Newcastle container terminal prospects smashed by Federal Court judge Jayne Jagot after ACCC action on NSW port privatisations

Justice Jayne Jagot published her written judgement in the case on Tuesday, three weeks after ruling against the ACCC's argument that the deals illegally blocked Port of Newcastle from developing a large container terminal.

She found that NSW Ports, the operator of Port Botany and Port Kembla, enjoyed "derivative Crown immunity" from prosecution and the port lease agreements were not anti-competitive because Port of Newcastle was not a credible player in the NSW container market.

Port of Newcastle chief executive officer Craig Carmody said the consortium was waiting "with interest" to see whether the ACCC launched an appeal, which it must do by next Tuesday.

"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," he said.

The court's decision was a "blow" to the port and the region's economy but had not dimmed Port of Newcastle's desire to build a container terminal, Mr Carmody said.

The ACCC said it would not comment unless it decided to appeal.

NSW Ports pointed to comments by Justice Jagot that the chance of Newcastle building a container terminal was " fanciful, far-fetched, infinitesimal or trivial".

The government's 2013 and 2014 long-term port lease deals require Port of Newcastle to fund state compensation payments to NSW Ports if Newcastle handles more than 30,000 containers a year, an arrangement the ACCC maintains is "brazenly anti-competitive".

The ACCC said it was concentrating on the legality, or otherwise, of the competition constraints built into the deals.

But Justice Jagot's judgement indicates that much of the case turned on impressions of the real-world viability of a large-scale Newcastle container terminal.

Newcastle's port does not handle more than 30,000 containers a year at present, but the operators propose to build a terminal on the former BHP steelworks site at Mayfield which can handle a million or more.

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."

Similarly, she said no Newcastle port operator could have mounted a sound case to convince the government to change its container policy, which is to develop Botany and Kembla before Newcastle.

She ruled both conclusions were true regardless of whether the container penalties were in place.

Port of Newcastle had been aware before signing the lease that the port was being privatised "on the basis that it would not be required (or, by implication, permitted by the state) for a container terminal until Port Botany and Port Kembla had reached capacity which may be after 40 years".

She said this state policy "reflected the enormous public and private investment in and around Port Botany, which is uniquely well placed to benefit from the population concentration in and around Sydney".

The potential benefits of a Newcastle container terminal to the Hunter economy depended on such a project's viability, which the "clear weight of evidence" in 2013 and 2014 suggested was "highly questionable".

"That remains the weight of the evidence today," Justice Jagot said.

Her decision notes the state's container strategy reversed a 2003 Labor policy that had Newcastle ahead of Kembla.

The container fees are contained in port commitment deeds revealed by the Newcastle Herald in 2016 after years of stonewalling by the government.

Justice Jagot found that making the compensation provisions and giving effect to them in the future would not substantially lessen competition, though evidence contained in the decision shows NSW Ports was concerned about the impact of a terminal being proposed for Newcastle when it was still in government hands.

"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," she said.

She said submissions by the ACCC and Port of Newcastle "confuse the purpose of the impugned provisions with their potential effect".

She rejected ACCC and Port of Newcastle claims that the purpose of the provisions was to prevent or hinder a container terminal in Newcastle, make Botany and Kembla immune from competition or enable NSW Ports to act without any constraint from competition.

The ACCC and Port of Newcastle had argued that the government was carrying on a business in privatising the ports and therefore was not entitled to Crown immunity under the Competition and Consumer Act.

But Justice Jagot ruled the government was entitled to immunity, and NSW Ports derivative immunity, because it had leased the ports as a "decision of policy" outside the business of operating the then publicly owned port corporations.

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," she said.

NSW Ports said the court had found the container provisions had been used to provide investors with certainty about NSW's container strategy to ensure the state received maximum value for the asset sales.

Prime Minister Scott Morrison has expressed support for the Newcastle proposal, as has Deputy Premier John Barilaro.

The Newcastle proposal has won support from Botany community groups fed up with truck congestion and from farmers seeking alternative export routes.

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