Rio Tinto Limited v The Australian Competition Tribunal

REASONS FOR JUDGMENT THE COURT: Introduction 1 On 11 June 2004 Fortescue Metals Group Ltd (FMG) made an application to the National Competition Council (the Council) under s 44F of the Trade Practices Act 1974 (Cth) (the TPA). It sought a declaration of a service under Pt IIIA of the TPA. It defined the service by reference to railway lines operated and managed by BHP Billiton Iron Ore Pty Ltd (BHP Billiton). The railway lines were jointly owned by several companies, including BHP Billiton Minerals Pty Ltd, trading as joint venturers. The railway lines were the Mt Newman to Port Hedland line and the Mt Goldsworthy to Port Hedland line. Precise terms of the application and its relationship to the provisions of Pt IIIA will be set out below. 2 The Council released an Issues Paper in March 2005 seeking comment on issues arising from FMG's application. Submissions were received. 3 In November 2005 the Council published a draft recommendation for the declaration of a service relating to the Mt Newman railway line. By that time it had decided that the Mt Goldsworthy line constituted part of a production process and was not a "service" to which Pt IIIA of the TPA applied. The Council sought the views of interested parties on matters raised in its draft recommendation. The publication of a draft recommendation is not required by the TPA. It was an administrative step taken by the Council in aid of a public consultation process. 4 On 23 March 2006 the Council made a final recommendation to the Minister, in this case the Treasurer. The Council recommended that, what it called the "Mt Newman Service", be declared for a period of 20 years. It described the service in subpara 1.2 of its final recommendation thus: The service to which FMG seeks access is the use of a 295 kilometre segment of the Mt Newman railway line running from a rail siding to be constructed near Mindy Mindy in the Pilbara to Port Hedland (Mt Newman Service). The Mt Newman Service includes the use of bridges, passing loops, train control systems, sidings, maintenance protection systems and other associated infrastructure. It is not in dispute that the final recommendation related to the use of the railway on a point to point basis, that is, from Mindy Mindy to Port Hedland. It did not contemplate use involving access to the railway at points in between. 5 Sixty days after receiving the recommendation, the Minister had made no decision on it and as a result he was taken, by virtue of s 44H(9) of the TPA, to have decided not to declare the service and to have published that decision not to declare the service. The date of that deemed decision was the 60th day. That was 23 May 2006. On that date the Council's final recommendation was made public. 6 On 9 June 2006 FMG applied to the Australian Competition Tribunal (the Tribunal) under s 44K of the TPA for review of the Minister's decision. At a directions hearing on 8 June 2007 the Tribunal declined to conduct a preliminary hearing to determine its jurisdiction to hear the FMG application. On 4 July 2007 Rio Tinto Limited (Rio Tinto) applied to this Court for an order by way of, or in the nature of, prohibition restraining the Tribunal from further considering the FMG application. It did so on the basis that the service recommended for declaration was a point to point service only. That is to say, the recommended service related to access to the Mt Newman railway at Mindy Mindy for transport of ore to Port Hedland and did not contemplate access in between. The recommendation was said to be inconsistent with the FMG application which had contemplated an all points access service. Rio Tinto contended that the Council acted beyond power in recommending a declaration of a point to point service and that there was therefore, in effect, no deemed decision by the minister. On that basis, it was contended the Tribunal had no jurisdiction to entertain the application for review. 7 For the reasons that follow we do not agree with Rio Tinto's contention. The application will be dismissed with costs. Statutory framework 8 Before considering in more detail the application by FMG and the way in which it was approached by the Council, it is necessary to refer to the key provisions of Pt IIIA of the TPA. Part IIIA was amended by the Trade Practices Amendment (National Access Regime) Act 2006 (Act No 92, 2006). The amendments commenced on 1 October 2006. The relevant circumstances occurred before that date and are governed by the provisions as they were prior to the amendments. Accordingly, the provisions set out below are the pre-amendment provisions. 9 Part IIIA was entitled "Access to Services". It comprised ss 44B to 44ZZQ. There were a number of definitions set out in s 44B. The definition relevant for present purposes is "service" which was defined thus: "service" means a service provided by means of a facility and includes: (a) the use of an infrastructure facility such as a road or railway line; (b) handling or transporting things such as goods or people; (c) a communications service or similar service; but does not include: (d) the supply of goods; or (e) the use of intellectual property; or (f) the use of a production process, except to the extent that it is an integral but subsidiary part of the service. 