TRGO Committee Meeting

STANDING COMMITTEE ON TRANSPORT AND GOVERNMENT OPERATIONS

LE COMITÉ PERMANENT DES TRANSPORTS ET DES OPÉRATIONS GOUVERNEMENTALES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 27, 2001

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[English]

The Chair (Mr. Ovid Jackson (Bruce—Grey—Owen Sound, Lib.)): Would you take your seats, please. We're ready to start the proceedings.

I want to welcome our witnesses here this morning. We're dealing with Bill S-2, and I understand we have four witnesses. We'll deal with two witnesses for the first hour. They each have five to seven minutes to tell us their story, we will have questions, and then I will switch to the other two witnesses at 12 p.m.

There are some housekeeping things before we move on. We will continue with Bill S-2 on March 29. We have three more witnesses, and hopefully we can go clause by clause after that. If the committee agrees that we're going to continue with Bill C-14 as well, we'll ask the clerk to make sure he has the witnesses and the appropriate things lined up.

We're going to spend a little bit of time firming up the agenda. I'm trying to accommodate everything. The committee is master of its own agenda, and I want to make sure everybody is happy. I've been trying to firm up some dates and see exactly how we could accommodate, for instance, Mr. Milton—what dates he could come, and that sort of thing.

If the committee agrees to what I've said, we'll continue along that way.

We'll see what we can do on Thursday. Thanks a lot.

I want to welcome our witnesses here. You have five to seven minutes each, and then we'll have questions. Thanks.

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Mr. Gilles Bélanger (President, Shipping Federation of Canada): Good morning, Mr. Chairman. I'd like to thank the committee for inviting us to appear before this committee to make representations on the proposed Marine Liability Act.

[Translation]

My name is Gilles Bélanger and I'm the President and CEO of the Shipping Federation of Canada. At this time, I'd like to introduce my colleague from the Federation, Anne Legars, Director, Policy and Government Affairs.

[English]

We're speaking here today on behalf of the federation and the Chamber of Shipping of British Columbia. Both the federation and the chamber represent virtually the entire maritime industry dealing in Canadian ports on both coasts—the chamber on the west coast and the federation east of the Rockies.

I would like to make the point that we're often referred to as representing foreigners. But this is not really true. We do represent a number of foreigners, but we represent all the Canadian shipping concerns that operate foreign-flag vessels. There's a major difference, because there are large Canadian companies that operate foreign-flag ships into Canada, so they are Canadian companies, and also, the foreign companies that trade here are all represented by Canadian companies, who are their agents. They are the people we represent in Canada.

This bill is more or less a successor to Bill S-17, on which we made representation before the Senate when it was studied in committee. Our position today is basically the same as it was at that time, although with a slight change. We strongly support Bill S-2, as we did Bill S-17. Our concern was, and still is, clause 46.

At the time of Bill S-17, we expressed concern about clause 46, because there was an imminent act in the U.S.—U.S. COGSA 99—that contained a jurisdiction clause. Because both France and the U.K. were looking at similar clauses, we raised concern but did not object to the clause.

This time it's different. The situation that existed last May has evolved in a number of ways.

First, the proposed U.S. COGSA 99 has made little legislative progress and is very unlikely to make any additional progress in the foreseeable future. Secondly, both France and Great Britain have refrained from adopting jurisdiction clauses that would have mirrored the proposed U.S. COGSA. Finally, the Hague-Visby regime, to which most of our trade partners adhere, does not provide for this type of jurisdiction clause.

Given the foregoing, there no longer exist any compelling reasons at the international level to adopt the kind of jurisdiction clause proposed under Bill S-2, and both the chamber and the federation now believe an amendment in respect of clause 46 is required.

We would also point out that we are not aware of any compelling need at the Canadian level to change existing law with regard to jurisdiction. Under existing law, the Canadian courts will enforce a clear jurisdiction clause contained in a bill of lading unless the plaintiff can establish strong reasons why they should not be bound by their contractual commitment. So that protection exists already under current Canadian law, and those strong reasons have been summarized by Mr. Justice Brandon in the Eleftheria case. A summary of that part of the judgment appears in our brief.

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This test is routinely applied in admiralty matters by the Federal Court of Canada when a jurisdiction clause is at stake. We believe current law achieves a reasonable balance between the need for certainty in commercial transactions and the need to protect the interests of both parties to the contract of carriage. We are therefore unable to identify a single reason to justify the need for a new jurisdiction clause. We are, however, able to identify a number of dangers associated with the proposed clause.

We submit that the proposed jurisdiction clause would undermine Canada's commitments at the international level as reflected in the Commercial Arbitration Act. This act is expressly based on the Model Law on International Arbitration adopted by the United Nations Commission on International Trade Law on June 21, 1985. Under that act, the courts must enforce arbitration clauses as confirmed by jurisprudence that we have put in appendices to our brief.

In contrast to the foregoing, clause 46 of Bill S-2, as currently drafted, seems to allow the claimant to institute judicial proceedings in Canada notwithstanding any arbitration clause in the contract of carriage. This would even go further than section 22 of the Hamburg Rules and contravene the Model Law to which Canada has been part.

Even if clause 46 were redrafted so as to make a clear distinction between the different regimes applicable to jurisdiction clauses and arbitration clauses, we submit that the international trading system would be unpredictable and chaotic if each country adopted the kind of jurisdiction clause proposed under Bill S-2. Claimants could choose to proceed in any country hosting the actual port of loading or discharge, or the intended port of loading or discharge, or the defendant's place of business, branch or agency, or the place where the contract was made, notwithstanding clear provisions of the contract providing the forum in which potential claims can be made. The defendant could not oppose this forum shopping, which would be at the sole discretion and advantage of the claimant.

It should be kept in mind that jurisdiction clauses are inserted in contracts for useful purposes, namely to clarify jurisdiction issues and to avoid uncertainty.

The Chair: If you're dealing with jurisdiction, we understand that. But if you read all the applicable stuff to jurisdiction, you'll use up maybe a half an hour or so. So just make sure you wrap it up.

Mr. Gilles Bélanger: Okay.

The jurisdiction clause is our problem. The rest of the act we support.

We oppose a jurisdiction clause because it goes against all the contracts that the carriers and their clients are signing, where they provide for clauses. There may be cases where we would want to protect somebody against those clauses because of the difference in level, in terms of negotiating the contract, but that's already protected under our act. The courts have done that over the years.

To summarize, we strongly and respectfully submit that clause 46 should be amended or removed from the act.

The Chair: Thank you very much.

Mr. Gilles Bélanger: Thank you.

The Chair: Lisa McGillivray is going to speak for the Canadian Industrial Transportation Association.

Ms. Lisa McGillivray (President, Canadian Industrial Transportation Association): Good morning, and thank you very much for permitting us to come and speak.

With me today is Sophie Tourangeau. She's the communications manager for CITA.

I'm here on behalf of Canada's shippers. We are the people who are buying transportation services in all modes. Our members include industries such as steel-making, mining, forestry, manufactured products, food products, agriculture, beverages, chemicals, fertilizers—the list goes on. Suffice it to say we represent just about every industry making and shipping in and out of Canada.

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My comments here are going to be excruciatingly short. Basically speaking, we support the tenor of the Marine Liability Act. We agree with the idea of bringing the diverse nature of liability and marine liability under one roof, so to speak. In direct contrast to Monsieur Bélanger, Canada's shippers support clause 46. We agree that where a Canadian shipper has made a contract with the Canadian agent of a marine line, that jurisdiction should remain in Canada.

I'll leave it at that.

The Chair: We'll start with the questions. We'll go to Andy Burton for ten minutes.

Mr. Andy Burton (Skeena, Canadian Alliance): At this point in time, I don't have any questions, Mr. Chairman. Thank you.

The Chair: Mr. St. Denis.

Mr. Brent St. Denis (Algoma—Manitoulin, Lib.): Thank you, Mr. Chairman.

Thank you for being here.

It's pretty clear that apart from the clause 46 concerns raised by Mr. Bélanger, everything else seems to be acceptable. So maybe we could talk a bit more about clause 46. To all of the witnesses, please feel free to comment. For those who will read this transcript and who are not of the legal profession, maybe it would be helpful to give one or two examples where in your view, Mr. Bélanger or Ms. Legars, clause 46 as it is in the bill, if implemented, would create a problem. Maybe we can get Ms. McGillivray or Ms. Tourangeau to comment on that same example. Perhaps we could get an idea of how both views would be represented within one or two examples. Is that possible?

Mr. Gilles Bélanger: One comment I would like to make, and I'll ask Ms. Legars to comment further, is that most of the commodities that travel by ship do not represent small quantities of goods. Generally, we're dealing with large quantities.

