Rather, Mr Heydon said the commission's terms of reference aimed to discover how well and how lawfully unions were performing their role.

"They compel an inquiry into whether the role could be performed better and more lawfully," he said. "They assume the desirability of unions having legitimate functions within the law."

Mr Heydon said the terms of reference for the inquiry launched by the Abbott government have been described as broad.

"In some ways they are. But in other ways they are restricted," he said.

"The terms of reference rest on certain assumptions which are not hostile to trade unions.

"The terms of reference do not assume that it is desirable to abolish trade unions. They do not assume that it is desirable to curb their role to the point of insignificance."

He said there had been a long history of inquiries into the activities of trade unions since one led by Sir William Erle, which sat in England in 1867.

He said his inquiry would seek to reveal diverse practices among unions or their divisions and branches.

"Some may engage in particular conduct. Others may abstain from that conduct. Yet others may forbid it," he said.

"It is relevant to inquire why these differences exist."

Senior counsel assisting, Jeremy Stoljar, said a royal commission "is not adversarial litigation" but an inquiry whose lines of inquiry may change over time.

He said reports of certain union officials setting up slush funds to pay for electioneering needed to be tested. This would require exhaustive analysis of accounting and other records of the funds and related entities.

Mr Stoljar said the commission would look at both sides of slush fund transactions.

"Slush funds only operate if there are slush fund contributors," he said.

"No honest working man or woman has anything to fear from this commission. Nor does any honest union official."

Mr Stoljar said the royal commission assumes that union members are entitled to know their money is being spent "with their interests at heart".

"After all, a shareholder in a company listed on a stock exchange can always sell his or her shares and move on," he said. "It is not so easy to switch unions."

When he announced the royal commission in February, Prime Minister Tony Abbott said it was in response to widespread claims of unlawful activity, corruption, organised crime involvement, standover tactics and kickbacks in the union movement.

He said the Royal Commission into Trade Union Governance and Corruption was designed to shine "a great big spotlight into the dark corners of our community to ensure that honest businesses and workers get a fair go".

"Honest workers and honest unionists should not be ripped off by corrupt officials and honest businesses should be able to go about their work without fear of intimidation, corruption and standover tactics," he said.

Employment Minister Eric Abetz said it would shine the spotlight on registered trade unions but also on employers.

"This is a sword that will cut both ways," he said.

However, legal experts have said it is unlikely the terms of reference for the inquiry would uncover criminal activity by companies and subcontractors in the building industry because they only considered conduct by or connected with unions and their related entities.

Andrew Stewart, a professor of law at the University of Adelaide said the terms of reference made it clear that corrupt conduct by anyone other than a union or union official was only to be treated as relevant to the royal commission if that conduct was related in some way to a union or union official, or a "separate entity" established by a union.

"It is possible of course that evidence of alleged corruption unconnected to a union might incidentally emerge in the course of detailing union-related dealings," Professor Stewart said.

"But I don't see the commission going out of its way to look for such evidence, or investigate such matters.

"Its brief from the government is clear: to target unions (and five unions in particular) and anyone else, including current or former Labor politicians, who may have had a hand in the establishment or funding of relevant entities."

NSW Greens MP and barrister David Shoebridge said the terms of reference were designed to avoid a repeat of the Greiner government's Gyles royal commission which in 1992 found no systemic corruption by unions but it did find criminality in the building industry driven by some of the biggest construction companies, their subcontractors and managers.

"Previous royal commissions at least paid lip service to balance in their terms of reference and did look for corruption and illegality beyond just unions," he said.

A spokesman for Mr Brandis said the interpretation of the terms of reference and the conduct of the investigation "are matters for the royal commissioner".

Last month, Mr Brandis said: "If there are businesses or business people who have engaged in or been complicit in the conduct which the royal commission has been established to identify, then the royal commission does have sufficient powers to expose and pursue those matters as well."

Only the Construction, Forestry, Mining and Energy Union had officials at the opening address. Michael O'Connor, the national secretary, Tony Maher, the national president and  Dave Noonan, the national secretary of the construction and general division - the division expected to be targeted in the inquiry - attended among the many lawyers who were presumably representing individuals and unions expected to be called.

Kathy Jackson, the Health Services Union national secretary, who blew the whistle on corruption in her union, resulting in the jailing of its president Michael Williamson and her predecessor, former MP Craig Thomson, also attended.

Outside the commission, she disagreed with other union officials that the commission was a witch-hunt, saying that honest unionists had nothing to fear.

"It's not a witch-hunt, it's a vampire hunt about what's happening in the unions.

"I don't know what the hysteria is about in the union movement but, as far as the HSU [is concerned], the members have contacted me with concerns and they have been referred to the royal commission."

Ms Jackson hinted more was likely to emerge during the inquiry about the running of the HSU.

- with Anne Davies