Bill C-11, the Transportation Amendment Act, amends the Canada Transportation Act (CTA) and the Railway Safety Act and includes consequential amendments to other acts. It was introduced in the Canadian House of Commons on May 4, 2006 and received Royal Assent on June 22, 2007.

The Bill was similar in many respects to Bill C-44 (which in turn was similar in most aspects to Bill C-26), which died on the order paper with the dissolution of Parliament in 2005. The highlights of Bill C-11 as they pertain exclusively to the railway sector are set out in this legal update with a focus on amendments to Sections 104 through 106 and specifically the lien and lease registry (Registry) maintained by the Registrar General of Canada. Readers should be aware that the provisions of Bill C-11, now SC 2007, Chapter 19, also apply generally to the air and marine sectors. Information on these particular amendments and new legislative provisions is available from McCarthy Tétrault.

Financial Transactions Provisions

Division III, Part III of the CTA dealing with financial transactions was amended by Bill C-11 as follows.

First, the tedious requirement to publish evidence of deposits under Sections 104 and 105 in the Canada Gazette is now eliminated. This publication requirement was a nuisance and its elimination should provide some modest cost savings to parties who file documentation in the Registry. Furthermore, the "effectiveness" of Section 104 filings, which was partly dependent on publication, is no longer in issue.

Second, the amendments also contemplate the introduction of regulations that would speak to the formal requirements of Section 104 and Section 105 filings. To date, users of the Registry have relied on informal guidelines issued by Industry Canada as well as existing convention. No draft regulations have been tabled to date.

Third, the language of Sections 104 and 105 has now been streamlined to ensure parallel structure. Curiously, the language of Section 104, which previously dealt only with mortgages and hypothecs of railway companies, now includes "a security agreement entered into by a railway company." That raises the question of whether rolling stock financing documents should be registered both under Sections 104 and 105 where the obligor is a railway company. A railway company is a company in possession of a certificate of fitness issued by the Canadian Transportation Agency. Most rolling stock transactions involve issuance of security by an intermediary, not by the railway company itself. As a result, a Section 104 filing in that instance would likely be inapplicable. The distinction is likely of little practical relevance for search purposes in that searches at the Registry pull up both Section 104 and 105 deposits simultaneously.

Fourth, the amendments also contemplate the possibility of memoranda or summary filings under Section 104. These had previously not been technically permissible.

Fifth, the amendments pave the way for a potential move of the responsibility for Sections 104 and 105 filings and the Registry itself from Industry Canada to another federal department, presumably Transport Canada, although no confirmation of this move exists to date.

Last, amendments in Section 106 have been introduced to parallel certain US bankruptcy provisions for the rail sector. The new legislative provisions in Bill C-11 should clarify when the stay of a court would apply in the event of an insolvency of a railway company where a scheme of arrangement has been filed. Specifically, new language in Section 106(5)(c) indicates that no court order would affect the right of any creditor where any default event has occurred on or after the 60 day statutory period which default event is then cured in accordance with the transaction documentation.

Review of Mergers and Acquisitions

Beyond the financial transaction provisions of Bill C-11 are additional provisions of interest to the rail sector in a variety of areas. The CTA provisions on mergers and acquisitions, previously restricted only to the airline industry, have been expanded to refer to all federally-regulated transportation undertakings of any significant size. What this means in the rail context is a new requirement that where a transaction is proposed, in addition to already existing requirements under the Canadian Competition Act, will be notice requirements to the Minister of Transportation. These notice requirements are triggered if the parties are required to notify the transaction under the Competition Act. Required disclosure under the CTA will be as set out in guidelines. To the extent that a proposed transaction "raises issues with respect to the public interest as it relates to national transportation," the Minister may direct an examination of issues.

Miscellaneous

Bill C-11 also creates a mediation process for disputes concerning federal transportation matters within the jurisdiction of the Canadian Transportation Agency. This provision may be of particular interest for railways where a rate or service issue is in question and mediation, as opposed to formal adjudication, under federal auspices might be of interest.

The federal regulator has also been granted new regulatory authority in respect of noise and regulation of railway companies and complaints from the public in respect of noise.

Last, other provisions arise in the context of amendments to time periods for railways to amend their publicly available plans as well as slightly altered rules with respect to discontinuance of rail lines particularly with respect to public passenger service providers.

For more information on Bill C-11 or transportation matters generally, please contact Anna Tosto