Opinion Number. 418



Key Legislation

NAVIGATION ACT 1912. ss. 287. 288

The Secretary, Department of External Affairs

The Head Agent of the Dutch Royal Packet Steam Navigation Company has written to the Prime Minister with reference to the position of his Company's line of steamships, in relation to the coasting trade between Australian ports and Port Darwin and Port Moresby in Papua, under the provisions of the Navigation Bill before the Commonwealth Parliament.

He points out that his Company has made considerable losses in the trade between Java and Australia.

He states that a Bill is now before the Legislative Assembly at the Hague to refund to the Company half the loss it may incur in the trade, up to a maximum of f 12,000 a year, commencing from the date at which the Bill will become law, and on the express condition that the Company is to refund all the money thus paid to it (without however, paying any interest thereon) out of the profits of the line, when it shall first have earned back the loss incurred by it previous to the operation of the new Act which loss, he states, may safely be put at say £50,000 up to now.

The Secretary to the Prime Minister has, by direction, forwarded the letter to me for advice as to whether a grant such as that referred to constitutes a subsidy within the meaning of the Navigation Bill.

The Company's vessels at present engage in the coasting trade as denned in the Navigation Bill, in that they take on board passengers and cargo at various Australian ports to be carried to and landed at Port Moresby and Port Darwin.

Under section 284(1) of the Navigation Bill, a foreign ship can only engage in the coasting trade if she is licensed to do so and a licence to engage in the coasting trade can only be issued on the condition, inter alia, that no subsidy or bonus shall be payable in respect of the ship to her owners other than by the Government of the Commonwealth or a State.

The section contains a proviso that any payment for services bona fide rendered in the carriage of mails, passengers, or goods, at rates based solely on the value of those services, shall not be taken to be a subsidy or bonus within the meaning of the section.

A subsidy is defined by the Standard Dictionary (inter alia) as follows:

Pecuniary aid directly granted by the Government to an individual or commercial enterprise deemed productive of public benefit.

I am of opinion that the grant proposed to be made by the Dutch Government to the Company is a pecuniary aid granted to a commercial enterprise, and that it does not come within the proviso mentioned and that it would be a subsidy within the meaning of the Navigation Bill.

[Vol. 9, p. 13]

(1)Enacted as section 287 and 288 of the Navigation Act 1912.