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This document was prepared by the staff of the Parliamentary Research Branch to provide Canadian Parliamentarians with plain language background and analysis of proposed government legislation. Legislative summaries are not government documents. They have no official legal status and do not constitute legal advice or opinion. Please note, the Legislative Summary describes the bill as of the date shown at the beginning of the document. For the latest published version of the bill, please consult the parliamentary internet site at www.parl.gc.ca.


LS-307E

 

BILL S-4:  AN ACT TO AMEND THE
CANADA SHIPPING ACT
(MARITIME LIABILITY)

 

Prepared by David Goetz
Law and Government Division
20 November 1997

 


 

LEGISLATIVE HISTORY OF BILL S-4

 

HOUSE OF COMMONS

SENATE

Bill Stage Date Bill Stage Date
First Reading: 11 February 1998 First Reading: 8 October 1997
Second Reading: 23 February 1998 Second Reading: 22 October 1997
Committee Report: 12 March 1998 Committee Report: 12 December 1997
Report Stage: 2 April 1998 Report Stage: 15 December 1997
Third Reading: 2 April 1998 Third Reading: 16 December 1997


Royal Assent:  12 May 1998
Statutes of Canada 1998, c. 6







N.B. Any substantive changes in this Legislative Summary which have been made since the preceding issue are indicated in bold print.

 

 

 

 

 

TABLE OF CONTENTS

 

BACKGROUND

DESCRIPTION AND ANALYSIS

   A.  General Maritime Claims:  Implementing the Limitation of
         Liability Convention and Other Amendments

      1.  Scope of Limitation Regime

         a.  Defendants
         b.  Types of Claims
         c.  Geographic Scope

      2.  Updating Liability Limit Levels

         a.  The New Limits
         b.  Future Amendment of Limits

      3.   Limits for Small Ships

      4.  New Limits for Owners of Docks, Canals and Ports

      5.  Passenger Claims

      6.   Application of Limits

         a.  Limits Represent Aggregate of Claims
         b.  Prioritization of Claims
         c.  Application to Set-Offs and Counterclaims
         d.  Stricter Standard for Setting Aside Limits

      7.  Limitation Funds and Other Procedural Matters

   B.  Oil Pollution Damage Claims

      1.  Extending the Scope of the Regime

         a.  Residual Oil and Other Pollutants
         b.  Internal Waters
         c.   Extra-Territorial Waters
         d.  New Liability for Environmental Reinstatement

      2.  Updating Liability Limit Levels

         a.  New Limits
         b.  Future Amendment of Limits

      3.   Application of Limits

         a.  New Method for Calculating Ships' Tonnage
         b.  Non-Convention Ships
         c.  Stricter Standard for Setting Aside Limits

4.  Changes to Liability Rules

5.  Funding the International Oil Pollution Compensation Fund

         a.  Obligation of Domestic Ship-source Oil Pollution Fund
               to Contribute to International Fund
         b.  Exempting Small Shipments from the Ship-source Fund Levy
         c.  New Powers for Ship-source Fund Administrator
         d.  New Penalty

      6.  Claims against the Ship-source Fund

         a.  Convention v. Non-Convention Ships
         b.  Limitation Period Where No Damage
         c.  Claims for Lost Income

      7.  Miscellaneous

COMMENTARY

 


BILL S-4: AN ACT TO AMEND THE CANADA SHIPPING ACT
(MARITIME LIABILITY)

 

BACKGROUND

Bill S-4, introduced in the Senate on 8 October 1997 (second reading, 22 October 1997), would amend parts of the Canada Shipping Act,(1) which deal with liability for maritime accidents and oil pollution damage.

Bill S-4 reintroduces amendments to the Canada Shipping Act first introduced in the House of Commons as Bill C-58 on 19 September 1996. Bill C-58 completed committee stage amended as proposed by the Standing Committee on Transport in its Report to the House of Commons on 11 December 1996. The bill died on the order paper in April 1997 when the 35th Parliament was dissolved.

