Under the Canadian Constitution Act 18672 aviation is a federal government area of responsibility. Transport Canada is a department of the government of Canada under the federal Minister of Transport, Infrastructure and Communities. It is responsible for the issuance of transportation (including aviation) operating permits and certifications and for transportation safety oversight. The principal legislation administered by Transport Canada with respect to aeronautics is the Aeronautics Act,3 and the Canadian Aviation Regulations4 (CARs) promulgated thereunder. The Carriage by Air Act5 implements, inter alia, the provisions of the Convention for the Unification of Certain Rules for International Carriage by Air (the Montreal Convention) as part of domestic law in Canada. The Canadian Air Transport Security Act6 establishes and defines the authority and the powers of the Canadian Air Transport Security Authority, the agency responsible for aviation security in Canada. Canada ratified the Convention on International Interests in Mobile Equipment and the Aircraft Protocol (collectively, the Cape Town Convention) on 1 April 2013. The Cape Town Convention is now part of the domestic law of Canada pursuant to the provisions of the International Interests in Mobile Equipment (aircraft equipment) Act.7 The Transportation Appeal Tribunal of Canada Act8 establishes the Transportation Appeal Tribunal of Canada, which provides for reviews and appeals of administrative actions taken by Transport Canada and the Canadian Transportation Agency (CTA) as expressly provided under federal transportation legislation, including aviation legislation.
The licensing of air operators for the provision of domestic air services and scheduled and unscheduled international air services is governed by the provisions of the Canada Transportation Act9 and the Air Transportation Regulations10 (ATRs) made thereunder. To operate an air service that is publicly available, a licence must be issued by the CTA, an independent agency established under the Canada Transportation Act. Licences for international scheduled services generally are issued pursuant to bilateral air service agreements made between Canada and foreign states and are route-specific, in accordance with the commercial rights identified in these agreements.
iii Air charter
The ATRs specify a stringent set of rules that nominally apply to air charter services. However, the impact of these rules is largely alleviated by the provisions of Canada's International Cargo Charter Policy and International Passenger Charter Policy (the Policies), which were announced in May 1998 and April 2000 respectively. The CTA is in the process of amending the ATRs to conform to the Policies but, in the interim, the CTA has been authorised to grant general exemptions from the application of those provisions of the ATRs that conflict with the Policies.
iv Airport slot allotments
Airport slots are allocated by individual airport authorities in Canada and there is no uniform slot allotment policy or system applicable to all Canadian airports. Some Canadian airports have airport adviser status with IATA and participate in semi-annual IATA Slot Conferences, at which carriers, airports, coordinators and industry experts discuss schedule adjustments. Upon negotiating, trading or transferring slot times at the IATA Slot Conferences, carriers can then apply to the applicable airport authorities for a slot. Slot allocation at the Canadian airports using the Slot Clearance Request/Reply system is regulated by the IATA Scheduling Guidelines.11
v Air navigation services
Civil air navigation services are carried out by NAV Canada, a private sector corporation established under the Civil Air Navigation Services Commercialization Act.12 Service charges are levied against air carriers and aircraft operators to recover costs incurred by NAV Canada in providing air navigation services.
vi Accident investigations
The Transportation Safety Board (TSB) is an independent agency established under the Canadian Transportation Accident Investigation and Safety Board Act.13 The TSB is responsible for conducting independent investigations of aviation incidents and accidents and publicly reporting its findings, identifying safety deficiencies and making recommendations for eliminating such deficiencies.
II LEGAL FRAMEWORK FOR LIABILITY
i International carriage
Canada is a party to and has ratified the Montreal Convention, which is made part of the domestic law of Canada by the Carriage by Air Act.14 Section 2 of the Carriage by Air Act provides that the provisions of the Montreal Convention relating to the rights and liabilities of carriers, passengers, consignors, consignees and other persons have the force of law in Canada. Subsection (5) of Section 2 provides that any liability imposed by the Montreal Convention on a carrier for the death of a passenger shall be in substitution for any liability of the carrier for such a death under any law in force in Canada. Subsections (6) and (7) provide for the conversion of francs and special drawing rights into Canadian dollars at rates established by the International Monetary Fund.
ii Internal and other non-convention carriage
There are no special rules with respect to death or injury to passengers and loss or damage to baggage or cargo for domestic carriage. Those claims are largely resolved in accordance with principles of the common law of contract and negligence, as interpreted by the courts of each province. The courts of Quebec apply civil law principles and concepts but the end result for an aviation claim in Quebec is not likely to substantially differ from that of a similar case in a common law province. In recent years the CTA has intervened in a number of domestic air accident cases to require air carriers to apply international liability rules. To date, such intervention has been limited to cases in which the claim is for damage to, loss of or delay in the transportation of baggage.
