Assessment of the Act

Railway line transfers and discontinuances

The Agency and the Federal Court of Appeal have rendered significant decisions concerning the determination of the net salvage value (NSV) of rail lines.

In a judgment of the Federal Court of Appeal regarding a Decision of the Agency (Decision No. 383-R-2007) under subsection 144 (3.1) of the Act, the Court clarified jurisprudence on NSV determinations by ruling that Division V of the Act is a complete code and operates according to definite timelines that cannot be modified by the Agency.

The Agency has no discretion to modify the timeline established for the completion of the discontinuance and abandonment process, and, in particular, within the 6-month period foreseen under subsection 144(4) of the Act. Accordingly, it is likely that the Agency will encounter difficulties completing the NSV of rail lines under this subsection within the timelines prescribed in the Act when there are difficult issues to be resolved, such as the assessment of environmental remediation costs or when winter weather conditions prevent the inspection of a railway line to assess track conditions. This may, in some cases, prevent the Agency from rendering the services it has been instructed by Parliament to provide to the parties involved.

Parliament may wish to consider whether there are exceptional circumstances under which the Agency should be allowed to extend the timelines set in Division V of the Act to meet the intent of legislation and ensure the application of procedural fairness.

Power to order parties to produce reports at their cost

Sections 144 to 146 of the Act require the Agency to provide a service to determine net salvage value. However, there is no explicit legislative requirement for parties involved to undertake studies in order to provide necessary information for the Agency to make an informed and full determination.

Such studies may involve evaluations, environmental assessments or technical reports. While the Agency may request such information, and has the legislative authority to ensure it is reimbursed for its costs by the applicant under subsections 144(3.1) and 146.3(1), there is no clear requirement on the part of the parties under subsections 145(5) or 146.2(7) to pay for the costs of studies requested by the Agency to support its decision-making process. The costs associated can be substantial. The Agency, however, is still expected to make a determination with or without this information. In an ongoing case, as a result of having to request a study deemed necessary to make decisions and to facilitate agreement to provide such costly studies, the Agency created new procedures to allocate costs for studies among parties. While successful in that particular situation, there is still no clear obligation on the part of the parties to provide the information required by the Agency, nor to cover the costs in the case of determinations under subsections 145(5) or 146.2(7) of the Act.

A modification to the Act could serve to clarify that the Agency can order a party or parties to produce necessary studies at their cost (and to determine the apportionment of costs between the parties where appropriate), or to reimburse costs incurred by the Agency to obtain the necessary studies.

Shipper complaints

Upon a shipper's complaint, pursuant to section 120.1 of the Act, the Agency can investigate unreasonable charges or terms and conditions for the movement of traffic or provision of incidental services contained in a tariff that is applicable to more than one shipper. If found to be unreasonable, the Agency can order changes to certain charges and conditions for the movement of traffic or provision of incidental services.

The Agency has only had three complaints to date under this new provision.

One related to fuel surcharges and was dismissed by the Agency in 2008-09 on the basis that the carriage of traffic in question was covered by the terms and conditions of a confidential contract between the parties, which included fuel surcharges set out in a tariff that was incorporated by reference into the contract. The Agency found that parties are bound by the contracts which they enter into and agree to for their mutual benefit and as such, that the Agency had no jurisdiction to change the terms of a contract between parties on application under this section of the Act.

Concerns by certain shipper groups were subsequently expressed to the Agency that this ruling has severely limited the recourse Parliament intended to be available to shippers against unreasonable charges and associated terms and conditions, as confidential contracts include a term which, by reference, incorporates all of the railway's tariffs.

In 2010-2011, Governor in Council confirmed that the Agency does have the jurisdiction to consider shipper complaints under section 120.1, whether or not a related tariff provision is contained in a confidential contract between parties. This Decision is currently under Judicial Review.

Authority to investigate and suspend unreasonable domestic tariff provisions

Sections 67.1 and 67.2 limit the Agency's authority to cases where a complaint has been received, thereby limiting the Agency's ability to conduct investigations concerning a carrier's adherence to its domestic tariff and the reasonableness of a carrier's terms and conditions of domestic carriage.

There are no similar complaint-driven constraints in respect of international tariffs.

