| OTTAWA, Wednesday, October 31, 2001
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| The Standing Senate Committee on Transport and Communications, to which was referred Bill S-33, to amend the Carriage by
Air Act, met this day at 5:52 p.m. to give consideration to the bill.
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| Senator Lise Bacon (Chairman) in the Chair.
|
| [English]
|
| The Chairman: I wish to welcome you to our first meeting on
Bill S-33, to amend the Carriage by Air Act.
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| Both Senator Fitzpatrick and Senator Oliver spoke to this bill in
the Senate at second reading. It is a short bill, but an important
one. Those of you who have been on this committee for a while
will recall that we reviewed earlier amendments to the Carriage
by Air Act in 1999. Much of this, therefore, will be familiar to
you.
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| The present bill will ratify Canada's acceptance of a new
international liability regime in air transportation. This new
regime will be known as the Montreal Convention and, when in
effect, will replace the Warsaw Convention that has been in place
since 1929.
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| Liability can be a fairly technical issue, and dealing with
national conventions from time to time, it can be hard to keep
clear what is signed, approved, ratified and in effect. We are
pleased to start our hearings with officials from the department,
who will help us to keep some of those details clear. Ms Dufour
appeared before us at the time of the last amendments in 1999.
She will, therefore, know well the aspects of the subject that are
sometimes difficult to follow.
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| Welcome to the committee.
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| [Translation]
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| Mr. Lee is a national policy advisor on air transport. Louis
Gautier is a counsel in Legal Services. Welcome; we are here to
listen to you.
|
| Valérie Dufour, Director General, Air Policy, Transport
Canada: I am pleased to be back here with you this evening. As
you said, we were together not that long ago.
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| [English]
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| The chairman has stolen my opening remarks. I wanted to
begin by reminding senators that they have become the
champions of the carriage by air legislation.
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| This is the second time that, together, we have looked at a bill
to amend this act. Last time it was Bill S-23. We began the
parliamentary process of enacting that bill, passing it in 1999.
|
| Bill S-33 begins a process for a much more dramatic change in
the international liability environment. This Montreal Convention
will pull together everything that has been part of Warsaw until
now. We are pleased that it will be called the "Montreal
Convention." There was very active Canadian participation in the
drafting of this bill as well as the mothering of it through the
processes in the international civil aviation environment.
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| I am pleased also to note that our opening remarks are being
made in the presence of the representative of the Air Transport
Association, who will be your next witness. It has been a joint
government activity to bring into effect a liability regime that was
desired by the aviation community. Governments are, in fact,
catching up with the needs of the private aviation sector.
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| We have provided for you, through your clerk, a briefing book
in which there is considerable detail, history and background on
the bill.
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| As the chairman said, this is a short bill. It has only six clauses.
From a legislative drafting point of view, each time we wish to
present an amendment to the act, all we do is add or subtract
words from the same six sections. In this case, we are adding
references to a new schedule. We are adding a new schedule. We
are not removing any of the old schedules because, as with most
of these complex conventions, they come into effect in a kind of
syncopated and slow way, based on a number of ratifications.
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| It is important that we act quickly, because it is important for
Canada and the international aviation community to have a
Montreal Convention that is in effect.
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| As to why we keep the old schedules, until this convention is
fully in effect, and even when it is in effect for other signatory
countries, for some countries with whom we have air travel
relations the old rules will apply until they become parties to the
Montreal Convention.
|
| I am not sure what is the easiest way to take you through the
bill. If we do it on a clause-by-clause basis, there is not much to
do or to see. Five clauses remove and add words and, in each
case, add the reference to the Montreal Convention itself, which is
now attached to the bill.
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| There are a number of features to the new Montreal
Convention, the most important of which is to move from a
regime of unlimited liability. It is a two-phased regime but, at the
end of the day, it creates a formal regime in which unlimited
liability is available.
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| The other important feature is that passengers who now have
complaints to make under these regimes can choose the country in
which they want to take action.
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| In the documents there is a full description of the various
agreements. They also explain how we are making good on the
Intercarrier Agreement on Liability. We explain the convention,
including the dollar values. The agreement allows for adequate
insurance for liabilities and for passengers to choose the country
in which they want to take action. There is more authorization for
the electronic exchange of information, a much more modern
element. The document deals with authorization for simplified
modern documents such as electronic tickets and waybills for
cargo. Carriers may be required by national law to make advance
payments without delay to assist entitled persons in meeting
immediate economic needs, the amount of which will be subject
to national law and deductions from the final settlement.
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| Clearly, this is a modern document. It takes into account
situations with which you are personally familiar, be it the
consequences of the Swiss Air incident or other incidents. The
insurance conventions play an important role in the handling, in a
humane and appropriate way, of passengers who have the
unfortunate requirement to deal with this legislation.
|
| [Translation]
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| The Chairman: After a few questions, I am going to give my
colleagues the floor. Our notes tell us that of the 67 states that
have signed the Montreal Convention, 11 have ratified it, whereas
30 states are required to give it force of law. Supposing Canada
ratified the Convention, how long would it be before the required
number of 30 states was reached?
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| Ms Dufour: I do not think anyone can say. Since people listen
to our country and it sets the example, we are trying to create
momentum. We took protocol action at the triannual meeting of
the ICAO in Montreal, last month, to encourage other countries to
act. I hope that within three years it will be possible. For us, it is
important to encourage other countries. It is the same thing for
our American colleagues. It is important that developed countries
have a tool this size. It is in our interest to make sure that we
reach the required number as swiftly as possible for it to come
fully into effect.
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| The Chairman: Does the possibility of unlimited liability not
carry with it a risk of bankruptcy for an air carrier? Can that be
avoided with adequate insurance? Would such insurance not be
very expensive for the carrier?
