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Australia – Latest Judgment On The Coastal Trading Act.

6 March, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Shipping, Maritime & Aviation

 

CSL Australia Pty Limited v Minister for Infrastructure and Transport [2014] FCAFC 10 (26 February 2014) 

 

What You Need To Know


The majority decision of the Full Court of the Federal Court of Australia in CSL Australia Limited v Minister for Infrastructure and Transport [2014] FCAFC 10 provides important guidance to the interpretation and the  operation of the Coastal Trading (Revitalising Australian Shipping) Act 2012 (Cth). This decision clarifies the law regarding the matters and considerations to be taken into account by the Minister in applications for the grant or variation of temporary licences under the Coastal Trading Act. 


What You Need To Do 


The principles and requirements set out in the judgment of the Full Court of the Federal Court of Australia will need to be considered in applications for the grant or variation of temporary licences under the Coastal Trading (Revitalising Australian Shipping) Act 2012 and submissions will need to be structured accordingly.


On 26 February 2014, the Full Court of the Federal Court of Australia handed down its judgment in CSL Australia Pty Limited v Minister for Infrastructure and Transport [2014] FCAFC 10. This judgment is the latest in a series which have been the central source of judicial guidance on the operation and ambit of the Coastal Trading (Revitalising Australian Shipping) Act 2012 (Cth) (Coastal Trading Act).


Background 


In summary, the matter involved an application by CSL Australia Pty Limited (CSL) seeking judicial review of a decision by the delegate of the Minister to vary the temporary licence granted to Rio Tinto Shipping Pty Ltd under the Coastal Trading Act in relation to shipments that were to be performed for Pacific Aluminium. The variation (which was granted by the Minister’s delegate) permitted Rio Tinto Shipping Pty Ltd to undertake four additional voyages under a previously granted temporary licence. All of the voyages the subject of the variation are now past. The considerations that were taken into account by the Minister’s delegate have been the subject of previous judicial consideration, initially by Justice Robertson (see [2012] FCA 1261) and then by Justice Katzmann (see [2013] FCA 152). 


Decision 


Chief Justice Allsop (with whom Justice Mansfield agreed) (together the Majority) allowed CSL’s appeal and set aside the Federal Court orders made on 1 March 2013, and ordered that a case be stated to be heard by the Full Court as to the decision of the Minister’s delegate. 


The Majority also declared the decision of the Minister’s delegate in relation to permitting one of the voyages was affected by an error in law arising from a misunderstanding of the effect of sections 32 and 34 of the Coastal Trading Act. 


Key Observations 


The extensive consideration of the Majority provides useful guidance in relation to applications for the grant or variation of temporary licences in accordance with the Coastal Trading Act. This decision clarifies the law regarding the matters and considerations to be taken into account by the Minister in applications for the grant or variation of temporary licences under the Coastal Trading Act. We have set out below some of the key points from the Majority’s judgment.


Subject Matter Of Mandatory Negotiations 


Section 32 of the Coastal Trading Act provides for mandatory negotiations to be undertaken where a holder of a general licence provides a notice in response and, in essence, objects to a temporary licence being granted. 


Section 32(3) details the matters in respect of which mandatory negotiations must be undertaken. These are:

 

  • whether, and to what extent, the vessel authorised by the holder’s general licence is equipped to carry the passengers or cargo specified in the application; and 
  • whether those passengers or cargo can be carried in a timely manner.

 

Additionally, section 32(4) provides that where an application relates to the carriage of cargo, the negotiations under subsection (3) must have regard to the “requirements of the shipper” of the cargo. 


What these requirements can include was an open question for the Full Court. On this point, the Majority concluded that the “requirements of the shipper” referred to in section 32(4) can only relate to the matters that are the subject of the negotiation, that is the suitability of the vessel and the timeliness of the carriage, stating at [44] that: 


“Any requirements (or desires) of the shipper as to freight rates or special clauses in the contract of carriage (other than such as deal with the subject matter of the negotiations in paras (a) and (b) of s 32(3)) do not fall within the phrase “requirements of the shipper in s 32(4).” 


In line with the above, the Majority disagreed with the earlier findings of Justice Robertson that for the purposes of section 34(3)(d), the reasonable requirements of a shipper could include economic considerations (such as freight rates, cost impacts and profitability). 


From our experience, freights rates are almost always a major commercial consideration for participants in the coastal trade and as such, we expect that the above may cause concerns for temporary licence applicants. However, at [50] the Majority noted that: 


“If the shipper has a requirement or desire (which may be reasonable) that does not relate to the suitability of the vessel for that kind of cargo, such as some commercial considerations such as the rate of freight or such as might concern some aspect of the carriage that is unrelated to the kind of cargo specified, that requirement will not be a mandatory consideration under s 34(3)(d). That does not mean, however, that the Minister cannot take that matter into account. It may be a matter that the Minister thinks relevant under s 34(2)(g).” 


