TRAN Committee Meeting

STANDING COMMITTEE ON TRANSPORT

LE COMITÉ PERMANENT DES TRANSPORTS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, March 10, 1998

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[English]

The Chairman (Mr. Raymond Bonin (Nickel Belt, Lib.): I call the meeting to order. The order of the day is Bill S-4, an act to amend the Canada Shipping Act (maritime liability).

For the benefit of members, I'll explain to you what I would like to try to accomplish. I'm being very careful of my wording. After all your questions have been answered by our witnesses, if members of the committee are prepared to do the clause-by-clause consideration, I would be very happy and willing to do it this afternoon. If not, we'll come back this evening.

Mr. Lee Morrison (Cypress Hills—Grasslands, Ref.): At 7 p.m.

The Chairman: At 7 p.m. this evening. I'm not asking you the question at this time. Hopefully, we will have answers to all our questions and be able to proceed.

For those who are not familiar with the issue, this bill has been dealt with in a former committee, before the election, and some of those members are still on this committee. We have invited witnesses to appear from a list given to us by the Reform Party, and all of them have indicated that they saw no need to appear, that they supported the bill and that they've been through it before.

Having said that, I wish to

[Translation]

welcome our witnesses, Mr. André Pageot,

[English]

Mr. Rysanek and Mr. Popp.

Perhaps you have a presentation to make. Please feel free to do so if you wish. Following that we will proceed to questions.

Mr. André Pageot (Director General, Marine Policy and Programs, Department of Transport): Thank you, Mr. Chairman.

You will realize this is a rather technical bill, but it is basically to modernize our liability regime and our insurance regime in Canada, both from the aspect of general liability and oil pollution damage.

I have with me two experts. Mr. Jerry Rysanek has worked on issues like marine insurance and all the liability issues in Canada, and Mr. Popp is general counsel and a maritime lawyer who has been chairman of the International Maritime Organization. Mr. Popp has worked on some of the international conventions referred to in the bill. Between those two gentlemen, we are optimistic we can answer all your questions. Thank you.

The Chairman: We are open for questions.

Mr. Morrison.

Mr. Lee Morrison: Thank you, Mr. Chairman.

Mr. Pageot, I didn't see anything in the bill dealing specifically with dangerous goods. I'm thinking of incidents like the Texas City disaster, or the Halifax disaster. Is there anything in here with respect to, say, above maximum liability, unusual liability, in a gross disaster of that nature? In fact, is there anything in here dealing with dangerous goods at all?

Mr. Jerry Rysanek (Chief, Policy Development, Insurance and Liability, Department of Transport): Thank you, Mr. Morrison.

The first part of the bill deals with the revision of part IX of the Canada Shipping Act that deals with maritime claims in general, any maritime claim, however caused, including claims caused by dangerous goods carried on ships. That's what you are probably referring to.

Mr. Lee Morrison: Yes.

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Mr. Jerry Rysanek: The revision in part IX will considerably increase the liability of shipowners for such incidents, so I think it would be fair to say that there is something for dangerous goods in the bill in the sense that the limits of liability in respect of all claims, including dangerous good claims, will be much higher in the future. Thank you.

Mr. Lee Morrison: But they could still be grossly under, if you did have a disaster similar to one of the two I mentioned, the Texas City one or the Halifax explosion, and there would be no possibility that the limits that are described in this bill would cover the damages of a major disaster.

What happens in the case of a major disaster? Is there any backup, any form of a pooling arrangement such as is held by, for example, banks and brokerage houses to cover one another, or is it that you reach your limit of liability and that's it?

Mr. Jerry Rysanek: The limits of liability are a function of the size of the ship. What Bill S-4 will do is provide, of course, graded limits, so it depends on the size of the ship. If you take a typical—if I may use the expression—merchant ship of 30,000 tonnes, its new limit will be around $70 million per incident.

Mr. Lee Morrison: Which is nothing.

Mr. Jerry Rysanek: That's as far as it goes.

Mr. Lee Morrison: Okay.

