Use the Lexology Getting The Deal Through tool to compare the answers in this article with those from other jurisdictions.
Which are the key ports in your jurisdiction and what sort of facilities do they comprise? What is the primary purpose of the ports?
Canada has 18 major ports. The most significant are:
- Port of Vancouver, which is Canada’s largest port and the third largest in North America in terms of tonnage (about 140 million tonnes). Its tenants include 27 major marine cargo terminals. It manages more than 16,000 hectares of water, 1,000 hectares of land and about 350km of shoreline in 16 municipalities. The port handles cargos that include automobiles, break-bulk, bulk and containers, as well as ferries and cruise ships.
- Montreal, which is the leading container port in Eastern Canada and also accommodates liquid bulk and dry bulk cargos, handles almost 30 million tonnes of cargo annually.
- Prince Rupert, which services containers, coal, grain, wood pellets, forest products, break-bulk and project cargo and cruise ships. It handles about 20 million tonnes of cargo and is the future site of several potential propane and other facilities, and other bulk cargo terminal projects.
- Halifax, which is Canada’s fourth-largest port as measured by container volume, also manages break-bulk, roll-on, roll-off (ro-ro) and bulk cargos.
Describe any port reform that has been undertaken over the past few decades and the principal port model or models in your jurisdiction.
Canada’s major ports are known as port authorities (CPAs) and were converted from Federal Crown Corporations to CPAs in 1999 pursuant to the federal statute, the Canada Marine Act (CMA). There are 18 CPAs in Canada. The government of Canada is the sole shareholder of each CPA. They are intended to manage Canada’s major ports for the benefit of its citizens. The CPAs operate as autonomous businesses with boards of directors appointed from the private sector and federal, provincial and municipal governments.
There are also many regional ports and dozens of small craft harbours that are owned by the federal government and either operated by Transport Canada or have been leased to municipalities or not for profit corporations. They primarily service Canada’s fishing fleet and domestic marine traffic.
The answers in this chapter do not include regional ports or small craft harbours unless otherwise noted.
State development policy
Is there an overall state policy for the development of ports in your jurisdiction?
Although owned by the federal government, each CPA is autonomous and governed by a board of directors nominated by port user groups and various levels of government with the object of implementing ‘user pay, user say’ principles within the port system.
With respect to carrying out their harbour management roles, CPAs are run on a cost-recovery basis implementing sound business principles, and have the authority and flexibility to determine strategic direction and make commercial decisions.
CPAs set their own fees (eg, berthage and wharfage), but such fees must be fair and reasonable. They are also responsible for the maintenance of commercial shipping channels, and in this regard finance their own dredging requirements.
CPAs are mandated to set commercial, market rates for land tenures, including those provided for terminal development.
What ‘green port’ principles are proposed or required for ports and terminals in your jurisdiction?
CPAs are required by the CMA and its regulations to consider social and environmental impacts in the context of port developments or operations. All CPAs include consideration of environmental sustainability as a core element of their mission. The major CPAs participate in Green Marine, which is a ‘voluntary environmental certification program for the North American marine industry’.
Legislative framework and regulation
Is there a legislative framework for port development or operations in your jurisdiction?
The operation of the CPAs and framework for port development is governed by the CMA and its regulations, the Port Authorities Operations Regulations and the Port Authorities Management Regulations. Each CPA also has a letters patent and by-laws, and has the ability to establish rules and practices and procedures applicable within lands and water under CPA jurisdiction. CPAs are also subject to the Canadian Environmental Assessment Act 2012 (CEAA 2012) and are required by section 67 of CEAA 2012 to carry out an environmental assessment where the project does not trigger the requirement for a federally run environmental assessment.
Is there a regulatory authority for each port or for all ports in your jurisdiction?
A CPA operates on an autonomous basis limited by the CMA and its respective letters patent and by-laws. In addition to CPAs, other authorities with jurisdiction relating to port activities include Transport Canada (the remit of which includes port state control, marine safety and approval of works with the potential to impact navigation), the Department of Fisheries and Oceans, Canadian Coast Guard - Vessel Traffic Services and the relevant regional pilotage authority.
What are the key competences and powers of the port regulatory authority in your jurisdiction?
