To exercise the new right to a service contract, a shipper will first have to request one from the railway. The railway will then be obligated to respond within 30 days. If an agreement cannot be reached through commercial negotiations, service arbitration would be available to a shipper to establish the terms of service. To access the remedy, a shipper would have to satisfy the Agency that an attempt was made to resolve the matter with the railway.
The arbitration process will be interest-based (as opposed to final offer), with a 45-day timeline. This could be extended by the arbitrator, for up to 20 days, if needed. The arbitrator’s decision will be binding and non-appealable. The imposed contract would be akin to a confidential contract and have a one-year term (or longer, if both parties agree).
The new provision describes the elements that must be included in an arbitrated service agreement broadly, including the operational terms and conditions of service that a railway must comply with. These could include communication protocols and performance standards, and operational terms in the event of a performance failure (e.g., recovery plans). This broad definition of elements gives the arbitrator flexibility to impose comprehensive service contracts tailored to a shipper’s needs.
The Act currently requires that decisions rendered by the arbitrator be commercially fair and reasonable to both shippers and railways. The new provision provides guidance for the arbitrator to take into consideration the shipper’s transportation needs to maintain and grow its business, as well as the railway’s need to operate an efficient network for the benefit of all users. In rendering a decision the arbitrator will consider the specific circumstances of the situation, including any voluntary commitments made by the shipper to the railway.
The new provision allows for an Administrative Monetary Penalty (AMP) of up to $100,000 to be applied against a railway for each confirmed violation of an arbitrated service agreement.
The Rail Freight Service Review was launched in 2008 to address ongoing issues with rail freight service. It fulfilled a government commitment as part of the 2008 process that amended the Canada Transportation Act. On December 22, 2010, after extensive consultations with stakeholders, the Panel submitted its Final Report to the Minister of State (Transport). The Report recommended commercial and, if necessary, regulatory solutions to address the issues identified by the Review.
On March 18, 2011 the federal government formally responded to the Review, accepting the Panel's commercial approach and that it intends to implement a number of steps to improve the performance of the entire rail supply chain. As part of its response, the government committed to engage a facilitator to develop a template service agreement and a streamlined commercial dispute resolution process between railways and shippers. The government also indicated its intent to table a bill to give shippers the right to a service agreement with the railways and provide a process to establish such an agreement should commercial negotiations fail.
On December 11, 2012, the federal government tabled a bill to fulfill this commitment. In addition to the rail service provision, the bill also includes some administrative amendments that will streamline internal processes and make minor updates to the legislation. The new legislative provision and other amendments to the Act are in line with the priorities of the Government of Canada, including economic growth, job creation and prosperity for Canadians.
December 2012
