Transport Committee on April 23rd, 2009

[The Chair, Conservative, Merv Tweed]

Good afternoon, everyone. Welcome to the Standing Committee on Transport, Infrastructure and Communities. This is meeting number 13. The orders of the day are that pursuant to the order of reference of Monday, March 30, 2009, we are considering Bill C-7, An Act to amend the Marine Liability Act and the Federal Courts Act and to make consequential amendments to other Acts.

Joining us today from the Canadian Shipowners Association is Mr. Bruce Bowie, president. Joining us from the Canadian Bar Association are Mr. Simon Barker, chair, national maritime law section, and Ms. Kerri Froc, lawyer, legislation and law reform. We welcome you today.

I understand you have been given some directions from Maxime, our clerk, on your time.

Mr. Bowie, please go ahead. Then we'll go to the second presentation and then have questions from committee members. Please begin.

[Bruce Bowie, President, Canadian Shipowners Association]

Thank you very much, Mr. Chair and honourable members, for the opportunity to provide the perspective of the Canadian Shipowners Association on Bill C-7.

The Canadian Shipowners Association represents the interests of the Canadian companies that own and operate Canadian-flag vessels on the Great Lakes-St. Lawrence waterway. We also operate in the Arctic and on the eastern seaboard of the United States and Canada. As such, we are one of the key stakeholder groups impacted by this legislation.

In 2008, the 67-vessel fleet handled about 62 million tonnes of bulk commodities, essentially coal, grain, iron ore, aggregates, salt, petroleum products, and general cargo. We provide Canadian primary industries and communities with reliable economical and environmentally sustainable transportation services.

The CSA fleet is dedicated to operating mainly in Canadian waters, providing uninterrupted service to customers through long-term commitment to shippers in the steel, agriculture, mining, construction, power, and petroleum industries.

The current Marine Liability Act, which has been in force since August 2001, is the principal legislation that deals with the liability of shipowners and ship operators in relation to passengers, cargo, pollution, and property damage. The intent of the legislation is to set limits of liability and to establish uniformity by balancing the interests of shipowners and other parties.

The proposed amendments to the Marine Liability Act contained in Bill C-7 result largely from the maritime law reform discussion paper released by Transport Canada in May 2005 and the subsequent consultations that took place with many stakeholders in all sectors of the marine community. CSA participated fully in this consultation process. Bill C-7 is largely the legislative response to the discussion and debate surrounding the Transport Canada paper.

CSA has worked closely with government officials and other stakeholders in the Canadian maritime industry. As I said, we have met on several occasions with Transport Canada regarding Bill C-7. I would like at this point to commend the Government of Canada, and in particular Transport Canada, for their excellent work in developing this important policy and legislative initiative leading to amendments to the Marine Liability Act. CSA is in agreement with most of the provisions in Bill C-7. Although the bill imposes significant obligations on domestic marine carriers, there is nothing that we, as responsible carriers in the domestic regime, cannot live with.

The bunkers convention is one of the international conventions that are brought into Canada through this bill. It deals with oil pollution from the bunkers of all ships other than tankers. Departmental officials, in presentations earlier this week, pointed out that ratification of this convention will enable Canada to rely on the compulsory insurance provisions introduced in the convention as a means of ensuring that the shipowner has the necessary coverage in the event of a bunker oil spill. CSA does not object to this new provision, and members will comply with the new requirement.

Bill C-7 also creates a maritime lien against foreign vessels for Canadian ship suppliers as security for unpaid invoices. CSA again supports this provision and wishes to go on the record as not being in support of any changes to Bill C-7 that would extend the maritime lien to Canadian vessels. The purpose of the lien provision is to protect Canadian suppliers against foreign-flag vessels that do not meet their obligations.