Under the Criminal Code,15 the dangerous or negligent operation of an aircraft or knowingly sending an aircraft that is not airworthy on a flight are criminal offences and any such incidents that result in injury or death may result in a criminal investigation and possible criminal charges, if the circumstances so warrant.
iii General aviation regulation
In Canada, civil aviation operations (including the operations of advanced and basic ultralight aircraft, gliders and unmanned aerial vehicles) are governed by the provisions of the Aeronautics Act16 and the CARs and the standards issued thereunder. The CARs regulate the identification and registration of aircraft, licensing and training of personnel, airworthiness of aircraft, general operating and flight rules, commercial air services and air navigation services.
iv Passenger rights
The CTA makes decisions concerning air, rail and marine matters and its jurisdiction extends to economic regulation and consumer protection. With respect to aviation, the CTA issues licences and permits, has authority to disallow tariffs and imposes rules relating to the accessibility of air services. Passenger rights are governed primarily by the provisions of the Canada Transportation Act17 and the ATRs, which require every air carrier to file a copy of its tariff with the CTA. Air carriers are required to include all of the terms and conditions of carriage in their tariff, including those relating to the carriage of persons with disabilities, compensation payable for denial of boarding, passenger rerouting, failure to operate on schedule, refunds, ticketing procedures, limits of and exclusions from liability, and so forth. The CTA has the jurisdiction to address complaints and disputes relating to transportation services, rates, fees and charges, terms and conditions of carriage, accessibility and other issues arising out of or in relation to the tariffs.
Air carriers providing charter services are required to provide financial guarantees in respect of advance payments received from tour operators. Carriers are also required to price charter contracts on the basis of tariffs in effect on the date the contract is entered into. Those tariffs must be maintained by the carrier but need not be filed with the CTA.
Additionally, the provisions of consumer protection legislation in certain provinces may be applicable also to air carriers, provided that such provisions do not conflict with federal law or encroach on federal jurisdiction.
Currently, neither the Canada Transportation Act nor the ATRs prescribe or impose minimum standards in respect of passenger rights for travellers. However, the government of Canada recently tabled legislation before Parliament that, if passed, mandates the CTA to develop regulations to govern passenger rights, including prescribing certain minimum standards.18 See Section XI for additional details.
III LICENSING OF OPERATIONS
i Licensed activities
A licence is required under the Canada Transportation Act19 to operate publicly available air services, which includes domestic air services (small, medium, large and all-cargo aircraft) and scheduled and unscheduled international services.
The CTA has issued a determination to clarify that a reseller (which does not operate aircraft but purchases seating capacity of an air carrier and subsequently resells those seats) is not required to hold a licence, provided it does not hold itself out to the public as an air carrier operating an air service. The air carrier operating the flight remains responsible to the passengers pursuant to its tariff.
ii Ownership rules
A licence to operate a domestic air service may only be granted to a Canadian, unless the applicant has been exempted from that requirement by the Minister. A 'Canadian' is defined in the Canada Transportation Act as a Canadian citizen or permanent resident, a government in Canada or an agent of such a government or a corporation or other entity incorporated or formed under the laws of Canada or a province or territory of Canada that is controlled by Canadians and of which a minimum of 75 per cent of voting interests are owned and controlled by Canadians. Further, the licence will only be granted to an applicant that is controlled de facto by Canadians.
Pursuant to amendments proposed to the Canada Transportation Act,20 the government of Canada proposes to raise the foreign ownership limit from 25 per cent to 49 per cent in order that a corporation or other incorporated entity qualifies as Canadian, provided at least 51 per cent of its voting interests are held by non-Canadians. However, under such proposal no single non-Canadian may hold more than 25 per cent of the voting interests.
iii Foreign carriers
A person may not operate an aircraft (other than a hang-glider or a parachute) in Canada unless it is registered in Canada or in a foreign state that is either a contracting state or has an agreement with Canada that allows aircraft registered in that foreign state to be operated in Canada.
