Issues Determined During Final Offer Arbitration

For some of the Final Offer Arbitration (FOA) requests filed with the Canadian Transportation Agency (Agency), preliminary questions were raised regarding the Agency's jurisdiction to refer these matters for arbitration. Since FOA is a private and a commercial matter between parties, the Agency keeps information relating to arbitration confidential. The Agency believes, however, that it may be helpful to the industry to have information on FOA matters which have come before and been decided by the Agency. The following list is a description of the preliminary issues, presented in a form which omits all references to parties to the FOA, as well as specific origins, destinations and commodities of the traffic involved. Please be aware that the first four FOA matters listed were filed with the National Transportation Agency, predecessor to the Canadian Transportation Agency, pursuant to the National Transportation Act (NTA, 1987).

FOAISSUES AND DISPOSITION
FOA # 1 — filed pursuant
to the NTA, 1987

Issue 1: Raised before referral to arbitrator: The carrier objected to the FOA process on the ground that the rate offered by the shipper was noncompensatory and therefore not in compliance with the requirement of the NTA 1987 that all rates be compensatory.
Agency Disposition: The Agency determined that there was no rate in existence and the matter was referred to the arbitrator.

Issue 2: Raised after arbitrator ruled: The carrier applied to have the arbitrator's decision set aside because the rate selected was noncompensatory.
Agency Disposition: The Agency determined that the Decision of the arbitrator was final and binding.

Issue 3: Raised after Agency Decision: The carrier appealed to Federal Court, submitting that the arbitrator had no authority to select a noncompensatory rate and that the arbitrator had breached rules he had established and the principles of procedural fairness by obtaining information from the shipper's counsel without advising the carrier of the information obtained.
Federal Court Disposition: The Court ruled that the arbitrator was not bound to have regard to the noncompensatory provision of the NTA 1987, but that principles of procedural fairness had been breached. The decision of the arbitrator was set aside and the matter was remitted to the arbitrator to give the carrier the opportunity to respond to the supplementary information provided by the shipper and then to confirm or vary his decision.
The parties subsequently agreed to withdraw the arbitration.

FOA # 2 — filed pursuant
to the NTA, 1987
Issue: Raised before referral to arbitrator: The carrier submitted that the FOA request did not contain the carrier's last offer. The carrier maintained that no offer could be made because the parties had a contract which stated that a rate proposal could only be offered 60 days prior to the contract's expiry. The rate submitted by the shipper as the carrier's last offer was a rate calculated by increasing the contract rate by a certain percentage.
Agency Disposition: The Agency determined that the rate submitted by the shipper as the carrier's last offer was not a rate offered by the railway. The shipper's submission was, therefore, incomplete and not in conformity with the requirements of the NTA 1987
FOA #3 — filed pursuant
to the NTA, 1987

Issue 1: Raised before referral to arbitrator: The carrier objected stating that the freight rates submitted for FOA were governed by a confidential contract and therefore not eligible for FOA without the consent of both the parties.
Agency Disposition: The Agency noted that the matter of price was not governed by the confidential contract since that issue was to be negotiated between the parties on a yearly basis. The Agency denied the carrier's request to dismiss and referred the matter for arbitration.

Issue 2: Raised before referral to arbitrator: The carrier appealed to Federal Court for leave to appeal the Agency's decision. The parties agreed to hold the arbitration proceedings in abeyance while the matter was before the court.

FOA Issue and Disposition

Federal Court Disposition: The Federal Court ruled that the FOA provisions are available when there is no confidential contract or when the confidential contract is silent or indefinite as to a term or condition of its execution. The Court ruled that the Agency's interpretation was reasonable and correct.

Issue 3: Raised before referral to arbitrator: The carrier applied to the Supreme Court of Canada for leave to appeal the decision of the Federal Court of Appeal and requested that the Agency hold the arbitration proceedings in abeyance until the legal proceedings were completed.
Agency Disposition: The carrier's request was denied. The Agency referred the matter to an arbitrator chosen by the parties.

Issue 4: Raised after referral to arbitrator: The carrier filed a motion challenging the suitability of the chosen arbitrator, objecting to the disclosing of confidential information to the arbitrator and requesting a stay in the proceedings.
Agency Disposition: The Agency determined that since the matter had been referred to the arbitrator, it was not for the Agency to decide these issues. Rather the arbitrator should decide what information was relevant to the arbitration; the parties should raise the issue of the arbitrator's suitability with the arbitrator; and any stay of proceedings was a matter to be decided between the parties and the arbitrator.

Issue 5: Raised after referral to arbitrator: Following the Agency's decision, the arbitrator withdrew from the proceedings, requiring the arbitration selection process to begin again. The carrier declined to submit a new list of names.
Agency Disposition: Agency selected and appointed the arbitrator. Carrier objected on the basis that the last offer of the carrier cannot be the published tariff.

