Section 101 of the Constitution of Australia provides that "[t]here shall be an Inter-State Commission", which would have such powers "as Parliament deems necessary" to administer and adjudicate all maters relating to the Constitutional provisions on interstate trade, and laws made under these provisions.
Section 103 provides that members of the Commission are to be appointed by the Governor-General in Council, for seven years, and whose remuneration must not be diminished during the seven-year tenure.
This dream was shattered soon after, in 1915, with the Wheat Case. This case involved the interpretation of Section 92 of the Constitution. As that provision dealt with interstate trade, it was first heard by the Inter-State Commission. However, on appeal to the High Court, it was held (New South Wales v Commonwealth (1915)) that the vesting of judicial power in the Inter-State Commission was invalid.
This was because the Constitution implicitly created separation of powers. Thus, judicial power can only be vested in the judiciary. Furthermore, Chapter Three of the Constitution provided that a court must have the following features: 1) being vested with judicial power; 2) not being vested with power other than judicial power; 3) having security of tenure, meaning that members are appointed for life (this has since been changed to mandatory retirement at age 70). The Inter-State Commission as it then existed violated all three criteria. Hence, as it was not a part of the judiciary (not a "Chapter Three Court"), it could not be vested with judicial power.
This ruling created continuing controversy, because although the Constitution clearly provides for an Inter-State Commission to "administer and adjudicate", the provision appears to be irreconcilable with the concept of separation of powers. As a result, the part of Section 73 providing for appeals on questions of law from the Inter-State Commission to the High Court has been 'dead letter law' for most of the Court's history.
The Commission did not become active due to the dismissal of the Whitlam Government. In 1984, following the re-election of Labor Party under Bob Hawke, the Commission received its appointments and was charged with investigating all matters relating to interstate transport.
It has been said that the Commission sits oddly outside of the three branches of government. It was intended as an institution of federal-state co-operation, but was to be controlled exclusively by the Commonwealth Government. As a result, it has not played any significant role, and certainly has not fulfilled the expectations of the framers of the Constitution. This is often cited as a lesson as to the importance of federal-state cooperation, and of preserving the balance of power between state and federal governments.
A few arguments have also been made, using the story of the Inter-State Commission, to support certain causes. These include advocates for the abolition of State governments, or some other type of radical change to the Australian system of government. It is also sometimes cited as an example of the inadequacy of the present Australian Constitution, and the importance of either a republic or a bill of rights.