Thank you very much.
Thank you, Mr. Chairman, and good afternoon, ladies and gentlemen. Chairman, I noticed your emphasis on brief, so I shall be as brief as I can. I'll take you through this deck to present to you Bill C-7.
At slide number 2 we set out the five objectives of the bill. I suggest to you that objectives number one and two are the principal parts of the bill, the core of the bill, dealing with oil pollution caused by ships. Item three is representing a number of changes that are needed in what we call global limitation of liability for maritime claims, and I will explain it later on in detail. Item four addresses a special commercial problem that exists in shipping, particularly by those who supply ships with provisions. Item five deals with housekeeping amendments to maritime law.
Slide 3 is the background to this legislation, to tell you where and how we started. The Marine Liability Act is the principal law of Canada and embodies all key regimes on liability of shipowners and other parties with respect to claims or incidents in which they may be involved.
In 2001, this act was adopted. Since then there have been a number of issues that were brought to the attention of the department, leading to a discussion paper that the department published in 2005 to engage stakeholders in consultations on the next stage of reform of this legislation.
The consultations were wide-ranging, coast to coast, and there has been thoroughly broad support for this initiative. Bill C-7 is not only a contribution to Canadian law; it is also a contribution to international law through the implementation of two international conventions that are involved in this bill.
In slide number 4 we set out the key rationale for this legislation, and I would say the first three bullets are common in nature. They represent the heart of the legislation. It's a link to the environmental agenda in the sense that we have a regime and improvements to the regime that deal with compensation for pollution incidents, including damage to the environment. The regime also respects the very important principle that it is not compensation funded by taxpayers but is funded by polluters. It's based on the polluter pays principle. We're not alone in this policy development. Many other nations have already adopted similar legislation, and they do so particularly for shipping that is international in nature. The last two bullets deal with domestic issues. One deals with adventure tourism, where we need a solution to a difficult problem, and the last bullet deals with ship suppliers and the alignment of Canadian and United States law.
Slide 5 is a snapshot of the stakeholders' response to our discussion paper and to the proposals that are before you. As far as oil pollution is concerned, there's unanimous support, largely because there's nothing terribly new as far as policy goes. We have been party to a number of international conventions dealing with oil pollution. Certainly, the support reflects the impact of the change in terms of the increase in compensation amounts, and I'll go through them in a minute.
Passenger liability is something that has been the objective for a while, specifically to introduce compulsory insurance in support of existing liability regimes. We were not able to do it because of a problem with adventure tourism. If the solution to adventure tourism is adopted in the bill, there will be a way to introduce compulsory insurance for the carriage of passengers in Canadian waters, and in that sense the marine mode will finally catch up to the aviation mode, and that has full support.
On the problem of adventure tourism, let me say that the solution before you is widely supported. There are some concerns, and, if you will allow me, I'll deal with the concerns when I address the issue in detail.
The same can be said about the maritime lien for ship suppliers—a new legislation, a solution to an old problem. It has broad industry support, but there are some residual concerns and I will deal with them.
Let me give you a bit more of a sense of what each element of the bill is all about. I'll start with the first one, which involves a relatively minor amendment. This is a limitation of liability for maritime claims already in the existing act. All I would say about this regime is that it is unique to the marine mode. It provides for a limit of liability following an incident, and it covers all claims arising from the incident, so it is a global limit. It doesn't matter how many claimants are involved in that incident. It is a fixed figure that is established by law and that fixes the liability of the shipowner.
This is a global limitation that has been in Canadian law for many years. We have to re-open the door for adventure tourism. In 2001, the Marine Liability Act changed the treatment of adventure tourism so that it could be brought back into this regime of limit per incidence. We also have this class of persons who may end up on a ship and who may trigger liability, and we want to be absolutely sure that it is understood what that liability is. Here we refer to distressed persons, or persons who are rescued by ships following incidents, to make it clear that these persons are not passengers when they are rescued and thus do not attract passenger liability. It is a technical change. It's not a major change, but it is necessary because the Marine Liability Act currently is not clear on what the situation is for people who are rescued and what kind of liability the shipowner has for those persons.
We also introduce in part 3 a provision that is international in nature. Whenever there is a change in the limits of liability to which we now subscribe by virtue of international convention, whenever the change occurs at the international level, we are bound to accept the change unless Canada objects to it. In the absence of an objection, this provision will provide for automatic updating of our limits, and it's a good feature to make sure that the limits of liability are kept up to date with international standards.
