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Newsletter > June 2018
In this issue: 1. News & Upcoming Events 2. Transportation Modernization Act Becomes Law 3. Enforcing Judgments / Piercing Corporate Veil 4. Medical Cannabis and Human Rights 5. Doing Business in Canada – Competition Law 6. Removal Order for Sunken Tug Valid
1. News & Upcoming Events
- Louis Amato-Gauci will participate in a webinar hosted by the National Customs Brokers & Forwarders Association of America, Inc., on Thursday, July 12, from 1:00 to 2:00 PM EDT, regarding the status of the NAFTA Modernization Negotiations, the steel and aluminum tariffs authorized under Section 232 of the Trade Expansion Act of 1962, and Canada’s response to those tariffs. Other participants: Evelyn Suarez, The Suarez Firm, Washington DC Alejandro García Seimandi (García Seimandi, Flores & Villeda – Mexico City)
- The Midwest Regional and Short Line Railroad Conference, organized by the Minnesota Regional Railroads Association will take place from 15th July to 17th July 2018 at the Madden’s On Gull Lake in Brainerd, United States.
- The International Conference on Transportation & Development, organized by the American Society of Civil Engineers will take place from 15th July to 18th July 2018 at the Wyndham Grand Pittsburgh Downtown in Pittsburgh, United States of America.
- Ship Arrest Conference, July 23-24, 2018 Singapore
- China Blockchain & Supply Chain Summit, July 26-27, Shanghai, China.
- The Canadian Board of Marine Underwriters Annual Golf Day will take place on August 21st, 2018 at the Richmond Hill Golf Club.
2. The Transportation Modernization Act Becomes Law
In 2016 the Federal Government undertook a review of how to make the Canadian transportation system “better, smarter, cleaner and safer”. Commercial stakeholders and citizens weighed in on the process. Taking both the submissions and the findings from a 2015 review of the Canada Transportation Act (*1) into consideration Transport Canada articulated a strategic plan to support a new vision for the future of transportation in Canada entitled “Transportation 2030: A Strategic Plan for the Future of Transportation in Canada” (*2). Transportation 2030 Transport Canada’s strategic plan grouped areas of work under five different themes: “The Traveller” This theme’s agenda calls for the provision of greater choice, better service, lower costs and new rights for consumers. Particular goals identified concern the establishment of an Air Travellers Passenger Rights Regime to better protect customers, changing international ownership rules to increase competition and reduce fairs in the domestic airline industry and working with the Canadian Air Transport Security Authority (CATSA) to ensure that passengers can go through security faster while maintaining high security standards. “Safer Transportation” The public interest calls for a safer, more secure transportation system that Canadians can trust. Particular goals identified concern a review of the Railway Safety Act (*3) to enhance railway safety standards including the introduction of locomotive voice and video recorders to be used during accident investigations. “Green and Innovative Transportation” This agenda item involves the reduction of pollution through new technologies. A particular goal concerns the reduction of carbon pollution from the transport sector, which accounts for 23% of air pollution. This would involve investment in electric car charging and low-emissions fuelling stations. “Waterways, Coasts and the North” The need has been identified to build world-leading marine corridors that are competitive, safe and environmentally sustainable, and to enhance the northern transportation infrastructure. This theme would require the introduction of stronger environmental protection for Canada’s coastline, the implementation of a moratorium on oil tanker traffic along the northern coast of British Columbia, and the introduction of a plan to increase marine safety, emergency response and a closer partnership with coastal communities. “Trade Corridors to Global Markets” The need has been identified to improve the performance of Canada’s transportation system to expedite the shipment of products to markets and to grow Canada’s economy. This would call for the investment of $10.1 billion in the transportation infrastructure to help eliminate bottlenecks and build more robust trade corridors. The Transportation Modernization Act (Bill C-49) With a view to starting the trek towards implementation of “Transportation 2030”, on May 16, 2017 the federal government proposed Bill C-49 (the “Transportation Modernization Act”) to improve the aviation and railway transportation systems and to also effect certain changes to the maritime industry. On May 23, 2018, B C-49 received “Royal Assent” – that is, the formal signing into law. The Transportation Modernization Act (officially, “An Act to Amend the Canada Transportation Act and other Acts respecting transportation and to make related and consequential amendments to other Acts”) features many important developments affecting the aviation, rail and maritime industries. The Aviation Industry The Canada Transportation Act has now been amended to, among other things:- Require the Canadian Transportation Agency to create a set of clear rules about how airlines in Canada must treat passengers, and be entitled to clear, consistent, transparent and enforceable compensation, as well as minimum standards of treatment when things do not go as planned.