Mr. André Pageot: But if I may add, Mr. Chairman, Canada relies a lot on deep sea shipping under foreign flags for a variety of historical reasons, and we have made a very clear policy decision that we want to align with the international community so that Canada doesn't have a unique regime that is so different that we may have a problem of competitiveness, whereas certain ship owners from other nations may be hesitant to come in our waters because we would have a unique regime.

But the key in this bill is if you take a ship of 100,000 tonnes, the current limits, based on the table I have here, would be a maximum of $46 million. That will go up to $181 million.

So it is a substantive improvement, but the second dimension is that it is in line with what our trading partners are doing, and if we get out of step with the international community, we may have a little bit of a problem of competitiveness with foreign fleets.

Mr. Bill Casey (Cumberland—Colchester, PC): Excuse me, where is the table?

The Chairman: Order. You'll have your turn after, Mr. Casey.

Mr. Bill Casey: I just want to find out what table he's referring to. He's referring to a table in his book.

The Chairman: Then you do it through the chair.

Could you clear up what table you're referring to?

Mr. Jerry Rysanek: It's the table on the top, tab D in your briefing books, page 3.

The Chairman: Mr. Morrison, go ahead.

Mr. Lee Morrison: You were referring to international conventions or international practice, and I think you said a maximum of $180 million for a 100,000-tonne vessel. Is that right?

What about the huge damages that were assessed against Exxon with respect to the Exxon Valdez? They were much higher than that. Under what regime was that worked out?

Mr. Jerry Rysanek: That, of course, falls under the second part of Bill S-4, which deals with the revision of part XVI of the Canada Shipping Act, which deals specifically with oil pollution damage. There the change is much more dramatic. The current regime provides about $120 million per incident, and after Bill S-4 is passed it goes up to about $270 million per incident. That's a compensation package that is derived from Canadian participation in international conventions.

In addition to that, Canada also has a domestic regime, a domestic fund, if you wish, so the total package with that fund comes to around $400 million per incident.

Mr. Lee Morrison: So I guess that comes back to my original question. I know there is a special regime in there for oil, and I wonder why there isn't one for dangerous goods. You could have a disaster that would make the Exxon Valdez look like nothing with dangerous goods, and again I refer to Texas City, when you destroyed the whole damn city. Shouldn't there be some protection, some means of pooling responsibility, some way of protecting the public from that type of incident?

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Mr. Jerry Rysanek: I think it is fair to say that the international maritime community has thought about that quite some time ago. I'm sure Mr. Popp would be even more qualified to discuss it, because we're talking about a new international convention that was adopted in the IMO, International Maritime Organization, two years ago. Mr. Popp has been the chairman of the conference, and he deals specifically with the reliability for dangerous goods carried by sea.

Canada signed the convention in September 1997, which is only a symbolic step. It's not a binding treaty yet. It remains for future decisions whether Canada would actually ratify the convention. But that would provide precisely what you are looking for, a dedicated regime for liability for dangerous goods carried by sea.

Mr. Popp may wish to add something to that.

Mr. Alfred Popp (Senior General Counsel, Maritime Law Secretariat, Department of Transport): I think you've described it very well. It's like the oil regime; it's divided into two parts. One part is devoted to the shipowner, and over and above the shipowner's limit of liability there is an international fund. That's basically the scheme, but we're not anywhere near significant ratifications of that scheme to bring it into force yet.

Mr. Lee Morrison: What year was that again?

Mr. Alfred Popp: That was in 1996.

Mr. Lee Morrison: Thank you.

Mr. Roy Bailey (Souris—Moose Mountain, Ref.): My question is akin to Mr. Morrison's question. I have some concern about the onus or the liability carried. I'm talking about the importation of huge amounts of narcotic drugs and the seizure of the boat and the liability that could fall. What onus does the captain or the company have in the importation of these goods into our country?

Mr. Alfred Popp: I have to confess that I'm taken by surprise by your question. I don't know what the answer is. I'm not a criminal lawyer, I'm a maritime lawyer. I don't know what the situation is. The subject matter of these bills is of course limitation of liability in the civil liability sense. That seems to me an entirely different question. I apologize, I don't have the answer.

The Chairman: It wouldn't fall under the bill.

Mr. Roy Bailey: Are we all agreed that it wouldn't fall under the bill?

Mr. André Pageot: No, it would be under criminal activity.

