Glencore Coal Assets Australia Pty Ltd v Australian Competition Tribunal
[2020] FCAFC 145
•24 August 2020
FEDERAL COURT OF AUSTRALIA
Glencore Coal Assets Australia Pty Ltd v Australian Competition Tribunal [2020] FCAFC 145
Review of: Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1 File numbers: NSD 1986 of 2019
VID 1285 of 2019Judges: ALLSOP CJ, BEACH AND COLVIN JJ Date of judgment: 24 August 2020 Catchwords: COMPETITION – applications for review of decision of the Australian Competition Tribunal (Tribunal) reviewing decision of the Australian Competition and Consumer Commission (ACCC) – where ACCC made an arbitration determination pursuant to s 44S of Competition and Consumer Act 2010 (Cth) (CCA) – where Tribunal conducted a “re-arbitration” pursuant to s 44ZP of the CCA – where declared service is the right to access and use monopoly infrastructure assets at Port of Newcastle – where access dispute concerns quantum of charges levied for access and use of declared service and proper scope of application of such charges – whether Tribunal erred in determining how declared service is to be interpreted and appropriate scope of application of arbitration determination – whether scope can be justified by reference to the underlying State legislation being the Ports and Maritime Administration Act 1995 (NSW) – where parties agreed to use building block model and depreciated optimised replacement cost methodology to calculate regulated asset base – whether Tribunal erred in deciding that contributions of service users should not be deducted when calculating regulated asset base – meaning of “extensions” in s 44X(1)(e) of the CCA – application of pricing principles in s 44ZZCA and criteria in s 44X(1) of the CCA – whether assessment is forward-looking – appropriate relief – whether matter should be remitted to Tribunal pursuant to s 44ZR(4) of the CCA
ADMINISTRATIVE LAW – application for judicial review of decision of Australian Competition Tribunal (Tribunal) by Australian Competition and Consumer Commission (ACCC) – where ACCC made arbitration determination pursuant to s 44S of Competition and Consumer Act 2010 (Cth) (CCA) – where Tribunal conducted a “re-arbitration” pursuant to s 44ZP of the CCA – where ACCC sought declaration that Tribunal erred – whether ACCC can seek review pursuant to s 163A(3) of the CCA
Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) s 5
Competition and Consumer Act 2010 (Cth) ss 44AA, 44CA, 44F, 44G, 44H, 44K, 44PC, 44S, 44V, 44W, 44X, 44Y, 44Z, 44ZD, 44ZF, 44ZN, 44ZNB, 44ZO, 44ZP, 44ZQ, 44ZR, 44ZZCA, 87CA, 163A, Part IIIA
Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth)
Competition Policy Reform Act 1995 (Cth)
Judiciary Act 1903 (Cth) s 39B
Ports and Maritime Administration Act 1995 (NSW) ss 3, 47, 48, 52, 58, 59, 60, 61, 66A, 66B, 66C, 67, Part 5, Divisions 2–6A
Trade Practices Amendment (National Access Regime) Act 2006 (Cth)
Cases cited: Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) [2009] HCA 41; 239 CLR 27
Application by Glencore Coal Pty Ltd [2016] ACompT 6
ASP Ship Management Pty Limited v Administrative Appeals Tribunal [2006] FCAFC 23; 149 FCR 261
Australasian United Steam Navigation Co Ltd v The Shipping Control Board [1945] HCA 45; (1945) 71 CLR 508
Australian Energy Regulator v Australian Competition Tribunal (No 2) [2017] FCAFC 79; 255 FCR 274
Australian Securities and Investments Commission v Administrative Appeals Tribunal [2011] FCAFC 114; 195 FCR 485
BHP Billiton Iron Ore Pty Ltd v National Competition Council [2007] FCAFC 157; 162 FCR 234
BHP Billiton Iron Ore Pty Ltd v National Competition Council [2008] HCA 45; 236 CLR 145
Comandate Marine Corp v The Ship “Boomerang I” [2006] FCAFC 106; 151 FCR 403
Federal Commerce and Navigation Co Ltd v Tradax Export SA (The Maratha Envoy) [1978] AC 1
Independent Commission Against Corruption v Cunneen [2015] HCA 14; 256 CLR 1
K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd [1985] HCA 48; 157 CLR 309
National Roads and Motorists’ Association Ltd v Parkin [2004] NSWCA 153; 60 NSWLR 224
Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36; 246 CLR 379
Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124; 253 FCR 115
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355
Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 2 QB 402
R v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; 144 CLR 13
Re Michael; Ex parte Epic Energy (WA) Nominees Pty Ltd [2002] WASCA 231; 25 WAR 511
Rio Tinto Limited v Australian Competition Tribunal [2008] FCAFC 6; 246 ALR 1
Sydney Airport Corporation Limited v Australian Competition Tribunal [2006] FCAFC 146; 155 FCR 124
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; 262 CLR 362
The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207; 70 NSWLR 344
The Ships “Hako Endeavour”, “Hako Excel”, “Hako Esteem” and “Hako Fortress” v Programmed Total Marine Services Pty Ltd [2013] FCAFC 21; 211 FCR 369
Tisand (Pty) Ltd v The Owners of the Ship MV “Cape Moreton” (ex “Freya”) [2005] FCAFC 68; 143 FCR 43
Westfield Management Limited v Perpetual Trustee Company Limited [2007] HCA 45; 233 CLR 528
Date of hearing: 1, 2 & 3 July 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub–area: Economic Regulator, Competition and Access Category: Catchwords Number of paragraphs: 323 For NSD 1986 of 2019: Counsel for the Applicant: Mr N Young QC with Mr N de Young SC Solicitor for the Applicant: Clifford Chance LLP Counsel for the First Respondent: The First Respondent filed a submitting notice save as to costs Counsel for the Second Respondent: Mr C Moore SC with Mr D Roche Solicitor for the Second Respondent: Clayton Utz Counsel for the Third Respondent: Mr S Lloyd SC with Ms C Dermody Solicitor for the Third Respondent: DLA Piper Australia For VID 1285 of 2019: Counsel for the Applicant: Mr S Lloyd SC with Ms C Dermody Solicitor for the Applicant: DLA Piper Australia Counsel for the First Respondent: The First Respondent filed a submitting notice save as to costs Counsel for the Second Respondent: Mr C Moore SC with Mr D Roche Solicitor for the Second Respondent: Clayton Utz Counsel for the Third Respondent: Mr N Young QC with Mr N de Young SC Solicitor for the Third Respondent: Clifford Chance LLP ORDERS
NSD 1986 of 2019 BETWEEN: GLENCORE COAL ASSETS AUSTRALIA PTY LTD (ACN 163 821 298)
Applicant
AND: AUSTRALIAN COMPETITION TRIBUNAL
First Respondent
PORT OF NEWCASTLE OPERATIONS PTY LTD (ACN 165 332 990)
Second Respondent
AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Third Respondent
JUDGES:
ALLSOP CJ, BEACH AND COLVIN JJ
DATE OF ORDER:
24 AUGUST 2020
THE COURT ORDERS THAT:
1.The determination of the Australian Competition Tribunal (Tribunal) made on 30 October 2019 be set aside and the matter be remitted to the Tribunal for determination according to law.
2.Within 7 days, each party file a minute of its proposed orders as to costs.
3.Within 14 days, each party file submissions of no more than 3 pages addressing its proposed orders as to costs, with the question to be dealt with on the papers unless the Court orders otherwise.
4.In order to prevent prejudice to the proper administration of justice, the reasons for judgment herein not be disclosed to anyone other than the parties and their legal representatives and the Tribunal in order that any party may make an application to redact or suppress any part of the reasons, any such application to be filed and served on or before 4pm Wednesday 26 August 2020. If no application be made by that time the Court will publish its reasons without qualification. If any application be made within that time, the Court will determine the question of publication with or without any qualification in the resolution of that application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
VID 1285 of 2019 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION
Applicant
AND: AUSTRALIAN COMPETITION TRIBUNAL
First RespondentPORT OF NEWCASTLE OPERATIONS PTY LTD (ACN 165 332 990)
Second RespondentGLENCORE COAL ASSETS AUSTRALIA PTY LTD (ACN 163 821 298)
Third Respondent
JUDGES:
ALLSOP CJ, BEACH AND COLVIN JJ
DATE OF ORDER:
24 AUGUST 2020
THE COURT ORDERS THAT:
1.The application be dismissed.
2.Within 7 days, each party file a minute of its proposed orders as to costs.
3.Within 14 days, each party file submissions of no more than 3 pages addressing its proposed orders as to costs, with the question to be dealt with on the papers unless the Court orders otherwise.
4.In order to prevent prejudice to the proper administration of justice, the reasons for judgment herein not be disclosed to anyone other than the parties and their legal representatives and the Tribunal in order that any party may make an application to redact or suppress any part of the reasons, any such application to be filed and served on or before 4pm Wednesday 26 August 2020. If no application be made by that time, the Court will publish its reasons without qualification. If any application be made within that time, the Court will determine the question of publication with or without any qualification in the resolution of that application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
THE COURT:
Before the Court are two applications for review, one by Glencore Coal Assets Australia Pty Ltd and the other by the Australian Competition and Consumer Commission (ACCC). They concern a decision of the Australian Competition Tribunal in Application by Port of Newcastle Operations Pty Ltd [2019] ACompT 1, being a re-arbitration under s 44ZP of Part IIIA of the Competition and Consumer Act 2010 (Cth) (the Act) of a determination by the ACCC as arbitrator under s 44S of the Act of the disagreement between Glencore and Port of Newcastle Operations (PNO) over the terms of access to a declared service (Service) under Part IIIA of the Act at the Port of Newcastle.
Part IIIA enacts a process by which access to a service provided by means of essential infrastructure may be made a declared service. In this case, the declared service related to the use of the shipping channels at the Port.
If a party seeks access to a declared service, and the provider of the service and the access seeker are unable to agree on one or more aspects of access, then Part IIIA provides for a statutory arbitral process to resolve the dispute. The arbitral determination may deal with any matter relating to access to the declared service.
