Evidence of meeting #59 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was shipper.
A video is available from Parliament.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
That's prohibited from part of this, so the only recourse for breach of contract is to go to court.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
There is the option of going to court, but there is also the option of going to the agency to have it apply administrative monetary penalties.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
But that doesn't do anything for the shipper, because the penalty is just collected by the government. It's a tax on the railroads.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
It doesn't go to the shipper, but it is a mechanism to provide for enforcement of the contract to make the railway accountable, to respect the contract.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
But if it's a $2-million breach, $100,000 is going to be no skin off my nose if I'm a railroad and you took me to court, right?
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
The administrative monetary penalty is intended to be a deterrent, or looked at another way, an incentive to comply with the contract.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
But the parties could, if they wanted to, ahead of arbitration, negotiate terms and conditions that would include price and would include monetary penalties for failures, on both sides.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
Yes.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
But once they get to arbitration, it's really only the other portions of the contract that can be determined by a third party.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
The shippers told us that they did not want price to be addressed in the arbitration; they did not want it to cover rates. They wanted it to focus on service.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
But it can't focus on failure for service either. It can't determine that failure to deliver or failure to arrive with the cars on time would result in a cost to the railroad.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
It cannot provide for a penalty scheme, which was what the shippers were proposing. It can certainly include mechanisms to deal with failure, such as recovery mechanisms, for example. It can talk about operational activities that would happen in the event of a failure, how to get back on track.
5:05 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
Normally, when you deal with arbitrated settlements in other situations, such as labour negotiations, etc., they become precedent setting. So one would think that over time, fewer and fewer of these arbitrations would be necessary because shippers and railroads would both know where these things tend to go and would work on getting there in the first place.
Except that here, they're confidential. Neither side will know about the precedents, and therefore each and every case.... Even if I had a contract last year with these guys, I'm going to have to go get them arbitrated again, or if I know that the farmer down the road has grain that is essentially the same schedule as mine, I have to go and get an arbitrated settlement because I can't use the precedent.
5:05 p.m.
Director General, Surface Transportation Policy, Department of Transport
The shippers were very clear in the consultations we had that they wanted these arbitrated agreements to be confidential. The reason we understand that to be the case is they felt it would provide competitive information about their business that they didn't want in the public domain.
5:10 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
In terms of the ability to use these things to set the tone, only the arbitrator and the railroad will know.
5:10 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
If you look at the way the confidential clause is drafted, there's a clear exception to the fact that the outcome is confidential. There's an exception that allows the agency.... First of all, any arbitrated decision has to be provided to the agency. The agency has the authority under the act, as an exception to confidentiality, to use the arbitrated decision for the purpose for fulfilling their mandate under the act.
One of the mandates under the act is to provide assistance to future arbitrators, so there is an ability for the agency to transfer knowledge going forward. Obviously, that transfer of knowledge from one to the other will have to somehow respect the rule of confidentiality.
You would assume that the agency in presumably helping another arbitrator will not disclose sensitive information, but the core nature of the dispute that was resolved could be transferred to a future arbitrator without disclosing sensitive information from the previous outcome. In doing so the arbitrator would obviously have to ensure that its own process complies with the rule of natural fairness.
There is a way to allow transfer of knowledge going forward from one arbitrator to the other.
5:10 p.m.
NDP
Mike Sullivan NDP York South—Weston, ON
That's not in the act. That's just in the way the agency will behave.
5:10 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
It is pretty much spelled out in the act.
5:10 p.m.
Conservative
5:10 p.m.
Conservative
Ed Holder Conservative London West, ON
Thank you, Chair. I'll share the last moments of my time with Mr. Daniel.
Thank you again, guests, for being here.
Minister Lebel indicated that the relationships between railways and shippers are better now, for any number of reasons, maybe the prospect of legislation coming forward, but that's good for business. It's obviously a positive.
Do you have any indication whether shippers, when requesting service agreements currently, are...whether there's more compliance in that regard? Do you have statistical information on that?
5:10 p.m.
Director General, Surface Transportation Policy, Department of Transport
We don't have statistical information. When shippers speak to us about service, they speak very generally about the overall relationship. They say things are working much more smoothly now than they were in the past, that the communication is much better, that they have an open door with their service representative and they stay in close touch, that sort of thing. Those are the kinds of comments they make.
Shippers generally, in our conversations with them, are very wary of sharing any details on the negotiation of contracts. Again, it is an issue that they consider to be sensitive commercial information. You may hear the odd comment such as, “I have a confidential contract, and it was tough to get”, or it wasn't. Generally we don't have a whole lot of feedback on that.
5:10 p.m.
Conservative
Ed Holder Conservative London West, ON
Just from a historical perspective, and again you would be enlightening me, why would railways not have given shippers service agreements when requested? What was the hesitation?
5:10 p.m.
Director General, Surface Transportation Policy, Department of Transport
I think that would be an interesting question to put to the railways when they're here—
5:10 p.m.
Director General, Surface Transportation Policy, Department of Transport
—because it's difficult for us, not being in that day-to-day business.
At a very general level, I would say that our understanding of the way the railway business has traditionally worked is it's very much based on these publicly posted tariffs. That is the standard approach for determining the rate that shippers are going to pay and setting out some general service parameters. At one point the act was amended, I think back in the 1980s, to allow for confidential contracts to be signed. There was then a shift for certain parts of the business to move to cover the rate under a confidential contract, but still, we understand today that for some shippers, they just ship under the general posted tariffs. That's just the way the relationships evolved.