Mr. Roy Bailey: I recognize this and I expected that answer. The point is, where does the onus lie? Is the company, the shipping company, the captain or whoever responsible? Can anyone be blamed for the actual carrying of the goods? They're coming in, and if there's a seizure say in the port of Halifax, is there any reflection then upon the ship or the company that actually carried the goods into our country?

Mr. Alfred Popp: I can only go by guesswork. As I say, I haven't really looked into this, but I suspect there are provisions under our narcotic legislation that make it an offence. If a ship is found to be carrying, then she's subject to, first of all, prosecution and, secondly, probably confiscation.

I guess that's a pretty inadequate answer to the questions you're putting to me.

The Chairman: We accept your answer, because in all fairness it should be a question asked of the justice department. Correct me if I'm wrong.

Mr. Roy Bailey: No, that's fine.

The Chairman: Okay, you accept that.

Mr. Casey.

Mr. Bill Casey: If we go back to that chart, if a ship of 300 tonnes had a $2 million accident, the maximum that could be sought out of the damages is $1.5 million. Is that correct? That's the maximum? There's a limit in a civil court if somebody took action against that 300-tonne ship?

Mr. Alfred Popp: That is the proposed limit for a ship of 300 tonnes.

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Mr. Bill Casey: Are there other parallel rules in other industries or other transportation sectors, such as rail and air, in terms of limits to liability in the event of a disaster from them?

Mr. Alfred Popp: I suspect it's dangerous to make that comparison, because this is based on tonnage, which is peculiar to ships. I think in other modes there is no limit of liability.

I think I'm correct in saying that as far as railways are concerned...except for, in the case of passengers, under the air mode. There is a limit there under the Warsaw convention.

Mr. Bill Casey: You mentioned this was in line with other countries. How many other countries have signed on to the agreement to set these limits?

Mr. Alfred Popp: I think the 1976 convention has been ratified by about 26 countries, going by a guess.

Mr. Bill Casey: In 1976.

Mr. Alfred Popp: Yes. The 1996 protocol, of course, is not yet in force, because it was only adopted two years ago at the same conference that adopted the dangerous goods convention. So this is not actually in force yet.

Mr. Bill Casey: If you go over to 579(2), under tab F, page 8, it says the governor in council can amend the limits of liability without any other legislation or anything. The governor in council can just increase limits of liability.

Do I understand correctly that it's entirely up to the governor in council?

Mr. Alfred Popp: Yes, but by way of explanation, the reason that has been put in is that in these new instruments there is a mechanism whereby the limits can be amended. One of the criticisms of the existing regime is that there is no method of amending the limits other than going back to a conference and amending and adopting a protocol, as has been done.

At the last conference, in 1996, an amendment procedure was put in place under these conventions. I think that provision was intended to ensure that the governor in council could then amend the limits in line with these increases that are agreed to internationally.

Mr. Bill Casey: Thank you.

The Chairman: Any other questions? Mrs. Desjarlais—or Ms. Desjarlais, sorry.

Ms. Bev Desjarlais (Churchill, NDP): Either. In line with Mr. Morrison's question on the dangerous goods, the liability is based on the tonnage. I'm curious as to why it's not based on possible risk in terms of what you're carrying rather than tonnage.

Mr. Jerry Rysanek: I don't know whether there is a safe and riskless answer to your question.

Ms. Bev Desjarlais: Probably not.

Mr. Jerry Rysanek: I think there is a bit of a historical connection here. The liability of shipowners historically has been tied to the size of the ship more than to what the ship was carrying. There had to be some common denominator, I think, in order to actually come out at the end and say that's the limit, and the limit is insurable, which is a critical condition of any liability imposed on shipowners. The tonnage of a ship was found to be the most practical way of going about it.

Ms. Bev Desjarlais: So it's done strictly on the basis of tradition rather than on the basis of really reflecting whether one thing should be riskier.

We talk about a possibility of oil or different things, but I wonder, if a ship was possibly carrying weapons-grade plutonium or something along that line, whether we wouldn't consider that a little bit more risky than a load of grain.

Mr. André Pageot: Yes, but we have other instruments. We have a dangerous goods code, and in terms of dangerous goods we have different handling techniques.