In addition, the Majority also noted that the suitability requirements of the shipper are intimately connected with the eventual need for safety to persons across the various stages of loading a vessel. 


Accordingly, the decision of the Majority provides coastal trade industry stakeholders useful guidance on how to structure applications and the various considerations that may be taken into account by the Minister. 


Object Of The Coastal Trading Act 


One of the grounds for CSL’s appeal was that the Minister’s delegate had made errors when considering the objects of the Coastal Trading Act. The Majority was of the opinion that the Coastal Trading Act does not have multiple objects, rather one, namely: 


“To provide for a regulatory framework that promotes (in the broad sense) the states of affairs which include the development and long-term growth of Australian shipping, including maximising the use of General Register ships, whilst promoting competitions in the coastal trade that is open to foreign-flagged vessels, enhancing efficiency and reliability of shipping and ensuring efficient movement of cargo.”


Building on this, the Majority also rejected the proposition that decisions under the Coastal Trading Act should adopt an assumed bias towards the holders of general licences, stating at [157]: 


“The [Coastal Trading] Act is not to be construed as demanding a bias towards General Registered vessels in the absence of exceptional circumstances. The regulatory framework provided for permits the Minister of the day, taking into account all relevant circumstances, to deal with licences in the way best able to promote the state of affairs in s 3(1).”

 

Section 3(1) sets out the object of the Coastal Trading Act and includes consideration of specific matters such as:


  • enhancing the efficiency of Australian shipping,
  • promotion of competition in coastal trading, and
  • ensuring the efficient movement of cargo.

 

The Majority also considered CSL’s submission that commercial considerations such as freight rates or the viability of other kinds of industry were “either altogether extraneous or matters on which very little weight should be placed”. In response to this, the Majority observed that although freight rates are not expressly mentioned as relevant in the Coastal Trading Act, such a central commercial consideration cannot be seen to be irrelevant and outside the scope of other matters that the Minister’s delegate can consider when deciding an application in accordance with section 34(2)(g) of the Coastal Trading Act.
CSL’s submission was also rejected that freight rates affect numerous aspects of section 3(1).


Importantly, the Majority concluded that it was impossible to exclude freight rates and their impact on industry as legally irrelevant. The Majority did however note that how much weight is to be put on freight rates in any particular case will generally be a matter for the decision-maker.


In this context, the Majority made a strong statement as to the weight to be attributed to freight rates (as this consideration may well distort the operation of the Coastal Trading Act). Accordingly, it is noted that the Coastal Trading Act was not introduced to ensure that shippers are able to obtain the lowest possible freight rates and as such, the relevant decision-maker will need to weigh up these competing considerations against government policy and other information.


Requirements Of Procedural Fairness


This matter also included a cross-appeal from the Minister in respect of the conclusions reached by the primary judge that the Minister’s delegate had denied CSL procedural fairness.


The Majority upheld the first of these cross-appeals, agreeing that the Minister’s delegate not having fully briefed the Australian Maritime Safety Authority (AMSA) (by providing CSL’s response to AMSA for AMSA’s input), did not raise any procedural unfairness to CSL. Procedural fairness did not require submissions from CSL as to the information to be supplied to AMSA.


The Majority, however, dismissed the second cross appeal, finding that procedural fairness did indeed dictate that the material provided to the Minister’s delegate by Rio Tinto regarding equivalent foreign flagged vessel rates should have been provided to CSL for comment.


Effect On Industry As An “Other” Matter The Minister May Have Regard To


In finding that the Minister’s delegate misconstrued section 3(1)(a) of the Coastal Trading Act by taking into account the economic interests, profitability and costs of the shipper/receiver of cargo, the Majority also had an opportunity to comment on submissions made in support of granting a temporary licence which detail the impact that not granting a temporary licence would have.


Importantly, the Majority found that while a decision on a particular application may affect the operation of a specific plant or factory, such a consideration is distinct from, and is likely to be unrelated to, the objective of a viable shipping industry that contributes to the broader economy.


Again, the Majority reiterated its earlier stated position that considerations, such as the effect on an industry, which is a commercial consequence of freight rates, is a consideration available under section 34(2)(g).


The takeaway point from this is that such considerations need to be framed in a way and given weight in a manner that is consistent with a correct understanding of the object of the Coastal Trading Act.

 

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For further information, please contact:

 

Paul Newman , Partner, Ashurst
paul.newman@ashurst.com

 

Shane Bosma, Ashurst

shane.bosma@ashurst.com

 

David Morgans, Ashurst
david.morgans@ashurst.com

 

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