This has been a problem, because foreign vessels and their owners do not have ties to Canada and can thus ignore their obligations to suppliers. This is not the case for Canadian-flag vessels. With corporate offices in Canada, suppliers have no difficulty getting paid by Canadian vessel owners. There is no evidence of a failure on the part of Canadian shipowners to pay ship suppliers such that a lien in their favour against shipowners and operators should be created. When claims have been asserted against Canadian shipowners by ship suppliers, either the threat of vessel arrest or a simple action in rem has been sufficient to ensure prompt settlement of any outstanding claim.

So a proposal to include a lien for Canadian ships would have significant adverse impact on the financing of our fleet. There's no question that financing costs would increase if the lenders were rendered subordinate to liens in favour of ship suppliers and CSA could not support a proposal that would increase costs with no discernible benefit for taxpayers, particularly in the current economic climate.

On the topic of the current economic climate, I would like to add that the core of the CSA fleet, which is the bulkers and self-unloaders that operate in the St. Lawrence and the Great Lakes, are currently averaging in age about 35 to 40 years old and they must be replaced. There's a pressing need to renew these vessels with modern, efficient, and environmentally green ship solutions. However, when new vessels are imported into Canada for use in the coasting trade--coasting trade is within domestic waters--they are subjected to a 25% duty under the customs tariff, resulting easily in a duty of $10 million or more per vessel when they come in. This is not only a tax on Canadian shipowners but also on the end users of marine transportation.

So the duty needs to be removed immediately for the health of the nation's manufacturing and resource-producing sectors that depend upon marine transportation and to facilitate the renewal of Canada's domestic flag fleet. The addition of a ship supplier lien on Canadian vessels would be an unnecessary action that would create undue hardship on the ship financing problem that we already have in Canada in terms of renewing our fleet.

That's our submission. Thank you very much for your attention.

[The Chair, Conservative, Merv Tweed]

Thank you.

Ms. Froc.

[Kerri Froc, Lawyer, Legislation and Law Reform, Canadian Bar Association]

Thank you, Mr. Chair. The Canadian Bar Association is very pleased to appear before this committee today on Bill C-7.

The Canadian Bar Association is a national association with about 38,000 members across the country. The primary objectives of the organization are improvements in the law and improvements in the administration of justice, and it is in this light that we've made our written submission, which has been circulated to you in advance, and make our comments to you today.

The CBA has been engaged in consultation with the government on marine liability amendments since at least 2005 and we are pleased to see progress made on this issue. I'm going to ask Mr. Simon Barker, who is the chair of the maritime law section, to make substantive comments about the bill.

[Simon Barker, Chair, National Maritime Law Section, Canadian Bar Association]

Thank you, Kerri.

Mr. Chairman and members of the committee, good afternoon, and thank you for giving us the time to speak to you.

Last night, instead of watching the results show on American Idol, I had the chance to spend two hours in front of the webcast and watch your deliberations on Tuesday. I must say I thought the Transport Canada submission to you was a very good one. I didn't see the slides that were presented, but I've seen some of them before, so I was able to follow that part of the discussion.

What I found more of interest was the question and answer session that you had as a round table afterwards. I put your questions and some of the answers that came from the department into three categories. One was oil pollution, which was described as the heart of the legislation; when you read the bill, it is clear that clause 11 is certainly the most substantive clause, and it is all about pollution. The other two were adventure tourism and maritime liens. I'll speak to both those this afternoon.

I appreciate that time is a precious commodity. We have put a three-page submission before you. I'm going to work on the assumption that you all have a copy of it.

The Canadian Bar Association's national maritime law section is, in general, supportive of Bill C-7. We don't find the oil pollution provisions in any way controversial. The supplementary fund protocol will increase the limits, and we believe it will better prepare Canada for an oil spill.

We don't believe the bunkers convention will have much impact in Canada. We've had a bunkers regime for a number of years. Canada, I'm happy to say, has always been in the forefront of oil pollution legislation worldwide. From 1970 on, we've had a very strong oil pollution provision in the legislation, starting with the Canada Shipping Act. Then in 2000-01, it was consolidated into the Marine Liability Act. So there aren't going to be any changes there. As I said, I don't believe it's going to be controversial in any way. The harmonization of international law is always a good thing, so to see Canada ratify conventions is a plus.