Ms. McGillivray's clients, the steel producers, the aluminum producers, etc., are quite capable of negotiating their contract of carriage with a company. If together they decide that for whatever reason they want the jurisdiction governing that contract to be the U.S. or the laws of England or France, they should have that right, as they have in all other aspects of commercial life.

Why could they not do that under the Marine Liability Act? If they introduce a jurisdiction clause, they can make an agreement together for the contract to be governed by the laws of a certain country, and if for whatever reason the shipper that agreed to that decides he now has changed his mind and wants to prosecute a claim to use the Canadian jurisdiction.... They could have chosen the Canadian jurisdiction to start with. So it's a negotiated jurisdiction clause between, generally, fairly sizeable corporate entities that know what they're doing.

To really answer your question on examples, I'll see if my colleague has a specific one.

Ms. Anne Legars (Director, Policy and Government Affairs, Shipping Federation of Canada): Actually, the jurisdiction or arbitration clauses that are inserted in contracts are aimed at reducing uncertainties in the contract by choosing in advance the kind of forum, arbitration or judiciary, and the country, the applicable law, and so on. It's to reduce uncertainty and potential litigation that you may have around these very specific issues. If you take these clauses out or do not enforce them, it causes additional uncertainty in the contract. That is something people in our industry don't like, because we want to reduce uncertainties in commercial matters as much as possible. That's one thing.

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Another thing is that, as drafted, clause 46 seems to amalgamate the arbitration clauses and the judiciary forums. I want to underline that. We did it in the brief.

The Hamburg Rules apparently and even explicitly inspired this clause. You have two different articles, articles 21 and 22. Article 21 is for judiciary forums and article 22 is for arbitration.

In the MLA these two articles are melded. Under clause 46, when you have an arbitration clause, the plaintiff apparently will be able to say, no, I will sue in the courts in Canada under clause 46, even if there was an arbitration clause in the contract. This goes further than the Hamburg Rules, and it causes even a greater uncertainty, because it's not only choosing the applicable law and the country of a forum, it is even choosing the kind of process—the arbitration process versus the judiciary process. This is an additional uncertainty that clause 46 would introduce.

Mr. Gilles Bélanger: If I may, Mr. Chairman, this is no different from most of my friends' clients who have jurisdiction clauses everyday in their supply agreements. They buy supplies or raw material and they decide the contract will be under the jurisdiction of the U.S., Canada, or another country. They do that daily. Why would that not be allowable under the Canada Shipping Act?

When COGSA was going to be introduced in the U.S. with that kind of jurisdiction clause, Canada, France, and the U.K. looked at it. With that kind of clause starting to be established in some countries, eventually we will have it all around the world. Some countries already have it, but the main countries we deal with don't at present. It will have a ripple effect.

The shipping lines, when taking on a contract for transportation, will never know in which forum that contract will end up being in a legal case until it happens, because in every country the recipient of the goods will have the right to prosecute for damage or whatever in that country. So you will never know in advance. It's going to be very difficult to do business that way, and it will likely increase costs because of that uncertainty. Businesses do that daily in all other aspects of their business.

Mr. Brent St. Denis: I wonder if CITA would like to comment.

Ms. Lisa McGillivray: No, I can wait.

Mr. Brent St. Denis: I'm just worried about my time. I have only two minutes left. We can always come back to it later if there's time.

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Ms. Lisa McGillivray: Thank you. First, I have a number of comments.

I freely admit that CITA does have a number of very large companies in its membership. We also have small and medium-sized companies, who may not be quite as versed in the rules or what goes into these contracts. Certainly, this isn't an anomaly. There are liability regimes for other modes of transport in Canada. For example, the Motor Vehicle Transport Act, which is also currently going through the system, in its previous incarnation was an operating authority act. You had to prove you were able to provide services through economic means. Transport Canada decided a number of months ago that they would turn it into a safety act. But I would point out to you that, despite that overall goal—and they say this is their goal—they will be regulating safety and not operations. A liability regime and the terms and conditions on a bill of lading were retained in that act, just for that very situation, to help those shippers who perhaps don't have a large and separate transportation and logistics function within their industries.

Second, on the issues of uncertainty and whether or not this sort of thing is consistent globally, I think the spirit of this clause, from my perspective, is to ensure that Canadian importers and exporters will be able to appeal a claim in a jurisdiction with which they are intimately familiar. The ability to do that, while it might add a little bit of uncertainty for some of Mr. Bélanger's members, would certainly add certainty for mine. So I guess it's a matter of balancing out those two requirements.

As to shopping for a jurisdiction, I reject this idea that shippers are so light in some of their transactions. Certainly they want the best environment in which to transact their business. I maintain that the best environment is one they're familiar with, be it in the U.S. or be it Canadian. Going over to Europe and into other areas, where they might not have a choice, might not create a good advantage.

The Chair: Okay. You're out of time, Mr. St. Denis.

I'll go to Mario, who just arrived. Mario, they were talking about jurisdiction. As you know, we have two guests here today to talk to the bill. They were referring, in particular, to clause 46, which is the jurisdiction. One party is saying they normally make arrangements and they like to know the rules of the game. On the other hand, we have some people saying it should be made in Canada. So just to get you up to speed, that's where we are. You had some questions?

Mr. Mario Laframboise (Argenteuil—Papineau—Mirabel, BQ): No, not at this time.

The Chair: Okay. Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): Maybe you could clarify something for me. I'm not expert in this field at all. If I'm a Canadian importer or exporter, I hire a shipping line and it has the flag of Liberia—I don't know if that's relevant or not—I contract my goods with that carrier, currently the liability aspect may be in Liberia—is that right? If I have damaged goods and I contract with that carrier and there's a dispute, because of the contract I signed with the carrier, my case may be adjudicated in Liberia—is that what you're saying?

Mr. Gilles Bélanger: The liability does not necessarily follow the flag. It generally follows the clauses that are introduced in the contracts of carriage.

Currently—and it has been true for a number of years—England has been one of the choice places for for the arbitration clause and the jurisdiction clause. There's a long tradition there. And so it does not follow the flag of the ship.

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Mr. Alex Shepherd: Okay. So that doesn't happen per se, we don't end up in Liberia adjudicating. But a high percentage of these cases that are adjudicated would possibly be in England right now—is that what...?

Mr. Gilles Bélanger: England is often the choice of the parties, but the clauses that are introduced in the contracts, in a good proportion of instances, would provide for cases to be dealt with under English law. It's the choice of the party at that point.

Mr. Alex Shepherd: So I have damaged goods. I'm a recipient of goods in Canada. It would be incumbent on me to try to get recompense for that in a court in England. Is that the state of the art?

Mr. Gilles Bélanger: It would depend on the circumstances.

Mr. Alex Shepherd: It's possible though.

Mr. Gilles Bélanger: Yes, and it is possible that it would be elsewhere—it could be in Canada as well. As I said earlier in our presentation, the courts have established a certain number of situations where they will bring the jurisdiction to Canada if certain conditions are met. That would certainly be the case in the situation of an individual contracting for a small shipment who applied through the courts to get the jurisdiction, even though the agreement could say England or somewhere else. The courts have ruled that if the circumstances of the contract of carriage meet certain conditions, the courts will not follow the jurisdiction clause provided in the agreement.

I'd like to have my colleague comment. She's more experienced in that field than I am.

Ms. Anne Legars: It's what we outlined in our brief. When you have a clear jurisdiction clause in your contract of carriage, the court will look at it and it will enforce it, unless the plaintiff—who would be, by definition, the shipper—can show that there is no true link with this jurisdiction, for example with England, if a forum indicated that a contract had England.

I described in the brief the test that is used by the courts, which shows all the elements that are taken into account. For example, the defendant, the shipping line, cannot use this jurisdiction clause as a procedural advantage. There have to be two reasons for the use of this jurisdiction clause. If the plaintiff can show that there are strong reasons not to follow the jurisdiction clause, a Canadian court will not enforce it and the case will stay in Canada.

So what we're basically saying in our brief is that we already have a legal test under current Canadian law, and it avoids possible abuses of jurisdiction clauses by allowing the courts to keep the case in Canada, if certain circumstances are met. We believe the existing Canadian law already provides a reasonable balance between the rights and obligations of the parties regarding jurisdiction clauses. We believe it's an adequate safeguard for the kinds of concerns shippers may sometimes have, because it will prevent abuses and it will allow the court to keep the case in Canada.

Mr. Alex Shepherd: So if you're already in a situation where some of these cases are adjudicated in England and some are adjudicated in Canada, what is your objection to the change in the legislation, in which the country of normal jurisdiction then would become Canada? How does that...?

