In that decision handed down in June last year Justice Jayne Jagot found the federal competition laws did not apply to the privatisation and the port commitment deeds promising compensation against container competition, because NSW Ports was protected by "derivative Crown immunity".

Justice Jagot also found the compensation provision did not have an anti-competitive purpose or effect.

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Five days have been set aside for the hearing, with the ACCC arguing that restrictions on a Newcastle container terminal - first revealed by the Newcastle Herald in 2016 - were "anti-competitive" and of national interest.

As Mr Borsky set out his arguments, Justice Allsop, Justice Jonathan Beach and Justice David Yates repeatedly questioned him on the ACCC's interpretation of the case. Mr Borsky said repeatedly that he disagreed with their propositions, and argued why.

The justices put it to Mr Borsky that the port commitment deeds detailing compensation to NSW Ports if a Newcastle container terminal was built were not protection from competition but a "price adjustment" if a later government changed the existing three ports policy and allowed a Newcastle terminal to go ahead.

Mr Borsky said it was the ACCC's submission that sovereign risk of a government policy change and the risk of competition were "the one thing".

He said it didn't matter how the situation was described, the arrangements had the purpose of "substantially lessening competition", providing a safety net for the monopoly (Botany) not having to compete to the same extent as it would because it had financial protection against its would-be competitor.

The judges spent considerable time examining the effect of the Ports Assets (Authorised Transactions) Act 2012 - introduced before the 2013 privatisation of Botany and Kembla - and its relationship with sections of the Competition and Consumer Act covering "anti-competitive" behaviour.

Mr Borsky said the government was still "carrying on a business" at Newcastle when Botany and Kembla were privatised, even if it wasn't a container terminal, and that his meant it was "encumbered by the anti-competitive provisions".

The case resumes this morning.

On the government's offer of the ex-BHP "Intertrade" site adjoining the proposed Newcastle container terminal site, Port of Newcastle said yesterday it had ample documentation confirming the approaches the government has disputed.

"On two occasions in 2020 and 2021, Port of Newcastle submitted proposals to the Department of Planning and Environment to acquire the Intertrade site," Port special projects director Ross Caddell said yesterday.

"These documents state very clearly, Port of Newcastle was interested in purchasing the site. All and any options have been requested and discussed with the minister's department for PoN to acquire the land.

"It's disappointing that the minister has not been provided with all the facts by his department and we will be providing the minister with relevant documents today to ensure the minister has all the information to hand."

The Herald also reported in March 2019 that the government had rebuffed an approach from PoN.

The ACCC has lodged an appeal against the Federal Courts decision to dismiss the ACCCs proceedings against NSW Ports Operations Hold Co Pty Ltd and its subsidiaries Port Botany Operations Pty Ltd and Port Kembla Operations Pty Ltd (together, NSW Ports).

On 29 June 2021, the Court found that competition laws did not apply to NSW Ports when it entered into certain agreements, known as the Port Commitment Deeds, because NSW Ports had derivative crown immunity. The Court also found that compensation provisions in the Port Commitment Deeds did not have an anti-competitive purpose or effect.

We are appealing from this decision because we consider that the purpose and likely effect of the compensation provisions entered into at the time the State of NSW privatised the Ports of Botany and Kembla was anti-competitive, ACCC Chair Rod Sims said.

Agreements entered into when existing State-owned monopoly businesses are being privatised, which seek to maximise profit from the sale by protecting that monopoly from competition in the future, are inherently anti-competitive.

We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years. This is a matter of significance for the Australian economy, Mr Sims said.

The Port Commitment Deeds, which were entered into as part of the privatisation of Port Botany and Port Kembla by the NSW Government in May 2013, for a term of 50 years, oblige the State of NSW to compensate the operators of Port Botany and Port Kembla if container traffic at the Port of Newcastle is above a specified cap.

Another 50-year deed, signed in May 2014 when the Port of Newcastle was privatised, requires the Port of Newcastle to reimburse the State of NSW for any compensation paid to operators of Port Botany and Port Kembla under the Botany and Kembla Port Commitment Deeds. This reimbursement would significantly increase the cost of moving a container at the Port of Newcastle.

The ACCC argued that the Botany and Kembla Port Commitment Deeds had an anti-competitive purpose and likely effect because they were intended, and were likely, to hinder or prevent the development of a competing container terminal at the Port of Newcastle.

We will argue that the Court made an error in finding that the Port Commitment Deeds didnt have an anti-competitive purpose, even though the Court found that the purpose of the Deeds was to secure a higher sale price for the State from selling the existing monopoly of Port Botany, and ensure that NSW Ports would retain the full value of that monopoly, Mr Sims said.

The Court found that the 50-year term of the Port Commitment Deeds was not relevant when assessing whether they have an anti-competitive effect, because the development of a container terminal at the Port of Newcastle was fanciful or a speculative possibility when the agreements were made.

The ACCCs case is that there was always a meaningful possibility that some time over the 50-year period a container terminal would be developed at the Port of Newcastle, if not for the compensation provisions. These provisions in the Port Commitment Deeds increased the barriers to the development of such a terminal, and this is anti-competitive, Mr Sims said.

The Court also found that, at the time the compensation provisions were agreed, it was speculative whether there would be a future change in State policy to favour the development of a container terminal at the Port of Newcastle, and took this into account in finding that the provisions were not likely to have the effect of substantially lessening competition.

State governments, and their policies, change regularly and are likely to change during the 50-year term of the Port Commitment Deeds, Mr Sims said.

We will submit that there was a meaningful prospect that there would be a change in State policy to favour the development of a container terminal at the Port of Newcastle at some time in the future.

The ACCC is also appealing from the Courts decision that the prohibition on agreements with an anti-competitive purpose or effect did not apply to the State of NSW and NSW Ports making the Port Commitment Deeds, on the basis of Crown immunity and derivative Crown immunity.

The ACCC is challenging the Courts finding that the competition law did not apply because the State was not carrying on a business when it entered into the Port Commitment Deeds, as well as the findings made by the Court that NSW Ports benefited from derivative Crown immunity.

Background

Crown immunity protects state governments from the operation of competition laws when they are not carrying on a business. When this immunity extends to parties that contract with state governments in certain limited circumstances, it is known as derivate crown immunity.

In December 2018, the ACCC instituted proceedings against NSW Ports. In 2019, NSW Ports made a cross claim against the State of New South Wales and the Port of Newcastle entities, joining them to the ACCCs proceedings.

NSW Ports operates Port Botany and Port Kembla under 99-year leases from the State of NSW.

The compensation to be paid by the State of New South Wales under the Port Commitment Deeds to the operators of Port Botany and Port Kembla is equivalent to the wharfage fee the port operators would receive if they handled the containers.

Container traffic at the Port of Newcastle has not yet exceeded the specified cap, and therefore to date no payments have been made by the State of New South Wales under the 2013 Port Commitment Deeds.

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