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Public Sector Joint Ventures in NSW and the

Public Authorities (Financial Arrangements) Act 1987 (PAFA)

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In New South Wales, Australia, Government has legislated to deal with many of the contractual relationships involving the public and private sector. It may be of interest to CAPSL members outside NSW to be aware of some of the NSW initiative. 

In that respect, the "Joint Venture" provisions of PAFA were introduced in 2000.   

Their operation has been, in my opinion, somewhat problematic due to the wording of the original legislative provisions. The provisions are so widely worded (see text extracted below) that the wording could potentially catch (and so require Treasurer approval) of transactions of wide-ranging nature, many of which, due to their relatively minor size or their being ones involving other government agencies, involved little or no real risk. 

This has been recognised in the way regulations were used over a number of years to clarify operation of the provisions. 

However, with the ever increasing interface of Government and the private sector across a myriad of situations involving shared and or joint activity, the frequency of relevance of the “joint venture’’ provisions should not be overlooked. 

Agency Specific Tailoring of Joint Venture provisions 

Various regulations have been made over the years to tailor the operation of the Joint Venture provisions to range of agencies and situations.   

These included some which excluded specific activity from the operation of the Joint Venture provisions, e.g. Public Authorities (Financial Arrangements) Amendment (Education and Training) Regulation 2002 and 2003 and the Public Authorities (Financial Arrangements) Amendment (Department of Agriculture Joint Ventures) Regulation 2003 and the Public Authorities (Financial Arrangements) Amendment (Excluded Entity) Regulation 2000.

Operation of the Provisions

Relevant provisions of PAFA are

Section 3 Definitions

joint venture is defined in section 22K.

joint venture arrangements means arrangements (as defined in section 22J) for or with respect to the carrying on of a joint venture.

Part 2D Joint ventures

22J      Definition

In this Part:

arrangement includes a contract or understanding, and includes the constitution of a body corporate referred to in section 22K (1) (b).

22K     Meaning of joint venture

(1)        In this Act, a reference to a joint venture is a reference to an activity:  

(a)  carried on jointly by two or more persons, whether or not in partnership, or

(b)  carried on by a body corporate formed by two or more persons for the purpose of enabling those persons to carry on that activity jointly by means of their joint control, or by means of their ownership of shares in the capital, of that body corporate,   

and includes a reference to an activity or activity of a class prescribed by the regulations as being within this section, but does not include a reference to an activity or activity of a class prescribed by the regulations as not being within this section. 

(2)        An activity may be regarded as carried on jointly even though some or all of the persons involved carry on different aspects of the activity.

22L      Restriction on joint ventures

(1)        An authority must not:
          (a)  enter into an arrangement with another person for the purpose of carrying on a joint
         venture, or
          (b)  carry on a joint venture under such an arrangement, 
          unless the Treasurer has approved of the arrangement. 

(2)        The Treasurer’s approval:  

(a)  may be given for a specified arrangement or class of arrangements, and

(b)  may be given in respect of one or more specified authorities or in respect of a specified class of authorities, and

(c)  may be otherwise specific or may be general, and

(d)  may be given on such terms and subject to such conditions as the Treasurer thinks fit. 

(3)        The Treasurer’s approval must be in writing.


(4)        The Treasurer’s approval is required under this section even though the arrangement is, or is entered into in connection with, financial accommodation authorised under Part 2, a joint financing arrangement authorised under Part 2B or some other financial arrangement authorised under this Act. 

Generalised Definitional Specification

Following the series of specific exclusions and tailoring over a number of years, the Public Authorities (Financial Arrangements) Regulation 2005 (the PAFA Regulation) was amended in July 2006 by the Public Authorities (Financial Arrangements) Amendment (Joint Ventures) Regulation 2006. GG No 90 of 7.7.2006, better to specify the activities that are to be considered "joint ventures" for the purposes of PAFA (which will accordingly require Treasurer Approval under Part 2 D PAFA) and to exclude some activity from the operation of the Joint Venture provisions of PAFA.  

The new provisions apply generally across the board to all NSW "authorities" as defined for PAFA purposes. 