In that context, the applications for review raise two issues concerning the re-arbitration conducted by the Tribunal as to the price and terms of access to the Service by Glencore. The first concerns the scope of the declaration and the extent to which Glencore is a party seeking access to the Service. It raises a question of proper construction of the terms of the declaration of the Service. The second concerns whether the Tribunal adopted the correct legal approach in dealing with the value of contributions made in the past by Port users to the cost of infrastructure used by PNO in providing the Service.
In order to succeed on an application to review the Tribunal’s decision, an error of law must be demonstrated. This Court, on review, is concerned with whether the legal framework for decision-making was observed and whether the law was properly understood and applied by the Tribunal in making its decision. Matters of fact and contextual economic analysis are for the Tribunal. As has been observed previously in a number of decisions in which review has been sought of a Tribunal decision under Part IIIA, it is not this Court’s function to resolve the difficult and complex matters of judgment the Tribunal may be called upon to resolve (and thereby slide into impermissible merits review) but is rather to ensure the decision of the Tribunal accords with the law: Australian Energy Regulator v Australian Competition Tribunal (No 2) [2017] FCAFC 79; 255 FCR 274 at 293 [44], 309 [133].
Nevertheless, Part IIIA of the Act has embedded within it economic concepts. The proper interpretation and application of its provisions are questions of law. By giving legal effect to what are fundamentally economic objectives, the access regime enacted by Part IIIA poses questions of statutory construction that must be informed by the particular conceptions of competition and efficiency that Part IIIA was enacted to advance. This aspect of context poses some complexities for the task of considering whether there was a reviewable error of law in the present case as distinct from alleged unreviewable error in the economic analysis undertaken by the Tribunal.
The present matter is further complicated to some extent by the fact that before the Tribunal, much of the factual analysis and reasoning by the ACCC on the first arbitration was not in issue. Therefore, although the Tribunal conducted a re-arbitration, it did so on the basis of the correctness of much of what had been decided by the ACCC. In consequence, it is necessary to consider significant parts of that material as well as the reasons of the Tribunal.
The ACCC was in the unusual position of having three distinct roles in the course of the dispute as to access. It conducted the original arbitration (as separately constituted for that purpose). It was then directed by statute to be available to assist the Tribunal on the re-arbitration. Finally, in this Court, it was a separate applicant for review of the Tribunal’s decision. It will be necessary in due course to say something of the separate application of the ACCC.
In the above circumstances, four broad questions arise:
(1)Did the Tribunal err in law in concluding that the Service was, in effect, only provided to those parties in control of a ship and, on that basis, confining the scope of its determination to instances where Glencore was in control of a ship being used to load and export coal?
(2)Did the Tribunal err in law in the way it treated Glencore’s claim that there should be regard to the value of past contributions by users of the Port when determining the price to be paid by Glencore for the Service?
(3)Whether this Court should entertain the ACCC’s separate review application in respect of the decision by the Tribunal?
(4)If error of law has been demonstrated, what is the appropriate form of relief?
For the reasons that follow we would allow the application by Glencore as to both issues raised by its application, dismiss the application by the ACCC and remit the matter to the Tribunal for further determination as to the matters identified in these reasons.
Background and an introductory explanation of the issues
The Hunter Valley coal industry, including its associated supply chain, is one of the largest coal export operations in the world. It includes coal miners as producers who export their coal, rail haulage and rail track providers, coal export terminals (including by Port Waratah Coal Services (PWCS)), and associated port facilities.
In May 2014, PNO took over the operation of the Port by commercial arrangements with the State of New South Wales as part of the privatisation of State assets.
The Port is not limited to the loading and movement of coal, but that is a significant part of the business of the Port. Newcastle is the largest coal exporting port in the world. The Port is the only commercially viable means of exporting coal from the Hunter Valley. The shipping channels are a natural “bottleneck” monopoly. Access to and use of the Port and its shipping channels are thus necessary for the export of coal from the Hunter Valley.
These matters are expressed at an appropriate degree of generality conformable with understanding the place of the Port and its shipping channels as an essential feature of the relevant economic activity and markets associated with the mining and export of coal. This is how a differently constituted Tribunal discussed the matter in Application by Glencore Coal Pty Ltd [2016] ACompT 6. That decision concerned the declaration of the Service under s 44K of the Act. It is the terms and conditions for access to this Service that were the subject of the disagreement between Glencore and PNO, and that were the subject of the arbitration by the ACCC and of the re-arbitration by the Tribunal (in respect of which re-arbitration determination the two present applications are brought).
In that earlier decision, the Tribunal set aside the decision of the Acting Federal Treasurer made on 8 January 2016 not to declare the Service. The Tribunal’s decision was affirmed by this Court in Port of Newcastle Operations Pty Ltd v Australian Competition Tribunal [2017] FCAFC 124; 253 FCR 115.
The expression of the Service in the decision of the Acting Federal Treasurer and by the earlier Tribunal in its determination was in the terms applied for by Glencore in its application, made on 13 May 2015 under s 44F of the Act, to the National Competition Council (NCC) for a recommendation by the NCC to the designated Minister. On 2 November 2015, the NCC had recommended that the Service not be declared, and on 8 January 2016 the Acting Federal Treasurer had made his decision not to declare the Service.
The first issue: the scope of the determination
The terms of the expression of the Service loom large in these applications, especially in the application brought by Glencore. Looking at the matter at the level of generality with which the matter has been expressed above, the commercial and competitive considerations might appear to be tolerably straightforward in the following respects: coal miners and exporters need to have access to and use the Port and the Service (being the shipping channels) for the export of their coal. There may be competition between coal-loading facilities (there being three), but there are only the monopolistically controlled (by PNO) shipping channels (including berths next to wharves as part of the channels) available to be used to load and to carry coal out of the Port to foreign ports of discharge. Looking at the matter thus, the relevant access or use of the Service was of those who wished to export coal.
That, however, was not how the Tribunal construed the Service and how it confined the scope of the varied determination that it made. In its decision, the Tribunal accepted the approach urged upon it by PNO and confined the applicable determination to terms and conditions of access to the Service only when Glencore owns the ship that enters the Port precinct or when Glencore, whether directly or by agent, charters a ship that enters the Port precinct and, in each case, when the ship loads Glencore coal.
Both the ACCC and Glencore criticise that form of limitation of the scope of the determination, albeit in two differential respects. Both the ACCC and Glencore submit that a wider scope is justified by reference to the operation of the underlying New South Wales Act, the Ports and Maritime Administration Act 1995 (NSW) (PMA Act). Glencore also seeks a wider and different scope for the determination, as covering all coal that it exports through the Port. The nature and justification for this approach can be seen in the expression of the matter thus far in its generality of expression of the economic and competition considerations.
The significance of the dispute about the scope of the determination is that Glencore propounds a width of the determination based on the scope of the Service that covers access for it to the shipping channels for the export of all its coal, irrespective of the contractual arrangements that it may, or may not, make for the carriage of goods by any ship. PNO propounds a more narrow width of the determination based on the scope of the Service that confines access to the shipping channels only where Glencore has a certain relationship with the ship (ownership or chartering of the ship), which confinement will limit the scope of the determination to only some of Glencore’s export sales. As will be seen, the better view of the Tribunal’s reasons is that in each such case the relevant ship must be controlled by Glencore.
The second issue: the relevance of past contributions by users of the Port facilities to the development of the Port infrastructure in reaching the price terms within the determination
On this issue the ACCC and Glencore put effectively the same submission. Both supported the approach taken by the ACCC in its arbitral determination. The ACCC used a building block model and a depreciated optimised replacement cost (DORC) methodology, in order to calculate the regulated asset base (RAB) that represents the value of capital on which a rate of return on and of capital is estimated as part of the calculation of the maximum allowable revenue (MAR) in the setting of the price of access.
It will be necessary to consider in some detail the elements of this methodology and their and its relationship with the Act. For now, it is sufficient to identify the nature of the dispute.
In the years before the privatisation of the Port, the State had developed the infrastructure of the Port. Two examples of such development illuminate the issue. In the 1970s and 1980s the shipping channels were dredged to deepen the channels from 10–11m draft to 15m to accommodate large modern bulk carriers. In the 1980s and 1990s, a coal loader operated by PWCS was built by reclaiming land from dredging spoil and by associated construction work. The users of the shipping channels were said to have paid for the channel dredging by a special levy imposed on them and said to have been levied at their request. The coal loader was built and paid for by PWCS.
The ACCC in its determination valued all the various so-called user contributions and deducted that value ($912 million) from the relevant asset base upon which the MAR and so the relevant charge (the Navigation Service Charge (NSC)) were calculated, the latter at $0.6075 by reference to gross tonnage of a vessel. If, as contended by PNO and as found by the Tribunal, one did not deduct the $912 million of so-called user contributions from the relevant asset base the calculation of the NSC was $1.0058.
The essence of the dispute is the proper way to bring to account, if at all, the value of investment of assets necessary for the Service said to have been paid for by users of the Service rather than the provider of the Service in the assessment of the efficient costs of the provider. Why, it was said rhetorically by the ACCC in submission, should PNO obtain a return on investment that neither it nor the State paid for? PNO and the Tribunal, on the other hand, focused upon the methodology employed – the DORC model – to calculate the present day value of all assets in which a hypothetical new entrant would be required to invest to build and operate the Port. To look at the value of the past contributions by others would, on this view, be to distort the model used to derive efficient costs and where that model was used, price was to be determined in accordance with its conceptual structure. In the alternative, PNO questioned whether the character of the particular user contributions in the present instance was such that those contributions should be brought to account in determining an access price.
The third issue: the proper role of the ACCC
As we have noted, the ACCC had three distinct roles in the course of events that led to the proceedings in this Court. The ACCC was not a party to the re-arbitration and therefore has no statutory right to seek review under s 44ZR of the Act, although it put submissions in the re-arbitration pursuant to ss 44ZP(5) and 44ZP(5A) of the Act. The issue is whether, in circumstances where Glencore has itself exercised its right of review and has raised the matters that the ACCC seeks to agitate by separate application, the Court can and should entertain a separate application by the ACCC.
The fourth issue: relief
If error of law is found, then an issue arises as to the appropriate nature of the relief that should be granted. Two aspects must be considered. The first is whether the matter should simply be remitted to the Tribunal or whether, by reason of the manner in which issues were joined before the Tribunal, there should be an order limiting the extent of any further consideration by the Tribunal or even a form of order that would recognise that a particular result was inevitable.
