Canadian National Railway Company v. Western Canadian Coal Corporation

Canadian National Railway Company v. Western Canadian Coal Corporation
Court (s) Database
Federal Court Decisions
Date
2007-04-11
Neutral citation
2007 FC 371
File numbers
T-1744-05
Notes
Digest
Decision Content
Date: 20070411
Docket: T-1744-05
Citation: 2007 FC 371
Ottawa, Ontario, April 11th, 2007
PRESENT: The Honourable Mr. Justice Kelen
BETWEEN:
CANADIAN NATIONAL RAILWAY COMPANY
Applicant
and
WESTERN CANADIAN COAL CORPORATION
Respondent
and
ATTORNEY GENERAL OF CANADA and
ATTORNEY GENERAL OF BRITISH COLUMBIA
Interveners
REASONS FOR JUDGMENT AND JUDGMENT
[1] This application for judicial review of an arbitrator’s decision requires the Court to determine if the procedural fairness imposed by paragraph 2(e) of the Canadian Bill of Rights, S.C. 1960, c. 44 [reproduced in R.S.C. 1985, App. III] applies to the final offer arbitration (FOA) regime enacted by Parliament under sections 159 to 169 of the Canada Transportation Act, S.C. 1996, c. 10 (the Act). The applicant, Canadian National Railway Company, submits that the FOA regime deprived it of the right to a fair hearing in accordance with the principles of fundamental justice under the Canadian Bill of Rights because:
1. The accelerated time limits for filing materials and responding to a notice of arbitration do not allow the applicant sufficient time to prepare its case or to know the case it has to meet;
2. The Act provides no intelligible legal criteria to be applied by the arbitrator in making his or her decision; and
3. The Act denies the applicant access to the arbitrator’s reasons for decision.
The Parties
[2] The respondent, Western Canadian Coal Corporation (WCCC), is a public company which operates a coal mine in north-eastern British Columbia called the Dillon Coal Mine. WCCC ships its coal to customers in overseas markets. It is entirely dependant on rail service to transport the coal from the Dillon Mine to terminals in Prince Rupert, British Columbia where it is loaded onto vessels. The Dillon Mine only came into production in 2004.
[3] The applicant, Canadian National Railway Company (CN), acquired BC Rail in 2004 and is the only railroad serving the area of the Dillon Mine.
[4] The Attorney General of Canada and the Attorney General of British Columbia have intervened in support of the position of WCCC, and submit that the Canadian Bill of Rights does not apply to the final offer arbitration regime in the Act, and, in the alternative, it does not deprive a person of the right to a fair hearing in accordance with the principles of fundamental justice as required by paragraph 2(e) of the Canadian Bill of Rights.
About the Final Offer Arbitration Regime
[5] In 1987 Parliament deregulated railroad freight rates and established provisions designed to facilitate the resolution of rate and service disputes between carriers and shippers. The FOA, which is set out in Part IV of the Act, provides one means of resolving such impasses through the use of an arbitrator or a panel of three arbitrators.
[6] The Federal Court of Appeal has considered the FOA, and I paraphrase, as follows:
1. the FOA provisions are aimed at resolving disputes in contractual relations of a commercial nature between shippers and railway carriers;
2. the FOA regime introduces a remedy to a dispute between the private parties through the use of an arbitrator;
3. the FOA regime is part of the legislative scheme chosen by Parliament to regulate freight rates without government authorities intervening;
4. FOA is a quick, simple and out-of-Court settlement of contractual disputes (see Canadian National Railway Company v. Canada (National Transportation Agency), [1996] 1 F.C. 355 (F.C.A.).
[7] The FOA may be invoked by a shipper if a contract with the carrier cannot be negotiated. The shipper invokes the FOA by filing the shipper’s “final offer” in confidence with the National Transportation Agency. The carrier then files its final offer. Both offers are then shown to the parties. The arbitrator must select one of the offers after the parties have exchanged information in support of their offers, interrogatories, responses to interrogatories, rebuttal evidence, if any, and presented evidence and submissions at a hearing before the arbitrator. Thus, the FOA is unlike regular arbitration where the parties mutually agree to submit a dispute to an arbitrator. In regular arbitrations, the arbitrator decides what is the reasonable amount for the contract.