Issue 6: Raised after referral to arbitrator: The carrier applied to the Supreme Court of Nova Scotia and was granted an interlocutory injunction. The parties were enjoined from presenting to the arbitrator submissions in support of their final offers until the Court decided the carrier's claim for an injunction against disclosure to the arbitrator information contained in the confidential contracts. The arbitrator was also enjoined from hearing the arbitration until receipt of the parties' submissions. The carrier was ordered not to make any changes to the rate in effect until the decision of the arbitrator was rendered or until January 1, 1997, whichever was earlier.

Issue 7: Raised after Referral to arbitrator: The parties subsequently agreed to withdraw the arbitration.

Agency Disposition: The Agency acknowledged the withdrawal and terminated the FOA proceedings.

FOA #4 — filed pursuant
to the NTA, 1987

Submission 2 (re-file of 1997
rate dispute)

Issue 1: Raised before referral to arbitrator: The carrier requested that this FOA submission be dismissed on the basis that the last offer of the carrier cannot be the published tariff.
Agency Disposition: The Agency determined that there was nothing in the FOA legislation to prevent a published tariff from being considered as the carrier's last offer. The matter was referred to an arbitrator chosen by the Agency.

Issue 2: Raised before arbitrator decided matter: The carrier applied to the Supreme Court of Nova Scotia and was granted an interlocutory injunction. The parties were enjoined from presenting to the arbitrator submissions in support of their final offers until the Court decided the carrier's claim for an injunction against disclosure to the arbitrator information contained in the confidential contracts.
The arbitrator was also enjoined from hearing the arbitration until receipt of the parties' submissions. The carrier was ordered not to make any changes to the rate in effect until the decision of the arbitrator was rendered or until January 1, 1997, whichever was earlier.

Issue 3: The parties subsequently agreed to withdraw the arbitration.
Agency Disposition: The Agency acknowledged the withdrawal and terminated the FOA proceedings.

FOA #5 — filed pursuant
to the CTA

Issue 1: Raised before referral to arbitrator: The carrier requested that the offer of the shipper be declared ineligible for FOA because the submission included international rates.
Agency Disposition: The Agency determined that the final offers must apply to goods within the jurisdiction of the CTA. The shipper was advised that it could re-file the submission reflecting final offers for domestic movements as well as offers for other traffic that is moved by railways and which is governed by the CTA.

FOA #6 — filed pursuant
to the CTA

Issue 1: Raised before referral to arbitrator: The carrier again objected to the shipper's final offer as it included rates to U. S. points. Carrier also requested that supporting documents filed with the shipper's submission be struck from the record.
Agency Disposition: Agency determined that valid final offers had been received for both domestic and international movements. The Agency noted that the final offers were reflective of standard railway practice for quoting international rates; the shipper had structured the international portion of its final offer so that any adjustments would apply against the Canadian portion of the movements, and the rates offered on the Canadian portion of the movements could also be specifically calculated.
The Agency found that the issue of supporting documents filed by the shipper was a matter for the arbitrator to consider and not the Agency. The matter was referred to an arbitrator chosen by the Agency.

Submission 2 re-file of the
above FOA submission

Issue 1: Raised before referral to arbitrator: The carrier requested that this submission be declared ineligible for FOA since it included rates to U. S. points.
Agency Disposition: The Agency ruled that only part of the offer presented by the shipper was eligible and would be considered for FOA.
The shipper requested that the valid portion of its offer be referred for arbitration. The shipper also sought agreement from the carrier to allow the decision of the arbitrator to be effective from the date of the shipper's submission to the Agency. The carrier refused and the matter was therefore not referred to arbitration.

FOA # 7 — filed pursuant
to the CTA

Issue 1: Raised before referral to arbitrator: The carrier expressed concern with the Notice of Intent filed by the shipper and with the reference made to its final offer. The carrier argued that the shipper presented as the carrier's last offer the final offer made by the carrier in the context of the earlier submission and as such this offer could not now constitute the carrier's last offer.
Agency Disposition: The Agency determined that the carrier was aware of the shipper's intention to submit the matter for FOA since the parties had not reached an agreement between the time the shipper filed its Notice of Intent and the time it re-filed its FOA submission with the Agency.

The Agency noted that the carrier had availed itself of its right to submit another offer to the shipper and the Agency for the purposes of the FOA proceedings and since there were clear final offers from both the carrier and the shipper, the Agency ruled that the matter would be referred for arbitration. The Agency advised the parties that unless there was an objection to the disclosure statement filed by the arbitrator, the matter would be referred to this arbitrator.

Issue 2: Raised before referral to arbitrator: An objection to the appointment of the chosen arbitrator was filed based on the disclosure statement provided by the arbitrator.
Agency Disposition: The Agency appointed an alternative candidate chosen by the parties from their respective lists of preferred arbitrators and referred the matter to this arbitrator.

FOA # 8 — filed pursuant
to the CTA
Issue 1: Raised before referral to arbitrator: A preliminary motion was filed by the carrier stating that the shipper had not established that it was the shipper entitled to make a request for FOA. The carrier requested that the FOA proceedings be stayed until this question was determined and until a related matter before the Queen's Bench of New Brunswick was decided. The carrier also requested a broad investigation be conducted by the Agency into the relationship between the shipper and its parent company.

