Australia: A bow wave of reform at our ports?

Glencore Coal's application for declaration of berthing and wharfage services at the Port of Newcastle could be followed by similar applications. We consider the key implications for access seekers, port operators and port privatisations.

Glencore Coal applied for declaration1 of berthing and wharfage services at the Port of Newcastle on 13 May 2015. Glencore's application followed a proposed price hike of nearly 60% in the navigation service charges applied to coal shippers.

Glencore's application follows a reported application by DP World in relation to landside services at the Port of Melbourne following the Port's proposal that these charges be increased by nearly 800% as part of the regular rent review mechanism in DP World's lease.2

A declaration application, if successful, enables the ACCC to have regulatory oversight of terms and conditions of access to the declared services, including price.

IMPLICATIONS FOR ACCESS SEEKERS

The threat of declaration as a tool to constrain the ability of infrastructure owners to set key terms and conditions has often been overlooked due to:

  • A perception that declaration is just about obtaining access, not lowering access prices; and
  • The tendency for declaration processes to take a long time.

The recent history of judicial challenges to what is, at heart, an administrative and executive process, has given rise to a perception that it is unsuited to resolving commercial disputes.

However, some access seekers have limited options when faced with price hikes by incumbent operators of natural monopoly assets.

Importantly, declaration is not merely about obtaining access. It may also be used to optimise terms and conditions of access.

Access seekers to declared services have ACCC arbitration to fall back on should commercial negotiations fail. This was illustrated most clearly by the declaration of the airside service at Sydney Airport and the resulting access dispute between Virgin Blue and the airport. That dispute concerned the charges for the airside service, not the provision of access itself.

While declaration potentially 'opens the door' to access by third parties, existing user's rights and reasonably anticipated needs are protected.

Unless a potential access seeker can fund a capacity expansion, declaration is unlikely to facilitate new entry where the underlying infrastructure is capacity constrained.

RISKS FOR INFRASTRUCTURE OPERATORS

Infrastructure operators now face increasing awareness amongst access seekers of the usefulness of seeking declaration – not only for the potential pay off in negotiations but also for the opportunity to profile the issues in dispute.

It remains to be seen whether any will take advantage of the opportunity to give an access undertaking under the same regime to seize the regulatory initiative and obtain a greater degree of regulatory certainty (particularly around pricing).

Undertakings have been successfully used in the telecommunications industry and may increasingly come into play.

IMPACT ON FUTURE PORT DISPOSALS

Interested buyers in port assets will be watching these developments closely. Potential port operators face a higher risk of sophisticated access seekers using declaration to constrain rises in port charges and increased sensitivity by Government vendors to the perception that privatisation can lead to higher charges.

This may lead Governments to seek increased certainty about terms and conditions of access post sale and may lead to applications for certification of State based regimes under the National Access Regime.

POTENTIAL REGIME CHANGE

Although the recent Harper Review of Competition Policy is still firmly in the realm of policy, it may lend some impetus to declaration applications by advocating retention of the access regime with some (relatively minor) modifications.

CONCLUSION: IN SEARCH OF CERTAINTY

Access seekers and infrastructure operators alike may be concerned by this increasing uncertainty. For access seekers, this is likely to lead to an increased focus on the merits of applying for declaration; while for infrastructure operators, their focus is likely to be on obtaining regulatory certainty for the future.

The authors would like to thank Sophie Morton (Graduate at law) for her assistance in preparing this article.

Footnotes

1 Under Part IIIA of the Competition and Consumer Act 2010 (Cth) (the National Access Regime).

2 As at 19 May 2015, the National Competition Council has not published any application in relation to the Port of Melbourne.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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