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Statements and Speeches

The Canadian Transportation Agency and the Montreal Convention

Speaking Notes for Mr. Guy Delisle, Member of the Canadian Transportation Agency

for a Presentation in Front of Members of the Canadian Transportation Lawyers Association
Calgary, Alberta
Friday, September 10, 2004

(check against delivery)

The Role and Structure of the Canadian Transportation Agency

The Canadian Transportation Agency is an independent, quasi-judicial tribunal that makes decisions on a wide range of economic matters involving federally-regulated modes of transportation, including air, rail and marine. It has some powers, rights and privileges of a superior court to exercise its authority. Along with its roles as an economic regulator and the aeronautical authority for Canada, the Agency works to facilitate accessible transportation, and serves as a dispute resolution authority over certain transportation rate and service complaints.

The Canada Transportation Act is the Agency's enabling statute and is a major tool to implement the federal government's transportation policy. The Agency also shares responsibility for administering other Acts and their related regulations, including the Canada Marine Act, the Pilotage Act, the Coasting Trade Act and the Railway Safety Act.

The Agency is made up of a maximum of seven Members, including the Chairman, who is the Chief Executive Officer, and the Vice-Chairman. In addition, there may be a maximum of three temporary Members. There are currently seven Members and one temporary Member, that is, the Air Travel Complaints Commissioner. A staff of about 270 employees assists the Members in their decision-making process or provides administrative support.

Air Transportation

The different directorates in air transportation help to protect the interests of the travelling public, shippers and Canadian air carriers by ensuring that proposed fares, rates, charges and terms and conditions of carriage are reasonable and consistent with Canadian legislation and regulations, and with the relevant air transport agreements into which Canada has entered with individual countries (bilateral agreements). They handle complaints related to air fares on domestic, non-competitive routes. Through the Office of the Air Travel Complaints Commissioner, they handle consumer complaints related to air travel. In many cases, the Commissioner deals, through facilitation and mediation, with complaints for which there is no other remedy at law.

The different directorates in air transportation also process licenses and charter permit applications from Canadian and foreign air carriers, and are involved in enforcing licensing requirements. They help negotiate and implement international air agreements, administer international air tariffs, and rule on appeals of Nav Canada user charges. The Agency also addresses complaints relating to the justness and reasonableness of tariffs, and whether a carrier has applied its tariff.

Statistics

During 2002, the last year for which statistics are publicly available, the Canadian Transportation Agency processed 1,286 air-licensing activities, including applications for new licences, suspensions, cancellations and reinstatements. As well, Agency staff completed 240 on-site inspections of Canadian-based air carriers and 32 passenger terminal operators. It also conducted 23 investigations of carriers or individuals suspected of operating illegal air services in Canada and identified a number of infractions. Following these inspections, three warnings, none of which were appealed, one notice of violation, and 83 informal warnings were issued.

In respect of the Air Travel Complaints Commissioner's Office, it received a total of 603 individual complaints raising 1,197 separate issues during the first half of 2003, a 10.1 per cent increase when compared to the previous six-month period. Problems with the quality of service continued to predominate, followed by flight disruptions, ticketing and baggage. Reports and information about the Air Travel Complaints Commissioner are posted on the Agency's Web site (www.cta.gc.ca).

Tariffs (domestic and international)

Canadian and foreign air carriers must publish and make available tariffs for the services they offer. The tariffs include the fares, rates, charges and terms and conditions of carriage applicable to the provision of such air services. For example, carriers must establish policies to address concerns such as lost, delayed or damaged baggage, denied boarding, and the transportation of minors and persons with disabilities. In case of a dispute, the carrier's tariff will be reviewed to ensure that the carrier has properly applied the fare, rate, charge or term and condition of carriage set out in its tariff. The Agency will also make certain that the tariff is not unreasonable or unduly discriminatory. Every air carrier in Canada is required to publish a tariff and to make it available for inspection at its principal place of business.

Air carriers providing international services to and from Canada must file their tariffs with the Agency. The acceptance of these filings does not constitute an approval of the tariff's content. There are two exceptions to the general filing requirements, that is, carriers that are designated under applicable bilateral agreements to operate between Canada and the United States, and between Canada and Germany, which are only required to file their general terms and conditions of carriage with the Agency.