The second aspect arises because the ACCC, but not Glencore, seeks declaratory relief. If it is appropriate to entertain the ACCC’s separate application then a question arises as to whether declaratory relief should be granted and, if so, in what terms.
Structure of these reasons
Both of the first and second issues, being the scope of the determination and of the Service, and the relevance of user contributions in the past, require for their resolution an attendance to the provisions of the Act, to the terms and nature of the Service including its proper commercial and legal context including the PMA Act, and to the economic conceptions underpinning the operation of Part IIIA of the Act. Therefore, these reasons consider first the terms of Part IIIA in the context in which they were enacted. They then consider the terms in which the Service has been declared and, in that context, the relevant terms of the PMA Act.
Thereafter, each of the four issues is considered.
Part IIIA of the Act – access to services
The context of and background to Part IIIA as originally enacted
The background to the introduction of Part IIIA of the Act was set out by the Full Court in Sydney Airport Corporation Limited v Australian Competition Tribunal [2006] FCAFC 146; 155 FCR 124 at 125–132 [2]–[21].
As is there explained, Part IIIA was added to implement reforms proposed in 1993 by the National Competition Policy Review chaired by Professor Hilmer (Hilmer Report). The focus of the Hilmer Report was upon measures that would promote “effective competition”. It described efficiency as the fundamental objective of competition policy and identified three recognised aspects to efficiency (at page 4), being:
•Technical or productive efficiency, which is achieved where individual firms produce the goods and services that they offer to consumers at least cost. Competition can enhance technical efficiency by, for example, stimulating improvements in managerial performance, work practices, and the use of material inputs.
•Allocative efficiency is achieved where resources used to produce a set of goods or services are allocated to their highest valued uses (ie, those that provide the greatest benefit relative to costs). Competition tends to increase allocative efficiency, because firms that can use particular resources more productively can afford to bid those resources away from firms that cannot achieve the same level of returns.
•Dynamic efficiency reflects the need for industries to make timely changes to technology and products in response to changes in consumer tastes and in productive opportunities. Competition in markets for goods and services provides incentives to undertake research and development, effect innovation in product design, reform management structures and strategies and create new products and production processes.
As to the relationship between efficiency and competition, the Hilmer Report noted (at page 5):
However, there are some situations where unfettered competition is not consistent with economic efficiency. Examples of such “market failure” include situations where participants in a market have imperfect information about products, producers or suppliers, and the existence of so-called “natural monopolies” where a single firm can supply an entire market significantly more efficiently than two or more firms.
In addition to a regime for access to essential facilities, the Hilmer Report proposed separate reforms to deal with the problem of “monopoly pricing”, which was described as occurring in conditions where firms are not subject to effective competitive pressure and therefore will “be able to charge prices above the efficient level for periods beyond those justified by past investments and risks taken or beyond a time when a competitive response might reasonably be expected”: page 269. The regime for access to essential services was described as dealing with a different but related concern, namely the effect on competition in upstream and downstream markets where access could not be obtained to services provided by means of essential infrastructure. For present purposes, it is important to note that regulation to constrain the practice of monopoly pricing and regulation to promote efficiency by requiring access to essential facilities are related but distinct matters. Put another way, establishing an access regime is not directed at the problem of monopoly pricing per se, it is concerned with the wider efficiencies that might be delivered in other markets if there is access on price and terms that are established by an independent process guided by the public interest, principles of economic efficiency and the interests of the owner of the facility and other users.
The Hilmer Report proposed an access regime that would only be applied “to the limited category of cases where access to the facility was essential to permit effective competition”: page xxxii. It described instances (including ports) of natural monopolies, being facilities that cannot be duplicated economically. However, the specific focus of the Hilmer Report was upon those natural monopolies that “occupy strategic positions in an industry, and are thus ‘essential facilities’ in the sense that access to the facility is required if a business is to be able to compete effectively in upstream or downstream markets”: page 240. The Hilmer Report contemplated legislation that would confer a right of access to facilities of that character upon payment of an access fee.
Significantly, the Hilmer Report proposed a gateway to whether a facility was to be subject to a statutory right of access in the form of a declaration of a particular service. Three criteria were proposed to govern whether a facility would be declared to be an essential facility and thereby subject to provisions conferring a statutory right to access, namely (a) access should be essential rather than merely convenient; (b) the making of the declaration must be in the public interest, having regard to the significance of the industry to the national economy and the expected impact of effective competition in that industry on national competitiveness; and (c) the legitimate interests of the owner of the facility must be protected through the imposition of an access fee and other terms and conditions that are fair and reasonable.
Where an essential facility was subject to a statutory right of access, the Hilmer Report recommended that the access fee and terms of access be the subject of a process of negotiation with statutorily mandated private arbitration if the parties could not reach agreement.
The complexities that might be involved in establishing a fair and reasonable fee for providing access were acknowledged in the Hilmer Report in the following terms (at page 253):
Policy judgments are involved as to where to strike the balance between the owner’s interest in receiving a high price, including monopoly rents that might otherwise be obtainable, and the user’s interest in paying a low price, perhaps limited to the marginal costs associated with providing access. Appropriate access prices may depend on factors such as the extent the facility’s existing capacity is being used, firmly planned future utilisation and the extent to which the capital costs of producing the facility have already been recovered. Decisions in this area also need to take account of the impact of prices on the incentives to produce and maintain facilities and the important signalling effect of higher returns in encouraging technical innovation. For example, relatively low access prices might contribute to an efficient allocation of resources in the short term, but in the longer term the reduced profit incentives might impede technical innovation.
The Hilmer Report also acknowledged the difficulties in developing a one-size-fits-all approach to establishing the principles to be applied in determining the price for access. The Hilmer Report favoured an approach that would “require the relevant Minister to stipulate more specific pricing principles in the context of declaring a right of access to particular facilities”: page 255. The parties would then be free to negotiate access agreements according to those principles. If they could not agree then either party could insist on binding arbitration.
Following the Hilmer Report, the Commonwealth, States and Territories entered into an inter-governmental agreement at the meeting of the Council of Australian Governments in Hobart on 25 February 1994. The Competition Principles Agreement was made with the express intention of achieving and maintaining consistent and complementary competition laws and policies throughout Australia. It formed part of a wider consensus supporting the principles of competition policy articulated in the Hilmer Report and the implementation of the reforms it proposed. The Agreement elaborated upon matters addressed in the Hilmer Report in significant respects and, consistently with its character as an inter-governmental commitment, its terms governed the form in which legislation was subsequently enacted.
By cl 6(1) of the Agreement, it was agreed that the Commonwealth would put forward legislation to establish a regime for third party access to services provided by means of significant infrastructure where:
(a) it would not be economically feasible to duplicate the facility;
(b)access to the service is necessary in order to permit effective competition in a downstream or upstream market;
(c)the facility is of national significance having regard to the size of the facility, its importance to constitutional trade or commerce or its importance to the national economy; and
(d)the safe use of the facility by the person seeking access can be ensured at an economically feasible cost and, if there is a safety requirement, appropriate regulatory arrangements exist.
It can be seen that the scope of the proposed access regime reflected the nature of the recommendations in the Hilmer Report. The Agreement also provided that the regime would not apply where a State or Territory had in place an access regime which conformed to the principles set out in the Agreement: cl 6(2). The Agreement then specified principles that should be incorporated in any State or Territory access regime: cl 6(4). Those principles described a right to access with independent resolution if parties cannot agree on terms and conditions for access and included the following (at cl 6(4)(i)):
In deciding on the terms and conditions for access, the dispute resolution body should take into account:
(i)the owner’s legitimate business interests and investment in the facility;
(ii)the costs to the owner of providing access, including any costs of extending the facility but not costs associated with losses arising from increased competition in upstream or downstream markets;
(iii)the economic value to the owner of any additional investment that the person seeking access or the owner has agreed to undertake;
(iv)the interests of all persons holding contracts for use of the facility;
(v)firm and binding contractual obligations of the owner or other persons (or both) already using the facility;
(vi)the operational and technical requirements necessary for the safe and reliable operation of the facility;
(vii)the economically efficient operation of the facility; and
(viii) the benefit to the public from having competitive markets.
Of particular relevance to the present case is para (iii) concerned with the economic value of any additional investment the access seeker or access provider had agreed to undertake.
The Commonwealth enacted an access regime as provided for in the Agreement. The regime comprised Part IIIA which was added by amendment to the then Trade Practices Act 1974 (Cth). In the second reading speech introducing the Bill that became the Competition Policy Reform Act 1995 (Cth), the legislation was described as a response to the Hilmer Report as well as the enactment of reforms agreed to be undertaken by the Competition Principles Agreement: Senate, Parliamentary Debates (Hansard), 29 March 1995 at 2435.
The access regime as enacted provided for a process by which an application may be made for a particular service to be declared. A service that was the subject of a State or Territory access regime that conformed to the requirements of the Competition Principles Agreement could not be declared. The criteria to be applied in determining whether to declare a service reflected the recommendations of the Hilmer Report and the terms of the Competition Principles Agreement. In particular, it was necessary to adjudge whether the facility to be used to provide the service was of national significance. The focus was upon the nature of the facility and the consequences for competition if the service was declared.
For present purposes, it may also be noted that Part IIIA as originally enacted provided for arbitral determination in the event of a dispute relating to access to a declared service. It did so by provisions that follow the same structure as the current provisions, namely:
(1)It provided that if the access provider and the third party seeking access were unable to agree “on one or more aspects of access to a declared service” then either party may notify the ACCC of the existence of an access dispute: s 44S(l). Therefore, a dispute did not have to concern price or price-related terms. A dispute as to any aspect of access may be the subject of a notification.
(2)It required that there must be a final arbitral determination on access by the third party to the service: s 44V(l).
(3)It specified that the determination “may deal with any matter relating to access by the third party”: s 44V(2).
(4)As to those matters, “[b]y way of example”, it stated that the determination may:
(a) require the provider to provide access to the service by the third party;
(b) require the third party to accept, and pay for, access to the service;
(c)specify the terms and conditions of the third party’s access to the service;
(d) require the provider to extend the facility;
(e)specify the extent to which the determination overrides an earlier determination relating to access to the service by the third party.
