Executive Summary: Key Legal and Evidentiary Issues

• The appeal questioned whether the Canadian Transportation Agency erred in law by not considering all required statutory factors when setting interswitching rates.

• The court addressed if the Agency was obligated to consider commercial market factors under the Canada Transportation Act.

• Statutory interpretation of sections 112 and 127.1 of the Act was central to the dispute.

• The Agency’s consistent use of a cost-of-capital methodology, excluding commercial market factors, was challenged.

• The decision analyzed the legislative purpose of promoting a competitive, economic, and efficient national transportation system.

• The court awarded costs to the appellant, Canadian National Railway Company.

Facts and outcome of the case

Background and facts

Canadian National Railway Company appealed a decision of the Canadian Transportation Agency regarding the setting of interswitching rates for 2024. The Agency set these rates under section 127.1 of the Canada Transportation Act. CN argued that the Agency erred in law by not considering commercial market factors and instead relied solely on its own cost methodology. CN claimed this excluded evidence of relevant commercial markets, including interswitching rates in other markets and commercial market prices, and that this approach denied CN sufficient returns. The Agency maintained that commercial market factors were irrelevant and relied on its established cost-of-capital methodology.

Legal issues and analysis

The main legal issue was whether the Agency was required to consider commercial market factors when setting interswitching rates. The court analyzed the text of section 127.1 and found that it does not provide a complete and exclusive list of factors. The court highlighted section 112, which requires that rates set by the Agency must be “commercially fair and reasonable to all parties.” The court determined that this standard is broad enough to include commercial market factors. The court also referenced the legislative purpose stated in section 5 of the Act, which emphasizes a competitive, economic, and efficient national transportation system. The court concluded that the Agency’s exclusion of commercial market factors was not supported by the statute and that such factors must be considered.

Outcome and disposition

The court allowed the appeal, set aside the Agency’s decision dated November 24, 2023, and remitted the matter to the Agency for redetermination. Costs were awarded to Canadian National Railway Company. The specific amount of costs was not stated in the decision. No damages were awarded.