Transport Committee on April 23rd, 2009

[Jeff Watson, Conservative, Essex, ON]

Thank you, Mr. Chair.

Thank you to the witnesses for appearing.

Mr. Chair, if I don't use all my time—I'm not sure if I will—I'd like to split it with my colleague Mr. Mayes.

Let me return to the issue of the maritime lien for a moment. As a foundational question, how significant is the problem of unpaid invoices for Canadian ship suppliers? Can you scope that out a little bit for us?

I'm not sure who wants to answer that.

[Simon Barker]

I'll let Mr. Bowie reply, because his clients are the ones who don't pay their bills.

I jest.

[Bruce Bowie]

Yes, surely you do.

[Jeff Watson, Conservative, Essex, ON]

I don't mind swashbuckling up here, either.

[Bruce Bowie]

Yes, I couldn't really give you a number in terms of the quantity. Certainly in my discussions with the ship suppliers, they report significant numbers of cases where the ship has disappeared and they have not been able to get paid. That, clearly, has had a very adverse impact on the ability of those suppliers to continue to operate, if it's a major customer. So it's certainly a significant problem for them, with the foreign ships.

[Simon Barker]

To give you some context, if you're the Canadian ship supplier and you're in a bankruptcy proceeding, there's a pot of money on the table and the government takes its whack, the port authority takes its whack, the banks take their whack, and the American supplier comes in and takes his whack. As a Canadian supplier, you're not left with much at the end of the day. So the fact that this proposal has an ability to bounce you up the line--

[Jeff Watson, Conservative, Essex, ON]

Yes, perhaps I didn't articulate it well, judging by your answers, because I was asking more about how widespread the issue is, perhaps, and not about the significance to the actual ship suppliers. I understand that it can be a very significant thing that happens to them. I just wanted to get a scope of the problem we're trying to address with the maritime lien and how widespread it is.

[Simon Barker]

Personally, in the 25 years I've been practising maritime law in the U.K. and here, I've had one case in Vancouver involving ship bankruptcy when there was a pot of money to be divided up. As in the example I gave earlier, I was representing the U.S. supplier, so I was up the line. But one in 25 years is--

[Jeff Watson, Conservative, Essex, ON]

Okay. I have a further question on that.

In your brief, Mr. Barker, you explain to us that this issue gets us on par in terms of a North American solution with the United States. In your brief, you suggest that if you compare it to the U.S. Maritime Lien Act, some safeguards are missing. I think you've defined a couple of them in your brief.

Let's presume the goal is actually to harmonize with the United States standard. Are these the only two safeguards missing when you compare it to the U.S. Maritime Lien Act? You used the word “many”, which I would presume is more than two. If that's the case, what other safeguards do you think are missing, and do you think they should be included? Those are two separate questions.

[Simon Barker]

I think some safeguards should be included. That's the position of the section. The danger with cherry-picking the U.S. legislation, the Maritime Lien Act, is that there's a lot of it, and a lot of the provisions that work in the U.S. will not work up here in Canada. The numbers are different. That's why I made the offer to the committee to provide some words, because I believe there are words out there that we can massage for you, if I can put it that way, to put this into a Canadian context.

I think there are two safeguards that you need to have there as a minimum.

One is a notice provision, so that people are put on notice that charterers cannot bind owners. If there's a link between the supplier and the owner, then fine--I mean, fine the property. For a lot of companies, the ship is the only asset they have. It's a huge asset and it moves around the globe, so as an owner, you're not going to want liens attaching to your asset for no reason. So I think there should be a notice provision as a minimum.

The other one is that there should be a tail to it; you can't have a lien out there forever. There should be an extinguishment type of situation. If the bill's not going to be paid, then take proceedings. A lien is just something that is one step before starting an interim action in a courtroom. Take the action, start it, and argue it. If you have a point, you'll succeed; if you don't have a point, you won't succeed. But you can't have a lien out there forever, so there should be a tail to that. As for whether that tail should be three years, such as the general limitation period, or whether it should be shorter, the American legislation talks about 60 days, so there is a difference in timing.

