Judge demolishes Newcastle's container case in 460 page Federal Court verdict

Chief executive Craig Carmody said the decision was a blow, not just for Port of Newcastle.

Mr Carmody aid it was blow to the port's commitment to diversification, to the wider Hunter and NSW regions and to the hardworking suppliers and small businesses who are being stopped from benefiting financially and competitively from a container terminal in Newcastle.

"This setback does not alter Port of Newcastle's desire to build a container terminal, nor our confidence that a container terminal at the Port is a diversification opportunity the port, Newcastle and the Hunter Region needs," Mr Carmody said.

"Having had time to absorb the judgement, we see that the Federal Court accepts that Port of Newcastle has the ability to compete in the same market as Port Botany, and that NSW State Government Policy is the major constraint to this.

"We await with interest the decision by the ACCC whether to appeal the outcome, expected later this month."

The 463-page decision by Justice Jayne Jagot published this afternoon goes against the ACCC and the Port of Newcastle and in favour of the operator of Botany and Port Kembla, NSW Ports, and the NSW government

NSW Ports welcomed the reasons Justice Jagot published, which had been withheld since their handing down on June 29 to allow lawyers for the various parties to confer on what commercial aspects of the decision should remain confidential.

A quick scan through the verdict reveals that relatively little has been redacted.

But the decision also finds that the NSW government was immune to competition law provisions in the way that the ACCC was concerned about, and that NSW Ports has "derivative immunity" arising from the state immunity.

The decision quotes the ACCC as saying: "A private trading corporation that engaged in such conduct would be caught by the Competition and Consumer Act. So should the Crown."

But Justice Jagot found otherwise.

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Although the ACCC said it was concentrating on the legality, or otherwise, of the competition restraints built into the NSW government's port privatisations, the chapter headings of Justice Jagot's decision indicate that the case also examined the real-world viability of a Newcastle container terminal.

In her key conclusions, Justice Jagot said: "No private operator of the Port of Newcastle, acting rationally, could have satisfied itself that in the reasonably foreseeable future a container terminal at the Port of Newcastle would be viable for so long as Port Botany has capacity.

"No private operator of the Port of Newcastle, acting rationally, could have satisfied itself that it could mount an apparently sound case to the NSW government to change the State policy so as to enable a container terminal to be developed at the Port of Newcastle while Port Botany has capacity.

"This is the position without the impugned provisions (or without the compensation provisions alone, as then the reimbursement provisions also would not exist)."

The "impugned provisions' are the Port Commitment Deeds revealed by the Newcastle Herald in 2016 after years of stonewalling by the NSW government.

In her opening remarks, Justice Jagot says that against what the ACCC contended: "The likely effect of the making of the compensation provisions was not to substantially lessen competition.

"The likely effect of giving effect to the compensation provisions in the future will not be to substantially lessen competition."

These remarks by the judge are despite evidence contained in the decision showing the the NSW Ports consortium was concerned about the impact of a container terminal being proposed for Newcastle when it was still in government hands.

Justice Jagot writes in paragraph 70 that: "In March 2012 the NSW Ports Consortium was again advised by its proposed adviser that the threat of a second container terminal at Port Kembla or Port of Newcastle was a key competition issue."

The chief executive of NSW Ports, Marika Calfas, said the verdict was "emphatic".

"NSW Ports will continue to focus on ensuring the key trade gateways of Port Botany and Port Kembla deliver efficiently and sustainably for the people and businesses of NSW," Ms Calfas said.

NSW Ports pointed to comments by Justice Jagot in which she described the chances of a Newcastle container terminal as " fanciful, far-fetched, infinitesimal or trivial".

It said the decision supported the existing NSW government container strategy, that said Kembla should be the next port after Botany, and then Newcastle.

Newcastle supporters point out that this strategy was a reversal of the original Carr government initiative that had Newcastle ahead of Kembla.

The Newcastle proposal has also enjoyed support among Botany area community groups fed up with truck congestion as containers leave the port on road, and from farmers in inland NSW seeking alternative supply routes for export produce.

Prime Minister Scott Morrison had recently expressed support for the Newcastle proposal but had said he would wait for the outcome of this case.

NSW Ports said the court had found that the provisions in the controversial Port Commitment Deeds were used to provide investors with certainty about the State's container port strategy to ensure that the State received maximum value for the asset sales.

The case began after the ACCC alleged that the provisions of these deeds were uncompetitive.

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