To be eligible for a licence to operate a scheduled international service, a foreign air carrier must obtain the appropriate Canadian aviation document from Transport Canada, have the prescribed liability insurance coverage in place, meet the prescribed eligibility conditions and satisfy the CTA that the foreign air carrier has not contravened the provisions of the Canada Transportation Act relating to sale of air services in Canada without an appropriate licence. To satisfy the eligibility conditions, the foreign air operator must be designated by a foreign government to operate an air service in terms of a bilateral air service agreement between that country and Canada and hold a scheduled international licence issued by that foreign government. Extra-bilateral authority in the form of additional city pairs and fifth or seventh freedom rights can be obtained on occasion on application to the CTA.
To obtain a foreign air operator certificate, a foreign carrier may be required to pass a base maintenance and safety-related inspection carried out by Transport Canada.
Transport Canada is responsible for regulating aviation safety and airworthiness requirements for all civilian aircraft in Canada. The CARs and the associated standards form a comprehensive code for the regulation of aviation safety. Airworthiness requirements are described in Part V of the CARs. The requirements include obtaining an airworthiness certificate for each aircraft operated in Canada and submission of an annual airworthiness report (except in cases of an ultralight aircraft). In addition to the airworthiness requirements prescribed in Part V of the CARs, any use of an aircraft for a commercial air service is subject to the certification scheme created by the Aeronautics Act21 and associated regulations. For aerial work (consisting of helicopter external loads, towing or dispersal of products and involving the carriage of persons other than crew members) an operator certificate is required subject to limited exceptions.
The Transportation Safety Board Regulations22 require reporting of aviation accidents and incidents. Where a reportable incident occurs, an obligation to preserve evidence is triggered. The Transportation of Dangerous Goods Act 199223 imposes reporting requirements in certain cases of release of, or improper transport of, dangerous or hazardous goods. In addition, safety management systems referred to in Part V of the CARs include the requirements that approved maintenance organisations report to Transport Canada as to certain service difficulties encountered in the course of maintaining an aircraft.
The maintenance of aircraft is regulated by Part V of the CARs and by the standards thereunder. A Transport Canada-approved Airworthiness Manual addresses the licensing and training standards that aircraft maintenance engineers must meet. Part V of the Manual defines the conditions under which different categories of work must be performed, as well as documentation requirements. In the case of commercial aircraft, all work must be done in accordance with a Transport Canada-approved maintenance policy manual.
For the CTA to issue a licence to provide domestic or international services, air carriers are required to carry liability insurance. Section 7 of the ATRs24 provides for a minimum liability insurance for commercial operators in the amount of C$300,000 per seat for passenger liability. In respect of public liability, the mandatory coverage is a minimum of C$1 million for aircraft with maximum certified take-off weight of less than 7,500 pounds and a minimum of C$2 million for aircraft with maximum certified take-off weight of more than 7,500 pounds. In cases of aircraft with maximum certified take-off weight in excess of 18,000 pounds, the minimum amount of insurance is C$2 million, plus an amount equal to C$150 multiplied by the number of pounds by which the weight of the aircraft exceeds 18,000 pounds.
Air operators, flight training unit operators, operators of balloons carrying fare-paying passengers and operators of aircraft in excess of 5,000 pounds maximum certified take-off weight are required to have passenger liability insurance in place in the amount of C$300,000 per seat. Insurance coverage need not extend to any passenger who is an employee of the operator and covered by worker's compensation legislation or to passengers carried on board for making a parachute descent, provided that the operator has provided notice to such persons of the absence of such insurance. All private operators are required to carry public liability insurance, which is related to aircraft weight and the nature of the operations undertaken.
Liability insurance can only have limited exclusions or waiver provisions consisting of standard exclusion clauses relating to chemical drift, excluding contractual liability and voiding of insurance on account of misrepresentation by the air carrier.
