Transport Committee on March 26th, 2013

[Annette Gibbons]

The intention certainly was to include performance metrics. The specific reference to performance standards is a specific example of what an operational term might include. It certainly, of course, was not meant to be exhaustive. But in the case of performance standards in particular, the intent was definitely that if standards were going to be set, there would have to be a mechanism to measure adherence to the standards, and that, of course, would be the metrics.

So it has always been the intent and our interpretation of the draft of the bill that they would be included.

[Pierre Poilievre, Conservative, Nepean—Carleton, ON]

Mr. Langlois, on the question of consequences for non-compliance, in addition to the administrative monetary penalties set out in the bill, can either party take action in a court of law in the case of alleged non-compliance by the other?

[Alain Langlois]

Absolutely. There is no restriction that prevents a party from doing that. The legislation makes it clear that the decision of the arbitrator is to be deemed to have the same force as the contract and should be enforced as such. If there is a failure, it is expected that a party will go to court and seek whatever compensation it can obtain through the normal court process.

[The Chair, Conservative, Larry Miller]

Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Thank you, Chair.

I heard the member opposite say that it's hard to get a good agreement. I heard that several minutes ago.

It seems to me that this is why we started this whole process to begin with. This is not the first minister who's tried to tackle this issue, but is the first who's really brought it to this point, where it looks like we will have a bill in place.

I recall it being said at some meeting before—it might have been Mr. Watson—that when both sides are a little bit cranky, it's probably not a bad bill.

I'm not sure if you intended just to get people cranky, but it strikes me that there are some “gives and puts”. I recall asking at a prior meeting why it ever had to get to this point. That's almost immaterial at this stage, except I think that what we're trying to do is change mindsets, and perhaps change expectations, certainly of the players involved.

I apologize for putting it this way, but have you done any best guesses as to how often you think, as a result of this legislation, an arbitrator might have to be involved? We heard some comments earlier today that there's a hope that they don't have to be used. You hear that a lot, but I would presume, in your analysis of this, you have some sense of what you might imagine the reality of that to be. It's one thing to have best intentions, and then there's reality.

Have you put some thought as to how often an arbitrator might really have to get involved in these kinds of discussion? Or do you think—I guess as a corollary to this—you've put in sufficient legislation to compel both parties to not want to go to arbitration? I guess that's the real question when it's all done.

Do you have any thoughts about that, please?

[Carolyn Crook]

We certainly gave a lot of thought to what the volume might be. Generally we think that there would be a very limited use of the remedy, that because it creates the incentive for commercial negotiations, in most instances parties would reach agreements commercially. It certainly gives them the added incentive to do so.

In those few instances when there are issues that are outstanding and that they are not able to resolve, then they do have this backstop remedy.

Though we didn't come up with a specific number, we'll definitely be watching.

[Ed Holder, Conservative, London West, ON]

I think we all will be, actually, when this is done.

The question of operational has come up a number of times throughout this discussion. Of course with the witnesses we had, particularly the shippers, feeling so strongly about it, if “operational” were removed from the bill, do you think that would force more arbitration interventions?

[Annette Gibbons]

That's a good question. I think at the end of the day the use of the term “operational” was really intended to ensure that there was broad coverage of the vast range of service issues that a shipper may wish to have arbitrated, to ensure that the coverage was there while at the same time limiting the scope of arbitration to service issues and not broadening it out to include financial penalties, and also avoiding the inclusion of obligations on shippers in terms of volume commitments and those sorts of things.

The decision around it was really a policy decision around what the right scope is. The focus is very clearly on service and a broad range of service issues that we know shippers have raised in the level of service complaint mechanism under the legislation now, the Canada Transportation Act.

As to whether or not there would be an impact on the volume of arbitration requests if we changed the language, it's possible that there may be more. If penalties were covered, for example, and a shipper really wanted to address that issue, wanted to seek arbitration, then that may increase the number. It's a possibility, but it's very difficult to say.

At the end of the day, we do hear from shippers that they really don't like to use remedies under the act, because it's a process, and they just prefer to settle things commercially. That's the agreed approach of everybody. They've told us that they want to have it there in case they need it, but they really hope not to have to use it.

[Alain Langlois]

If I could add to that, we have to bear in mind the other concern, which is that the process in and of itself is pretty short. Legislation establishes the process: you come in and you come out in 45 days. If you remove “operational” and open it up to every possible contractual issue that could arise between the shippers and the railways—

[Ed Holder, Conservative, London West, ON]

What's the potential extension of that? Can you help me understand what that would be? Let's say we included.... You've just said that there would be more factors brought into play. What would be the potential of delaying a decision beyond the 45 days? Any speculation on that?