10 Division 2 of Pt IIIA was entitled "Declared services" and subdiv A was entitled "Recommendation by the Council". 11 Section 44F provided: (1) The designated Minister or any other person, may make a written application to the Council asking the Council to recommend under section 44G that a particular service be declared. (2) After receiving the application, the Council: (a) must tell the provider of the service that the Council has received the application, unless the provider is the applicant; and (b) must recommend to the designated Minister: (i) that the service be declared; or (ii) that the service not be declared. … (4) In deciding what recommendation to make, the Council must consider whether it would be economical for anyone to develop another facility that could provide part of the service. This subsection does not limit the grounds on which the Council may decide to recommend that the service be declared or not be declared. (5) The applicant may withdraw the application at any time before the Council makes a recommendation relating to it. 12 Section 44G(2) identified mandatory relevant considerations for the Council in determining whether or not to recommend declarations, and provided: The Council cannot recommend that a service be declared unless it is satisfied of all of the following matters: (a) that access (or increased access) to the service would promote competition in at least one market (whether or not in Australia), other than the market for the service; (b) that it would be uneconomical for anyone to develop another facility to provide the service; (c) that the facility is of national significance, having regard to: (i) the size of the facility; or (ii) the importance of the facility to constitutional trade or commerce; or (iii) the importance of the facility to the national economy; (d) that access to the service can be provided without undue risk to human health or safety; (e) that access to the service is not already the subject of an effective access regime; (f) that access (or increased access) to the service would not be contrary to the public interest. Subsections (1), (3) and (4) are not material for present purposes. 13 Subdivision B was entitled "Declaration by the designated Minister". Section 44H provided, inter alia: (1) On receiving a declaration recommendation, the designated Minister must either declare the service or decide not to declare it. (2) In deciding whether to declare the service or not, the designated Minister must consider whether it would be economical for anyone to develop another facility that could provide part of the service. This subsection does not limit the grounds on which the designated Minister may make a decision whether to declare the service or not. … (7) The designated Minister must publish the declaration of his or her decision not to declare the service. At the time the designated Minister must give reasons for the decision and a copy of the declaration recommendation to the provider and to the person who applied for the declaration recommendation. (8) If the designated Minister declares the service, the declaration must specify the expiry date of the declaration. (9) If the designated Minister does not publish under subsection (7) within 60 days after receiving the declaration recommendation, the designated Minister is taken, at the end of that 60 day period, to have decided not to declare the service and to have published that decision not to declare the service. 14 Section 44K provided for review of a Minister's declaration of a service or decision not to declare a service. It provides: (1) If the designated Minister declares a service, the provider may apply in writing to the Tribunal for review of the declaration. (2) If the designated Minister decides not to declare a service, an application in writing for review of the designated Minister's decision may be made by the person who applied for the declaration recommendation. (3) An application for review must be made within 21 days after publication of the designated Minister's decision. (4) The review by the Tribunal is a re-consideration of the matter. (5) For the purpose of the review, the Tribunal has the same powers as the designated Minister. (6) The member of the Tribunal presiding at the review may require the Council to give information and other assistance and to make reports, as specified by the member for the purposes of the review. (7) If the designated Minister declared the service, the Tribunal may affirm, vary or set aside the declaration. (8) If the designated Minister decided not to declare the service, the Tribunal may either: (a) affirm the designated Minister's decision; or (b) set aside the designated Minister's decision and declare the service in question. (9) A declaration, or varied declaration, made by the Tribunal is to be taken to be a declaration by the designated Minister for all purposes of this Part (except this section). 