The CPAs plan and help to develop port projects to best serve the Canadian public now and in the future. They manage marine and land traffic on their premises and operate any port facilities that they directly own. They are responsible for the safety and security of the lands and water within their port, and permitting and approval of all proposed projects on port lands. They lead environmental reviews for projects on port lands that are not designated projects under CEAA 2012. CPAs also operate as landlords to privately owned terminals and marine operations operating in the port, or may develop and operate terminals and marine infrastructure on their own.
How is a harbourmaster for a port in your jurisdiction appointed?
The harbourmaster is typically a senior level manager within a CPA and is either a member of, or reports to, the executive team of the CPA and, ultimately, its chief executive officer.
Are ports in your jurisdiction subject to specific national competition rules?
Are there regulations in relation to the tariffs that are imposed on ports and terminals users in your jurisdictions and how are tariffs collected?
Each CPA has its own tariffs and fees for port users, which are generally collected through the CPA’s tenants on behalf of the CPA or directly from vessels. Port fees and tariffs are subject to review for appropriateness pursuant to the Canada Transportation Act, or in some cases the validity of fees or tariffs may be reviewed by the Federal Court.
Are there restrictions relating to the currency applied to the tariffs or to any fees that are payable by a port operator to the government or port authority? Are any specific currency conditions imposed on port operators more generally?
By statute, all tariffs and fees must be levied and paid in Canadian dollars. There are no specific currency conditions imposed on port operators more generally.
Public service obligations
Does the state have any public service obligations in relation to port access or services? Can it satisfy these obligations through a contract with a private party?
CPAs are subject to a ‘public good’ mandate under the CMA and must endeavour to achieve certain national and regional objectives supporting economic and social benefits for the Canadian public. A CPA can seek to satisfy its obligations by contracting with private parties.
Can a state entity enter into a joint venture with a port operator for the development or operation of a port in your jurisdiction? Is the state’s stake in the venture subject to any percentage threshold?
There are no limitations on the participation of foreign state entities in port developments. Typical involvement by a foreign government includes development and operation of ferry services from Canada to the United States.
Although CPAs must be owned solely by the federal government of Canada, Canada has been transferring the ownership or operation of regional port facilities and small craft harbours to interested Canadian parties since 1995.
The Ports Asset Transfer Program aims to sell or divest certain small port facilities owned by Transport Canada (not including assets under the jurisdiction of CPAs) to ‘interested parties’, which are identified as other federal departments, provincial and municipal governments, aboriginal peoples’ communities and other interested parties. If none of the foregoing show interest then the eligible candidates are private citizens, industry, non-government organisations and CPAs.
Are there restrictions on foreign participation in port projects?
Subject to Canadian laws in general with respect to foreign investment, there is no restriction on foreign ownership of tenants operating in CPA ports and participating in port projects.
Public procurement and PPP
Is the legislation governing procurement and PPP general or specific?
Canada has adopted policies and provided funding which encourage public-private partnership (PPP) projects in appropriate circumstances. The legislation and policies governing procurement are general in nature and are not specific to PPPs or ports. Ports are required under the CMA to establish procurement policies to ensure transparency and fairness.
May the government or relevant port authority consider proposals for port privatisation/PPP other than as part of a formal tender?
CPAs are prohibited from selling lands under their administration unless the CPA has acquired the relevant lands with their own funds and the lands are designated in their letters patent as ‘other than federal real property’. However, certain regional ports are being divested by Canada through the Ports Asset Transfer Program, which is being run through a tender process as described in question 13.
Government policy would generally not support completion of a sale or a PPP arrangement without a competitive procurement process.
Joint venture and concession criteria
What criteria are considered when awarding award port concessions and port joint venture agreements?
CPAs are required by the CMA to charge market rates for rents or concession fees. Subject to this requirement, when conducting a competitive procurement process a CPA will also typically consider social, economic and environmental impacts, including the volume and value of goods to be shipped.
Is there a model PPP agreement that is used for port projects? To what extent can the public body deviate from its terms?
Each CPA has its own preferred PPP structure and its own preferred form of contract. The CPA is free to modify its preferred form of contractual arrangement as it determines, subject to compliance with the CMA and the letters patent for the CPA.
What government approvals are required for the implementation of a port PPP agreement in your jurisdiction? Must any specific law be passed in your jurisdiction for this?
For a PPP project on the premises of a CPA, generally, only approvals from the CPA are required. If the CPA’s letters patent do not permit participating in a PPP, then a supplemental letters patent would need to be issued to the CPA.
