Canada: An Introduction to Ship Source Oil Pollution Regulations in Canada

Canada has taken steps to protect its marine environment by the implementation of several international conventions through its domestic legislation as well as standalone legislation to prevent and respond to pollution incidents.  

With thanks to Bernard LLP for their contribution to this article.

It is important to note that Canada is a federation, i.e. it has a central Federal government, as well as Provincial and Territorial governments. While matters relating to “navigation and shipping” such as ship source oil pollution are generally regulated by the Federal government under the provisions of Canada’s Constitution, there are elements of ship source pollution, like waste and environmental management, which arguably fall within Provincial jurisdiction. Although this summary will focus on the relevant Federal legislation, in the event of an incident some Provincial and Territorial legislation dealing with environmental matters may come into play depending on the location and nature of any oil pollution incident.

Canada has legislation dealing with both the quasi-criminal (regulatory) aspects and civil liability aspects of ship source pollution. This summary will address both.

Canada is a signatory to and has implemented a number of the international conventions relating to liability and compensation for ship source oil pollution.,

A brief summary of these conventions is as follows:

• The 1992 Civil Liability Convention (CLC), sets limits of liability payable by the registered owner and their insurer for pollution damage caused by the escape or discharge of persistent hydrocarbon mineral oil carried as cargo and -where the tanker has residues of a persistent cargo on-board at the time of the escape or discharge-bunkers. 

Seagoing tankers carrying more than 2,000 tonnes of oil as cargo in bulk are required to maintain adequate insurance to cover liabilities under the CLC. Limits of liability are set by reference to Special Drawing Rights (SDR) and increase with the size of the vessel. The maximum limit for the largest category of ship (140,000 GT or larger) is SDR 89.77 million.

• The 1992 Fund Convention, provides a second level of compensation to claimants in addition to that already provided under the CLC.

• The Supplementary Fund Protocol provides another level of compensation to claimants in addition to that already provided by the  CLC and the Fund Convention 1992. The IOPC Funds administer claims under both the 1992 Fund Convention and the Supplementary Protocol.

• The International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (the Bunkers Convention), which applies to all seagoing vessels carrying oil onboard for the operation or propulsion of the vessel. Pursuant to the Canadian legislation giving the Bunkers Convention the force of law in Canada, it covers damages relating to pollution from bunkers in Canada’s territory, territorial sea or EEZ as well as reasonable pollution prevention measures if there is a grave and imminent threat of pollution damage, the reasonable costs of environmental monitoring and certain categories of economic losses suffered by Indigenous groups and others. The limit of liability for claims under the Bunkers Convention is subject to the limits set out in Canadian law, including the limits set out in the Convention on Limitation of Liability for Maritime Claims (LLMC), which has also been implemented in Canada.  Limits under the LLMC vary according to the size of the vessel. The current limit of liability for property claims for ships not exceeding 2,000 GT is 1.51 million SDR. Additional amounts are added for each ton above 2,000 GT.

The Bunkers Convention requires ships over 1,000 GT to maintain insurance or other financial security to cover pollution liabilities of the registered owner under the Convention. Penalties for failing to carry or produce a Bunkers Convention Certificate include vessel detention and fines of up to CAD 250,000 pursuant to Canada’s Marine Liability Act.

Canada has recently extended the application of the Bunkers convention to non-sea-going vessels, despite the Bunkers Convention only applying to seagoing vessels. International Group Clubs will not be issuing Bunker Convention Blue Cards to non-sea-going vessels, as these fall outside the Convention.

Ship source oil pollution is governed mainly by Parts 8 and 9 of the Canada Shipping Act, 2001, S.C. 2001, c. 26 (“CSA”), along with its regulations. 