- The Transportation Modernization Act amends the definition of “Canadian” in the Canada Transportation Act in order to raise the threshold of voting interests in an air carrier that may be owned and controlled by non-Canadians while retaining its Canadian status, while also establishing specific limits related to such interests.
- The Transportation Modernization Act amends the Canada Transportation Act to create a new process for the review and authorization of arrangements involving two or more transportation undertakings providing air services to take into account competition considerations and broader considerations respecting public interest.
- Require the Canadian Transportation Agency to offer information and informal dispute resolution services.
- Expand the government’s regulation making power to require major railway companies to provide to the government information relating to rates, service and performance.
- Repeal provisions in the Canada Transportation Act dealing with insolvent railways in order to allow the laws of general application respecting bankruptcy and insolvency to apply to those companies.
- Clarify the factors that must be applied in determining whether railway companies are fulfilling their service obligations.
- Shorten the time period by which the Canada Transportation Agency is to adjudicate a “level of service” complaint.
- Allow Shippers to obtain terms in their contracts dealing with amounts to be paid in relation to a failure by a railway to comply with its service obligations.
- Require the Canada Transportation Agency to set the inter-switching rate annually.
- Provide for a new remedy for shippers who only have access to the lines of one railway company at the point of origin or destination of the movement of traffic in circumstances where inter-switching is not available.
- Change the process for the transfer and discontinuance of railway lines to, among other things, require railway companies to make certain information available to the government and the public and to establish a remedy for non-compliance with the process.
- Change provisions respecting the maximum revenue entitlement for the movement of Western grain and require certain railway companies to provide to the government and the public information respecting the movement of grain.
- Change provisions respecting the final offer arbitration process by, among other things, increasing the maximum amount for the summary process to $2 million and by making a decision of an arbitrator applicable for a period requested by the shipper of up to two years.
- Amend the Railway Safety Act, by prohibiting a railway company from operating railway equipment and a local railway company from operating railway equipment on a railway unless the equipment is fitted with the prescribed recording instruments and the company, in the prescribed manner and circumstances, records the prescribed information using those instruments, collects the information that it records and preserves the information that it collects, and
- Amend the Canadian Transportation Accident Investigation and Safety Board Act (*4) to allow the use or communication of an on-board recording as defined in that Act if that use or communication is expressly authorized under certain other federal statutes.
- The Transportation Modernization Act amends the Coasting Trade Act (*5) to enable the repositioning empty containers by ships registered in any register, conditional on the eventual enactment into law of Bill C-30 being the Canada-European Union Comprehensive Economic and Trade Agreement Implementation Act.
3. Enforcing Judgments, Related Companies, and “Piercing the Corporate Veil”
A case that has attracted considerable interest of late is that of Yaiguaje v. Chevron Corporation, the latest and possibly last chapter of which was written by the Court of Appeal for Ontario on May 23, 2018 (*1). The case involves a protracted legal saga related to environmental damage caused by Texaco’s operations in Ecuador between 1964 and 1992. After being denied success in a class action commenced in the United States, the appellants eventually secured judgment in Ecuador against Texaco’s parent, Chevron Corporation, following an 8-year trial and 2 appeals. The case in Ontario involves the appellants’ attempts to enforce their judgment against Chevron Corporation against one of its Canadian subsidiaries. The case is also of interest because, as the Ecuadoran judgment is for $9.5 billion USD, the stakes could hardly be higher. The appellants, who ultimately succeeded in the Ecuadoran courts, sought to enforce their judgment in Canada against the assets of a seventh-level subsidiary of Chevron Corporation – Chevron Canada Limited (“Chevron Canada”). Having won on the jurisdictional question of whether an enforcement action could be brought in Canada (an issue which went all the way to the Supreme Court of Canada), the issues in this proceeding were whether Chevron Canada’s assets and shares were available for execution to the appellants to satisfy the judgment debt of Chevron Corporation. For litigants, the court’s decision is interesting for its clarification of how the Execution Act (*2) applies as well as for what it has to say about the availability of assets of related companies when enforcing a judgment debt. In the Court of Appeal it was observed that, once a foreign judgment has been recognized in this jurisdiction, local law applies as to its enforcement. The court further noted that the Execution Act “granted extensive rights to collect the judgment debt.” The appellants specifically sought to rely on the broad language of s. 18 of the Act, which permits the sheriff to seize and sell “any equitable or other right, property, interest or equity of redemption in or in respect of any goods, chattels or personal property of the debtor ….” The theory on which the appellants sought to recover was that, as Chevron Canada was indirectly an “asset” of Chevron Corporation, the latter’s assets, of which Chevron Corporation was the ultimate 100% beneficial owner, should be available for execution. The Court of Appeal rejected this ground of appeal, upholding the long-standing rule of the separateness of corporations from their shareholders. That is, while acknowledging that the appellants might have a claim against Chevron Corporation’s ownership interest in, for example, shares of Chevron Canada – assuming it owned any directly – they could not obtain execution against the assets of Chevron Canada itself, even though these might ultimately be available to its shareholders on wind-up. This is because Chevron Corporation, even if a shareholder of its subsidiary, did not “own” those goods directly. While it was still operating, only Chevron Canada, a separate legal entity, owned these assets. Quite apart from this, the Court also noted that the separateness of corporations themselves had to respected; that is, Chevron Corporation did not own the shares of Chevron Canada. Ownership of those shares was in fact seven times removed from the ultimate corporate parent. Further, as to the broad language of the Execution Act itself, the court affirmed that any rights to property under it were procedural only, and that it could not create substantive rights. It would thus only allow the sheriff to enforce a judgment debtor’s existing rights on behalf of the creditor by stepping into the judgment debtor’s shoes. In short, as Chevron Corporation had no existing “rights” to shares, or in any other property, of Chevron Canada, being several corporations removed in the chain of ownership, the Execution Act could not create these rights. Those rights would default to being determined by the law relating to separate corporate personality. Attempting to bypass the corporate separateness principle by another path, the appellants advanced the argument that this would be an appropriate case to “look through” intervening corporate entities, asking the court to use its power in equity to “pierce the corporate veil” – in effect, to treat Chevron Canada and Chevron Corporation as one and the same company. On this issue, the Court of Appeal took a similarly hard line. The Court held that the test for whether the corporate veil should be pierced applied equally to proceedings for enforcing judgments as it already did in proceedings where liability was yet to be determined. Citing the test in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (*3), it noted that, in this case, the appellants needed to satisfy the court that a company – here, Chevron Canada – is “a ‘mere façade’ concealing the true facts.” Before the Court would pierce the corporate veil, it further had to be satisfied that: (i) the subsidiary is a “mere puppet” of the parent; and (ii) the subsidiary was incorporated for a fraudulent or improper purpose. Because the appellants conceded that Chevron Canada was not incorporated for either a fraudulent or for an improper purpose, having not met this test, the appeal necessarily failed on this ground. The Court also saw no reason for applying the “group enterprise theory of liability,” which holds that where related companies operate as a single entity, they should be responsible for each other’s debts. The majority of the Court of Appeal noted that this has been “consistently rejected” by the courts. While it conceded that this might reflect economic reality, there were good policy reasons for separating this from “legal reality.” To do otherwise would cause a separate mischief by undermining the fundamental principles of corporate law on which many business decisions are based. The immediate takeaway from this ruling is that the attempt to enforce a judgment, foreign or domestic, against related companies is likely to be swiftly shut down in all but the most extreme and exceptional cases. One must be careful not to read too much into this decision, however. In both the majority and minority reasons, the court was clearly influenced by certain background facts; in particular, the earlier finding by the US courts that the Ecuadoran judgment against Chevron Corporation could not be enforced in the US because it “was the result of massive fraud.” Thus Nordheimer J.A., who agreed in the result, nevertheless gave compelling concurring reasons why there should be less concern about a court piercing the corporate veil in enforcing a judgment, where liability is already fixed, against a related entity than there might be in those cases where questions of liability have yet to be determined. Further, in cases like this one, where Chevron Corporation has 100% ownership of its subsidiaries, there is similarly a diminished concern about possible injury to “innocent” shareholders, as there would be none. Thus this may well prove to be a case where the strong language of the majority is somewhat deceptive as to the state of the law. While corporate separateness appears for the moment to have won the day, this remains very a much a case of watch this space. Oleg M. Roslak Endnotes (*1) 2018 ONCA 472 [Chevron]. (*2) Execution Act, R.S.O. 1990, c. E.24. (*3) (1996) 28 O.R. (3d) 423 (Gen Div.), affirmed (1997) 74 A.C.W.S. (3d) 207 (Ont. C.A.) [Transamerica].4. Medical Cannabis and Human Rights: Case Law Update
This article provides a summary of two recent cases regarding medical cannabis; the results are welcome news for employers.- Medical cannabis and benefit plans
- Medical Cannabis use at work
- promote the efficiency and adaptability of the Canadian economy
- expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada
- ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy
- provide consumers with competitive prices and product choices.
