Transport Committee on April 16th, 2013

[Annette Gibbons]

The use of the word “operational” was very deliberate, to ensure that the scope of the provision covers a very wide range of service terms, but it did not cover absolutely everything in the possible universe of terms that may be put forward by a shipper. As we mentioned the last time at this committee, there was a decision to not allow terms related to financial penalties to be subject to the decision of the arbitrator by broadening the phrase to “terms” as opposed to “operational terms”. Then that would be within the scope.

There was also a question with respect to other terms that may come up, other terms that are found in contracts. Again, there the intention was not to capture every possible contractual term that a shipper may propose, but rather to stick to those terms that are really related to railway service.

[The Chair, Conservative, Larry Miller]

Okay.

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

So is the obverse true, that the railway can't impose terms on the shipper that aren't operational terms?

[Annette Gibbons]

I'm not sure exactly what kinds of terms you're referring to.

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

If the carrier decides to impose a term that is not an operational term on the shipper in return for having gone to arbitration, or whatever, that isn't covered by this because we've limited it to operational terms that can be dealt with by the arbitration, not other terms such as whether it was just a “continue operating” service. That's a term, but it's not an operational term. It could abandon the line.

[Annette Gibbons]

In the case of abandonment, the act recognizes that abandonment takes place and prescribes a process that railways must follow if they wish to abandon. Obviously, there's no desire to create an inconsistency with the current regime governing rail-line abandonments.

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

The other point is that an internal dispute resolution mechanism or something to deal with force majeure or any of those kinds of things that are normally in agreements between parties cannot be included in this; they can't be part of an arbitrated decision.

[Alain Langlois]

I think we discussed force majeure, either last time or the first time around. I strongly believe force majeure is captured by an operational term. If we tell a railway company to pick up the car on a Monday, Tuesday, or Wednesday, part of an operational term will be that they shall not pick up the car on these days if the following events occur. To me, that's an operational term. There's no ambiguity, no doubt that this is covered.

What's meant to be left out by restricting it to operational terms—as Annette was saying, a deliberate restriction was made—was to leave the non-service obligation aspect of the relationship between the railways and the shippers to be dealt with by the arbitrator. For example, a dispute resolution clause, a liability clause, a mediation clause that would normally be found in agreements, the choice of what law applies in case of dispute—all these clauses you would normally find in a contract were meant to be left outside the scope of the arbitrator's discretion. Essentially, this provision allows the arbitrator to establish the obligation of the railways, but that's the extent of the arbitrator's discussion. He sets the obligation that the railway must comply with in providing adequate and suitable accommodation to the shippers.

[The Chair, Conservative, Larry Miller]

Before we go to Mr. Goodale, I have a note that I should have read before.

First of all, we need a mover for each amendment, so I'm going to take it, Mr. Goodale, that you would have moved the first one in LIB-8, and if two members...Mr. Aubin and Mr. Sullivan are nodding their heads.

[Robert Aubin, NDP, Trois-Rivières, QC]

So moved.

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

So moved.

[The Chair, Conservative, Larry Miller]

Also, just a note that amendment NDP-2 is identical to amendment LIB-2, and if NDP-2 is moved, which it is, LIB-2 cannot be proceeded with. A vote on NDP-2 applies to NDP-5, NDP-6, and NDP-7, what have you. Just so you know that.

Mr. Goodale.

[Ralph Goodale, Liberal, Wascana, SK]

Mr. Chairman, the issue I want to raise here for just a moment is whether or not this whole process could end up being stymied by the parties not being able to agree on things that are terms, but not operational terms. The legislation purports to say that a shipper is entitled to a level-of-service agreement. If that level-of-service agreement, which consists of both terms and operational terms, cannot be negotiated between the parties, then certain things, operational terms, can be referred to arbitration. But terms that are not operational terms cannot be.

What if the sticking point between the parties is a term that is not an operational term? That's the thing that is hanging them up. They can't come to an agreement on that. Then the right in the legislation for the shipper to have an agreement is essentially vacuous because the whole process would founder on that point that could not be referred to arbitration. Isn't that a problem?

[Alain Langlois]

Not really, in my humble view. If a shipper and a railway can agree on, let's say, choice of law clause—which law, Ontario's or Manitoba's, should apply in the case of a dispute—the shipper has an ability, if they can't get the railway to sign an agreement, to agree to sign an agreement; they still get to arbitration. They get an arbitrator to establish the actual obligation that the railway will have to comply with, notwithstanding the dispute that is ongoing with the railway and the choice of law.

The choice of law can be resolved at the point where a dispute occurs. The railway may refuse to sign an agreement in the absence of a clause that says this is the applicable law. The shipper, being frustrated, may decide to go to arbitration to get an arbitrator to force the railway to comply with the actual obligation set out in the decision of the arbitrator because that's the outcome of the arbitrator's process.

[Ralph Goodale, Liberal, Wascana, SK]

But if the railway wanted to say they're just not going to agree on choice of law, then there's no agreement and you can't arbitrate.

[Alain Langlois]

You can go to arbitration to get the service element established—

[Ralph Goodale, Liberal, Wascana, SK]

But not the agreement. You don't have an agreement until everything is agreed.

[Annette Gibbons]

Mr. Chair, can I just come back to the purpose of this section of the act and the purpose of this provision? It is very much focused on rail service. This section of the act is not intended to cover every possible element of a relationship between a railway and a shipper. It is focused on service. The concerns that have been brought to the government at various stages when this section of the act on railway obligations with respect to service has been under review have always been about service. That is the focus. These provisions are in keeping with the kinds of concerns that people have brought before the government throughout the history, I would say, of having these railway obligations in the act.

The kinds of issues you're raising are not front-and-centre issues, I would say, with the exception of the financial penalties issue and the issue of commercial dispute resolution, having the arbitrator being able to make a decision on that. Those were the two items that were more important, I would say, on par with the kinds of service obligations that are covered under the new provision. It was a policy decision of the government not to include them under the arbitrator's scope. But the other types of issues that you raise are not really major issues that have been brought forward by shippers as a concern.

Just to come back, the intent of this provision was not to try to establish a fully comprehensive contract between railways and shippers that covers everything. It was to focus on service, because that is the area where Parliament has determined there needs to be legislation governing the behaviour of railways.

[The Chair, Conservative, Larry Miller]

Mr. Sullivan.

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

But on the matter of service, there can be nothing in the agreement in terms of penalities or any kind of dispute resolution. If one side or the other—because it's a two-sided agreement—violates the terms of the service level, that can't be done?

[Annette Gibbons]

There can be terms with respect to coming back from service failures. Under paragraph 169.31(1)(b), if a railway fails to comply with an obligation imposed by the arbitrator, there are operational terms that can be in the agreement imposed by the arbitrator that deal with how to come back from a service failure. In paragraph 169.31(1)(a), at the very bottom of that paragraph, there is reference to “communication protocols”. So there can be some dispute resolution practices and processes covered there, but the actual proposal of having the arbitrator impose external dispute resolution, if there is a service failure in the future, is not covered.

There are aspects of what you're referring to that are covered, but not financial penalties per se and not external dispute resolution processes per se.

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

But they're limited to operational?

[Annette Gibbons]

They are limited to operational.

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

If the railway fails to comply and your grain is destroyed as a result, that's not operational.

[Annette Gibbons]

In that case, that would be subject to the administrative monetary penalty scheme.