Decision No. 367-R-2002

July 10, 2002

File No. T7300-16

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APPLICATION

On March 21, 2002, the Canadian Industrial Transportation Association (hereinafter the CITA) filed with the Canadian Transportation Agency (hereinafter the Agency) the application set out in the title.

CITA advises that it represents over 200 shippers that purchase in excess of $6 billion in freight transportation services annually. Its membership includes chemical companies, resource companies, vehicle and parts manufacturers, processed food companies, grain companies, durable goods manufacturers, consumer and retail goods manufacturers, as well as representatives of other economic sectors in Canada. Its stated mission is to actively promote a more competitive and cost effective North American transportation system.

PRELIMINARY MOTIONS

Prior to the filing of any answer on the merits of this application, the Canadian National Railway Company (hereinafter CN) and the Canadian Pacific Railway Company (hereinafter CP) filed preliminary motions questioning, among other matters, the jurisdiction of the Agency to consider the application, the standing of the applicant to file this application and the need to sever the application, if it proceeds, into two separate proceedings - one against each railway company.

In its Decision No. LET-R-119-2002 dated April 22,2002, the Agency opened pleadings on the above mentioned motions concluding that they raise fundamental issues which ought, in the circumstances, to be determined as early as possible in the proceedings.

ISSUE

The issue to be addressed is whether the motions on the Agency's jurisdiction should be granted.

If the motions are granted, the application is to be dismissed. Conversely, if the motions are denied, the Agency is to examine the motions relating to CITA's standing to file this application. In the event that the Agency upholds CITA's right to file this application, the Agency will then direct a procedure for the exchange of pleadings on the merits of the application, or applications, as the case may be.

POSITION OF CN

CN argues that the Agency's jurisdiction is limited to that which it is specifically empowered to do under the Canada Transportation Act (hereinafter the CTA), that there is no general declaratory power in the CTA and, even if such a power does exist, it is only in respect of specified railway rates. In this latter respect, CN refers to the mandate of the Agency to determine interswitching rates, competitive line and joint rates, maximum grain rates and statutory level of service obligations and to refer disputes to an arbitrator under the final offer arbitration provisions of the CTA.

In support of its position, CN refers to the decision of the Federal Court of Appeal in Canadian National Railway Company vs. Brocklehurst, [2002] 2 F.C. 141, which, according to CN, found that following the further deregulation of the industry in 1996, the Agency has no regulatory mandate unless there is a specific provision of law granting it such a power.

According to CN, in effectively deregulating the Canadian railway industry through the repeal of the National Transportation Act, 1987 [Repealed, 1996, c. 10, s. 183], Parliament intended that the Agency possess only a limited mandate over railway tariffs with no residual or general jurisdiction over railway charges. This lack of jurisdiction over rates generally is, in CN's opinion, illustrated in Canadian National Railway Company vs. Gordon Moffatt, Her Majesty in Right of the Province of Newfoundland and Labrador, Canadian Transportation Agency and Canadian Pacific Railway Company, the Atlantic Provinces Trucking Association (2001), 207 D.L.R. (4^th) 118.

Thus, unlike the clear mandate provided under previous railway legislation, the absence of a specific jurisdiction to investigate service charges or penalties under the present legislation means that there is no such mandate today. Similarly, the lack of enabling language under the CTA is to be compared with that in the Canada Labour Code, R.S.C, 1985, c. L-2, which grants an express declaratory power to the board. Further, CN states that the national transportation policy which appears in section 5 of the CTA is a statement of policy only, and is not, as the applicant claims, a jurisdiction-conferring provision.

CN also refers to section 25 of the CTA and concludes that the powers of a superior court granted to the Agency under this provision do not make the Agency a superior court or otherwise capable of issuing general declaratory rulings.

POSITION OF CP

CP asserts that CITA's application rests upon the allegation that the tariffs at issue are unfair, unreasonable and poorly administered by the railway companies. According to CP, there is nothing in the CTA, directly or inherently, granting the Agency the authority to determine such a matter.

Rather, CP suggests that if a shipper seeks to challenge a railway company's tariff on the grounds that it is unfair, the remedy available is final offer arbitration under the CTA. Otherwise, and when there is no particular failure or complaint giving rise to an Agency decision-making power elsewhere under the CTA, no other remedy exists before the Agency. Thus, CP argues that while the Agency might in certain circumstances grant declaratory relief, this can arise only when as a condition precedent, the Agency's jurisdiction is triggered under a substantive provision of the law.

