Transport Committee on Feb. 12th, 2013

[Joe Daniel, Conservative, Don Valley East, ON]

Do you feel this will actually hold the railways accountable in terms of providing the right level of service?

[Annette Gibbons]

The intention behind the administrative monetary regime was to provide a mechanism to provide accountability.

[Joe Daniel, Conservative, Don Valley East, ON]

Changing the subject a little, the arbitrator will consider whether shippers have alternative or competitive means for transport. Those transport options may not need this recourse as much as someone with no options located in a remote area.

What are the concerns with having an arbitrator consider whether the shippers have options?

[Annette Gibbons]

The particular factor, if you will, that the arbitrator will take into account is one of several factors intended to recognize the fact that shippers are different from one another, and that the circumstances and needs of shippers will differ depending on their unique situations.

The arbitration decision cannot be one size fits all. The presence of that particular factor in the bill reflects the fact that you can expect the situation of a shipper who has access to three railways in an urban area will be different in practice from the situation of a shipper who has only one railway and one transportation option because, say, trucking isn't viable in their remote area. Having that in there allows the arbitrator to consider those kinds of differences and to reflect that in the service agreement.

I would add that the provision, the access to the arbitration, is available to all shippers, whether they have competitive options or not. Any shipper can access the provision.

It means it's not a barrier to the remedy. The shipper can access the remedy. It's just something the arbitrator will consider.

[The Chair, Conservative, Larry Miller]

Your time is up. That was Mr. Poilievre's time, but I have you down for another seven minutes. I don't know whether you want to keep going or let someone else have a turn.

Okay, keep going, Mr. Daniel.

[Joe Daniel, Conservative, Don Valley East, ON]

The way the bill is put forward, it almost seems to be favouring the shippers rather than trying to come up with an equitable solution. Given that a railway network business is a network business obligated to provide service to all shippers, why do shippers feel they should not be considered?

[Annette Gibbons]

The list of factors that an arbitrator must consider captures the individual shipper's needs. It also captures the fact that the railway is obligated elsewhere in the Canada Transportation Act to provide service to all shippers. The goal there is to ensure that the arbitrator is really considering the individual shipper's requirements and also taking into account the fact that the railway has a broader obligation to provide service to all shippers. What that means in practice is making sure that it can operate an efficient network for everybody. Both of those factors are there to try to come up with a solution that allows the railway to operate the network and still provide individual shippers who have asked for an arbitration with the service they need.

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you. I'm going to pass it over to Lawrence.

[The Chair, Conservative, Larry Miller]

Mr. Toet.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

Thank you. I wanted to follow up along the same line.

When I look at this, the shippers do not have to make any commitments when they go forward to the arbitrator, but they may make commitments, which obviously would be part of the arbitrator's decision process going forward, as to which way to ultimately arbitrate on the service level agreement.

Is there any consideration for breaches that may be applied by the shipper that he has committed to as part of the arbitrator's process? Is there any consideration in that as far as applying any penalties at all, or can they make these commitments, then not stand up to them, and face no penalty whatsoever? Am I correct in that?

[Alain Langlois]

You're correct in that they're free to make a commitment. Nobody can force them. If they make a commitment in filing the application for arbitration, the act is very clear that they have to undertake to the railway that they will comply with the commitments they are making for the duration of the arbitrator's decision.

We're trying to get the parties to be bound by a commercial arrangement whereby a shipper commits to do this and an arbitrator, on the basis of the commitments, issues a decision that factors in these commitments, and post arbitrator's decision the relationship between the parties is set forth by the commitments and the arbitrator's decision. So if the shipper does not comply with a commitment and a railway feels harm in any shape or form, the railway can pursue whatever action it wants to pursue, in the same way that a shipper would have the same ability under contract.

[Annette Gibbons]

What the arbitrator imposes will have the force of a contract, so the railway has the option to sue for breach of contract.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

Okay, but that's its only avenue, really, to sue for breach of contract. There is no ability, through this particular piece of legislation, to have any kind of imposition of penalties on the shipper. The shipper is basically free under this legislation on that.

If we talk about some of the aspects of the shippers' concerns on market aspects and things like that, is that part of the reason that's in there? Is it to kind of balance this off, saying that the railway has a big, strong arm and the shipper is the weakling in this arm-wrestle? Is this a balancing factor, and we're saying that they're not open to penalties automatically through this process? As a business guy, I could make some crazy commitments if I knew I didn't have to live up to them and there would really be nothing of consequence, because I'd be putting the onus on them to come after me and sue me in court, which would be an expensive proposition for both sides. You can say the railways have a lot of money, but they also don't want to go through unnecessary litigation.

Maybe you can clarify. Is that the whole rationale behind this? As Mr. Daniel has said, it could be looked at very quickly on the surface and appear a little bit stacked one way.

[Annette Gibbons]

The provisions on rail service in the Canada Transportation Act are obligations on railways. They impose obligations on railways; they do not impose obligations on shippers. This bill reflects that same approach.

[Lawrence Toet, Conservative, Elmwood—Transcona, MB]

I'd also like to have clarification on the overall approach for the arbitrator. From my understanding, the arbitrator is not just looking at a one-off contract, so to speak. That, obviously, is what is being dealt with at that particular moment in time, but the arbitrator is having to look at the overall network capability of whatever rail line the service level agreement is being made with. In other words, the arbitrator is not looking at this and saying, “Well, you have x number of cars, so you can definitely fulfill this contract”. The arbitrator is looking at where those cars have got to be throughout Canada, because we're spread over a wide, vast area. Is that part of the process?

[Annette Gibbons]

The way the railways operate their networks, rail service operates very much like a bus route operates. So what you're looking at are the needs of everybody along the route and you're trying to come up with a schedule and an approach to serve everybody's needs in an efficient way. From that optic, the arbitrator, in receiving a demand from a shipper, will look at what the shipper needs, considering what the railway service is on that route for all of the shippers on the route.

It's a factor they take into account. If the shipper is saying, “I absolutely need more for my business”, and makes a case for that, then the arbitrator has the discretion to respond to that.

[The Chair, Conservative, Larry Miller]

Okay, the time has expired.

We now move to Mr. Sullivan, for five minutes.

[Mike Sullivan, NDP, York South—Weston, ON]

Thank you.

And thank you to both witnesses for being here.

I just want to clarify this for myself and for the record. The arbitration can't be about price, right?

[Annette Gibbons]

That is right.

[Mike Sullivan, NDP, York South—Weston, ON]

Can the arbitration be about the cost to either shipper or carrier for failure? It says “operational term”.

[Annette Gibbons]

Are you talking about penalties?

[Mike Sullivan, NDP, York South—Weston, ON]

Yes.

[Annette Gibbons]

There are penalties. A penalty scheme, what the shipper—

[Mike Sullivan, NDP, York South—Weston, ON]

The arbitrator can't put a penalty scheme into a contract.

[Annette Gibbons]

That's right.