The last item is fairly small, but it is an important amendment. It deals with shipwrecks or ships that may be abandoned by shipowners for whatever reason, and that may pose a hazard to navigation or to the environment. If the state or governmental authority decides to remove the wreck, the related costs of the removal are then charged to the shipowner. With this change, the shipowner will not be able to claim any limit of liability against the bill for removal of a wreck by governmental authorities, so there is basically no limitation on these types of claims by public authorities.
These are necessary technical amendments to a regime that has been in our law for a long time.
With respect to adventure tourism, up to 2001, a commercial operation involving whitewater rafting, kayaking, canoeing, or whale-watching was subject to the regime I just described. There was one limit per incident, regardless of how many persons were whale-watching on board a kayak, a whitewater raft, or a Zodiac. There was simply one limit, and in the case of an incident, the amount that would be awarded would have to be divided by the number of people involved in the incident—or the number of claimants, if you wish. So the per capita or per person limit was obviously fluctuating depending on how many claimants were involved.
In 2001 this was changed, because we then introduced a stand-alone regime for carriage of passengers by water and a stand-alone liability regime based on a fixed amount per person. In that sense, it was very similar to the regime that exists in aviation. And the amount involved—which is still the amount in the act—was about $350,000 per person. So in a situation where there was an operation of maybe 20 people on a whitewater raft, the limit of liability became 20 times $350,000, or $7 million overnight. That was the effect of introducing the passenger limit, and that was the effect of treating adventure tourism the same way as Marine Atlantic or BC Ferries, or any other large operation.
That was a problem for adventure tourism, because suddenly the exposure was so high that they had difficulty in finding and obtaining insurance. It was also on the heels of 9/11, when insurance markets severely contracted. The problem was compounded by another change in law in 2001, when the Marine Liability Act not necessarily prohibited but invalidated the use of waivers of liability. The waivers were a very common practice of adventure tourism operators, who have their clients, the users, sign a waiver of liability because of the nature of the risk being different from that in typical or common transportation.
So the argument since 2001 has been very strong and convincing that adventure tourism is not transportation and ought not to be treated as transportation—that it is different from Marine Atlantic and BC Ferries, and anybody else in between. More significantly, it was recognized that those who participate in the activities of adventure tourism are not only “passengers”, but often the operators of the vessels as well.
So we came to terms with and accepted the proposition that the law went too far in 2001, and what is now before you is a change to bring the adventure tourism operators back to where they were prior to 2001, taking them out of the liability regime based on per person limits. Once we do that and the law passes, then it will be possible—with the rest of the industry involved in common commercial carriage of passengers, from Marine Atlantic to BC Ferries, and anybody in between—to introduce compulsory insurance, which we could not do as long as adventure tourism was involved in this part of the legislation. They would simply never have been able to comply with the insurance requirements.
It's a solution that is before you. I said that it has broad support, which is true. But there are some residual concerns with regard to adventure tourism among our legal community. I think it would be fair to say that the reaction to our discussion paper in the legal community was not 100%. I think one of the issues, the way I read it, is that they feel it's not progressive but regressive in going back to 2001. I think some of the members of the legal community feel this is not a good policy and that we should preserve the existing regime and not touch that particular part of the law.
The balance of that argument is all over the place, but perhaps I should say that the strongest argument for change is the very fact that we deal with an industry in which the users often participate in the operation, and I think that has to be recognized.
We are also fixing a relatively small problem. At this stage, part 4 of the liability regime for passengers makes no distinction between those who are passengers and do nothing else while they are on board a vessel, going from A to B, and those who are there partly as passengers and partly as sail trainees. We have received a fair amount of input on that particular problem. I think we had to recognize that those who are involved in training conservatorships cannot be considered to be passengers and attract the same sort of responsibility on the part of the ship owner. The proposition before you is to take them out and leave them in part 3, where they have some basic provision in terms of the limit of liability, but not the same provisions as if they were bona fide passengers. So it's a refinement of the law that needs to be done to make sure that sail trainees have a treatment distinct from typical passengers. That's all I can say about slide 7.
In slide 8 is the heart of the legislation. It's the oil pollution, summarized in one page. The first division deals with the international aspects of oil pollution, where following the adoption of this act it will be possible for Canada to ratify two international conventions. The first one, the Supplementary Fund Protocol of 2003, is a protocol to a regime to which Canada has been a party since 1989, so it's not terribly new. It increases the level of compensation that would be available in the future, and I'll illustrate in a minute how big that increase is. This convention applies to oil tankers, so all ships that operate and carry oil as cargo, and it deals with the pollution caused by the spill of oil as cargo.