[8] Since FOA forecloses the option of the arbitrator choosing a compromise position between the two offers, the design of FOA encourages the parties to settle the dispute through their own negotiations.
[9] The FOA process disciplines the parties to advance tempered offers because the more far reaching a party’s position, the greater likelihood that the other party’s final offer will be selected by the arbitrator. The FOA decision only applies for contracts one year or less. Accordingly, it is to be used as a stop-gap so that the parties can conduct their business with efficiency and certainty under the National Transportation Act, which introduced FOA as a provision to enhance the bargaining power of shippers, particularly captive shippers served by only one railway and with no alternative transportation services. The Act stipulates that the FOA process must be completed within 60 days of its initiation and that the arbitrator not issue any reasons for his or her selection of one of the two offers unless requested by both parties. The Act provides that the FOA decision will be final and binding and that there is no appeal except for judicial review.
Background Facts
[10] In 2004, WCCC began negotiations with CN over rail rates and conditions with respect to the movement of coal from the Dillon Mine. In September 2004, CN asked WCCC to pay upfront capital costs for upgrades required in order for CN to move the coal from the WCCC mine. WCCC rejected these conditions in September 2004 and raised the prospect of a FOA.
[11] Since no agreement could be reached, WCCC executed a seven month contract with CN from December 1, 2004 to June 30, 2005. WCCC took the position that the rates charged were excessive but that it had no option but to ship at those rates since CN was the only service provider, and WCCC had made commitments to customers. Following the December contract, negotiations began toward a new rail contract. Since the negotiations did not succeed, on June 23, 2005 WCCC served its notice of intention to proceed to FOA with respect to rail rates and other conditions of rail service.
Steps and timeframes in this FOA
[12] Sections 159 to 169 the Act details the steps and timeframes for the FOA. The respondent submitted the following summary of the eight steps in this arbitration:
1. Notice of Intention to submit the matter for FOA must be sent by the shipper to the carrier at least five days before the submission is filed with the Agency. (sub-section 161(3))
In the arbitration before Mr. Roberts, notice of intention was served June 23, 2005.
2. The submission for FOA containing the shipper’s final offer without dollar amounts is filed with the Agency and served on the railway. (paragraph 161(2)(a))
In the arbitration before Mr. Roberts, the submission for FOA containing the shipper’s final offer without dollar amounts was filed with the Agency July 2, 2005.
3. Within 10 days after the FOA submission is filed, the shipper and the railway file their final offers with dollar amounts with the Agency. (section 161.1) The Agency distributes the final offer of each party to the other.
In the arbitration before Mr. Roberts, the final offers of both parties with dollar amounts were filed July 12, 2005.
4. Within five days from the receipt of the final offers with dollar amounts, the Agency refers the matter to an arbitrator. (sub-section 162(1))
In the arbitration before Mr. Roberts, the Agency referred the matter to the arbitrator July 18, 2005.
5. Within 15 days from the appointment of the arbitrator, the parties exchange the information they intend to submit in support of their final offers. (sub-section 163(3))
In the arbitration before Mr. Roberts, the parties exchanged the information they intended to submit in support of their final offers August 2, 2005.
6. Within seven days after the exchange of information, each party may direct interrogatories to the other (sub-section 163(4))
In the arbitration before Mr. Roberts, the parties directed interrogatories to each other August 9, 2005.
7. Within 15 days after receipt of the interrogatories, the parties exchange their answers to the interrogatories (sub-section 163(4))
In the arbitration before Mr. Roberts, the parties exchanged the answers to interrogatories August 24, 2005.
8. Unless otherwise agreed by the parties, the decision of the arbitrator is rendered within 60 days after the filing of the submission for arbitration. (paragraph 165(2)(b))
In the arbitration before Mr. Roberts, the hearing was held August 30, August 31, September and September 2, 2005. The decision of the arbitrator was rendered September 6, 2005.
[13] By letter dated September 13, 2005, CN sought WCCC’s concurrence under subsection 165(5) of the Act to request from the arbitrator reasons for his decision dated September 6, 2005. By letter dated the same day, WCCC refused to concur with the applicant in its request for reasons.