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Ms. Anne Legars: It's because under current law, when you have a clear jurisdiction clause, it has to apply. It's enforced by the courts unless you can demonstrate strong reasons not to enforce it. Under normal circumstances there is certainty that the jurisdiction clause will be enforced and the forum that was elected in the contract will be the forum that will be used for litigation.

But you still have the safeguards, of course. You have fewer cases than the contrary because it's like a safeguard. So it's not something that happens in all cases that the plaintiff can retain jurisdiction in Canada if a test is met.

Mr. Alex Shepherd: Where do you see the increase in costs by bringing in this legislation? You mentioned you were going to charge these people more money because of the situation.

Mr. Gilles Bélanger: I mentioned that as a possibility. We have not studied that aspect, but if you have a situation where you don't know what to expect at the end of the trip, you would consider the costs that may incur. In order to price your move correctly, you will consider the possibilities of incurring additional costs. That's the normal thing to do in all businesses.

One point we are really concerned about.... You asked why, if there is a possibility today that this can happen, do we object? Today, generally speaking, the majority of the contracts are between corporate entities who know what they're doing, and they together decide that this contract will be governed by the laws of a certain country.

Today hundreds and thousands of businesses in Canada sign contracts daily, whether it's for supplies.... For all sorts of reasons they sign contracts and they decide that the jurisdiction is going to be this or that jurisdiction. You have people here in Ottawa who would submit their contract to the Quebec jurisdiction or to the U.S. jurisdiction because they agree there is an advantage in doing that. That's the way it happens in shipping all the time.

In other areas of transportation you don't have a choice. My friend, Mrs. McGillivray, talked about trucking earlier. If you have a load coming in from the U.S. and under a U.S. bill of lading, U.S. law applies. U.S. law has certain differences from Canadian law. Even if the Canadian receiver may take action in a Canadian court, the court will enforce U.S. laws on bills of lading. That's the way it happens in other modes.

What we're trying to do now with clause 46.... We have had some kind of harmony established over hundreds of years in the business and that's the way it has been done. The contracts of carriage provide for an arbitration clause, or a jurisdiction clause, and there is fairly substantial harmony on that issue around the world. Now we want to create chaos.

The Chair: Mr. Burton.

Mr. Andy Burton: Mr. Bélanger actually just answered my first question regarding shippers having the ability to freely negotiate jurisdiction. Is that correct?

Mr. Gilles Bélanger: Yes.

Mr. Andy Burton: Our concern is with the smaller clients who maybe don't have the capabilities of some of these large bulk shippers, whether it be shiploads of copper concentrate or whatever. That's obviously a whole different ballgame.

So they have the capability, the legal backup, and so on, but would you support amending the clause, possibly, to read that the jurisdiction would be Canada unless expressly agreed otherwise? That gives some flexibility.

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Mr. Gilles Bélanger: Sure. Basically, what we want to protect is our ability to agree on jurisdiction and arbitration clauses, which we have done for hundreds of years.

Mr. Andy Burton: But if it was understood to be Canada unless otherwise stated, is that an acceptable approach?

Mr. Gilles Bélanger: Yes.

Mr. Andy Burton: Thank you.

How does Ms. McGillivray feel about that approach?

Ms. Lisa McGillivray: The jurisdiction should be Canada, but why not go a little further and say unless the defendant can show why it ought not to be?

Mr. Andy Burton: The bigger contractors, the bigger shippers, would have the ability to negotiate, would they not?

Ms. Lisa McGillivray: Yes, absolutely. It's more or less the same thing. It's just reversed.

Mr. Andy Burton: All right.

That's all I have right now, Mr. Chairman.

The Chair: Thank you.

Marcel.

Mr. Marcel Proulx (Hull—Aylmer, Lib.): Thank you, Mr. Chair.

It must be the cold weather this morning. I'm a little bit slow.

I want to go back to Madame Legars and Monsieur Bélanger, if you don't mind.

[Translation]

Mr. Bélanger, earlier, you stated that the Canadian Industrial Transportation Association had some very big clients. How would you qualify the clientele of the Shipping Federation of Canada? Who are your clients? What kind of corporations do they represent? What type of consumers are they?

Mr. Gilles Bélanger: They may be companies that operate 500 vessels, just as they may be companies with only one ship, as well as their agents here in Canada.

Mr. Marcel Proulx: I'm sorry, but I didn't make myself clear. In that case, who are your clients' clients? What matters to you is that your clientele feel protected. Who exactly are your clients' clients?

Mr. Gilles Bélanger: Goodness, I...

Mr. Marcel Proulx: Are we talking here about very large industries, or about private consumers, like SMEs? Could SMEs be counted among your clients?

Mr. Gilles Bélanger: Basically, Mr. Proulx, anyone who ships goods by boat, with the exception of certain small packages that are shipped by air, can be a client of ours.

Mr. Marcel Proulx: I see.

Mr. Gilles Bélanger: Good. Basically, anyone can be our client. It's pretty rare that a client will purchase a small package and ship it by boat. Generally speaking, in the vast majority of cases, we handle large supply contracts, that is we ship steel, 30,000 tons of grain, 30,000 tons of steel, and so forth. We handle fairly large shipments, anything that can be shipped by container.

Mr. Marcel Proulx: I see.

Mr. Gilles Bélanger: Some people purchase or place an order that arrives in 250 or 2,000 containers. Some people receive... If I purchase a sofa that is made in France or Italy, at some point, it arrives by container. It is likely part of a lot shipped to America by the sofa manufacturer. I'm not the one who will be entering into negotiations with the shipper. Generally it will be the manufacturer who arranges to ship either one or several containers of similar goods.

Mr. Marcel Proulx: I understand. I assume clause 46 was included to avoid situations where Canadian consumers, regardless of their size, would have to incur exorbitant costs to defend against or institute proceedings against one of your clients abroad. That must be the reason, at least in part, for this provision.

Mr. Gilles Bélanger: This provision would enable Canadians, whether Canadian shippers or receivers, to institute proceedings in the Canadian judicial system. That would appear to be the reason.

Mr. Marcel Proulx: It would allow them to deal with the matter closer to home, and thus incur fewer costs.

I would assume that if your clients have contracts which provide for disputes to be arbitrated elsewhere, then this could make things more difficult for Canadian consumers, although it would be to your clients' advantage. Is that the basis for your objection?

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Yet, you seem to be well protected, since the bill states that the dispute can be arbitrated elsewhere. Pursuant to clause 46(2), the parties can agree to have the proceedings instituted either in Canada or elsewhere. What then is the basis for your opposition to clause 46? My question is directed to either Mr. Bélanger or Ms. Legars.

Mr. Gilles Bélanger: The problem is that despite the possibility of reaching an agreement and even if I had an ironclad contract which stated that should a problem arise, the dispute would be arbitrated before a U.S. or British tribunal, for example, because of market conditions or for a variety of reasons, the shipper or receiver may feel that today, it would be better to institute proceedings in Canada or in the United States. If there are ties of any kind with the United States, the Canadian stakeholder may well wish to institute proceedings in that country.

Therefore, the dispute might not necessarily be heard in Canada. This provision will enable the client to shop around and determine where in the world conditions are most conducive for instituting proceedings.

Mr. Marcel Proulx: You would like this provision to be structured more clearly so that you can plan your financial reserves. If something happens, you know in advance in which jurisdiction the dispute would be arbitrated. Otherwise, the cost could be determined on the basis of British jurisdiction and all of a sudden, you could find yourself before a Canadian tribunal which could be more generous or which could take into account other provisions. That's where you have a problem.

In other words, your clients would like to know in advance the risks they would be incurring.

Mr. Gilles Bélanger: Certainly they would.

Mr. Marcel Proulx: Then this legislative provision could stipulate that all disputes must always be arbitrated in Canada, unless there are sound reasons for acting otherwise. I don't know what reasons you could have for bringing the matter before a British tribunal, for example, but if the legislation stipulated that barring exceptional circumstances, proceedings must always be instituted in Canada, as Ms. McGillivray was saying, then you would have a clear rule to go by and you would be able to set prices and determine your costs based on Canadian jurisdiction.

Mr. Gilles Bélanger: The day we decide to go with this rule, Britain could move to pass similar legislation. The British could then institute proceedings at home, as could the French and the Americans.

Mr. Marcel Proulx: Correct.

Mr. Gilles Bélanger: If that were the case, a Canadian involved in a particular transaction could find himself somewhere in the world...

Mr. Marcel Proulx: I see where you're going with this.

Mr. Gilles Bélanger: ... for the same reason.

Mr. Marcel Proulx: The Canadian ship owner.

Mr. Gilles Bélanger: Even the shipper.

Mr. Marcel Proulx: Even the shipper.

