Australia’s competition watchdog is appealing against the decision of the Federal Court in the NSW container terminal competition case.
At the time of privatisation of the ports of Newcastle, Botany and Kembla, the State Government had agreed for 50 years to compensate the operator of Port Botany & Port Kembla if container traffic at the soon-to-be rival Port of Newcastle rose above a certain threshold. The agreement was contained in documents known as “Port Commitment Deeds”.
Another deed, signed when the Port of Newcastle was privatised, required the Port of Newcastle to reimburse the State of NSW for any compensation paid to the operators of Port Botany / Port Kembla. The compensation that would be paid by the NSW government to NSW Ports would be equivalent to the wharfage fee that NSW Ports would receive as if it had handled the containers. The ACCC reports that no payments have yet been made as the container threshold at Newcastle has not yet been reached.
Derivative crown immunity
On 29 June this year, in the case of Australian Competition and Consumer Commission v NSW Ports, the Court ruled that competition laws did not apply to port operator NSW Ports because it enjoyed “derivative crown immunity”.
Australian federal, state and territory governments have immunity from some laws under specific conditions. That immunity can extend to non-government entities in certain circumstances.
According to the ACCC, crown immunity protects state governments from competition laws when those governments are not carrying on a business.
The ACCC is appealing against the finding that competition law did not apply because the State was not carrying on a business when it entered into the Port Commitment Deeds. The competition watchdog is also appealing against the finding that NSW Ports benefited from derivative Crown immunity.
Effects on competition
Secondly, the Federal court ruled that the compensation provisions in the Port Commitment Deeds did not have an anti-competitive purpose or effect.
ACCC Chair Rod Sims commented: “we are appealing from this decision because we consider that the purpose and likely effect of the compensation provisions entered into at the time the State of NSW privatised the Ports of Botany and Kembla was anti-competitive.
“Agreements entered into when existing State-owned monopoly businesses are being privatised, which seek to maximise profit from the sale by protecting that monopoly from competition in the future, are inherently anti-competitive.
“We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years. This is a matter of significance for the Australian economy,” Mr Sims said.
The decision of the Federal Court in ACCC v NSW Ports (2021) can be read here.