Part 8 deals with the obligations of vessels and oil handling facilities to plan for and respond to a spill.  Part 8 and its associated regulations require oil tankers of over 150 GT or more or other vessels of 400 GT or more that carry oil as fuel or cargo and vessels that carry oil as fuel or cargo and that are engaging in towing or pushing at least one other vessel that carries oil as fuel or cargo if the combined gross tonnage of those vessels is 150 GT or more to have an arrangement with a certified response organization. This requirement does not apply to vessels that are only transiting Canada’s territorial sea or EEZ and are not loading or unloading oil during that transit or vessels in waters north of latitude 60 degrees N.

Regulated vessels must enter a contractual arrangement with a certified spill response organization.  The Membership Agreements for Eastern Canada Response Corporation (ECRC) and Western Canada Marine Response Corporation (WCMRC) are both compliant with International Group guidelines and full Club cover is therefore available.

Vessels transiting the Strait of Juan de Fuca will naturally cross the international boundary with Washington State, USA . WCMRC has entered into agreements with US Contingency Plan providers NRC and WSMC to provide coverage for vessels transiting the Straight, avoiding duplication of enrolment fees.  The standard versions of the WSMC and NRC plans are also compliant with IG Guidelines.

Members are advised to contact the Club prior to signing any spill response contracts to ensure that proposed terms do not fall foul of International Group requirements and potentially prejudice cover.

In addition to the above, regulations enacted pursuant to the CSA require every oil tanker of 150 GT or more and every other vessel of 400 GT or more that carries oil as fuel or cargo to have a shipboard oil pollution emergency plan (SOPEP) or a shipboard marine pollution emergency plan (SMPEP) if the vessel is carrying Noxious Liquid Substances on board that meets the requirements of MARPOL.

Under the CSA, every Canadian vessel must have an authorised representative who is responsible for acting in all matters relating to the vessel that are not otherwise assigned by the legislation to another person.

The authorised representative is the owner or bareboat charterer, unless the owner has entered into an arrangement with a “qualified person”.  Owners often choose to enter into a contract with specialist organisations to fulfill this role.

The terms provided by both ECM and Gallagher are compliant with International Group guidelines and Club cover is therefore available where either is appointed to act as an authorised representative.  Members are advised to contact the Club prior to entering any arrangement with a company to act as a qualified person to ensure that proposed terms do not fall foul of International Group requirements and potentially prejudice cover.

Part 7 of the Marine Liability Act 2001(“MLA”) established the SOPF.  The SOPF is Canada’s domestic pollution compensation fund and provides compensation over and above the Conventions or in the case of claims that are not covered by the Conventions.

The SOPF succeeded the Maritime Pollution Claims Fund (MPCF) established in 1973. The money in the original MPCF – collected by levy on oil imported into or exported from Canada from 1972 to 1976 – was transferred to the new SOPF in 1989, a special account established in the accounts of Canada to which interest is credited monthly by the Minister of Finance. Although no levy has been imposed for the Fund (or its predecessor MPCF) since 1976 the Minister of Transport retains the power to reimpose a levy of 56.32 cents per metric ton of oil (as of April 1, 2022).

The SOPF differs from the International Convention Funds in that it covers pollution damage, or anticipated pollution, from any type of oil and any type of ship or boat in Canadian waters. Like the 1992 Fund, the SOPF also covers mystery spills – oil spills from an unknown/unidentified ship. Though the SOPF is both a fund of first and last resort (i.e. a claimant can choose to claim against a shipowner or the SOPF), claims are usually submitted to the owner in the first instance.  An expedited and simplified procedure exists for small claims under CAD 35,000, or following a significant incident, for claims up to CAD 50,000.

Claims settled directly by the SOPF are pursued as a subrogated claim against a shipowner (and their insurer, where applicable).