For example, Marine Atlantic, when they go across on a voyage and carry dangerous goods, would have different rules and practices, depending on the cargo.

Here I guess the focus is on the liability on the ship, if there are accidents with the ship, but we have other procedures where we will differentiate, depending on the cargo, and impose different safety rules for natural gas than we would for coal.

Ms. Bev Desjarlais: Safety-wise, but the liability-wise still doesn't help with the consequences.

Mr. André Pageot: No.

Ms. Bev Desjarlais: That's fine.

The Chairman: Questions? Mr. Casey.

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Mr. Bill Casey: In clause 31 it refers to giving the insurance company sufficient time to react to new limitations provisions in the event that they are changed. Do you have any estimate of the increase in insurance costs that this legislation will result in?

Mr. Jerry Rysanek: The same question, I think, was actually raised during the hearings of the Senate committee. The insurance industry appeared before the committee to respond to it. I have to go by my memory, but I think the insurance industry's view, not only at the Senate committee but throughout this process, was that with regard to the liability for pleasure vessels, at the lower end of the scale, ships up to 300 tonnes, the change in insurance costs should not be dramatic. Many people now are insured for $1 million anyway—that's what we are told—so basically they would not experience any change in premiums as a result of this legislation.

We must bear in mind, of course, that liability and insurance involve questions of future claims, and premiums are derived from claims. So if there is no material change in the future claims experience, I think the view of the industry—and I share it—is that there should not be any appreciable change in the insurance costs as a result of the legislation.

Mr. Bill Casey: Thank you.

The Chairman: Other questions? Mr. Bailey.

Mr. Roy Bailey: As a matter of interest, in watching the news fairly regularly I notice that every once in a while a country or a port refuses to accept the cargo of a particular vessel that is therefore unable to unload. So it sits there for awhile and then takes off in the hope of finding some other port that will take the load, which may be nuclear waste or whatever. That happened just recently. Does that liability stay with that load? Do they have to set their target like a plane logging a flight? Does a boat have to log that out? Do they have to log their way back so they know they are totally under the coverage of that insurance?

Mr. Jerry Rysanek: I'm not sure whether your question deals with insurance or if it deals with whether it's illegal—

Mr. Roy Bailey: The liability. They're loaded with goods that were prearranged for delivery to another country's port.

Mr. Jerry Rysanek: Right.

Mr. Roy Bailey: And they get there and they can't unload. We never hear what happens to that load. We never hear anything about that from there on.

Mr. Lee Morrison: They dump it at sea, Roy.

Mr. Roy Bailey: They dump it at sea? They had better not!

Some hon. members: Oh, oh.

Mr. Jerry Rysanek: I think from an insurance point of view, if the ship was insured at the start of its voyage, from A to B, and then could not offload in B, unless the ship has done anything illegal or has carried illegal cargo—

Mr. Roy Bailey: It stays with it.

Mr. Jerry Rysanek: —the insurance would continue. I can't see any reason why the underwriters would cancel or terminate the insurance.

Mr. Roy Bailey: All right.

Mr. André Pageot: But you see, with respect to the cases you raised, in most countries we have a commercial agreement or free trade agreement or a GATS agreement that allows free access. In cases where a cargo is prevented, you would have to be governed by other legislation, either on pollution and environment, or under legislation like nuclear waste and so on.

To really answer the question you will need to refer to the specific act governed by the cargo, because the rest is under freedom of access, freedom of the seas, OECD agreements, and GATS agreements, with no restrictions on access to the ports, and the rules that govern will be more safety rules or other legislation. We may have other legislation governing nuclear waste or military passage or other things, but in general the cargo is insured under commercial terms.

The Chairman: Mr. Fontana.

Mr. Joe Fontana (London North Centre, Lib.): Just quickly, as a follow-up, insurance is never a guaranteed commodity. Obviously the underwriters...if in fact a number of companies or shipowners are doing something either illegal or questionable, there is a moral risk that any underwriter must assess, obviously, so insurance isn't a guaranteed commodity. That means if you're prepared to pay for it you automatically get it. Obviously that has to be taken into consideration.