Following those changes the Public Authorities (Financial Arrangements)  Regulation 2005 now contains the following clause 55A (bolding is my emphasis) 

55A Joint ventures 

(1)               Activities that are joint ventures 

For the purposes of section 22K of the Act (but subject to subclause (2)), an activity of a commercial nature that
(a) is entered into for the purposes of profit or gain, and
(b) is carried on jointly by an authority and another person, and
(c) involves a range of technical, managerial and financial resources or other assets in the form of jointly controlled operations, assets and entities (either within or outside of Australia, or both), 

is prescribed as an activity that is within that section. 

(2) Excluded activities
For the purposes of section 22K of the Act, the following activities are prescribed as not being within that section (but only if the activity is carried on in
New South Wales or is related to an activity carried on in New South Wales): 

(a)               an activity carried on by 2 or more authorities but with no other person involved, 

(b) an activity carried on by an authority and an agency of the Commonwealth or of another State or Territory but with no other person involved. 

Treasury Circular 

Consistently with the new clause 55A, NSW Treasury Circular (NSW TC 06/18) states that the aim of the amendments was to narrow the operation of the provisions to include "..State significant and high risk arrangements..". 

The primary thrust of the amendments seems to be to limit the operation of the provisions to transactions of a commercial nature involving an intent by an authority to carry on or conduct the activity jointly with "another person" to make profit or gain by jointly conducted operations involving technical, managerial or financial resource or asset contributions of the participating parties. 

The provisions are such that the "Joint Venture" provisions will not normally relate to activities carried on by two or more NSW PAFA authorities together, provided the activity is carried on in New South Wales or is related to an activity carried on in New South Wales. 

What exactly is meant by " related to an activity carried on in New South Wales " in context of any activity outside New South Wales, remains to be seen

Activities carried out with the Commonwealth or another State or Territory entity, if carried on in NSW or if related to an activity carried on there, would be exempt from report and the need for Treasurer approval. 

NSW Treasury Circular (NSW TC06/18) outlines of format register of relevant joint ventures involving contributions over $100,000. “Contribution” is defined in the Treasury Circular in a way which is capable of including the value of agency / authority staff time involved in providing resources or services to the joint operation. 

These are to be maintained so as to enable NSW Treasury to keep an eye on estimated contingent liability of State authorities in respect of relevant joint ventures. 

It is interesting that the PAFA provisions do not talk in terms of anticipated risk or potential exposure which might flow from the proposed activity but only in terms of "contribution", though the format register attached to NSW Treasury Circular TC 06/18 plus havoc on noting contingent liability issues, to the extent that they involve a contingent liability on the Consolidated Fund. 

An Authority's actual power to enter into a "joint venture" must flow from some power it has apart from PAFA, such as its own enabling Act. 

Commercial + "Jointly” and “Jointly" 

Clause 55A (1) not only requires that something of a "commercial" intent but twice uses the word "jointly", in both subparagraphs (b) and (c).  

The double use of the word will be important in determining whether a particular arrangement falls within the provisions. 

It will involve detailed examination of fact situations to determine whether particular existing or proposed activity of an authority and another person is commercial activity carried on "jointly" involving "joint" contributions. 

It is not uncommon for state agencies to be involved in transactions involving development and licensing of intellectual property.  

If the arrangements concerning the development and licensed use of intellectual property (or even jointly owned intellectual property being used commercially) involve royalties being paid those arrangements could that not amount to an arrangement falling within the provisions? 

Indeed, the format register attached to NSW Treasury Circular TC 06/18 envisages or gives an example of a joint-venture as one involving "Research".


With so much outsourcing, ‘partnering’, collaboration and the like between State Agencies and the private sector, both within NSW and beyond, in the provision of “services”, collaborative development of Intellectual property and the like, there would seem to be a real need for careful consideration of any proposed transactions before implementation to avoid inadvertent classification as “joint ventures” which, in light of section 22L(4) PAFA, may, at the same time, also be subject to PAFA’s “financial accommodation” and “joint financing arrangement” requirements. 

Greg Ross 

Special Counsel,
Shaw Reynolds Bowen Gerathy Lawyers
151 Macquarie Street
02 9271 3019 / 0413 544 106



Nothing in the above is to be considered or taken as advice as to any particular situation but is merely a general overview of the operation of relevant PAFA provisions.