For the most part, Bill S-4 seeks to implement the Convention on Limitation of Liability for Maritime Claims, 1976 (hereinafter, the Limitation of Liability Convention) and its 1996 Protocol, as well as the 1992 Protocols to the Convention on Civil Liability for Oil Pollution Damage, 1969 (hereinafter, the Civil Liability Convention), and the 1971 Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (hereinafter, the Fund Convention). In essence, these agreements aim to increase the amount of compensation available to public and private claimants for general maritime damage and for oil pollution damage, while preserving the basic policy of limiting shipowners’ liability.

Limitations on liability have traditionally been accorded to shipowners in most maritime nations. Such limits have served to encourage investment in maritime ventures and to enable shipowners to assess their potential liability more easily and seek appropriate insurance coverage. The previous global standard for shipowner liability limits, set in 1957, has come to be seen as inadequate, as have similar limitations on the liability of owners of docks, canals, ports, and ship-repairers. Moreover, the provisions covering these groups are not uniform.

The existing regime with respect to limits for general maritime claims is set out in sections 574-84 in Part IX of the Canada Shipping Act and is largely based on the International Convention Relating to the Limitation of Liability of Owners of Sea-Going Ships, 1957. The limits on liability set out there have naturally lost value as a result of inflation over the years. Enactment of the proposed amendments to Part IX of the Act would bring Canadian liability limits into line with current global standards, as reflected in the 1976 Limitation of Liability Convention and the 1996 Protocol, and would permit Canada’s accession to these two international agreements. Specifically, Bill S-4 seeks to: substantially increase shipowners’ limits of liability (by anywhere from over 300% to over 2600%, depending on ship tonnage); increase the limits of liability for owners of docks, canals and ports; impose a more stringent test for claimants seeking to get around the liability limits; introduce special provisions regarding liability limits for small ships (less than 300 tons); introduce a special provision on the liability of shipowners to their passengers; and affirm that the maritime liability claims regime applies to ships sailing inland and internal waters.

With respect to oil pollution liability and compensation, the proposed amendments to Part XVI of the Act would implement the 1992 Protocols to the Civil Liability Convention and the Fund Convention. Specifically, Bill S-4 would: increase, from about $120 million to $270 million, the maximum compensation available jointly from shipowners’ liability under the 1969 Civil Liability Convention and the International Compensation Fund to claimants in an oil pollution incident; allow compensation for damage caused by ships with residual oil from previous cargo; allow for recovery of costs incurred for preventative measures in anticipation of a tanker spill; make shipowners liable for the costs of reasonable measures of environmental reinstatement; and extend the geographic scope of the oil pollution liability and compensation regime to the limits of the exclusive economic zone (i.e., the 200-mile limit).

The bill would also significantly streamline the procedure for any future adjustments in shipowners’ liability limits both for general maritime claims and oil pollution damage. The "rapid amendment" procedures adopted in the 1992 and 1996 Protocols allow for the negotiation of new limits by a specified number of Contracting States, rather than a full-scale diplomatic conference. The bill would then allow the Governor in Council to declare such new limits in force, rather than requiring a statutory amendment involving Parliament.

DESCRIPTION AND ANALYSIS

   A. General Maritime Claims: Implementing the Limitation of
        Liability Convention and Other Amendments

Clause 2 of the bill would repeal sections 574 to 584 in Part IX of the Act and replace them with new sections 574 to 583, dealing with the "Limitation of Liability for Maritime Claims."

Most notably, clause 2 would create a new section 575 declaring that Articles 1 through 15 of the Convention on Limitation of Liability for Maritime Claims, 1976, as amended by the Protocol of 1996, had the force of law in Canada.(2) In the event of any inconsistency between Articles 1 to 15 of the Convention and the proposed new sections 576 to 583, the latter would prevail.