Mr. Gilles Bélanger: The shipper could be involved in... Even if proceedings are instituted elsewhere, depending on the movement of the goods, the shipper would still be involved.

Hence the need to establish a harmonious liability system where proceedings could be instituted in any country in the world, based on certain criteria.

Take, for example, a shipment from Canada to Greece. The party receiving the shipment in Greece decides that because of his ties with a London-based company, he will institute proceedings in London. The Canadian shipper will be forced to travel to London to defend himself.

In each case, the first question that the court will need to consider is whether it is the proper forum in which the case should be heard. The parties will therefore be battling in Greece, England, Canada or the United States just to determine if the matter is being heard by the right tribunal.

If each party has the right to have his case heard in his own country, other nationals will challenge the situation and we will be faced with endless jurisdictional challenges. Clause 46 will bring about the end of a liability regime that has been in place for 2000 years.

Mr. Marcel Proulx: You're saying then that we must consider this from an international perspective.

Mr. Gilles Bélanger: Yes.

Mr. Marcel Proulx: Thank you.

[English]

Thank you, Mr. Chair.

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[Translation]

The Chair: Go ahead Mr. Laframboise.

Mr. Mario Laframboise: Following up on Mr. Proulx' comments, I get the impression that your displeasure stems from the fact that Canada is deciding to give precedence to the Hamburg Rules. The only way to avoid this whole issue would be to adhere to the UN Convention that was negotiated in Hamburg.

Why have you no desire to adhere to these rules? You seem to say that everything has been working well for the past 2000 years, but one must remember that international rules were surely established because something wasn't going smoothly somewhere. Otherwise, the Hamburg Rules would not have been introduced.

In your submission, you also seem to be saying that you don't want Canada to give precedence to the Hamburg Rules because clause 46 does just that. It says that if things appear too complicated, you need only adhere to the Hamburg Rules. The conclusion I have drawn is that you do not wish to adhere to them.

Mr. Gilles Bélanger: First of all, it goes a little further than the Hamburg Rules, because it combines jurisdictional and arbitration rules. Canada is already a party to the international arbitration rules model and Canadian courts must apply existing arbitration clauses. This would be the case under the Hamburg Rules, but no longer under clause 46.

Secondly, the Hamburg Rules have not been adopted by Canada or by the majority of world countries. Only a handful of nations have adhered to them. I'm not familiar with all of the reasons why this is so. Perhaps my colleague is more informed that I am about this matter. However, there are a number of reasons why the Hamburg Rules have not been adopted here.

Most traffic is currently conducted according to the Hague- Visby regime which preceded the Hamburg Rules, again because the latter have not been adopted. We are currently in the process of renegotiating a new multinational agreement to replace the Hague- Visby regime, in light of the failure of the Hamburg Rules to be adopted as a global standard. The CMI and the OECD are currently in the process of negotiating a new international agreement which would take the place of the Hague-Visby and Hamburg regimes.

Mr. Mario Laframboise: Why haven't you asked that the Hague- Visby Rules be substituted for the Hamburg Rules in this bill?

When I look at the Hamburg Rules, I see everything that can be negotiated; at least they contain a reference to the liability of the shipper and to the duration of that liability. Treaties of this nature set out important rules. If we dispense with them, we may find ourselves before courts in various countries.

Consider the position of a merchant, often someone who acts through a broker, who may find himself before a court in a country where he is unfamiliar with the laws. He is forced to rely on the person who has negotiated the contract for him. It would be good to have a simple international standard in force, one that would help shippers understand what they are getting into.

Once again, I think we need to adhere to a standard. If you dislike the Hamburg Rules, then adhere to the Hague-Visby regime. I think it's important for Canada to adhere to a treaty that everyone can understand. Otherwise, not everyone is familiar with legislation. It's different in your case, because you represent large shippers. You have no need of experts. More than likely you have lawyers working for you. However, not everyone is in the same situation.

As I see it, the bill provides for a standard with which everyone can comply. People are familiar with the Hamburg Rules. I personally have a copy of these rules. They are available to everyone. Shippers can come to a decision together...

The last paragraph of clause 46 states the following:

(2) Notwithstanding subsection (1), the parties to a contract [...] may [...] designate by agreement [...]

They may designate another tribunal if they do not wish to have the proceedings here in Canada. If you do not go by the Hamburg Rules, then you go by clause 46 which states that the proceedings will be held before a Canadian tribunal, unless both parties agree to designate another country or another tribunal. I think it's simple enough.

The problem is that you dislike the Hamburg Rules. You claim that a new standard should apply. If that's the case, then choose a standard on which everyone who finds the existing standard too complicated can agree. At least with the Hamburg Rules, everyone would know that they are the standard in use in contracts.

• 1155

Mr. Gilles Bélanger: We don't have any problems with the Hague-Visby regime. This standard is applied in Canada and we operate according to existing rules. This model is applied just about everywhere in the world. We don't a problem with it.

Mr. Mario Laframboise: In your view, why did the drafters of this bill not use the Hague-Visby model? Surely there has to be a reason.

Mr. Gilles Bélanger: I really don't know.

Mr. Mario Laframboise: I see.

The Chair: Thank you very much, Mr. Laframboise.

[English]

I'll go back to Marcel.

Mr. Marcel Proulx: Thank you, Mr. Chairman.

Mr. Bélanger, I understand provisions similar to Bill S-2's clause 46 have been enacted in Australia, New Zealand, Sweden, Denmark, Finland, Norway, the Republic of South Africa, and the People's Republic of China. I understand England wants to keep with the way it's doing business, because it gets most of the insurance business and the law work. I also understand the United States of America will more than probably bring it back. Where would that leave Canada standing if we didn't have our own, not necessarily against these parties, although countries like the People's Republic of China and South Africa are fairly important countries as far as shipping is concerned? If the United States of America have their own, where would that leave us?

Mr. Gilles Bélanger: We understand that although COGSA may come back in the U.S., it's not for tomorrow. In any case, because a new regime is being negotiated right now, we hope the new international regime will take place in time.

Mr. Marcel Proulx: Thank you.

The Chair: Are there any further questions? Nothing?

I would like to thank our guests for being here. Gilles and Ms. McGillivray, we appreciate your coming in.

We will suspend for two minutes while our other guests take their places.

• 1157

• 1203

The Chair: I would like to reconvene the meeting and welcome our guests. We have James Gould from the Canadian Maritime Law Association; and Douglas McRae and Art Payne from the Canadian Board of Marine Underwriters.

We'll start with James.

Mr. James Gould (President, Canadian Maritime Law Association): Thank you, Mr. Chair. I am James Gould, president of the Canadian Maritime Law Association—what we call the CMLA—and I'll just say a few words about the association for you.

It was founded in 1951 by Canadians interested in Canadian and international maritime law. Our mandate is to promote effective, modern maritime laws, within Canada and internationally. We promote and debate with other national maritime law associations—of which there are many—proposals for international unification, uniformity, and harmonization of maritime laws.

It's important that we have two groups of members, individual and constituent. Our approximately 300 individual members are practising lawyers, members of the marine insurance community, marine average adjusters, academics, judges, marine surveyors, shipping company executives, and the like. Our 19 constituent members are associations with particular but varying interests in maritime affairs. They include the Canadian Board of Marine Underwriters, represented here by my friends Mr. McRae and Mr. Payne; the Association of Average Adjusters of Canada; the Canadian Shipowners Association; the Shipping Federation of Canada, from which you've just heard; the Company of Master Mariners of Canada; the Canadian Bankers Association; and even the Canadian Bar Association. So we have a very broad constituency, but the CMLA is not a lobby group for any particular interest.

• 1205

We are also Canada's representative association to the Comité Maritime International, CMI, a non-governmental international organization founded in Belgium in 1897 whose main purpose is the promotion of uniformity in and unification of international maritime law. Over the last 104 years or so, the CMI has been responsible for many very important international maritime law conventions.

We support Bill S-2, as we supported Bill S-17. It's long overdue. I needn't go into it, as I think you're all familiar with it. It does consolidate the major components of Canada's marine liability regimes, and it adds two important new features, one relating to apportionment of liability and the other the liability for passengers. Again, we wholeheartedly support it.

Given the topic this morning, I would like to turn to the question of the jurisdiction clause in part 5, and that's clause 46 of Bill S-2. I'll skip over the other things, but I would be quite willing to comment on them if you'd like. Suffice it to say we do support the whole bill.

The CMLA strongly supports the adoption of the jurisdiction clause set out in clause 46 of Bill S-2. In a way, it reflects the provisions of articles 21 and 22 of the Hamburg Rules, which, as you know, are already part of our law, since they're already a schedule to our existing Carriage of Goods by Water Act. They just haven't been proclaimed in force.

