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.
Conservative
Carolyn Crook Director, Rail Policy, Department of Transport
Of things that might be included if you were to remove it...? You could have items on which there were specific decisions not to include, such as, for example, a detailed penalty regime. If you were to remove the word “operational”, that could be included in the arbitrator's decision.
There's the notion of an embedded dispute resolute process, the request that an arbitrator have the ability to impose a sort of second-tier dispute resolution process to deal with issues arising in the implementation of an imposed agreement in terms of determining whether there has been a failure in service, in terms of imposing different consequences or compensation.
All of those could be deemed as being now available and within the purview of what could be included in an arbitrated agreement, and the policy decision had been not to increase the scope to that breadth.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
On the issue of penalties and awards, are there other arbitrated agreements imposed on parties that include predetermined penalties in any other sector?
Director, Rail Policy, Department of Transport
I think the only thing we've found is not directly comparable because it's a voluntary system. I believe one of the shippers, when they were here, mentioned the grain exchange. That provides a comparable model, although it is something that parties voluntarily enter into. When they choose to operate through this commodity exchange, they're basically signing on to all the rules and obligations that are laid out.
So something like that does have pre-established penalties or compensations that would be associated with various failures, for example, to deliver your grain at the prescribed time. But that was something that both parties had entered into voluntarily. It's not akin to what would be happening here in the legislation with an outside third party imposing and pre-establishing what the penalties would be.
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
So there's no example of where an arbitrator imposes a predetermined penalty in a contract.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
I mean, the nuance, I would say, is that unless the party agrees that the arbitrator would actually be entitled to do that—
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
Which is impossible because of the verb I used: “imposed”.
Senior Legal Counsel, Team Leader Modal Transportation Law, Department of Transport
Yes.
Conservative
Conservative
Pierre Poilievre Conservative Nepean—Carleton, ON
So there is no parallel example of a predetermined penalty imposed by an arbitrator on parties to a forced agreement.
Director General, Surface Transportation Policy, Department of Transport
Not to our knowledge, no.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
I am looking for some overall clarification on a few things I see in here that seem to be at odds with each other.
I want to start with the creation of the bill, which was meant to drive commercial negotiations, from my understanding, and to be a backstop for that. Really what we're trying to do is drive both parties, the shippers and the rail companies, to commercial negotiations. This arbitration process is hopefully something that is not made use of, or, if it is, very rarely made use of.
Do I have that intent correct?
Director General, Surface Transportation Policy, Department of Transport
Definitely. In fact shippers have told us that they hope they don't have to use this and that the legislation was structured in a way that there's a right for a shipper to ask a railway for a surface agreement. Essentially that's a commercial agreement. In the event that's not successful, then the second step would be to go and ask for arbitration.
It's very much geared towards encouraging the commercial negotiation in the first instance.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
That being the case, then, I would say that the less prescriptive we are in the formal arbitration process as to what must be included in it—not what can be included but what must be included—the more we leave the door open to those commercial negotiations occurring.
If we have a very prescriptive set in there of exactly what has to be covered in this agreement, we're actually making it much more difficult for the commercial negotiations to conclude. We have this backstop that's not really a backstop anymore; it becomes a piece of legislation that actually says what has to occur.
Director General, Surface Transportation Policy, Department of Transport
At the same time, the bill does allow for a process and gives the arbitrator a very broad scope to resolve service issues that are not addressed in a commercial negotiation.
The way the bill is structured does ensure that when a shipper comes forward and says they can't get agreement on the three elements of service that are very important to them, the arbitrator will have scope to address those.
So it is designed as a backstop while still ensuring that there is power with the arbitrator to address a broad range of issues.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
Right, but that comes back to, I guess, what Mr. Langlois was talking about, the fact that the more prescriptive we are in that process, the less likely it is we can broaden the arbitrator's ability as he goes forward in the process.
We've said these things must be covered, and that makes it much more difficult for him to move outside of that. Everything that we put in that's a prescriptive item is....
Mr. Langlois referred to the operational aspect of it. I'm just asking this to get clarity in my own mind; with things like operational, basically the message I got was, to the shippers, be careful what you're asking for, because you may get something that you didn't really want in the first place. This may be a very deficient thing in this.
Again, that's why you've tried to keep this as broad and as open as possible, to allow the arbitrator, if it does come to that backstop position, to really be able to look at the overall picture as opposed to, “Here are the issues you must deal with as you go through the arbitration process”.
If I were a shipper, I'd be looking at that and saying, well, actually, it's fairly advantageous to me, because it really does allow me to raise a lot of different things with the arbitrator going forward, and he is allowed to look at those.
Is that correct? Is that the whole intent here?
Director General, Surface Transportation Policy, Department of Transport
Yes.
Conservative
Lawrence Toet Conservative Elmwood—Transcona, MB
The last thing I want to talk about is the whole idea of including penalties for breaches. Again, if we have commercially negotiated contracts, it's wide open to having breaches negotiated within them. It works to everybody's favour not to get to the point of going to this arbitration but to have a normal commercial contract, so to speak, that may include penalties for breaches, which is very difficult to do in our legislative process.
As I go through some of these items, I see a lot of prescriptive things being asked for. Yet when I get further down, when we start to talk about some of the other clauses, we are trying to broaden it out again. We're basically saying that now all of a sudden we want to have everything included in it.
I seem to get this mixed message. I don't know whether that's a messaging that the department's been getting from the beginning, and if that's why you came to the conclusions you did as far as how you've formatted this bill, that you were getting these messages that we want to have this really tight in, but we also want to have this broad perspective.
Was that, through the whole process, something that you were dealing with and were trying to bring forward in the final wording of this legislation?
Director General, Surface Transportation Policy, Department of Transport
The department had issued some parameters for the intent of the bill before consultations began last summer. One of the things made clear in that document was that the new provision was not intended to alter existing provisions in the act.
Certainly some of the points raised by the shippers about changing the common carrier obligation fell outside the scope of what was intended for the bill. There definitely was that consideration of the desire for very prescriptive language versus consideration of how the rest of the act is drafted, the approach that's taken. Yes, it's very high-level, but we also know that there's quite a bit of jurisprudence from various court decisions and agency decisions that gives meaning to the common carrier obligation, and therefore will also inform this new service agreement provision.
Knowing what the common carrier obligation means, what service issues are faced by shippers, and then considering how the rest of the bill is drafted, there was a decision to make around the approach: whether to be very detailed or to go with that higher-level approach. In the end, the government took the decision to go with higher-level language consistent with the rest of the act, knowing that this is in fact a fairly broad approach to service.