15 Section 44Q required the Australian Competition and Consumer Commission to maintain a public register that included each declaration, including a declaration that is no longer in force. The FMG application 16 The application by FMG was entitled "RAIL ACCESS DECLARATION APPLICATION". It was sub-titled: FORTESCUE METALS GROUP LIMITED - APPLICATION UNDER PART IIIA OF THE TRADE PRACTICES ACT 1974 FOR DECLARATION OF THE SERVICE PROVIDED BY PART OF THE MT NEWMAN RAILWAY LINE AND PART OF THE GOLDSWORTHY RAILWAY LINE It may be noted that the application contemplated by s 44F is a request to the Council to recommend that a particular service be declared. It is not in terms an application for a declaration. However no point was or could be made of that difference. 17 The introductory paragraphs of the application read as follows: 1.1 Fortescue Metals Group Limited wishes to access the service provided by part of the Mt Newman Railway Line and part of the Goldsworthy Railway Line by having the relevant parts of those railways lines Declaredas a service under Part IIIA of the Trade Practices Act 1974. 1.2 Accordingly, Fortescue Metals Group Limited hereby makes this application to the National Competition Council to have the relevant parts of the Mt Newman Railway Line and Goldsworthy Railway Line Declared. 18 Paragraph 2 of the application set out a number of definitions. These included: 2.1(6) "Facility" means the facility and associated infrastructure as described in paragraph 5 of this Application; … 2.1(11) "Mt Newman Railway Line" means the railway line of approximately 425 kilometres in length which is currently used to carry ore from the mines in the Mount Newman area as well as from Yandi, to Port Hedland as described in paragraph 5.1 of this Application; … 2.1(13) "Service" means the use of, and access to, the Facility described in paragraph 5 of this Application; 19 Under the heading "The Applicant", FMG described itself as an Australian resident public company listed on the Australian Stock Exchange Limited (ASX) with a "major focus in the Australian iron ore industry". It stated: 3.3 FMG has a number of projects in the Pilbara region of Western Australia in which it is expanding its iron ore resource operations. The Company acquired tenements in the Mount Nicholas area of the Pilbara in 2001 and is currently completing a major drilling program to delineate reserves in this area. It has also identified further resources along the Chichester Ranges including its interests at Christmas Creek which the Company estimates will host a resource of over 1 billion tonnes of iron ore. In total the Company holds tenement interests covering in excess of 12,000 square kilometres and estimates the associated resources on these tenements are likely to exceed three billion tonnes. 3.4 FMG is also involved in a 50/50 incorporated joint venture under the name of Pilbara Iron Ore Pty Ltd (ACN 100 410 295) with Consolidated Minerals Limited (ACN 000 727 926). This joint venture is nearing completion of resource identification at Mindy Mindy. FMG is making this application on its own behalf and in its capacity as a joint venture shareholder and operations manager of Pilbara Iron Ore Pty Ltd. 20 Critical to the present application is the description of the service and facility used to provide the service set out in para 5 of the application. The relevant parts of that paragraph are as follows: 5.1 The Service which FMG seeks to have Declared is: (1) the use of the Facility, being: (a) that part of the Mt Newman Railway Line which runs from a rail siding that will be constructed near Mindy Mindy in the Pilbara to port facilities at Nelson Point in Port Hedland, and is approximately 295 kilometres long further details of which are set forth and coloured red in the diagram annexed to this Application and marked "Annexure 1" for the purposes of identification; and (b) the part of the Goldsworthy railway line that runs from where it crosses the Mt Newman railway line to port facilities at Finucane Island in Port Hedland, and is approximately 17 kilometres long further details of which are set forth and coloured red in the diagram annexed to this Application and marked "Annexure 2" for the purposes of identification. (2) access to the Facility's associated infrastructure, including, but not limited to: (a) railway track, associated track structures, over or under track structures, supports (including supports for equipment or items associated with the use of the railway); (b) bridges; (c) passing loops; (d) train control systems, signalling systems and communication systems; (e) sidings and refuges to park rolling stock; (f) maintenance and protection systems; and (g) roads and other facilities which provide access to the railway line route. 