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| Ms Dufour: I am going to talk about the situation since
September 11. We clearly understood the example of American
Airlines. The World Trade Center was evidence of it. There is a
point when "unlimited" becomes completely unmanageable.
Before September 11, the big carriers had - my fellow witnesses
who follow will correct me if necessary - a billion or more in
coverage, depending on the size. Normally, that was regarded as
adequate. Nowadays, insurers have got scared since September
11. The Canadian government is the one that will provide
short-term compensation while a commercial solution for aviation
insurance is found.
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| It is difficult today to foresee what the future will be like, but
throughout the system, it is necessary for large carriers like Air
Canada to have a minimum of a billion in coverage at all times.
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| [English]
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| Senator Oliver: The document you have provided states that
one of the features of this bill includes no arbitrary limitation on
liability, the recovery of full compensatory damages, and an
explicit waiver by airlines of the defences to which they were
entitled under the Warsaw Convention. What defences did they
have under that system that will now be eliminated since there
will no longer be a limitation on liability?
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| Ms Dufour: It has to do with the presumption of guilt. Before,
it was a bit like car insurance. There was a good side and a bad
side. The company with which you flew established a contract for
carriage and agreed to indemnify you, regardless of the
circumstances. They cannot claim non-negligence.
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| Senator Oliver: To use a practical example, let us say that Air
Canada, under the new regime, and after 30 countries have
ratified the agreement, has an accident. Presumably, they will be
insured with a group of insurance carriers to cover the loss. The
insurance company will likely have a policy that contains many
exclusions. They might want to exclude an act of terrorism, for
instance. Does that mean that, under this bill, the airlines will
require a sufficient supply of cash to personally respond to a
claim not covered by their insurer because of insurance
exclusion?
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| Ms Dufour: I will start by putting it the other way. First, this is
about third party liability, and this is about international carriage.
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| Second, war risk insurance was a piece of an overall insurance
policy. It was presumed, just as you have certain elements in your
house insurance. Recently, while there are still some levels of
insurance for hulls, engines and other third party liability, there is
now a resistance to provide coverage for accidents as a result of
war or terrorism.
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| We are currently in an in-between situation. The government
has said that it will indemnify for those acts for a limited period
of time, while encouraging the commercial insurance industry to
come back to the table and to reinsure, as they have in the past. It
is an in-between time now. It is a very challenging time for the
airline industry.
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| Senator Oliver: Recently, the Minister of Transport arranged a
government guarantee of $75 million to help out a Canadian
airline. He indicated that it was having a cash flow problem. What
if, under the new regime, after 30 countries have ratified, that
particular airline had a claim against it for which the insurer
denied coverage, and that company had a cash flow problem?
How is an injured claimant to be paid? Do they have to wait, once
again, for the Government of Canada to step in?
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| Ms Dufour: No, I do not think there is a link. The current loan
guarantee to Canada 3000 is short-term liquidity support. Further
out, we should not be there. They should be once again
successfully running a private sector business without the
government at the table.
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| In the meantime, there must be an assumption that commercial
insurers will be back at the table. It is the commercial insurers
who will, for a fee from all of their customers, carry the risk and
be required to pay out.
|
| Canada 3000 will not be able to fly unless it is fully insured. Its
lessors will not let it fly. Its bankers will not let it fly. It is a
different link from the one that you are suggesting.
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| Senator Oliver: I understand your response, but that was not a
response to my question. Let me put it another way.
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| An insurance company, in its policy, may have lots of
exclusions. Let us say there is a claim for $300 million. Let us say
that a company, like Canada 3000 was having some cash flow
problems and the exclusion was applied; the company would not
have the $300 million to pay the claims. Does that mean the
Government of Canada will have to step in, in this new
unlimited-liability regime?
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| Ms Dufour: Not at all.
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| Senator Oliver: Where will the money come from to pay out?
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| Ms Dufour: The money will come from the commercial
insurers to which Canada 3000 paid its premiums, just like the
pool of insurance money from whom any other form of claim
would take place.
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| Senator Eyton: I have a supplementary question. I am curious
about your assertion that may be a temporary resistance to
insurance covering acts of war or terrorism. What happens to
legislation if you make the presumption - and I think it is a
good one - that it will be impossible to insure either large
buildings or airplanes, aircraft, from acts of terror, if that goes on
for a very long time?
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| You have indicated the government will have to step in and you
suggested that it would be for a short period. In a conference call
this morning I discussed some large buildings in New York that
are running out of insurance. Within 30 days or so, they will not
be able to get insurance of the kind to which I am referring. I
suspect the same policy will apply to aircraft.
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| We are in a spot where all sorts of flyers will not be able to get
the insurance you are talking about. Governments will either have
to be there on a much more permanent basis or some other
solution that I cannot visualize will have to come along. What
happens in that sort of regime?
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| Ms Dufour: Canada has put in a proposition for indemnification for 90 days. About 50 countries around the world have
already come to support their carriers. Some countries have made
the carriers pay some form of commercial fee. If, Senator Eyton,
the issue continues, we will probably need to put that on the
agenda of the Ministerial Conference on Aviation Security that
will be convened in Montreal in the ICAO context early next year.
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| Most people say that we should wait until after Christmas
before assessing consumer and commercial confidence. We are
still in such an uncertain and volatile environment. That is why
we knew we had to be there for at least 90 days.
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| Once we see how permanent the resistance is, there must be a
completely new way of thinking. Every government must sit
down and think outside the box about how our carriers can
continue to operate in an environment where the assets are so
valuable, including the people in them. All this insurance is about
hulls, motors and people. We do not have the answers yet, but
governments around the world, must get together and talk about
this as a group, rather than expecting any individual country to
come up with a solution in isolation.
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| Senator Oliver: There is a presumption that the military can
opt out. If a civilian travelling on a DND aircraft suffers an injury,
how will a claim be paid out for damages suffered as a result of
negligence on the part of DND?
