Australia: Sharing is caring: Third party access to infrastructure clarified by High Court

Last Updated: 30 September 2012
Article by Michael Corrigan and Sian-lee Ooi

Key Points:

Access to essential infrastructure can only be granted if it is not profitable for another person to develop an alternative facility.

The High Court's recent decision in The Pilbara Infrastructure Pty Ltd v Australian Competition Tribunal [2012] HCA 36 has clarified the rules and the processes governing third party access to essential infrastructure.

This was the latest decision in Fortescue's eight year battle to gain access to rail lines in the Pilbara, owned by BHP Billiton and Rio Tinto. However, this is not the end of the matter as the High Court has now sent it back to the Australian Competition Tribunal for "determination according to law".

What is the role of the Australian Competition Tribunal?

The High Court found that the Tribunal was wrong to engage in a detailed court-style process role in reviewing the Minister's decision. It set out a much more confined process for the Tribunal limited to the matter before the Minister, supplemented by material which the Tribunal may request from the National Competition Council.

In order for a third party to gain access to infrastructure under Part IIIA of the Competition and Consumer Act 2010 (Cth), the Minister must make a decision to declare (or not declare) a service. This decision can be reviewed by the Australian Competition Tribunal.

At the hearing before the Tribunal in this matter, the parties presented materials and evidence which far exceeded the material which was placed before the Minister. The Tribunal treated its task as being to decide afresh on the new body of evidence and material placed before it whether the services should be declared.

The High Court has said that this was not the Tribunal's task:

"Its task was to review the Minister's decisions by reconsidering those decisions on the material before the Minister supplemented, if necessary, by any information, assistance or report given to the Tribunal by the [National Competition Council] in response to a request made under s 44K(6)."

The Tribunal will now need to re-consider the matter under the approach outlined by the High Court. The process outlined by the High Court is similar to the more streamlined process introduced by legislation in 2010.

A "privately profitable" test

One of the six criteria of which the Minister must be satisfied before making a decision to declare a service is that "it would be uneconomical for anyone to develop another facility to provide the service". The proper interpretation of this criterion has been the subject of uncertainty since the decision of the Full Court in this matter.

What are the possible interpretations of what is "uneconomical"? Various constructions have been used, including a "natural monopoly approach", a "net social benefit approach", and a "privately profitable test".

The High Court took a strict textual approach, and rejected the first two possible constructions. The High Court held that this criterion is met if "it would be uneconomical (in the sense of not profitable) for anyone to develop an alternative facility".

What is in the public interest?

Another of the six criteria the Minister must be satisfied of before making a decision to declare a service is that "access (or increased access) to the service would not be contrary to the public interest".

The High Court recognised that the range of matters to which the National Competition Council and the Minister may have regard when considering whether this criteria is satisfied is "very wide indeed".

Given the context of the limited scope of the review by the Tribunal, the High Court considered that the Tribunal should not lightly depart from the Minister's conclusion about whether access (or increased access) would be in the public interest.

No residual discretion

The High Court also considered whether or not, if all of the six criteria set out in section 44H(4) were satisfied, the Minister (and therefore the Tribunal on review) had a residual discretion to refuse to declare the service in question.

The High Court held that if a decision-maker was satisfied as to the six criteria, there was no residual discretion able to be exercised.

What this decision means for the future of third party access applications

In this decision, the High Court has clarified questions around the interpretation of the criteria in section 44H(4). Significantly, under the new interpretation, access to essential infrastructure can only be granted if it is not profitable for another person to develop an alternative facility.

In practice, given the significance of the facilities to which access is commonly sought, it would be unusual for the different interpretations of "uneconomical" to yield different results.

However, in borderline cases, it may be more difficult for an access seeker to satisfy the "privately profitable" construction and to gain access to facilities where it may potentially be economically feasible for others in the market place to develop another facility.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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