In 2002, the Agency received a total of 14,623 tariff submissions from airlines proposing to amend or add fares, rates, or terms and conditions of travel to their international tariffs. Ninety-five per cent of these submissions were filed electronically. Electronic tariff submissions, part of the Agency's contribution to the Government On-Line initiative, speed up the approval process significantly and give airlines more flexibility.

The Agency also received 71 consumer complaints in 2002 about pricing on international and transborder routes. In another 30 instances, Agency staff satisfied passenger inquiries before they became complaints, that is, it was able to respond to concerns by providing explanations of a carrier's activities that were sufficient to allay such concerns and thereby avoiding the filing of a formal complaint.

The Montreal Convention

Signed on May 28, 1999, the Montreal Convention came into force on November 4, 2003. In Canada, the convention is incorporated into domestic law by the Carriage by Air Act. As of today, it has been ratified by 54 countries, including Canada (see "Note" below for a link to a list of all signatory countries).

The Montreal Convention consolidates and modernizes the rules of the Warsaw Convention of 1929 and its associated documents. It provides for unlimited liability for damages in the case of death or injury to passengers arising out of accidents during international air carriage, simplifies ticketing requirements, provides for electronic documentation and establishes a new jurisdiction that will allow most passengers to take legal action for damages in their own country, as long as the carrier in question is operating to and from that country. It applies to all international carriage of persons, baggage or cargo performed by aircraft for reward. It also applies to gratuitous carriage performed by an air carrier.

Here is an example of the variance that is possible now in dealing with limits of liability. On the domestic scene, the liability limits vary from one airline to another, with the majority ranging between $100 and $1,500 for checked baggage, with many of the new low cost carriers establishing a maximum liability limit of $250 for checked baggage.

For international travel from and to Canada, the limits of liability are established by the Montreal Convention. The exception to this standard is in situations involving a one-way trip originating from, or destined to, a country that has not ratified the Montreal Convention. In this case, the Warsaw Convention would still apply.

Under the Warsaw Convention, the carriers' liability was limited to 250 French Gold Francs (approximately $33) per kilogram of checked baggage and to a maximum of 5,000 French Gold Francs (approximately $660) for unchecked (carry-on) baggage per passenger. Under the Montreal Convention, liability for checked baggage is limited to 1,000 Special Drawing Rights (approximately $2,000) per passenger. The same limit applies to unchecked baggage, but the passenger must prove that the carrier is at fault for any loss. In all cases, the carrier's liability does not exceed the actual loss suffered by the passenger.

As a general rule, the liability regime established under the Carriage by Air Act, which incorporates the Warsaw Convention and the Montreal Convention, is administered by the courts. In other words, someone who suffers damages in the context of an international flight subject to the Carriage by Air Act could sue the carrier for damages before a court of competent jurisdiction. The court would then examine the case in light of the regime established under the Carriage by Air Act and, if appropriate, order the carrier to pay damages.

Note: For the list of signatory countries, click on: www.icao.int/icao/en/leb/mtl99.htm

The Canadian Transportation Agency and the Montreal Convention

While the main task of implementing the Carriage by Air Act lies with the courts, the Canadian Transportation Agency also has a role to play in the implementation of this legislation. The legal framework governing the Canadian Transportation Agency's activities in respect of air transportation, namely the Canada Transportation Act and the Air Transportation Regulations, requires that tariffs be just and reasonable. To be just and reasonable, tariffs must comply with Canadian law. As such, tariffs must be consistent with the Carriage by Air Act, which incorporates the Montreal Convention. In the execution of its mandate, the Agency, therefore, has to make sure that the tariffs filed with it are consistent with the rules established in the Montreal Convention, as embodied in the Carriage by Air Act.

Following the coming into force of the Montreal Convention on November 4, 2003, Agency staff concentrated its efforts in contacting, through various means, air carriers conducting services to or from Canada, so they would file appropriate tariff revisions to include a provision incorporating the Montreal Convention by reference. On April 6, 2004, the Agency issued a letter to the industry which instructed carriers to amend their tariffs to include the following wording as a stop-gap measure: "For the purposes of international carriage governed by the Montreal Convention, the liability rules set out in the Montreal Convention are fully incorporated herein and shall supersede and prevail over any provisions of this tariff which may be inconsistent with those rules." This situation is only a temporary one implemented until the industry catches up with the state of the law.

