Vol. 148, No. 8 — April 9, 2014
SOR/2014-71 March 28, 2014
CANADA TRANSPORTATION ACT
Regulations Amending the Canadian Transportation Agency Designated Provisions Regulations
P.C. 2014-309 March 27, 2014
Whereas, pursuant to subsection 36(2) of the Canada Transportation Act (see footnote a), the Canadian Transportation Agency has given the Minister of Transport notice of the annexed Regulations;
Therefore, the Canadian Transportation Agency, pursuant to subsections 177(1) (see footnote b) and (1.1) (see footnote c) of the Canada Transportation Act (see footnote d), makes the annexed Regulations Amending the Canadian Transportation Agency Designated Provisions Regulations.
Gatineau, November 1, 2013
GEOFFREY C. HARE
Canadian Transportation Agency
His Excellency the Governor General in Council, on the recommendation of the Minister of Transport, pursuant to subsection 36(1) of the Canada Transportation Act (see footnote e), approves the annexed Regulations Amending the Canadian Transportation Agency Designated Provisions Regulations, made by the Canadian Transportation Agency.
REGULATIONS AMENDING THE CANADIAN TRANSPORTATION AGENCY DESIGNATED PROVISIONS REGULATIONS
1. The heading before section 1 of the French version of the Canadian Transportation Agency Designated Provisions Regulations (see footnote 1) is replaced by the following:
2. Sections 1 and 2 of the Regulations are replaced by the following:
1. In these Regulations, “Act” means the Canada Transportation Act.
2. The provisions, requirements and conditions set out in column 1 of the schedule are designated for the purposes of subsections 177(1) and (1.1) of the Act.
3. The portion of section 3 of the English version of the Regulations before paragraph (a) is replaced by the following:
3. The maximum amount payable in respect of a contravention of a provision, requirement or condition set out in column 1 of the schedule is the amount
4. (1) The heading of column 1 of the English version of the schedule to the Regulations is replaced by “Provision, Requirement or Condition”.
(2) The heading of column 2 of the English version of the schedule to the Regulations is replaced by “Maximum Amount Payable — Corporation ($)”.
(3) The heading of column 3 of the English version of the schedule to the Regulations is replaced by “Maximum Amount Payable — Individual ($)”.
5. The schedule to the Regulations is amended by adding the following after item 13:
Any requirement imposed under section 169.37
COMING INTO FORCE
6. These Regulations come into force on the day on which they are registered.
REGULATORY IMPACT ANALYSIS STATEMENT
(This statement is not part of the Regulations.)
An Act to amend the Canada Transportation Act (administration, air and railway transportation and arbitration), Bill C-52, was introduced in the House of Commons on December 11, 2012, and received Royal Assent on June 26, 2013.
That Act amended the Canada Transportation Act (CTA) to, among other things, add subsection 177(1.1), which empowers the Canadian Transportation Agency (the Agency) to make regulations designating any requirement imposed on a railway company in an arbitrator’s decision made under section 169.37 of the CTA as a requirement the contravention of which may be proceeded with as a violation in accordance with sections 179 and 180 of the CTA. Subsection 177(1.1) also empowers the Agency to prescribe, by regulation, the maximum amount payable as a penalty for each violation, but that amount cannot be more than $100,000. In order to be able to assess an administrative monetary penalty for the violation of a requirement imposed in an arbitrator’s decision made under section 169.37 of the CTA, the requirement must first be designated by regulation. An amendment to the Canadian Transportation Agency Designated Provisions Regulations (the Regulations) is therefore necessary.
The Regulations also need to be amended to modify some of the terminology to better align it with the terminology used in the CTA.
As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including arbitration on level of services.
As an economic regulator, the Agency makes determinations and issues authorities, licences and permits to transportation carriers under federal jurisdiction. It also establishes and administers administrative monetary penalties to enforce the provisions of various acts and regulations for which the Agency has sole or shared responsibility.
The Rail Freight Services Review (the Review) was launched in 2008 to address ongoing issues with rail freight service. On December 22, 2010, after extensive consultations with stakeholders, the panel conducting the Review submitted its final report to the Minister of State (Transport). The report recommended commercial and, if necessary, regulatory solutions to address the issues identified by the Review.
On March 18, 2011, the federal government formally responded to the Review, accepting the panel’s commercial approach and indicating its intent to implement a number of steps to improve the performance of the entire rail supply chain. As part of its response, the Government committed to engage a facilitator to develop a template service agreement and a streamlined commercial dispute resolution process between railway companies and shippers. The Government also indicated its intent to table a bill to give shippers the right to a service agreement with railway companies and provide a process to establish such an agreement, should commercial negotiations fail.
On December 11, 2012, the federal government tabled Bill C-52 to fulfill this commitment, and Royal Assent was given on June 26, 2013. Bill C-52 amends the CTA to allow shippers to request that railway companies enter into service level agreements. If no agreement is reached through commercial negotiations, shippers may then request that the Agency appoint an arbitrator, who will impose service obligations to be provided by railway companies in an arbitral award. Bill C-52 also includes a provision which allows for administrative monetary penalties of up to $100,000 to be imposed on railway companies for each and any violation of an obligation contained in the arbitral award. In order to implement this provision, the Regulations must be amended to allow for penalties to be assessed when a designated enforcement officer establishes that a violation of an arbitral award has occurred.
The primary objective of the amendments to the Regulations is to designate any requirement imposed on a railway company in an arbitrator’s decision under the new section 169.37 of the CTA as a requirement the contravention of which may be proceeded with as a violation in accordance with sections 179 and 180 of the CTA. This will allow for the levying of an administrative monetary penalty in the event of rail carriers violating the arbitrator’s decision.