a) The B.C. pilots’ description of the various ways an anchor chain could foul the wreck and the risk of fouling tow lines due to the area being frequently used by tugs with large barges and log barges. There was a dispute as to whether some of this information was truly new information or simply variations on the same theme of risk of fouled tow lines. b) The Port’s description of incidents where access to the location had been denied and a discussion of an October 2015 snagging incident. c) A discussion of displaced vessels from the location that were forced to anchor elsewhere and the cascading impact on the national availability of anchorages. d) A discussion of the probability of fouling being low but the severity of such a fouling being high.
In November 2016, the Minister issued a third Notice to Remove requiring the removal of the wreck by December 31, 2016. The Navigation Impact Assessment that formed part of the reasons for the decision provided as follows:Wreck of the Samantha J is causing a substantial interference to navigation for the purpose of anchoring deep-sea vessels within the Port of Nanaimo. Alternative mitigations have not been identified. Notice to Remove, pursuant to NPA s. 16(1), issued on 20 Jan 2015. Following correspondence with the proponent’s representatives, and further research conducted by NPP and the NPA, notice re-issued on 05 Oct 2015.
Following meeting with BCCP, NPA and representatives on Oct 6th, 2016 and considering relevant information, while the likelihood of a deep-sea vessel to foul an anchor line is low, the resulting impact should it occur is substantial and could result in severe damage to a vessel and the environment. New Notice to remove issued on Nov 9, 2016.
The court commented on the standard of review of the decision finding that:There is some disagreement between the parties with respect to the standard of review of the merits of the Decision. In my view, the Minister (or his delegate) has a wide discretion as to whether to order removal and what may be done in that process as evidenced by the words “[t]he Minister may” in s 16(1) and (2). Moreover, in respect of whether something is an “obstruction”, that conclusion must be reasonable – it is not simply a discretionary finding. The scope of whether an obstruction exists is wide since the exercise is within the Minister’s home statute in an area with which his or her officials have some experience, if not expertise. In this case the delegate had the benefit of independent expertise in the BC Pilots’ involvement and opinions. The standard of review therefore is reasonableness, including deference to the Minister in both the assessment of risk and in the corrective actions to be ordered.
On the issue of procedural fairness, the applicant’s position was that the Minister failed to provide a fair process by not providing adequate notice, not giving the applicant a reasonable opportunity to respond to the evidence and by coming to the decision on the basis of an incomplete record. The court found that the process was fair. Justice Phelan held that:The Act leaves it to the Minister to set the necessary procedure. Over the two years that this issue of the Wreck was being debated, there was nothing that suggested the type of process to which the Applicant says it was entitled.
This was a non-judicial administrative decision requiring Greville [the Minister’s representative] to interpret and implement his home statute, and rely on his department’s expertise or the expertise available to it in addressing marine safety, including any potential safety risks. It is not an ongoing process of argument and debate.
The court held that the process was fair and that the applicant was entitled to a fair process, but not a never-ending one. The application for judicial review was dismissed. Rui M. Fernandes Follow Rui M. Fernandes on Twitter @RuiMFernandes and on Linkedin. See also his blog at http://transportlaw.blogspot.caThis newsletter is published to keep our clients and friends informed of new and important legal developments. It is intended for information purposes only and does not constitute legal advice. You should not act or fail to act on anything based on any of the material contained herein without first consulting with a lawyer. The reading, sending or receiving of information from or via the newsletter does not create a lawyer-client relationship. Unless otherwise noted, all content on this newsletter (the “Content”) including images, illustrations, designs, icons, photographs, and written and other materials are copyrights, trade-marks and/or other intellectual properties owned, controlled or licensed by Fernandes Hearn LLP. The Content may not be otherwise used, reproduced, broadcast, published,or retransmitted without the prior written permission of Fernandes Hearn LLP.
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