21 The service provider was identified at subpara 6.2: FMG understands that the Facility is jointly owned by BHP Billiton Minerals Pty Ltd (ACN 008 694 782), Mitsui-Itouchu Iron Pty Ltd (ACN 008 702 761) and CI Minerals Australia Pty Ltd (ACN 009 256 259) trading as joint venturers. FMG further understands that the operator and manager of the joint venture or joint ventures is BHP Billiton Iron Ore Pty Ltd (ACN 008 700 781). 22 Under the heading "The Application" in para 7 of the application the following appeared: 7.1 FMG submits that the Facility which it seeks to have Declared is an infrastructure service of national significance. FMG hereby applies to the Council to have the Service Declared under Part IIIA of the Act. If the Service is Declared, FMG will utilise access to the Service to operate trains and rolling stock to transport iron ore and iron ore products from Mindy Mindy to port facilities at Port Hedland (as referred to in paragraph 5.1 of this Application) in accordance with best practice and in compliance with all relevant safety and other legislative requirements. … 7.3 FMG requires access to the Service for the following reasons: (1) to transport its iron ore and iron ore products from Mindy Mindy and various other mine sites to the export facilities at Port Hedland and accordingly, to enable the transport of iron ore from those mine sites for sale and export; (2) there is currently no rail alternative to transport iron ore from Mindy Mindy to Port Hedland for the type and volume of product planned by FMG; … (4) to facilitate FMG's efforts to exploit other iron ore reserves that might not in their own right, justify the construction of rail infrastructure; (5) to increase the options available to FMG when determining the optimum method of transporting FMG's iron ore and iron ore products from Chichesters to Port Hedland; and (6) to further enable FMG to optimise the utilisation of its own rail infrastructure together with the Provider's rail infrastructure in a mutually advantageous way. FMG envisages this will effectively result in organisation of the combined assets of FMG and the Provider, to facilitate the most efficient use of the Facility and FMG's own infrastructure. 23 In subpara 7.4 FMG said it sought access to promote "… its foundation principle that rail infrastructure in the Pilbara region of Western Australia should be more readily available to third parties to encourage the development and expansion of the currently stranded resources to boost and benefit both the local and national economy." 24 The period for which the declaration was sought was 20 years, and in subpara 9.2 FMG said: This is the period which FMG envisages is of sufficient duration to enable the resources at Mindy Mindy and its other mines, to be mined. 25 In making its competition case in the application, FMG asserted that access to the service would promote competition in a number of markets including (at subpara 12.1): (2) production, development and exploitation of other minerals and products in the Pilbara region of Western Australia requiring transport services from the source of production to port facilities at Port Hedland; 26 In addressing the economic difficulties facing the development of alternative facilities, FMG said (at subpara 13.2): Therefore, in order for any party to develop another facility to provide the same service, that person would need to construct an alternative railway line from the Mindy Mindy siding to Port Hedland. This would in effect, duplicate both the existing Mt Newman railway line as well as the associated infrastructure support. 27 In its supplementary submissions to the Council dated 8 July 2004, in relation to markets associated with iron ore production, FMG stated: 6.8 Other mining companies could be developing resources in the Pilbara and in particular could be applying new technologies and new marketing strategies to develop such resources. However they are inhibited from doing so because they are regarded as stranded due to the ability of the Provider to deny access to its railway line. And under the heading "OTHER MINERAL ORES" it said: 7.1 The absence of the development of appropriate markets is not confined to iron ore related activities upstream from the railway systems. Many other mineral activities ranging from copper, lead, zinc, nickel and molybdenum through to gold are similarly stranded without access to transport. All potentially exploitable deposits of such mineral resources are stranded without access to the Provider's railway transport infrastructure despite the fact that these products would not compete with the Provider's iron ore product. 