      1. Scope of Limitation Regime

         a. Defendants

Article 1 of the Convention defines who is entitled to limit liability under the Convention. Article 1 covers the same people as the current Act (i.e., shipowners, charterers, persons with an interest in the ship, persons in possession of the ship, and managers, operators or agents of the ship),(3) but extends the benefit to salvors not operating from a ship and to insurers of shipowners and salvors. Article 1 also explicitly confirms that officers, servants or agents of the shipowner or salvor are entitled to limit their liability under the Convention. The Article also stipulates that a shipowner’s liability includes any in rem claim against the ship.

         b. Types of Claims

Article 2 defines the types of claims that are subject to liability limitation under the Convention. They are:

a) claims in respect of loss of life or personal injury or loss of or damage to property occurring on board or in direct connection with the operation of the ship or with salvage operations, and any consequential damage;
b) claims for losses resulting from delayed arrival of cargo, passengers or their luggage;
c) claims for other losses resulting from the infringement of non-contractual rights occurring in direct connection with the operation of the ship or salvage operations;
d) claims arising from the raising, removal, destruction or the rendering harmless of a ship which has been sunk, wrecked, stranded or abandoned;
e) claims arising from the removal, destruction or the rendering harmless of the cargo of a ship; and
f) claims in respect of measures taken in order to avert or minimize a loss which is subject to limitation under the Convention.

Article 3 defines the types of claims that are not subject to limitation under the Convention:

a) claims for salvage;
b) claims for oil pollution damage;
c) claims for nuclear damage where limitation of liability for such a claim is prohibited by international convention or national legislation;
d) claims against the owner of a nuclear ship for nuclear damage; and
e) claims by servants of the shipowner or salvor under a contract of service where the law governing the contract either does not allow for limitation of liability or allows it for a higher level than is applicable under the Convention.

Pursuant to Article 15(5), the Convention does not apply to air cushion vehicles (hovercraft) or to floating platforms constructed for the exploitation of natural resources of the seabed or seabed subsoil.

         c. Geographic Scope

Article 15(2)(a) permits a State Party to regulate the limitation of liability for ships intended for navigation on internal and inland waters. Proposed section 576 of the Act would extend the Convention regime to Canadian inland waterways, by redefining the Convention terms "carriage by sea," "ship," and "shipowner" (clause 2). These new definitions are consistent with the scope of the current liability regime in Part IX of the Act.

      2. Updating Liability Limit Levels

         a. The New Limits

Article 6 sets out the limits of liability for any distinct occasion of damage in respect of all claims covered by the Convention other than those for loss of life or personal injury to passengers (these are governed by Article 7). In respect of claims for loss of life or personal injury:

  • 2 million units of account(4) for ships with a tonnage not exceeding 2,000 tons; and for ships with a tonnage in excess of 2,000 tons, the following additional amounts:

  • for each ton from 2,001 to 30,000 tons, 800 units of account;

  • for each ton from 30,001 to 70,000 tons, 600 units of account; and

  • for each ton in excess of 70,000 tons, 400 units of account.

In respect of any other claims:

  • 1 million units of account for ships of up to 2,000 tons; and

  • for ships in excess of 2,000 tons, the following additional amounts:

  • for each ton from 2,001 to 30,000 tons, 400 units of account;

  • for each ton from 30,001 to 70,000 tons, 300 units of account; and

  • for each ton in excess of 70,000 tons, 200 units of account.

         b. Future Amendment of Limits

Clause 2 proposes a new section 579 to implement the new expedited procedure adopted by Article 8 of the 1996 Protocol to the Limitation of Liability Convention for future amendments to the liability limits for general maritime claims. Future adjustments could be negotiated by a specific number of Contracting States and the Governor in Council could then amend the applicable limits in the Act by order in council.

      3. Limits for Small Ships

Article 15(2)(b) gives State Parties the right to make laws for the limitation of liability for ships under 300 tons. The new section 577 of the Canada Shipping Act proposed in clause 2 would limit the liability of such shipowners for claims, other than those relating to the loss of life or personal injury of passengers (which would be covered under the new section 578) to $1 million in the case of loss of life or personal injury, or to $500,000 in respect of any other type of claim.(5)

      4. New Limits for Owners of Docks, Canals and Ports

A new section 583 would update the liability limits of owners of docks, canals and ports for damage or loss caused to ships or anything on board a ship. The liabilities of the owners of such facilities and that of any persons for whose negligence such an owner is responsible would be limited to the greater of $2 million or $1,000 multiplied by the tonnage of the largest ship that had used the dock, canal or port within the previous five years. As is proposed for shipowners under this bill (see 6(d) below), owners of docks, canals or ports would lose the benefit of this limitation if the loss or damage in question was the result of their personal negligence where the damage had been intended or where it had been known that the damage was probable.

