Principles related to level of service arbitration objections

A notice of intent and the demonstration by a shipper that an attempt has been made to resolve the matters are the basis for determining whether a submission will be referred for arbitration. A further contextual consideration is that it is expected that a shipper will have made specific requests to a railway company regarding its specific level of service needs and that discussions or negotiations will have been attempted and rejected by the railway company or have taken place in advance of a notice of intent being filed. This attempt to negotiate will have informed a railway company of a shipper’s specific requests which may later form part of a shipper’s notice of intent and submission for arbitration of level of service terms.

Attempt

The Canadian Transportation Agency (Agency) will apply certain principles when determining whether an attempt has been made to resolve the matters contained in an arbitration submission. These principles include that the shipper:

1. has the evidentiary burden to establish that an attempt has been made to resolve the matters in the arbitration submission;
2. must provide sufficient evidence to prove that a specific request to the railway company has been made for the purpose of commencing negotiations for matters that it includes in a submission for arbitration. This evidence would normally be expected to be in writing;
3. cannot submit matters for which no attempt to resolve has been made.

If a shipper fails to respect the above principles, it risks having an arbitration dismissed at an early stage before the exchange of proposals.

Further to these principles, "an attempt", as contemplated by paragraph 169.33(1)(b) of the Canada Transportation Act (CTA), encompasses any process used by a shipper to attempt to negotiate a level of service agreement with a railway company. This may include, at the shipper’s discretion, the process provided for in subsections 126(1.1) to (1.5) of the CTA. However, this process is not mandatory. A shipper may access level of service arbitration without making a request under subsection 126(1.1) of the CTA.

Attempt to resolve following the Notice of Intent

Although the 15-day period following the filing of a Notice of Intent may provide an opportunity to either party to conduct further negotiations, a shipper is not required to under subsection 169.33(1) of the CTA.

Notice of Intent

In accordance with subsection 169.33(2) of the CTA, a notice of intent must contain the descriptions referred to in paragraphs 169.32(1)(a) and (b) of the CTA and, if a shipper’s submission will contain an undertaking described in paragraph 169.32(1)(c) of the CTA, a description of that undertaking.

A notice of intent is a pre-requisite for the filing of a submission for arbitration. As such, it would not be reasonable to interpret subsection 169.33(2) as requiring that a Notice of Intent duplicate the detailed description required to be contained in the submission for arbitration.

Subsection 169.33(2) of the CTA simply requires a high level description of the matters to be submitted for arbitration which is sufficient for a railway company to assess its response (consideration of filing an objection). That is, a notice of intent need not be detailed to the same level required for a submission of arbitration which may be filed a minimum of 15 days after the filing of a notice of intent.

Process of the Agency to assess notice of intent and attempt

The most efficient way to address the requirements set out in subsection 169.33(1) of the CTA is to address them at the earliest possible opportunity.  To this effect, the Agency may, upon receipt of a shipper's notice of intent and submission for arbitration, dismiss all or specific portions of the shipper's submission if, in the Agency's opinion, one or more of these requirements has not been met.

Scope of the matters a shipper is entitled to submit for arbitration

The arbitration provisions set out in Part IV, Division II of the CTA set out a process where a shipper may request arbitration on level of service with respect to the manner in which the railway company shall fulfill its obligations under section 113 of the CTA.  However, not everything shall be submitted to the arbitrator, only what falls under the scope of paragraphs 169.31(a) to (e).  Subsection 113(1) of the CTA sets out, in broad terms, the railway company's obligation to provide adequate and suitable accommodation for the receiving, carrying, loading, unloading and delivering of traffic offered for carriage on the railway and that it must be done with due care and diligence.

It is based on these obligations that the scope of the matters a shipper is entitled to submit for arbitration ought to be defined, including what constitutes an operational term. An operational term that the shipper is entitled to submit for arbitration must relate to the railway company's level of service obligations set out in subsection 113(1) of the CTA.

The Agency is responsible for ensuring that the matters submitted by a shipper for arbitration that are referred to an arbitrator are, in fact, matters that the shipper is entitled to submit for arbitration.  Section 169.35 of the CTA states that "the Agency must refer […] the matters for arbitration to be conducted by an arbitrator" and section 169.37 of the CTA states that "the arbitrator's decision must establish […] terms, that the arbitrator considers necessary to resolve the matters referred to him or her for arbitration."   There are no provisions in the CTA that grant the arbitrator the power to determine if a matter submitted is a matter the shipper is not entitled to submit for arbitration or to subject the arbitration to the effect that any such matter would not be considered by the arbitrator in rendering a decision.  This is clearly a matter for the Agency to determine in referring eligible matters to the arbitrator.

Section 169.37 of the CTA requires that all matters referred to the arbitrator must be considered by the arbitrator, and therefore the Agency's role is to ensure that the matters that are referred to the arbitrator are, pursuant to section 169.31 of the CTA, matters which a shipper is entitled to submit for arbitration; the arbitrator cannot, at any point, "scope out" matters once they have been referred for arbitration.

As such the Agency may, upon receipt of the shipper's notice of intent and submission for arbitration, declare the shipper is not entitled to submit a matter to the Agency for arbitration and, pursuant to section 169.43 of the CTA, order that the matter will not form part of the arbitration.

However, this in no way affects a railway company's right to apply to the Agency under subsection 169.43(1) of the CTA, within 10 days of receiving the shipper's submission,  for an order declaring that a shipper is not entitled to submit to the Agency for arbitration a matter contained in its submission. After an Agency order dismissing certain matters from the arbitration, a railway company may still file an objection which may point to other matters that it claims should be dismissed from the arbitration.

Third Party Representation

The Agency recognizes a shipper’s ability to choose its own representative when negotiating with a railway company.

In cases where a third party represents a shipper and attempts to negotiate with a railway company on its behalf to arrive at a level of service agreement, there must be evidence that the third party is representing an identified individual shipper and that the specific matters to be negotiated are for that same shipper. The evidence provided by a shipper must demonstrate that the representative made a specific request for a level of service agreement on terms to be negotiated for the individual shipper. There is no provision in the level of service arbitration provisions of the CTA for group level of service agreements.