As part of its initiative to update and modernise air transport regulations, the CTA is currently reviewing the minimum liability insurance requirements under the ATRs to ensure the current requirements continue to be appropriate over time.25
The aviation industry in Canada is subject to the provisions of the federal Competition Act,26 as well as certain sector-specific competition rules. In response to the merger of Air Canada and Canadian Airlines in 1999, the government passed the Regulations Respecting Anti-Competitive Acts of Persons Operating a Domestic Service27 to define specific anticompetitive acts that would be subject to the abuse of dominance provisions. There are also provisions in the Canada Transportation Act28 that deal with mergers in the aviation sector. Access to the aviation sector is further regulated by certain financial and nationality requirements. Access to the market for international air services is governed by bilateral air service agreements between Canada and various foreign states.
The general regulator of competition matters in Canada is the Competition Bureau, headed by the Commissioner of Competition. Proposed mergers and acquisitions that meet prescribed thresholds must be notified to the Commissioner under the Competition Act, and simultaneously notified to the Minister of Transport, Infrastructure and Communities and the CTA under the Canada Transportation Act. The Minister is required to make a determination as to whether the proposed transaction raises issues with respect to the public interest as it relates to national transportation. A proposed transaction may not be completed unless it is approved by the Governor-in-Council on the recommendation of the Minister, and the CTA determines that the transaction would result in an undertaking that preserves the 'Canadian' nature of the operator as required by the Canada Transportation Act.29
Under the Competition Act,30 a person who conspires with a competitor to fix prices, allocate customers, sales or territories, or control or prevent supply is guilty of a criminal offence punishable by imprisonment or a fine, or both.
Proposed amendments to the Canada Transportation Act include the introduction of an antitrust immunity regime for transactions involving transportation undertakings, including air transportation.
VII WRONGFUL DEATH
Under common law, there is no general right to bring an action for wrongful death for the death of a family member. Many provinces have therefore enacted statutes that allow certain survivors to bring a wrongful death claim in certain circumstances, and damages are awarded in accordance with the prescribed limits. Wrongful death claims arising out of international carriage by air are subject to Article 17 of the Montreal Convention and the limits of liability under Article 21 of the Montreal Convention. Under Article 21, a carrier cannot limit its liability in the event of the death of or injury to a passenger for damages of up to 100,000 special drawing rights (SDR) per passenger, and the carrier's liability will not exceed 100,000 SDR if the carrier can establish that the damage was not the result of the negligence or other wrongful act of the carrier, or that such damage was solely the result of the negligence or wrongful act of the passenger. Courts in Canada have consistently held that any action for damages arising in the course of international carriage may only be brought subject to the terms and conditions and the limitations of liability provided by the Montreal Convention, and that no damages are recoverable for purely psychological injuries, pain and suffering or loss of enjoyment. Generally, courts in Canada will award damages on the basis of life expectancy, loss of income, the level of the claimant's dependency on the deceased and expenses incurred on behalf of the deceased.
VIII ESTABLISHING LIABILITY AND SETTLEMENT
Claims relating to passenger air travel, terms and conditions of carriage, charter flights and transportation of persons with disabilities are adjudicated by the CTA. In addition, the CTA also investigates alleged or suspected violations of terms and conditions of licences or illegal or unlicensed operations by carriers providing publicly available services. In the event of consumer complaints, claimants are encouraged by the CTA to attempt to resolve the dispute directly with the air carrier before approaching the CTA. A complaint must be filed as soon as possible after the incident. In the event the Montreal Convention applies to the complaint, it must be filed within two years of the date of the incident.
Upon receipt, the CTA investigates the complaint and if the complaint is warranted, attempts to facilitate a settlement between the claimant and the air carrier. In the event the claimant is not satisfied, the claimant may resort to the formal process for resolution of the complaint, conducted by a panel of members of the CTA and involving submission of evidence and written arguments. In certain matters where the issues involved are of general public interest, the CTA panel may hold a public hearing. Once the CTA panel has considered the evidence, it issues a written decision. CTA decisions are binding unless overturned.
The CTA does not entertain complaints relating to issues such as customer service, aircraft cabin standards, aircraft noise, problems at airports, unfair competitive practices and bilingual services. The CTA also does not hear complaints against tour operators and travel agents. Depending upon the nature of the complaint, a complainant may approach a provincial court, a superior court, Transport Canada, the Competition Commission or other tribunals that have jurisdiction over such matters.
ii Carriers' liability towards passengers and third parties
An operator's liability to a passenger for incidents arising in the course of international carriage is established and limited in accordance with the provisions of the Montreal Convention. Operators are strictly liable for proven damages up to the prescribed amount under Articles 21 and 22 of the Montreal Convention, unless a special declaration of interest is made at the time of delivering baggage or cargo to the operator.
