Transport Committee on Feb. 26th, 2013

[Greg Cherewyk]

What we're saying—and here I'm building on Wade's theme—is that if there is another process that we could consider for those shippers who would like to inject that into their SLA, there is merit in looking at that alternative to allow for day-to-day discipline, which shippers would really be held to account on. That said, we know that not everyone would prefer this, for reasons that were well hashed out on the first day of the committee's meetings.

I have both the tariffs from CN and CP here in front of me showing you how everything from how we order equipment, to the documentation that we file, to how we cancel or change orders, and how we communicate comes with a disciplinary charge or fee. So there is that day-to-day behaviour modification tool in place.

It's difficult to imagine how AMPs would accomplish that, which is why we're searching for other solutions as well.

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

But in fairness, the administrative challenge of confirming non-compliance would likewise be present if a penalty were to be awarded against a railway in favour of a shipper.

[Greg Cherewyk]

I chose to emphasize the importance of performance metrics. If you've established a standard that says, here's the reasonable range of variability on this particular component, here's what we've agreed upon in terms of how you will service me, the window within which—

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

But liquidated damages, I should say, for example, would require some oversight, right? You're not proposing that the shipper would simply be able to allege, without any proof or confirmation, that there's been non-compliance and then be given liquidated damages, are you?

[Greg Cherewyk]

I'm not alleging anything, but I would defer to the lawyer to weigh in on this one.

We're talking about two things. Predetermined liquidated damages, when we've already established at the signing of contract the potential cost associated with a failure, is one thing. But determining—

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

I'm coming back to your first comment, in which you said that the fines are very hard to administer because there could be dozens of different infractions for many different shippers, and that to expect that the agency will go out to inspect all of those infractions.... It would take a long time.

Liquidated damages would have the same process, presumably, isn't that right?

[Greg Cherewyk]

Presumably you would have multiple arbitrators available to address those particular instances, whereas, if you paved a path to the agency to address the hundreds of potential infractions that would occur, the question I'm asking is whether that is the most cost-effective and efficient approach we can consider.

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

Right, but either way, whether you say that the arbitrator is going to go around investigating these alleged infractions or it's the agency, somebody has to do it and somebody would have to pay for it? Correct?

[Greg Cherewyk]

That's correct.

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

Okay, so there is no difference, really, in the administrative cost to the government, or to the process, between an administrative monetary penalty on the one hand and liquidated damages on the other.

[Wade Sobkowich]

Can I add a little bit to that?

The way we've proposed the amendment, you would have to submit to the agency for arbitration terms governing whether or not a service failure has occurred and the manner in which damages are to be assessed. So you're submitting to the agency for arbitration on whether a breach has occurred.

The main difference with the AMPs is that AMPs are paid to the government. Deterrence is good, but it doesn't do anything to compensate shippers for damages that shippers have incurred as a result of a railway's failure to perform. I'd say this tongue in cheek, but if deterrence is the objective and the railways have under law the right to unilaterally impose tariffs for shipper non-performance, then perhaps the tariffs paid by the shipper should also go to the government. It's silly, but that's really what we're comparing here.

[The Chair, Conservative, Larry Miller]

That's it.

Mr. Sullivan, you have five minutes.

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

While I have the floor, I want to put on the record that we are moving a motion to invite the Honourable Denis Lebel, Minister of Transport to appear before the committee regarding the supplementary estimates (C) before March 7, and that this meeting be televised.

I'm just making sure that notice is there and we'll deal with it in due course.

[The Chair, Conservative, Larry Miller]

Okay. I suggest you talk to other members as well, but that's on the record.

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

Thank you, Chair.

I want to thank all of you folks for appearing. I think this is the most crowded this room has ever been.

With regard to the mechanism for compensating shippers, I personally like what you're suggesting. I think the minister suggested that each and every breach would have to go before the courts; that you'd be free to sue. Of course, as you know, the railroads being what they are have much deeper pockets than those 4,239 small or very small shippers, and spending $600,000 to get $50,000 in damages is not really a good way to spend your money.

That said, for Monsieur Poilievre's edification, the labour arbitration system in Canada has damages within it. Every labour arbitrator can award an individual or a union damages at every arbitration hearing. It's just the way it works.

Most labour arbitration is just right or wrong. Someone who was fired can be reinstated, and someone who didn't get paid can get paid. But this has expanded to include the notion of damages. There's a little cottage industry of labour arbitrators in this country who—

[Ralph Goodale, Liberal, Wascana, SK]

It's a fairly big one.

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

It's a fairly big cottage industry. Yes, that's true.

Damages aren't awarded very often, because there needs to be proof of them, but it's possible.

In Canada, in the law, each and every agreement between a union and an employer must have a provision for the settlement of disputes. That's more or less what you're asking for, that you be permitted to put in front of the service level agreement arbitrator the notion of a dispute resolution mechanism within the service level agreement, which includes the possibility of damages.

[Wade Sobkowich]

Yes.

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

You don't have to put it in, but it would include it, so that it would avoid the awful spectre of the courts each and every time you needed to collect from a railroad company, and we know how litigious they can be.

So I welcome that amendment. It seems to me to be a sensible solution to the problem.

There are other amendments that you have raised that I also find very sensible. Any time there is vagueness in the law, the big parties tend to use that vagueness against you. So the operational term, I agree, should be dropped.

This has been asked of you a couple of times, but I'll ask you a third time: is the notion of being able to put into your service level agreements a dispute resolution mechanism the most important of these changes, if you had to order them?

[Wade Sobkowich]

Are you asking me?

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

I'm asking anybody.

[Wade Sobkowich]

Well, different people will give you different responses, depending on where they sit.

Concerning point number one, about better defining “adequate” and “suitable”, doing that helps to ensure that the service pie grows, and I think it's one that everybody here feels is an important one.

It's very difficult to rank them, and they're inextricably linked. What we're identifying is a gap in our ability to get damages from zero to $200,000, to the point that it becomes so costly that you would initiate court proceedings or a level of service complaint.

We're identifying that there's a gap there. For us in the grain industry, anyway, I can say that it's a very important one.

It's very difficult to say which is the most important one, from my perspective.

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

Is there anybody else?

[Robert Ballantyne]

I think most of us would agree with the comments that Wade has made. We've tried to put forward a package in which these things are all inter-related—we do see this as a package. As we have said right up-front, each of the industries represented won't have exactly the same emphasis, but they certainly support all of these things.

As a comment on the issue of damages, one thing I noted in my remarks was that one of the consultants who reported to the rail freight service review panel—NRG Research Group—indicated that 62% of the shippers they surveyed reported that they had suffered financial consequences as a result of poor performance.

Also, the comment has been made that the way the law is currently structured, the railways have the unilateral right to impose penalties on shippers for non-performance. So there is that provision the other way round.

[The Chair, Conservative, Larry Miller]

Time has expired, Mr. Sullivan.

I'll turn it over to Mr. Holder for five minutes.