The amendments also harmonize the terminology used in the Regulations with the terminology in the CTA.
The amendments designate any requirement imposed under section 169.37 of the CTA as a requirement the contravention of which may be proceeded with as a violation in accordance with sections 179 and 180 of the CTA. The amendments also prescribe that the maximum amount payable in respect of a contravention of such a requirement is $100,000.
The amendments allow for a penalty of up to $100,000 to be applied against a railway company for each violation of an obligation in an arbitrated level of service agreement.
The amendments also modify section 2 of the Regulations to add a reference to the new subsection 177(1.1) of the CTA.
In addition, the English text of sections 2 and 3 of the Regulations is amended to add a reference to requirements and conditions designated for the purposes of subsections 177(1) and (1.1) of the CTA. Prior to this amendment, the Regulations only referred to provisions designated for such purposes. It is not necessary to amend the French text of the Regulations because, based on the wording used in the enabling authority for the making of the Regulations, the term “texte designé” covers provisions, requirements and conditions.
The amendments also replace the heading of column 1 of the English text of the schedule that reads “Designated Provision” with “Provision, Requirement or Condition” and, in the heading of columns 2 and 3 of the English text of the schedule, replace the term “Maximum Amount of Penalty” with the term “Maximum Amount Payable.”
The “One-for-One” Rule does not apply to these amendments to the Regulations, as there is no change in administrative costs to business.
Small business lens
The small business lens does not apply to this proposal, as there are no incremental costs to small business expected as a result of the proposed amendments.
Consultations were held by means of debates in both the House of Commons and the Senate. A large number of witnesses, including members of the shipper, carrier and port/terminal communities, appeared before parliamentary committees. Both the Standing Committee on Transport, Infrastructure and Communities and the Standing Committee on Transport and Communications held hearings on this Bill, where the issue of the administrative monetary penalty and its value was specifically debated.
The Government noted that certain parties had raised concerns that the amount of the administrative monetary penalty would be too low to constitute a deterrent that would promote compliance with the arbitral award. The Government’s response was that the level of the penalty would be significant: up to $100,000 for each violation. Multiple violations of an obligation in an arbitrated service level agreement might result in multiple contraventions and the resulting penalty would increase accordingly.
The railway companies also proposed an amendment to completely eliminate the administrative monetary penalties provision in Bill C-52. Again, this proposed amendment was rejected by the House Standing Committee on Transport, Infrastructure and Communities because it was important to ensure that the Agency would have a strong enforcement tool to force the railway companies to comply with the arbitrated service level agreements, if necessary.
The following is a link to the minutes of the House of Commons Standing Committee on Transport, Infrastructure and Communities (TRAN): www.parl.gc.ca/CommitteeBusiness/CommitteeMeetings.aspx?Cmte=TRAN&Language=E&Mode=1&Parl=41&Ses=1.
The following is a link to the minutes of the Senate Standing Committee on Transport and Communications: www.parl.gc.ca/SenCommitteeBusiness/CommitteeTranscripts.aspx?parl=37&ses=1&Language=E&comm_id=19.
The following is a link to the minutes of Bill C-52 through Parliament: www.parl.gc.ca/LegisInfo/BillDetails.aspx?Language=E&Mode=1&billId=5926164.
Prior to arbitration, a shipper must first request the railway company to enter into a service agreement. The railway company is obligated to then respond within 30 days. If an agreement cannot be reached through commercial negotiations, service arbitration would be available to a shipper to establish the terms of service. To access the remedy, a shipper would have to satisfy the Agency that an attempt was made to resolve the matter with the railway company.
Section 169.37 of the CTA outlines the elements that must be included in an arbitrated service agreement, including the operational terms and conditions of service that a railway company must comply with. These can include communication protocols and performance standards, and operational terms in the event of a performance failure (e.g. recovery plans). This broad definition of elements gives the arbitrator flexibility to impose comprehensive service contracts tailored to a shipper’s needs.
The amendments designate any requirement imposed under section 169.37 of the CTA as a requirement the contravention of which constitutes a violation, thereby allowing for the levying of an administrative monetary penalty in the event of rail carriers violating the arbitrator’s decision. The amendments also prescribe the maximum amount of the penalty, specifically, $100,000. This maximum amount may be applied against a railway company for each confirmed violation of an arbitrated level of service agreement, as negotiated under the provisions contained in section 169.37 of the CTA. The possibility of being subject to such a penalty creates an incentive for rail carriers to comply with the arbitrator’s decision because of the relatively quick and efficient imposition of an administrative monetary penalty for non-compliance.
Regarding costs to the rail carrier community, only those subject to an administrative monetary penalty will be affected.
Implementation, enforcement and service standards
Every complete and valid request for an investigation by a shipper that is a party to an arbitrated level of service agreement will be investigated by the Agency utilizing existing resources. The Agency will not initiate investigations on its own motion or on the basis of requests by other parties. Once a determination is made as to whether a violation of the arbitrator’s decision has occurred, a penalty will be assessed where applicable. The maximum penalty for contravention of an arbitrated level of service agreement is $100,000.
All administrative monetary penalties are subject to two levels of appeal, both within the Transportation Appeal Tribunal of Canada (TATC): a one-member review panel and a three-member appeal panel. TATC appeal panel decisions are final and binding, and are not appealable. As with all quasi-judicial decisions, they are subject to judicial review, in this case, by the Federal Court.
In all cases, the enforcement response by the Agency will be tailored to achieve both compliance and deterrence.
Canadian Transportation Agency
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