This means that a decision requiring a carrier to change its international tariff because it has been determined to be unreasonable cannot be extended to the equivalent domestic tariff unless there has been a specific complaint about the domestic tariff. However, should the Agency find a domestic tariff provision unreasonable, it can order changes to be made to a carrier's domestic tariff while also ensuring these are reflected in the carrier's international tariff.

Subsection 67.2(1) of the Act allows the Agency to suspend a domestic tariff against which a complaint has been filed, but only after the Agency has first determined that the tariff is unreasonable. This differs from the international regime where the Agency has the ability to suspend an international tariff pending the results of its investigation and decision on the matter.

Over the years, the Agency has received several complaints that relate concurrently to both domestic and international carriage, and has suspended the international condition at issue pending investigation, while the domestic condition remains in effect. This situation tends to create confusion for consumers.

The inability of the Agency to take action on its own motion regarding domestic tariffs can result in unequal treatment between domestic and international air travellers and increases the complexity of compliance for industry. It can also create confusion for passengers when dealing with the same air carrier, since different rules may apply for domestic and international legs of a flight.

A potential solution to avoid such confusion would be to allow the Agency to broaden its review to include the domestic tariff when investigating an international tariff provision, whether the investigation is of its own initiative or as a result of a consumer complaint. This could provide consistency in approach and eliminate situations where the Agency has found an international tariff to be unreasonable, but can take no action against the same provision domestically with the same carrier.

Allowing the Agency to also suspend a potentially unreasonable domestic tariff provision pending its determination, in cases when it has taken similar action for the same international tariff provision, could also potentially eliminate an inconsistency that can confuse consumers.

Authority to address systemic issues related to international tariffs

The Convention for the Unification of Certain Rules for International Carriage by Air (Montreal Convention) amended important provisions of the Warsaw Convention relating to compensation for losses during the international carriage of persons, baggage and cargo. It came into force in 2003, and has been incorporated into domestic law by the Carriage by Air Act.

A number of actions have been taken by the Agency to encourage air carriers to incorporate the terms and conditions of the Montreal Convention into their tariffs. Nonetheless, a significant number of carriers have still not done so.

In exercising its jurisdiction as the Canadian aeronautical authority to address the issue of non-compliance with the Montreal Convention, the Agency can act on its own motion as it deals with an international tariff. However, such matters must currently be addressed on a carrier-by-carrier basis.

To obtain consistency, based on existing legislation, Agency staff have begun to launch processes with each and every carrier individually. The Agency regulates hundreds of carriers operating international air services and tariffs typically contain many pages of legal text addressing liability matters.

The legal framework governing the Agency's activities in respect of air transportation requires that tariffs be just and reasonable, and to be such, tariffs must comply with Canadian law, both domestically and internationally.

While progress in ensuring compliance is being made, allowing the Agency to address systemic issues of non-compliance with international conventions and Canadian law on a systemic basis would provide the Agency with additional leverage and methods to compel all non-compliant carriers to comply.

One approach to dealing with this issue may be to provide the Agency with the power to substitute or suspend terms and conditions of air carriage for all, or a group of, carriers and allow the Agency to issue an order applying to all air carriers to implement tariffs consistent with Canadian law and international conventions signed by Canada. Such an order, if disregarded by those carriers not in compliance with Canadian law, could be enforced by administrative monetary penalties.

It is the Agency's view that such an approach, while ensuring fairness among carriers, would also enable more efficient and effective enforcement of Canadian law.

Investigation of systemic accessible transportation matters

Subsection 172(1) of the Act allows the Agency to investigate accessible transportation matters which are brought before it only upon complaint. The Agency's investigation is limited to the issues raised by the applicant against a particular carrier or terminal operator.

While individual issues are effectively resolved through the complaint adjudication process, the following systemic issues are problematic:

• Undue obstacles related to industry-wide policies or practices may only be resolved with the service provider named in the complaint. Persons with disabilities may continue to encounter the same undue obstacles with other service providers.
• Decisions placing requirements to remove undue obstacles to accessibility on only one or some service providers can create significant competitive cost and/or operational disadvantages among providers.
• Individual parties to complaints often do not fully and effectively represent the interests of other affected parties. This cannot be effectively addressed unless other affected parties intervene. However, their participation and the extent of involvement are at their discretion. Therefore, complaints that may have ramifications for an entire industry may not have the benefit of a broader investigation that brings forward all the issues and interests.