Agency Disposition: The Agency found it unnecessary to conduct the type of investigation and analysis proposed by the carrier given the nature of the definition of shipper provided for in the CTA. The Agency noted that to find otherwise would permit the carrier, by its own action, to frustrate the ability of the shipper to obtain an arbitrated result from the FOA process.

In examining the documents filed by the shipper, the Agency found nothing to indicate that the shipper filing the FOA submission was not the owner of the goods produced or that the shipper had relinquished control of the traffic. The Agency rejected the carrier's motion to stay the FOA proceedings and referred the matter to the arbitrator.

Issue: Raised before referral to arbitrator: The carrier objected to the FOA submission on three grounds: a submission for FOA cannot make reference to the terms of a previous confidential contract; the shipper's submission cannot contemplate that the results of the arbitration be incorporated in a confidential contract unless agreed to by the carrier and; the shipper's submission cannot rely on the terms of a confidential contract which go beyond the statutory obligations of a railway company.

Agency Disposition: Ground 1: The Agency found that there were no barriers in the legislation which prevent a shipper from mentioning matters contained in an expired contract in its FOA submission. The Agency noted that the shipper had framed its submission to protect against public disclosure any commercially sensitive information contained in the contract.

The Agency also noted that the carrier's last offer included a reference to the expired contract. Since the shipper's submission must include both offers, the Agency concluded that should such information be barred from an FOA submission, a carrier could, by including a reference to a confidential contract in its offer to the shipper, prevent any matter from ever being arbitrated.

Ground 2: The Agency accepted the shipper's statement that the results of the arbitration would only be incorporated in a confidential contract if both parties consented. The Agency noted that should the carrier not wish to have the arbitrator's decision contained in a confidential contract then the rates and conditions associated with the movement would be published in a public tariff.

Ground 3: The Agency determined that the appropriateness of the conditions associated with the movement of the goods proposed by either party was a matter to be considered and determined by the arbitrator.

FOA #9 — filed pursuant
to the CTA

Issue 1: Raised before referral to arbitrator: The carrier objected claiming that the applicant was not entitled to make a submission for FOA because it was not a "shipper" since the traffic was not its property.

Agency Disposition: The Agency concluded that the applicant was a "shipper" within the meaning of section 6 of the CTA.

Issue 2: Raised before referral to arbitrator: The carrier subsequently requested a review of the Agency's decision based on new information that confidential contracts existed between the carrier and a third party which governed the traffic in question and as such precluded the matter from being submitted for FOA. The third party made a submission to the Agency supporting the carrier's position and requesting intervenor status.

Agency Disposition: The Agency denied the application for review on the basis that the information was in existence prior to the carrier's initial objection and thus did not constitute new facts or circumstances. In declining to review the decision, the Agency found that the application for intervenor status was moot. The matter was referred for arbitration.

Issue 3: Raised after referral to arbitrator: The arbitration could not be completed within the statutory time and therefore the arbitration concluded without a decision being rendered. The carrier applied to the Federal Court for leave to appeal the Agency's confidential letter decisions in respect of Issues 1 and 2.

Federal Court Disposition: The application for leave to appeal was dismissed with costs.

FOA #10 — resubmission
of FOA

Issue 1: Raised before referral to arbitrator: The shipper refiled an FOA submission as a result ofits initial submission having concluded without an arbitrated decision. Upon receiving this submission, theAgency issued procedural directions and advised the third party that it would be granted intervenor status should the carrier raise the same issue regarding the existence of a confidential contract.

The carrier objected to the second request for FOA stating that the submission was deficient on five grounds:

  • the submission did not contain the last offer made by the shipper to the carrier;
  • the carrier did not submit a last offer to the shipper and the shipper erred in submitting the existing tariffs asthe carrier's last offer;
  • the applicant is not the shipper of the grain and thus does not qualify to make an FOA submission;
  • the existence of confidential contracts between the carrier and the third party prevent the applicant as an agent for the third party from making an FOA submission and;
  • referral of the submission would be illegal and would contravene public policy.

Agency Disposition: Although the Agency accepted that the applicant was a shipper within the meaning of the CTA, the submission of the intervenor raised the question of whether the applicant had the authority to act for the intervenor in this matter.
The Agency, in reviewing an Agency agreement between the applicant and the intervenor, found that there was no express authority provided to the applicant with respect to the negotiation of freight rates. In view of the intervenor submission, the Agency was compelled to deny the applicant's request for FOA on this preliminary issue alone. Consequently, the Agency found it unnecessary to deal with the other objections raised by the carrier.

FOA #11 — filed pursuant
to the CTA

Issue 1: Raised before referral to arbitrator: The carrier objected that the freight rates in question were not eligible for FOA, and that prior to any FOA on the matter, the Agency should have to first determine whether the Terms of Union between the governments of Newfoundland and Canada still had application.