Relevant Legislation
[14] The legislation relevant to this application is:
1. the Canada Transportation Act, S.C. 1996, c. 10; and
2. the Canadian Bill of Rights, S.C. 1960, c. 44 [reproduced in R.S.C. 1985, App. III].
The relevant excerpts of these statutes are reproduced at Appendix “A” to these Reasons.
Issues
[15] The issues raised in this application are as follows:
1. Does paragraph 2(e) of the Canadian Bill of Rights apply in respect of the FOA decision-making process?
2. Is the FOA process established under sections 159 to 169 of the Act incompatible with paragraph 2(e) of the Canadian Bill of Rights on the basis that it does not allow the applicant adequate time to prepare its case or to know the case it has to meet?
3. Are the FOA sections of the Act incompatible with paragraph 2(e) of the Canadian Bill of Rights on the basis that they provide no legal criteria to be applied by an arbitrator in making his or her decision?
4. Is subsection 165(4) of the Act incompatible with paragraph 2(e) of the Canadian Bill of Rights on the basis that it denies the applicant reasons for the arbitrator’s decision?
Standard of Review
[16] All of the objections raised in this application concern issues of procedural fairness. The Supreme Court of Canada has held that questions of procedural fairness or natural justice are subject to the correctness standard: Ellis-Don Ltd. v. Ontario (Labour Relations Board), [2001] 1 S.C.R. 221 at paragraph 65. If a breach of the duty of fairness is found, the decision must be set aside: see, e.g., Congrégation des témoins de Jéhovah de St-Jérôme-Lafontaine v. Lafontaine (Village), [2004] 2 S.C.R. 650 at 665.
Analysis
Issue No. 1: Does paragraph 2(e) of the Canadian Bill of Rights apply in respect of the arbitrator’s decision-making process?
[17] Before addressing the alleged breaches of the right to a fair hearing in accordance with the principles of fundamental justice raised in this application, it is necessary to determine whether paragraph 2(e) of the Canadian Bill of Rights applies in respect of the arbitrator’s decision-making process. Paragraph 2(e) reads:
Construction of law
2. Every law of Canada shall, unless it is expressly declared by an Act of the Parliament of Canada that it shall operate notwithstanding the Canadian Bill of Rights, be so construed and applied as not to abrogate, abridge or infringe or to authorize the abrogation, abridgment or infringement of any of the rights or freedoms herein recognized and declared, and in particular, no law of Canada shall be construed or applied so as to […]
(e) deprive a person of the right to a fair hearing in accordance with the principles of fundamental justice for the determination of his rights and obligations;
Interprétation de la législation
2. Toute loi du Canada, à moins qu’une loi du Parlement du Canada ne déclare expressément qu’elle s’appliquera nonobstant la Déclaration canadienne des droits, doit s’interpréter et s’appliquer de manière à ne pas supprimer, restreindre ou enfreindre l’un quelconque des droits ou des libertés reconnus et déclarés aux présentes, ni à en autoriser la suppression, la diminution ou la transgression, et en particulier, nulle loi du Canada ne doit s’interpréter ni s’appliquer comme […]
e) privant une personne du droit à une audition impartiale de sa cause, selon les principes de justice fondamentale, pour la définition de ses droits et obligations;
[18] The Canadian Bill of Rights was enacted in 1960 by the Diefenbaker government as an ordinary statute of the federal Parliament applying only to federal laws. The Bill of Rights lost most of its importance in 1982 with the adoption of the Canadian Charter of Rights and Freedoms as most of the rights and freedoms guaranteed by the Bill of Rights are now guaranteed by the Charter.
[19] Two provisions of the Bill of Rights that are not duplicated by the Charter are (1) the “due process” clause in paragraph 1(a), which extends to the protection property, and the guarantee in paragraph 2(e) of a fair hearing for the determination of rights and obligations. Both these provisions go beyond the guarantees in the Charter and remain operative constraints on federal activity. See Hogg, Peter W., Constitutional Law of Canada, Toronto: Carswell, loose-leaf ed. at 32-2.
