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Judge gives reasons why ACCC lost NSW Ports case

Speedier Newcastle container terminal hopes seen as unreal, given state ports policy


Justice Jayne Jagot has released her mammoth reasoning for backing NSW Ports and the New South Wales government against the Australian Competition and Consumer Commission (ACCC).

The ACCC lost the case but just why has only now come to light in a 427-page finding in the Federal Court.

The judgement explains why there will be little Newcastle port container haulage business for the foreseeable future.

In fact, Jagot discounts such ambitions entirely, describing the idea of a large-scale port container terminal there as “mere speculative hopes” that “were and remain far-fetched and fanciful on the evidence and were and are not a real chance or real possibility”.

Keeping in mind that this was a competitions law case, rather than one hinging on the powers the government used for implement its ports policy, the judgement comes in two parts:

whether making the Port of Newcastle [PON] reimburse the state government for the number of containers it handled over a threshold NSW government agreed with NSW Ports investors contravened  section 45 of the Competition and Consumer Act 2010 (Cth)

if the government  had immunity from that section and those it dealt with derived immunity from it.

On the competition law aspect, Judge Jagot viewed the Newcastle penalty’s purpose as separate from it effect, thereby splitting the need to reassure NSW Ports investors that the monopoly they were buying would be worth the cost over time from the possible deterrent value of the recompense.

It should be noted that the ACCC views state creation of private monopolies as particularly obnoxious.

On the possible deterrent, she relied on the lack of such a suggestion “in the detailed documentary record” but noted that the price PON investors paid for its lease did not pay “for any right to construct a container terminal while Port Botany has capacity or before a container terminal is constructed at Port Kembla”.

The compensation provisions “were intended to allocate financial costs and benefits appropriately if the State policy changed in the future and a container terminal was permitted to be constructed at the Port of Newcastle before Port Botany and Port Kembla had reached full capacity.

“After all, from the perspective of the State and NSW Ports, NSW Ports paid for what it received and PON paid for what it received.

“The question which would arise for the State is, why should PON now get more than it received for nothing?”

Read about earlier NSW port privatisation concerns, here

Also on Jagot’s mind was the lack of likelihood of any container terminal actually being built at Newcastle port, given that it would go against government policy and would need government support to make it attractive to finance.

“The evidence discloses how much ports depend on government support and the need for them to engage in strategic government management including advocacy for infrastructure which will benefit the port,” she finds.

“Without this support being secured, I cannot see any real possibility of financing being obtained to enable construction of a container terminal at the Port of Newcastle.”

This fed into the competition argument.

“As such, there was and is not any credible threat of entry by PON into the pleaded market for container port services in New South Wales,” she stated

On the question of immunity, as the relevant part of the Act only concerns the state when it is “carrying on a business”, it is not bound by it under section 45 for policy or implementation purposes, Jagot rules.

“Contrary to the ACCC’s submissions, the State did not decide to privatise the two ports in carrying on the businesses of operating those ports or the Port of Newcastle. It decided to privatise the ports as a matter of government policy,” she observes.

“The compensation provisions did not serve the purpose of the carrying on of those businesses, that is, the businesses of the State operating the two ports through the SOCs [state owned corporations].”

“The provisions had nothing to do with those businesses.”

Given this, NSW Ports, and PON for that matter, benefit from “derivative Crown immunity”.

NSW Ports welcomed Jagot’s reasoning.

The outcome was “an emphatic win for the State of NSW and NSW Ports” NSW Ports chief executive Marika Calfas said.

“NSW Ports will continue to focus on ensuring the key trade gateways of Port Botany and Port Kembla deliver efficiently and sustainably for the people and businesses of NSW.”

She added: “Premature development of another container terminal in NSW whilst Port Botany still has capacity would increase the overall cost of moving freight in NSW, to the detriment of the state’s economy.” 

The ports operator viewed the judgment as supporting the principle of NSW’s container port strategy, that container terminal development should be conducted in sequence, with existing capacity at Port Botany utilised first, followed by Port Kembla and only then Port of Newcastle.

“This strategy delivers the most effective use of significant public infrastructure investment in support of the overall cost and efficiency of the NSW freight task,” it said. 

The full judgement can be found here.


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