The use of the drafting technique of specifying examples is significant. It was a mechanism by which to ensure that the particular illustrations did not confine the general statutory authority to determine any matter relating to access by the third party to the declared service.
(5)It specified in s 44X(l) the matters that must be taken into account in making the determination, which at that time were expressed in the following terms:
(a)the legitimate business interests of the provider, and the provider’s investment in the facility;
(b)the public interest, including the public interest in having competition in markets (whether or not in Australia);
(c)the interests of all persons who have rights to use the service;
(d)the direct costs of providing access to the service;
(e)the value to the provider of extensions whose cost is borne by someone else;
(f)the operational and technical requirements necessary for the safe and reliable operation of the facility;
(g) the economically efficient operation of the facility.
(6)It provided restrictions on what a determination may require, including that a determination must not be made that would have the effect of “requiring the provider to bear some or all of the costs of extending the facility”: s 44W(l)(e).
It should be noted that the statutory authority to make a determination was not confined to the terms upon which the provider may be required to allow the third party to use the service. None of the statutory examples given in s 44V(2) refer to use of the service by the third party. Rather, the language of these and other provisions of Part IIIA is consistently to the effect that the statutory focus is upon “access to the service”. This language reflects the economic character of the legislation which is concerned with facilitating arrangements that will advance economic efficiency rather than simply facilitating the physical use of the facility.
Therefore, a dispute as to commercial terms of access to the declared service sought by a particular third party for the purpose of securing the ability for another party to physically use the facility was within the scope of the statutory provision. In such cases, the arbitral determination would consider the appropriateness of such terms having regard to relevant matters to be taken into account (as to which, see the reference below to s 44X). There is no indication that the fact that the service to which access was provided to a particular third party might result in the service being physically used by another party (though under terms secured by the third party) could be a reason, of itself, to determine that access to the service should be confined to instances where the service was physically used by the third party.
Further, it is evident from the scheme of Part IIIA that it was not for the access provider to confine the statutory jurisdiction to make a determination by itself imposing some form of restriction as to the way the service may be obtained or the type of arrangement by which access to the service might be secured (such as by confining the provision of access to the service to those who wished themselves to use the service). A determination could deal with “any matter relating to access”. A third party was not obliged to take access to the declared service that was of a particular kind proffered by the access provider. The party seeking access could seek a determination as to the manner in which the service was provided and any terms and conditions that might govern that access. Therefore, the terms sought might include provision by which the service might be used by a party other than the party seeking the arbitral determination relating to access to the service. Whether access on those terms would be provided would be a matter for agreement or arbitral determination.
It is also to be noted that, as originally enacted, Part IIIA did not specify particular pricing principles to be taken into account in an arbitral determination dealing with any matter relating to access (as to which, see below). Rather, it contemplated that a determination as to access that dealt with the matter of the price of access would be treated in the same way as any other matter and would be required to be made by taking into account each and all of the matters listed in s 44X(l)(a) to (g).
The terms of s 44X(l) can be seen to substantially reflect the matters that were recorded in the Competition Principles Agreement as matters that should be taken into account in resolving a dispute as to the terms and conditions of access. However, the legislation adopted a modified approach by specifying a number of restrictions as to particular effects that must not be the consequence of an access determination. In particular, in relation to extensions to the facility, s 44W(l)(d) and (e) provided that an access determination cannot make the access seeker the owner of the extension or require the access provider to bear some or all of the costs of extending the facility. In that respect, the Act clarified the terms of the Competition Principles Agreement which provided for costs incurred by the facility owner in extending the facility in order to provide access to be brought into account in determining terms of access, but did not deal with whether an obligation may be imposed upon an owner to incur that cost (an obligation which, by any measure, would be a very substantial imposition upon the owner of a facility).
Section 44X(1)(e) also adopted a different form of language to the Competition Principles Agreement in describing what is to be taken into account where value is provided by someone other than the access provider. Whereas cl 6(4)(i)(iii) required the economic value to the owner of any additional investment that the person seeking access had agreed to undertake to be brought to account, s 44X(l)(e) referred to the value to the provider of extensions whose cost is borne by someone else. There appear to be three material differences in the language. First, instead of just referring to contribution by the person seeking access, s 44X(l)(e) refers to “cost borne by someone else”. This appears to be intended to include instances where the cost is borne by someone other than the provider or the access seeker. Second, whereas the Competition Principles Agreement refers to costs that the access seeker has agreed to undertake, s 44X(1)(e) focuses upon the value of extensions whose cost is borne by anyone other than the access provider. This appears to be intended to make clear that the focus of the provision is not confined to extensions agreed or determined as part of the bilateral access process itself. Third, whereas the Competition Principles Agreement uses language that looks forward to cost not yet expended by referring the value of an extension that an access seeker had agreed to undertake, s 44X(l)(e) refers to value “whose cost is borne by someone else” – not is to be borne or is agreed to be borne – thereby capturing (but not being limited to) cost that has already been incurred in a manner that was not confined to costs yet to be borne.
In context, the statutory language appears to invite consideration of the value to the provider of any extension whenever undertaken “whose cost is borne by someone else”. If so, the use of the present tense “is borne”, may be to ensure that past cost (represented in the form of the present value of an extension) which is no longer being borne in any relevant economic sense by someone else (for example, because the extension has reached the end of its economic life) is not a matter to be taken into account. The focus is upon value that is currently being borne and in the future will be cost that is borne by someone other than the access provider.
In any event, the consistency between the Agreement and s 44X(l)(e) is that in determining appropriate terms and conditions for access, in every case, a category of value to the access provider that is created by cost not borne by the owner is to be taken into account (though the particular descriptions differ in language and scope).
As to the terms of s 44X, the only express guidance provided by the Explanatory Memorandum was as follows (at [233]–[234]):
The references here to the “legitimate” business interests of the provider and to the “direct” costs of providing access are intended to preclude arguments that the provider should be reimbursed by the third party seeking access for consequential costs which the provider may incur as a result of increased competition in an upstream or downstream market.
The section also provides that the Commission, in making a determination, may take into account any other matters that it thinks are relevant in addition to those it must take into account.
However, as to the operation of s 44W, the Explanatory Memorandum stated (at [224]–[228]):
This section specifies a number of constraints on the Commission in making a determination in relation to an access dispute. If a determination by the Commission breaches any of the constraints it is of no effect.
The constraints basically relate to existing rights and the ownership of the facility used to provide the declared service.
…
In summary these provisions give protection to:
(a)reasonably anticipated usage of a declared service as at the time the dispute was notified …
(b)future use of the service by the exercise of rights that existed at the time the dispute was notified in so far as the holder of those rights will actually use the service; and
(c)all contractual rights relating to access to a declared service, either of the provider or of the third party, that existed at the beginning of 30 March 1995.
In addition, these provisions guard against the provider being required, against his or her wishes, to pay for extensions to the facility …
Where, for example, a third party seeking access to the declared service has had to pay the cost of an extension to the facility, or has had to pay fair compensation to another party for the loss of a right, this should be taken into account by the Commission in determining (under section 44V) the price of access by the third party to the declared service.
Significantly, the last paragraph of the passage quoted above provides an example that deals in the same way with past payment for an extension and payment for loss of a contractual right. It is not an explanation that is confined to bearing the cost of an extension. Rather, it is an explanation that the price of access is to be determined under s 44V and should take account of payments relating to access that have been borne by the third party where those payments have already been made. It is simply pointing to s 44V as being the relevant provision when it comes to determining whether such matters should affect the access price (and hence to s 44X which specifies the matters to which there must be regard in making a determination under s 44V).
Therefore, the terms of the Explanatory Memorandum indicate that the restriction on what an access determination may require is not a means of specifying or confining the matters to which there must be regard in determining the price for access. Rather, those matters are stated in s 44X(l). If no extension is (or has been) sought as part of an arbitral determination, then the statutory obligation is still to take into account each of the matters specified in s 44X(l), including s 44X(l)(e) which concerns the value to the provider of any extension the cost of which has been borne by someone else.
In any event, given the context and subject matter, it is difficult to see why the fact that an extension was sought by the access seeker as part of an agreement or determination (or had been required by an earlier agreement or determination with that access seeker) would be of singular significance when it came to bringing to account the value to the provider of an extension whose cost had been borne by someone else. Take the case where an agreement had previously been reached between the provider and another party (a fourth party) as to the terms of access (without the need for an arbitral determination) and the agreement required that the fourth party bear the cost of an extension. Say that thereafter, access is sought by the third party and an arbitral determination of the price and terms of access is sought because agreement as to access cannot be reached. In such a case there would be no requirement to have regard to the contribution by the fourth party to the value of the capacity and the provider could seek a price on the basis that the facility included that capacity and therefore there should be regard to the cost of that capacity in determining an access price to be paid by the third party.
Take the further case where most of the capital cost of the capacity to which access is sought has been met by a public infrastructure subsidy to encourage a new industry and then there is an arbitral determination of the terms of access to a third party. Or the further case where the subsidy had been paid before Part IIIA was enacted.
It is difficult to see any reason why such cases should be treated differently to a case where the extension was sought by the particular party seeking access by the exercise of rights conferred by Part IIIA (especially where s 44X(l)(e), unlike cl 6(4)(i)(iii), is not confined to a contribution by the access seeker and includes any case where the contribution is borne by someone other than the provider).
If it is considered that the value to the provider of an extension whose cost is borne by someone else is a matter which must be taken into account where an extension is or has been sought in the exercise of rights under Part IIIA, then the same economic rationale must apply if the costs are borne by someone else for some other reason.
In the context of legislation concerned with promoting competition in the interests of economic efficiency, the use of the same terminology of “extend” or “extension” in s 44V(2), s 44W(l)(e) and s 44X(l)(e) may be explained by the economic significance of instances where the facility is made larger thereby adding value by creating part of the capacity to which access is being sought (on the one hand) compared to those instances where a capital contribution is made to existing infrastructure that does not add economic value (on the other hand). In terms of the concepts of economic efficiency described in the Hilmer Report, it is not the quantum of actual cost borne that is significant, but rather the value to the provider of the extension (that is, the economic value). This explains why the focus is upon the value to the provider, not the particular extent of the historical cost incurred by someone else in bringing the extension into existence.