      5. Passenger Claims

Article 7 sets the limit for shipowners’ liability for claims by or on behalf of passengers for loss of life or personal injury at 175,000 units of account multiplied by the number of passengers that the ship’s safety certificate authorizes it to carry.(6)

However, Article 7 applies only to such claims in relation to ships that require a certificate under Part V of the Act (i.e., ships over 5 tons gross tonnage capable of carrying more than 12 passengers(7)) and where there is a contract of passenger carriage (or where the person, with the consent of the carrier, is accompanying a vehicle or live animals covered under a contract for the carriage of goods). The new section 578, proposed in clause 2, would cover these scenarios. For claims for the death or personal injury of passengers on ships that do not require a certificate under Part V, the new section 578(1) would limit shipowners’ liability to: either 2 million units of account or the product of 175,000 units of account and the number of passengers on board, whichever was greater. For passenger claims where there was no contract of carriage, the proposed section 578(2) would limit shipowners’ liability to 175,000 units of account multiplied by the number of passengers that the ship was authorized to carry.

Clause 1 of the bill would repeal section 565(4) of the Act, which has been relied on by shipowners to contract out of liability to their passengers. It is an interpretive provision which stipulates that nothing in section 565 (which apportions liability among vessels involved in collisions) is to be construed as affecting liability under a contract or the right of anyone to legally limit their liability.

Clause 3 of the bill would repeal section 587 of the Act, which imposes a special limit on shipowners’ liability (set at $200) for loss or damage to passengers’ luggage.

      6. Application of Limits

         a. Limits Represent Aggregate of Claims

Article 9 confirms that the liability limits set out in Articles 6 and 7 respectively apply to the total of all such claims arising on any distinct occasion. This reflects the existing legislation (see section 577(2) of the Act).

         b. Prioritization of Claims

Article 6 allows for certain priorities among claims. To the extent that claims for loss of life or personal injury exceed the liability limits for that type of damage, these claims can share in the funds available for property damage under the Convention. Furthermore, Article 6 allows State Parties to the Convention to provide in their national law that claims for damage to harbour works, basins, waterways and navigational aids have priority over other property claims.

         c. Application to Set-Offs and Counterclaims

Pursuant to Article 5, where a person entitled to limit liability under the Convention has a counter-claim against the claimant arising out of the same occurrence, the respective claims shall be set off against one another and the liability limits will apply only to any balance owing by a person with limited liability under the Convention.

         d. Stricter Standard for Setting Aside Limits

Article 4 describes conduct that will disentitle a person from taking advantage of the liability limits under the Convention. For this to happen, the loss in question must have resulted from the personal negligence of that person where the damage had been intended or where it had been known that the damage was probable.

      7. Limitation Funds and Other Procedural Matters

Article 10 confirms that it is not necessary for a defendant to constitute a limitation fund in order to invoke the liability limitations in the Convention, although State Parties are permitted to enact such a condition in their national law.

According to Article 11, any person alleged to be liable for a claim subject to limitation under the Convention may constitute a limitation fund with the court of the State Party where legal proceedings are instituted. This is done by payment into court, or production of an acceptable guarantee, of sums equivalent to the applicable liability limits, according to Articles 6 or 7, plus interest from the date of the occurrence to the date of the constitution of the fund. Where more than one co-defendant is liable for the same breach (e.g., shipowner and shipowner’s servant), a fund constituted by one of them, or that party’s insurer, is deemed to have been constituted by all co-defendants.

Article 12 preserves and formalizes existing rules for distribution of a limitation fund among claimants in proportion to their established claim against the fund. It also specifies a right of subrogation for a person liable who has already paid a claim to the right of the claimant with whom the settlement was made.