[Alain Langlois]

Well, right now the legislation doesn't allow a lot of flexibility. It's 45 days. The arbitrator has an ability to extend to 60 days in circumstances, so at the tail end of the process it's 60 days, unless the parties agree otherwise. If you're asking an arbitrator to deal with potentially every aspect of a contractual relationship between the railways and the shippers, 60 days is pretty short—

[Ed Holder, Conservative, London West, ON]

Mr. Langlois, when you were having this dialogue with all the parties as you were putting together your thoughts towards the bill—and I'm not sure if it was you directly or your colleagues at the table within your department—clearly you weren't moved, then, by the shippers' position as it relates to the reference to “operational”. Why was that?

If I recall the clauses, and I do recall them, the word “operational” was I think in every one of them, maybe save one. It was really the issue that the shippers have hung on. That seemed to be their raison d'être with the amendments, but you weren't moved by that to suggest that you wanted to include it in the legislation. Why is that?

[Annette Gibbons]

This never came up in the discussions with shippers because we weren't at the level of the actual language that would be in the bill; it was the concepts of what would be covered. There was a list given of “here's what we want to be covered” and, in the end, the government decided that “we're going to cover this much and we're not going to cover these items here”.

That's what shaped the use of the term “operational”. It was to set that framework to include most things shippers asked for but to deliberately not include other things. The use of the term was very much a technical part of the drafting process, if you will, to capture the policy intent.

[Ed Holder, Conservative, London West, ON]

Just so we don't imagine that this is all one-sided, because we do have another party or a series of parties called “the railways” involved and when they provided some thoughts to you, they've been very candid. What we have heard in testimony is that they would have preferred that this not happen at all. I recall asking in one of my questions, “Why did we ever get to this point?” As I say, that's less critical than the fact that we are now at this point.

To what extent did the input you received from the railways affect the legislation that you put in place in support of them as well? Because you can't have one party without the other party; it's clear that a symbiotic relationship is necessary. You need products to ship and that's what the shipper does, and in good faith the railways should be doing what they do. What was your response to the railways in terms of the input they provided you, please?

[Annette Gibbons]

Well, there certainly was a policy direction to reflect the fact that railways are required to provide service to all shippers and that they are operating in a network environment. Certainly, the decisions around “adequate and suitable”—the common carrier obligation—have always reflected that the railways have those obligations to all shippers and operate in a network environment. That was carried over to this new provision, if you will. That was certainly a position that the railways had put forward that is reflected in the bill.

There are other things that are not there. The railways had asked that there would be mediation as a mandatory first step. In the end, the requirement for the shipper prior to requesting arbitration is simply to demonstrate that an attempt was made to reach an agreement commercially. Some things are reflected and some things are not reflected.

[Ed Holder, Conservative, London West, ON]

In that spirit, I wonder if you would be mindful, Chair, that I have a few moments?

[The Chair, Conservative, Larry Miller]

Yes. The bells haven't started yet, so we'll go ahead.

[Ed Holder, Conservative, London West, ON]

Sure. I'm not trying to dominate, but I'm just trying to understand this dialogue here, because it always takes both parties to do a deal.

One might assume that because of the historic relationship that railways have and, if you will, a certain amount of extra influence over the process, do you think there's enough...? I say this in total good faith: is there sufficient protection for the railways in this balance back and forth? It's just so that we get that other perspective, because we've spoken at length about shippers and, of course, beyond the shippers are the people that actually have to produce the goods to be shipped.

We understand that we have an obligation and that the intent of this bill is to try to find that balance, but do you feel that there's sufficient here to protect the interests of the railways as well, as a result of this bill?

[The Chair, Conservative, Larry Miller]

That's your last question, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

You have been very generous. Thank you.

[Annette Gibbons]

Railways have been increasingly making use of service agreements. It's something that seems to work well for them in better defining their relationships with shippers. In that respect, a regime that encourages the use of commercial agreements is very much in keeping with what has been happening commercially, and is therefore felt by the government to be something that is manageable for the railways. The provision is manageable.

[The Chair, Conservative, Larry Miller]

Thank you.

Everyone knows there will be no committee meeting Thursday afternoon. I want to take this opportunity to thank our witnesses. I also want to wish everybody a very happy Easter. We will see you in two weeks.

The meeting is adjourned.