[20] In Hogan v. The Queen, [1975] S.C.R. 282, 294-295, Laskin J. (as he then was) described the Bill of Rights status in these terms: “The Canadian Bill of Rights is a half-way house between a purely common law regime and a constitutional one; it may aptly be described as a quasi-constitutional instrument.” The description of the Bill of Rights as “quasi-constitutional legislation” was affirmed by the Supreme Court of Canada in Bell Canada v. Can. Telephone Employees Assn., [2003] 1 S.C.R. 884 at paragraph 28.
[21] A more recent application of the Bill of Rights occurred in Authorson v. Canada (Attorney General), [2003] 2 S.C.R. 40, in which a group of disabled veterans argued that they were denied due process through the passage of federal legislation which barred claims for interest payable on pension accounts before 1990. The veterans in Authorson were unsuccessful because the Court held that paragraph 2(e) did not apply to the legislative process itself. The veterans were not entitled to a “fair hearing” before Parliament expropriated their property through legislation. The Court’s comments on the Bill of Rights, per Major J., provide useful direction:
10 The Bill of Rights is a federal statute that renders inoperative federal legislation inconsistent with its protections. […]
[…]
32 Where federal legislation conflicts with the protections of the Bill of Rights, unless the conflicting legislation expressly declares that it operates notwithstanding the Bill of Rights as required by s. 2, the Bill of Rights applies and the legislation is inoperative; R. v. Drybones, [1970] S.C.R. 282 […]
[…]
34 With the constitutional amendment and the adoption of the Charter in 1982, many of the protections of the Bill of Rights gained constitutional status. The Bill of Rights, however, provides two protections not expressly available in the Charter. Section 1(a) protects the enjoyment of property, the deprivation of which must occur through the due process of law. Section 2(e) guarantees a fair hearing in accordance with the principles of fundamental justice for the determination of rights and obligations. These two provisions are the essence of this appeal.
[Emphasis added]
[22] As a matter of statutory interpretation, four basic conditions must be met in order for paragraph 2(e) to operate in respect of the arbitrator’s decision:
1. the applicant must be a “person” within the meaning of paragraph 2(e);
2. the arbitration process must constitute a “hearing […] for the determination of [the applicant’s] rights and obligations”;
3. the arbitration process must be found to violate “the principles of fundamental justice”; and
4. the alleged defect in the arbitration process must arise as a result of a “law of Canada” which has not been expressly declared to operate notwithstanding the Canadian Bill of Rights.
1st Requirement
[23] No controversy arises out of the first of these requirements. As a corporation, the applicant is entitled to the benefits of paragraph 2(e): see Canada (Attorney General) v. Central Cartage Co., [1990] 2 F.C. 641; 71 D.L.R. (4th) 253; 109 N.R. 357; 45 Admin. L.R. 1 (F.C.A.) at para. 32; Brown D.J.M., Q.C. and Evans J.M. (The Honourable), Judicial Review of Administrative Action in Canada, Toronto: Canvasback, 2004 at 8-31.
2nd Requirement
[24] The second requirement is that the arbitration process constitute a “hearing […] for the determination of [the applicant’s] rights and obligations”. The respondent argues that the final offer arbitration process does not afford the applicant any right or impose on it any obligation, and thus falls outside the scope of paragraph 2(e).
[25] In my view, the impugned arbitration process is one that determines the rights and obligations of the parties involved. In particular, the arbitrator is tasked with determining the obligations of the applicant—namely the obligation to provide freight service as a carrier, the conditions associated with the service, and the rate at which it is to be compensated for providing the service.
[26] In 2003, the Québec Court of Appeal held in Air Canada v. Canada (Attorney General) (2003), 222 D.L.R. (4th) 385, that rights and obligations of a purely economic nature affected by a law of Canada are protected by the Bill of Rights. Accordingly, the affected party is entitled to a fair hearing in accordance with the principles of fundamental justice. The Court of Appeal stated:
¶ 40. From the outset, the Attorney General of Canada (respondent) argues that Air Canada cannot rely on the Canadian Bill of Rights. The Attorney General argues that this law is outdated, and that generally the courts refuse to use it to strike down laws subsequently enacted. The respondent adds that it is impossible to determine what right of Air Canada has been infringed and it is far from uniform or accepted law that s. 2(e) of the Canadian Bill of Rights protects rights of a purely economic nature.