Our valued constituent member, the Shipping Federation of Canada, and another one, the Chamber of Shipping of British Columbia, while otherwise supportive of the bill, have spoken here against the jurisdiction clause. Our reasons for supporting the jurisdiction clause, in summary, are that it provides Canadian claimants with an option—and it's just that, an option—to sue or arbitrate in Canada in circumstances in which there is a substantial connection with Canada. It would provide an advantage to Canadian exporters and importers whose only other option might be to abandon their claims or sue or arbitrate claims in a foreign jurisdiction.

Particularly, advancing low or medium-sized claims can be subject to very significant inconvenience and disproportionate cost if one is forced to litigate or arbitrate in a foreign jurisdiction. In England, for example, you may have to hire a solicitor. It makes one a bit envious, but it could be from £250 to £300 or more per hour. If you require a barrister, that's additional, and they're the same or even higher. Even the hotel costs there are higher than here, so it can be very expensive.

I also understand that in Japan, for example, even though the contract may be made in English amongst or with Japanese parties, all documents have to be translated into the Japanese language before proceeding, which in itself can be quite a burden.

Furthermore, Canada would not be alone in adopting such legislation. On the contrary, as already mentioned this morning, there are a number of very important countries that have already enacted provisions similar to clause 46. They include Australia and New Zealand, which bluntly say you can litigate or arbitrate there, and that any provision to the contrary is void. I think that's the way it's put.

You also have the four Nordic countries of Sweden, Denmark, Finland, and Norway—all shipowning countries, which is of some significance—the Republic of South Africa, and the People's Republic of China, which is a huge market.

We've heard that the U.S. COGSA is dead or wounded. The president of the Maritime Law Association of the United States and I spoke last Friday. He confirmed their association continues to promote and is firmly committed to new U.S. carriage of goods by sea legislation containing a jurisdiction clause similar to clause 46. So as far as he is concerned, while the COGSA initiative may be delayed, it isn't dead.

Furthermore, and perhaps most importantly, the Comité, the CMI, is actively reviewing issues relating to the carriage of goods by sea. There is substantial agreement within the CMI that the provisions of articles 21 and 22 of the Hamburg Rules should be incorporated in any new convention on carriage of goods by sea.

• 1210

Of significance too is the recent decision of the Federal Court of Appeal dealing with an arbitration clause, where the court effectively pleaded for implementation of clause 46. It's a short but quite instructive decision, and one I'd be pleased to review in more detail, if you wish.

If the jurisdiction clause is not retained, the present situation will continue, keeping Canadian importers and exporters at a significant disadvantage, I think, and that would only benefit foreign shipowners and operators. Canada, incidentally, is not a legal or judicial wasteland. We have very good courts here, including the Federal Court of Canada, which are quite capable of dealing efficiently and effectively with such claims. We also have good maritime arbitrators.

The Chair: Thank you very much, Mr. Gould.

I would say to Mr. McRae that we don't like to have the whole time taken up in stating positions. Members may have questions. We'll run out of time if your presentation is too long. So Mr. Payne or Mr. McRae have five or seven minutes for words of wisdom from the underwriters.

Mr. Art Payne (Past President, Canadian Board of Marine Underwriters): Sure. My name is Art Payne and I'm here as the immediate past president of the Canadian Board of Marine Underwriters. I first came here with respect to this legislation as the president of the Canadian Board of Marine Underwriters.

The Canadian Board of Marine Underwriters was founded in 1917. Our corporate members include all major Canadian marine insurers, including many that write both commercial and pleasure craft insurance. The CBMU strongly supports the international harmonization of maritime law, which tends to reduce costs and maintain a competitive position for the Canadian shipping industry. The CBMU comments will be mainly directed at part 4 of Bill S-2, which implements the international regime for carriage of passengers, the Athens convention, although we have also some other comments regarding the bill. We have brought with us a detailed written report for the committee's consideration, and we would like to highlight some of the issues.

Marine insurance in Canada is an international business. The principal world market for liability insurance for large vessels and protection and indemnity insurance is a series of mutual associations known as protection and indemnity associations, or P and I clubs. By pooling their capacity, the P and I clubs can provide an estimated $4 billion of capacity for individual claims. The P and I clubs are the obvious choice for large vessel owners, and particularly the tanker owners.

The Canadian marine insurance market provides coverage for the smaller craft generally operating within Canadian waters. This class of insurance represents a very small fraction of the total liability insurance premium underwritten in the Canadian market. We do not believe the bill will have any serious impact on Canadian vessel owners or Canadian insurers.

Why do we like the bill? Look at part 4, liability for carriage of passengers by water. In 1996 Parliament simultaneously introduced two related bills, Bill C-58 to enact the 1976 convention on the limitation for maritime claims and its 1996 protocol, and Bill C-59 to enact the Athens convention dealing with liabilities arising from carriage of passengers. Both bills have widespread industry support, but neither was enacted, as the election was called.

In our view the two conventions are inseparable, and the enactment of Bill S-2 will unite them in Canadian law. The temporary measure in Bill S-4 subclause 577(3) restricting the global liability with respect to passengers can be removed, greatly increasing the limitation amount available to meet passenger claims.

Our second item concerns marine insurance implications of the bill. As mentioned the P and I clubs offer very high capacity to ship owners with exposures to large claims. The P and I clubs have already endorsed the Athens convention, so the adoption by Canada of that convention will have no impact on large vessels.

I will let my colleague Doug McRae finish up our observations.

Mr. Douglas McRae (Chairman of the Legislative Committee, Canadian Board of Marine Underwriters): Currently many of the small Canadian passenger vessels, charter boats, small ferries, excursion vessels, are insured in the Canadian market, and we expect vessels with fewer than 24 passengers will continue to be insured in our market, whereas the larger vessels, because of the increased limitation amounts available under the Athens convention, will probably go to these protection and indemnity associations.

The required limits for both large and small vessels, in our view, are available at reasonable cost. We have provided in our paper some summaries of costing. A large passenger vessel currently only pays about $3,500 annually for its liability insurance, which will cover Athens. That is not a large amount of money. We expect there'll be no premium increases as a result of the bill except to the extent that some small vessels may have to purchase more liability insurance than they have now, but that's available at quite reasonable cost.

• 1215

I'd like to make a comment on clause 39, compulsory insurance. We're pleased to note the bill provides a means for compulsory insurance to be introduced if required. We do not believe that the measures are necessary at this time. It is our opinion that the vast majority of shipowners will willingly purchase the insurance necessary to meet the higher limits. If compulsory insurance is to be introduced, we submit that the problem of enforcement will have to be dealt with and considerable study will be needed before it's done.

We note with interest clause 40, about changes in limit provisions, and we applaud it. With regard to the method by which passenger claim limits can be changed, it requires just an Order in Council and not enactment of further legislation. So when the initiatives which are currently going on to increase limits of the Athens Convention are concluded, Canada can quite easily and readily increase those limits.

We like the concept of a Marine Liability Act, which has been spoken to by many people. We think it's a very good framework.

Lastly, just to make a small comment on clause 46, the carriage of goods provision, the CBMU strongly supports the affirmation of Canadian jurisdiction. We don't think it's unreasonable that ships bringing cargo to and from Canada should submit to Canadian jurisdiction for claims arising from damage to the cargo.

We'd like to thank the committee for inviting us to come here and express our views.

The Chair: Thank you very much, Mr. Payne.

We'll go to Andy Burton of the Canadian Alliance for this first round.

Mr. Andy Burton: Thank you.

This for for Mr. McRae or Mr. Payne. What percentage of passenger vessels in Canada purchase passenger liability insurance from your members or from the CBMU, would you expect that number to increase or decrease if this legislation is passed, and so on?

Mr. Douglas McRae: We don't have the exact numbers of passenger vessels. Certainly any passenger vessel with 100 passengers or more would currently be insured by a P and I club because they provide unlimited liability and have capacity for up to $4 billion, as we mentioned, in response to a claim. They charge in the neighbourhood of $3500 a year for that protection. Virtually all the large passenger vessels are with the clubs, and they will continue to stay with them, we would imagine. Some of the smaller vessels currently carrying 20 or 30 passengers will, with the increase provided for by the Athens convention, probably move over to these P and I clubs as well. We'll lose a small number of clients but not a significant number. It's not a very important class of business to the Canadian marine insurance business at all.

Mr. Andy Burton: Are there any companies writing passenger liability insurance in Canada that are not members of the CBMU?

Mr. Art Payne: I would doubt that there are.

Mr. Andy Burton: Are you satisfied with the compensation limits of $350,000? Is that sufficient, or would you consider more would be more appropriate?

