Omnitrax, Ottawa trade multimillion-dollar legal punches over unrepaired Churchill rail line, port failure

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This article was published 14/11/2017 (2895 days ago), so information in it may no longer be current.

OTTAWA — Omnitrax and the federal government doubled down Tuesday in their feud over the damaged rail line to Churchill and its port, accusing each other of sabotaging northern Manitoba in new court filings seeking millions of dollars.

In a claim filed Tuesday under the North American Free Trade Agreement, Omnitrax says it will sue the government for $150 million if arbitration doesn’t result in a settlement that sees the railway repaired and transferred alongside the Port of Churchill for a negotiated amount.

The move came after Transport Canada gave Omnitrax a month to repair the line, or face an $18.8-million lawsuit to claw back funds Ottawa provided under a 2008 agreement to improve the transportation link. That ultimatum clocked out Sunday, and the government filed a statement of claim Tuesday.

Ottawa transferred the Hudson Bay Railway and Port of Churchill to the Denver-based railway company in 1997. But the previous federal government ended the Canadian Wheat Board monopoly in 2012, which had extensively used Churchill to export grain. Now, companies use ports located in Vancouver and Thunder Bay to ship Prairie grain.

The Manitoba government also shuttered its Churchill Gateway Development Corp. in 2015.

In its filing, Omnitrax alleges “a continuum of behaviour” by both the feds and the province, which “lured Omnitrax into believing in their commitment,” followed by “government conduct that persistently undermined, instead of developing, the potential of the assets.”

The company said Ottawa’s “unreasonable conduct” has continued in its recent legal threat, saying the government knew Oct. 13 was too late to fix the flood-damaged rail line within a month. Omnitrax painted that as “a further continuation of its high-handed, arbitrary, unreasonable and obstructionist dealings.”

The filing is a Chapter 11 claim, the NAFTA component regarding trade, which Global Affairs Canada says is used to ensure a “predictable, rules-based investment climate.” Omnitrax claimed the government is unlawfully trying to expropriate the rail line and port by devaluing their value so Omnitrax feels pressure to sell it.

The 22-page filing contains multiple allegations the Free Press could not verify, including government officials lowballed the rail line’s value and funding had been promised but never delivered.

For example, the company claimed officials with the granting agency Western Economic Diversification “strung Omnitrax along” this spring, after it requested federal funds to help deliver 350,000 metric tonnes of grain from producers to the Port of Churchill, prior to the rail line’s May 23 washout.

In a written statement, Omnitrax’s Canadian head, Merv Tweed — who has declined interview requests for months — said the move was a “last resort,” but his company is open to reaching an agreement.

“We are disappointed that it has come to this, after having attempted countless times over the past several months to find a viable long-term solution,” he wrote Tuesday. “We believe we have exhausted all available options to facilitate the repair and transfer of the HBR, port and related assets. At every turn, our efforts have been stalled, obfuscated or ultimately sabotaged by the federal government.”

However, the federal government accused Omnitrax of similar tactics. In its own statement of claim, filed in Winnipeg, the attorney general eschewed dramatic language to plainly outline parts of a 2008 agreement it says Omnitrax failed to meet.

Most of the lawsuit surrounds the obligation to maintain service along the line, but it also claims Omnitrax hadn’t followed a clause on “Aboriginal consultation.” The government also asked the court to hold Omnitrax accountable so it doesn’t hide behind its subsidiary, the Hudson Bay Railway Co., in case the HBRC folds.

The province still hasn’t decided whether it will sue Omnitrax for the $20 million it’s already given the company under its own 2008 contract.

“The government of Manitoba has been monitoring Omnitrax’s ongoing inaction on the rail line, and will be carefully reviewing the latest legal steps,” a government spokesman wrote. “Since the closure of the rail line, which falls under federal jurisdiction, our government has focused primarily on the safety and security of the community.”

The province still hasn’t released its contract; Omnitrax consented to its release to the Free Press three weeks ago.

A spokeswoman for Transport Minister Marc Garneau said Ottawa was “optimistic” about ongoing talks aimed at transferring the rail line and port into local hands.

“As the private owner of the line, Omnitrax had the obligation to repair the rail line when it was damaged and it is irresponsible that they have not commenced repairs,” Mélany Gauvin wrote Tuesday.

Churchill Mayor Mike Spence, a key member of the consortium seeking ownership of the line, said Tuesday he hoped the two lawsuits didn’t mean the takeover talks “take a backseat.”

He signed a statement Tuesday with the mayors of Thompson and The Pas, claiming Omnitrax has laid off all but eight of its previous 200 staff in the region.

Last week, Spence ordered a town hall meeting on the rail crisis, scheduled for Tuesday evening.

The Public Service Alliance of Canada, the union that represents port workers, said Ottawa needs to speed up the takeover talks. “Waiting for lawsuits and countersuits to solve this issue will only mean more delay, more devastation and more hardship for the people of Churchill,” wrote Marianne Hladun, the union’s director for the Prairies.

dylan.robertson@freepress.mb.ca

Omnitrax's Nov. 14 NAFTA filing

wfppdf:https://media.winnipegfreepress.com/documents/AGC+v+HBRC+and+Omnitrax_Statement+of+Claim_November+14+2017.pdf|AGC v HBRC and Omnitrax Statement of Claim:wfppdf