Mr. Speaker, thank you for attempting to regain a little order. It is much appreciated.
What I was saying was that there is significant disappointment, not just in the House but in the shipping community. The legislation does not fully achieve the objectives that the shipping community had been hoping for. They have been waiting for this legislation for a long time.
The debate about level of service agreements in the country began in 2006-2007. Before that period of time, the focus was on costing agreements and the level of freight rates and whether or not farmers and other shippers were receiving the full value that they thought they should receive. The argument was all about having costing reviews and the timeliness of costing reviews, what revenue was raised by freight rates and how it was shared or not shared across the entire continuum, from the shipper to the port and ultimately to export destinations.
In 2006-2007, the focus really zeroed right in on the issue of level of service agreements. That is when this debate really began.
The government took a while to think about that, but in 2008, the government said it agreed that there was a legitimate issue, that service levels might well be deficient and there ought to be a review of the level of service provided by the railways to the various shippers.
I should make the point that we are not talking here about just the agricultural sector. As large and as important as the agricultural sector is, the shipper community includes those who move virtually anything by rail. It includes the forestry sector, the chemicals sector, the fertilizer sector, mines and minerals, and manufactured goods. It is a broad cross-section of those who rely upon our railway system. They made the general complaint that they thought the services they were getting were in fact deficient.
As I said, the government agreed in principle, but there was an issue here, starting in 2008, and it said it would have a formal review. That review panel was appointed in the fall of 2009. It got to work pretty quickly and completed its work in about a year. It finished its report in the fall of 2010. The report was officially published at the beginning of 2011 and by about March, the government said it accepted the report of the review panel and that it intended to implement the report.
The panel essentially said that the marketplace for transportation services was basically a non-competitive marketplace, that there was not a fair balance between the shippers on one side and the railways on the other and that there was indeed an imbalance of market power that was biased in favour of the railways. That report of the review panel appointed by the government came out at the beginning of 2011.
In March of 2011 the government said that it essentially accepted that principle and that it would do something about it. The discussion continued to go on without a specific proposal from the government. In fact, it referred the whole matter back to another review process, chaired by Mr. Jim Dinning from Alberta. He was not able to move the yardsticks any further in trying to reach consensus between the railways and the shippers, so the process dragged on through 2011 and through 2012. By the end of 2012, in December of last year, the government finally tabled legislation. We are now halfway through 2013.
I would just remind the House that this whole process began in 2007. It has been a long time, and the shippers have waited patiently for legislation that they hoped would address their concerns. Unfortunately, they are disappointed. They find this legislation to be deficient.
The shippers essentially wanted four things in the legislation. First, they wanted in legislation the enshrined right that they would be entitled to an enforceable level of service agreement with the railways. That was number one.
Number two, they wanted the legislation to lay out what constitutes the basic services that the railways are to provide and how performance or non-performance would be measured. That was their second request. They wanted some clarity and some specificity about what constitutes service and how it is measured.
Number three, they wanted it very clear that if there were a breakdown somehow in the system, if the level of service that they contracted for was not in fact delivered as promised, then they would be entitled to recoup damages for the deficient service that they were delivered.
I would note that the review panel had reported, when it examined all of the anecdotes presented by shippers, that the typical agricultural shipper in western Canada could expect to get exactly what it ordered from the railways only 50% of the time. That is a pretty compelling statistic. If we can count on the transportation we have ordered to deliver only 50% of the time, we have a big problem if we are relying upon the railways to actually perform in that manner. Obviously the situation was serious and the shippers wanted the opportunity to recoup damages. They hoped they would not have to do that, but they wanted the opportunity to recoup damages if in fact the level of service fell below what was expected.
Finally, the fourth element was the dispute resolution mechanism.
The right to have a level of service agreement was point number one. They could negotiate that. If the negotiations were not successful, then it would be referred by arbitration to the Canadian Transportation Agency and the agency would impose an arbitrated agreement. That actually is in the law and that is a good part of Bill C-52. It is the other elements of the ask that are missing. The clarity with respect to the definition of what services are to be provided and the consequences if the level of performance falls short. In other words, the ability by the shippers to recoup damages.
Those two things, the clarity of the definition and the ability to recover damages, are not in Bill C-52. Those are the two primary reasons why the shipping community feels that this legislation is deficient.
The government's answer with respect to the definition of level of service is that it is just going to rely upon the traditional language that has been in the Canadian Transportation Act for 40 or 50 years and it does not need to upgrade that language or make it any more specific to satisfy the concerns of shippers. I think quite frankly that the government is going to find out that this is a false conclusion on its part. The definition in the act is what has caused the problem in many ways over the last number of years. It is not clear. It is like nailing Jello to the wall. To simply say, “we're going to carry on with those same definitions of service levels in the future and cross our fingers and hope for the best”, the government, the shippers and the railways are going to be disappointed. The language has proven to be deficient in the past and the definition of insanity is continuing to do the same old thing over and over again and expecting a different result.
