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Focus: Infrastructure – November 2005

NSW Government establishes the Infrastructure Implementation Corporation

In brief: Senior Associate Ren Niemann and Paralegal James Nicholls report on new legislation that empowers the NSW Government to take over 'major infrastructure projects', and offer some clues as to how it might affect private-sector parties. 

Overview

The NSW Government will be able to assume a direct role in major infrastructure projects, including possibly taking over from state-owned corporations, following assent of the Infrastructure Implementation Corporation Act 2005 (NSW).

The Act establishes the Infrastructure Implementation Corporation (the Corporation) to undertake or take over major infrastructure projects of high strategic importance, in conjunction with the Infrastructure Implementation Group (already established within the Premier's Department).

The legislation was introduced to Parliament on 9 November, following the undertaking of critical infrastructure projects such as the Royal North Shore Hospital redevelopment and the Kurnell desalination plant, and received assent on 17 November 2005. It will come into force on a date yet to be proclaimed.

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What projects could be affected?

The Act gives no guidance as to what factors will be taken into account in deciding which projects the Corporation will undertake or take over. This will be a decision of the Premier in consultation with the Treasurer and the relevant public authority. Where the public authority is a state-owned corporation (SOC ), before making any project authorisation order, the Premier must also consult with the portfolio Minister, voting shareholders and board of directors of the SOC.

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What is the nature and function of the Corporation?

The Corporation will be a statutory corporation, managed by the Director General of the Premier's Department. The Corporation represents the Crown and has the status, privileges and immunities of the Crown.

The primary functions of the Corporation are to:

  • carry out a major infrastructure project (ie any project to which Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) applies); or
  • take over a major infrastructure project carried out by (or involving) another public authority (which is broadly defined and includes SOCs),

as authorised in a 'project authorisation order' issued by the Premier. The Act does not set out what will be dealt with in a project authorisation order but this may be the subject of further regulations.

In carrying out its functions under a project authorisation order, the Corporation may:

  • transfer to itself the assets, liabilities and rights of the public authority in relation to the relevant project, and/or
  • acquire land required for the purpose of carrying out or taking over works.

Alternatively, the Premier may order that the project continue to be owned by the public authority and that the Corporation be given the power to exercise the functions of the public authority and to direct the public authority in relation to the carrying out of the project.

Importantly, in carrying out its functions, the Corporation is not relieved of the need to comply with the legislative regime applicable to the relevant project (eg the normal planning process or environmental requirements under the Environmental Planning and Assessment Act).

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Transfer of project to a public authority

The Premier is further empowered to make a 'project divesting order', requiring that the Corporation transfer the assets, rights and liabilities it has (in relation to projects taken over by the Corporation from a public authority) to a public authority. Such an order may be made in relation to an entire project or to parts of a project. Again, the Act does not set out what will be dealt with in a project divesting order but this may be the subject of further regulations.

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Contractual impact of transfers

The Schedule to the Act sets out provisions that regulate the transfer of rights, assets and liabilities between a public authority and the Corporation, where required by a project authorisation order or a project divesting order. Importantly, the Schedule provides that:

  • any assets, rights or liabilities subject to such an order are transferred by virtue of the schedule and do not require any other means of transfer (ie conveyance or assignment) in order to be effective;
  • any acts or omissions by the transferor or any reference to the transferor in any document or legislative instrument are deemed to have been acts done by, or references to, the transferee; and
  • duty is not payable on any of the transfers brought about under the Act.

The Schedule also protects the transferring parties by providing that any transfer according to the Schedule cannot be regarded as a breach of contract or any form of civil wrong or give rise to termination of the underlying contracts to the extent that they relate to the assets, rights or liabilities being transferred.

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How are private-sector participants affected?

Private-sector parties involved in major infrastructure projects in NSW should be aware of the effect that the Corporation may have on the delivery of major projects.

The Act does not deal with all issues that might arise by virtue of the transfer of a project, for example:

  • the application of the Public Authorities (Financial Arrangements) Act 1987 (NSW) to the Corporation, including whether a deed of guarantee given in respect of the relevant public authority under that Act is available to the Corporation;
  • the need to ensure that any Crown immunities that the Corporation may have do not affect the Corporation's liabilities and obligations under the underlying contracts; and
  • how, in a practical sense, any transfer of a project will take effect (eg with respect to staff, documents, project management etc).

Private-sector participants and their financiers will, no doubt, be concerned to ensure that the continued viability of projects is not affected by the Corporation taking over, or undertaking, major infrastructure projects. This will need to be carefully monitored.

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