I think what we, as a section, should do for you is take the weight of the American legislation and see if there are words we can put together for you as a committee that will suit a Canadian context and provide the safeguards for what is a good idea.

[Jeff Watson, Conservative, Essex, ON]

Thank you.

[The Chair, Conservative, Merv Tweed]

Mr. Mayes.

[Colin Mayes, Conservative, Okanagan—Shuswap, BC]

Thank you, Mr. Chair.

I'd like to direct my questions to Mr. Barker, just so I understand the words totally in regard to agreements you talked about that should be recognized. Is my understanding correct that between the provider of the service and the recipient of the service they can actually, in their mutual contract agreement, extend the limitations of that agreement beyond what is stated in the three years or two years?

[Simon Barker]

Yes. What you find in the Marine Liability Act today, under the Hague-Visby Rules, which is the cargo liability regime in the legislation, is a one-year limitation period in the cargo section. It's a period that runs from the day of discharge. The cargo is discharged. It gets to the consignee's warehouse. It's found to be damaged upon arrival. There's a clock ticking, and the cargo interests then have a year to bring claim against the shipowner or the carrier for the damage to the cargo.

Maritime lawyers regularly get called on the eleventh month, the thirtieth day, and at about the twelfth hour to say, “The day of discharge was a year ago. Can you protect our interests?” What you find is that if the ship is a German line vessel or a Chinese line vessel, the claims department is in Hamburg, Shanghai, New York, or Hong Kong. Cyprus, for example, has a foreign fleet. Not one of their ships ever goes home to Cyprus, because they can't fit into any of their ports. They have satellite offices at locations around the globe.

You find the claims office. You contact them and say, “We've just been retained. Can we have an extension of sue time to allow us to collect some papers and collect some thoughts?” The shipowner writes back and says, “Subject to all of our usual defences, you can have an extension of time for three months to gather your thoughts.” That's a tolling agreement. Whether it is the Federal Court of Canada or the Supreme Court of British Columbia--which has an end-run jurisdiction for shipping--or indeed any other courtroom that hears cases, it's a form of dispute resolution.

Most cargo cases are resolved outside the courtroom, but you need time to do it, especially if you're in different time zones with insurance companies, whether they're in London, New York, or wherever. Invariably, the claims department of the shipping company and the insurance person are in different countries, different time zones. You need that little bit of time. A tolling agreement, in the context of federal navigation and international shipping, makes a lot of sense.

In British Columbia, they're allowed in the provincial courts; in Ontario, we don't allow them. When I get that eleventh-month, eleventh-hour request, I get to file in the Ontario court a notice of action that gives me 30 days to catch my breath before I hit them with the full pleading. I have to launch the lawsuit in the provincial system, and that doesn't work sometimes. That's why tolling agreements do make sense in this context.

[The Chair, Conservative, Merv Tweed]

Mr. Dhaliwal.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you, Mr. Chair.

I would like to welcome the panel members, and I would like to thank them for their valued input into this Bill C-7 legislation.

My question is to Mr. Barker.

Mr. Barker, you said that looking at the compulsory insurance for adventure tourism operators is getting us away from the real issue, which is whether the operators are operating safely or not. I want to understand why you feel there should be additional rules in the law needed to ensure that adventure tourism is safe.

[Simon Barker]

Sir, my understanding of adventure tourism is that a lot of the operators today are safe. The message, certainly, that we got is that if you keep them in part 4 of the Marine Liability Act and you put them into this compulsory insurance regime with strict liability, they can't get insurance at the level that part 4 requires. If you take them out of part 4 and put them back to where they were prior to 2000-01, they can get insurance. They can still operate. Although it's not compulsory insurance, they will still be able to get insurance. It'll be voluntary insurance. As I said, if they're big enough organizations, they don't even need to get insurance; they can self-insure.