The second convention, the international convention on bunker oil, is the opposite. It deals with all ships but tankers and basically involves any commercial ship that is using bunker oil as a source of propulsion. The ship owner will be now liable for any pollution damage caused by bunker oil.
In divisions 2 and 3, I have some general amendments and restructuring of this particular part of the legislation. In number 4 we have a number of amendments to our domestic pollution fund, which we have had for a long time and which is integrated into the overall Canadian regime of liability for oil pollution.
I think the next slide speaks for itself, and it's much easier to use the slide to explain to you what I just said. On the left-hand side, in the big graph, you can see the summary of the international and domestic regime dealing with oil tankers. It's the baby-blue part in the graph that represents the change in the legislation and represents the international convention that we would ratify following the passage of the bill.
Effectively, after this law passes and we become party to the convention, the amount of compensation available for oil pollution claims in Canada would increase from about $500 million per incident to $1.5 billion per incident, so it is a substantial increase.
We're not the last one to do it. Many other maritime nations have already adopted the supplementary fund, but certainly it is very timely for Canada to move ahead and ratify this treaty.
On the right-hand side, it's the regime that deals with all other ships. The bunkers convention does not provide the same amounts, but it's certainly still a very substantial change. The convention is represented in the lower part of the graph. You can see it's about $100 million per incident for any bunker spill. On top of it, we still would have a domestic fund for any excess, providing $250 million for bunker spills.
The important feature of the bunkers convention is that it comes with compulsory insurance so that any ship, whether Canadian or foreign, operating in Canadian waters would have to have compulsory insurance when this convention comes into force.
The dark blue part is the new regime.
That summarizes the heart of the legislation into the changes for pollution liability and compensation. What is left in the overview is section 5, dealing with enforcement.
Because we have two regimes that deal with compulsory insurance and the obligation of ship owners to maintain insurance and provide evidence of insurance on demand, we need to have provisions that would enable ship inspectors and others, who are involved in verification of documentation that ships have to carry, to have this power to demand evidence of insurance and inquire about availability of insurance with respect to any ship to which the law will apply.
In terms of the final item I will deal with, maritime lien for ship suppliers, this is a commercial problem that is very old and needs some solution. Let me describe what is involved by way of an example.
If a ship arrives in a Canadian port—and I am talking particularly about foreign ships—there are basically three principals who are involved in terms of any supply to the ship such as drinking water, bunker oil for operation, provisions, food, and equipment. It's either the owner of the ship, or the master of the ship, or the ship's agent. The ship supplier at the other end of that relationship provides the ship, on order, with whatever they need and sends them an invoice, because he provides it on credit and expects payment. It so happens that sometimes the ship disappears before a payment is made. This is a problem the ship suppliers have consistently raised. We are pointing out the U.S. legislation, which has a provision giving the ship suppliers in the United States a right to enforce a maritime lien, an instrument by which to pursue and enforce a payment of its invoice.
The call was to level the playing field, because very often a Canadian ship supplier would be supplying the same ship when it's in a Canadian port and the U.S. supplier would do the same for the same ship when it's in a U.S. port. Yet they would each have different rights of enforcement of unpaid invoices.
What is before you is an alignment of legislation giving our ship suppliers under our law a maritime lien, an instrument they can use to enforce payment of invoices if the problem persists. If the problem is resolved, it will not affect anyone. But it is an important tool and it will apply only to foreign ships operating in Canadian waters. It's not going to apply to Canadian ships, because Canadian ships are not the source of the problem, as we understand it. They seemingly pay their invoices on time.
There are some concerns about this, although it is widely supported by ship suppliers, as you can imagine. I understand the legal community has some concerns, largely on two points, that it applies only to foreign ships and that it is not uniform in terms of application to both foreign and Canadian ships. Then perhaps it is too technical, but they feel the ship suppliers should have this right of enforcing a maritime lien only in circumstances where the ship supplier supplied the ships or provided the ships with provisions at the express request of the owner, not the master or the ship's agent.
In other words, they see an important relationship and an important duty of the owner to be the authorized person to actually order the supplies and be responsible for the invoice. That, of course, is an option. It is somewhat more difficult, and I think the ship suppliers would have to respond to it, but it is not the practice today. The practice is to deal locally and to deal with people who are in contact with the ship supplier, not necessarily the owner, who may be located halfway around the world.
That is the concern. I thought I should put it to you, but overall it has wide support.