Article 13 prohibits claimants against a fund from seizing and claiming against other assets of a person on whose behalf the fund has been constituted. This Article also establishes a procedure whereby courts can release a ship or other property seized where a limitation fund has already been constituted in another State Party. Similar provisions exist in the current law (see section 583 of the Act).

The proposed sections 580 to 582 in clause 2 would deal with certain procedural matters in relation to litigation in Canadian courts of claims covered by the Convention.

The new section 580(1) would preserve the exclusive jurisdiction of the Admiralty Court in relation to the constitution and distribution of limitation funds. The proposed section 580(2) would confirm the right of a person entitled to limit liability under the bill and the Convention to plead the limitation in any court of competent jurisdiction in Canada.

The new section 581(1) to (4) would confirm the power of the Admiralty Court to deal with the constitution and distribution of limitation funds; control persons entitled to claim against the fund; set aside moneys from a fund for proceedings outside Canada; control duplicate litigation; prevent maritime liens from interfering with the distribution of limitation funds; and make rules of procedure. The proposed section 581(5) would establish the interest rate payable on constituting a limitation fund, adopting the rate payable by the Minister of National Revenue under the Income Tax Act in respect of refunds of tax overpayments.

The new section 582 would deal with certain aspects of the release of ships arrested in relation to general maritime claims covered by the bill and the 1976 Convention. Where a ship had been ordered released by the court because of the constitution of a limitation fund, the person who applied for the release would be deemed to have submitted to the jurisdiction of that court for the purposes of determining the claim. On consideration of an application for release of an arrested ship or other property, under the new section 582 the court would be required to disregard a limitation fund constituted outside Canada unless it was satisfied that the country was a State Party to the Convention. These provisions of the bill largely reflect the current law (see section 583 of the Act).

   B. Oil Pollution Damage Claims

The following proposed amendments relate mainly to Part XVI (Civil Liability and Compensation for Pollution) of the Act and would essentially implement the 1992 Protocols to the 1969 Civil Liability Convention and the 1971 Fund Convention, respectively.

      1. Extending the Scope of the Regime

Clauses 4 and 5 of the bill would update and amend certain definitions in Parts XV (Pollution Prevention and Control) and XVI (Civil Liability and Compensation for Pollution). The changes, which are primarily consequential, would bring the definitions into conformity with the 1992 Protocols to the 1969 Convention on Civil Liability for Oil Pollution Damage.

         a. Residual Oil and Other Pollutants

The definition of "Convention ship" would be extended to include ships with residues of oil from previous cargo and the definition of "pollutant" would be amended to include "any aquatic organism and pathogen."

         b. Internal Waters

Clauses 4 and 5 would also amend the definition of "ship" to make it clear that the term included vessels operating in the internal and inland waters of Canada. Clause 6 would replace section 675 of the Act to extend the geographical application of Part XVI (Civil Liability and Compensation for Pollution) in respect of Convention ships to any area of actual or anticipated pollution damage in the internal waters of Canada or of any other party to the Civil Liability Convention.

         c. Extra-Territorial Waters

Clause 6 would also extend the application of Part XVI to the exclusive economic zone of Canada or that of any other party to the Convention. Where such a state had not established an exclusive economic zone, application would be extended to any waters adjacent to that state’s territorial sea, up to a distance of 200 nautical miles. Such extensions would be in accordance with the 1992 Protocols to the 1969 Convention.

         d. New Liability for Environmental Reinstatement

Clause 7(3) of the bill would create a new section 677(2) to implement a feature of the 1992 Protocols by establishing liability of shipowners for reasonable measures of reinstatement in respect of environmental impairment caused by oil pollution.