Regard to the three aspects of economic efficiency described above reveals that there is the prospect of economic inefficiency if the provider of an essential facility can appropriate (and charge a price for access to) the value of capacity the cost of which has been borne by others. The result will be that to the extent that the cost of the capacity is still being borne by others, they will make their economic decisions and price their products accordingly. Yet, in addition, the value of that capacity will have to be paid for and borne again by a third party who has to pay for access. By pricing twice the same value into the market, there is allocative inefficiency. The capacity is attributed with more value than it should be and market decisions are distorted in consequence. The cost of access to the capacity to the market as a whole is doubled, thereby distorting economic decisions leading to economic inefficiency. In addition, there will also be productive inefficiency if the double burden is imposed on parties who have already borne the cost of the extension and must now pay again for access to that capacity. However, there is inefficiency even if that is not the case.
It is also possible (and the present case may be an example) that there will be two categories of users of the essential facility; those who are bearing the cost of capacity and those who are not. If there is no mechanism by which the cost-bearing users can charge the other users then those other users will, in effect, obtain the service at a lower cost. Theoretically, it is possible that those free-riding users may then use more of the service than would be the case if the price signal to them properly reflected cost. This may lead to allocative inefficiency. However, it is also possible that the price advantage may be captured as additional margin which would not give rise to efficiency concerns.
In that context, it is significant that s 44X(1)(e) is concerned with regulating the behaviour of the party in control of the essential facility, particularly the need to bring to account the extent to which the cost of capacity is being borne by others (whether they be users or not). It is specifically directed to ensuring that the price for the service to which access is being sought is not inefficiently high because it includes the value for an extension that is being borne by others. In regulating the price and terms of access, it is ensuring that the party in control of an essential facility does not charge a price that is too high by reason that it is a charge for capacity the cost of which is being borne by others.
The manner in which these and other matters of context bear upon the proper construction of the text of s 44X(l)(e) is considered below in the course of dealing with the second issue which is concerned with the proper approach to user funded contributions to the cost of the Port that contribute to the value of the assets used to provide the Service.
Context of and background to Part IIIA as subsequently amended
Since their first enactment in the context and terms described above, presently relevant parts of Part IIIA have since been amended in certain respects.
The context for the amendments begins with the detailed review conducted by the Productivity Commission in its Review of the National Access Regime, Report No 17, 28 September 2001 which led to the Trade Practices Amendment (National Access Regime) Act 2006 (Cth) (Review). The Review was an inquiry into the arrangements established by cl 6 of the Competition Principles Agreement and Part IIIA for regulation of access to significant infrastructure facilities. The Review proposed incremental changes to Part IIIA, particularly the introduction of an objects clause and pricing principles in Part IIIA.
As to the introduction of the objects clause, the Review described the difficulties in conveying the object of the legislation in a meaningful way. It observed (at page 128):
In the case of access regulation … the presumption is that unregulated markets will not promote efficiency – thus, regulatory intervention to induce competition is required to promote efficient outcomes. By definition, this requires judgements (and the scope for error) about what might constitute the appropriate degree of competition. Put simply, competition is a means to an end, rather than an end in itself.
Then (at page 129):
Given the emphasis on competition in the TPA, and the now substantial body of legal precedent revolving around competition as a proxy for efficiency, the task at hand is to marry competition more explicitly to efficiency. In the Commission’s view, such unification is best pursued at the regime’s operational level, notably within the declaration criteria (see chapter 7). This leaves scope to focus the objectives for the regime on improving efficiency – the fundamental reason for intervention in this area.
The Review proposed an objects clause that incorporated an explicit efficiency objective and recognised the role that Part IIIA plays in providing the framework for industry-specific regimes. The recommendation led to the introduction of s 44AA into Part IIIA as part of a number of amendments made in 2006 (see below). It provides:
The objects of this Part are to:
(a)promote the economically efficient operation of, use of and investment in the infrastructure by which services are provided, thereby promoting effective competition in upstream and downstream markets; and
(b)provide a framework and guiding principles to encourage a consistent approach to access regulation in each industry.
As to the need for pricing principles, the Review linked the need for their introduction to the explicit terms of the objects clause to ensure that it had “more than symbolic value”. It noted that efficiency of service use and efficient investment, being key elements of its recommended objects clause, “are determined to a large degree by the terms and conditions of access”: page 137. It noted a report from the ACCC to the effect that access pricing proposals should be designed to “prevent monopoly rent-taking by facility owners” and “provide efficient market signals for the use of existing facilities and for future investment”. The statement of these dual aspects echoes the recognition in the Hilmer Report of the two related but distinct concerns of monopoly pricing and efficient pricing (signalling and resulting in appropriate use of essential facilities in the interests of the wider economy).
In that context, the Review considered the criteria specified in s 44X as matters that must be taken into account in making an access determination: page 138. In recommending the inclusion of pricing principles, the Productivity Commission reasoned in the following way (at page 142):
Thus, a key role of pricing principles is not so much to prescribe what should happen in a particular situation, but to rule out approaches and methodologies which would be inappropriate. More generally, even pricing principles which signal that a particular outcome could fall within a wide band provide, at least tacitly, some discipline on regulators to justify the outcome of a particular determination.
As to the content of those principles, the Review noted the importance of ensuring that prices are set in a manner that preserves investment incentives to ensure ongoing efficient investment rather than simply strengthening the emphasis on reducing access prices so as to encourage efficient use and then concluded (at page 332):
In sum, the pricing principles must necessarily involve a balancing act between addressing monopoly pricing and allowing a degree of flexibility for revenue to be above costs. In pursuing this balance, the Commission considers that the principles should explicitly recognise the role of access regulation in curbing inefficient monopoly rents, but set a clear floor to ensure that incentives to invest are protected.
The terminology proposed by the Productivity Commission came to be incorporated in Part IIIA as s 44ZZCA in the following terms:
The pricing principles relating to the price of access to a service are:
(a) that regulated access prices should:
(i)be set so as to generate expected revenue for a regulated service or services that is at least sufficient to meet the efficient costs of providing access to the regulated service or services; and
(ii)include a return on investment commensurate with the regulatory and commercial risks involved; and
(b) that the access price structures should:
(i)allow multi-part pricing and price discrimination when it aids efficiency; and
(ii)not allow a vertically integrated access provider to set terms and conditions that discriminate in favour of its downstream operations, except to the extent that the cost of providing access to other operators is higher; and
(c)that access pricing regimes should provide incentives to reduce costs or otherwise improve productivity.
It will be necessary to consider this language in more detail in dealing with the competing contentions of the parties, but considered in the context of the Review by the Productivity Commission and the introduction of the objects clause, the focus is upon achieving economic efficiency whilst protecting the incentive to invest. The Productivity Commission proposed pricing principles to which there must be regard in making an access determination. It did so on the express basis that they involved a “balancing act”. The drafting technique deployed in giving effect to the recommendation was to state the pricing principles in s 44ZZCA, but then include those pricing principles as an additional matter in the list of matters set out in s 44X(l), being matters that must be taken into account in making a determination. Informed by that context, s 44ZZCA may be taken to state principles that required balancing as between each other and with the other matters listed in s 44X(l).
As to the criteria to be applied in an access determination, the Productivity Commission considered possible changes (in addition to incorporating pricing principles into the criteria) “consistent with its views on the need to better focus Part IIIA on improving efficiency”: page 217. It examined in some detail whether the access determination should allow for an access provider to extend or expand its facility. It differentiated between a geographic extension, an interconnection and a capacity expansion. It observed that the status of s 44V was not absolutely clear on the issue of capacity expansion that did not involve geographic extension. The Productivity Commission then reasoned in the following way (at page 225):
The Commission notes that Clause 6(4)(j) of the Competition Principles Agreement refers to adjustments of access tariffs to reflect the costs and benefits of “extensions”.
In other words, the need for provisions covering mandated capacity expansions may depend on the detailed pricing requirements attached to the services in question. Importantly, these questions have never been addressed in a Part IIIA context.
In addition, there are complex issues relating to the treatment of the cost of a capacity expansion. There would be difficulties in having access seekers pay for capacity expansion because, unlike geographical extension, capacity expansion is not necessarily incremental and easily hypothecated to particular users. Capacity expansions can require discrete blocks of investment. As a result, in many circumstances, it may be difficult to attribute the costs to the individual users.
The Productivity Commission did not favour allowing a determination to require a facility owner to be directed to expand the capacity of a facility: page 226.
Subsequently, the Competition Policy Review was conducted by a Panel chaired by Professor Harper (Harper Review). It published its Final Report in March 2015. The Harper Review noted that “few infrastructure assets are currently regulated under Part IIIA. For the most part, the bottleneck infrastructure assets cited by the Hilmer Review as requiring access regulation have been regulated by industry-specific access regimes”: page 426. However, it observed that Part IIIA provides a legislative framework upon which industry-specific regimes are based and acts as both a model and a backstop for regulated access to services provided by essential infrastructure: page 429. It proposed revisions to the declaration criteria, but did not propose changes to the matters that must be taken into account in making a determination on access.
The Harper Review proposed only that the Tribunal be empowered to undertake a merits review of access decisions by the ACCC, a change that was made. It described the reason for doing so in the following terms (at page 439):
Decisions to declare a service under Part IIIA, or determine terms and conditions of access, are very significant economic decisions where the costs of making a wrong decision are likely to be high.
The Panel favours empowering the Tribunal to undertake a merits review of access decisions, including hearing directly from employees of the business concerned and relevant experts where that would assist, while maintaining suitable statutory time limits for the review process.
In the present context, those comments serve to emphasise that an access determination is fundamentally an economic decision the evaluation of the merits of which is a matter entrusted to the Tribunal.