The carrier objected to the submission on the following grounds:

  • the shipper had not satisfied the requirements of subsection 161(2) of the CTA in that he reserved the right to use an alternative carrier one day per week;
  • the shipper had not agreed to pay one half of the costs of the arbitration;
  • the application was incomplete as it was not for the rail only portion of the movement, and;
  • part of the movement was on water or might involve ancillary charges for services performed by a third party.

Agency Disposition: The Agency directed that the matter would be dealt with in two parts, with the first part addressing FOA eligibility, and the second part addressing the Terms of Union question.

The Agency held in favour of the shipper on all carrier objections and determined that the rates in question were eligible for FOA. This decision has been appealed by the carrier to the Federal Court of Appeal and the matter is pending.
With respect to the Terms of Union challenge by the carrier, the Agency determined that the Terms continue to apply to the subject traffic. Although the Agency ruled that the matter was referrable for arbitration, FOA proceedings have yet to commence. The carrier was granted leave to appeal the Agency's decision by the Federal Court of Appeal and the matter is pending.

FOA #12 — filed pursuant to the CTA

Issue: Raised before referral to arbitrator: The carrier filed an objection stating that the FOA submis-sion was deficient and inadmissible for FOA referral on several grounds:

  • the shipper's submission for FOA was different from its advance notice of its intent to file an FOA
  • no last offer was provided by the carrier for the movement of the traffic in question;
  • the shipper's submission lacked a definition of the traffic, an indication of traffic volumes and service requirements, or an undertaking to ship the traffic according to the decision of the arbitrator.

Agency Disposition: The Agency reviewed the shipper's advance notice and FOA submission and found that both documents referred to the same traffic.
In considering the issue of the carrier's last offer, the Agency determined that the carrier is never prejudiced by the last offer chosen by the shipper for inclusion in the FOA submission as the carrier always has an opportunity to submit another offer for the purpose of the arbitration.
The Agency also noted that the term last offer cannot be interpreted restrictively to require that a formal and matching offer be received by the shipper from the carrier before the shipper can make use of the FOA process. To permit such an interpretation would effectively provide carriers with the ability to compromise the entire FOA process by simply refusing to enter into negotiations with shippers or refusing to make offers during negotiations.
The Agency noted that the carrier relied on the fact that there were no local rates, combination rates or rates to be used in combination with Rule 11 of the AAR. (See note below for description of Rule 11).
The Agency found that the carrier cannot be permitted to rely upon its own failure to fulfill its statutory obligations under the CTA by not issuing requested rates to defeat a submission for FOA.

The Agency determined that the submission contained a suitable definition of the traffic, appropriate indications of both the anticipated traffic volumes and service requirements, and a clear undertaking as required by the CTA.
The Agency dismissed the carrier's motion and referred the matter for arbitration. The Agency later learned that the arbitration was withdrawn.

FOA #13 - filed pursuant to the CTA, 1996 Issues Raised Before Referral to Arbitrator:The carrier objected to the FOA submission on the following seven grounds: 1) FOA can only be demanded by a person to whom rates are charged and in this case no one who pays rates has demanded FOA; 2) the rates in question are established and fixed by confidential contract; 3) the parties have agreed to all terms in an agreement and as such there is no matter left to refer for FOA; 4) the existing agreement expresses that any difference that might arise between the parties is to be resolved in accordance with the arbitration clause in the agreement; 5) the undertaking given by counsel for the applicant was not a proper undertaking and does not satisfy the requirement of section 161(2)(c) of the CTA; 6) the applicant's request for rebates off contract charges is not a proper subject matter for FOA; and 7) the use of a railway company's infrastructure and charges for use of the infrastructure are not matters for FOA since they are not for the movement of goods.

The carrier requested, pursuant to subsection 162(1.2) of the CTA, the consent of the applicant that the Agency defer referring the matter to an arbitrator until its application was dealt with. The applicant did not consent and, in accordance with the law, the matter was referred to an arbitrator before the Agency's decision was rendered.

Federal Court Proceeding: Following the referral of the matter to the arbitrator, the carrier applied to the Federal Court, Trial Division, seeking an order restraining the arbitrator from proceeding with the arbitration. The carrier's motion was granted by the Court.

Agency Disposition: Issue 1: Agent-Principal Relationship: The Agency noted that both parties recognized that it was the applicant who pays the rates to the carrier and that the applicant is the entity responsible for the management and operation of the service being provided. The Agency found, on this issue, that the applicant could properly file a submission.

Issue 2: Confidential Contract: The Agency found that the contract between the carrier and the applicant was not a confidential contract within the meaning of section 111 of the CTA as the applicant was not a shipper per the term of the Act. As such, the Agency found that the exception provided for by subsection 126(2) of the CTA could not be raised by the carrier in this case.

Issue 3: Agreement Between the Parties: The Agency found that the wording of subsection 160(1) of the CTA implies that the existence of a valid and binding contract between parties should be an exception to FOA for the matter agreed upon by the parties in the agreement.