We are not going to get a different result, so the definition in this legislation is not adequate to change the water on the beam, to solve the problem that the shippers have been complaining about and that the government's own review panel concluded was in fact a legitimate problem and that the shippers were not crying wolf.
Second, on the issue of enforcement, what happens when the level of service turns out to be deficient and it does not measure up to the standards that the shippers have every right to expect? The government's answer is not to give the shippers damages. The government's answer is to establish a system of administrative monetary penalties, in layman's language, fines for railway substandard performance. Some might think that is a kind of penalty and enforcement mechanism, would that not work? The problem is the fine goes to the government. It goes into the general revenue fund.
It simply becomes an additional revenue source for the treasury of the Government of Canada and bears no relationship whatsoever to the transportation problem out in the field. What the shippers need is the ability to recover damages. If a shipment is not delivered on time and it misses a customer or a market, that is a monetary penalty that shippers have to pay. They lose income, lose profit and incur added costs because the transportation system has failed them.
It does them no good whatsoever to say we will slap the railways on the wrist and they will pay a fine to the government. That does not move an extra bushel of wheat, that does not move an extra tonne of lumber. All it does is transfer a bit of money from the railways to the government. Meanwhile, the shipper is stuck with the same problem: deficient service for which there is no remedy because they cannot recover damages unless they go through the elaborate process of going to court.
We just had a discussion about small shippers and the disadvantages they have. The railways have deeper pockets for the lawyers in the court process than the shippers have and, undoubtedly, that imbalance will continue to function in favour of the railways and to the disadvantage of the shippers.
Probably the greatest illustration of the discrepancy remains on the playing field. Remember, the panel said the original problem was a lack of balance on the playing field. It was tilted in favour of the railways and the shippers were largely in a captive market situation. They were not in a position to find some other railway to move their product and they were not in a position to enforce their legal rights because they did not have the legal rights, so they were stuck in a disadvantageous position.
Perhaps the greatest illustration of that discrepancy is the fact that railways can, and always have been able to, level unilateral demurrage charges against the shipper if the shipper fails to deliver their side of the bargain on time or in the way the railways had expected. The railways can extract a cash penalty from a shipper called demurrage if the shipper falls down on its obligations, but on the flip side of the equation, the shipper does not have the ability to recover a cash penalty or cash damages from the railways if the railways fail to perform. Therefore, the railways have the power to punish the shippers, but the shippers do not have the power to punish the railways. That is a classic illustration of the fundamental market imbalance that exists in this situation and the imbalance that the shippers had hoped would finally be rectified by this new legislation.
Those are the fundamental problems. The legislation creates, to a certain extent, some steps forward. There will be a legislated right on the part of all shippers to have level of service agreements with the relevant railways. They can first try to negotiate those agreements and if the negotiations succeed, great. Everybody hopes that is the way it will work, that they will not need recourse to the legislative and regulatory framework so that the parties will be able to work out a deal. However, if the shipper is not able to successfully conclude an agreement with the railways, the legislation takes an additional step, which is good, in saying that the shipper can then to go to the Canadian Transportation Agency and get an arbitrated settlement from the agency. Those steps in the legislation are positive steps forward.
However, let me repeat that where it falls down is in the language that is in the act or, more accurately, that is not in the act defining what “level of service” means. The same vague old language is being used that has been there for decades and that vague old language is part of the problem. There needs to be greater clarity about what constitutes level of service and the way level of service is measured. The second major deficiency is that when there is a failure to perform on the part of the railways, there is no ability on the part of the shipper to go to the Canadian Transportation Agency through some form of dispute settlement process and obtain liquidated damages to address the practical problem that the shipper has, that their goods are not moving because the railways have failed to perform.
Paying a penalty to the government does not do the shipper any good. The money is in the pocket of the government, not in the pocket of the shipper and the shipper is the one that has experienced the problem.
Those are the issues that were discussed at committee. Those are the issues that members of this House, both in committee and otherwise, have discussed with the shipping community across the country. They say that, because of the legal provision in Bill C-52 that would create the right to have a level of service agreement, the legislation is a step forward. It is, as they put it to me both verbally and in writing, better than nothing. They would like substantially more, but it is better than nothing.
On that basis, that it is some small improvement over what has existed in the past, Liberals will be reluctantly supporting this legislation. We would prefer to have it vastly improved. There still is an opportunity to do that. The parliamentary process is not yet complete.
Hopefully before it is complete and before this legislation is given royal assent, the government will have the opportunity to reflect on those two key points. First, a more effective definition of level of service and the way it is measured; second, the way proper service is enforced by the railways, by giving the rights to the shippers to have liquidated damages, as opposed to just a penalty paid to the government.
If the government would change those two things, the shipper community members would be a lot more satisfied with this legislation than they are today. I think all of us are reluctantly accepting it the way it stands, but the government will find it will be revisiting this issue in a year or two.
There is a statutory review of the Canada Transportation Act in the year 2015. This is going to come back again, because this time the government has not seized the opportunity to do it right, the way it should have.