According to CP, the CTA does not authorize the issuance or application of tariffs. Rather, the CTA only restricts the procedure for the publishing of a tariff and the content of tariffs. Thus, CP states that it does not need statutory authority to either publish or apply a tariff in any given circumstance. Further, and once applied, the tariff becomes a contract between the carrier and the requesting party so that any disputes that relate to the contractual relationship is outside the purview of the Agency.

Regarding any implied power to issue declarations, CP suggests that, to the extent that a declaration would amount to a discretionary remedy, the discretion should not be exercised when, as is the case here, aggrieved shippers have available to them a more common accessible remedy such as final offer arbitration.

POSITION OF CITA

CITA argues that its application is not a rate complaint as it does not ask the Agency to adjudicate upon the fairness or reasonableness of the rules and charges contained in the railway companies' tariffs. Rather, it seeks a declaration that CN and CP have arbitrarily and unilaterally imposed the rules and charges in the subject tariffs and that this is not authorized by the CTA.

Accordingly, CITA argues that the application is not seeking regulatory interference in a contract or any type of consequential relief. It only seeks a finding by the Agency that the tariffs either have or do not have the "force of law against non-shipper third parties as well as against shippers, pursuant to paragraph 119(1)(a) [sic] of the Act". CITA asserts that section 119 of the CTA grants the Agency the regulatory mandate to issue such a ruling here.

According to CITA, the Agency's power to grant declaratory relief is not founded in any specific section of the CTA. Rather, CITA suggests that the powers, rights and privileges of a superior court that are granted to the Agency under section 25 of the CTA include the power to issue declarations.

In support of its position, CITA references various past Agency orders and decisions which, it says, amount to legal declarations.

ANALYSIS AND FINDINGS

The Agency has examined the pleadings on these motions and CITA's application giving rise to this dispute.

Paragraph 12 of the application details the "basis" of this application as being twofold. First, the CTA does not authorize CN and CP to unilaterally impose the rules and charges in the subject tariffs on shippers or other parties. Secondly, despite the lack of a statutory authority, CN and CP have unilaterally established and issued the rules and charges in these tariffs and taken the position that such tariffs are legally binding on affected parties.

This, according to CITA, merits the conclusion that the tariffs are not authorized by the CTA, are inconsistent with the national transportation policy set out in section 5 of the CTA and that this conclusion ought to be set out in a "declaration" by the Agency.

CITA suggested that this would not amount to a finding by the Agency on the reasonableness or fairness of the tariffs. Instead, this declaration would only amount to a finding that the tariffs do not have the "force of law" pursuant to section 119 of the CTA.

The Agency acknowledges that the application seeks a declaration. In this respect, the Agency finds that the applicable legislation, namely the CTA, unlike some other federal laws, does not refer to a specific mandate to issue "declarations". This, however, does not determine the issue. There are two reasons.

First, the Agency's enabling legislation speaks throughout of Agency "determinations", "quot;, ", "quot;findings", "quot;, ", "quot;decisions" and "orders" or "directions" as well as the Agency "prescribing terms and conditions". In certain provisions of the CTA, the Agency may also "deem" something to be, as with extended interswitching under subsection 127(2) of the CTA, or it may "establish" matters such as railway routings for competitive line rates under section 132 of the CTA.

In appropriate circumstances, and depending upon the facts of the matter, while not a declaration per se, any of these can amount to a "declaration". For example, a decision in a particular case may be that the CTA has been complied with, or not, and this finding would effectively "declare" the breach or the compliance to exist.

In many cases, this statutory decision-making power also carries with it the ability to offer a particular remedy. Thus, if there has been a breach of the level of service obligations (sections 113-116 of the CTA), the Agency can, among other things, specify "maximum charges" or "grant" running rights to another railway company.

Secondly, there may be instances where a tribunal like the Agency has the power to issue a declaration when the matter in dispute goes to the root of its jurisdiction in the sense that it is integrally related to a matter that is clearly within the Agency's jurisdiction and where, as referenced by CP in its submission, there are no adequate and effective statutory remedies available to redress a particular matter.