Our concerns, like those of the committee on Tuesday, touched upon two areas: adventure tourism and maritime liens. I would direct you to page 2 of our submission. The two areas touch upon two clauses in your bill: clause 1, the definition of the term “passenger”, and clause 12, which is where you'll find reference to the maritime lien, plus the general maritime limitation period, which I'll comment on as well.

Instead of getting into some of the nitty-gritty detail of clause 1 and the problem with the definition of the term “passenger”, let me approach it by saying that we're coming into summer season here in Canada, and most of us will go to a cottage, either our own or a friend's. As you're walking down the dock to the boats, let us suppose that on your left you have a boat with a motor and on the right you have a canoe. If you pass the bill as it currently reads, I would encourage you to get into the canoe, because the way the text currently reads, if you are injured as a passenger in a canoe, you will get substantially more money if liability is founded than if you get into the motorboat with the engine.

I think that is an anomaly that appears in the drafting. I think it was not intended by the department when it was drafting the bill, and I think it needs to come out.

Right now under the Maritime Liability Act, if you are injured in a boat, no matter how it is propelled, there's a limit of a million dollars for a vessel under 300 tonnes, and most small vessels in Canada fall into that category. In clause 1, you have a definition of the term “passenger”, and proposed paragraph (c) will in effect expose a passenger in a canoe to a higher limit. That may be fair for the person in the canoe, as I said to you, when you have the choice, but it will be very unfair to the person in the motorboat. Harmonization would suggest that we should all, as we do today, have a limit of a million dollars, and paragraph (c) should be removed from clause 1 in the definition of “passenger”.

The other point, which I think is a little bit more interesting, is the one noted by Mr. Volpe on Tuesday afternoon when talking about proposed section 37.1, which is where you find the definition of marine adventure activity.

If we go back to the transport discussion paper in 2005, the initial thought was to try to find a way to get adventure tourism out of part 4. Part 4, as you will recall from your deck on Tuesday, is pretty much about the Athens Convention, and the Athens Convention relates to big ship passenger vessels that are seagoing. We don't have that many seagoing passenger vessels in Canada.

If we do have passenger vessels, Mr. Volpe, in Toronto Harbour, they're cruise lines, but they're not seagoing. They're lake-going, but the fact is the same.

I think we're trying to find a way to pick up on the thought that the honourable member for Pembroke had on Tuesday, of keeping the good operators out of the structure and making sure the bad operators stay in the structure. The trick is to differentiate between the two.

Initially we started out by defining the term “ship”. That was felt to be not workable, and so through the consultation process with Transport Canada and the stakeholders, the idea of an activity came up. If you could put parameters around what was the activity, then that would get the good out and keep the bad in.

The point that you made, Mr. Volpe, on Tuesday was on ship safety standards. There was reference to the Canada Shipping Act and the standards for ship safety in that piece of legislation and enforcement by Transport Canada.

The point that the Canadian Bar Association national maritime law section wanted to make is on one of the criteria that appear in proposed section 37.1. If you put in another criterion requiring the adventure tourism industry to have a seaworthy ship at the commencement of the voyage, properly crewed, it will ensure that you have good operators coming out of part 4, staying in part 3. The bad operators will always be in part 4, because if at the start of the voyage the ship is unseaworthy, they won't be able to invalidate the waivers, they won't be able to get out of the structures of part 4, and the rules that you have in part 4 will continue to apply.

The other concern we have is over maritime liens, which you will find in clause 12. A maritime lien is a privilege claim. You heard discussion about it on Tuesday afternoon. The thing to remember in the discussion is that a maritime lien as a privilege claim generally ranks in priority above other claims against maritime property, be it mortgages or unsecured creditors, and the discussion of priorities always comes up in the context of a bankruptcy or a ship arrest if someone's arguing over a limited pot.