      2. Updating Liability Limit Levels

         a. New Limits

Clause 10 of the bill would amend section 679 of the Act to increase significantly the limits on liability of shipowners of Convention ships for pollution occurrences, by implementing the limits adopted in the 1992 Protocol to the 1969 Convention. This would represent a 326% increase over the limits set under the 1969 Convention and a 125% increase over the recovery available under the 1971 Fund Convention.(8)

         b. Future Amendment of Limits

Clause 10 would also adopt the new "rapid amendment procedure" for future amendments to the liability limits for oil pollution damage. This would allow the Governor in Council to amend the limits in accordance with those agreed to by a specified number of Contracting States in the manner set out in Article 15 of the 1992 Protocol to the 1969 Convention.

      3. Application of Limits

         a. New Method for Calculating Ships’ Tonnage

Clause 10 would change the method of calculating a ship’s tonnage for the purposes of the oil pollution liability limits. In future, tonnage would be the gross tonnage established in accordance with the 1969 International Convention for the Tonnage Measurement of Ships.

         b. Non-Convention Ships

The term "Convention ships" refers essentially to ships that carry oil as bulk cargo.(9)

Clause 10 would adopt new liability limits in respect of oil pollution damage for non-Convention ships. For such ships up to 300 tons, the limits would be those set out in clause 2 for general maritime claims (where loss of life or personal injury was involved, $1 million, otherwise, $500,000, exclusive of any claims for losses by passengers). For non-Convention ships in excess of 300 tons, limits would be those set out in the Article 6 of the Limitation of Liability Convention (see 2a in Part A, above).

         c. Stricter Standard for Setting Aside Limits

Clause 10 would restrict the conditions in which claimants could circumvent the liability limitations by proving shipowners’ personal negligence. Currently, section 679(1) deprives shipowners of the benefit of the liability limits where there has been "actual fault or privity" on their part. Under the new section 679(2) proposed in clause 10 of the bill, in order to prevent application of the liability limits in respect of their claim, plaintiffs would have to show not only personal fault on the part of the shipowners, but also an intent to cause pollution damage or at least reckless conduct with the knowledge that such damage was a probable consequence.

      4. Changes to Liability Rules

The 1969 Civil Liability Convention and the 1971 Fund Convention direct liability for an oil spill to the shipowner and prohibit claims against servants or agents of the shipowner. This is referred to as "channelling" of liability. In accordance with the 1992 Protocols, clause 12 of the bill would replace section 681(2) of the Act so as to extend channelling to preclude claims against: a ship’s pilot; a charterer; a person performing salvage operations with the consent of the shipowner or on the instructions of a competent public authority; any person taking measures to prevent oil pollution damage from the ship; and any servant or agent of such persons. These persons would, however, be exposed to personal liability where damage was the result of their personal conduct undertaken with the intent to cause damage or through recklessness, knowing that the damage would probably result.

Clause 12 would also add section 681(3) to the Act, to impose joint and several liability for damages caused by two or more Convention ships where such damages were not reasonably separable between or among them. This would implement a provision of the 1969 Civil Liability Convention which is substantially carried forward in the 1992 Protocol.

      5. Funding the International Oil Pollution Compensation Fund

The International Fund was established by the 1971 Fund Convention and is designed to cover claims in excess of the shipowners’ liability limits. Canada also has a domestic fund, the Ship-source Oil Pollution Fund, which is designed to cover claims not recoverable from persons liable or the International Fund.

         a. Obligation of Domestic Ship-source Oil Pollution Fund to
             Contribute to International Fund

Clause 17 would replace section 701(1) of the Act. The clause would preserve the obligation in that section for the payment of contributions to the International Fund from the domestic Ship-source Oil Pollution Fund, in accordance with Articles 10 and 12 of the Fund Convention. Contributions to the International Fund are made on the basis of contributing oil (oil shipped to or from a member country as bulk cargo) reported in each member state.