The insurance side of it is an element of risk management. The difference between being in part 4 and being out of part 4 is compulsory. If you're in part 4, you have no choice; you have to get insurance at the limits that are required by the legislation. The adventure tourism industry is telling everybody they can't get insurance at those limits, so either they exist outside of part 4 or they don't exist. If they exist--and they clearly can exist if you put in proposed section 37.1 as the bill proposes--then you're saying to them that if a marine adventure activity fits these criteria, it can come out of part 4.

I'm saying if you put in another condition saying that it's a properly crewed seaworthy vessel at the commencement of the voyage, the minute it is not a seaworthy vessel that's properly crewed, it doesn't come out of part 4. The waivers are null and void, and the public in that respect is protected. As Mr. Volpe said today, there is a standard missing in proposed section 37.1, and having a seaworthy vessel at the commencement of a voyage is that standard.

[Sukh Dhaliwal, Liberal, Newton—North Delta, BC]

Thank you.

[The Chair, Conservative, Merv Tweed]

That's it. We've gone our complete rounds. I think I'll go one free round and see if anybody has any other comments to make. I know Monsieur Laframboise has a brief question, and then Mr. Bevington.

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

I just have a short question concerning maritime liens. You are saying, Mr. Barker, that shipowners are not protected. It is rather technical. We want to force foreign shipowners to pay their debt to Canadian suppliers. You seem to say that there should be a contractual link with the owner. Are shipowners easily accessible?

Mr. Bowie might also answer if he wishes. I would not want that, because of the lien system and because we need the agreement of the owner to negotiate with charterers, suppliers or others, this results in a delay in maritime traffic in a harbour. I just would like to be sure of this. I would not want that this new way of doing business, specifically linking a lien to a shipowner, enable suppliers to detain a ship in harbour until they get… Will this slow down maritime traffic? That is the question I am asking.

[Simon Barker]

No, it's not, sir. The nice part about a maritime lien is if you have a ship in your port—and it doesn't matter whether I were a U.S. attorney based in Seattle or a Canadian lawyer based in Vancouver—and you are threatening to arrest the ship, you don't arrest a ship lightly. It's not something you do willingly, because you have a whole operation rolling. You can arrest a ship, and I have, in the past, arrested a ship in a two-and-a-half-hour period. The Federal Court of Canada is very good. They have a duty officer. They can open the courthouse after hours. You issue a pleading. You issue an affidavit. You can arrest the ship.

Loading operations don't stop just because a ship is under arrest. Unloading operations don't stop. What you are telling a shipowner is that vessel cannot leave the port until this matter is resolved, and the matter of resolve being that either you post security and pay the letter of undertaking from one of the international P and I clubs, or you put money in court or put up a bail bond or a surety. The arrest is something that will very quickly focus an owner, and if the owner is in Vanuatu or Liberia or Cyprus or anywhere else around the world, if his or her ship is in the port of Vancouver and it is under arrest, the P and I club correspondent in Vancouver for that particular ship will be on the phone asking what they need to do to get the ship out of arrest.

Half the time that conversation takes place before the arrest is even done, because the threat of arrest is sufficient. So you'll never be chasing an owner around the world. You'll have their undivided attention, because their asset is right in your own port. A maritime lien is a very strong tool, and the arrest of a ship is a very strong tool to resolve disputes.

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

I would like to hear Mr. Bowie's view on that subject. In fact, if the shipowners are American, there is no problem. But if they are in Cyprus or Nigeria, there should be no problem either to reach them. Is that correct?

[Bruce Bowie]

I just represent the Canadian shipowners. We are based in Canada and we're easy to get hold of, and if you want to get paid you know where to find us, essentially. That's why we don't feel there's a need for a very powerful tool when there are Canadian laws that deal with going to court and getting paid and that sort of thing.

[The Chair, Conservative, Merv Tweed]

Mr. Bevington.

[Dennis Bevington, NDP, Western Arctic, NT]

I have just a quick question. We just went through an exercise with the European free trade agreement where we are lifting the tariff on ships coming from Norway. Is Norway a potential supplier of ships to the Canadian system?