The Agency found no evidence to support the applicant's argument that the legislative amendments to section 160 of the CTA was enacted in order for certain entities to reopen binding negotiated agreements. The Agency further disagreed with the applicant's argument that the wording of section 160 indicated an immediate application of the statute to all contracts, including all those which are already in existence. The Agency found that the wording of section 160 of the CTA, which provides that: sections 161 to 169 apply...in respect of rates charged or proposed to be charged", is identical to the wording of section 161 of the Act. The Agency noted that if it were to determine that the applicant has the ability to reopen binding negotiated agreements based on the wording of section 160, then it would also have to allow other shippers dissatisfied with rates to reopen their agreements. As section 160 must be read in accordance with section 161 and as section 161 clearly provides that only when a matter cannot be resolved between the shipper and the carrier may the Agency refer the matter for arbitration, the Agency found that the applicant was subject to the limitation provided for in section 161. The Agency determined that the FOA request to obtain rebates on operating charges and on shared infrastructure use charges provided for in an agreement between the parties is not a matter that can be referred to arbitration.

The Agency found that there was no need to examine the carrier's other arguments.

FOA #14 - filed pursuant to the CTA, 1996 Issue 1: Raised Before Referral to Arbitrator:The carrier objected to the FOA submission stating that it was not a matter which the Agency has jurisdiction to refer to an arbitrator. The carrier submitted that part of the movement occurs over the line of a provincial carrier not governed by the CTA nor the Agency. The carrier stated that section 3 of the CTA provides that the Act applies only to transportation matters that are under the legislative authority of Parliament, and as such the CTA only applies to federally-regulated railways under the purview of Parliament. Since the provincial railway, in this circumstance, is not subject to the legislative authority of Parliament and does not hold a certificate of fitness under section 92 of the CTA, the carrier argued that the CTA does not apply to the provincial railway nor to any movements on the provincial railway's line.

The carrier further submitted that the portion of the movement from origin to the interchange with the provincial railway could be eligible for FOA. The carrier argued that should the Agency allow more than this portion then the Agency would be extending federal jurisdiction to the carriage of traffic by a provincial railway company.

Agency Disposition: Issue 1: Jurisdiction

The Agency found that the applicant had offered a single through rate and service package from origin to destination and the carrier had countered exactly on that basis. Although the point of destination was not on the carrier's railway line, the proposed movements were still quoted as the carrier through movement. That is, there were no separate offers or counter offers which somehow excluded or segregated the portion of the through movement which took place on the provincially regulated railway's trackage or, otherwise, brought the provincial railway in as one of the contracting parties. Consistent with what the Agency appreciates is common rail industry practice in Canada, the provincial railway acts as a subcontractor to the carrier for the tail end segment of the movement.

The Agency found that if it were to accept the carrier's argument that an FOA is only available for the portion of a through movement that occurs on the carrier's infrastructure, it would force the shipper to somehow determine the portion of the through rate relating to the movement over the federally-regulated carrier's lines. The Agency noted that this would be virtually impossible in the absence of any segregated offer by the railway. The Agency found that if this burden was imposed upon a shipper it would denude the FOA provisions under the CTA of the desired effect in determining shipper/ carrier rate disputes.

The Agency found the shipper's submission to be eligible on the basis that the carrier's through offer subsumes charges for services that are performed by a third party pursuant to an arrangement with the federal railway.

With respect to the carrier's constitutional argument, the Agency found that the relief sought before the arbitrator in this circumstance does not involve the regulation of the provincial railway or the imposition of rates or service obligations on the provincial railway. Any decision of the arbitrator would only bind the carrier and the shipper in accordance with subsection 165(6) of the CTA.

The matter was referred to the arbitrator chosen by the parties.

FOA # 15 filed pursuant to the CTA, 1996 The carrier filed an interlocutory motion seeking an Agency ruling that the FOA submission filed by the shipper on a Saturday is null and of no effect or that it be deemed to have been served on the carrier on the next day that is not a Saturday, Sunday or holiday. The carrier asserted that if the Saturday submission were to be accepted, its right to the full period of time to prepare its final offer would be prejudiced.

The carrier further submitted that the submission relates in part to a matter governed by a confidential contract and was filed without the consent of the carrier.

Agency Disposition: Issue 1 - Saturday Filing: As part of its analysis, the Agency referred to the General Rules and noted that while the General Rules do address matters of filing, service and holidays, the General Rules are silent on the time when an application, submission or similar document can be served on a person. Subsection 10(3) of the General Rules provides that where the time limited for the doing of any thing pursuant to the General Rules expires or falls on a Saturday or holiday, the thing may be done on the next following day that is not a Saturday, Sunday or holiday. However, subsection 10(3) of the General Rules did not apply in this case as the shipper was under no obligation pursuant to the General Rules to act on a Saturday, Sunday or holiday. The Agency added that the filing and serving of a document on a Saturday is not prohibited by the Interpretation Act, as the word "holiday", as defined in the Act, does not include a Saturday. The Agency further noted that it had in previous instances accepted filings on a Saturday.

