Bills Digest 138 1996-97
Australian National Railways Commission Sale Bill 1997
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
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.
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.
This page was prepared by the Parliamentary Library, Commonwealth of
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Last updated: 6 June 1997
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