Determination No. R-2022-117

APPLICATION

[1] On June 3, 2022, VDS applied to the Canadian Transportation Agency (Agency) for a certificate of fitness to operate a railway authorizing, under the terms of various agreements, the operation of passenger transportation services by heavy rail offered by VIA Rail Canada Inc. (VIA), by the National Railroad Passenger Corporation (Amtrak) and by EXO on the Viaduc du Sud, between mileages 72.96 and 73.99 of the Saint-Hyacinthe Subdivision and between mileages 1.20 and 1.36 of the Montreal Subdivision.

[2] To issue a certificate of fitness to VDS, the Agency must find that VDS has demonstrated that the requested certificate applies to a railway that falls within the legislative authority of Parliament and, consequently, within federal jurisdiction. In addition, the Agency must be satisfied that the VDS railway project will have adequate liability insurance coverage in accordance with the Railway Third Party Liability Insurance Coverage Regulations (Liability Insurance Regulations).^{Note 1} The relevant provisions of the CTA and the Liability Insurance Regulations are set out in the Appendix.

BACKGROUND

[3] On December 8, 2021, the Agency found, in Determination R-2021-184, that InfraMTL was operating a railway within the meaning of subsection 90(1) of the CTA and that it was required to hold a certificate of fitness. Consequently, InfraMTL had to apply for a certificate of fitness and comply with the requirements of the CTA.

[4] On December 23, 2021, InfraMTL and VIA signed a lease (agreement) under which InfraMTL provides access to the rail infrastructure used to operate a heavy rail passenger service to VIA to ensure that its passenger service continues to be operated on the Viaduc du Sud.

[5] On March 28, 2022, InfraMTL transferred to VDS all its rights, titles and interests of the agreement with VIA regarding the portion of the railway lines.

[6] On April 1, 2022, InfraMTL sold to VDS part of the assets composing the Viaduc du Sud, including all the rail infrastructure used to operate heavy rail passenger service over a length of about 1.6 kilometres, located entirely within the City of Montréal, Quebec. This sale includes the entirety of the ownership and operating rights for the corresponding railways.

[7] VDS indicates that it carries out, as owner, support structure maintenance activities on the Viaduc du Sud to ensure the sustainability and integrity of existing services. It also indicates that it has developed the contract relationships necessary to ensure access to and maintenance of railway infrastructure as well as traffic control and management to fulfill its railway operating obligations in accordance with the CTA.

Liability insurance coverage put in place by VDS

[8] VDS indicates that in addition to the liability limits established through agreements in place with stakeholders and insurance policies taken out by these stakeholders, it also independently holds general liability insurance sufficiently and appropriately covering the risks presented by its railway operations on the Viaduc du Sud, namely:

i) third-party bodily injury or death, including injury or death to passengers;

ii) third-party property damage, excluding damage to goods carried on a shipper’s behalf;

iii) risks that are associated with a leak, pollution or contamination.

[9] VDS provided to the Agency a written confirmation that it has fully disclosed to its insurers the nature and extent of, and the risks associated with VDS’s operation on the Viaduc du Sud as part of the overall assessment of the risks and risk exposure. This full disclosure ensures that the liability program provides coverage for any third-party liability that VDS may incur as a result of its railway operations.

[10] Regarding the amount for VDS’s self-insured deductible in terms of a claim, VDS provided the Agency with an excerpt from a resolution by its Board of Directors confirming that this amount will be maintained in its bank account at all times, and it will be used exclusively, as needed, to pay the deductible of its insurance coverage.

ANALYSIS

Is VDS operating a railway under the legislative authority of Parliament?

[11] Further to Determination R-2021-184, InfraMTL transferred to VDS its operating rights for the part of the railway located on the Viaduc du Sud, which is used to operate heavy rail passenger services. InfraMTL also transferred to VDS all its rights and obligations stemming from the agreement with VIA, which gives VIA access to the railway infrastructure located on the Viaduc du Sud so it can continue to operate heavy passenger rail service in this location.

[12] Subsection 146(2) of the CTA specifically states that when a railway company transfers a railway line or the rights that it holds, including a transfer authorized under subsection 141(3) of the CTA, the railway company has no further obligations with respect to any operations.

[13] Thus, pursuant to subsection 146(2) of the CTA, InfraMTL no longer has obligations under CTA regarding this portion of the railway lines. Given the transfer of ownership and operating rights of this portion of the lines to VDS, it is now VDS that holds all the rights and must fulfill all the obligations set out in Parts III and IV of the CTA related to the operation of this portion of the lines that was transferred to VDS to ensure business continuity.