With respect to the carriers assertions of prejudice, the Agency found that the carrier ignored the advance notice given to it by the shipper prior to the actual filing of the submission.

The Agency noted that given the silence of the General Rules with respect to filing and service time, and the wording of subsection 126(2) and 165(6) of the CTA, there may be a period of time between the expiry of confidential contracts and the filing of an FOA submission, during which no agreed rate would be in effect. In these circumstances and absent legislation change, the shipper may have no choice but to file its submission on a Saturday in order to avoid this type of situation, unless parties agree otherwise in their contractual arrangements.

In view of these findings, the Agency determined that the shipper acted legally in filing and serving its submission for an FOA on a Saturday.

Issue 2 - Confidential Contract: Prior to the referral of the matter to the arbitrator, the parties advised the Agency that they had reached a settlement and the FOA submission was withdrawn. The Agency did not, therefore, rule on the second motion.

FOA # 16 - filed pursuant to the CTA, 1996

Issue: Raised before referral to arbitrator: The carrier filed an objection stating that the FOA application was concerned in part with the storage of goods. The carrier submitted that storage of goods is not a matter which can be referred to FOA under the CTA, as "storage of goods" does not fall within the meaning and scope of the words "carriage of goods" found in paragraph 159(1)(b) of the CTA nor within the meaning and scope of the words "movement of goods, or with any conditions associated with the movement of goods" found in subsection 161(1) of the CTA.

Agency's finding on carriage of goods and subsection 159(1)(b) of the CTA

The purpose and essence of section 159 of the CTA is to designate the type of movements, by mode, which are eligible for final offer arbitration pursuant to sections 161 to 169 of the CTA. What is apparent from the reading of section 159 of the CTA is that it does not concern itself with the details of the service or matter that can or cannot be referred to arbitration, but rather to the types of movements, by mode, which are eligible for the remedy of final offer arbitration. If it had been Parliament's intention to use section 159 has a means to restrict the availability of FOA to specific services or matters, it would certainly have used narrower language than that found in the introductory part of section 159. The reference to expansive words such as "matter arising between shippers and carriers that involves" is indicative of Parliament's intention to make final offer arbitration available to resolve disputes between shippers and carriers that involve, include or are closely related to the carriage of goods by a federal railway to which the CTA applies.

In this case, there is no doubt that the final offer submission filed by the shipper involves, includes or is closely related to the movement of goods by a railway to which the CTA applies. There is also no doubt that the portion of the shipper's final offer submission relating to storage involves, includes or is closely related to the movement of goods by a railway to which the CTA applies. This stems not only from what the Agency understands is a customary service often provided by the railways as part of their overall rail service but also from the operational and commercial practice specifically developed between the railway and the shipper involved in this application.

While paragraph 159(1)(b) of the CTA is broad in nature, it does not mean that any matter, service or dispute arising between shippers and carriers that involves, includes or is closely related to the carriage of goods by railway is eligible for final offer arbitration. Subsection 161(1) of the CTA makes it clear that it is only disputes or matters involving the rates charged or proposed to be charged by a carrier for the movement of goods or involving any of the conditions associated with the movement of goods that can be referred to arbitration.

Agency's finding on storage of goods and subsection 161(1) of the CTA

There is no doubt in this case that the storage and the proposed charge associated with the storage of the shipper's commodities at destination is a "rate charged or proposed to be charged by the carrier for the movement of goods, or with any of the conditions associated with the movement of goods" within the meaning of subsection 161(1) of the CTA.

It is difficult to understand how the railway can now claim that the storage of the shipper's commodities at destination and the charges associated with such storage do not form part of the rates charged or proposed to be charged for the movement of shipper's goods and/or the terms and conditions associated with the movement of the shipper's goods when such services and charges have always been part of the overall railway service package provided by the railway to the shipper.

Not only has it always been part of the overall railway service package provided to this shipper by the railway but it also has always been part of the railway service package offered by the railway to the shipper throughout the negotiation in order to renew the parties' railway service agreement.

In the opinion of the Agency, a carrier cannot offer a shipper a complete railway rate and service package and then, upon failure of the negotiation and the subsequent filing of a final offer arbitration submission by the shipper, claim that a portion or portions of the railway rate and service package offered during negotiations is or are not "rates charged or proposed to be charged for the movement of goods" and/or "terms and conditions associated with the movement of goods". If the railway argument was to prevail, it would lead to a discontinuity between the negotiations between the carrier and the shipper and the final offer arbitration. That is, it would force the shipper to somehow determine the portion or portions of the railway rate and service package offered that is/are not customarily extended by the railway as part of its overall railway service. This task would be virtually impossible for shippers and would denude the final offer arbitration provisions under the CTA of any efficacity in resolving shipper/carrier disputes. As stated by the Federal Court of Appeal in the Moffat case, the possible discontinuity between negotiation and final offer arbitration was not a result intended by Parliament when enacting final offer arbitration.

