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In any federal system of government, the constitution must regulate the legal relationships that exist between the central repository of governmental power and the regional or provincial levels of government which co-exist with it. In Australia, the regulation of intergovernmental power was first discussed in D’Emden v. Pedder where it was established that the Commonwealth was impliedly immune from any associated state legislation — the reciprocal position being established in Federated Amalgamated Government Railway and Tramway Service Association v NSW Railway Traffic Employees Association. This rationale was subsequently rejected in the Amalgamated Society of Engineers v Adelaide Steamship case and the constitutional interpretation of intergovernmental immunities was redefined by the High Court in the Melbourne Corporation v Commonwealth decision.
The scope of immunity after the Melbourne Corporation v Commonwealth decision was poignantly termed the Melbourne Corporation doctrine and it consisted of two distinct limbs — framed by Mason J in Queensland Electricity Commission v Commonwealth. The first limb consisted of a prohibition against State discrimination such that the Commonwealth could not place special burdens or disabilities on the States, while the second limb was a prohibition against the creation or application of laws that ‘[i]mpose restrictions which prevent [the States] from performing functions or impede them from doing so.’ While the first limb of the Melbourne Corporation doctrine was applied by the High Court in the QEC Case, the second limb of the test was not definitively applied until Western Australia v Commonwealth where the High Court rejected Western Australia’s argument as to the validity of the Native Title Act 1993 (Cth) ruling that ‘[t]he Act does not purport to affect the machinery of government of the State’. Additionally, in Re Australian Education Union and Australian Nursing Federation; Ex parte Victoria the High Court again considered the second limb of the Melbourne Corporation doctrine — applying it against the Commonwealth Industrial Relations Commission in upholding the Victoria’s contention that the States should have the power to determine ‘[t]he terms and conditions on which its employees shall be engaged’.