On 25 October 2012, the Federal Government announced a Productivity Commission (PC) inquiry into the effectiveness of the national access regime (Regime). Under the Regime, third parties may seek regulated access to certain services provided by nationally significant infrastructure.
On 28 May 2013, the PC released its draft report (Draft Report). The Regime has been subject to extensive criticism as a result of the cost and delay involved in Fortescue’s ultimately unsuccessful attempt to gain access to iron-ore railways owned by BHP Billiton and Rio Tinto in the Pilbara.
In a measured response to the many disparate submissions, the Draft Report is generally supportive of the current Regime. The PC recommends modifications and clarifications to key provisions rather than wholesale reform or repeal, reflecting its approach of “[confining] proposed changes to the Regime to where it considers the greatest gains can be made.”
While the PC’s recommendations don’t clearly favour either infrastructure owners or access seekers, the Draft Report represents a victory for those who would like to see a generic access regime retained with some targeted changes to better reflect the intentions of the microeconomic reform policies underlying it.
The PC has invited further written submissions in response to the Draft Report, which are due by 5 July 2013. The PC will then hold public hearings in Perth, Brisbane, Sydney and Melbourne over the course of July, before providing a final report to the Federal Government in October 2013.
In relation to the framework for declaration of services (the first stage in obtaining regulated access), the Draft Report recommends that various ‘declaration criteria’ be amended. In particular, the PC recommends that:
The current declaration process involves a number of steps and institutions. While the National Competition Council (NCC) and the relevant Minister are the key decision makers, review powers are vested in the Australian Competition Tribunal (Tribunal) and the Federal and High Courts. In some cases, such as the Pilbara rail case, the declaration process (including judicial review) took what many would consider to be unacceptably long time to complete.
Notwithstanding concerns around timing – often expressed in submissions to the PC’s inquiry – the PC recommends that the current process be retained. This largely reflects the fact that amendments made to the Regime in 2010 to impose time limits on the NCC’s decision making and to limit the review powers of the Tribunal, and aspects of the High Court’s decision in the Pilbara rail case, have not yet been tested. Not unreasonably, the PC considers that these changes should be given time to work before further change occurs.
However it does recommend one change. Under the current Regime, if the Minister does not publish a declaration decision within 60 days, he or she is deemed not to have declared the relevant service (even where the NCC has recommended declaration). To improve the transparency of decision making and to leave open the possibility of a judicial review of published reasons, the PC recommends that the deeming mechanism be modified so that the Minister is instead taken to have followed the NCC’s recommendation.
The ACCC is responsible for arbitrating access disputes arising between declared service providers and access seekers. Arguably, there is some uncertainty as to whether the ACCC can, in making a determination in relation to an access dispute, require a facility owner to expand the capacity of the existing facility (rather than geographically extend it, which is clearly contemplated by the Regime).
To improve investment and regulatory certainty, the PC recommends that the Regime be amended so that capacity expansions are explicitly permitted. In doing so, the PC aligns itself with the current practice of the Tribunal.
While some may be disappointed that the Draft Report lacks any recommendations for fundamental reform of the Regime, such as proposals to weigh the Regime in favour of access seekers or to speed up the declaration process, it must be read in the context of calls from others for the repeal of the Regime in its entirety. The Draft Report represents a measured response to the submissions, which focuses on necessary change and recognises that the broader impacts of the Regime should not be measured by the problems with the Pilbara rail case alone.
Finally, while the Draft Report is a good guide to the PC’s thinking and the likely direction of future reform, it is only a step along the way. The PC will issue its final report in October 2013 and substantive legislative amendments arising from that report may not appear in the short or even medium term. The drafting of any amendments will be critical to ensuring that the PC’s underlying rationale is promoted. As the Pilbara rail case demonstrates, the courts are sometimes unpredictable and may not interpret ambiguous provisions in the way assumed by regulators or business.
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