Shippers gain bargaining clout over extra railway fees

Freight customers have every right to object to additional service charges piled on them by the railways, says a Supreme Court of Canada decision being praised by a shipper organization and a transportation law expert.
The court ruled unanimously against a CN appeal of a cabinet ruling that the Peace River Coal Inc. had the right to take its complaints about unilateral charges imposed by the railway to the Canadian Transportation Agency for adjudication.

The charges were levied after a confidential transportation contract was reached between the shipper and carrier.

While the decision will likely lead to other shipper complaints about similar charges to the CTA, “it likely won’t trigger a great rush of them,” said Bob Ballantyne, president of the Freight Management Association of Canada, which intervened in support of the company in the appeal. “But it will have significant impact on future confidential contract negotiations between carriers and shippers.”

The agency had originally sided with CN in the dispute, but was overruled by the cabinet in 2010, which led to CN’s appeal to the Supreme Court. The CTA has been able to mediate settlement in other customer-carrier disputes over extra charges, Ballantyne noted.

Shippers have complained for years about CN and CP imposing supplementary charges under confidential contracts for services such as currency surcharges, fees for submitting paper bills-of-lading, weighing of cars, and penalty charges such as demurrage and overloaded cars.

Ottawa-based transportation lawyer Ian MacKay of Conlin Bedard, said the decision was important because it upheld the 2008 Canada Transportation Act. The court noted the law intended “to rebalance the legislative framework in favour of shippers because rail services are not provided in a perfectly competitive marketplace. The railways are seen “to have superior market power to shippers.”

MacKay said the decision “is a powerful recognition of the current state of the rail shipment industry and provides a strong policy rationale for future shipper complaints.”

The court also upheld the cabinet’s right to reverse CTA decisions.

The ruling, as well as the passage of C30 the Fair Rail for Farmers Act and minimum shipping targets imposed on CN and CP by Ottawa “marks a new willingness on the part of government to curb excess railway market power,” he added.

The onus now is clearly on shippers to “properly draft confidential contracts to ensure that they are able to take advantage of this favourable ruling,” he said. Shippers shouldn’t hesitate to seek CTA arbitration in any disputes with a railway during contract negotiations.

The decision is expected to provide solace to the grain industry, despite a winter of delayed shipments, because its shipments move under government-controlled tariffs rather than negotiated contracts, Ballantyne said.

Ballantyne said the court has confirmed that “all rail shippers are now able to challenge such charges and associated terms and conditions. These charges add significant costs to the movement of freight, are arbitrarily imposed by the railways and, for some shippers, measure in millions of dollars annually.”

 

Alex Binkley is an Ottawa-based contributor to the Manitoba Co-operator

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