28 Again there was a reference to significant iron ore deposits throughout the Pilbara region and the fact that no other company (other than the existing duopoly) had exploited those resources. FMG attributed this to the absence of suitable transport systems with the result that the deposits were regarded as uneconomic to develop. In submitting that there would be positive competitive impact from a declaration FMG argued that a declaration would open up all the markets upstream from the point at which control was exerted and introduce competition progressively downstream as new entrants competed for the expanding volume of long-term contracts emanating from China (at subpara 15.1). 29 The broad sweep of these submissions is notable. It was submitted that they were inconsistent with an application for a point to point service between Mindy Mindy and Port Hedland. 30 In its response dated 6 May 2005 to the Issues Paper released by the Council on 11 March 2005, FMG said, inter alia: 3.9 Regardless of the outcome of its Declaration Application, Fortescue needs to build a railway from the Christmas Creek area in the Chichester Ranges to a point in close proximity to the Mount Newman railway line. If Fortescue is successful in its efforts to have the Facility declared, it is entirely possible it will not be necessary for Fortescue to build those sections of its proposed railway line that will run in close proximity to the Facility. Instead, Fortescue would seek to use the Facility. 31 FMG further made the point that the development of the Mindy Mindy mine was currently wholly reliant on accessing the Mt Newman railway. If the service were not declared and access were not available, resources at the Mindy Mindy mine would effectively be stranded and FMG could not justify further expenditure in developing it. Even if the Chichester Range to Port Hedland railway were built by FMG in its entirety, it was said not to be commercially viable, based on production alone from the Mindy Mindy mine, to construct a spur from that railway to the Mindy Mindy mine site. 32 There was some correspondence exchanged between the Council and FMG in July 2005 which was the subject of comment at the hearing and it is appropriate to refer to it briefly. On 26 July 2005 the Council wrote to FMG observing that, taken together, FMG's application, its response to the Issues Paper and recent public statements gave rise to at least two potential scenarios as to FMG's intentions if the service were declared. The Council identified those scenarios as follows: a. That FMG proposes to use the Service to rail ore from its Cloud Break and Christmas Creek projects, as well as the Mindy Mindy joint venture, to Port Hedland, thus avoid the cost of constructing that part of FMG's own railway which duplicates the Facility. If necessary, this may entail some delay in the start-up of the Cloud Break and Christmas Creek projects to allow for negotiation of access terms, appeals to the Australian Competition Tribunal and/or arbitration by the ACCC; b. That FMG proposes to commence construction of its own railway line in late 2005, and will use that railway to carry iron ore from the Cloud Break and Christmas Creek projects to Port Hedland. In this case, FMG will use the Service only to carry iron ore from Mindy Mindy, and/or to provide haulage services to third parties. 33 The Council indicated that FMG's intentions would have a significant impact upon its consideration of the likely effects of declaration, although not necessarily upon the outcome of that consideration. The Council sought a statement of FMG's intentions in that regard and the degree of certainty that should be given to it. 34 FMG responded on 28 July 2005. It informed the Council that it was its current intention in relation to its "Chichester Project" to construct its own railway line. This had been confirmed in numerous public statements by FMG. The exact route and extent of the railway was not finalised but it was expected to run from Port Hedland to a point in the Chichester Ranges, probably running to an area known as Cloud Break initially. Its alignment would probably be more to the east than originally envisaged. A map showing the latest version of a corridor within which the railway would be built was attached. 35 FMG's intentions were stated in the following paragraph of the letter of 28 July 2005: The Company's intentions in relation to its "Mindy Mindy Project", which is the subject of the Declaration Application as lodged with the NCC, are unchanged from those set forth at the time of submission of that application. Namely, it is the Company's intention to use the Service to move iron ore from Mindy Mindy to Port Hedland. 36 FMG reserved its position to the extent that it said: However, as with any large resource based company, the Board must consider all of the facts and circumstances existing at any particular time in order to review and consider its strategy and objectives and therefore the Company's intentions could change. However, there are currently no specific likely events that would trigger a change of strategy. It also stated that if the service were declared, there was a variety of other potential entrants to the iron ore and resource markets that would be encouraged to bring their projects and developments to fruition.