¶ 41. I do not share this restrictive approach argued by the respondent, which for all intents and purposes would have the effect of sterilizing the Canadian Bill of Rights. [ …]
[ …]
¶ 49. To be entitled to the protection of s. 2(e), a party is not required to allege infringement of a fundamental right. Once it is established that the complainant’s rights or obligations are affected in the broadest sense, he or she is entitled to a fair hearing of his or her case.
[27] The respondent’s argument is that the FOA process merely settles disputes of a private and commercial matter between the parties. My view is that the unique nature of the FOA scheme imposed by law distinguishes it from ordinary commercial arbitration. This is not a situation in which the parties freely consent to settling their dispute by arbitration or to have the terms of their contract determined by the arbitrator. Instead, I would characterize the process as one in which a contract is, in effect, formed as soon as the matter is submitted by the shipper to the Agency for referral to FOA. At that point, the carrier is bound to the terms of whichever offer is selected by the arbitrator – an obligation imposed on it by statute.
[28] The arbitrator’s determination is unlike the granting of a mere “privilege” such as citizenship or a discretionary licence, to which paragraph 2(e) has been held to be inapplicable: see Dowhopoluk v. Martin, [1972] 1 O.R. 311 (Ont. H.C.J.); McCaud, Ex p., [1970] 1 O.R. 772 (Ont. H.C.J.). As will be discussed in greater detail below, section 5 of the Act declares certain objectives to be considered by an arbitrator in reaching his or her decision. In my view, the final offer arbitration regime gives rise to “the application of law to individual circumstances in a proceeding before a court, tribunal or similar body” and therefore attracts the protections of paragraph 2(e) of the Canadian Bill of Rights: Authorson v. Canada (Attorney General), above, at paragraph 61.
4th Requirement
[29] The third requirement is considered below in issues 2, 3, and 4. The final requirement is that the defect giving rise to conflict with paragraph 2(e) must arise by operation of a “law of Canada” not expressly declared to operate notwithstanding the Canadian Bill of Rights. I reject the respondent’s submission that the private nature of the parties’ dispute indicates that the arbitration lacks the governmental action necessary to bring it within the scope of the Canadian Bill of Rights. The arbitration regime has as its legal source sections 159 to 169 of the Act. Participation in the arbitration process and compliance with its result has been mandated by the Parliament of Canada; therefore, the protections of paragraph 2(e) apply.
[30] Accordingly, I conclude that paragraph 2(e) applies in respect of the arbitrator’s decision-making process.
Issue No. 2: Is the FOA process established under sections 159 to 169 of the Act incompatible with paragraph 2(e) of the Canadian Bill of Rights on the basis that it does not allow the applicant adequate time to prepare its case or to know the case it has to meet?
[31] The applicant argues that various aspects of the FOA regime have the effect of denying it the opportunity to prepare adequately its case and to know the case it has to meet. In particular, the applicant challenges the following features of the arbitration regime, which it argues are unfairly prejudicial and constitute a violation of paragraph 2(e) of the Canadian Bill of Rights:
1. Paragraph 161(2)(a) excludes for 10 days from the shipper’s final offer the dollar price it is willing to pay for the rail service contained in the offer. Accordingly, the carrier must respond to the shipper’s final offer without knowing the dollar price the shipper is willing to pay;
2. The Act does not provide for the disclosure by the shipper of the initial submission of facts and legal grounds on which it intends to rely in support of its offer. Accordingly, the carrier must respond to the shipper’s final offer without knowledge of the facts upon which the offer is based;
3. The final offers of the parties, once submitted to the Agency, cannot be withdrawn or amended;
4. The carrier has only 30 days from the first filing of the FOA by the shipper to provide the evidence upon which the carrier intends to rely in support of its final offer; and
5. The carrier is unable to obtain an extension of time or suspension of the arbitration process without the shipper’s consent.
[32] As the Supreme Court of Canada held in R. v. Duke, [1972] S.C.R. 917, paragraph 2(e) requires that a federal tribunal adjudicating upon rights must “act fairly, in good faith, without bias and in a judicial temper, and must give to [a party] the opportunity adequately to state his case.” In Canada (Attorney General) v. Central Cartage Co., above, Chief Justice Iacobucci stated:
¶40 There is no doubt that procedural fairness generally implies the right to state one's case adequately. This right is part of the broader rule commonly expressed by the Latin expression of audi alteram partem -- to hear the other side.
