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SURFACE TRANSPORTATION BOARD

Arbitration

What is Arbitration?

Arbitration is an alternative dispute resolution process which allows parties to resolve a dispute in a private setting, rather than in a formal proceeding before the Board.  In an arbitration, the parties to a dispute informally present evidence to a panel of neutral third-party arbitrators (or a single arbitrator) with expertise in the subject matter of the dispute, and the arbitrators make a decision that is binding on the parties.  Because this process does not involve many of the legal and procedural steps required in a formal Board proceeding, arbitration offers parties the chance to receive a faster decision and reduce litigation costs.  The Board maintains an arbitration program and encourages resolution of disputes through arbitration whenever possible.

Which Parties Can Use the STB’s Arbitration Program?

Under the STB’s arbitration program, shippers and railroads can agree in advance to arbitrate certain types of disputes by “opting in” to the STB’s arbitration program.  To opt into the program, parties must submit a notice with the Board.  49 C.F.R. § 1108.3(a)(1).  When a party opts into the program, parties can limit the types of matters that they are willing to arbitrate from the list of eligible matters discussed below.  Parties can opt back out of the program at any time, but must give 90-day notice.  The list of parties that have opted into the program are as follows:

PartyEligible IssuesOpt-in DateLetter
Union Pacific RailroadDemurrage; Accessorial Charges; Misrouting or Mishandling of Rail Cars matters, up to $200,000 (Subject to specific conditions — see letter)June 21, 2013UP Arbitration Opt-in Letter
CSX TransportationDemurrage matters, up to $200,000 (Subject to specific conditions — see letter)June 28, 2019CSX Arbitration Opt-in Letter
Canadian National Railway Co.Demurrage matters, between $3,000 and $200,000 (Subject to specific conditions — see letter)July 1, 2019CN Arbitration Opt-in Letter

In addition, parties can agree by mutual written consent to arbitrate disputes on a case-by-case basis, even if they have not opted into the program.  49 C.F.R. § 1108.3(a)(2).

What Matters Can Be Arbitrated? 

The following five types of matters are eligible for arbitration (49 U.S.C. 11708(b)(1)).

  • Rates (if the rail carrier has market dominance as determined under section 10707)
  • Demurrage
  • Accessorial charges
  • Misrouting or mishandling of rail cars
  • Disputes over a carrier’s published rules and practices as applied to particular rail transportation

Accessorial charges “may include, but are not limited to, charges for diversion, inspection, reconsignment, storing, weighing, and other services not specified” in statute or the Board’s regulations.  See Revisions to Arbitration Procedures, STB Docket EP 730, at 7-8 (STB served Oct. 11, 2016).

Additionally, parties can agree to arbitrate disputes on matters not listed above on a case-by-case basis, so long as they involve matters within the STB’s jurisdiction.  49 C.F.R. § 1108.4(e).

Arbitration cannot be used to:

  • Resolve matters involving labor protective conditions
  • Obtain the grant, denial, stay or revocation of any license, authorization (e.g., construction, abandonment, purchase, trackage rights, merger, pooling), or exemption related to such matters
  • Prescribe conduct, rules, or results of general, industry-wide applicability
  • Resolve disputes that are solely between two or more rail carriers.  49 U.S.C. § 11708(b)(2).

Arbitration Procedures

Arbitration is conducted before a panel of three arbitrators, selected from a roster of arbitrators maintained by the STB.  Alternatively, arbitration may be conducted using a single arbitrator, upon agreement of all parties.  All arbitrators have experience in rail transportation, economic regulation, or the freight logistics industry.  The parties share equally the costs of arbitration.  The process for selecting the panel of arbitrators is set forth in 49 C.F.R. § 1108.6.  The STB’s arbitration roster is available above under “Resources.”

With the exception of rate disputes, arbitration procedures begin no later than 40 days after filing of a complaint.  The lead or single arbitrator shall establish all rules deemed necessary for each arbitration proceeding, including with regard to discovery, the submission of evidence, and the treatment of confidential information.  The evidentiary process must be completed within 90 days (unless the parties agree to and are granted an extension).  49 U.S.C. § 11708(e)(2).  The arbitrators must issue a written decision no later than 30 days after the end of the evidentiary phase of arbitration.  49 C.F.R. § 1108.7Arbitration awards are capped $25 million for each rate dispute, and $2 million for all other matters.  49 C.F.R. 1108.8.  (Parties may also agree to lower award caps.)

In deciding on rate disputes, the arbitrators must “consider the Board’s methodologies for setting maximum lawful rates, giving due consideration to the need for differential pricing to permit a rail carrier to collect adequate revenues.”  49 U.S.C. § 11708(c)(3).  Additionally, all arbitration decisions “must be consistent with sound principles of rail regulation economics.”  49 U.S.C. § 11708(d).  Redacted copies of the arbitrators’ decisions are posted on the STB’s website, though they do not have precedential effect.  49 C.F.R. §§ 1108.9 – 1108.10.

Parties can appeal the decision to the STB or to a court of appropriate jurisdiction under the Federal Arbitration Act.  If appealed to the Board, the agency will modify or vacate an arbitration award only on grounds that it reflects a clear abuse of arbitral authority or discretion or directly contravenes statutory authority.  49 C.F.R. § 1108.11.

For additional information about STB arbitration, contact the Rail Customer & Public Assistance Program at (202) 245-0238.