In 2017, the Competition and Consumer Amendment (Competition Policy Review) Act 2017 (Cth) made a number of amendments to Part IIIA to implement the recommendations of the Harper Review and the Review by the Productivity Commission concerning the national access regime. As part of those amendments, s 44X(l)(e) was amended to insert the words “(including expansions of capacity and expansions of geographical reach)” after the reference in that provision to extensions. The rationale for this amendment was expressed in the Explanatory Memorandum in the following terms (at [12.65]–[12.66]):
The Commission can make a determination in an access dispute that requires an infrastructure service provider to extend the facility or permit interconnection to the facility by a third party. This is separate to the declaration process, as the Commission may only arbitrate an access dispute after a service has been declared. There are also a number of safeguards that restrict how the Commission may use these powers.
Various references in sections 44V, 44W and 44X are amended. The intent of these amendments is to clarify that the Commission can require a service provider to expand the capacity of its facility (as well as being able to require a geographical extension) when making an access determination. The amendments also clarify that the safeguards in sections 44W and 44X apply to directed capacity expansions. It is intended that the Commission could require a provider to expand a facility’s capacity, whether or not it requires the provider to extend the facility’s geographical reach.
It can be seen that, despite the view of the Productivity Commission concerning expansions, the amendment was made in order to make clear that the reference to extensions in ss 44V, 44W and 44X applied to both expansions of capacity and expansions of geographical reach. The changes were not made to alter the meaning of the underlying concept of the value to the provider of extensions whose cost is borne by someone else. That value remained a matter that must be taken into account in making any determination. Importantly in the present context, it was not identified as a matter to be taken into account only when the determination itself proposed a requirement that the provider extend the facility (or such a requirement had been proposed by an earlier determination).
Further, it adopted that position despite the recognition by the Productivity Commission that there are complex issues when it comes to the treatment of the cost of a capacity expansion and despite the focus of the Productivity Commission on issues associated with imposing a requirement to expand capacity.
In the result, examination of the context shows that s 44X(l)(e) appears to have its origins in language adopted in the Competition Principles Agreement concerning matters to which there must be regard in any independent process for the determination of the terms and conditions of access. To the extent that a comparison between that language and the language as enacted assists, it appears to indicate that the reference to the value of extensions was not to be confined to extensions made in particular circumstances (whether by agreement between the access seeker and the access provider or by reason of the terms of an access determination). Further, the pricing principles in s 44ZZCA were introduced to ensure that there was a focus upon the matters stated in the objects clause added as s 44AA, namely economic efficiency and investment incentives, when determining the price on which access was to be provided.
The text and structure of the Part IIIA provisions concerning declaration of a service
In Sydney Airport 155 FCR at 132–136 [23]–[32], the Full Court discussed the text and structure of important parts of Part IIIA in the form in which it stood in 2006. Importantly since then, the terms of s 44G and s 44H have been amended by the removal of the criteria for the decisions of the NCC and the designated Minister in s 44G(2) and s 44H(4), respectively and the introduction in 2017 (by Act number 114 of 2017 with effect from 6 November 2017) of s 44CA containing the “declaration criteria”. Relevant to the position of the parties here, though not relevant to these applications, was the placement into the declaration criterion in s 44CA(l)(a) of the words “on reasonable terms and conditions, as a result of a declaration of the service” being words that did not previously appear in s 44G(2)(a) or s 44H(4)(a). The introduction of those words was directed to the decision in Sydney Airport 155 FCR at 146–148 [76]–[89] that s 44H(4)(a) (and so necessarily s 44G(2)(a)) required a comparison of the future state of competition with the right or ability to access the service with that future state of competition without any such right or ability or with restricted right or ability. It did not require a comparison of the current factual position with a future position. Thus, whilst the effect of the declaration itself on competition (as it factually existed) might be relevant to consider, it was not mandated by the Act. As can be seen from s 44CA(l)(a) the effect of the declaration is now a mandatory consideration.
The importance of the operation of this change to the parties (but not to these applications) is that the declaration of the Service made by the Tribunal in 2016 was revoked in September 2018, by operation of s 44J(7) of the Act, after the Minister received a recommendation from the NCC that the declaration be revoked. The importance of the construction of the previous terms of s 44G(2)(a) and s 44H(4)(a) by the Full Court in Sydney Airport to the declaration of the Service by the Tribunal in 2016 can be seen in the Tribunal’s reasons: Application by Glencore Coal Pty Ltd [2016] ACompT 6 at [57]–[102].
The terms and nature of the Service
The declared Service was described by the Tribunal in 2016 as being defined as:
the provision of the right to access and use the shipping channels (including berths next to the wharves as part of the channels) at the Port of Newcastle (Port), by virtue of which vessels may enter the Port precinct and load and unload at relevant terminals located within the Port precinct and then depart the Port precinct.
The Service is recorded in a public register. The Service was declared by the Tribunal in 2016.
A question arises whether that Tribunal decision can be used as an aid to construction of the terms of the Service, in circumstances where it is found in a public register. In Westfield Management Limited v Perpetual Trustee Company Limited [2007] HCA 45; 233 CLR 528 at 538–540 [35]–[44], the High Court (Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ) discussed the limited role of extrinsic evidence in construing the Torrens Title register. That there should be a concentration on the public form of the words used to create (not merely evidence) proprietary rights in a register can be readily accepted. The private circumstances of the parties and their intentions, perhaps many years before, can be seen easily to be legally irrelevant. Similar considerations apply to the statutory contract between a company and its members: National Roads and Motorists’ Association Ltd v Parkin [2004] NSWCA 153; 60 NSWLR 224 at 236–238 [81]–[86] (Ipp JA); and Strata Title by-laws: The Owners of Strata Plan No 3397 v Tate [2007] NSWCA 207; 70 NSWLR 344 at 357–362 [53]–[71] (McColl JA). See generally Herzfeld P, Prince T, Tully S, Interpretation and Use of Legal Sources: The Laws of Australia (Thomson Reuters, 2013) at 555–556.
But here the public register is explained by an available public document: the decision of the Tribunal. Whilst recognising that it is principally the words of the Service that create the statutory rights involved, their proper meaning and reach is informed by their statutory, legal and public commercial context. In part, at least, that is provided by the earlier Tribunal decision.
In the earlier Tribunal decision, access to the Service was discussed by reference to the practical need for the Port as an essential step in the dependent market of producing and exporting coal from the Hunter Valley region. There was no discussion of the contractual methods of sale of coal and whether in some, but not all, of those contractual methods a coal producer would in some form of contractual mechanism take some control of a ship, but in others not do so either at all, or as relevant to the determination before the Tribunal. Such considerations are irrelevant to the relevant economic considerations of obtaining access to and using (both physically and economically) the Port to export coal, on ships. The shipping channels need to be the focus of the Service declared because that is the monopoly bottleneck. The declared Service is thus defined; but the point of its definition is its relationship (as a bottleneck monopoly) to the market of producing and exporting coal. Whilst vessels physically use the channel, it is the access to the channels by the producer and exporter of cargo that is of relevant economic significance. So much is manifest from the earlier decision of the Tribunal.
Further, the declaration of the Service should not be interpreted as if it were a statutory enactment. It is a purposive instrument which expresses a form of declaration to facilitate the exercise of the statutory right to access services provided by means of facilities, in order to advance the economic objects stated in s 44AA. It is concerned with promoting the economically efficient operation of, use of and investment in infrastructure by which the declared service is to be provided. It is not concerned with the regulation of the circumstances in which particular parties may themselves be allowed to use the infrastructure. It rests upon the constitutional heads of power described in s 44R which include the access for the purposes of constitutional trade or commerce.
For those reasons, as was stated in Rio Tinto Limited v Australian Competition Tribunal [2008] FCAFC 6; 246 ALR 1 at 13 [59], there should not be a literal or pedantic adherence to the description of the service in an application for the declaration of service when it comes to the form in which the service is declared. It is enough that the substance and essential nature of the service is not altered. Likewise, once the declaration has been made there should be no literal or pedantic approach to its interpretation, particularly an approach which would frustrate the evident economic purpose to be served by the instrument. As to these matters, see also Australian Securities and Investments Commission v Administrative Appeals Tribunal [2011] FCAFC 114; 195 FCR 485 at 499 [120].
The PMA Act
It is necessary to have regard to the PMA Act, being legislation regulating charges of the kind the subject of the determination by the Tribunal: the Wharfage Charge (WhC) and the NSC. It is important, however, to recall that State legislation cannot control or confine the reach and scope of the proper operation of the Act. This consideration is particularly important when due regard is had to the potential reach of terms and conditions of access to the Service (when the terms of the Service are properly understood) as permitted by the flexibility within the chapeau of s 44V(2): “may deal with any matter relating to access by [Glencore]”.
The PMA Act was passed in 1995, amongst other purposes, to establish State-owned corporations to operate the State’s port facilities, to provide for port charges and pilotage, and for other marine matters.
Part 5 of the PMA Act deals with port charges. By the definition section for the Part (s 47) Newcastle is a “designated port”. A “relevant port authority” is defined relevantly in (a1) and (e1) in terms that included a party in PNO’s position, for the purposes of a navigated service charge, and site occupation and wharfage charges, respectively as follows:
(a1)in relation to a navigation service charge for Port Kembla or Port of Newcastle – each of the port operator of the port and the appropriate public agency for the port, or
…
(e1)in relation to site occupation and wharfage charges for sites at a private port each of the port operator of the port and the appropriate public agency for the port, or
Newcastle (along with Port Kembla and Botany Bay) is defined (in s 3) as a “private port”.
Section 48 defines the “owner” of a vessel or cargo as follows:
(1)In this Act, owner of a vessel or cargo means (subject to this section) the person who owns the vessel or cargo.
(2)A reference in this Act to the owner of a vessel includes a reference to:
(a)a person registered as the vessel’s owner in the relevant authority under the marine legislation or the National law or other certificate of registry for the vessel, or
(b)a person who has chartered the vessel.
(3)A reference in this Act to the owner of a vessel or cargo includes a reference to a joint owner of the vessel or cargo.
(4)A reference in this Act to the owner of a vessel or cargo includes a reference to any person who, whether on the person’s own behalf or on behalf of another:
(a)exercises any of the functions of the owner of the vessel or cargo, or
(b)represents to the relevant port authority that the person has those functions or accepts the obligation to exercise those functions.
(5)For the purposes of this Act, a person does not cease to be an owner of a vessel because the vessel is mortgaged, chartered, leased or hired to another person.
