The Harper government moves to strengthen rail freight service

“The Harper government is taking action in the interest of all Canadians to enhance the effectiveness, efficiency and reliability of the entire rail freight supply,” Minister Lebel said. “This bill will help shippers maintain and grow their businesses while ensuring that railways can manage an efficient shipping network for everyone.”

This announcement fulfills a key commitment following the recommendations made by the Rail Freight Service Review Panel in 2011. The Panel’s report encouraged the use of bilateral service agreements between shippers and railways as an effective way of bringing more clarity, predictability and reliability to rail service.

Most shippers acknowledge there has been improvement in rail service since the Review began. The new legislative provision builds upon that progress, and will help solidify these gains.

“To continue creating jobs and growth for the Canadian economy, agriculture producers and processors must be able to get their world class product to market in a reliable and efficient way,” said Minister Ritz.

The new process will create a strong incentive for shippers and railways to negotiate service agreements commercially. If these negotiations are not successful, shippers will be able to trigger a fast and efficient arbitration process with the Canadian Transportation Agency. The goal of the legislation is to encourage railways and shippers to work together.

The arbitrator will have the mandate to establish terms and conditions of service based on the shipper’s needs, as well as the railways’ requirement to provide adequate and suitable service to all the other customers. Strong enforcement mechanisms will hold railways to account for obligations imposed by an arbitrator.

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.

SOURCE Transport Canada