Ship suppliers have a lien today. The department officials on Tuesday described it as a statutory lien. That is lower down the ranking than a maritime lien. What, in effect, the ship suppliers are asking is to allow them to go higher up the ranking and put themselves on parity with the U.S. suppliers.

As a Canadian sitting before you, albeit with a strange accent, I would tend to agree that that's a good thing. However, what you have to do if you give someone a privilege claim is make provision for the traditional safeguards. I think some of the safeguards that are in the U.S. Maritime Lien Act are missing from our lien provision.

There was talk on Tuesday of a “made in North America” type of fix. It seems that there has been a little bit of cherry-picking going on, and some of the good parts have been taken out of the U.S. legislation and some have not.

The best analogy I can make is that you heard comments on Tuesday afternoon of an owner, a ship's master, a ship's agent. I didn't hear any comments on the webcast of a charterer. If I put it into a landlord-tenant type of analogy, the owner of the ship is like the landlord and the charterer of a ship is like a tenant. The issue that you have to come to terms with is this: is it fair for a tenant to be able to bind the landlord to charges on his property if the owner doesn't know anything about it or the landlord doesn't know anything about it? Right now in the bill you have a provision, which is a good provision, but it needs some safeguards put into it.

The last point is that a general limitation period has been proposed. That is a good thing. It harmonizes federal law across the country and that should be encouraged.

The one thing that is missing is what we call a “tolling agreement”. A tolling agreement is a mechanism that allows parties to extend the limitation period by agreement, if they so choose. Today, tolling agreements are allowed in the province of British Columbia, for example. They are not allowed in the province of Ontario. If you're going to have maritime law uniform across the country, then things that make sense and work, as tolling agreements do in British Columbia, should be extended across the country and put into a general maritime provision.

Those are my comments. I'm going to open the floor to the committee for questions. I'll take as many as you want to throw at me. Those I can't answer I'm going to deflect to Mr. Bowie.

Thank you for letting me speak to you this afternoon.

[The Chair, Conservative, Merv Tweed]

Thank you very much.

Mr. Volpe, you have seven minutes.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Thank you very much, Mr. Chairman.

And Mr. Bowie, Mr. Barker, and Madame Froc, thank you very much for joining us today.

I have a couple of questions, although Mr. Barker, you've been good enough to explore some of the issues the committee raised, or were raised in committee, last Tuesday. So I guess my questions will be just to ask you to elaborate on some of those issues. You really raised three areas that are of some concern to us. I'm wondering if Mr. Bowie would allow us to proceed with that. There's a brief comment or observation I'd like to make.

But I guess, Mr. Barker, the big issue is that if we're going on to the definition of liabilities.... You pointed out how the definition of “passenger” needs to be defined a little better, with respect to those who opt to go on a motorized vehicle or on a paddle-propelled vehicle. Is there, in your mind, a clear indication here about who will pay for the insurance that ought to be put in place?

[Simon Barker]

Yes, there's a clear indication in my mind, because in a former life I was an insurance broker. But the insurance of ships, whether they're big ships or little ships.... I believe one of the witnesses coming before you next week is the Canadian Board of Marine Underwriters, if I'm not mistaken. They could perhaps speak a little bit better to the point.

The idea of the Athens Convention was that big ships would have insurance, and it would be compulsory insurance, and there would be a strict liability regime in place to back that. Other than Mr. Bowie's association and the Great Lakes fleet, we don't really have a deep-sea offshore fleet in Canada. We are a nation of importers, so we have a lot of foreign-flag vessels coming into our Vancouver, Halifax, and Montreal gateways. And all those vessels that come into our ports come in with insurance through mutual associations of shipowners called protection and indemnity associations. So they all have insurance. All the passenger vessels are enrolled in the P and I clubs—there's an international group of them. So they all have insurance.