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| Ms Dufour: DND is always self-insured through the Govern
ment of Canada. We insure our military personnel flying on
military aircraft. That has been the case since the beginning. I
would repeat that DND continues to ask not to be subject to that
regime. Their own regime applies. That comes into effect in the
case of a military accident.
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| Senator Callbeck: In your opening remarks you mentioned the
two-tier regime. You said passengers can choose the country in
which to take action. Does that mean they can choose between the
country where the accident happened and the country where they
live?
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| Ms Dufour: That is right.
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| Senator Callbeck: A passenger cannot pick just any country.
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| Ms Dufour: I am not sure the idea is that you can shop for the
best legal system but, clearly, in the past, one could only claim in
the country of the aircraft. If you were flying on "Air Slobovia,"
you could only claim in Slobovia which is not fair and not
efficient for you. Now a Canadian citizen can make a claim
against Air Slobovia in Canada.
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| Senator Callbeck: What about lost luggage? Does this in any
way change the liability for lost luggage?
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| Ms Dufour: The rules for lost luggage are in an air carriers'
terms and conditions of carriage. There is a separate set of
regulations which are national and which require carriers to have
terms and conditions which include what they do with lost
luggage, along with bumping and other things that irritate
passengers.
|
| The handling of cargo is partially covered here. Parts of the
Guadalajara and Montreal Conventions dealt with baggage, and
they continue to apply, but in practical terms the terms and
conditions of a carrier's tariff would cover that. Some carriers
may offer $600 for lost luggage; some carriers may offer nothing.
|
| Madam Sénécal, as a carrier representative, may be able to
speak more specifically about how ATAC carriers deal with
baggage in Canada.
|
| Senator Adams: The taxpayers of Canada have paid close
to $70 million in relation to the crash of Swissair Flight 101,
although that aircraft came from another country. If a terrorism
attack occurs here in Canada, can the air carrier's country be held
responsible, or is it only the insurance company?
|
| Ms Dufour: If a Canadian is on a U.S. flight - for us, that is
an international flight because it goes in and out of Canada - the
passenger has an insurance relationship with the carrier for that
plane. The passenger's family would be able to make a claim
against that carrier either in the U.S. or in Canada. There would
be a direct relationship with the air carrier.
|
| This is about if you end up having to make a claim when you
are not satisfied with what you have been offered under the terms
that were written into your contract of carriage. The rules of how
they will treat you will be written on the back of an international
ticket. Your ticket is your contract of carriage. It includes your
baggage insurance, Senator Callbeck.
|
| Senator Adams: What is the liability if there is property
damage on the ground when a plane crashes? What if it kills
someone? Is it still the same insurer?
|
| Ms Dufour: Yes, it is still in relation to the carrier. It may be a
different part of the insurance policy, because this is carriage.
Damage on the ground and damage to persons on the ground is
not the same as loss of life while flying or as a result of having
actually bought a ticket and boarded a plane. The person on the
ground or the property owner on the ground does not have a
contract of carriage, but the carrier has coverage for those kinds
of incidents.
|
| Senator Adams: When you fly over a city you fly over lots of
buildings. If an aircraft that crashed into it destroys a building,
would that be part of it?
|
| Ms Dufour: Not really. This is about being in an accident
while you are a passenger in an aircraft. If an aircraft runs into
something on the ground, there is one relationship between the
passengers and the airplane and the operator of the aircraft, and
there is a different insurance relationship between the building
owner and the people on the ground.
|
| [Translation]
|
| Senator Gill: You said that the Montreal Convention would
not be complete for three years. The government has acted on an
ad hoc basis, but three years from now, companies will have
become involved and gone bankrupt, and insurance companies
will have stopped insuring national and international air carriers.
Premiums will have increased so much that the aviation
companies will not be able to continue operating or the cost of
tickets will be exorbitant. Companies have to cover their
expenses. Have transitional measures been provided? Everyone is
affected by this situation - the international, national and local
companies as much as the regional ones.
|
| Ms Dufour: We have to realize that it is on the international
level and that current fears are related to acts of terrorism.
|
| Aside from that, the airline companies, of their own accord,
have acquired the level of undertaking to insure that is in the
Montreal Convention. The large companies were already there
and offering the level of coverage laid down. We are attempting
to formalize the obligation in Canada first, because we want to be
party to a convention that has full force of law.
|
| Concerning the other aspect, obviously we are living in
uncertain times. The governments of all countries should work
together to see what can be done with this area of insurance if the
big insurers and reinsurers do not regain their confidence that this
is an area - once their current fears have been allayed - worth
insuring.
|
| For a certain category of insurers, it is a matter of risk
management. It may be less true that, between Sept-Îles and
Montreal, there are as many risks as between Heathrow and
Boston-New York at present. There is a certain relativity.
|
| The insurers have not said they were not doing anything
anymore. They have said there are circumstances in which the
demand on insurers' resources is so excessive that they no longer
wish to get involved. That is where the governments have to
come in.
|
| Senator Gill: This nevertheless affects the domestic situation.