¶41 But it has been well recognized that there can be circumstances where the audi alteram partem rules can be qualified, and these qualifications have developed over time both by the common law and by statute. […]
[33] The duty of procedural fairness varies with the context of each case, the particular statute and the rights affected. In Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817, Justice L’Heureux-Dubé stated at page 837:
The existence of a duty of fairness, however, does not determine what requirements will be applicable in a given set of circumstances. … [T]he concept of procedural fairness is eminently variable and its content is to be decided in the specific context of each case. All of the circumstances must be considered in order to determine the content of the duty of procedural fairness.
The Court in Baker identified the following non-exhaustive factors as relevant in determining the content of the duty of fairness:
a) the nature of the decision being made and the process following in making it;
b) the nature of the statutory scheme and the terms of the statute pursuant to which the body operates;
c) the importance of the decision to the individuals affected;
d) the legitimate expectations of the person challenging the expectation; and
e) the choices of procedure made by the agency itself.
[34] In order to examine the contextual nature of the decision-making process at issue in this application, it is helpful to review the Federal Court of Appeal’s description of the FOA provisions under the former National Transportation Act, 1987, R.S.C. 1985 (3rd Supp.), c. 28, in Canadian National Railway Co. v. Canada (National Transportation Agency), above, at paragraph 15:
[…] It is true that the impugned provisions are aimed at contractual relations of a commercial nature between shippers and carriers, that they introduce a remedy to a dispute between private parties without any public interest issue being engaged and that they create a scheme which gives the Agency a direct role only at the outset, the decision of the arbitrator being final and binding. But it is trite law, absent colourability, that legislation on a subject-matter within federal jurisdiction can affect matters within provincial jurisdiction, including property and civil rights. The final offer arbitration provisions of the NTA 1987 establish a method of determining rates in special instances and, as such, are an integral part of the whole legislative scheme chosen by Parliament to regulate freight rates in the new economic and commercial context now prevailing in Canada. They are specifically addressed to disputes relating to rates or conditions associated with the movement of goods, issues that are integral to the operation of the railways. The quick, simple and out-of-court settlement of those disputes, with indirect involvement of the Agency, is no doubt a means, and an important one, to achieve the object and purpose of the new National Transportation Act, 1987 which, as stated in more detail in section 3 [as am. by S.C. 1992, c. 21, s. 33] thereof, is aimed, in effect, at rendering the railway industry, in particular, more efficient and more competitive, and the transportation system, generally, more economical. The fact that the issues of rates and conditions of carriage arise in the course of or with respect to the execution of a private contract cannot have the effect of nullifying their significance with respect to a legitimate and valid federal objective and, as a result, take them out of the federal legislative competence.
[Emphasis added]
[35] Final offer arbitration has been described as “an intentionally high risk form of arbitration” that encourages settlement and tempers final positions. The arbitration resolves isolated disputes over rates to be charged by a carrier for a period of one year when the parties are unable to agree. The arbitrator’s task is to select the more reasonable of the two offers submitted. As is indicated in paragraph 165(6)(a) of the Act, the arbitrator’s decision is intended to bring finality to the dispute. The limited duration of the decision’s binding effect on the parties is closely linked to the limited timeframe within which the arbitration process occurs. The issue raised by the applicant is whether, by virtue of this limited timeframe, the arbitration regime unlawfully deprives the applicant of an adequate opportunity to prepare and present its case.
[36] The chart attached as Appendix “B” sets out the number of days in which the parties had to complete the different steps in this FOA including:
1. 31 days to file evidence in support of the final offers;
2. 7 days to direct interrogatories (after receiving the evidence in support of the final offer);
3. 5 days to respond to the interrogatories;
4. in this arbitration the parties had the opportunity to file rebuttal evidence 10 days prior to the hearing which evidence was considered at the hearing; and
5. 58 days between the commencement of the arbitration proceedings and the beginning of the four day hearing conducted by the arbitrator.
