asset which is affixed to land to be disposed
of separately to the land (see Item 1).The Schedule also contains
provisions to enable the Minister for Transport to issue written
notice to railway operators to make available railway services on a
priority basis for defence or emergency purposes (see Item
2).Compensation for loss or damage and for acquisition of
property other than on just terms is a responsibility of the
Commonwealth (see Item 3).
One of the key issues in the sale of Australian National is the
status of the various Railways Agreements between the
Commonwealth and the States of South Australia and Tasmania.It may
have been tempting for the Commonwealth to consider whether it
could simply have acted unilaterally, by Act of Parliament, and
disposed of the Commonwealth rail operations over any objections
from the States of South Australia and Tasmania.This may have given
rise to at least a claim by those States for compensation under the
just terms provision of the Constitution.The Commonwealth has not
acted in that unilateral way in this Bill and the Bill contains
safeguards to honour the negotiation requirements of the
Railways Agreements.
Amendments to the Railways Agreementsare disallowable
instruments.
- Brew, J.R. Review of Australia National Railways Commission and
National Railwa
- Corporation, Sydney, 1996 (Folio).
- AAP London, 'Britons tipped to run Australian rail', The
Canberra Times, 7 April 1997.
- Jackson, S. 'Making Tracks', The Australian, 20 December
1996.
Brendan Bailey
29 May 1997
Bills Digest Service
Information and Research Services
This Digest does not have any official legal status. Other
sources should be consulted to determine whether the Bill has been
enacted and, if so, whether the subsequent Act reflects further
amendments.
IRS staff are available to discuss the paper's contents
with Senators and Members and their staff but not with members of
the public.
ISSN 1328-8091
Commonwealth of Australia 1997
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Published by the Department of the Parliamentary Library,
1997.
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Last updated: 6 June 1997
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