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Secondly, though—and this leads to my question. Let's face it, this is not a perfect world. There are people who must have insurance who usually don't, and if in fact they do something that's wrong and a claim results and there isn't any insurance, I take it the international protocol.... That's why there is a part II to this, so that in the event that there isn't any insurance coverage and a particular ship has a cargo that causes some difficulties, that's where the international pool in fact looks after the obligation to the globe or to the world, because that unscrupulous shipowner or whatever has not obtained insurance. I would hope there's a provision in there that protects society or what have you from that standpoint.

Mr. Jerry Rysanek: Either of us, I'm sure, could answer the question.

Mr. Alfred Popp: I think we just have to be clear here. As a general proposition, what is not covered by the shipowner and his insurers is not covered off somewhere else.

Mr. Joe Fontana: Of course.

Mr. Alfred Popp: In the case of oil, we now have an international fund, which covers off compensation to the extent that you cannot recover it from the shipowner. At some time in the future, hopefully, we will have the same kind of scheme for dangerous goods as we described earlier. But for the rest, it's on the shipowner, and there is no global fund or anything like that.

Mr. Joe Fontana: Okay. Thank you.

The Chairman: Mr. Morrison.

Mr. Lee Morrison: I think you've answered this to Mr. Fontana, but I just want to get this nailed down. There is nothing akin to what we have, for example, in automobile insurance in Canada, where the uninsured renegade goes out and does a bunch of damage. If your dock gets hit by an uninsured ship, that's just tough luck. Is that right?

Mr. Alfred Popp: Yes, and unfortunately it happens all the time. That's an ongoing problem. Just as a matter of interest, this committee I am chairing internationally is looking at that very question: what do you do about uninsured ships? There is no solution yet.

Mr. Joe Fontana: If I were a portmaster, before that ship came to port I would ask whether or not their insurance was either gotten or paid for or what have you, and not risk the problem.

Mr. Alfred Popp: The international consideration is moving in that direction, but we're not there yet.

The Chairman: This concludes this part of our meeting—questions to the department.

I would be very happy to accept a motion to consider the clock being at 7 p.m. This would mean that if we do this, we would go to clause-by-clause immediately. Do we have problems with it?

Mr. Fontana.

Mr. Joe Fontana: Mr. Chairman, based on some of the questions and some of the answers and the fact that this committee has undertaken a full study, and we in fact have initiated the legislation, and the questions have all been answered, I'm prepared to move that all clauses be read and approved at this point in time.

The Chairman: Okay. At this point you're giving me a motion that we consider this to be—

Mr. Joe Fontana: Yes.

The Chairman: Because there are two meetings called for today. So we agree that it is now 7 p.m. and we are entering into the clause-by-clause?

Mr. Joe Fontana: It's now Newfoundland time and we're ready-set to go.

The Chairman: This is unanimous?

I would like to follow the suggestion of Mr. Fontana. Are we prepared to vote in one motion from clause 2 to clause 31? Is there any objection to this at this point?

Some hon. members: Agreed.

The Chairman: It is moved by Mr. Morrison and seconded by Mr. Drouin.

Mr. Stan Keyes (Hamilton West, Lib.): A point of order, Mr. Chairman.

The Chairman: Yes, Mr. Keyes?

Mr. Stan Keyes: Before we do that, maybe we could have some clarification from legal.... Do we have to set aside clause 1 first, do the rest of it in one block, and come back to clause 1?

The Chairman: Yes; that's why I said from clause 2 to 31.

Mr. Stan Keyes: Oh, I'm sorry.

Mr. Lee Morrison: Wake up. Come on, Stan.

(Clauses 2 to 31 inclusive agreed to)

The Chairman: Shall the schedule carry?

Some hon. members: Agreed.

The Chairman: Shall clause 1 carry?

Some hon. members: Agreed.

The Chairman: Shall the title carry?

Some hon. members: Agreed.

The Chairman: Shall the bill carry?

Some hon. members: Agreed.

The Chairman: Shall I report Bill S-4 to the House?

Some hon. members: Agreed.

The Chairman: Thank you very much. This concludes Bill S-4.

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For members, if you would stay, I need four minutes to talk about consultation for passenger rail. We'll do that in camera immediately.

[Editor's note: Proceedings continue in camera]