On what basis are port projects in your jurisdiction typically implemented?
CPAs in Canada have implemented port projects in a number of ways. In some cases, CPAs have developed their own facilities and then entered into operating concessions or leases of the facilities to operators. In most cases, a form of a build-operate-transfer or a build-own-operate-transfer arrangement (whether via concession agreement or lease) is used.
Is there a minimum or maximum term for port PPPs in your jurisdiction? What is the average term?
There is no minimum term for a PPP. If, as is common, the terminal operator is providing material infrastructure investment, the term of the PPP will typically be at least 25 or 30 years, often with rights of renewal. However, the term (including all rights of renewal) cannot be longer than 60 years without approval of the Minister of Transport.
On what basis can the term be extended?
Subject to the requirement for ministerial approval to exceed total terms of 60 years, CPAs may extend the term of a PPP for a variety of reasons. A fairly common reason to extend the term would be expansion plans, with the terminal operator agreeing to invest in exchange for an extension of the term.
What fee structures are used in your jurisdiction? Are they subject to indexation?
CPAs have the autonomy to implement a variety of fee structures. Arrangements between CPAs and their tenants include fixed rents, participation rents, throughput-based rents and port services fees. Indexation is subject to negotiation on a case-by-case basis, but for longer term contracts some form of indexation is typical.
Does the government provide guarantees in relation to port PPPs or grant the port operator exclusivity?
The federal government does not provide guarantees. Exclusivity is a matter to be negotiated with the CPA, but is unlikely to be granted unless it can be shown to be commercially necessary and the CPA determines that on balance granting exclusivity is for the public good.
Does the government or the port authority provide any other incentives to investors in ports?
There are no incentives generally provided to investors in ports. Some CPAs offer harbour dues reductions to vessel users as an incentive to decrease emissions (greenhouse gas emissions) and to slow down, thereby reducing noise from ships and its impact on whale populations.
Port development and construction
What government approvals are required for a port operator to commence construction at the relevant port? How long does it typically take to obtain approvals?
The length of time to obtain approvals for construction will range from weeks to many years depending on the size and scope of the project. Normally, the proponent of a construction project must obtain permits from the CPA and whichever federal government departments may also regulate the project. In addition, approvals may be required by the Minister of Environment if the project triggers the following:
- Canadian Environmental Assessment Act 2012;
- Transport Canada under the Navigation Protection Act, for infrastructure built in navigable waters;
- Environment Canada, for disposal at sea; or
- Department of Fisheries and Oceans, for projects that may impact fish.
If there are overlaps with lands or matters under provincial jurisdiction, provincial permits or authorisations may also be required.
Does the government or relevant port authority typically undertake any part of the port construction?
The CPA is responsible for port construction that is not related to a specific tenant. To the extent that any tenant-driven construction is performed by the CPA, the CPA may require some form of additional payment (eg, participation rent) to recover its contribution.
Does the port operator have to adhere to any specific construction standards, and may it engage any contractor it wishes?
The CPA has complete control over its procurement processes (subject to any limits in the CMA or its letters patent) although any federal laws that apply to undertakings on federal lands will also apply.
Depending on the permit terms for construction projects by tenants or operators, the CPA may have veto power over the choice of contractors to be hired by the tenant or operator.
What remedies are available for delays and defects in the construction of the port?
The usual array of remedies found in construction contracts will be available. There are no additional legislative or other types of remedies applicable to a port project in particular.
What government approvals are required in your jurisdiction for a port operator to commence operations following construction? How long does it typically take to obtain approvals?
Approvals for a port project are typically acquired prior to the start of construction. These will be obtained from the CPA, other applicable federal regulatory bodies and in some cases applicable provincial regulators. The issuance of these approvals can take from weeks to years depending on the size and complexity of the project and how many regulators are involved.
Once project approvals have been issued, construction has been completed, and any inspections or confirmations required by the project approvals have occurred, the port operator can then commence operations.
What services does a port operator and what services does the port authority typically provide in your jurisdiction? Do the port authorities typically charge the port operator for any services?
CPAs provide the services listed in question 6 and also promote the competitiveness of the CPA as compared to other ports and advocate on behalf of the marine industry. The CPA charges fees that are collected through its tenants or from vessel owners in the case of harbour dues.
Access to hinterland
Does the government or relevant port authority typically give any commitments in relation to access to the hinterland? To what extent does it require the operator to finance development of access routes or interconnections?