[37] Additionally, I note that in the course of this particular arbitration, there were two pre-hearing conferences with the arbitrator regarding admissibility of evidence and procedures to be followed at the arbitration. CN did not express any objection about any aspect of the FOA. As well, during the arbitration, the arbitrator asked for cost information from CN for the movement of the coal. CN declined. Then the arbitrator requested an extension of the time for the conduct of the arbitration so that he could obtain technical assistance from the Agency. CN declined to grant the extension.
[38] The crux of the applicant’s argument on this issue is that the final arbitration process unfairly disadvantages carriers which are compelled to participate in arbitration proceedings once initiated by a shipper. The shipper, by choosing when to submit a matter to the Agency for arbitration, has the advantage of being able to prepare its witnesses, evidence and submissions before filing the FOA. Meanwhile, the applicant argues, the carrier is forced to respond in a short timeframe to an offer without knowing the dollar amount involved and without having had a similar opportunity to prepare its case for arbitration.
[39] Although the statutory framework provides for an expedited arbitration process, it cannot be said that the applicant’s participation in these proceedings began only when the respondent served notice of its intention to submit an issue to arbitration. Section 161 of the Act provides that final arbitration is available “if the matter cannot be resolved between the carrier and the shipper”. The Act contemplates that the parties will have negotiated, or at least communicated, in an attempt to set the applicable shipping rate and conditions. In this case, the respondent’s negotiations with the applicant over rates and conditions began shortly after the applicant acquired B.C. Rail on July 14, 2004. In a letter dated September 15, 2004, the applicant submitted to the respondent a proposal relating to rates, fuel surcharges, a demand for upfront capital for upgrades, a demand for the respondent to provide capital for communication systems, and a sharing of rail upgrade costs. As early as September 22, 2004, the respondent raised with the applicant the prospect of submitting the issues of rates and conditions to final offer arbitration. This was 9 months before the respondent submitted the issue to FOA.
[40] The respondent submits that, as a captive shipper, it was left with no choice but to capitulate to the applicant’s demands and, accordingly, it entered into a confidential 7 month transportation contract effective December 1, 2004 to June 30, 2005. The parties then entered negotiations toward a new rail contract. The information submitted to the arbitrator documents these negotiations, which lasted until June 23, 2005 when the respondent served its notice of intention to proceed to FOA. Among the issues that were negotiated were the rail rates, the payment for the applicant’s infrastructure, scheduling, train sizes, types of cars and frequency, the applicant’s level of service, and the length of the contract.
[41] Based upon the statutory scheme, the fact that both parties were obviously prepared for the hearing in that they both filed extensive complex and technical information, and the fact that CN at no point during the course of the FOA process raised any objection to not having the opportunity of knowing the case they had to meet because of time constraints, the Court concludes that this basis for the alleged breach of the right to a fair hearing is without merit.
[42] In preparing a final offer, the carrier has the benefit of general market information, and I see no reason for concluding that the arbitration regime enacted by Parliament deprives the carrier of material information necessary to submit a reasonable offer. The applicant’s lack of full knowledge of the rates and conditions contained within the respondent’s final offer does not give rise to a violation of the principles of fundamental justice. The FOA regime is designed to require that the carrier submit its final offer before knowing the dollar amount of the shipper’s final offer. This feature makes the arbitration a high risk for the carrier and it is designed to cause the carrier to temper its offer by making it as reasonable as possible. While CN does not think this is fair, it is Parliament’s regime to balance the bargaining power between a railroad in a monopolistic position and a shipper totally dependent on that railroad.
[43] In view of Parliament’s intent that this FOA process be expedited, and upon the Court reviewing the voluminous information filed by both parties at this arbitration, the Court is satisfied that the applicant had adequate time to prepare its case and to know the case it had to meet. Accordingly, the applicant’s challenge on this basis cannot succeed.
Issue No. 3: Are the impugned sections of the Act incompatible with paragraph 2(e) of the Canadian Bill of Rights on the basis that they provide no legal criteria to be applied by an arbitrator in making his or her decision?
[44] The applicant argues that the Act provides no legal criteria and no legal standard to be applied by the arbitrator in reaching a decision. The absence of legal criteria, the applicant argues, is contrary to the principles of fundamental justice since it can lead to an arbitrary decision by the arbitrator.