Examples of past systemic issues brought forward on complaint include the one-person-one-fare policy and the provision of oxygen on board aircraft and, more recently, matters related to the carriage of passengers with allergies aboard aircraft.

As well, a complaint may be filed against a carrier's policies which may have a broad public interest component, but due to the nature of the complaint, the Agency is limited as to what it can investigate.

Parliament may wish to consider a legislative amendment giving the Agency the power to expand the scope of a case in order to investigate issues raised in a complaint on an industry-wide basis, when this is determined to be appropriate. Such an amendment could enable the Agency to more effectively review issues that have broad implications for stakeholders, while not necessarily placing individual transportation service providers at an unfair competitive disadvantage. It would also allow the Agency to stay an application that has ramifications for an entire sector while it completes a thorough investigation.

Having the flexibility to investigate known broader issues at the beginning of a process rather than having to wait for further complaints would allow for greater efficiency.

To preserve the integrity of accessibility review, including undue hardship analysis, any orders issued by the Agency would be applied on an individual service provider basis. This would only be done after ensuring interests are fully considered and weighed and after taking into consideration the operational and economic circumstances of each of the individual service providers.

The current jurisdiction of the Agency limits its ability to expand the scope of its investigation into accessibility issues when it is appropriate to do so, thereby placing limits on the Agency's ability to act effectively and consistently.

Jurisdictional overlap with the Canadian Human Rights Act

The Canadian Transportation Agency, the Canadian Human Rights Commission (CHRC) and the Canadian Human Rights Tribunal (CHRT) have the power under their respective legislation to address complaints by persons with disabilities regarding the accessibility of the federal transportation system.

Sections 170 and 172 of the Canada Transportation Act explicitly set out the mandate of the Agency to ensure that undue obstacles to the mobility of persons, including persons with disabilities, are removed from federally-regulated transportation services and facilities.

In 2007, the Supreme Court of Canada confirmed that Part V of the Canada Transportation Act is human rights legislation and that the principles of the Canadian Human Rights Act must be applied by the Agency when it identifies and remedies undue obstacles. The Supreme Court also acknowledged that the Agency uniquely has the specialized expertise to balance the requirements of persons with disabilities with the practical realities – financial, structural and logistic – of the federal transportation system.

Section 171 of the Act requires the Agency and the CHRC to coordinate their activities in order to avoid jurisdictional conflict, and a memorandum of understanding designed to achieve this was entered into between the Agency and the CHRC. Despite this, the CHRT issued a Decision which dealt with the same complainant and identical issues while arriving at a different decision from one previously made by the Agency. In this case, the jurisdictional overlap resulted in a conflicting outcome.

The CHRT Decision could have significant jurisdictional implications for future transportation-related accessibility complaint applications.

This jurisdictional overlap can lead to the following problems:

• Complainants face uncertainty as to which body should address their complaints, particularly given the different remedies available under the Canada Transportation Act and the Canadian Human Rights Act. Although the Agency has the mandate to remove undue obstacles from the federal transportation network, it does not have the power to award compensation for pain and suffering, unlike the CHRT.
• Respondents (e.g., carriers, terminal operators) face the possibility that they will have to defend the same issues under two different legislative regimes.
• To the extent that both the Agency and the CHRC/CHRT deal with the same complaint, there is uncertainty and added costs for the respondent and the Government of Canada.

At the request of the Agency, the Federal Court undertook a judicial review on these jurisdictional issues at the end of 2009-10. In October 2010, the Federal Court overturned the CHRT's Decision, affirming the jurisdiction of the Agency as the principal expert tribunal in all transportation matters, including those related to accessibility.

The Federal Court ruling has been appealed by the CHRT. The Agency will report further on this issue once the appeal has been heard.

To clarify jurisdictional boundaries between the Agency and the CHRC/CHRT, the Canada Transportation Act could be amended to confirm the Agency's exclusive mandate with respect to dealing with complaints by persons with disabilities regarding the accessibility of the national transportation network.

Clarification of the Agency's two main business functions

The Canadian Transportation Agency is an independent body of the Government of Canada which currently performs two key functions within the federal transportation system.