The Agency has had informal discussions with the United States Department of Transportation and with various institutions such as the Air Transport Association of America (ATA) and the International Air Transport Association (IATA). While not wanting to get into the nitty gritty of those discussions, I can tell you that the ATA is working on developing language for a model tariff to reflect the Montreal Convention. As for IATA, it is currently developing language respecting the Montreal Convention that will eventually appear on airline passenger tickets. Until such a time as there is an actual filing, there is not much that I can say on the contents of these projects. However, once these two activities have been completed, the tariff regime will presumably become fully compliant with the Montreal Convention.

For an illustration of how the Agency typically applies the Warsaw Convention and the Montreal Convention through its tariffs provisions, you can consult the following Agency decision: McCarthy vs Skyservice, Decision No. 324-C-A-2002, issued on June 11, 2002. In this decision, the Agency noticed that the liability limit found in the carrier's tariff fell short of the Warsaw Convention limit set out in the Carriage by Air Act, and was not just and reasonable. Accordingly, the Agency disallowed the tariff and the carrier was required to file a new tariff provision with the Agency.

Other interesting decisions from the Canadian Transportation Agency

I would like to refer you to a few decisions that are not primarily related to tariffs but rather relate to the interpretation of the Policy for International All-Cargo Charter Air Services. My purpose in mentioning these decisions is simply to bring them to the attention of those who do not deal with the Agency on a regular basis. These are some of the more important and significant decisions of the Agency in the recent past. They illustrate the balancing of interests which the Agency must perform and the importance the Agency attaches to insuring that regional economic activity is adequately supported by air services.

On the East coast, there were a series of decisions concerning all-cargo flights operated by MK Airlines (among which, Decision No. 305-A-2003, issued on May 29, 2003, which was rescinded by Order-in-Council No. P.C. 2003-803 dated June 2, 2003, which was subsequently overturned on judicial review, thus validating the Agency's original decision) and by Polar Air Cargo (among which, Decision No. 100-A-2004 issued on March 4, 2004). These decisions were for the movement of fresh fish products from Atlantic Canada to Europe.

And here in the West, there are the very recent decisions concerning Korean Airlines and Asiana Airlines international all-cargo services in and out Calgary Airport (see Decisions No. 429-A-2004 and No. 430-A-2004 issued on August 6, 2004). All of these decisions granted significant operating rights which were not provided in the air services agreements with the various countries involved.

On another matter, for those who are truly interested in how the Agency has dealt with tariff interpretation in the past, I would like to refer you to a recent decision of the Federal Court of Appeal involving Northwest and KLM Airlines (see Decision No. 2004-FCA-238 issued on June 23, 2004). This is a case where the Federal Court of Appeal upheld an Agency decision ordering Northwest and KLM to apply certain provisions of their tariff and to honour tickets that had been sold in peculiar circumstances (see Decision No. 232-A-2003 issued on April 29, 2003). This case had to do with a refusal of the airlines to honour tickets issued by a travel agent who, in turn, had failed to remit the funds collected to the Bank Settlement Plan (BSP), the entity that collects ticket proceeds on behalf of the airlines.

And perhaps one of the most important decisions to be rendered by the Canadian Transportation Agency in recent times was issued last week. This decision dealt with the Canadian ownership and control requirements of Air Canada's proposed new corporate structure. After a careful and comprehensive examination of all information and documentation filed in respect of that matter, the Agency concluded that the new entity, ACE Aviation Holdings, will meet the Canadian ownership and control requirements as defined in the Canada Transportation Act.

In conclusion, you can readily see from this short exposé that the Agency is kept busy on the aviation side of its regulatory mandate despite the wave of liberalization and deregulation that has dominated the aviation industry in recent times.

Note: To consult the most recent decisions and orders issued by the Canadian Transportation Agency, please visit the Agency's Web site at: www.cta.gc.ca and select "Rulings" on the Home page.