Bills Digest 138 1996-97 Australian National Railways Commission Sale Bill 1997


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WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History

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.

Purpose

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.

Background

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.

Main Provisions

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).

Concluding Comments

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.

Endnotes

  1. Brew, J.R. Review of Australia National Railways Commission and National Railwa
  2. Corporation, Sydney, 1996 (Folio).
  3. AAP London, 'Britons tipped to run Australian rail', The Canberra Times, 7 April 1997.
  4. Jackson, S. 'Making Tracks', The Australian, 20 December 1996.

Contact Officer and Copyright Details

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
Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means, including information storage and retrieval systems, without the prior written consent of the Parliamentary Library, other than by Members of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1997.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 6 June 1997


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