In the small vessel context, the small vessels can get insurance in Canada, whether through the insurance companies that are headquartered in Toronto or in Montreal. So they can get insurance.

The issue is that if you take an activity such as adventure tourism out of part 4 and the need for compulsory insurance and then put it back into the part, as it has always been, the good operators will get insurance because they're good operators, and the bad operators will not have insurance because they're bad operators. They want to try to keep their costs down.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

And it won't matter.

[Simon Barker]

And it won't matter to them.

So what you need to do is this. If you're saying, in a piece of legislation, you're going to put a gateway proposal in place—and proposed section 37.1 is a gateway-type threshold provision—you're saying that if you meet these four or five tests, you will be felt to be a marine adventure tourism activity and part 4 will not apply.

The analysis will go on after the fact—after there's been an accident, after someone has been injured—because the attorney who's looking after the injured party will ask if there is a way he can get them out of one of those five. And they can get that boat and that activity back into part 4, to strict liability, because all the normal negligence provisions as were discussed on Tuesday will apply.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

Is it incorrect, then, to draw from this that the issue related to people signing a waiver, which is a natural kind of thing to do if you're going into adventure tourism—because adventure tourism is by its own nature and definition a risk-taking exercise—would be a reason why we wouldn't adopt your suggestion?

[Simon Barker]

No, the waiver is a bit of a red herring. I will give you a personal example.

Last summer I had the pleasure of going to Quebec City, and after a meeting there I was able to go to the Saguenay on a whale-watching tour. They have operators up there with big ships, little ships, Zodiacs. My son is not particularly comfortable around water, so we went on a big ship to give him some feeling of structure around him. We weren't asked to sign a waiver. It was a ship with all the necessary safety equipment, and we were in every sense of the term passengers. If I were to go down Hells Canyon in the Fraser River on a white-water rafting exercise or go up the Ottawa Valley to Pembroke for white-water rafting, I'd be asked to sign a waiver, because I would be engaging in an adventure. There would be no suggestion that I was a passenger.

The question in my mind arises if I go up there and the activity is something outside the normal bounds of being a passenger, and I am asked to sign a waiver and am given safety presentations, and I'm on a seaworthy ship that's properly crewed. Then I'm squarely out of part 4. I know I'm out of part 4, I'm consenting to it, and although I'm saying I'm out of part 4, all the normal rules still apply. If I am hurt, I can still sue someone, and if I can find a way to get through the waiver, then I will. It's business as usual.

What we're trying to say to you today is this. I don't believe that back in 2000 when adventure tourism was put into part 4, the idea was to capture the small-ship and big-ship Athens Convention type of seagoing vessel. The recognition we've had over the last seven or eight years in the adventure tourism industry is that it's not appropriate to capture the small adventure tourism activities in part 4. They can be dealt with in part 3. What we're trying to do is find a way to put a box around the activity so that the good stays out and the bad can stay in.

[Joe Volpe, Liberal, Eglinton—Lawrence, ON]

But you haven't found that.

[Simon Barker]

I wouldn't say we haven't found it. I think Transport Canada, in putting forward to you proposed section 37.1, is pretty damn good. I'm only saying that if you add a condition in it about seaworthiness, it would be even better.

[The Chair, Conservative, Merv Tweed]

Mr. Laframboise.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

Mr. Bowie, my first questions are for you.

In your statement, you were against the idea that Canadian shipowners be subject to liens. Being trained as a notary, I know that even if there is a law, when you sort out the lien, there is nothing to worry about. As concerns liens, there is no problem as long as you are willing to pay. If Canadian competitors do not pay up because of financial difficulties, it might be advantageous for those who make their payments that those who will fail to make their payments be subjected to liens. Try to convince me that Canadian shipowners should not be the object of liens.

