WINNIPEG, Dec. 11, 2012 /CNW/ - Today, the Honourable Denis Lebel,
Minister of Transport, Infrastructure and Communities, along with the
Honourable Gerry Ritz, Minister of Agriculture and Agri-Food, announced
the introduction of the Fair Rail Freight Service Act bill to give
companies that ship goods by rail the right to a service agreement with
railways. It will also create an arbitration process to establish an
agreement when commercial negotiations fail.
"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
"This bill is good news for Canada's farmers as it will help ensure all
shippers are treated fairly by the railroads. We will continue to work
on improving the performance of the supply chain for all crops, with an
emphasis on innovation, capacity, efficiency and stakeholder
collaboration through the Crops Logistics Working Group as we move
towards a stronger rail freight supply chain and stronger Canadian
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
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
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
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
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.
BACKGROUND ON THE RAIL FREIGHT SERVICE REVIEW AND LEGISLATION
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
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
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.
SOURCE: Transport Canada
For further information:
Office of the Honourable Denis Lebel
Minister of Transport, Infrastructure and Communities
Transport Canada, Ottawa
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