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Good morning. I'm here to talk about the aviation industry indemnity act. I'm going to read the presentation to you, and if you have any questions after the fact, we'll deal with them.
Air industry participants, including carriers, airports, and air navigation service providers, as well as other suppliers to the air industry, require sufficient insurance coverage to operate. Insurance is required by regulation, commercial contracts, and for fiduciary reasons. Air industry participants need two types of insurance coverage: general and war risk. General insurance coverage is required in case of accidents, the same as for anyone else, but war risk insurance is different.
War risks is the term the insurance industry uses to describe potential damages caused by acts of violence. These include acts of war, but also other actions, like civil unrest, and of particular concern in recent times, acts of terrorism.
War risk insurance covers a range of categories of losses, liabilities, or damages. For example, an airline purchases insurance to cover the plane and the equipment, otherwise known as first party insurance, and the plane's contents, including the passengers and cargo, otherwise known as second party insurance. Finally, it must also account for the people and the property on the ground who have no particular relationship to the flight. These people are called third parties. The same broad categories exist for other parts of the air industry, other than just the airlines.
Before the attacks of September 11, 2001, the insurance industry offered war risk insurance at low rates. Following the attacks, insurance providers invoked short-term cancellation clauses for war risk coverage, leaving the air industry in a predicament, as this insurance is necessary for them to operate. The absence of a workable legislative framework necessitated the government's use of the royal prerogative to provide the coverage the aviation industry required. Since that time, the government has continued to use the interim authorities to provide an aviation war risk liability program, as the commercial markets for war risk insurance have been unstable and third party coverage has been most affected.
This situation was compounded by the recent global financial and economic crisis. In the Canadian context, the broader instability was particularly exacerbated by the approach of our closest competitors in the United States, which implemented a government based and supported approach to aviation war risk insurance that created a competitive advantage for their air industry participants.
This bill, the aviation industry indemnity act, would allow the government to provide aviation war risk liability coverage in a dependable and transparent manner when it's necessary to do so. It would also allow the tailoring of such assistance, if circumstances warrant, to the specific needs of individual industry participants and to rapidly adjust to changes in circumstances.
The markets for general insurance have not been affected in the same way. For that reason, general insurance risks are not addressed in this bill.
The events of 2001 illustrate the importance of providing the Minister of Transport with the ability to issue an indemnity if and when needed. The aviation industry indemnity act would provide the minister with the ability to offer an indemnity. It would not guarantee one. The Minister of Transport would undertake regular assessment of the state of the aviation war risk insurance markets and decide whether to offer an indemnity in light of the findings. This also would give the minister the ability to act or respond on very short notice, especially in that kind of emergency situation when rapid action is most necessary.
For example, at times it's necessary for the government to contract with an aircraft operator to send an aircraft into dangerous situations to evacuate Canadian citizens or undertake other humanitarian activities. In cases where the necessary flights would be impossible because insurance was not available, this bill would ensure that the Minister of Transport had the flexibility to issue an undertaking on short notice that would give the aircraft operator the coverage necessary to complete such urgent missions on Canada's behalf in a timely manner.
Although third party coverage for people and property with no connection to the aviation industry participant has been the primary concern to date, the bill would also give the minister the ability to provide an indemnity to address coverage for first and second parties if needed. Such coverage might be necessary in the earlier example of chartering an aircraft for emergency evacuations.
It could also be necessary, more generally, in a worst case scenario that included a broad-based withdrawal of private insurers for the aviation war risks.
If considered necessary, an indemnity could be provided to any member or group of members in the Canadian aviation industry. Because these entities might have differing insurance needs, the bill provides for tailoring an indemnity to meet the needs of the various players most effectively. It is even possible to indemnify an individual participant in case of special need. This flexibility ensures that coverage remains available to Canada’s aviation industry when and if it is necessary.
The bill includes provisions that allow the to attach appropriate terms and conditions to an undertaking. These include the amount of indemnity to be provided and whether the aviation industry will have to purchase some insurance on its own. This is particularly important when there is instability but not outright failure in the markets.
This approach provides the additional benefit of encouraging commercial insurance markets to optimize coverage, and divides the risk between the government and the air and insurance industries in a way that is most appropriate to the circumstances prevailing at the time.
In addition, the terms and conditions attached to an indemnity can reference standard insurance industry practices or documents to ensure that not only is coverage provided, but it's provided in such a way as to ensure compatibility with practices familiar to Canadian aviation industry participants, and in a way that foreign regulators and business partners understand.
