Transport Committee on Feb. 28th, 2013

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

I don't think anybody wants to go back to the era of state-run industry. I think both Liberal and Conservative governments moved away from that over the last couple of decades, and that has been an unmitigated success.

Mr. Mongeau.

[Claude Mongeau]

Could I maybe just shed light on the issue? Parties in a commercial agreement are free to come to terms on all aspects of an agreement. The same way that all the shippers cannot have an arbitrated solution with trucking, or an arbitrated solution with airlines, or an arbitrated solution by the government with shipping, there shouldn't be an arbitrated solution for railroads.

We tend to refuse liquidated damages in commercial contracts for good reason. The railroad is a very network-based business: 55% of our traffic finishes or starts on another railroad, and more than another 30% finishes or touches a terminal.

You asked a question about our service, Mr. Goodale. Our service for the last six weeks has been very, very subpar. We have had tremendous difficulty, and a difficult winter.

In coal, for instance, for Teck and other coal miners in northern Alberta and northern B.C., we've had a lot of difficulty meeting shipping schedules. Part of the reason is that RTI, which is a government-owned unloading facility at the terminal, has had difficulty having the unloading performance it's supposed to have. They were targeting 400 unloads a day. They've achieved 260 unloads a day. If the terminal does 260 unloads a day, no railroad in the world can achieve the service that's required to meet the ship.

So if you get into a dispute where there are liquidated damages, and there's an arbitrator that can ding the railroad without due regard to what's happening to the network or what happened at the terminal, you just get into a rat's nest of problems. It's not conducive to mutual cooperation, visibility, and the things that commercially always work best.

[The Chair, Conservative, Larry Miller]

Thank you.

Mr. Watson, seven minutes.

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for appearing today on Bill C-52.

You talked about the power disparity, I think, that the shippers face with respect to the rail lines. One of the positives, I would submit, with Bill C-52 is that it gives shippers, not the companies, a unilateral right to trigger an arbitration process, which effectively is a compulsion, at least to a reasonable degree, to negotiate a service-level agreement fairly.

Would anyone disagree with that?

[François Tougas]

As I said, I'm in that business. Right now the railways have, and have had for decades, the unilateral ability to impose rates and conditions of service. Parliament decided at some point to allow railways to impose penalties on shippers—had no concerns with that whatsoever. That power is exercised all the time.

[Jeff Watson, Conservative, Essex, ON]

Would you like the government to consider whether it removes demurrage, for example? Is that what you're asking the committee to consider at some point?

[François Tougas]

No. What I'm saying is that the ability of a party to respond to that unilateral statutory authority necessitates a system that allows the shipper to invoke it. That's what we have in the final offer arbitration mechanism. That's what this system proposes. That's what the government has decided to do.

It doesn't surprise me that it would be shipper-initiated, because it's a response to the power of the railway to do it now unilaterally.

[Jeff Watson, Conservative, Essex, ON]

It accords shippers a unilateral right that it doesn't give in the negotiating process with the rail company. I'm simply asking whether that is or is not an improvement over the status quo. It does compel, at least to some reasonable degree, that parties must negotiate fairly with respect to a service-level agreement or there will be some consequence.

You can disagree with whether you think it will succeed in terms of the outcome that it will force in the process. I'm simply asking whether that's an improvement over the status quo.

That was only the first opening question. That's why we're having difficulty understanding—

[The Chair, Conservative, Larry Miller]

Mr. Watson, Ms. Cook wanted to intervene, if that's okay with you.

[Fiona Cook]

I just want to clarify that in terms of the right to a service-level agreement, right now railway companies are offering service-level agreements on their websites, but they fall short of what shippers need. That's why we come back to the elements—

[Jeff Watson, Conservative, Essex, ON]

I'm not negotiating your service-level agreement.

[Fiona Cook]

No.

[Jeff Watson, Conservative, Essex, ON]

I'm simply asking whether Bill C-52 establishes a unilateral right for shippers to invoke a process in the event that negotiations are not proceeding the way that at least the shippers might perceive them to be moving.

That's what I'm trying to establish.

[Fiona Cook]

You are correct. It does invoke that right, but whether it will be successful in generating improved agreement, that's where we disagree.

[Jeff Watson, Conservative, Essex, ON]

Fair enough. Section 116, the CTA's ability to compel railroads to effectively build works or other remedies, is unchanged by Bill C-52. Is that correct? That still remains.

[François Tougas]

That's correct.

[Jeff Watson, Conservative, Essex, ON]

Even to the point of having to build rail lines, if you will, that is still unchanged.

I would argue that with respect to the elements of a service agreement, many of them are actually established in Bill C-52. The only point we're disagreeing with are the issues of dispute mechanism and penalty, which is what you want explicitly included.

This brings me to my colleague's point. It would be unprecedented to pre-establish or predetermine, with respect to agreements between commercial entities, what a penalty could be, for example, and who gets blame or responsibility within the supply chain. There are a lot of elements that would have to be tailored.

Typically, whether we're dealing with labour agreements or other issues that are non-commercial, they deal with retroactive situations, not sort of predetermined. I think you're asking the government to do something that is unprecedented, or can you point to a precedent with respect to agreements between commercial entities where this is predetermined?

[François Tougas]

Yes, it's in the tariff-making power that Parliament granted railways. That is unilateral and it's done legally. It's a penalty for failure to do something.

[Jeff Watson, Conservative, Essex, ON]

That's not an arbitrated situation.

[François Tougas]

No, it's not arbitrated; it's unilateral. It's even worse.

[Jeff Watson, Conservative, Essex, ON]

It's a separate issue from what we're dealing with, with respect to the mechanism of Bill C-52, which is to invoke an arbitration process. What I'm suggesting is that with respect to an arbitration process between commercial entities, what you're asking the government to do is unprecedented.

Can you point to another such situation that is analogous to this or where a precedent like that has been set? Everything deals with retroactivity, something that has occurred that is typically resolved by a court, if you will.

[Roger Larson]

I don't think we're looking for retroactive punitive measures. We are looking for—

[Jeff Watson, Conservative, Essex, ON]

The panel yesterday was.

[Roger Larson]

I don't think we asked for a penalty. We asked for a dispute resolution mechanism, not for a specified penalty, and I think—

[Jeff Watson, Conservative, Essex, ON]

Where has that been established with respect to confidential contracts, which is the substance of what would be established with the arbitration process?