[45] A review of the Act as a whole, and the arbitration provisions in particular, reveals that there are legal criteria to be considered by the arbitrator in reaching a decision. Subsection 164(2) of the Act provides:
Arbitration considerations
(2) Unless the parties agree otherwise, in rendering a decision the arbitrator shall have regard to whether there is available to the shipper an alternative, effective, adequate and competitive means of transporting the goods to which the matter relates and to all considerations that appear to the arbitrator to be relevant to the matter.
Éléments à prendre en considération
(2) Sauf accord entre les parties à l’effet contraire, l’arbitre tient également compte de la possibilité pour l’expéditeur de faire appel à un autre mode de transport efficace, bien adapté et concurrentiel, des marchandises en question ainsi que de tout autre élément utile.
In addition, section 5 of the Act declares certain objectives of the National Transportation Policy. These objectives would appropriately be addressed by the parties in framing their submissions and considered by the arbitrator in determining the relative reasonableness of the parties’ final offers:
Declaration
5. It is hereby declared that a safe, economic, efficient and adequate network of viable and effective transportation services accessible to persons with disabilities and that makes the best use of all available modes of transportation at the lowest total cost is essential to serve the transportation needs of shippers and travellers, including persons with disabilities, and to maintain the economic well-being and growth of Canada and its regions and that those objectives are most likely to be achieved when all carriers are able to compete, both within and among the various modes of transportation, under conditions ensuring that, having due regard to national policy, to the advantages of harmonized federal and provincial regulatory approaches and to legal and constitutional requirements,
(a) the national transportation system meets the highest practicable safety standards,
(b) competition and market forces are, whenever possible, the prime agents in providing viable and effective transportation services,
(c) economic regulation of carriers and modes of transportation occurs only in respect of those services and regions where regulation is necessary to serve the transportation needs of shippers and travellers and that such regulation will not unfairly limit the ability of any carrier or mode of transportation to compete freely with any other carrier or mode of transportation,
(d) transportation is recognized as a key to regional economic development and that commercial viability of transportation links is balanced with regional economic development objectives so that the potential economic strengths of each region may be realized,
(e) each carrier or mode of transportation, as far as is practicable, bears a fair proportion of the real costs of the resources, facilities and services provided to that carrier or mode of transportation at public expense,
(f) each carrier or mode of transportation, as far as is practicable, receives fair and reasonable compensation for the resources, facilities and services that it is required to provide as an imposed public duty,
(g) each carrier or mode of transportation, as far as is practicable, carries traffic to or from any point in Canada under fares, rates and conditions that do not constitute
(i) an unfair disadvantage in respect of any such traffic beyond the disadvantage inherent in the location or volume of the traffic, the scale of operation connected with the traffic or the type of traffic or service involved,
(ii) an undue obstacle to the mobility of persons, including persons with disabilities,
(iii) an undue obstacle to the interchange of commodities between points in Canada, or
(iv) an unreasonable discouragement to the development of primary or secondary industries, to export trade in or from any region of Canada or to the movement of commodities through Canadian ports, and
(h) each mode of transportation is economically viable,
and this Act is enacted in accordance with and for the attainment of those objectives to the extent that they fall within the purview of subject-matters under the legislative authority of Parliament relating to transportation.
Déclaration
5. Il est déclaré que, d’une part, la mise en place d’un réseau sûr, rentable et bien adapté de services de transport viables et efficaces, accessibles aux personnes ayant une déficience, utilisant au mieux et aux moindres frais globaux tous les modes de transport existants, est essentielle à la satisfaction des besoins des expéditeurs et des voyageurs — y compris des personnes ayant une déficience — en matière de transports comme à la prospérité et à la croissance économique du Canada et de ses régions, et, d’autre part, que ces objectifs sont plus susceptibles de se réaliser en situation de concurrence de tous les transporteurs, à l’intérieur des divers modes de transport ou entre eux, à condition que, compte dûment tenu de la politique nationale, des avantages liés à l’harmonisation de la réglementation fédérale et provinciale et du contexte juridique et constitutionnel :
a) le réseau national des transports soit conforme aux normes de sécurité les plus élevées possible dans la pratique;
b) la concurrence et les forces du marché soient, chaque fois que la chose est possible, les principaux facteurs en jeu dans la prestation de services de transport viables et efficaces;
c) la réglementation économique de