Are you sure that in the next two or three years the companies
will survive and will continue to give essential services because,
sometimes, there are not any other means of transportation. We
should provide for a solution in case your prediction is not
accurate.
|
| Ms Dufour: Incidents have reminded us how governments
have to be ready in the circumstances. I must say that the current
government took some action demonstrating that the public
interest is that there will be air transportation serving Canada
adequately. Compensation has been provided for some losses and
events are being followed very closely.
|
| [English]
|
| Senator Finestone: Why was the United States so prompt in
signing the Montreal Convention? I recognize that they did have
their own system. What do you think accounts for their desire to
be part of the team so quickly?
|
| Ms Dufour: This is a personal view since I cannot speak on
behalf of the Government of the United States, but their industry
was so far ahead of the international conventions on insurance
that they felt that they were not served by being members of some
of the earlier versions, even those we talked about two years ago.
|
| Senator Finestone: Are you referring to the $135,000?
|
| Ms Dufour: Yes. They were offering higher amounts long
before the international community was moving to that. Their
large airlines were way ahead of that.
|
| Senator Finestone: In signing on, they signed at $135,000
per person. Is it if that person is injured or killed?
|
| Ms Dufour: They have signed on to the concept that this
includes unlimited liability. It is a regime that is completely
compatible with where they wanted to be. They were proponents
of the idea that there be a convention to catch up with where the
international carrier community had been for a number of years.
|
| Senator Finestone: Is there a limit to the liability above and
beyond the $135,000, or do you then have to go to the courts? Is
that being used as a disincentive to go to the courts, which is
more expensive?
|
| Ms Dufour: I am not quite sure that is how it works.
|
| Senator Finestone: How does it work?
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| Ms Dufour: I have never processed an insurance claim for a
carrier. I would not be able to explain it. However, I think Madam
Sénécal may be able to help you. It is their day-to-day business.
|
| We have few examples of instances where you can make a call
of this magnitude on a carrier. We do not want to have them.
|
| Senator Finestone: No, of course not.
|
| Ms Dufour: It is not something about which everyone will say,
"I remember," and so on. I think the last Canadian carrier incident
was in Cincinnati a long time ago. There was a burned air hull
and some loss of passengers by a Canadian carrier. No other
Canadian carrier has ever faced the issue you are raising.
|
| Senator Finestone: What about the criteria required to claim a
higher amount? If you are a big earner and you are caught in a
terrible situation like that, $135,000 will not cover your annual
income.
|
| Ms Dufour: Presumably, that is part of the negotiations with
your family and the carrier.
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| Senator Finestone: With the carrier or the court?
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| Ms Dufour: It depends on whether the carrier arrives at a
settlement with all of the families of the passengers on board, or
whether there is litigation.
|
| Senator Finestone: You said 67 states have already signed the
Montreal Convention; is that accurate?
|
| Ms Dufour: Yes. There is a list in your book.
|
| Senator Finestone: However, only 11 have ratified. Is that
accurate?
|
| Ms Dufour: Yes.
|
| Senator Finestone: Will it go into effect with a low number of
ratifications like that? What number of ratifications is required to
make it operative?
|
| Ms Dufour: It requires 30 signatories. However, it is important
to understand that the signatories can agree among themselves to
operate at the level of the Montreal Convention without the
convention being ratified. What it means, though, is that they
cannot oblige the carriers that have not ratified to operate in the
unlimited regime. Those who are still working on the Warsaw
Convention levels will interrelate with Canada at that level. You
go down to the lower of the two. The big countries are all
operating at the levels of Montreal Convention 1999 now.
|
| Senator Finestone: What is the point of ratifying, then?
|
| Ms Dufour: Because we want to turn it into a global
convention so that the world works to that standard, not to the
1929 plus-plus standard, but the 1999 standard. The objective
here is related to passengers.
|
| Senator Finestone: Earlier, our committee studied the situation
involving Air Canada and Canadian. Air Canada was with Star
Alliance and Canadian was with One World. Does that make any
difference at all in the search for people to sign on? Does it have
anything to do with that?
|
| Ms Dufour: No. The difference is that governments, on behalf
of their citizens, adhere to this convention. The carriers operate at
the level that their state has signed on to or at a level above that,
which is the choice of a number of airlines whose countries have
not ratified. It is the difference between what governments are
saying is the baseline and what carriers are prepared to operate.
|
| Senator Finestone: This has happened to many of us around
this table. Say you were planning to take a plane at a certain hour.
Unfortunately, your responsibilities delay you and you miss the
plane and you travel with another airline. Say I had an Air Canada
ticket but I ended up on a WestJet flight. Let's also suppose that,
unfortunately, that airline has an accident. Since I had a ticket that
was transferred to a different airline, would I still be covered?
|
| Ms Dufour: If you were flying in Canada, this would not cover
you at all. This is not about domestic carriage.
|
| Senator Finestone: Does it apply only to international flights?
|
| Ms Dufour: Yes.
|
| Senator Callbeck: My question is about international flights.
What is the difference in the liability between domestic and
international? We know now what it is for international flights. Is
that a question to ask you?
|
| Ms Dufour: I do not know the answer. I think that ATAC will
be able to answer that. We only create an obligation that there be
an insurance regime. As a government, we do not establish the
levels of the regime. That is a commercial arrangement. It is
driven by the value of the aircraft involved, and the entire
operation that the insurance industry is supporting and assuming
risk upon.
|
| [Translation]
|
| The Chairman: We thank Ms Dufour, Mr. Lee and
Mr. Gautier for their explanations and we will continue our
examination of bill S-33.
|
| [English]
|
| I have just been informed that there is to be a vote in the Senate
chamber. We will suspend the meeting and return after the vote.
|
| The committee resumed at 6:59 p.m.
|
| The Chairman: I would welcome the officials from ATAC, the
Air Transport Association of Canada, to our review of Bill S-33.