Clause 17 would also maintain the existing provision in section 701(1) requiring the Administrator of the Ship-source Fund to communicate to the Director of the International Fund the names and addresses of persons receiving contributing oil and the quantities received, in accordance with Article 15 of the Fund Convention. Clause 17 would add, however, that the Administrator of the Ship-source Fund would be liable to the International Fund for any financial loss occasioned by failure to fulfil these reporting requirements. This provision would respond to a new provision in Article 15 of the Fund Convention which imposes liability on member states for losses to the International Fund in such cases. Clause 18 would amend section 702 of the Act to allow the Administrator to pay any such liability out of the Ship-source Fund.

         b. Exempting Small Shipments from the Ship-source Fund Levy

Clause 22 of the bill would amend section 716(1) of the Act to establish a threshold for the Ship-source Oil Pollution Fund levy, which, when it is in effect, is to be collected on oil shipped to or from Canada as bulk cargo. The purpose of the levy is to help fund the Ship-source Fund and, indirectly, the International Fund. Clause 22 would exempt shipments of oil of up to 300 tons from the levy as collection on small shipments is considered uneconomical.

         c. New Powers for Ship-source Fund Administrator

Clause 17 would give new powers to the Ship-source Fund Administrator to verify and obtain information relating to the receipt and reporting of contributing oil. Specifically, clause 17 would add section 701(1.2) to the Act in order to give the Administrator the power to:

  • enter any premises at any reasonable time in the belief, on reasonable grounds, that they contain records that relate to the receipt and reporting of contributing oil;

  • examine, take away or copy any such record; and

  • require an owner, occupant or person in charge to give all reasonable assistance in connection with the examination; to answer all proper questions; and, for that purpose, to require such a person to attend at the premises with the Administrator.

Moreover, clause 17 would add section 701(1.3) to the Act to prohibit the obstruction or hindering of the Administrator in the exercise of the above powers. The new section would also prohibit the making of a false or misleading statement to the Administrator exercising those powers.

Proposed section 701(1.4) would have certain restrictions to ensure that, where the premises to be entered were a dwelling-house, the Administrator would first have to obtain the consent of the occupant of that dwelling-house or a warrant issued under the proposed section 701(1.5). This new provision would allow a justice of the peace to sign and issue a search warrant where he or she was satisfied that:

  • there were reasonable grounds to believe that there were records in the dwelling-house relating to the receipt and reporting of contributing oil;

  • entry into the dwelling-house was necessary for the Administrator’s compliance with the above reporting requirements vis--vis the International Fund; and

  • entry into the dwelling-house had been refused or there were reasonable grounds to believe that it would be refused.

         d. New Penalty

Clause 25 would amend section 725(2) of the Act to provide a penalty (on summary conviction, a fine of up to $100 a day for each day of default) for failing to file information with the Minister of Transport regarding oil shipments as required by regulations issued under section 719(c) of the Act. This section deals with information necessary for the Administrator of the Ship-source Fund to comply with the payment and reporting requirements in section 701 with respect to the International Fund. Section 725(2) already provides for the same penalty for failing to file information returns with the Minister pursuant to regulations under section 719(b) with respect to oil shipments subject to the Ship-source Fund levy under section 716.

      6. Claims against the Ship-source Fund

         a. Convention v. Non-Convention Ships

Clause 19(1) would replace section 709(c) of the Act with a new provision differentiating between the Ship-source Oil Pollution Fund’s liability for claims for Convention ships and other ships. With respect to Convention ships, clause 19(1) would maintain the Ship-source Fund’s liability for claim amounts in excess of shipowners’ maximum liability under Part XVI (but as amended by this bill) which are not recoverable from the International Fund. With respect to non-Convention ships, liability would be imposed on the Ship-source Fund for claim amounts that exceeded the owner’s maximum liability under the new general maritime liability limitations in the clause 2 amendments to Part IX of the Act (see 2 in part A, above).

         b. Limitation Period Where No Damage

Clause 20(2) of the bill would replace section 710(1)(b) of the Act, which currently requires a claim for loss, costs or expenses to be filed with the Administrator of the Ship-source Fund within one year in cases where there has been no oil pollution damage (e.g., where claim is for preventative measures only). Clause 20(2) would extend this period to five years, thereby providing greater harmony with the six-year limitation period for claims against shipowners under section 677(10)(b), while still leaving one year for the Ship-source Fund to exercise its right to make a subrogated claim against the shipowner.

         c. Claims for Lost Income

Section 712 of the Act governs claims against the Ship-source Oil Pollution Fund for loss of income by certain persons (i.e., those who are dependent on the waters for their livelihood). Clause 21 would attempt to clarify this provision and to harmonize it with those for other types of claims, as well as to facilitate such claims.