The carrier's objection was accordingly dismissed.

FOA # 17 filed pursuant to the CTA, 1996

Issue 1: Raised before referral to arbitrator: The carrier filed an objection stating that it could not respond to the shipper's final offer due to the structure of the shipper's submission, which contained the relevant rate. According to the carrier, the shipper's final offer did not apply to the movement of goods within the jurisdiction of the Canada Transportation Act (the CTA), as it did not seek to set rates to carry goods to a border gateway for interchange with a connecting carrier. Therefore, the carrier submitted that the shipper's final offer was not eligible for FOA and should not be referred to an arbitrator.

The carrier requested that the Agency rule on this issue prior to the carrier being compelled to submit its final offer.

Agency Disposition Issue 1: The Agency noted that it had not been advised by the shipper that it wished to defer referring the matter to an arbitrator prior to the Agency dealing with the carrier's objection. In the absence of such consent, subsection 162(1) of the CTA provides that the Agency shall refer the matter for arbitration within five days after final offers have been received. The matter was accordingly referred to an arbitrator and the parties were directed to file their respective answer and reply to the carrier's motion regarding the legality of the shipper's offer.

Issue 2: Whether the carrier's final offer, which did not include dollar amounts for movements to specific destinations in Canada, could be considered a final offer for the purposes of subsection 161.1(1) of the CTA.

Agency Disposition Issue 2: As part of its analysis, the Agency referred to section 159 of the CTA, which designates the type of movements, by mode, which are eligible for FOA pursuant to sections 161 to 169 of the CTA. In previous decisions, the Agency determined that the final offers of the shipper and carrier must apply to the carriage of goods within the jurisdiction of the CTA. The Agency concluded that the FOA was limited to those offers containing rates, terms and conditions for the movement of goods within Canada. If a shipper does not provide a mechanism that permits a carrier to determine the Canadian-only portion of the traffic and movements in question, the carrier does not know what to reply to and the statutory FOA is not triggered.

The Agency subsequently ordered that the arbitration in this matter be discontinued.

FOA # 18 filed pursuant to the CTA

Issue 1: Raised after referral to arbitrator: The shipper had made a request to the Agency to amend certain parts of its final offer, which the carrier objected to. According to the shipper, its final offer had an inadvertent typographical error and therefore it would like the Agency to correct the error.

Agency Disposition: The Agency determined that it did not have jurisdiction to amend the final offer of the shipper since it had been exchanged with the carrier and had been referred to the arbitrator.

FOA # 19 filed pursuant to the CTA

Issue 1: Raised before referral to arbitrator: The carrier filed an objection stating that it could not respond to the shipper’s final offer due to the structure of the shipper’s final offer. According to the carrier, the shipper’s final offer was unclear if it was seeking rates to the last Canadian station or if it was seeking rates for interchange points before the US border. Therefore the carrier argued that the matter should not be submitted by the Agency to FOA pursuant to section 161 of the Act.

The carrier requested that the Agency rule on this issue prior to the carrier being compelled to submit its final offer.

Agency Disposition: The Agency determined that the shipper’s final offer clearly identified that the traffic would be moved through Canada to its ultimate destination. Therefore, the carrier’s position that the structure of the shipper’s final offer made it impossible for the carrier to file any meaningful, responsive final offer was not valid. 

The Agency denied the carrier’s request and ordered that the carrier and the shipper submit their final offers including dollar amounts.

FOA # 20 filed pursuant to the CTA

Issue 1: Raised after referral to arbitrator: The carrier objected to the arbitrator’s request for technical assistance from the Agency in determining the long-run variable costs (LRVC). The carrier argued that the data required to make the LRVC calculations is confidential and is protected by section 51 of the CTA.

Agency Disposition: The Agency determined that it was not necessary to analyse whether providing the information requested would violate confidentiality as it had declined the arbitrator’s request for technical assistance.

Issue 2: Raised after referral to arbitrator: The shipper argued that the carrier’s objection to the arbitrator’s request for technical assistance from the Agency pursuant to subsection 162(2) of the CTA was a request for review or appeal of the arbitrator’s decision which the Agency did not have jurisdiction. 

Agency Disposition: The Agency determined that this decision did not constitute an appeal of the arbitrator’s request. Instead, it was a determination by the Agency as to whether it would apply its discretion in providing the arbitrator with the requested assistance. Therefore it was a determination that was within the Agency’s jurisdiction to make.

Issue 3: Raised after referral to arbitrator: Whether the Agency should grant the arbitrator’s request for assistance in determining the LRVC.

Agency Disposition: The Agency determined that it would decline the arbitrator’s request for technical assistance as it was unclear whether staff would have been able to finalize the calculations before the statutory deadline for the issuance of the decision in this matter.