Although the proposed aviation industry indemnity act specifically identifies who may receive an indemnity, the types of risks covered, and some procedural matters, it does not include many other prescriptive elements. This is done because such things are impossible to anticipate and the government may have to react very rapidly. Rigid requirements would remove much of the usefulness of this bill.
This bill is designed to ensure clarity and transparency to Parliament and the Canadian public. It includes provisions for the regular assessment of the state of the aviation industry as well as regular reports to Parliament on activities undertaken under the authority of the bill.
A report must be made within 90 days after a new or amended indemnity is provided, or if there have been no changes, at least every two years. In addition, all new or amended indemnities will be published in the Canada Gazette. This approach ensures that all who need or want to know what is happening with regard to the bill can do so.
In conclusion, this bill will allow the government to provide aviation war risk insurance coverage in a dependable and transparent manner, as and when needed due to limitations in the commercial insurance markets.
Thank you.
In recognition of the significance of marine transportation to Canada and its contribution to the Canadian economy, the Canada Marine Act was enacted in 1998.
One of the outcomes of this legislation was the establishment of Canada port authorities. There are currently 18 port authorities across Canada, and each is incorporated under their own letters patent. They are autonomous entities operating independent from the federal government. Their mandates are to manage their marine infrastructure and services in a commercial manner that encourages and takes into account input from users and the community in which the port is located.
They have boards of directors composed of between seven and eleven directors. The majority of the appointments to the boards are made by the Governor in Council. The individuals are nominated by the minister, and in some cases are in consultation with port authority users. Additionally, municipalities and provinces also appoint directors to the port authority boards.
Most appointments in the Transport portfolio become effective at a date set by the Governor in Council. However, effective dates of appointments to port authorities are not determined by the Governor in Council. Under subsection 14(2.2) of the Canada Marine Act, these appointments come into effect when port authorities are notified. This appears to be a unique constraint to the Governor in Council's power to appoint.
In addition, a distinct mechanism is required to track and monitor effective dates for appointments to port authorities. This results in additional administrative processes. A total of 95 Governor in Council appointments are affected, which represents one-third of all appointments in the Transport portfolio.
To assist in standardizing effective dates throughout the Transport portfolio, the government is proposing to amend the Canada Marine Act. As a result, the Governor in Council would set the effective date of appointments to port authorities. This change would also improve efficiency in administrative processes.
The amendment does not change any of the qualifications or other requirements for appointments to port authorities. It is a change to the effective date of the appointment only.
Thank you.
This morning I'm pleased to have the opportunity to speak about the amendments to the Marine Liability Act as contained in Bill the safeguarding Canada's seas and skies act.
The purpose of the Marine Liability Act amendments is to fill a gap in the current liability regime for ships and to ensure that Canadians and the environment are well protected from the risks of marine transport. This bill protects Canadians against the financial consequences of hazardous and noxious substance spills from ships by: one, ensuring that shipowners carry the appropriate amount of compulsory insurance for the risks associated with the cargoes they carry; and two, providing Canadians access to an international fund to provide compensation beyond the shipowner’s limit.
These amendments are important and necessary, because while Canada has an excellent marine safety record, it is important to have in place a robust liability and compensation regime to ensure that polluters pay for incidents and that Canadian interests are protected by modern legislation that includes proper compensation.
These amendments will facilitate the implementation of the 2010 hazardous and noxious substance, HNS, convention, an international liability and compensation convention adopted by the International Maritime Organization. Spills of dangerous substances can be costly to clean up, and these amendments will ensure that those affected by these spills are adequately compensated.
Shipping is truly and inherently a global industry. The international shipping industry is responsible for carrying about 90% of world trade, and is critical to the functioning of global commerce. Unlike other modes of transportation, which are more or less confined to our roads, railways, and airports, international ships have vast amounts of waterways to operate in and are constantly on the move from state to state to connect global supply chains and deliver goods and people to their markets and destinations.
Given this, it is important that Canada continue to contribute to the uniformity of international maritime law and continue its long-standing tradition of multilateralism with regard to international shipping. As I said, this is a global industry requiring global rules. Canada's intimate involvement in the advancement of the HNS convention is indicative of that long-standing tradition.
The 2010 hazardous and noxious substance convention establishes strict liability for the shipowner and also introduces compulsory insurance for their liability for the pollution damage caused by a spill of hazardous and noxious substances from a ship. This is a major improvement over the current regime when it comes to dangerous goods such as chemicals. The convention also includes membership to an international fund that will pay compensation for pollution damage caused by such spills.
Contributions to the international fund will be paid by cargo owners. By splitting the financial responsibility between the two principal parties involved, the shipowner and the cargo owner, this convention supports the very important polluter pays principle and will ensure that both the shipowner and cargo owner pay for pollution damage caused by their ship or goods.