In the present case, CITA has asked for a declaration that the impugned tariffs do not have the "force of law". The Agency takes this to mean that, if these tariffs somehow offend or breach the CTA, they, therefore, do not have any legal basis. The applicant has not asked on this account that the tariffs be set aside but, clearly, this is the implication.

The applicant's position is that if the railway companies are not permitted or mandated to do something under the CTA, then they cannot do it. In this respect, the application references previous legislation where the statute (the National Transportation Act, 1987) expressly granted a railway company the ability to issue a tariff "at the request of a shipper" and "in any other case". CITA argued that the deletion of the language "in any other case" means, by implication, that the railway companies have only a limited power to issue tariffs - being able to do so now only upon shipper request.

The Agency finds that this change in the wording of section 119 of the CTA (previously section 115 under the National Transportation Act, 1987) does not by implication delineate railway company powers. This conclusion is based upon the clear policy direction under the CTA that the Canadian railway industry be deregulated, leaving the railway companies free to conduct their business as they see fit, although subject to a limited number of exceptions. In other words, laws of general application are to apply to railway companies now, rather than industry-specific laws, such as those set out under the Railway Act [Repealed, 1996, c. 10, s. 185], or the National Transportation Act, 1987.

There are exceptions to this policy, however, and they continue to be set out under the CTA. It is in respect of these specific matters that the regulator has retained any kind of jurisdiction. This conclusion is consistent with the recent findings of the Federal Court of Appeal in the Brocklehurst and Moffatt cases, referenced above.

These considerations lead the Agency to reject the applicant's argument that a federal railway company can only do that which it is expressly authorized to do under the CTA. In fact, it is quite the opposite. As the CTA is presently framed, the railway companies are free to conduct their business in any manner they see fit subject to the exceptions set out under the CTA and under any applicable general laws of general application or industry-specific laws such as the Railway Safety Act, R.S.C., 1985, c. 32 (4th Supp.), or Transportation of Dangerous Goods Act, S.C., 1992, c. 34.

It is these exceptions under the CTA (as well as under the railway Safety Act) that give rise to an Agency mandate and it is in respect of these that the Agency enjoys any kind of declaratory power. As such, this power is an adjunct to substantive powers that exist elsewhere under the CTA. The adjunct nature of this power is evident in the cases cited by the applicant as examples of the exercise of a declaratory power. In these cases, the Agency acknowledges that the declarations, to the extent that they exist, either rely on an underlying jurisdiction in the CTA giving rise to a complaint or the ability of the Agency to make declaratory findings that it does or does not have jurisdiction to rule on matters coming before it.

In a deregulated environment, the powers of the Agency over railway company tariffs are limited to determining: (i) whether a tariff has been issued upon the request of a shipper (section 118 of the CTA) or (ii) whether the railway company has published a 20-day notice of tariff rate increases (subsection 119(1) of the CTA).

As a practical matter, railway tariffs are commercial in nature and, as a legal matter, are now effectively left to the railway companies and their customers, that is outside of regulatory interference. If there is relief available to shippers, for example, in respect of such commercial matters, the CTA clearly grants them the right of final offer arbitration. That is, arbitration is available to shippers who are dissatisfied with "the rate or rates charged or proposed to be charged by a carrier for the movement of goods, or with any of the conditions associated with the movement of goods ..." (subsection 161(1) of the CTA).

In summary, tariffs are now commercial matters, to be resolved between a railway company and its customers, with final offer arbitration and the courts being available to resolve disputes in the pre-contract or post-contract stages, respectively. To the extent that a shipper apprehends anti-competitive conduct or consequences in this setting, relating for example to abuse of dominant market power, they may bring the matter to the attention of the Commissioner of Competition who is responsible for the administration of the provisions of the Competition Act, R.S.C., 1985, c. C-34.

CONCLUSION

There is no statutory authority for the Agency to make the requested declaration that the rules and charges in CN's Tariff No. CN9000 and CP's Tariff No. CPRS 6666 do not have the force of law against non-shipper third parties as well as shippers, pursuant to paragraph 119(2)(a) of the CTA. Therefore, the Agency hereby grants the motions filed by CN and CP and dismisses the application.

In light of this finding, it is not necessary for the Agency to rule on the standing and severance or any time extension matters set out in the railway companies' motions.