As the representative of the air carriers, your views are important
to us as we consider these amendments to the Carriage by Air
Act.
|
| We are told that you were involved in the development of the
Montreal Convention. We understand that you are generally in
favour of the convention and wish to see Bill S-33 passed. Now is
your opportunity to let us know if you have any concerns.
|
| Welcome to our committee. Please proceed.
|
| Mr. J.C. (Cliff) Mackay, President and Chief Executive
Officer, Air Transport Association of Canada: We are very
pleased to have been invited to testify here tonight.
|
| You are correct, Madam Chair. This proposed legislation that is
very important for the industry.
|
| I would like to introduce my colleague, Ms Sénécal. She is an
expert in this area. Her day job is assistant general counsel for
litigation for Air Canada. She is very involved in these sorts of
issues, not only in Canada but around the world. I am pleased that
she has been able to be with us to make a presentation and to
answer questions. Without further ado, I turn it over to
Ms Sénécal.
|
| [Translation]
|
| Ms Louise-Hélène Sénécal, Assistant General Counsel, Air
Transport Association of Canada: On behalf of the Air
Transport Association of Canada, we are honoured by the
invitation you have made us to present our position respecting
Bill S-33 to amend the Carriage by Air Act and to further the
Convention on the unification of certain rules respecting
international air transport, by incorporating the Montreal Conven
tion, adopted in Montreal on May 28, 1999.
|
| [English]
|
| I am before you as a member of ATAC's legal committee. I am
also assistant general counsel, litigation, for Air Canada. I am
responsible for all Air Canada litigation across the world. The
general claims department also reports to me. They handle the
claims for bodily injury, damage to property, and damage or delay
to cargo.
|
| The opinions voiced by the undersigned are made on behalf of
ATAC today and do not necessarily reflect the opinions of
individual airline members of our association.
|
| [Translation]
|
| I am particularly interested in this legislation, having had the
honour of being part of the Canadian delegation to the ICAO in
connection with the Montreal Convention. Actually, representatives of three airline companies had been invited to take part as
technical support for the Canadian negotiating team masterfully
led by Gilles Lauzon from Justice Canada and skillfully assisted
by Elizabeth MacNab from Transport Canada.
|
| As a privileged observer, I can affirm that the Montreal
Convention would never have seen the light of day without the
unflagging efforts of these two individuals who, with their
diplomacy, thorough legal knowledge, writing skills and credibility, were key contributors to the consensus reached among
the various nations with often divergent interests.
|
| [English]
|
| I would thank the Canadian government for providing my
colleagues and me with this unique opportunity to participate in
writing a page in the history of international air transportation law.
|
| ATAC supports the adoption of this bill. It modernizes a unified
liability system that first started in 1929 with the Warsaw
Convention. This convention first recognized the international
character of air transportation and the need to find a unified
system of liability for all international carriage by air. It was only
in 1955 that the states met again to try to modify certain
provisions; then again in 1961, with the Guadalajara Supple
mental Agreement, and in 1975, with Montreal Protocol No. 4.
Moreover, in 1995-96, members of IATA, the association which
regroups international air carriers and of which Air Canada is a
member, met and adopted the Intercarrier Agreement on Liability,
which some carriers, members of IATA, decided to accept
contractually and waive the limits of liability.
|
| The difference between the intercarrier agreement and what is
being proposed by the Montreal Convention is that the intercarrier
agreement is a contractual undertaking by the carriers, whereas
the Montreal Convention, if adopted, will become law. It will be
unified per country. It will not be per carrier. That is the
difference.
|
| Why does ATAC believe in the Montreal Convention? First, it
purports to unify a liability regime that today could be qualified as
patchwork, since certain, though not all, states have ratified the
Warsaw Convention. Some have ratified The Hague protocol but
may not have ratified the Montreal protocol No. 4.
|
| [Translation]
|
| It incorporates the provisions and commitments undertaken by
some air carrier signatories to the inter-carrier agreement, which
removes liability limits for bodily injury - including the ultimate
bodily injury of death - while keeping, for a certain level of
damage, presumptive liability.
|
| These provisions are advantageous to passengers, who may
enjoy compensation for bodily injury equivalent to the jurisprudence in the country in which the dispute arises, without falling
into the excesses often attributed to our neighbours to the south,
who further to civil litigation by jury, grant damages that are more
like winning the jackpot than actual compensation.
|
| The Chairman: I am sorry, but a vote is taking place in a few
minutes in the Senate Chamber and I am going to have to
interrupt your presentation.
|
| Ms Sénécal: All right.
|
| [English]
|
| When you left for the vote, I was listing the advantages of the
Montreal Convention. It simplifies the conditions of the contract
of carriage, paving the way for electronic commerce. In 1929, it
was the inkwell and the quill. Today we have electronic
commerce and the Internet. It modifies the language to allow for
such things.
|
| In the same way, in the carriage of cargo, the Montreal
Convention incorporates provisions that allow the replacement of
the traditional paper airway bill with electronically supported
documentation.
|
| On the passenger side, there are some requirements encouraging countries to adopt legislation similar to that adopted
in the United States to assist the families of victims.
|
| [Translation]
|
| Regarding baggage transportation, liability limits are calculated
by passenger and not by baggage weight. This method of
calculation is the one used by current Canadian carriers for loss
and damage occurring during domestic transportation.
|
| This new method would make it possible to standardize
systems, at least in Canada. This Convention acknowledges the
changing aspect of the economy by incorporating mechanisms to
review limits of liability based on fluctuations in the cost of
living. This will prevent having to wait almost 60 years before
being able to revise the limits imposed in another era.
|
| Another element that is important is the addition of another
jurisdiction; the Warsaw Convention provided for only certain
places where people could take legal action. The passenger's
place of residence was not one of them. It was the carrier's
residence, where its main place of business was, the place where
the contract of carriage was drafted or the destination of the flight
concerned. These were the four jurisdictions.
|
| Now, further to the Montreal Convention, a fifth jurisdiction
will be introduced, which is not only the passenger's residence, it
is the passenger's residence provided the carrier has a place of
business or operates flights from this jurisdiction.
|
| This is the main reason why Americans support this new
legislation, especially since the Lockerbie incident, in which none
of the passengers' families could take action against the U.S.
|
| Thank you again for this invitation, I am available to the Senate
committee to answer any questions about this bill or the Warsaw
Convention or the legislation.
|
| [English]
|
| The Chairman: Is there any variation among your members
with regard to the Montreal Convention? Is there a difference
between large and small carriers as to how they are regarded?
|
| Mr. Mackay: Not in any substantial way. As was already
mentioned, this is an international carriage bill. In the Canadian
context, you are essentially talking about four, possibly five,
companies, and they are all of the same view, namely, that this
sort of uniformity is good for them and good for their passengers.
|
| The Chairman: Do you believe that unlimited liability could
result in a significant increase in insurance premiums for air
carriers?
|
| Ms Sénécal: No. We had elaborated on that before supporting
and going forward with the Intercarrier Agreement on Liability, in
which, personally, the carriers waived their liability. Air Canada is
a signatory to the Intercarrier Agreement on Liability of 1995-96.
|
| Litigation costs in this type of situation are high. The limits
were so low that the money was being spent in debating whether
there was gross negligence or wilful misconduct, because only
after that had been established could the limits be lifted.
