Given the long-term nature of public private partnership projects, the risk of changes in legislation, changes in government policy, and the election of a new government are often viewed by the private party as critical risk factors when contracting with government.
The risk of legislative and policy change is complicated further by Australia's character as a Federation, where powers are divided between the Commonwealth and the states. This means that even if a state government takes the risk of its actions causing detriment to the project, there remains the vexed question of who is to bear the risk of detriment arising from federal or local government action.
Project agreements will be entered into with the Queensland Government. The federal government generally has no involvement at all as a contracting party (but may have some involvement where federal approvals are required). Local governments also have a degree of autonomy from the Queensland Government, which may be an issue in some projects, such as land transport projects.
Specific areas of legislative and government policy risk are:
• the risk that government or the contracting department (on behalf of government) will not have the power to enter the contract or its ability to do so will be limited
• the risk (from the private party's viewpoint) that government will be immune from legal action
• the risk of no remedy being available at law to prevent government from legislating to affect the rights of the private party (often identified as sovereign risk)
• the risk that the relevant minister(s) will grant or refuse to grant statutory consents in a way that disadvantages the project
• the risk that government will use its power to propose or alter legislation and subordinate instruments, or that parliament will reject, accept or amend such legislation and subordinate instruments in a way that negatively impacts on or disadvantages the project
• the risk that government will adopt or change policy, including policies with respect to the project, in a way which impacts on the project's mode of operation or alters the relationship between the project and competing public infrastructure
• the risk that statutory regulators will exercise their powers to disadvantage the project and
• the risk that government will require changes in service specifications or will otherwise interfere with the private party's business operation in a way which negatively impacts on or disadvantages the project.
These risks and government's likely preferred position on their allocation are discussed below.