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TheStreet Open House

The Harper Government Moves To Strengthen Rail Freight Service

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.

An administrative monetary penalty of up to $100,000 could be issued by the Canadian Transportation Agency for each violation of an arbitrated service level agreement. This is in addition to other existing remedies in the Act (e.g. Level of Service Complaint) to ensure railways meet their service obligations.

Further details about Rail Freight Service Review process can be found at http://www.tc.gc.ca/eng/policy/acg-acgb-menu.htm.


Backgrounder






SERVICE CONTRACTS UNDER THE FAIR RAIL FREIGHT SERVICE ACT

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.

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