Arbitration a likely track for rail access negotiations

25 Jun, 2015 02:00 AM

SEEKING independent arbitration to determine costs for its grain trains to use the State's southern freight rail network seems a likely next move for CBH Group as negotiations with Brookfield Rail drew to a close yesterday.

Ninety days of negotiations between CBH and Brookfield Rail attempting to reach an agreement for the next 10 years under the Railway (Access) Code 2000, were scheduled to conclude after Farm Weekly went to press.

Unless Brookfield Rail substantially reduced its pricing offer on the final day of negotiations, it was not expected agreement could be achieved.

As late as Tuesday afternoon both parties held significantly different views on the net worth of the requested access - amounting to tens of millions of dollars - in relation to the performance expected.

"CBH is committed to continuing the negotiation and using every opportunity available within the 90-day negotiation period," a CBH spokesperson said on Tuesday.

"We would welcome a good outcome within that process and are negotiating in good faith, but we cannot allow Brookfield Rail to force WA growers into a deal they cannot afford."

Without an agreement, CBH has three options.

Under the code it can notify code regulator, the Economic Regulation Authority (ERA), it is in dispute with freight rail operator Brookfield over pricing and request arbitration.

The ERA is bound to appoint one or more independent arbitrators from its panel of five, to adjudicate on the dispute.

Within 10 days of being appointed, the arbitrator must arrange a preliminary conference with CBH and Brookfield to establish a timetable for arbitration and a determination.

The arbitrator's written determination can specify terms, conditions and costs under which CBH can use sections of the rail network, including requiring Brookfield to re-open requested sections of Tier 3 grain lines shut down after June 30 last year.

Under the code, the determination is binding on Brookfield, but CBH has 14 days to decide whether to accept or reject it.

As an avenue already successfully tried by CBH, arbitration seemed the most likely option on Tuesday.

In June last year CBH notified the ERA it was in dispute with Brookfield over whether there was "capacity" to run grain trains on some Tier 3 lines.

The ERA appointed an arbitrator who determined in February there was capacity, enabling CBH to push to have some lines reopened.

In a full-page advertisement in Farm Weekly last week, general manager operation David Capper reaffirmed CBH was prepared to go to arbitration again.

"Arbitration would see an independent expert determine a pricing structure for the future, it could take more than a year to get a final outcome but it has the potential to set up a fair agreement for the future," he said.

The other options available to CBH are to ask Brookfield to agree to extend the statutory negotiating period or to initiate new discussions with Brookfield outside of the code.

Extending current negotia-tions would continue to let Brookfield set pricing, an option CBH is unlikely to consider.

Negotiating outside of the code could leave CBH in a similar bargaining position to April when it failed to negotiate a fourth interim access agreement before the deadline and had to park its trains for 18 hours on May 1 because it no longer had authority to run them on the network.

The interim negotiations broke down when CBH rejected a 25 per cent cost increase proposed by Brookfield and a backdating clause that it considered had indeterminable cost implications.

Both parties made concessions to get trains running again but the agreement, which expires on December 31, was not to CBH's satisfaction.

Following last week's advertisement, Brookfield issued a statement saying it was "disappointed" CBH had started talking about arbitration before negotiations had concluded.

"We note that (the) arbitration period will likely be a costly and time-consuming exercise for both parties, and will unfortunately create further uncertainty for growers," it said.

"Brookfield Rail has presented a price that will deliver a sustainable grain freight rail network at the standard that CBH needs without further ongoing reliance on government funding."

It said its proposed pricing was "a small proportion of commodity value and a small portion of CBH's overall supply chain charge to farmers" and the pricing mechanism "encourages" grain to be transported on rail.

p See for the latest developments on this issue.

Mal Gill

Mal Gill

is wool and dairy writer for Farm Weekly


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