Therefore, there were endless trials by the lawyers for the
passengers or lawyers for the cargo, to demonstrate that there was
gross negligence. They would examine every mechanical record.
It is an advantage to both the carrier and the passenger not to go
through that process. That is why there is a presumed liability
when an accident occurs on board an aircraft or in the process of
embarking or disembarking.
|
| [Translation]
|
| The Chairman: Does the possibility of unlimited liability
carry a risk of bankruptcy for an air carrier? Can this be avoided
with adequate insurance? Will such insurance not be very
expensive for carriers to assume?
|
| Ms Sénécal: The insurers determined that removing the
liability limit did not change overall liability very much. It should
also be recalled that we are talking here about bodily injury or
death; we are talking about damage to cargo, damage to baggage
and delays. It is not the aircraft that is a different liability. This is
not about damage like the incidents or events of September 11:
this would only be for the people in the plane, this would not be
the people who were in the tower. This is the "war risk" we are
talking about. There are two types of coverage. We are only
talking about people who are passengers or who have accidents
"in the process of embarking or disembarking the aircraft."
|
| [English]
|
| Senator Oliver: I am interested in limited liability insurance.
You mentioned that one of the problems in the past was the cost
of litigation. In this new regime, is there any provision for
mediation or arbitration as a way of resolving disputes when a
person is injured or there has been death, without having to go to
the courts?
|
| Ms Sénécal: No specific provision calls for that, but if
litigation occurs, it is done in the different courts of the different
jurisdictions. In most Canadian, American and British courts,
there are procedures that require mandatory mediation. Things are
developing in that direction in law. As head of litigation, I have
the mandate from our insurers to handle the cases. I do not want
to pay large fees. The avenue of mediation is better for everyone.
People do not feel bitter. They need not wash their dirty laundry
in public. They need not disclose every minute detail of the
passenger in open court. We favour mediation when possible.
|
| Senator Oliver: I am aware of that. Would there have been
any advantage to including in the legislation a provision strongly
encouraging mediation and arbitration as a way of speeding up
the process and of reducing costs?
|
| Ms Sénécal: It could have been included. It was not discussed
in the convention. However, I can assure you that in Canada and
in the United States, where most of the litigation is concentrated,
it exists. The different provincial courts that administer the
judicial system have established these processes.
|
| There is one provision, however, that requires carriers, in the
case of major accidents, to make advance payment to the families
of the victims.
|
| Senator Oliver: Swissair did that.
|
| Ms Sénécal: Swissair did it on a voluntary basis. Some carriers
have adopted that as a process in their emergency response. I am
not sure whether EgyptAir made advance payments.
|
| Senator Oliver: I know that you were in the room when I
asked questions of our other witnesses. I would like to have your
view on the main question that I was asking.
|
| Let's say a Canadian carrier is carrying Canadian passengers to
Europe, and there is negligence and passengers are injured and
killed. Let's say that the total amount of the lawsuit is$200 million. Let's say that the air carrier had insurance, and the
insurance policy had certain exclusion clauses in it and they
denied coverage on the basis of those certain exclusions.
|
| Under this legislation, in order to protect passengers from
possible injuries and death, should our carriers not be self-insuring
or setting aside a capital sum sufficient to respond to a claim in
the event the insurer denies liability?
|
| Ms Sénécal: We carry between $1 billion and $2 billion
insurance for our general coverage. That is our general obligation
as a carrier. The liability and the unlimited liability are based on
per passenger. The two-tier system that we explained is based on
per passenger. The first $150,000, which I calculated, represents
the Special drawing rights. The calculation used is based on the
gold franc conversion; but you do not want to know that. As a
quick calculation, $100,000 in Special drawing rights is equivalent to about US$ 117,000. That is the first element.
|
| There is no need to prove negligence. The fact that there is
negligence or even gross negligence does not negate coverage
under any of the current aviation insurance.
|
| I have never seen any refusal to cover an accident that falls
within the Warsaw regime or the Montreal Convention. It is clear
that any accident, any bodily injury occurring on board an aircraft
on an international flight or in the process of embarking or
disembarking is covered by insurance. There is no doubt about
that.
|
| Senator Oliver: Let us take a hypothetical passenger, a
neurosurgeon, 30 years of age, with a life expectancy of 85 and a
family of three. If that passenger dies, would the insurer pay the
present value of that claim for general damages?
|
| Ms Sénécal: That would be paid by the insurer.
|
| When we look at this legislation we tend to think of plane
crashes. However, the everyday implementation of this legislation
relates to the briefcase in the overhead bin that falls on a
passenger's head. It deals with the runaway cart, the slip and fall,
or the passenger who burns a finger when touching the light
instead of touching the flight attendant call button. Those are the
situations that this legislation covers. They occur on everyday
international flights.
|
| Senator Callbeck: You mentioned that three Canadian carriers
participated in the Montreal Convention. They had no major
objections to it.
|
| Ms Sénécal: No, they supported it.