Access to interconnections by road or rail is handled on a case-by-case basis involving negotiations with the railway line servicing the CPA’s premises or the neighbouring municipalities. CPAs will typically work to facilitate access, and in some cases may contractually commit the CPA to additional infrastructure investment, subject to whatever arrangements the CPA and the terminal operator make for cost recovery by the CPA.
How do port authorities in your jurisdiction oversee terminal operations and in what circumstances may a port authority require the operator to suspend them?
CPAs manage terminal operations through their contractual arrangements (which focus on land operations) and the CPA’s general by-laws (which focus on marine operations).
Port access and control
In what circumstances may the port authorities in your jurisdiction access the port area or take over port operations?
If there is a breach of the agreement between the CPA and its operator or tenant, the remedies available to the CPA may permit the CPA to take over operations at that facility. Most CPAs also maintain the ability to retake terminals and other CPA property in the case of a national emergency or other public purposes justification.
Failure to operate and maintain
What remedies are available to the port authority or government against a port operator that fails to operate and maintain the port as agreed?
Remedies are based on the terms of the lease or concession agreement and any enforcement measures which are available to the Port Authority pursuant to the Canada Marine Act and its regulations.
What assets must port operators transfer to the relevant port authority on termination of a concession? Must port authorities pay any compensation for transferred assets?
Most CPA agreements provide that any improvements to the property revert to the CPA at the end of the agreement without any compensation to the operator. Parties may negotiate exceptions to this for improvements that either the CPA knows it will want removed, or ones that the operator knows it will want to take and the CPA is preparing to allow them to take.
Special purpose vehicles
Is a port operator that is to construct or operate a port in your jurisdiction permitted (or required) to do so via a special purpose vehicle (SPV)? Must it be incorporated in your jurisdiction?
SPVs are neither prohibited nor required. If an SPV is used, the CPA may require guarantees or other security for some or all of the obligations of the operator. Any corporation or partnership operating in Canada must be registered with the corporate registry of the relevant jurisdiction.
Transferring ownership interests
Are ownership interests in the port operator freely transferable?
Typically the agreement between the CPA and the operator will include restrictions on changes in ownership. In addition changes in ownership may (depending on the size of the transaction and other market factors) require approvals under applicable legislation such as the Competition Act or the Investment Canada Act.
Can the port operator grant security over its rights under the PPP agreement to its project financing banks? Does a port authority in your jurisdiction typically agree to enter into direct agreements with the project financing banks and, if so, what are the key terms?
This will be governed by the agreement between the CPA and the operator. Typically, the operator will be permitted to grant security over its contractual rights. Direct agreements are very common, and will typically include provisions such as notice between the CPA and the lenders of any defaults under either the operator’s agreement with the CPA or the lending agreements, stand-still and step-in rights and other enforcement-related provisions. The CPA will typically preserve the same approval rights on any enforcement action by the lenders as have been negotiated under the agreement with the operator.
Agreement variation and termination
In what circumstances may agreements to construct or operate a port facility be varied or terminated?
This is governed by ordinary contract law and can only be over-ridden under extreme circumstances for national security or public purposes reasons.
What remedies are available to a government or port authority for contractual breach by a port operator?
The same contractual remedies that any private party would have, which could include termination of a contract, eviction or damages.
Must all port PPP agreements be governed by the laws of your jurisdiction?
There is no statutory requirement for this, but it is typically the case.
How are disputes between the government or port authority and the port operator customarily settled?
The PPP contract, lease or concession contract would typically contain dispute resolution provisions, which could include negotiations between senior officers, referee processes, mediation or arbitration. If not, or if the contractually agreed dispute resolution processes do not resolve the dispute, the parties will need to resolve their dispute through litigation.
Updates and trends
Updates and trends
Updates and trends
Canada’s major ports compete directly for cargo with ports in the United States and encounter fierce competition to keep their share of international trade.
The CPAs continue to make large capital investments in infrastructure, including in technology, to meet the growing needs of port users and seek the most efficient means of funding such investments.
Many of the CPAs are very actively working to fulfil their responsibility for environmental stewardship on port lands and waters.
Legislation and regulation
A recent review of the CMA made strong recommendations for changes to be made to enhance the overall competitiveness of Canada’s port system while the CPAs continue to advance their mandate to serve the ‘public good’.