The Full Federal Court has dismissed an appeal by the ACCC in its proceedings against NSW Ports.
The ACCC's proceedings were brought against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd (together, NSW Ports). NSW Ports operates Port Botany and Port Kembla.
The ACCC had alleged that agreements entered into by NSW Ports at the time the State of NSW privatised the Ports of Botany and Kembla were anti-competitive.
The agreements, known as the Port Commitment Deeds, oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a minimal specified cap. The Port Commitment Deeds were entered into in 2013, for a term of 50 years.
Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds. This reimbursement would significantly increase the cost of moving a container at the Port of Newcastle.
The Full Court dismissed the ACCC's appeal against the trial judge's findings that NSW Ports had 'derivative crown immunity' and that the ACCC had not established that the purpose and likely effect of the compensation provisions was anti-competitive.
"We originally took this action because we were concerned that under the Port Commitment Deeds NSW Ports has an effective monopoly in container port services in NSW for 50 years," ACCC Commissioner Liza Carver said.
"We appealed this case because we considered that the compensation provisions created a significant barrier to entry. The threat of new entry is an important part of the competitive process, and imposes a competitive discipline on existing businesses, including monopolies."
At this stage the judgment has been made available only to the parties' lawyers, on a restricted basis, pending resolution of confidentiality issues. Accordingly, the ACCC cannot yet discuss the reasons for the decision.
Since the appeal was heard, the NSW Parliament has passed legislation establishing a process for extinguishing the liability of the Port of Newcastle to reimburse the State for any compensation paid to the operators of Port Botany and Port Kembla. The Port of Newcastle (Extinguishment of Liability) Act 2022 (NSW) came into effect on 25 November 2022.
The passage of the legislation should facilitate competition between ports in NSW for the provision of container port services.
Background
Crown immunity protects state governments from the operation of competition laws when they are not carrying on a business. When this immunity extends to parties that contract with state governments in certain limited circumstances, it is known as 'derivative crown immunity'.
In December 2018, the ACCC instituted proceedings against NSW Ports. In 2019, NSW Ports made a cross claim against the State of New South Wales and the Port of Newcastle entities, joining them to the ACCC's proceedings.
In June 2021, the Federal Court dismissed the ACCC proceedings against NSW Ports.
In July 2021, the ACCC lodged an appeal against the Federal Court's decision to dismiss the ACCC's proceedings against NSW Ports.
NSW Ports operates Port Botany and Port Kembla under 99-year leases from the State of NSW.
The compensation to be paid by the State of New South Wales under the Port Commitment Deeds to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers.