However, the second matter is the use to which the DORC methodology may be put in making the determination in circumstances where it was not agreed that the RAB should simply equal the DORC value. The extent to which there should be adjustment, by reason of the matters to which s 44X required the Tribunal to have regard, was not a task that was resolved by the nature of the agreement to use DORC. For reasons we have given, aspects of that task required consideration as to whether there were user contributions of a kind that should result in an adjustment to the RAB. The Tribunal was in legal error in approaching its task as if no such requirement applied to the determination process.
Sixth, assets used to provide the Service that were not leased by PNO
At a number of points in their submissions, Glencore and the ACCC sought to draw an analogy between certain assets that were used to provide the Service but were not leased by PNO and remained under the control of the State (State Controlled Assets) and the capacity created by the user contributions. The ACCC in its determination had excluded the State Controlled Assets from the assets included as part of the DORC valuation. There had been no issue taken with that approach before the Tribunal. It was said that consistency in logic required the same approach to be taken in respect of the capacity created by the user contributions.
We do not accept the logic of the submission. Part IIIA provides a right to access a declared service that is provided by means of the provider’s facility. The fact that PNO as the provider is able to deploy other assets, not part of the facility that it leases from the State, in providing the Service does not bring those assets within the statutory scheme. They do not form part of the facility of the provider. On the other hand, the whole of the Port assets that were leased, were part of the facility in the hands of the provider. The fact that funds to generate a significant part of that capacity may have been sourced from users did not make them a separate facility that was not part of that which was regulated. They were part of the facility which was under the control of PNO and were, for that reason, not directly analogous to the State Controlled Assets.
The Tribunal’s final paragraph
As we noted when considering the Tribunal’s reasoning, in its final paragraph concerning user contributions (at [365]) it stated:
We indicate that even if some regard was had to the financing of particular dredging projects (for instance), this would need to be done as part of a comprehensive examination of historical matters. This would include the benefits provided by the State in return for contributions, the history of under-recovery by the State, the question of which users would be entitled to the benefit of any contributions and the users’ expectations. Such matters should not be included in the calculation of a DORC value, but may influence the MAR and associated prices. None of these matters were considered properly by the ACCC nor could they be on the material before it. Similarly, the Tribunal could not undertake this task if we were of a different view to the one we have already reached, namely, no deduction at all should be made to the RAB for user contributions.
The final words hint at a conclusion that, as a matter of fact and economic analysis, the material before the Tribunal was insufficient to provide the foundation for a conclusion that there had been user contributions that should be used to adjust the MAR and associated prices. In its form, it suggests a view that there was a failure to present sufficient material for the Tribunal to reach a conclusion on that issue in any event.
In the view of the Tribunal, if user contributions were to be brought to account there needed to be a comprehensive historical analysis of all of the past economics of the Port and where the benefits and burdens had fallen to see whether there was some offsetting benefit that was received for the contributions and whether the benefit of past contributions should be confined to those users who had made them.
On that basis PNO submitted that even if there was error in the principal analysis by the Tribunal, the applications for review must fail because of the view expressed in the final paragraph which summarised some earlier statements made by the Tribunal.
However, the difficulty with the Tribunal’s alternative basis for its conclusion is that it assumes a particular view of what is required as a matter of law if user contributions are to be brought to account. It assumes that the terms of s 44X(1) operate in a manner where there is to be no regard to past considerations unless they can be evaluated in a comprehensive way. In effect, if one aspect of the past is to be brought to account then all aspects must be included and if that cannot be done then there is no basis to consider past matter. It also assumes that there is a relevant inquiry to be made as to who made the user contributions.
However, there is no support in the terms of s 44X(1) for those views.
For reasons we have given, s 44X(1)(e) requires that there be regard to the value to the provider of extensions whose cost is borne by someone else. It is not concerned with whether there were other aspects of the past that might have provided some benefit to the provider. It is concerned only with whether the value of an extension that forms part of the facility used to provide the Service is value that “is borne” by someone other than the provider. It does not invite an accounting of all past benefit to that other person from having met the cost. It does not invite an allocation of that value to the particular person bearing the cost. Therefore, the alternative conclusion was not based upon a correct view of that provision.
We do not wish to be taken to accept the proposition advanced for Glencore that it was enough to show that there had been contributions in the past. There may be aspects of the past that bear upon a conclusion at the relevant time as to whether the cost that has been met in the past that is represented by the present value of an extension might properly be said to be cost that “is borne”. One matter that may be relevant to that inquiry may be the perpetual nature of the asset created by past user contributions. Another matter may be whether regard to those contributions together with regard to the other factors in s 44X(1) requires balancing of competing considerations. In particular, s 44ZZCA(a)(ii) requires the Tribunal to have regard to the principle that the provider be able to earn a rate of return commensurate with the regulatory and commercial risks involved. The Tribunal has not considered that aspect in expressing its final conclusion.
However, what was not suggested by PNO was that the extent of the user contributions could not be assessed in the manner undertaken by the ACCC. Rather, the principal complaints by PNO focused upon whether, having regard to other historical circumstances, the extent of the work funded by users should not be brought to account. Those arguments have not been addressed with a proper understanding of what was required by s 44X(1)(e).
Also, for reasons we have given, regard to the statutory object of promoting the economically efficient operation of, use and investment in the Port as the relevant infrastructure requires regard to whether part of the capacity has been provided by the contributions of users. The alternative conclusion by the Tribunal is not informed by that aspect of what the statute requires.
Whether regard to those matters leads to the same result as that reached by the ACCC or to some other result is not a matter to be adjudged by this Court. However, that view must be informed by a correct view of the statutory provisions. Those provisions do not require either a complete historical analysis of benefits or an assessment as to which user provided funds so that any price benefit would be confined to the contributing user.
In short, our conclusions about legal error extend to include the final alternative conclusion by the Tribunal at [365].
Conclusion as to issue 2
With respect to the Tribunal, it has been demonstrated that there was an error of law by the Tribunal in failing to have regard to the user contributions on the basis that such contributions could not be relevant to the determination of an appropriate level of efficient costs. Various provisions in s 44X(l) required the Tribunal to consider whether there were user contributions of a character that should be brought to account in determining the price and terms of access.
Issue 3: the application by the ACCC
As we have noted, Glencore and the ACCC each brought separate applications challenging the Tribunal’s decision. Glencore’s application relied upon the statutory right to appeal by way of review expressed in s 44ZR(1) of the Act. It raised both the scope and user contribution issues.
The application by the ACCC sought to invoke three separate aspects of the Court’s jurisdiction. First, the ACCC claimed to be a “person aggrieved” by the decision of the Tribunal for the purposes of s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth). Second, it also claimed to be a person with a “special interest” who had standing to allege jurisdictional error and invoke the jurisdiction conferred by s 39B of the Judiciary Act 1903 (Cth). Third, it relied upon s 163A(3) of the Act which provides that the ACCC may institute a proceeding in the Court seeking the making of a declaration.
The ACCC submitted that there is a public interest in seeing an important aspect of Part IIIA properly interpreted. It said that it has a statutorily recognised public interest function in bringing proceedings to clarify the operation of the legislation. So much can be accepted. However, the proceedings that it commenced alleged that the contextual application of the legal principles for which it contends in the adjudication of the private dispute between Glencore and PNO should lead to a variation of the Tribunal’s determination in a manner that would reinstate the ACCC’s determination of the appropriate charge. In short, the primary relief it sought was an adjustment to the price that Glencore would pay. It also sought a declaration that the Tribunal erred by holding that the NSC should be based on the value of the assets used to provide the Service, without any adjustment for those assets not paid for by the service provider. Relief of that kind provided a direct and peculiar benefit to Glencore as the outcome of a statutory arbitral process; and in circumstances where Glencore was advancing that position for itself, in its own interests.
Division 3 of Part IIIA provides for the resolution of a dispute between the provider of a declared service and a third party who wants access to the service. The arbitration is to be conducted by the ACCC. It has powers to terminate the arbitration in certain circumstances, including where the dispute was vexatious or its subject matter was trivial, misconceived or lacked substance: s 44Y. The ACCC is to be constituted by two or more members for the purposes of conducting the arbitration: s 44Z. The arbitration must be conducted in private, unless the parties agree to a public hearing: s 44ZD. The parties may be charged by the ACCC for its costs of conducting the arbitration: s 44ZN.
It can be seen that the legislation provides for an independent adjudication by the ACCC (as constituted for the purposes of the arbitration) of a dispute between two parties. The ACCC has no role in bringing forth the issues for determination and the outcome is an adjudication of a dispute to which the ACCC is not a party. Plainly, the role of the ACCC in making a determination is to make a decision that will quell the dispute between the parties, not to perform some broader statutory function in the public interest. There are detailed provisions which govern the procedure to be applied by the ACCC in making the required arbitral determination which manifest its character as an independent decision making process: see, for example, s 44ZF.
The mechanism whereby a statutory right to access a declared service, provided by means of essential infrastructure at a price and on terms to be determined by independent arbitration in the event of dispute, is created in the wider interests of economic efficiency can be traced back to the recommendations of the Hilmer Report. It is a scheme by which the public interest is served by conferring the right of access and ensuring that individual disputes can be settled by arbitration.
Other access regimes establish a mechanism by which a regulator (in some cases the ACCC) sets a benchmark price or a schedule of prices and standard terms to apply in the marketplace as a whole. In such instances, the regulator exercises a statutory power to determine appropriate prices and terms of broad application in the public interest. The determination the subject of the present proceedings was not of that character.
The distinction between the private nature of the determination and its possible public consequences is addressed by a separate statutory requirement that the ACCC must publish a written report about the final determination it makes, which report may include the determination and reasons for determination: s 44ZNB. Amongst other things, the report must include “any implications the Commission considers the determination has for persons seeking access to the service or to similar services in the future”: s 44ZNB(3)(f). It is the report that provides wider guidance as to other determinations.
If there is an application to the Tribunal to review the arbitral decision by the ACCC then the determination has no effect until the Tribunal makes its determination on review: s 44ZO(2). A review by the Tribunal is a re-arbitration: s 44ZP(3). In conducting the review, the Tribunal has the same powers as the ACCC: s 44ZP(4). Significantly, the determination as affirmed or varied by the Tribunal is taken to be a determination of the ACCC for all purposes of Part IIIA: s 44ZP(7). Many of the procedural provisions that otherwise apply to the Tribunal do not apply to those instances where it conducts a re-arbitration under Part IIIA: s 44ZQ.