There are no specific rules governing the liability of aircraft operators for surface damage; however, the Airport Traffic Regulations,31 which were made under the Government Property Traffic Act,32 prescribe rules for the operation of motor vehicles, pedestrians and mobile equipment at airports. Contravention of those rules may result in a fine or imprisonment or both. In addition, the Airport Traffic Regulations address requirements specific to the control of aircraft on aprons.
There is no special legislation in place governing an operator's liability to third parties so that such liability is governed by the common law of torts. With respect to accidents and incidents, however, it is important to note that under Section 7(2) of the Canadian Transportation Accident Investigation and Safety Board Act,33 the TSB cannot make any findings on civil or criminal liability and under Section 7(3) no finding of the TSB can be construed to assign blame or liability. The findings of the TSB also do not bind any party to a legal proceeding.
iii Product liability
Manufacturers and owners are subject to the provisions of the Aeronautics Act and the CARs and may not operate an aircraft except in compliance with the same. A person who makes false representations in seeking to obtain a Canadian aviation document, falsifies records, operates or deals with a detained aircraft or acts in contravention of a Canadian aviation document is guilty of a criminal offence punishable by a fine, imprisonment or both.
There is no special legislation in place governing a manufacturer's or owner's liability to third parties and such liability is governed by the common law of torts.
In cases of consumer complaints adjudicated by the CTA, it may, depending on the circumstances, order the air carrier to compensate the consumer for out-of-pocket expenses incurred by the consumer. It cannot, however, award damages for pain and suffering or impose punitive damages or penalties on air carriers.
In Canada, damages are quantified in accordance with the principles of common law of contracts and torts, and there are no special rules applicable to claims related to the aviation industry. Typically, the actual loss or damage suffered by the claimant will play a significant role in determining the amount of damages that may be awarded. The plaintiff is required to prove that the defendant caused the loss or damage and that such loss or damage was reasonably foreseeable. Punitive damages are less common and may be awarded only in situations in which the plaintiff's conduct is excessively malicious or oppressive.
Canada has a universal publicly funded healthcare system administered by the governments of all of the provinces and territories. The government has a right to recover healthcare costs with respect to a person who is injured as result of the acts or omissions of a third party.
IX VOLUNTARY REPORTING
Pursuant to Section 2(1) of the Transportation Safety Board Regulations, the owner, operator, pilot-in-command, crew member and any person providing air traffic services who has direct knowledge of an aviation occurrence involving a fatality or serious injury, structural failure or damage to an aircraft, missing or inaccessible aircraft, engine failure or other operational issues in case of large aircraft, is under a statutory obligation to report to the Transportation Safety Board. Under Section 30(2) of the Canadian Transportation Accident Investigation and Safety Board Act, a statement given to the Transportation Safety Board in relation to a transportation occurrence is privileged.
X THE YEAR IN REVIEW
i Standing at the CTA
In Lukacs v. Canada (Transportation Agency),34 the Federal Court of Appeal overturned a decision of the CTA dismissing a complaint of discriminatory practices commenced by an individual passenger advocate (not a passenger), Dr Gabor Lukacs, on the preliminary basis that he lacked standing to bring the complaint. Dr Lukacs filed a complaint with the CTA alleging that certain practices of Delta Airlines Inc (Delta) relating to the transportation of 'large (obese)' persons are discriminatory, contrary to Section 111(2) of the ATRs.35 The CTA found that although Dr Lukacs was not required to be a member of the group discriminated against in order to have standing, he was required to demonstrate 'sufficient interest' in the practices complained of, which the CTA determined he had failed to do. The Federal Court of Appeal overturned the CTA decision on the ground that the CTA erred in applying the law in regard to standing on a complaint of discriminatory practices under the Canada Transportation Act36 and the ATRs. Delta appealed the Federal Court of Appeal decision to the Supreme Court of Canada. In Delta Air Lines Inc v. Lukacs,37 the Supreme Court of Canada, by a majority decision, held that the CTA has broad discretion to hear and determine complaints, but it did not exercise this discretion in a reasonable manner. The Supreme Court found that the CTA had applied an unreasonable test to determine whether public interest standing was available, and the CTA's total denial of public interest standing was unreasonable in view of its legislative scheme. The Supreme Court stated that the CTA's application of tests for determining public and private interest standing precludes any public interest group or representative group from ever having standing before it. Therefore, the Supreme Court remitted the matter back to the CTA to reconsider whether it would hear the complaint.