• As a quasi-judicial tribunal, the Agency, informally and through formal adjudication, resolves a range of commercial and consumer transportation-related disputes, including accessibility issues for persons with disabilities. It operates like a court when adjudicating disputes.
• As an economic regulator, the Agency makes determinations and issues authorities, licences and permits to transportation carriers under federal jurisdiction.

In its role as an economic regulator, some of the Agency's decisions – including many pertaining to charter permits or licensing activities – have effectively become routine and involve little or no discretion. The delivery of such routine, non-discretionary regulatory services could be dealt with more effectively by staff.

However, there are no provisions for such a delegation of authority to staff in the Canada Transportation Act. Currently, the Act:

• Provides limited guidance regarding the role of Members or the Chair/Chief Executive Officer (Chair/CEO);
• Requires Members to make all Agency decisions; and
• Makes no distinction between the adjudicative and regulatory provisions administered by the Agency.

In the Agency's opinion, when the Act is next reviewed consideration should be given to clarifying:

• The authority of the Chair/CEO over the administration of economic regulations involving non-discretionary or routine decisions and powers of delegation in that respect; and
• The two distinct functions of the Agency and the procedural expectations vis-à-vis each function.

These changes would:

• Allow Members to concentrate on their core role as adjudicators;
• Help distinguish between the responsibilities carried out by the Agency as an administrative public service organization and those borne by its Members as a tribunal; and
• Provide for the efficient, effective and timely administration of the routine and regulatory matters within the purview of the Agency.

120 day deadline

Subsection 29(1) of the Act states that the Agency will make its decision in any proceeding before it as expeditiously as possible, but no later than 120 days after the originating documents are received, unless the parties involved agree otherwise.

The Agency has set in place high performance standards. With a view to ensuring transparent, fair and efficient regulation of Canada's transportation system, the Agency implemented a new Performance Measurement Framework in 2007. This framework was amended in late 2010-11 to support the Agency's next three-year Strategic Plan (2011-2014).

Performance indicators specific to, and based on benchmarks for, different areas of its service delivery have since been implemented and reported on in its Annual Report. For example, in 2010-11, the Agency exceeded its performance targets related to air licensing and charters by issuing 88 percent of all air licences within 14 days and 97 percent of all charter permits within 30 days. On the other hand, the resolution of complex dispute cases can require, and in certain cases has required, more than 120 days.

The Agency has adopted a series of service-specific, time-related performance measures which are more effective for overall Agency accountability than the single maximum 120-day legislated timeframe for all proceedings before the Agency. In all cases, these measures are based on time-related targets of less than 120 days. The transportation industry has been informed of these targets and the Agency reports to Parliament on its performance against them.

These performance measures and processes are relevant to the nature of each business activity and have been designed to ensure that the Agency's services are provided in an efficient, transparent and client service-oriented manner. Performance results are published in the Agency's Annual Report to Parliament and on its Web site for clients and stakeholders.

Such results-focussed performance indicators establish benchmarks and determine the level of service delivery the Agency needs to achieve to help maintain an efficient federal transportation system. They allow the Agency to track how closely its objectives are being met and to implement continuous improvements to enable it to meet the accountability expectations of Parliament and Canadians.

In light of the fact that subsection 29(1) of the Act already requires the Agency to act as expeditiously as possible, and as the Federal Court has ruled that the 120-day legislated timeframe is not mandatory, the Agency recommends the removal of this 120-day deadline and that, in its place, the Agency be required to establish service-specific, time-related performance measures. These measures would continue to be reported on annually in the Agency's Annual Report to Parliament.

This proposed change would contribute to better managing expectations by recognizing that in all instances the Agency aims to issue its decisions in less than 120 days, while acknowledging that this is not possible in certain circumstances.

Improving annual reporting to Parliament

Subsection 42(1) of the Act requires the Agency's Annual Report to be submitted to the Governor in Council by the end of May, two months following the close of the fiscal year ending March 31.

The Agency's Departmental Performance Report is only required to be filed by the end of July, four months following the close of the fiscal year ending March 31.

Allowing the Agency to submit its Annual Report by the end of July, rather than the end of May, would:

• Provide the Agency with a more reasonable time frame to finalize March 31 year-end data;
• Strengthen the linkages between the Annual Report and the Agency's Departmental Performance Report and Report on Plans and Priorities; and
• Create greater efficiency for the Agency to meet all of its reporting requirements to Parliament within its resource allocation.