This international convention is modelled on an existing regime for oil pollution from ships, which has served Canada well. The regime ensures that the risks associated with international shipping are shared globally. By ratifying this convention, Canada will gain access to approximately $400 million in compensation for a single spill of hazardous and noxious substances.
The hazardous and noxious substances convention covers a wide variety of substances, some 6,500 substances that are carried in bulk and in packages and containers along our coast and through Canadian waters. These substances include liquefied natural gas, propane, refined fuels, and other dangerous cargoes. The broad scope of coverage of these hazardous and noxious substances under this convention will go a long way in ensuring that Canadians are well compensated should an incident occur.
In the case of ship-sourced spills of refined fuel, compensation available from the ship-source oil pollution fund will continue to apply. This is a unique Canadian feature of our regime that will continue to benefit Canadians by ensuring that another tier of compensation is available to victims of oil pollution damage and by providing one of the highest amounts available globally for a spill of oil.
Transport Canada has consulted with Canadians and stakeholders who widely support the passage of the proposed amendments to the Marine Liability Act. The shipping industry had recently written to the chair of this committee to express their strong support for the proposed amendments to the Marine Liability Act. The cargo owners who would pay into this HNS fund have also voiced their support for this bill.
In summary, these amendments will ensure that shipowners carry adequate insurance and are held strictly liable for the damage caused by hazardous and noxious substances from their ship, and set out the legal framework for an international compensation fund to provide compensation to victims. It's a significant step forward in advancing the ship-sourced liability and compensation regime and in ensuring that victims of spills of hazardous and noxious substances are adequately compensated.
Thank you.
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I would like to thank the committee for the opportunity to speak of the important amendments to the Canada Shipping Act, 2001, as part of Bill .
The amendments focus on three key areas, the first of which is the removal of obstacles to respond to an oil spill by addressing gaps in the civil and criminal immunity protection provided to response organizations, oil spill responders, and responders coming from outside of Canada at the request of a Canadian response organization.
Currently, the responder immunity provisions apply to certified Canadian response organizations and persons designated by the minister as an approved responder. Over the course of the past several years, industry stakeholders, specifically Canadian response organizations and certain U.S. oil spill response organizations, have raised two primary concerns with responder immunity and its application.
One concern brought forward by stakeholders was whether agents of Canadian response organizations were provided immunity when responding to a spill in Canadian waters. The second concern was whether Canadian response organizations were covered by responder immunity when responding to a spill at an oil handling facility.
The responder immunity amendments were designed to address these two concerns by providing civil and criminal immunity protection to agents of certified response organizations, including those coming from outside of Canada at the request of a response organization. The responder immunity amendments also provide the inclusion of “oil handling facility” within the definition of a response operation. This in turn clearly provides response organizations with immunity when responding to a spill at an oil handling facility during the loading or unloading of oil to or from a vessel.
The second series of proposed amendments will enhance the current requirements for oil handling facilities to reduce the likelihood of a spill from occurring and improve upon the response to a spill in the unlikely event that one should occur.
Currently, the Canada Shipping Act, 2001 does not include an authority to set requirements for persons who propose to operate an oil handling facility. For example, Transport Canada cannot compel such persons to formally notify the minister of the proposed operations or compel them to submit plans to the minister to verify compliance. The current legislative framework only provides Transport Canada with the authority to verify compliance once the facility becomes operational. Under such an approach, there is a risk that regulatory compliance issues could go undetected, resulting in an increased risk of a pollution incident.
To address this gap, amendments targeting new oil handling facilities would require persons who propose to operate a facility to provide notifications to the minister and to submit an oil pollution prevention plan, as well as an emergency plan, at least 90 days before operations begin. In addition, the minister will have the authority to compel persons who propose to operate a facility to submit any information or documents required to assess compliance. Finally, oil handling facilities would be prohibited from beginning operations unless the plans meet the requirements set out in the regulations.
Other sets of amendments target oil handling facilities that are or have been operational. Currently, there is no legal requirement for an operator of a facility to notify the minister, which means that Transport Canada may not be aware of all of the facilities that are currently in operation. Similar to the requirements for persons who propose to operate a facility, the minister will have the authority to require oil handling facilities to submit information or documents. The act presently requires oil handling facilities to have plans on site, but it does not specify that the plans have to be up to date, which is currently implicit but will now be clearly stated in the act. This requirement also has been included.
Also introduced is a requirement that operators of oil handling facilities who wish to make significant changes to the nature of their operation, for example, transfer rate, product, etc., will be required to notify the minister of the proposed change at least 180 days prior to the day on which the change is made. This includes the obligation to revise and submit the plans to the minister 90 days before making the changes.
