On May 4, 2006, the Minister of Transport introduced Bill C-11 in the House of Commons to amend the Canada Transportation Act (“CTA”), and that Bill received Royal Assent in the early summer of this year.
Bill C-11 is similar to its predecessors, C-26 and C-44, both of which died on the Order Paper with the dissolution of prior sessions of Parliament. According to department officials, Bill C-11 focuses on “balancing the interests of communities, consumers, commuters and urban transit authorities with those of air and rail carriers.” No mention is made of the balance between rail carriers and shippers. Bill C-58, introduced in the House on May 30, 2007, addressed some of those issues sought by some rail shippers for many years.
Bill C-58 (at 2nd Reading before the House was prorogued) might have clarified CTA provisions intended to protect rail shippers from abuse of market power by rail carriers. Among other things, Bill C-58 would have expressly allowed a group of shippers to initiate final offer arbitration, addressing a complaint that the use of this dispute settlement provision was prohibitively expensive for smaller shippers and even some not-so-small shippers.
Further, Bill C-58 would have repealed a 20-year-old provision that a shipper seeking relief respecting rates or service under the CTA first demonstrate that it would suffer substantial commercial harm if the relief were not granted. This reverse onus provision is one of the most frequently mentioned weaknesses of the CTA. There were a number of new provisions as well, and these will be discussed in future notes or articles if the proposed Bill is reintroduced into the current session of Parliament, as is expected.
Bill C-11, now law, deals with all modes of transportation. It contains three significant amendments which are summarily canvassed under these headings:
- National Transportation Policy,
- Reviews of Mergers and Acquisitions, and
- Dispute Resolution: Public Passenger Service Providers and Railway Companies.
National Transportation Policy
Bill C-11 replaces section 5 of the CTA with an updated National Transportation Policy Statement that had gone virtually unchanged since 1967, although governments had recently attempted to make similar changes. The new policy’s main feature is to elevate the role that competition, economics and efficiency play in serving the needs of users, advancing the well-being of Canadians and enabling competitiveness and economic growth of areas throughout Canada.
Bill C-11 is striking in its reference to principles used in antitrust economics to benefit society in general and users in particular. The policy statement recognizes the dilemma inherent in reliance on competition when rates and services are provided by monopolies, which characterizes Canadian transportation providers across modes, particularly rail, but also air and marine carriers in certain corridors. Whether the new policy results in constraining the market power of carriers over price and service remains to be seen.
Review of Mergers and Acquisitions
Under the Competition Act, parties engaged in a transaction exceeding certain monetary thresholds must notify the Commissioner of Competition, allowing the Commissioner to block, approve or change the terms of such a transaction. Before the passage of Bill C-11, the CTA merger review provisions set out mandatory notification procedures for parties involved in airline industry transactions.
Bill C-11 repeals those previous provisions and replaces them with a new regime that would govern any federal transportation undertaking (air, rail, marine, buses, trucks, airports or marine ports). As a result, parties to a transaction involving a transportation undertaking that is notifiable under the Competition Act must also give notice to the Minister of Transport. Transactions involving air transportation require further notification to the Canadian Transportation Agency. In addition to the information required by the Competition Act, the notice must contain information that will allow the Minister to assess public interest concerns in relation to national transportation.
Dispute Resolution: Public Passenger Service Providers and Railway Companies
Adopting the proposals in predecessor bills, Bill C-11 amends the provision definitions in the CTA to include “public passenger service provider” (“PPSP”). A PPSP is defined to mean “VIA Rail Canada Inc., a passenger rail service provider designated by the Minister or an urban transit authority.”
Bill C-11 adds provisions that pertain to a process of dispute resolution between PPSPs and railway companies. When a PPSP and a railway company cannot agree on a rate, term or condition related to the operation of the passenger service on the railway’s facilities, the PPSP may, after reasonable efforts to resolve the matter, apply to the Agency for a decision. Either party may also re-apply to the Agency for a new resolution if they cannot agree on the implementation of the previous decision. Notably, this procedure intends to replace the existing final offer arbitration recourse for PPSPs set out in Part IV of the CTA.
Final offer arbitration is a process available to a shipper dissatisfied with the rates or conditions of service proposed by a railway company. An independent arbitrator reviews the final offers made by each party, and selects one or the other. Predecessor bills proposed amendments to the final offer arbitration procedure which Bill C-11 did not adopt. Recourse to final offer arbitration is still available to a “railway company engaged in passenger rail services,” though it remains to be seen whether the new system will gain traction over the final offer arbitration mechanism.
In contrast to the final offer arbitration procedures that involve an independent arbitrator, the above amendments give the Agency a role in dispute resolution. The dispute resolution mechanism allows for PPSPs to gain access to federally regulated railways in a manner designed to allow for compensation to the railways by the PPSP that prevents the imposition of unreasonably high rates.