Evidence of meeting #65 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 shippers.
A recording is available from Parliament.
4:50 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
But the higher-level language was intentionally brought forward—
4:50 p.m.
Director General, Surface Transportation Policy, Department of Transport
Absolutely.
4:50 p.m.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
—to create within the act the ability to move it and to actually broaden the need for...in the arbitration process, if need be, so that it could include more items rather than defining them down to a small list saying these are the items that are going to be in the process.
I guess that's what I'm trying to get some clarity from the department on. It seems to me that the shippers are saying that we're not achieving that, the way the bill is formatted today, and yet you're saying, if we would be more prescriptive in it, we'd actually be working against what they're trying to achieve.
That's my sense from the feedback I'm getting today, that the department would say that the danger is that in doing some of these things, you're actually getting less than you thought you'd be getting in the bill today.
4:50 p.m.
Director General, Surface Transportation Policy, Department of Transport
The removal of the term “operational” certainly could have very unintended consequences from a shipper perspective, because it does, as Alain pointed out, allow for the possibility of the railway asking for volume commitments to be imposed on the shipper, or infrastructure changes to be imposed on the shipper, as part of the contract that's imposed.
4:55 p.m.
NDP
Olivia Chow NDP Trinity—Spadina, ON
Should we not restrict arbitration to matters submitted by the shippers, not by the rail companies? There's a complete imbalance of power. If everything can be solved through the commercial front by commercial agreement, then absolutely, you're right: the less restrictive the better and everything can be worked out in the commercial agreement.
The problem is that the shippers really don't have a lot of power since it's a monopoly. You either take it or leave it. It's hard to actually get a good agreement commercially, which is why we have this legislation. It's really a protection for the shippers.
Putting that as the cornerstone for why we need this bill in the first place, would it then not make sense to restrict the arbitration matters to ones that are submitted by the shippers, not by the rail companies? If not, then the rail companies can say “let's put volume on the table”, and sometimes you get more grain and other times you get less. Putting volume on the table is very difficult for the shippers. One of my amendments actually restricts the arbitration just to matters raised by shippers.
4:55 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
The legislation already does that. I can walk you through it. The legislation already restricts arbitration to the issue that the shipper puts on the table. If you go to 169.39, you see that the arbitration gets triggered by the shippers. In their application, the shipper has to detail the matters that are to be arbitrated. That's proposed paragraph 169.32(1)(a). Everything is focused on that from that point on. On day 10, the shippers and the railway file their proposed terms to resolve the matters that have been raised by the shippers, not—
4:55 p.m.
NDP
Olivia Chow NDP Trinity—Spadina, ON
But in the bill you have a clause that allows the rail companies to say that “this should not be part of the arbitration”. You have that clause in there that allows the rail companies to come in and say yes or no to different matters and bring up different matters.
4:55 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
Well, the legislation does allow the railway to come in with their own proposal—
4:55 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
—but their proposal to resolve the matter that's been submitted by the shipper. The legislation is very clear on that. The shipper raises the matter. The offers that are put on the table have to be offers to resolve the matters raised by the shippers.
The matters raised by the shippers are referred to an arbitrator. If you go to proposed section 169.37, you see that the role of the arbitrator is to establish terms to resolve the matter that has been “referred to him or her”, which is the matter that's been raised by the shippers. The process itself is to resolve the issue that has been raised by the shippers only, nothing else.... The railway can't come to the table and raise something that has nothing to do with the matter that has been raised by the shipper in regard to the arbitration.
4:55 p.m.
NDP
Olivia Chow NDP Trinity—Spadina, ON
I wasn't sure that was how I was reading it.
Let me just ask you this. You said in response to my earlier question, which my colleague Mr. Sullivan picked up on, that volume cannot be—
4:55 p.m.
A voice
Operational—
4:55 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
Imposed. Enforced.
4:55 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
The arbitrator doesn't have the ability to force that term on the shippers in its decision.
March 26th, 2013 / 4:55 p.m.
Conservative
Jeff Watson Conservative Essex, ON
Thank you, Mr. Chair.