[14] As the transfer involves part of the railway lines for which an agreement with VIA still applies, this portion of the lines continues to be for the general advantage of Canada within the meaning of subsection 144.1(2) of the CTA.

[15] Consequently, the Agency finds that VDS is operating a railway that falls within the legislative authority of Parliament within the meaning of subsection 90(1) of the CTA and must therefore hold a certificate of fitness to operate its railway.

Does VDS have sufficient liability insurance coverage?

[16] Regarding liability insurance and self-insurance, the Agency examined, in accordance with the requirements described in the Liability Insurance Regulations, all the information and documents produced by VDS when it submitted its application to operate a passenger rail service on the Viaduc du Sud. The Agency also examined VDS’s capacity to pay the amount of its self-insurance deductible based on the information included in the application.

[17] In addition, the Agency considered the unique arrangements involved in operating passenger service on the Viaduc du Sud, including the liability limits and the insurance coverage recognized in the various agreements in place.

[18] In light of the foregoing, the Agency finds that VDS has sufficient liability insurance coverage, including self-insurance, to operate its railway.

CONCLUSION

[19] Consequently, the Agency, under paragraph 92(1)a) of the CTA, issues to VDS Certificate of Fitness 22001 to allow it to operate a railway in the City of Montréal used for heavy passenger rail service on the Viaduc du Sud.

[20] The Agency also reminds VDS that, under section 94 of the CTA, VDS is required to inform the Agency of any changes to its liability insurance and any changes to its operations that may have an impact on its liability insurance.

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APPENDIX TO DETERMINATION R-2022-117

Canada Transportation Act, SC 1996, c 10 (CTA)

Paragraph 90(1)(b)(i) of the CTA provides that no person shall operate a railway without being the holder of a certificate of fitness that is issued under paragraph 92(1)(a) for the portion of the operation that relates to a passenger rail service.

Subsection 91(1) of the CTA provides that any person may apply for a certificate of fitness for a railway, including a person who owns or leases the railway or controls, either directly or indirectly, a person who owns or leases the railway.

Paragraph 92(1)(a) of the CTA provides that the Agency shall issue a certificate of fitness for the proposed operation of a railway that relates to a passenger rail service or for the proposed construction of a railway, if the Agency is satisfied that there will be adequate liability insurance coverage for the proposed operation or construction, as determined in accordance with the regulations.

Section 94 of the CTA provides that the holder of a certificate of fitness shall notify the Agency in writing without delay

(a) if the liability insurance coverage is cancelled or altered; or

(b)  if there are any changes to the construction or operation that may affect the liability insurance coverage.

Subsection 141(3) of the CTA provides that subject to section 144.1, a railway company may sell, lease or otherwise transfer its railway lines, or its operating interest in its lines, for continued operation.

Subsection 144.1(2) provides that whenever a railway company’s rights and obligations under an agreement with VIA Rail Canada Inc. are vested in another person or entity by subsection (1), the portion of the railway line to which the agreement relates is hereby declared, as of the day the transfer takes place, to be a work for the general advantage of Canada.

Subsection 146(2) of the CTA provides that if the railway line, or any interest of the railway company in it, is sold, leased or otherwise transferred by an agreement entered into through the process set out in sections 143 to 145 or otherwise, the railway company that conveyed the railway line has no obligations under this Act in respect of the operation of the railway line as and from the date the sale, lease or other transfer was completed and has no obligations with respect to any operations by any public passenger service provider over the railway line as and from that date.

Railway Third Party Liability Insurance Coverage Regulations, SOR/96-337

The Regulations provide, including but not limited to, the following:

3. Third party liability insurance coverage is adequate if there is

(a) sufficient insurance, including self-insurance, to compensate for the following matters that may arise out of an applicant’s proposed construction or operation of a railway, including a proposed temporary construction or operation of a railway resulting from unforeseen or exceptional circumstances:

(i) third party bodily injury or death, including injury or death to passengers,

(ii) third party property damage, excluding damage to cargo, and

(iii) named perils pollution;

(b) a written confirmation provided to the Agency by the applicant that the applicant has fully disclosed to the insurer the nature and extent of the proposed construction or operation of the railway and any associated third party liability risks; and

(c) full disclosure to the Agency by the applicant of the amount of self-insured retention and of the third party liability risks that may arise from the proposed construction or operation of the railway.