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Thank you very much, Mr. Chair and honourable members, for the opportunity to provide the perspective of the Canadian Shipowners Association on Bill .
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.
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 . 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 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.
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Do you mean the amendments in general for marine liability? The implications are that it would be a good thing and they would harmonize.
Shipping is a very international business, and the pollution parts of the bill.... The supplementary fund has an international focus and it would basically give Canada more money in the event of a spill if a convention ship or a tanker was involved. Given that international ships visit our shores on a regular basis, that's a good thing. Thankfully, in the 30 to 40 years that we've had environmental protection legislation in this country, we haven't had a big spill. The Canada Shipping Act talks of a 10,000-tonne response capability. We've never had a 10,000-tonne spill in this country. The Nestucca spill on the west coast back in the late eighties was an 800-tonne spill. The biggest spill, I think, was a 7,000-tonne spill when the Kurdistan broke its back in the Cabot Strait in the gulf in the late seventies. So we've never had a catastrophic spill here and, touch wood, we never will.
But to be party to the supplementary fund convention.... We're already party to the civil liability convention, the fund convention, the limitation liability for maritime claims convention, Athens--conventions that this bill embraces. The fact that we're harmonizing with the other shipping nations around the world is a good thing.
Maritime liens, as we heard on Tuesday, are a North American fix. They're slightly out of step with the international community with the maritime liens, and the proposal is to give Canadian ship suppliers the same footing as American ship suppliers in situations where priorities become important. I think that is to some degree a North American problem for us in that ships have been known to choose Canada as the place to go bankrupt because of our priorities order. The port of Vancouver was popular for a while there for a certain number of companies that would declare bankruptcy--priority hearings--and the difficult thing for Canadian suppliers is that they would always be at a disadvantage if an American supplier had a claim too.
I used to defend American suppliers when I lived in Vancouver, and it was always a lot better than if you were defending a Canadian supplier because you were guaranteed payment. That always struck me--other than the fact that I was getting paid--as being somewhat unfair to the Canadian, because it was his turf that we were arguing on and the American was getting the benefit of it.
So the proposal by the Canadian suppliers is to create some form of parity. I think that is a good thing, but as I said, if you are giving someone a privilege--and I believe you are by bumping them up the line--you have to put a few safeguards in place too. Charters cannot or should not be able to bind owners and have ships carry that lien around. That is a safeguard that is in the U.S. legislation and it's missing from ours, and I think ours needs to be tightened up as a result.
Is it a good thing to give Canadian ship suppliers a priority ranking? I believe it is. You should look after your own.
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It's right in that they want to go back to the old, because as I understand it, they couldn't get the insurance, compulsory insurance, at the limits that were required by the Athens Convention and by part 4. This proposal in the bill is to take adventure tourism, as an activity, out of part 4 and out of the requirement to have compulsory insurance and out of the requirement to have a strict liability regime and put it back in the position it was in before, which is getting insurance in the normal marketplace without the increased limits. Getting insurance in the marketplace for the activity is based upon a number of different risk factors by which underwriters will rate the operation: the seaworthiness of the operation, the seaworthiness of the vessels, the risk factors. There's a whole slew of them the insurance industry will look at in rating a premium for insurance. The insurance companies will require these operators to provide waivers, to give briefings.
The bottom line is that the people who go to these activities are looking for risk. When you're a passenger on a vessel, whether it's in the Saguenay looking at the whales with your son, whether it's in Toronto Harbour on one of the cruise ships that go out at night, whether it's in Vancouver, you're not looking for risk as a passenger, you're looking for carriage from A to B. I think that's the difference: when you go looking for risk, you would like to get some risk. You want to find the rocks because you want the whitewater that's close to the rock.
When you go shopping, you're looking for a good operation that has all the equipment painted the right colour, has got all the nice brochures, has seaworthy vessels, and gives you a nice experience, so then you can go back and recommend it to your friends. Those are the people who will have insurance, whether you make it compulsory or not.
Athens has a compulsory system and has increased limits, because with those increased limits and with that compulsory system comes a strict liability regime that is very hard for you to get out of. You have to prove certain things in the normal negligence action. You don't have to prove a number of things in a strict liability regime. That's the trade-off part 4 has.
The adventure tourism people, as I understand it, are saying, “Take us out of part 4, but we're still caught by the normal liability rules and we'll still try to protect ourselves by waivers. We'll still risk manage with insurance. Because there won't be as high a limit, we'll be able to get better premiums that we can afford and we'll be able to run better operations.”
That's why I believe, to go back to Mr. Volpe's point on Tuesday, that a standard is important. You're trying to come up with a minimum safety standard for these people for this activity, and you can do that through the Canada Shipping Act, and I believe you can also do that through this piece of legislation.
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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.
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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.