Mr. Douglas McRae: Well, it's a balance. If you have 1000 passengers, it's $350 million in total. If you have 10 passengers, it's still a significant amount globally.

These limits were established 10 years ago, and I think there's an international move to revise them and review them on a regular basis. I would expect they will probably be rising internationally in the foreseeable future.

It's not a lot of money for an individual passenger, but it's a great deal of money for a serious.... If the Titanic occurs again, it's a lot of money.

Mr. Andy Burton: Right.

So you would possibly suggest that there should be some flexibility in the legislation or some consideration for increasing amounts over a review period?

Mr. Douglas McRae: The legislation does, I believe, provide for Order in Council change of limits, so this can be done quite efficiently as the bill is currently drafted.

Mr. Andy Burton: You support that, then?

Mr. Douglas McRae: Very much so.

Mr. Andy Burton: All right.

Is it possible that members of your association would benefit from a lower per-passenger limit of liability because it will reduce the overall amount payable in the event of an accident?

Mr. Art Payne: It's possible since the majority of these vessel owners are currently buying their insurance in the P and I club market, but lower limits would not necessarily direct more business to us. It might, but only nominally. As we said, it is not a huge line of business within our insurance world, so we won't be impacted plus or minus by any current change.

Mr. Andy Burton: How about the discrepancy between the limits for passenger vessels and the limits for pleasure crafts? They're much higher, possibly $1 million. How do you explain the imbalance? Is there some need to adjust that?

• 1220

Mr. Douglas McRae: Again, if you've got 20 people on your yacht for the weekend, $1 million isn't very much to go around. If you're dealing with a commercial situation, which is the thrust of this bill, I think the balance they tried to achieve was aimed at providing a lot of financial protection in the case of a serious incident involving a lot of passengers. So it's a balance that has to be looked at. I think it was well done.

Mr. Andy Burton: Okay. And how quickly could the industry respond to a requirement for compulsory insurance? Would it be relatively quick, or would it take months or weeks?

Mr. Art Payne: This would require, I think, an investigation beyond anything that's being discussed here.

Mr. Andy Burton: So there's some concern about that?

Mr. Art Payne: I think that's a valid observation. When put to the test, we would find solutions there, but I don't think there's a ready answer for it in a matter of a month. It's something we've just never been confronted with.

Mr. Andy Burton: That's all I have right now, Mr. Chairman.

The Chair: Mr. Shepherd.

Mr. Alex Shepherd: Once again, I'm not an expert on any of this.

As to compulsory insurance, what are we saying? Are we saying there are a number of commercial carriers plying the waters of Canada uninsured?

Mr. Douglas McRae: I don't believe so. I think the vast majority of them do carry insurance. There may be very exceptional ones that don't, but—

Mr. Alex Shepherd: But it's optional, so there must by definition be problematic situations for the government to impose compulsory insurance. We must assume therefore that there are some people who don't have their vessels insured.

Mr. Douglas McRae: It's possible, but we only know this when we see a claim that's not been compensated, which is a very rare occurrence.

Mr. Alex Shepherd: So you think compulsory insurance is difficult to police, do you?

Mr. Douglas McRae: As businessmen, we don't mind compulsory insurance. Presumably that would make sure everyone bought insurance, so that part would be beneficial to the insurance industry in Canada.

Our concern is that the administration of it would be very difficult. There are a couple of thousand vessels right across the country, and there's no system of licensing in place to ensure that the law would be complied with. We just think it would take a good deal of study to make sure that the administrative side of it is reasonably in place before it's undertaken.

Mr. Art Payne: I think it's fair to say that even if you put the regime in place, make it mandatory, and police it, there's absolutely no guarantee that you'll get full compliance with it in any event. By the same token, if the truth be known, there are many uninsured automobile drivers living in provinces with a compulsory regime but driving uninsured vehicles. It's just the nature of the world we live in.

Mr. Alex Shepherd: Even so, the worst-case conclusion is that there's a certain percentage of the travelling public travelling on marine vehicles that are unprotected.

Mr. Art Payne: That very well may be the case, but we have no response to that in the context of experience we've had in responding to or hearing about those incidents. They just haven't come up.

The Chair: We'll move over to Mr. Laframboise.

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

Messrs. Payne and McRae, you represent insurers. You say that the government should not impose a compulsory insurance scheme. I'mm concerned for the public because once the government has passed this legislation, members of the public will be under the impression that they are insured when they travel by boat. Yet, that's not what the bill says. Shippers who have paid insurance premiums will be able to file a claim for damages, whereas those without insurance will not be able to compensate passengers who have sustained losses. That's what worries me.

I put the same questions to government representatives who defended the proposed legislation. When a liability regime is introduced, it's important that those who suffer damages be automatically protected and confident that they will be compensated. That is not what the bill is proposing and you've confirmed what government officials told me, namely that an in- depth analysis of the insurance market was not conducted prior to the passage of this legislation.

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You say that this would take a certain amount of time, but once again, you can't confirm exactly how long this insurance market analysis would take or how long it would take to bring in a compulsory regime. That's what concerns me. We have a duty to protect the public. It's all well and good to have legislation which provides for a liability regime for shippers. The problem is the lack of a safety net in the event damages are sustained. Any shipper could set himself up as a numbered company, not pay insurance premiums, offer better rates and compete with other shippers who have subscribed to the insurance regime. When damage is sustained, the shipper is not insured. The insurers will not be the ones at fault. In fact, the fault will lie with the government for having sanctioned legislation that makes no provision for a safety net.

I realize that we can't ever stop people from not getting insurance or from not complying with legislation. We can't prevent this from happening. However, if at least the government required shippers to have insurance before they could get a shipping license, or if at least some controls were in place governing the issuance of licenses and the like, then the government would have done all it could.

For example, obviously we can't stop people today from getting behind the wheel of an automobile. However, drivers are required to have insurance. They must license their vehicles. There will always be drivers who don't have insurance and who will cause accidents, but when this happens, the government is not to blame.

Unless I'm mistaken, the same holds true for air carriers. They must have insurance. There is no such requirement for shippers, or safety net in place to protect the public, our constituents. The latter may well believe they are protected as a result of the passage of this legislation, but that will not be the case. We know that shippers are responsible people, but that doesn't necessarily mean that they will have the money to compensate people for damages incurred.

Have I understood the situation correctly?

Mr. Douglas McRae: Based on our experience as insurance underwriters, we find that the vast majority of business people who invest purchase insurance. This is not a problem in Canada. In the vast majority of cases, business people in Canada buy insurance to protect their property.

[English]

I think I'd better go on in English.

[Translation]

Mr. Mario Laframboise: Go ahead.

[English]

Mr. Douglas McRae: Compliance in Canada with insurance just doesn't seem to be a problem. Most people are conditioned to buy insurance, particularly people with investments to protect such as boats that they buy and businesses they set up. So in our experience, I can't say there are no operators of boats who are out there without insurance; there may be some, but it doesn't seem to be a big problem.

The problem of embarking on compulsory insurance would be to ensure that there is a market for all the people who have to buy insurance. That's an area we can't necessarily guarantee. There may be people who aren't licensed. There's no system in place for licensing passenger vessels with fewer than 12 passengers.

Over 12 passengers, there's a coast guard inspection, the boat is certified, and there's some insurance that there's security in place. For the small boats, with 10 or 12 passengers, there may be no method in place to inspect these boats. There may be no way to ensure that they will have insurance available to them, without first doing a study.

So the law certainly permits the minister to invoke compulsory insurance if it's found to be a necessity. We can't say we wouldn't welcome it. We would, but we can't guarantee that we would be able to insure everyone who would make a request for insurance, without first having these boats inspected. There may be 2,000 of them across the country, and some of them in remote places. It would be quite an undertaking to bring all this up to a level at which we could guarantee that everyone who sought to have insurance would have insurance.

So it's certainly a topic of interest, but I don't think we could say to you that we're ready for the regime to be put into place immediately, and we certainly wouldn't like to see the law delayed while that study was undertaken.

[Translation]

Mr. Mario Laframboise: I think it's a little more complicated then you would have us believe. You claim that everyone is insured, including businesses. However, when you're asked to institute an insurance regime, it's quite another matter.

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If everyone is insured, then it shouldn't be that difficult to accomplish this. However, it's likely because many people are not insured that you don't want to get into this debate. And that's what worries me.

You claim that everyone in Canada is insured and acts responsibly. If that were true, then there wouldn't be a problem legislating a compulsory insurance scheme. However, you have a big problem with this compulsory insurance program because the fact of he matter is that everyone isn't insured. Surely that's the reason. Otherwise, it would be a simple matter. Everyone would be a client of yours and compulsory insurance wouldn't change a thing.

