Privatisation might be the modern equivalent of selling off the farm, but it is providing lawyers with a unique and challenging new line of work. ALB investigates.

Queensland Premier Anna Bligh’s dogged defence of a proposed A$3bn float of Queensland Rail’s coal and freight assets has been met with a frosty reception from unions and the coal industry alike.

However, unlike the privatisation angst of the 1990s, a certain sense of inevitability is permeating the air. That same mood is manifesting itself in NSW, where a number of firms including Gilbert + Tobin have been ducking for cover following controversy relating to the sale of NSW Lotteries. But again, this is a controversy relating to form, not substance. As the political pendulum swings slowly back towards the Liberals and the ALP shores up its economic credentials, there is little room for questioning whether or not privatisation should happen. The only controversy is what model should be used.

In a slow economic environment, privatisation work has proved to be a mainstay for beleaguered national firms. Queensland Rail may be dominating the headlines, but it’s only one of a series of public asset sales upon which firms have provided advice. Freehills partner Robert Nicholson notes that such work raises a wide range of potential advisor roles. Nicholson himself acted mainly for governments in the privatisation of Victorian assets during the 1990s, but he notes that there are also a number of buy side and financing roles. Indeed, some of the major firms such as Mallesons and Blake Dawson see their place in the market as firmly on the buyers’ or financiers’ side, as acting for governments often raises conflicts of interest with existing clients.

Lawyers have commented on the unique nature of these transactions and the unique skills which need to brought to the table: “It is a chance for M&A lawyers to broaden their horizons and be challenged in ways that they would not usually find,” said Nicholson. “Anyone working in this area has got to be able to bring to bear skills in the regulatory area as [privatisations] often have a significant legislative and regulatory feel to them. The final area that lawyers must have skills in is public policy.”

One of the main tasks for any law firm advising on the sale of a government asset is to provide advice on the amendment of the legislative and regulatory schemes regulating those assets’ activities. The regulatory aspect combined with commercial considerations is what makes government transactions so appealing to Gilbert + Tobin’s Bryan Pointon, who recently represented the NSW government in the sale of NSW lotteries.   Pointon was struck by the diversity of the matters the team to advised on, such as the re-structuring of statutory licence operations, drafting a regulatory consultation paper and working in conjunction with working groups to re-structure the lotteries. Gilbert + Tobin is also acting for the NSW Government in relation to the sale of its waste management business WSN Environmental Solutions, with legislation allowing this sale before both houses of parliament at the time of printing.

Queensland has been very active in the privatisation stakes with railways, ports, forestry plantations and motorways all on the block. . Simon Brown, partner at Blake Dawson in Brisbane, sees these projects as a recognition of the growth occurring in Queensland: “The Queensland government doesn’t have the finance or the capacity to develop these things at the rate that industry requires,” said Brown. The consequence is that there will be a shift in the way that facilities operate and there will be a greater involvement from the private sector.

Nicholson believes that the increasing cost of maintaining infrastructure, for example electricity poles and wires owned by governments ‘just to keep the lights on’ is of concern to governments across Australia which still own those assets. The need for increased funds to maintain and develop infrastructure is a significant push factor – one that will lead to additional privatisations.
Pointon noted that one of the benefits of the sale of NSW Lotteries was the removal of the conflict between the NSW Government’s ownership and regulatory roles in relation to that asset and he said that the NSW government was likely to review more of the businesses activities it undertakes as part of a trend of separating out its ownership and regulatory roles.