Major North American railroads and shippers say they support more federally sponsored arbitration, but the carriers can’t get onboard with the current proposal requiring them to opt-out instead of opting in.
The Surface Transportation Board’s effort to increase arbitration in disputes over demurrage, accessorial charges, and misrouting and mishandling of cars is part of a broader strategy to ease tension on both parties. The railroad regulatory agency last week announced plans to change rules to give shippers restricted to a single railroad service a better avenue to challenge rates.
“We generally believe that providing more access to arbitration for rail shippers would be a very positive development and will facilitate the ability of both shippers and carriers to resolve disputes in a businesslike matter,” Randall Gordon, a spokesman for the National Grain and Feed Administration, told the STB at a public hearing on Thursday.
The drive for more arbitration between railroads and shippers also appears to result from complaints that the agency takes too long to settle disputes. Arbitration not only can save parties time and money, but also encourage shippers and carriers to reach an agreement before a third party needs to get involved.
Unlike shippers, however, the railroads would have to opt-out of the arbitration process, instead of having the choice to opt-in. They don’t like that approach. The “unbalanced” measure could prevent a carrier from seeking a resolution over demurrage with a shipper, said John Scheib, Norfolk Southern Railway’s general counsel.
Shippers counter that carriers can opt-out of an arbitration proceeding by filing the necessary paperwork, a statement the Association of American Railroads rejected.
The looming question is whether, given the choice, the railroads would opt-in. There is no evidence the railroads are part of the reason arbitration hasn’t been used more often to settle STB-related matters, and the AAR “fully supports increased use of mediation and voluntary arbitration,” said Louis Warchot, an attorney for the association.
The three-member STB also wanted to hear opinions about how many arbitrators there should be and how they should be chosen. The majority of shipper associations testifying believed one arbitrator for small cases would be sufficient, but a three-member board would be best for more complicated cases.
Louise Rinn, general counsel for Union Pacific Railroad, said she has had “a frustrating time” finding a single arbitrator in a current dispute with a shipper. She said many of the arbitrators in the STB’s pool have been paid to testify for the shippers against the railroads, while there is little information on the background of other listed potential arbitrators.
The NGFA has had success using voluntary arbitrators in the roughly 100 years the program has existed, Gordon said. With the aim of promoting transparency of the process, he advocated that the arbitration decisions be published but with sensitive information redacted.
The last major point of discussion was capping the levels of relief, with the STB proposal limiting awards to $200,000. Shipper representatives lobbied for awards as high as $1 million, in order to make the time and costs required to bring the dispute to an arbitrator worthwhile. The railroads said their support for a cap largely depended on whether they would have to opt-in or opt-out of the program.