FOA # 21 filed pursuant to the CTA

Issue 1: Raised before referral to arbitrator: The carrier objected to the shipper’s request for FOA as it claimed the shipper’s final offer could not be filed in advance of the expiry of the confidential contract. The carrier stated that the shipper had not requested that the carrier agree to early filing or that the applicable date be other than the date of filing. Furthermore, the carrier submitted that it had not and would not agree to early filing of FOA. Therefore it stated that the shipper’s request for final offer is improper in process and substance and the Agency should not refer its submission to arbitration.

Agency Disposition: The Agency determined that the shipper’s final offer was not improper because the matter submitted for final offer arbitration fell outside of the confidential contract, after the expiry date. However, the Agency also determined that the shipper’s offer was deficient in that it set out a term that was not consistent with the legislative requirements.

Issue 2: Raised before referral to arbitrator: The shipper had submitted a subsequent submission stating that the carrier had split its case and requested that the Agency accept its submission, to which the carrier also objected.

Agency Disposition: The Agency determined that it was appropriate to accept both the carrier’s and the shipper’s subsequent submission as it was relevant to its consideration of the application.

Issue 3: Raised before referral to arbitrator: The carrier objected to the Agency’s letter decision in which the Agency had, pursuant to section 27(4) of the CTA, amended the shipper’s final offer so that it would be consistent with legislative requirements. The carrier argued that the Agency did not have jurisdiction to amend the shipper’s final offer and therefore urged the Agency to reverse its decision.

Agency Disposition: The Agency determined that the only authority it had to reconsider and reverse its decision was pursuant to section 32 of the CTA. Although the carrier had not filed an application pursuant to section 32 of the CTA, the Agency had considered the carrier’s submission in which it urged the Agency to reverse the amendment decision as an application for reconsideration under section 32. Section 32 of the CTA permits the Agency to reconsider a decision if there are new facts or circumstances. The Agency found that the carrier’s application under section 32 did not constitute any new facts or circumstances and therefore it dismissed the carrier’s application.

Issue 4: Raised before referral to arbitrator: The shipper had submitted its final offer including dollar amounts; however, its final offer did not reflect the amendment as required by the Agency. The shipper claimed that the letter decision in which the Agency amended the shipper’s final offer was not received due to an administrative error and therefore requested the Agency accept its late filing with the amendments. 

Agency Disposition: The Agency determined that it was appropriate, as a matter of fundamental natural justice, to accept the amended version of the shipper’s final offer which reflected the Agency’s amendment. 

Issue 5: Raised after referral to arbitrator: The carrier applied to the Federal Court of Appeals for leave to appeal the Agency’s decision.

Agency Disposition: The Federal Court of Appeal dismissed the carrier’s application for leave to appeal.

FOA # 22 filed pursuant to the CTA

Issue 1: Raised before referral to arbitrator: The carrier claimed the Agency did not have the required jurisdiction to refer the FOA process to arbitration because it infringed constitutional and quasi-constitutional principles which guaranteed a person a fair hearing in accordance with the principles of fundamental justice.

Agency Disposition: The Agency determined that pursuant to subsection 161(4) of the CTA, the FOA was not a proceeding before the Agency; instead it was a proceeding before the arbitrator. Therefore the Agency was not the competent tribunal where allegations concerning the validity of the FOA process having regard to constitutional or quasi-constitutional principles should be brought.
Furthermore, the Agency ruled that a superior court of competent jurisdiction confirmed that the FOA process did not violate paragraph 2(e) of the Bill of Rights.

Issue 2: Raised before referral to arbitrator: The carrier also objected to the FOA process because it claimed the shipper’s submission for FOA was premature and theoretical.
Agency Disposition: The Agency found that the evidence demonstrated that there was a serious and reasonable possibility that the shipper’s product would be produced and shipped during the period of application of the arbitrator’s decision. Therefore, the Agency considered that the FOA award should not be discontinued or set aside as premature or theoretical.

Issue 3: Raised before referral to arbitrator: The carrier further submitted that the shipper was not a “shipper” within the meaning of the CTA as it was not in a position to actually ship its product while the arbitrator’s award would be applicable.

Agency Disposition: The Agency determined that pursuant to section 6 of the CTA, “shipper” meant a person who sends or receives goods by means of a carrier or intends to do so. Therefore in this case, the shipper’s intention to ship was actual and serious even though there was no set date for the beginning of the production and shipping of the product.

Issue 4: Raised before referral to arbitrator: The carrier argued that the Agency should not refer the matter to arbitration because the shipper’s submission was illegal and invalid as it did not contain a valid undertaking pursuant to section 161(2)(c) of the CTA.

Agency Disposition: The Agency determined that the requirement of section 161(2)(c) was met when the shipper effectively undertook to ship, with the rail carrier, any of the goods captured by the arbitration award during the one-year period.

Note: In general terms Rule 11 allows a shipper to request that traffic be moved from origin to destination on a through bill of lading with more than one carrier responsible for the assessment and collection of freight rates. Shippers can have their traffic moving under a combination of rates rather than a single through rate and the confidentiality of each rate is ensured by separate billing on traffic moving under a unique bill of lading.

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