[English]

Mr. Douglas McRae: The people who are insured with the Canadian insurance industry currently have submitted insurance applications. We understand the business they're in, what types of boats they're using, and what sorts of activities they're doing.

Without knowing all the people who would come to us for insurance, we don't know whether we'd be able to guarantee that we would be able to provide insurance for all of them. There are some thrill rides, for example, that may be operating with or without insurance that we would have to look at very carefully before we could say that the insurance would be available to them.

We think most people buy insurance. We have no way of knowing without going to every boat owner and asking the question, are you sure you have insurance?

[Translation]

Mr. Mario Laframboise: This brings me back to the first question I put to government officials. Why bring in a liability regime in the first place if you cannot guarantee a safety net for passengers on a ship?

A thorough review of the insurance market should have been conducted. Such a review should have been commissioned several years ago to enable us to make certain determinations: for instance, ships that carry 20 or 25 passengers or more are required to have insurance, whereas the jury is still out in the case of other ships.

What surprises me is that the government is seeking to introduce a compulsory program. Ultimately, however, it won't because the insurance market will not be able to implement it. A study has yet to be commissioned and you do not seem prepared to conduct one any time soon. Therefore, this provision will never apply. Section 39 provides minimal protection and as I see it, we'll have to live with this.

[English]

Mr. Douglas McRae: We would probably be able to provide the insurance for the people who would require that. It is just that we're not sure the administrative system is in place to ensure that these people would buy insurance even if it were in the law.

The international convention that dealt with large passenger vessels, the Athens convention, may bring compulsory insurance in eventually. It's something they're looking at.

One of the other problems I would mention is international business. We have foreign passenger vessels coming to Canada to embark and discharge passengers. It would be difficult perhaps to be out of step with the international convention to the extent that these vessels would have to provide some sort of proof of insurance under terms that you're not aware of. So the international side of it has to be looked at as well as the domestic regime.

But if the government said to us, all vessels that are certified by the Canadian Coast Guard carrying 12 or more passengers need insurance, I'm sure we can provide it. It's not going to be a difficult issue to deal with. But at this point in time our priority is to get the bill passed to bring in the benefits, the higher limits, immediately, and then look at the question of the compulsory insurance regime perhaps later.

Mr. Art Payne: I also want to make the observation that we made earlier, that I don't think the Canadian public has suffered currently from the absence of a compulsory insurance regime with respect to vessels carrying passengers. There's no evidence that's the case—to my knowledge, certainly, not as a practitioner of insurance.

[Translation]

Mr. Mario Laframboise: My next question is for Mr. Gould.

Do you think it makes sense to bring in a liability regime without making any provision at the same time for a safety net?

[English]

Mr. James Gould: Yes, sir, I do. We have to have a basis for it before we can move to compulsory insurance. As Mr. McRae has said, to put in place a scheme of compulsory insurance for all vessels that might be carrying passengers in Canada requires an administrative framework, and that can't possibly be provided yet. The only inspection scheme that's available now is for vessels carrying more than 12 passengers, I think. Thrill rides, for example, may have 12 or more but they may not be able to get insurance at all.

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I accept that the Athens convention is a desirable part of our law. I'm quite happy to leave to the future the decision as to whether or not compulsory insurance is a desirable feature.

The Chair: Thank you very much, Mr. Gould.

[Translation]

Thank you very much Mario. You've asked some good questions.

[English]

We'll move on to Marcel Proulx of the Liberals.

Mr. Marcel Proulx: Thank you, Mr. Chair.

I would like to continue along the same line of questioning. When you're talking about vessels of 12 or more, either 13 and up or 12 and down, whatever, what are we talking about in terms of exposure of 11 and fewer, for example? What are you thinking of? Are you thinking of rafting, or of small ferries? What exists, in practice, for fewer than 12?

Mr. Art Payne: You have whale-watching activities on the east coast, or on the west coast for that matter. If you travel to Victoria, you'll see a considerable number of these small pontoon-type vessels taking up to 12 people out to watch whales. There are also river-rafting activities.

Mr. Marcel Proulx: Would those not be covered under provisions or licensing for small watercraft, under DFO, I suppose, or the coast guard? Would those not be covered under that part of the legislation?

Mr. Douglas McRae: Not if they're under five registered gross tonnes. They don't require inspection unless they're over five tonnes or carry more than 12 passengers.

Mr. Marcel Proulx: I see.

I'm wondering if it would be feasible to have something included in a section here to force whale-watching boats, for example, because they don't necessarily carry insurance, to advertise the fact that they don't have insurance? That's not, of course, making insurance compulsory, because the system can't absorb it. My colleague's main concern on this, if I understand him correctly—and I agree with him—is the protection of the Canadian population. If you go out on one of these boats for a Sunday afternoon outing and you don't have insurance, and something happens, that can be very dramatic.

Can we think of a system that would force them to say “Welcome on board, and by the way, we don't carry liability insurance”?

Mr. Art Payne: Well, you might legislate it, but I suppose it's a reverse way of driving people into buying insurance. I'm trying to visualize somebody putting up the sign, “Here's your ticket. This vessel is totally uninsured.”

Mr. Marcel Proulx: What I'm trying to do here is put the onus on you, on your industry, because these boat owners would then be indirectly forced to go back to you and ask for insurance. I'm surprised to hear you say that no insurance is available. I have an insurance background, and it's always been known that everything is insurable.

Mr. Art Payne: Oh, I'd be surprised if we've said that insurance is unavailable. I'm saying in some circumstances it may be unavailable, or the price is so prohibitive that it becomes a balancing act whether, with the cost of insurance, the business is viable. There are those decisions to be made as well.

Mr. Marcel Proulx: Okay.

The Chair: Andy Burton from the Alliance.

Mr. Andy Burton: Thank you.

Mr. Gould, you've indicated that overall you're basically pleased with the legislation. Are there any additions or changes you'd like to see form part of this bill, either now or in the future?

Mr. James Gould: I don't think so, sir, no.

Mr. Andy Burton: You're basically totally satisfied with the format, then.

Mr. James Gould: We're as satisfied as we can be. We've been involved with the Marine Liabilities Act for years, and we've strongly promoted it.

• 1240

Mr. Andy Burton: How difficult is it, or is it even possible, for a potential injured passenger to break the liability limit, the $350,000 limit?

Mr. James Gould: They can do it if they're able to demonstrate that, conditions permitting, the breach of the limits would apply—that is, it was a deliberate act with intent to cause damage. Those provisions are set out in both the limitation of liability convention and the Athens convention.

Mr. Andy Burton: So it is possible to breach those limits.

Mr. James Gould: It is possible.

Mr. Andy Burton: It's not overly difficult? What I'm getting at is, if it is overly difficult, should the limits be higher?

Mr. James Gould: The limitation of liability schemes that you now see in effect are much more beneficial for claimants than they used to be. In this case, the obligation is on the owner or operator of the passenger vessel. The injured passenger, or a deceased passenger's dependants, need only prove that they fall within the statute. The fault is presumed unless the contrary is proved by the shipowner. The liability limits, however, can be breached if it's a deliberate act.

How difficult would it be? Well, it would vary according to the circumstances of the case.

Mr. Andy Burton: This might be slightly off the topic of the bill, but I think it's relative, Mr. Chairman.

It appears there is a gap in regulations with regard to under 12 passengers and under five tonnes. It appears that vessels are unregulated, and not subject to inspection, with no requirement for insurance.

Is there something that should be considered there? Do we need to cover some loophole here, or does it matter?

Mr. James Gould: Again, the administrative framework would have to be in place. With respect to passengers, the current situation is that a shipowner can exclude or limit its liability in any event. The Athens convention would prohibit contracting out of the convention.

That's why I say, for example, with thrill rides, when you get on them, whether they have insurance or not, you probably sign a waiver, which is your agreement that you will not make a claim against them for any reason.

Mr. Andy Burton: Thank you, Mr. Chairman.

The Chair: Mr. Shepherd.

Mr. Alex Shepherd: I'm surprised that an impediment to insurance could possibly be licensing. Many of us in Ontario, and I think throughout Canada, are going through a process for our small craft. I just had to get a licence the other day to run my little motorboat around the lake. So to me it seems unusual that this is a problem.

I guess what some of the questions are getting at is this: What is the actual propensity for vessels to be underinsured? You talk about the maximum claim. Presumably there are forms of liability other than personal injury—for instance, if I ran my cargo ship into the side of a dock.

From an actuarial point of view, it's common in the insurance business to co-insure. Is co-insurance a factor? I guess what I'm asking is, how poorly are carriers insured?

Mr. Art Payne: As we understand it, the major carriers and ship operators in Canadian waters are members of the professional protection and indemnity mutual clubs, which provide unlimited liability. In the context of that amount of protection, issues of inadequacy or co-insurance just don't arise.

