The High Court has handed down its decision in the case of BHP Billiton Iron Ore Pty Ltd v NCC. The Court had to decide whether two railway lines operated by BHP Billiton in the Pilbara region of Western Australia could be declared under Part IIIA of the Trade Practices Act 1974 (TPA).

The High Court unanimously held that the services for which declaration was sought do not involve 'the use of a production process' – in other words the services can be declared under Part IIIA of the TPA.

Implications

Although declaration of one of the rail networks, Mt Newman, had already been refused by the former Federal Treasurer it is now before the Australian Competition Tribunal.

In relation to the other rail network, the Goldsworthy line, the National Competition Council (NCC) has made a recommendation to the Federal Treasurer on a subsequent application for declaration. The Treasurer has until 28 October to decide whether or not to declare the service.

For a range of reasons, only a handful of services have been declared under Part IIIA in the 12 years since it commenced operation. This decision will not necessarily open the floodgates to further declarations under the access regime.

The High Court's ruling, however, has removed one of the perceived obstacles to declaration, and that has the potential to make it easier for third parties to gain access to bottleneck services such as railway lines. A higher risk of declaration under Part IIIA may increase the pressure on service providers to allow third party access to key infrastructure facilities.

Background

Part IIIA of the TPA is an access regime for services provided by means of infrastructure facilities. Gaining access is a two stage process. The NCC must make a recommendation to the relevant Minister on whether a service should be 'declared'. If the relevant Minister declares the service, the Australian Competition and Consumer Commission can arbitrate if either the service provider or an access seeker cannot agree on the specific access terms and conditions.

Only a 'service', as defined in section 44B of the TPA, can be declared. This definition excludes 'the use of a production process'.

BHP Billiton operates two railway lines as part of its mining operations in the Pilbara region. In 2004, Fortescue applied to the NCC for declaration of these railway lines under Part IIIA.

The NCC decided that:

  • the service on the Goldsworthy line involved the use of a production process. This meant it was not a 'service' and could not be declared;
  • the service on the Mt Newman line did not involve the use of a production process, and was therefore a 'service' that could be declared.

Each finding was appealed to the Federal Court. In 2006, Justice Middleton held that access to the railway lines did not involve the use of a production process because neither service, by itself, created or made a product, or transformed one thing into another. As a result, both services could be declared.1 In this judgment, the judge departed from the earlier Federal Court decision in Hamersley Iron Pty Ltd v NCC.2

In 2007, the Full Federal Court dismissed BHP Billiton's appeal against Justice Middleton's ruling.3 The majority (Justices Sundberg and Greenwood; Justice Finkelstein dissenting) concluded that the services involved the use of part of a production process, but not the whole of BHP Billiton's production process. Accordingly, both railway lines were services that could be declared.

The decision of the High Court

The High Court took a similar approach to the majority in the Full Federal Court and unanimously dismissed BHP Billiton's appeal against the Full Federal Court's decision.

The High Court accepted that a production process is the manufacture, by a series of operations, of a marketable commodity.4 The Court noted that BHP Billiton used a production process described as a Continuous Stockpile Management System, which included elements of its mining, rail and port operations.5 The rail track and associated systems to which Fortescue sought access were components of this production process. But this did not mean that each service was a production process in its own right.6 Accordingly, the Court found that the use of BHP Billiton's railway lines were services that could be declared under Part IIIA of the Trade Practices Act.

Footnotes

1 BHP Billiton Iron Ore Pty Ltd v NCC [2006] FCA 1764

2 [1999] FCA 867

3 BHP Billiton Iron Ore Pty Ltd v NCC [2007] FCAFC 157

4 [2008] HCA 45 at paragraph [37]

5 [2008] HCA 45 at paragraph [36]

6 [2008] HCA 45 at paragraph [41]

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