So, where there is a re-arbitration, the power to make the determination is not transferred to the Tribunal. It remains with the ACCC as the original decision-maker. The Tribunal’s power is to determine that the original decision was correct or to vary that determination. However, the determination takes effect as a decision of the ACCC.
It appears that the statutory obligation to prepare the report would also apply upon completion of the re-arbitration by the Tribunal because the re-arbitration takes effect as a final determination by the ACCC and the ACCC must prepare a report about a final determination.
In those particular circumstances, for the ACCC to seek to challenge the outcome of the re-arbitration by the Tribunal is for the ACCC to challenge its own arbitral determination, its own exercise of statutory power. Further, the position adopted by the ACCC in bringing its own application to challenge the decision by the Tribunal gives rise to the strange possibility that the ACCC may seek to challenge the re-arbitration in circumstances where none of the parties to the arbitration seeks to do so. The ACCC could contend for relief (and a consequent outcome) that no party to the dispute seeks. In such an instance if the ACCC was to succeed, who would have the carriage of any reconsideration of the matter by the Tribunal? It cannot be the position that the ACCC could run a case before the Tribunal that no party to the dispute wanted to run. All of these difficulties explain why s 44ZR(1) is couched as it is. Only a “party to an arbitration” may appeal to this Court, and s 44U makes clear that the ACCC is not such a party. Hence, the ACCC’s collateral challenge seeking to invoke other aspects of the Court’s jurisdiction. While s 44ZR may not limit the jurisdiction of the Court under the Judiciary Act 1903 (Cth) or the Administrative Decisions (Judicial Review) Act 1977 (Cth), the considerations discussed herein reveal why the proceedings in the form they took should not have been commenced or maintained.
The terms of Part IIIA in requiring the preparation of a report as to the consequences of the determination, reinforce the manifest intention that the process of arbitration is to deal only with the resolution of a private dispute. To the extent that there is a wider public interest to be served then those matters are to be addressed in the report.
Therefore, although the arbitral determination was mandated by statute, its character as an adjudication of a private dispute is evident and must be kept in mind in considering the extent to which there might be said to be a wider interest that might justify the approach adopted by the ACCC in bringing its own application to review the Tribunal’s decision. The fact that there may be consequences for the law that the ACCC must administer is not enough to justify the ACCC bringing the present application for review. Consequences of that kind arise whenever this Court adjudicates a dispute between private parties concerning a law administered by the ACCC, such as, for example, decisions concerned with unconscionable conduct of the kind proscribed by the Act.
In our view, even though no complaint was raised by PNO, it was not a proper step for the ACCC to take to bring an application challenging the decision of the Tribunal (and thereby, in effect, challenging its own exercise of statutory power). Although it was not the decision-maker on the review application to the Tribunal, the outcome of the re-arbitration was a determination by the ACCC. Further, the role of the ACCC when it made its decision was not as an administrative decision-maker exercising a statutory power with attendant discretions. Rather, it was independently adjudicating a dispute between two parties, the nature and extent of which was determined by those parties (save that the ACCC had power to determine matters that were not the basis for notification of the dispute: s 44V(2)).
Therefore, though not directly analogous to the circumstances in R v Australian Broadcasting Tribunal; Ex parte Hardiman [1980] HCA 13; 144 CLR 13, the ACCC’s role in making the determination is akin to that of a statutory tribunal of the kind there addressed. The difference lies in the addition of the layer for re-determination by the Tribunal. It is not uncommon for legislation to provide for two layers of independent statutory review. For example, there have been independent review processes interposed between the making of an administrative decision and the exercise of a right to seek review in the Administrative Appeals Tribunal. In such circumstances, the independent decision-maker at the first layer should be guided by what are commonly known as the Hardiman principles as much as they should guide the independent decision-maker at the second layer. They do not countenance the commencement of proceedings by the independent Tribunal to challenge the validity of the decision making process.
Otherwise, in proceedings in which the ACCC’s independent decision (being its determination to take effect as varied by the decision of the Tribunal) is the subject of challenge, its active appearance in any proceedings should be regarded as exceptional and should, in general, be limited to submissions going to powers and procedures rather than the appropriate outcome. It ought not be alleging, for example, as the ACCC did in this case, that the decision of the Tribunal was so unreasonable that no reasonable Tribunal could have arrived at the decision (a position not pressed in oral submissions). All the more so, it should not be commencing its own proceedings in order to adopt a partisan position as to the outcome.
In the result, Glencore by its own application raised similar complaints and sought similar relief to the ACCC in relation to the issue of user contributions. But the appropriateness of the course taken by the ACCC is not to be adjudged by that further and separate step. The merits of the justification advanced by the ACCC must pertain even if Glencore and PNO had settled their differences after the Tribunal’s decision and even if PNO did not wish to dispute the Tribunal’s decision. It is inconsistent with the statutory scheme if the ACCC is seen to be arguing for the correctness of its own view in its own proceeding against the Tribunal.
Finally, whilst a case may be advanced as to why the ACCC had an interest, on behalf of the public, in seeking appropriate declaratory relief as to the meaning of relevant statutory provisions, those were not the terms in which the ACCC sought declaratory relief. It did not seek a declaration as to the proper construction of relevant provisions of the legislation in the circumstances and for the purposes of some ongoing aspect of administration of the Act. Possibly, such a course may have been appropriate to inform the content of the report to be prepared by the ACCC after the decision by the Tribunal if there was a concern as to the extent to which the Tribunal had proceeded upon a correct understanding of the law. Instead, the ACCC took the course of seeking a declaration that the decision by the Tribunal was wrong. For reasons we have given, it has not been shown why such an application should be entertained in the exercise of the Court’s discretion that attends any application under s 163A(3).
It follows, in our view, that the proceedings brought by the ACCC should not have been commenced. Therefore, it is appropriate for them to be dismissed. The proper role for the ACCC was to make submissions on Glencore’s application (to which the ACCC was named as a respondent) as to matters relating to the proper construction of the relevant legislative provisions and to provide such assistance as the Court may need in dealing with applicable economic principles. Further, if the ACCC had not been named as a respondent to Glencore’s application, the appropriate step would have been to seek leave to intervene under s 87CA rather than to institute or, in this case, continue separate proceedings. In the result, for the most part, the submissions advanced for the ACCC were related to grounds raised by Glencore that were similar in character to those expressed in the application by the ACCC. However, to the extent that the ACCC sought to advance separate review grounds, in our view it has not been demonstrated that there was a proper basis for the ACCC to do so and for that reason those grounds have not been separately addressed in these reasons.
Issue 4: the appropriate form of relief
As to relief, the application by Glencore sought an order that the Tribunal’s determination be varied by substituting the NSC as determined by the ACCC, alternatively that the matter be remitted to the Tribunal for determination of the NSC according to law. In its written submissions, Glencore invited this Court to affirm the determination by the ACCC.
Section 44ZR(4) provides that the orders that the Court may make include (but are not limited to) an order affirming or setting aside the decision of the Tribunal and an order remitting the matter to be decided again by the Tribunal. Notably absent is any express power to make any decision that the Tribunal itself could have made.
As we have noted, the Tribunal’s decision is itself a re-arbitration. Once the re-arbitration process has been invoked and a determination made, it is difficult to see the basis on which this Court might return the parties to a position whereby the original ACCC determination takes effect without any re-arbitration. Therefore, by reason of the subject matter of the appeal by way of review conferred by s 44ZR, it is not open to this Court to reinstate the original determination of the ACCC, save perhaps in an instance where there was some defect in the application to the Tribunal such that the re-arbitration process was never validly invoked.
Possibly if this Court were convinced that as a matter of law a particular decision was inevitable, this Court could order that the determination of the Tribunal be varied in a manner that gives effect to that inevitable outcome. However, for the following reasons, this case is not of that character.
For reasons we have already given, the question of scope must be referred back to the Tribunal.
As to the issue of the user contributions, for Glencore it was contended that, no issue having been taken before the Tribunal as to the extent of the user contributions, if the Tribunal was in error in failing to have regard to those contributions then the consequence was that the accepted value of the contributions had to be brought to account in the manner determined by the ACCC in that determination. Even accepting the premise for that submission as being correct (a matter disputed by PNO), the statutory task to be undertaken by the Tribunal required it to have regard to the user contributions and not simply to bring them to account in the manner reasoned by the ACCC in its determination. It is not for this Court on review to undertake that task which involves regard to matters other than user contributions alone.
Therefore, the question of user contributions and any consequence for the access price arising from a determination of that issue is a matter for the Tribunal and that aspect must be referred back to the Tribunal.
As to the declaratory relief sought by the ACCC, in circumstances where the ACCC had appeared as a respondent to the application by Glencore it may be appropriate for declaratory relief to be granted in a form that affords certainty or protection for a respondent that a particular matter has been adjudicated by the Court. However, no such purpose would be served by granting declaratory relief in the terms sought by the ACCC. The Court’s finding of error will be given effect by orders setting aside the Tribunal’s decision and remitting the matter for determination according to law.
Conclusion, orders and costs
For reasons we have given, the application by Glencore should be allowed. The application by the ACCC should be dismissed. The matter should be remitted to the Tribunal for further determination according to law. As to costs, there should be orders for short submissions as to the appropriate orders in light of these reasons. Each party should first file a minute of the orders as to costs that are sought, then there should be written submissions filed on the basis that, unless the Court otherwise orders, the question of costs will be dealt with on the papers. We will also restrict publication of the reasons for judgment for a short period in the light of the fact that there were confidential matters before the Tribunal addressed in argument. In particular, there were matters in the redacted and confidential material which were related to what is found in the last sentence of [229]. There may be other matters of which we are unaware. Thus, there will be orders allowing the parties a short time to make any application for any redaction or orders of suppression over any part of the reasons for judgment.
I certify that the preceding three hundred and twenty–three (323) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop and Justices Beach and Colvin. Associate:
Dated: 24 August 2020
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