Last, provisions have been included that would prohibit the facility from making a change to operations unless the plans meet the requirements set out in the regulations.
These requirements will strengthen the ability of oil handling facilities to prevent, prepare for, and respond to a potential oil spill. They will also provide Transport Canada with the necessary information to inform oversight activities.
The third series of proposed amendments looks at creating a fair and effective alternative to prosecution when dealing with minor to moderate contraventions of the pollution prevention and response requirements contained in the Canada Shipping Act, 2001, and pursuant regulations.
Currently, the administrative monetary penalties regime that is set out in part 11 of the act does not apply to part 8. Therefore, there are only two options for dealing with non-compliance with part 8 and its regulations: either to prosecute regulatory infractions through the court, or to take administrative actions, for example, by suspending the certification of a non-compliant response organization.
Both options are drastic and potentially expensive. Creating effective deterrents to contraventions of legal requirements is key to maintaining the integrity and effectiveness of any regulatory program. Administrative monetary penalties are a flexible enforcement tool that provides a quick yet effective means, consistent with administrative fairness, for addressing non-compliance with legislative and regulatory requirements. Administrative monetary penalties have long been considered a more cost-effective method of enforcement than prosecution.
Amendments to the Canada Shipping Act, 2001 will allow the making of regulations that could result in fines ranging from $250 to $25,000 for violations of relevant provisions pertaining to pollution prevention. Administrative monetary penalties will apply to both response organizations and oil handling facilities, thus providing another enforcement tool for marine safety inspectors.
In addition to the amendments already discussed, Bill provides the minister with several new powers targeting oil handling facilities. The minister will now be able to direct the operator of an oil handling facility to update or revise a plan and submit that plan. The minister will be able to take measures if it is believed that an oil handling facility has discharged, is discharging, or is likely to discharge oil. The minister can now also monitor measures taken to repair, remedy, minimize, or prevent pollution damage, as well as direct operators to take necessary measures to repair, minimize, or prevent pollution damage. Finally, the minister will have the power to designate an oil handling facility to be part of a class regardless of its prescribed class as set out in the regulations.
New offences have also been established for non-compliance in areas such as a failure to submit updated plans, failure to notify the minister of a change of operation, or failure to update plans following a change of operation.
These infractions could result in a fine of not more than $1 million, up to 18 months in prison, or both. Failure to notify the minister of proposed operations or beginning operations without first notifying the minister could result in a fine of not more than $100,000, up to 12 months in prison, or both.
In conclusion, these amendments are an important first step towards achieving our goal of establishing a world-class tanker safety system in Canada.
I would like to thank the committee once again for the opportunity to present this overview of proposed amendments to the Canada Shipping Act, 2001. I look forward to answering your questions.
I want to thank the witnesses for joining us today. I also want to thank them for their work on this issue.
This is a large bill that enacts the Aviation Industry Indemnity Act and amends, among others, the Aeronautic Act, the Canada Marine Act, the Marine Liability Act and the Canada Shipping Act, 2001. So its scope is fairly broad.
Many of this bill's provisions have been approved at the industry's request to establish safer rules. We also support the polluter pays principle. These measures are steps in the right direction, especially given the situation with the Marine Liability Act. I have a few more questions about that.
Generally speaking, given the large number of budget cuts and station closures, the NDP asked that the bill's scope be broadened in order to protect the coasts. Like Canadians, we are very concerned about environmental protection.
I would now like to go back to part 4 of the bill, which amends the Marine Liability Act.
Mr. Meisner, is a ship owner's liability limited in the case of hazardous and noxious substance spills?
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Thank you to our witnesses for appearing today.
I was looking at the speaking notes related to amendments to the Canada Shipping Act. The final paragraph begins as follows, “In conclusion, these amendments are an important first step towards achieving our goal of establishing a World Class Tanker Safety System in Canada.”
If you'll permit me a moment to correct the record, it's actually not the first step but one in a series of actions and steps already taken by our government, including increasing the number of inspections on all foreign tankers, and increasing funding for the national aerial surveillance program in order to keep a watchful eye on tankers moving through Canadian waters. Also, I know that there's increased scientific research on non-conventional petroleum products and systems of navigational aids. There's a number of steps that we've taken, so this may be, more accurately, sort of the first legislative step related to our move to a world-class tanker safety system in Canada.
You mentioned, Mr. Meisner, a review that's been undertaken of compensation regimes. Was that related simply to the question of oil spills or to HNS or both?