|
| Senator Callbeck: You told us why you support it and, you
mentioned that it would encourage countries to consider
legislation such as they have in the U.S. to assist the families of
victims.
|
| Ms Sénécal: Yes. That is in the Montreal Convention. There is
a specific provision encouraging countries to adopt legislation
similar to the United States. It does not use the words "similar to
the United States," but it means legislation to assist families of
victims. One of these is the advance payment of a certain amount
of money in the event of a plane crash, regardless of the liability.
|
| Senator Callbeck: Is that in the convention?
|
| Ms Sénécal: Yes. I can try to give you the exact provision.
|
| Senator Callbeck: Were you here when I asked another
witness about the difference in liability between domestic flights
and international flights?
|
| Ms Sénécal: Yes, I was.
|
| Senator Callbeck: Could you explain that, please?
|
| Ms Sénécal: In domestic transportation, the domestic law
applies. In Canada we have two regimes, and they are based on
contractual liability. If the passenger resides in Quebec, for
instance, then the civil law of contractual liability would apply.
Did the carrier fail in its obligations or not? There is no presumed
liability. Therefore, the passenger in domestic travel must
demonstrate that the carrier committed a fault or a tort in common
law.
|
| Senator Oliver: Or a breach of contract?
|
| Ms Sénécal: Or a breach of contract. There is no limit of
liability. There used to be in the tariff a limit of liability for bodily
damage, but that was overturned at some time.
|
| Senator Callbeck: It states here that liability limits are higher
for international journeys if that journey involves a stop in the
United States. Why is that? It states in brackets, "This is indicated
on the back of any airline ticket."
|
| Ms Sénécal: There are three different approaches. There is the
pure Warsaw Convention amount, that is, those countries whose
carriers have not adopted in their tariffs the higher limitations.
Those amounts were $15,000 to $25,000, which is ridiculous
when you think of a death on board an aircraft.
|
| The United States Department of Transportation, as a condition
of issuance of licences to operate to and from the United States, in
order to safeguard their citizens, imposed an increase on the limits
of liability to the carriers. That is why it is higher, but it is not as
high as that held in the tariffs of Air Canada, for example, or any
other carrier that signed the Intercarrier Agreement on Liability.
We have incorporated that into our tariffs. Those are the three
different approaches to which I referred.
|
| However, there are more. Some ratified The Hague protocol
that increased it slightly. There are those that ratified the Montreal
Protocol No. 4 and that, again, increased it slightly. I tried to
explain the patchwork system.
|
| Senator Finestone: I would go back to Senator Oliver's
example of the young neurosurgeon. If the neurosurgeon were
sitting near a 24-year-old fellow passenger who had not finished
university, and both were hit on the head by the same kind of
equipment, would they both receive an equal payment?
|
| Ms Sénécal: No. It depends on their damages.
|
| Senator Finestone: Suppose that both suffered a crushed skull
- they suffered identical, serious injuries. I would suggest that
equality would not mean the same measures or the same
compensation. Would the 24 year old with no job and no
particular future receive equal compensation as the neurosurgeon
who has a family and a good future? If you are to trying to make
everything equal and common to all, how do you plan to
compensate the family?
|
| Ms Sénécal: Perhaps I did not express myself well. There are
two aspects. One is liability. Is the carrier responsible or not?
How much should be paid? What is the cap? The other aspect is
the assessment of damages. In any liability case there are three
elements: Is any liability garnered; is there a fault or a presumed
fault? Second, what are the damages? Third, is there a link
between the two?
|
| In the Warsaw regime prior to the Montreal Convention and the
intercarrier agreement, there may also be caps on liability. In your
example, as in any other liability case, the damages suffered by
each must be established.
|
| Senator Finestone: Suppose they both died.
|
| Ms Sénécal: It depends on who is entitled to sue. What is the
effect on the family and on the estate? What would have been the
loss on his estate?
|
| Senator Finestone: Assume that both of them were out of
commission or sick for three months. I am trying to determine
why there is a differential.
|
| Ms Sénécal: The courts have established that for someone who
has an established career, it is easier to quantify the loss of
income to the family than it is for the person who has hopes of a
career. It is a loss of chances as opposed to a loss of income. You
evaluate two different systems. Actuaries are champions in
determining this. Forensic accountants establish these quantums.
|
| The estate of a person with young children will probably get
more than that of a person who has no children.
|
| Senator Finestone: Where does that $135,000 figure come
into this calculation?
|
| Ms Sénécal: The $100,000 Special drawing rights is the level
where the system of liability changes. Up to $100,000 Special
drawing rights, the carrier basically has little defence, provided
that it is an accident that occurred on board the aircraft or in the
process of embarking or disembarking. The liability of the carrier
cannot be limited or excluded save for the contributory negligence
of the passenger. I can give you examples later.
|
| In the second tier, there is no limit. Over $100,000 Special
drawing rights, for the layer on top of that, the carrier has more
defence. These defences are the contributory fault of the
passenger; if the carrier was not negligent and took all necessary
steps; if the damages were not caused by wrongful act or
omission of the carrier; or if the damage is solely due to the
negligence or wrongful act of a third party. Those are the defences
for that amount above the $100,000 SDR.
|
| Senator Finestone: The first tier assumes that the carrier is
strictly liable for claims up to $135,000. That $135,000 will not
do very much on a long-term basis for a family with three
children. What happens then? Do you go to court?
|
| Ms Sénécal: They have their own personal life insurance. That
is what life insurance is for.
|
| Senator Finestone: In other words, God forbid something
serious happens such as a plane taking a terrible dip, as happened
once, falls hundreds of feet, and a lot of people get hurt. The
maximum damages that could be paid to anyone would
be $135,000. Is that the cap?
|
| Ms Sénécal: That is not what I am saying. For anything
over $135,000, they can always get compensation provided they
demonstrate that there is fault by the carrier.
|
| Senator Finestone: From whom?
|
| Ms Sénécal: From the carrier, if the carrier admits that there is
a fault by the carrier or that the carrier did not take all reasonable
steps. There is a presumption, and we have to raise the defence.