ii Tarmac Delay
In July 2017, two Air Transat flights from Brussels and Rome were diverted to Ottawa MacDonald-Cartier International Airport, together with 18 other commercial aircraft, owing to inclement weather. The diverted flights experienced lengthy tarmac delays of, respectively, almost six hours and almost five hours. During the period of delay, the passengers were not given an opportunity to disembark, and were only provided with limited food and water. The CTA conducted an investigation following several passenger complaints and media coverage and a public hearing then ensued.38 The CTA determined that Air Transat had failed to apply provisions of its tariffs relating to the distribution of drinks and snacks, and that its tariff relating to disembarking passengers in the event of a tarmac delay was unreasonable. The CTA further determined that Air Transat was not exempt from liability pursuant to the non-application of its tariff provisions on the basis that the diversion resulted from a force majeure event, or that its third-party service providers failed to perform their obligations. The CTA ordered Air Transat to compensate passengers for expenses incurred by them as a result of Air Transat's failure to properly apply its tariffs, to revise certain provisions of its tariffs and to provide proper training to its crew in relation to the provision of services during on-board delays. The CTA further imposed an administrative monetary penalty against Air Transat of C$295,000 based upon the examination of the details and severity of the incident.
In response to an increase of reported incidents involving recreational drones across Canada, the Minister of Transport issued an interim order aimed at controlling the operation of model aircraft, effective 11 May 2017. The purpose of the order is to address aviation safety and the safety of the public by imposing restrictions regarding how and where recreational model aircraft may be operated.
The Transportation Modernization Act, amending the Canada Transportation Act and other legislation relating to transportation, received royal assent and was passed into law on 23 May 2018. Among other matters, the new Act liberalises rules concerning foreign ownership of a Canadian airline, which means that although the airline must continue to be controlled by Canadians, up to 49 per cent of the voting interests of the airline may be owned and controlled by non-Canadians, provided that no more than 25 per cent of such voting interests are owned directly or indirectly by any single non-Canadian. Additionally, the CTA is tasked with establishing new air passenger rules concerning flight delays and cancellations, denied boarding, tarmac delays, lost or damaged baggage, seating of children with parents or guardians and transporting musical instruments. The CTA has until 28 August 2018 to receive input from the public, the airlines and other stakeholders before developing the regulations. Finally, the Act creates a process for review of air carrier joint ventures so as to take into consideration issues concerning public interest and competition.
1 Laura Safran QC is a senior partner and Prasad Taksal is an associate at DLA Piper (Canada) LLP.
2 30 & 31 Victoria, c. 3 (UK).
3 R.S.C. 1985, c. A-2.
5 R.S.C. 1985, c. C-26.
6 S.C. 2002, c. 9, s. 2.
7 S.C. 2005, c. 3.
8 S.C. 2001, c. 29.
9 S.C. 1996, c. 10.
11 See www.iata.org for details.
12 S.C. 1996, c. 20.
13 S.C. 1989, c. 3.
14 See footnote 5, above.
15 R.S.C. 1985, c. C-46.
16 See footnote 3, above.
17 See footnote 8, above.
18 Bill C-49, An Act to amend the Canadian Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts, 1st Sess, 42 Parl, 2017.
20 See footnote 17, above.
21 See footnote 3, above.
23 S.C. 1992, c. 34.
24 See footnote 9, above.
26 R.S.C. 1985, c. C-34.
28 See footnote 8, above.
30 See footnote 22, above.
31 C.R.C., c. 886.
32 R.S.C. 1985, c. G-6.
33 See footnote 12, above.
34 2016 FCA 220.
35 See footnote 9, above.
36 See footnote 8, above.
37 2018 SCC 2.
38 Determination No. A-2017-194.