Clause 21(1) of the French version of the bill, clause 21(2) of the English version, and clauses 21(4) and 21(5) in both official languages would amend sections 712(1) and 712(8) of the Act to clarify that a plaintiff claiming lost income from the Ship-source Fund for an oil pollution incident would not have to exhaust all other legal remedies before filing a claim with the Fund Administrator.

Clause 21(3) would add section 712(3.1) to the Act to make it clear that a claimant for loss of income under that section would not have to satisfy the Administrator of the Fund that the pollution occurrence giving rise to the claim had been caused by a ship. It would be sufficient that the Administrator was not convinced that the pollution was from some other source. An identical provision already exists with respect to other claims against the Fund (see section 710(5)).

      7. Miscellaneous

Clause 16 of the bill would repeal section 700 of the Act, which, enacted in accordance with Article 5 of the 1971 Fund Convention, had envisioned extra costs (particularly insurance costs) to shipowners as a result of the compensation guaranteed to claimants under the 1969 Civil Liability Convention, which extra costs should be indemnified by the Fund. Subsequent experience has apparently not borne out the need for this provision, however. The provision on shipowner indemnification for extra costs was dropped from the 1992 Protocol to the Fund Convention.

COMMENTARY

Groups affected by this proposed legislation would include: shipowners, general cargo owners, oil cargo owners, passengers, marine insurers and the marine law community. While most of these stakeholders agree that the existing liability limitations should be revised, smaller operators have expressed concern that their insurance costs would be significantly increased as a result. Specifically with respect to the oil pollution damage provisions, the Canadian oil industry favours Canadian accession to the 1992 Protocols; however, it feels that contributions to the International Oil Pollution Compensation Fund should be made out of the Ship-source Oil Pollution Fund as it exists, rather than through another levy.

With respect to the bill’s proposed amendments to Part XVI, there may be particular cause for urgency. Any delay in the transition from the 1969-1971 regime to that of the 1992 Protocol would expose states remaining in the 1971 Fund to higher contributions for any claims falling under that regime.


(1)  R.S.C. 1985, c. S-9, Parts IX and XVI, as amended.

(2)  Under clause 2 of the bill, Article 7 – which deals with claims for loss of life or personal injury of passengers – would have the force of law in Canada only upon the coming into force of the new section 578, which is also proposed in clause 2. Under clause 31 of the bill, the new section 578 would only come into force on proclamation by the Governor in Council, whereas the rest of clause 2 (and the other provisions of the Limitation of Liability Convention) would come into force 90 days after Royal Assent.

(3)  See sections 575 and 577 of the current Act.

(4)  Article 8 defines the unit of account in which the liability limits in the Convention are now to be valued. Units of account are equivalent to special drawing rights under the International Monetary Fund (IMF) and are to be converted into the appropriate national currency in accordance with the method used by the IMF. In 1997, such a unit of account would be worth approximately $2.

Article 8(2) establishes a method of calculating the value of the liability limits for states that are not members of the IMF and whose laws do not permit the use of the above unit of account formula; this does not apply in the case of Canada. Under the current Act, the limitations are expressed in "gold franc."

(5)  However, under the proposed section 577(3), until the coming into force of the new section 578 (see clause 31), which deals specifically with claims for the death or personal injury of passengers, the proposed limits in the new section 577(1) would apply in relation to ships under 300 tons and those in Article 6 of the Convention (which would be given the force of law by the proposed section 575(1)) would apply in respect of ships in excess of 300 tons.

(6)  These are dealt with in Part V of the Act.

(7)  See section 406 of the Act.

(8)  The new limits would be as follows. For ships up to 5,000 tons: 3 million units of account; for ships that exceed 5,000 tons: the lesser of (a) the aggregate of 3 million units of account for the first 5,000 tons and 420 units for each additional ton and (b) 59.7 million units of account.

(9)  Section 673 of the Act.