Mr. Alex Shepherd: Okay.

This doesn't involve personal insurance, but my final question has to do with the Irving Whale. I was down there when they were bringing it up and so forth. How is it the Government of Canada got stuck with the liability for bringing that up?

Mr. Art Payne: I really don't.... There is probably a long and a short answer to that one, and I don't know who wants to undertake either one.

Mr. Douglas McRae: It was insured.

Mr. Alex Shepherd: Was an insurance claim made for the salvage operation?

Mr. Douglas McRae: It was a complicated legal situation, as I understand it. It wasn't clear that the owner, or the insurer of the vessel, was liable to have it removed. Due to the circumstances, it was outside territorial waters when it sank. It had been down there for 20-something years. So there were a lot of legal questions aside from the straightforward aspect of who—

Mr. Alex Shepherd: Because it was a three-mile limit, as opposed to a 100-mile limit.

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Mr. Douglas McRae: So there were legal issues, but there was protection indemnity insurance in place on the vessel when it sank, and that insurance company would have responded if it had a claim lodged against it.

Mr. Alex Shepherd: So if the Irving Whale incident occurred today, it would be insured—is that what you said?

Mr. Douglas McRae: It certainly would be, yes.

Mr. Alex Shepherd: And to the full cost of the recovery that the government actually had on the bailout situation?

Mr. Douglas McRae: Absolutely.

The Chair: Mario, any further questions?

[Translation]

Mr. Mario Laframboise: Thank you, Mr. Chairman.

Mr. Gould, I have a question for you concerning clause 46. The witnesses testifying before you, including Mr. Bélanger from the Shipping Federation of Canada, seemed to be saying that the greatest irritant, in their view, was that the Government of Canada appeared to be giving precedence to the Hamburg Rules by virtue of the inclusion of section 46. They would have preferred to see the Hague-Visby regime apply. Can you quickly explain to me the differences between Hamburg and Hague-Visby? Are there any differences between the two regimes, in your opinion? On the issue of liability, how do the Hamburg Rules differ from the Hague-Visby rules?

[English]

Mr. James Gould: Well, sir, they're not completely different, but they are different regimes of legal liability. As things stand now, as I understand it, Canada, for example, can only apply its carriage-of-goods legislation to outbound bills of lading—that is, shipments from Canada to some other place or to some other place in Canada. Whereas, inbound bills of lading may be subject to the Hague-Visby Rules, which are in conformity with our law at the present time, or they may be subject in certain cases to the Hamburg Rules, so that when we receive goods in Canada, they may be subject to either one, depending on the law applicable to the bill of lading at the time it's issued.

I don't think it's a case of not liking the Hamburg Rules. The issue of clause 46 is to take a feature that's considered desirable from the Hamburg Rules and insert it in the Hague-Visby Rules where it was not inserted before, so that there is this ability to recognize and support Canadian shippers and importers.

What was said about the forum shopping I don't think is really a fair comment. A bill of lading may be issued abroad; you may have a German shipper and a Canadian receiver, and a Liberian vessel; and when the goods arrive in Canada, they may already be in the hands of the consignee subject to arbitration or jurisdiction in Germany or England or some other place. The objective is to provide Canadian shippers and receivers with the option—just an option—to proceed in Canada.

Now, what Mr. Bélanger has said, and it's true, is that in many cases you have large shippers and large shipowners coming together and agreeing that, no matter what, we're going to litigate this in Hamburg if we have a dispute. That's one thing. Often you don't know who the carrier is when you make your shipment. Sometimes the jurisdiction clause will provide that it will be according to the law of and in the place where the carrier has its principal place of business, and you don't find that out until you know who the carrier is. I don't know that I need to say anything more about it.

The problem that has arisen, I think, with respect to these clauses in litigation in Canada is best expressed by the case I referred to earlier, where you had a Canadian shipper, two vessels owned by two different companies carrying wood pulp from British Columbia to Rotterdam, where it was transshipped onto other vessels owned by two different owners for ultimate delivery in Finland. The cargo was found to be damaged in Rotterdam at the point of transshipment. You had all kinds of connections with many different laws: the United States; Liberia; there were some Scandinavian countries involved, obviously Finland; the Netherlands; and so on.

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But the contract between one plaintiff and one of the defendants—and there were two plaintiffs, I think, or maybe five plaintiffs and ten defendants—that one contract provided for London arbitration.

Oddly, England is about the only country in the world that didn't have some connection with this particular contract. Yet the court said in that particular case that, really, they couldn't do anything until the Marine Liability Act was enacted. The court exercised its discretion in favour of granting a stay so that it could be sent to arbitration in England.

Justice Sexton from the Federal Court of Appeal said it's clear the result is not entirely satisfactory. Ideally, the parties should be able to litigate their claims all in one action in one place. Obviously legislation is required so as to facilitate this. Hopefully, such proposed legislation as Bill S-17, which is the former Marine Liability Act, if enacted will accomplish such purpose. However, until that happens we must abide by the law as it stands.

So, as my friends have stated to you, you do have a certain amount of uncertainty in any event. But this, I think, would provide manageable certainty, because if you're shipping to Canada or from Canada, you know that Canada may be one of the jurisdictions where the suit or arbitration may be brought.

[Translation]

Mr. Mario Laframboise: Fine. I have another question for you.

Clauses 91 and 92 touch on the limit of liability of the Ship- source Oil Pollution Fund on the carriage of petroleum or other products. The limit of liability of the Fund is based on figures established in 1990. Therefore, the limit of liability is pegged at 1990 levels. Pursuant to subclause 91(3), these amounts are indexed to the CPI, excluding the food and energy components.

I have a problem with the petroleum products industry. Energy costs are excluded from the indexation process. One has to understand that the latest increases in the CPI in Canada are largely due to the energy component. Yet, this is excluded throughout the bill, even from the amount shipowners must pay into the Ship-source Oil Pollution Fund.

Do you think it's reasonable for the liability amounts payable under the fund to be still pegged at 1990 levels, given the costs of the environmental and other damages that could be sustained as a result of an oil spill and also given the increased liability under the bill? Any party that sustains losses, including fishers and those operating fish processing plants, could be compensated from the Fund. Shouldn't these figures have been adjusted - this is the 21st century after all - to reflect the true costs of damages that could be sustained in this century?

[English]

Mr. James Gould: Well, I think it's a policy matter, sir. What you're addressing here in those particular sections is the limit of liability of the Ship Source Oil Pollution Fund but not the limit of liability with respect to the incident itself. You have a multi-layer system of liability in that particular part of the bill. There are two international conventions which stand between the Ship Source Oil Pollution Fund and the shipowner who may cause oil pollution damage.

So the Ship Source Oil Pollution Fund is important, but this limits its liability. It's a Canadian institution, but that doesn't limit the liability of the shipowner ultimately. At least I don't think it does.

[Translation]

Mr. Mario Laframboise: Fine.

Then you don't have a problem with these figures being pegged to 1990 levels? Do you not think that the liability of the Fund should have been increased? Of course, by doing so, shipowners might have to pay more into the Fund. At least then, liability amounts might be more reasonable.

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Are the dollar figures quoted still reasonable? Are you satisfied with the $100 million limit of liability, which will be indexed to the CPI, naturally, although energy components will be excluded. You appear to be satisfied with the limit of liability of the Ship-source Oil Pollution Fund.

I realize that the shipowner is also liable, but the fact remains that this fund is secure. If a disaster were to occur - and we hope that doesn't happen - would the sum of $100 million be sufficient, given the total cost of the damage that could be sustained? Do you not think that this limit of liability should be increased, albeit gradually, so that there is more money in the fund, enough to compensate anyone who might sustain losses as a result of a spill?

[English]

Mr. James Gould: Well, probably the administrator of the fund would be better able to answer. But as I understand, they have lots of money, and the claims against that fund are insignificant compared with the resources available. So I can't really answer your question of whether $100 million is sufficient or not. They have lots of money and haven't had to pay.

The Chair: Finished, Mario?

Mr. St. Denis from the Liberals.

Mr. Brent St. Denis: Actually, in the intervening time my questions have been dealt with. A comment I might make I'll reserve until Thursday. It's a general comment. It can be made then, so I'll pass.

The Chair: Andy?

Mr. Andy Burton: No, thank you, Mr. Chairman.

The Chair: Any further questions from members?

I'd like to thank our guests, Mr. Gould, Mr. McRae, Mr. Payne. It's a pleasure having you here today expressing your positions. We appreciate your input, and obviously we'll consider it as we work through the bill.

Anything else for the good of the committee?

We're adjourned until 11 a.m. on Thursday.