With respect to a breach of a service level agreement, currently the situation is that the courts can, in a commercial-to-commercial agreement...right? You go to the courts for remedy and presumably they are to enforce penalties that are agreed upon, or a mechanism that is agreed upon, in an agreement. That right is not removed from the shipper, with Bill C-52, they can still do that. The addition is the administrative monetary penalty. That would be for breach per service level agreement of up to $100,000. There are obviously dozens and dozens or more service level agreements so multiple breaches, if you will, of up to $100,000 are a new feature that could be applied in the event that rail companies are not acting in good faith. Is that correct? So there is significant deterrent value to the addition of the administrative monetary penalty.
Returning to the Coalition of Rail Shippers presentation for just a moment, I want to probe a couple of things here.
The second issue they raised is around operational term instead of term and they said that the expression “operational term” eliminates the shipper's ability to address non-rated items in or missing from a confidential contract or tariff such as force majeure.
What is a force majeure clause, for my own understanding, first of all? Are the shippers accurate in saying these clauses could not be included unless the bill is amended?
5 p.m.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
A force majeure clause in very simple terms is usually if you have a contract a party can agree on what's going to be a force majeure and whether a party will be excused from performing if a force majeure occurs.
For example, I have to deliver cars and there's a tornado or an avalanche and the trains are stopped because the track is wiped out and the railway can't fulfill their obligation. The parties can agree in the contract that if there's a force majeure like that the railway is relieved of its obligation to perform.
Whether or not the concept of force majeure is captured by the existing legislation, the answer is yes, it is captured. Proposed paragraph (a) of proposed subsection 169.31(1) captures the notion of force majeure.
When we allow an arbitrator to establish the operational terms of the railway with respect to loading, unloading, and delivery of traffic it includes what they have to do and also includes under what conditions they are not obligated to do what the arbitrator will decide is going to be their obligation.
So it not only includes force majeure but it includes other issues that could be put on the table with the railway or the shippers. For example, a problem with the congestion at the port terminal that could affect both the railways and the shippers. Technically speaking that is not force majeure but that's something the arbitrator could look at and impose a term on under proposed paragraph (a) of proposed subsection 169.31(1).
5 p.m.
Conservative
Jeff Watson Conservative Essex, ON
I am looking at Liberal-1 and NDP-1 for a moment, which form the basis of the first issue raised by the Coalition of Rail Shippers, effectively defining adequate and suitable accommodation and service obligations.
I take particular note in the way that it's done, “a railway shall be considered to have fulfilled the service obligations referred to...if it has carried them out in a manner that meets the rail transportation needs of the shipper”. Does this effectively vault the right of the shipper, if you will, above network operations in the consideration of obligations?
5 p.m.
Director General, Surface Transportation Policy, Department of Transport
This section is specific to the new service agreement provision—the right to ask a railway for one—but that provision makes a reference back to service obligations as being the service obligations in the common carrier obligations. So this would essentially be changing the definition.
In terms of what “adequate and suitable” means, there's a lot of jurisprudence regarding “adequate and suitable”, and certainly in practice, consideration has been given to providing service that meets the needs of the shippers and also reflects the railways' overall operations. There have been discussions with shippers on this concept of making shippers' needs paramount, so there would be a change in the current standard of service under the act.
5:05 p.m.
Conservative
Jeff Watson Conservative Essex, ON
The evolving jurisprudence defines “adequate service” and not necessarily “perfect service”.
What did the court say with regard to the common carrier obligations? It is my understanding that they've established that these obligations are not necessarily absolute either but that they're situational or circumstantial, if you will. I guess that's the effect service level agreements have on the network.
That would strike, I presume, at the heart of why we can't be prescriptive with respect to prejudging potential penalties or damages, because individual breaches would have to be investigated and penalties or damages would have to be determined considering the situation and conditions including network operation.
Thanks.
5:05 p.m.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
Performance standards require performance metrics. There is a difference between the two and there's a difference in interpretation as to whether just one or both should be included. Some of the shippers believe that metrics are not included or provided for under the proposed statute. Others brief me that they are. Which answer is the right one?