They do not have to demonstrate that. I can say, "I, the carrier, did
everything reasonable to prevent this."
|
| One of the perfect examples would be a recent case of a
disruptive passenger. This is another of the aspects that I deal
with. One passenger basically beat up another passenger.
|
| Senator Finestone: Are you talking about air rage?
|
| Ms Sénécal: Yes. It was a KLM case that went to court in
Montreal. KLM said that the fault was that of a third party. A
fellow just beat up another passenger. The court held that KLM
did not do everything that was reasonable. The court found that
the airline knew that the passenger had demonstrated erratic
behaviour and had been aggressive to other passengers in the past,
and that the airline should have monitored the passenger more.
|
| Senator Finestone: They should have dipped the plane on its
side and knocked him off his feet.
|
| Senator Oliver: Was alcohol involved?
|
| Ms Sénécal: I am not sure if the person had consumed alcohol
or pills or a combination of both, or if he was just very angry and
very aggressive.
|
| Senator Finestone: Is there liability if the airline serves a
passenger liquor after they have noted that he is agitated?
|
| Ms Sénécal: It depends on whether or not it is international. In
this instance, it was a day flight, so it was not the same.
|
| Senator Finestone: The pilot could have taken a very hard
right, then, and tipped him over on his head?
|
| Mr. Mackay: That would not be a good idea. Many other
people would have been tipped on their heads, too.
|
| The Chairman: Do not get carried away, Senator Finestone.
|
| Senator Finestone: I have a question about electronic
ticketing. Is there any problem with that now?
|
| Ms Sénécal: No, there is not.
|
| Senator Finestone: Is the change advantageous?
|
| Ms Sénécal: Yes. Currently, if you have an electronic ticket for
international carriers, you also have to send a paper confirmation,
an itinerary receipt, because the Warsaw Convention specifies the
delivery of a ticket. It is presumed that you have to deliver
something tangible. An e-mail is not sufficient as a confirmation.
|
| Senator Finestone: My electronic ticket was lost through
someone else's negligence.
|
| Ms Sénécal: It can be retrieved.
|
| Senator Finestone: The itinerary was not enough. I had to
have the retrieval.
|
| Ms Sénécal: You have to segregate international and domestic
flights. On domestic flights the ticket can be delivered by e-mail
without a problem. It can be sent electronically or you can just
give a record number.
|
| The Warsaw Convention was drafted in the days when people
would take the time to fill in a ticket by hand. Now you can go up
to a kiosk and enter the information on buttons, and that is it.
|
| Senator Adams: If I want to leave Ottawa and go to Europe,
do I now have to buy extra insurance with the ticket? How does
that system work? Do the insurance company and Air Canada, or
whatever airline, work together?
|
| Ms Sénécal: You do not need to do so. It is the passenger's
personal decision to have additional coverage. Right now, it
depends on where you shop and what you have in your luggage.
There are limits of liability on luggage that may not cover
everything you have. Most people's home insurance covers the
difference, but you may want to purchase extra valuation
insurance or insurance that provides you other things that are not
related to your vulnerability on board an aircraft. It can be health
insurance that allows you to come back earlier. There are a slew
of other travel related insurances that are good to hold, depending
on the type of ticket you have purchased.
|
| Senator Adams: We have been talking about international
flights, and that would then mean we are talking about different
monetary units. How is that handled?
|
| Ms Sénécal: There is a unit called Special drawing rights
which is the standard unit of account used by the International
Monetary Fund. I believe $100,000 Special drawing rights is US$ 117,000.S. and about Can. $170,000, depending on the
conversion. It will be the equivalent of approximately
U.K £75,000.
|
| Senator Callbeck: I have a question about domestic flights and
lost luggage. What is the maximum amount payable?
|
| Ms Sénécal: Currently, for most Canadian carriers, the
maximum is $1,500 per passenger. Under the Warsaw regime, it
was a maximum allowance based on weight. The carriers
accepted two pieces of luggage at a maximum weight of 32 kilos
each. You calculated the weight of the baggage, and that was the
limit of liability. Under the Montreal Convention, the limit will be
close to the $1,500 Canadian per passenger. That is what I meant
when I said it could harmonize domestic and international travel.
|
| Senator Oliver: Will it be unlimited?
|
| Ms Sénécal: No, baggage is not unlimited. However, for
anything in excess, you have your homeowners insurance and,
depending on how you paid for your ticket, often the credit card
provides additional coverage. You also have the option of
independent additional coverage.
|
| Senator Callbeck: It will be $1,500. Someone told me that
now the figure is $350.
|
| Mr. Mackay: It is for international travel, yes. It is a formula
that is used in the calculation of weight. Historically, it has been
significantly lower on international than on domestic. With this
convention, the international limit moves up to the standard
domestic limit.
|
| Ms Sénécal: That is unusual because if you travel internationally you should have more luggage than if you travel
domestically.
|
| The Chairman: You never know.
|
| Senator Adams: If someone wore $10,000 worth of jewellery
what would happen if and accident occurred? You talked about
luggage and people using their own insurance for that. What
would happen if someone had a mink coat worth $5,000 and it
was lost?
|
| Ms Sénécal: If you check your $5,000 mink coat in your
luggage you should buy additional insurance. Your limits are
disclosed, they are public, and you are taking a risk. It is the same
as sending anything through Canada Post by regular mail.
|
| [Translation]
|
| Thank you very much for your comments. Once again, we are
sorry that we had to stay a little later than expected.
|
| [English]
|
| Thank you for giving us more information on this bill.
|
| The committee adjourned.
|
