Thank you very much, Mr. Chairman.
CN certainly appreciates the opportunity to appear before you today on Bill C-8. I'd just like to address something that Minister Cannon raised when he was here, and Mr. Mackay alluded to, and that's the commercial dispute resolution process. As the minister mentioned, in the summer of 2006 he basically challenged the railways to find a commercial solution to concerns that had been expressed by some of the shippers. We strongly agreed that this was the appropriate way to proceed, and as a result, both CN and CP worked very hard to develop the commercial dispute resolution process--the CDR, as I'll refer to it--as we believed that it addressed the needs of both the shippers and the railways.
The CDR represented a significant number of compromises by the railways, but we were quite willing to make those compromises in order to attain the regulatory stability that is essential in order for the railways to continue to reinvest large amounts of capital into the railway system. We were also anxious to find a less confrontational way to settle disputes with our customers. The CDR was intended to deal with disputes related to level of service, transportation rates, and the application of optional services fees.
What we proposed was a two-step process specifically to address the concerns that had been expressed by the shippers. First, the shippers had said that the railways did not listen, or that it was hard for the shippers to find someone in authority to speak with them when there were issues. We agreed, at the request of the shippers, that we would submit any dispute that they were raising to compulsory mediation. This would ensure that there would be someone with authority who would be listening to the shippers to try to find a solution.
In addition, if the mediation did not solve the problem, we proposed that in addition to existing statutory remedies the shippers would also have the option of going to binding commercial arbitration. The shippers had mentioned that they wanted to find commercial solutions to problems that are really of a commercial nature. So we proposed binding commercial arbitration, a system that basically works in most of the other areas of business in this country. We want to make it clear that we were not asking them to renounce or to give up any of their statutory remedies. We presented this proposal to a number of shippers and their representatives. Many of our customers were quite interested in the proposal.
Unfortunately, some of the shippers, through their associations, insisted, as Mr. Mackay said, that the CDR apply to U.S. as well as Canadian movements, and this was something we could not agree to; therefore, the discussions were not successful. However, we still have maintained the CDR in a contract form. We've put it up on our website and it is available for all customers who wish to take advantage of it. Many of our customers told us they like the proposal, but they saw no need to sign on at this time as they had no problems with our services. They indicated that if in the future problems arose, they would be interested in using the CDR.
I suppose it's not surprising that shipper associations did not rush to accept the CDR. They knew that if the process failed, the minister would introduce legislation, which of course is exactly what happened with Bill C-8. We have a number of specific concerns with the bill, as Mr. Mackay has referred to, but in the end our biggest concern is the continuing move toward re-regulation of the rail sector. Mr. Mackay referred to the deregulation of rail in Canada and how it's been a resounding success. It has triggered innovation and improved efficiency in the rail system and the rail industry to the benefit of all, including shippers. It has allowed the railways to improve service and asset utilization, and by any measurement, the railway service offering is dramatically better than it was ten years ago. Transit times are shorter and more reliable, car velocity is higher in real terms, and rates have decreased.
These improvements have led to a financial performance that has enabled the railways to make further capital investment in the rail system, and Mr. Mackay has referred to that. But in order to invest, there is a need for stability, and we need a regulatory regime that allows us to continue doing the things necessary to make our railway more efficient. We are concerned that this legislation is likely a step backwards.
The provisions of the FOA group create another adversarial process. To us it really is building a ring for us to fight with the shippers, whereas there should be a better process, such as the mediation and arbitration process. A very important thing is that unlike class action proceedings in law, there is no requirement for the group of shippers to show that they are in fact a true group, and in fact there's also no need in the current legislation that the decision apply equally to all of the group members.
We know that shippers do not like paying optional charges. They are in place to drive efficiency and discipline in the system. The railways cannot afford to have shippers use the yards and the equipment as warehouse space. Many shippers with private car fleets keep them parked in the railway's yards because they lack sufficient storage space of their own. All these things create congestion in the yards and affect the railway's efficiencies. Yards are there to sort cars, and congestion is expensive to CN, to the system, and ultimately to the customer.
We don't question the right of shippers to final-offer arbitration. This is a remedy they have now. We understand that there is a need for a remedy, but we do have many concerns with the FOA process as it currently exists.