The new Aviation Industry Indemnity Act gives the Government of Canada the ability to insure against war risks, and amendments to the Aeronautics Act give the military new powers to investigate aviation accidents.

On December 9, 2014, the Aviation Industry Indemnity Act 1 (the “AIIA”) received Royal Assent and came into force, creating a system for the Government of Canada (the “Government”) to indemnify “aviation industry participants” for losses caused by what are commonly known as ‘war risks’.

In the same Bill that created the AIIA, the Government also introduced amendments to the Aeronautics Act 2 that give the Canadian Forces increased powers to investigate any accidents involving military aircraft or installations. These amendments will come into force on February 7, 2015.

This bulletin will briefly outline the AIIA, and the amendments to the Aeronautics Act.

AVIATION INDUSTRY INDEMNITY ACT INDEMNIFYING LOSSES FROM WAR RISKS

Transport Canada introduced the AIIA to create a transparent system to help the Government respond  to incidents like the September 11, 2001 attacks, after which aviation insurance providers invoked short-term cancellation clauses for war risk coverage. Similarly, were the Government on a short term basis to rent commercial airliners to, for example, evacuate Canadian citizens from Libya, the AIIA now allows it to provide war risk coverage to the airliners’ owners which would likely not be commercially available.3 Prior to the coming- into-force of the AIIA, the Government could only use the Royal Prerogative to respond to such events.

The regime outlined in the AIIA does not limit the Government to such short-term coverage, but rather gives the Government significant latitude in its ability to provide war risk coverage. Specifically, the AIIA allows the Minister of Transport (the “Minister”) to issue an undertaking to indemnify any “aviation industry participants” for any loss, damage or liability caused by an “event” (i.e. a war risk) that is not otherwise insured or indemnified. When the Minister does this, it must be published in the Canada Gazette.

The class of people and organizations who can potentially benefit from this coverage – “aviation industry participants” – is broad. It includes air carriers; NAV CANADA; and owners or operators of airports. In addition, an undertaking can benefit suppliers who directly support the operation of aircraft from an airport including contractors who maintain and clean aircraft; contractors who load and unload passengers, baggage, and cargo; airport security; freight forwarders; and air navigation providers.

The “events” to which an undertaking can apply are essentially wars or terrorist acts. Specifically, the AIIA applies to any acts of unlawful interference with an aircraft, airport, or navigation facility, or an act or omission in the course of armed conflict.

Once an “event” occurs, the “aviation industry participants” covered by the undertaking who have suffered loss or damage must notify the Minister of the potential claim within two years. These “participants” can claim for all losses resulting from the “event”, except income loss or any losses that the Minister determines are the “participant’s” own fault.

Finally, the AIIA requires the Minister to actively monitor whether it is feasible for members of the aviation industry to obtain war risk coverage in the market. The Minister must report to Parliament on the state of the market within 90 days after issuing, amending, or revoking an undertaking, or in any case within two years of the previous report.

The AIIA therefore provides a comprehensive regime that allows the Government to monitor the aviation war risk insurance market and to respond to any market failures or uncertainties, which will likely prove especially valuable in times of crisis. This system entirely replaces the aviation related aspects of the former Marine and Aviation War Risks Act,  the short title of which has now been amended to the Marine War Risks Act.

AERONAUTICS ACT – CANADIAN FORCES’ POWER TO INVESTIGATE  INCIDENTS

The amendments to the Aeronautics Act give the Canadian Forces’ Airworthiness Investigative Authority (the “Authority”) jurisdiction to investigate all incidents involving military aircraft or installations in Canada and abroad, similar to the current powers of the Transportation Safety Board of Canada. However, the Authority only has the option of taking over the investigation in military-civilian incidents; should it choose the Authority can observe another agency’s investigation, review the findings, and not conduct its own investigation.

When conducting an investigation, the Authority can compel anyone to give statements  or produce documents or things. These statements and documents cannot be used for legal proceedings other than when there are allegations of perjury. The Authority can also conduct tests on anything, including destructive tests if the owner is present. Resisting the Authority when it seeks to collect a statement or documents, or to conduct a test, will be an indictable offence and could result in imprisonment.

The report produced as a result of an Authority investigation cannot be used in any legal proceeding, and the investigator can generally not be compelled to testify in any proceedings.

Since this new regime only applies to incidents involving military aircraft, its use should be limited especially considering the limited role the report can play in subsequent proceedings. It nonetheless introduces an important new regime for those few incidents that will see its operation.