[Bruce Bowie]

The first thing to say is that providing a special maritime lien for suppliers is not a practice globally. It is the practice in the United States, and because it is a practice in the United States, Canadian ship suppliers are at a disadvantage when something happens to a ship that trades in both Canada and the United States, because the U.S. suppliers have a lien, but the Canadian suppliers do not have a lien, and they fall below these others. There are issues when, because you are lower in the ranking, it's very difficult to go after the shipowner, because the ship has left the country and you can't find the owner or find the ship in order to exercise any rights you have under normal maritime law to get payment.

That's not the case with the Canadian ships. We're always operating in the Canadian system. All the rules that suppliers have within the Canadian judicial system for getting paid—seizing the ship, in rem, and those sorts of things—are available to them. There isn't a requirement for an additional provision.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

If I understand you correctly, at the international level, this is not the usual practice. As a Canadian shipowner, you do not want to have obligations that others, at the international level, are not subjected to. Is that right?

[Bruce Bowie]

Yes, that's right.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

You conclude by saying that you would like to see the 25 per cent surtax on imports abolished. You know, of course, that this tax is designed to protect the shipbuilding industry in Canada. Are you not a little uncomfortable in asking us to remove this protection?

[Bruce Bowie]

Not really, because in effect the policy is not effective.

Among our members we haven't built a ship in Canada since 1985. All the policy has done, in fact, is impede us from renewing our fleet. The Canadian shipyards don't really have the capacity or the capabilities to build the kinds of ships we need. We really need to go offshore, but to go offshore we have to pay a 25% duty. It's really a punitive tax on doing business in Canada. It's a no-win situation for us. The Canadian shipbuilders can't build it, and if we want to replace our fleet, we have to go offshore and pay a 25% tax, and then we're not competitive with the rail and truck companies, which don't pay those kinds of duties on their capital infrastructure. We're not able to compete with them for the domestic trade.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

If I understand you correctly, you are saying that Canadian shipowners do not have the capacity to do this work for you. Is that right?

[Bruce Bowie]

Yes, that's right. They haven't built a ship for us since 1985, and the yards that were available then are no longer in operation.

[Mario Laframboise, Bloc, Argenteuil—Papineau—Mirabel, QC]

My next question is for Mr. Barker.

In regards to adventure tourism, you would like us to add a criterion that speaks to the question of quality and I can understand that. In your view, there should be a requirement that vessels destined for adventure tourism be seaworthy and properly crewed. If we added this criterion, who would assume that responsibility: Transport Canada or the Coast Guard? Have you gone as far as to consider who should be responsible for supervising adventure tourism operators?

[Simon Barker]

The regulatory authority for shipping and marine safety in Canada is Transport Canada. They use the Canada Shipping Act and the regulations that support the Canada Shipping Act to do that.

What I'm suggesting, and what the national maritime law section of the Canadian Bar Association is suggesting, is not that you do away with the marine safety rules for shipping. They would still apply, Transport Canada would still enforce them, and ships would either be fined for not complying or they would comply. What we're suggesting here is that it be a double test. If you want to ensure appropriate minimum safeguards for adventure tourism, you can do it in two ways: you can do it when the ship is built, you can do it when Transport Canada enforces it, and you can also say that there is an obligation on the shipowner himself or herself to ensure at the commencement of the voyage that the vessel is seaworthy and is properly crewed. If the shipowner does that, he or she can avoid part 4 of the Marine Liability Act. If he does not have a seaworthy vessel and he does not have proper crewing, if he gets caught by the enforcement teams, he'll get fined, and if an accident occurs during the voyage and someone gets hurt, any waivers that he's relying upon will be null and void and part 4 will apply. The strict liability provisions will apply. There is a double whammy there.

I think Mr. Volpe's point the other day was that there's something missing from proposed section 37.1, a standard. I heard the department say it was missing from section 37.1 because it's somewhere else in the legislation, and another part of Transport Canada would enforce it. What we're saying is to have both. If you have both, you've covered the whole base. You look after the good operators and you make sure the bad operators are penalized.