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Just to be clear, when we're talking about a world-class tanker safety system, it's pertaining to the transport of oil by ships. We have developed a framework to define what a world-class system would be, and that framework consists of three components.
The first pillar is prevention measures, doing everything we can to possibly prevent the spill from happening in the first place. Those measures are contained in terms of the Canada Shipping Act, such as safety for ships, safety for crew, and provisions for oil handling facilities, ones that are existing and ones that are included in what's being proposed today. It also includes increased inspectors for inspections of ships, of tankers. It includes a program of national aerial surveillance, where we have an aircraft flying over ships to see that they are appropriately equipped to carry the fuel. Then the coast guard component of that would be to provide a safe navigation system. That's all in the first pillar of prevention.
The second pillar is preparedness and response. We currently have a regime in place where private sector response organizations, funded by the cargo owners, are prepared to respond to a spill, should it happen. That was the subject of the panel's report that was referred to earlier. They were commissioned to review our preparedness and response regime. In December they issued a report with 45 recommendations to the minister as to how to prepare and improve our response capacity in Canada.
Just as an aside, their basic recommendation is going from one where we have a standard capacity of 10,000 tonnes across the country to one that is more locally reflected based on the risk and conditions in a local area.
The third pillar that we have going towards a world-class tanker safety system is our liability and compensation regime.
Again, the first pillar is preventing the spill. The second is being prepared to clean it up if it should happen. The third is having enough compensation for those that may be impacted from a spill in the event it happens. The panel made a couple of recommendations on that one. We also have a separate study that does recommend improvements to our liability and compensation regime for spills from ships.
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Currently, eight countries including Canada have signed the convention or the protocol, subject to ratification. Signature doesn't mean ratification. It's just a signal of intent.
The important point to remember here is that this convention is a contributory convention, which means there are certain requirements for it coming into force. One of those requirements is not just the number of states that ratify the convention, but also the amount of contributing cargo that will be part of the fund. There's a magic number in the convention, and that's 40 million tonnes.
Once you have those numbers, 12 countries and 40 million tonnes of contributing cargo, being reported by those countries to support the fund, then you trigger the entry into force. That's how it works.
There are a number of countries, particularly in the European Union, that have very large ports that receive a significant amount of HNS, Rotterdam, for example, that could make up almost that 40 million tonnes right there.
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It's a contingency. I want to repeat that. The industry has to purchase on the market its own insurance up to a certain level, and the government has stepped in with the current program because it's deemed that the amounts of the market rates aren't feasible for the industry. Also, the fact is that our American friends have a program in place where they in fact have almost a full insurance industry of their own. Those two factors together have made us continue this program.
Going forward it's important, should this proposed act pass, that the minister have the powers and be accountable to the country and to you for them. We designed it so that he could react more quickly, because right now, if something were to happen or there were a change required, it's a significant amount of time.... I think you can appreciate that it's under royal prerogative, but that's not an instantaneous action, by any measure.
Also, in the case of my example of wanting to send a plane to a foreign country to rescue Canadians, that too has been proven to be too much of a burden under the current program. There was an example where it took a great amount of time to respond to that.
I think the measures that will be in place going forward would be that the minister would establish a rate or amounts, contributing factors, define the program, and then on an ongoing basis would report back to cabinet. If something were to happen or it was decided to make a change to the program, within 90 days the minister would come back and say, “Here's why I changed it.” On a more ongoing basis, assuming no changes were made, he would report back to cabinet on a two-year basis and explain that.
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Perhaps providing a little historical reference might make this a little clearer.
The environmental response program was one of three programs transferred in 2003 from the Canadian Coast Guard to Transport Canada, when the coast guard became a special operating agency. The programs that were specifically transferred over were programs that had a regulatory mandate.
Some of the responsibilities, specifically those for the environmental response program, were split. The response authorities and responsibilities were retained by the coast guard, which is why we have pollution response officers. At that time, prior to 2003, we had pollution prevention officers as well who did the prevention work, as opposed to the ships' officers in the field, who are out there in the event of a response.
In terms of the pollution prevention officer, in some ways that specific designation is somewhat of a legacy issue of that particular point in time. In an effort to harmonize it, it has also been linked to what we're doing with our administrative monetary penalties. We have marine safety inspectors. We also have pollution prevention officers. The authorities are simply being harmonized under the marine safety inspection authorities portion of the act.
It is very much an administrative move internal to the act in order to make it a cleaner process for us for our training. For our inspectors in the field, it gives them certain authorities that the marine safety inspectors had as well.
As my colleague Monsieur Lachance said earlier, we have marine safety inspectors, but we also have these dedicated resources as well, which are the pollution prevention officers. They all have the designation.