Any person in Canada that has suffered damages from oil pollution or an anticipated pollution event, may submit a claim. Claimants may include:

•    Canadian Coast Guard
•    Ports, harbours and marinas
•    Fishing & tourism industries
•    All levels of government
•    Corporations
•    Indigenous communities
•    Individuals
•    Coastal landowners and owners of impacted ships or boats

Pursuant to section 101 of the MLA, the SOPF is liable for pollution and related costs, including economic loss, under sections 51, 71 and 77 of the MLA, Article III of the CLC and Article 3 of the Bunkers Convention if, among other things,

a.    Reasonable steps to recover from the owner, the International Fund and Supplementary Fund have been unsuccessful;
b.    The owner of the ship is not liable by reason of the statutory defences available under the MLA, the CLC or the Bunkers Convention;
c.    The claim amount exceeds limits of liability;
d.    The owner is financially unable of meeting their obligations to pay under the MLA or the Conventions; and
e.    The cause of the pollution damage is from an unknown ship.

In addition, and pursuant to section 101(1.1) of the MLA, the SOPF is liable for the costs and expenses of the Minister of Fisheries and Oceans or any other person for response measures following a discharge or possible discharge taken to repair, remedy, minimize or prevent pollution damage even if those costs and expenses did not arise from a grave an imminent threat of possible pollution damage.

Section 103 of the MLA allows a claimant to make a claim to the SOPF for “any kind of loss, damage, costs or expenses arising out of actual or anticipated oil pollution damage, including economic loss caused by oil pollution suffered by persons whose property has not been polluted” as well as future loss of profit or future economic loss.

There is no limit to how much the SOPF can compensate. In the event of a significant incident, the SOPF has access to  a maximum of an additional CAD 50,000,000 per fiscal year.

On 23 March 2023, the IOPC Funds and the SOPF signed a Memorandum of Understanding to enhance readiness, cooperation and efficiency in the handling of claims and to formalise their roles in any future oil pollution incident involving both organisations.

On 4 October 2022 the International Group of P&I Clubs and the SOPF signed a Memorandum of Understanding (MOU) regarding cooperation in the event of a significant spill..  The MoU addresses the manner in which the International Group Clubs and the Fund will work together in the event of a significant oil spill in Canadian waters and highlights the importance placed by both parties on environmental protection, response and clean up and on the need to ensure that claimants that have suffered losses as a result of a significant ship sourced oil spill receive prompt and adequate compensation.

Further information about the SOPF is available here.

The Fisheries Act governs the protection of fish and fish habitat and prohibits a number of activities including depositing or permitting the deposit of “a deleterious substance of any type in water frequented by fish …”(s. 36(3)). “Deleterious substance” includes “any substance that, if added to any water, would degrade or alter or form part of a process of degradation or alteration of the quality of that water so that it is rendered or is likely to be rendered deleterious to fish or fish habitat or to the use by man of fish that frequent that water.”

As of August 2023 the penalties for a contravention of section 36(3) (deposit of a deleterious substance) are set out in section 40(2).

Please see here for a table of fines.

Note that the court may impose a fine less than the above minimum amounts if it is satisfied that the minimum fine would cause undue financial hardship on the convicted person.

Despite the above, under section 38 the owner of a “deleterious substance” (as well as some others) has an obligation to notify, among others, a fishery officer of a deposit or if there is a serious and imminent danger of such a deposit.  The owner (as well as some others) also has the obligation to “take all reasonable measures consistent with public safety and with the conservation and protection of fish and fish habitat to prevent the occurrence or to counteract, mitigate or remedy any adverse effects that result from the occurrence or might reasonably be expected to result from it.”  A fishery officer can, on reasonable grounds, order an owner (as well as some others) to take preventive, counteractive or remedial measures.  The Fisheries Act does not define “owner”.  

As to penalty for contravention of section 38 (obligation to notify; obligation to take remedial measures; obligation to comply with order) the maximum fine for a first offence is CAD 200,000 and for a second offence is CAD 200,000 and/or a term of imprisonment up to six months.

The MBCA was enacted to protect migratory birds and their habitat. Section 5.1 prohibits any “person” or” vessel” from depositing any substance that is harmful to migratory birds in water frequented by such birds. Exceptions are substances authorized by the CSA and its regulations. Additionally, pursuant to section 5.4 every master, chief engineer, owner and operator of a vessel and, if the owner or operator is a corporation, every director and officer of the corporation who is in a position to direct or influence its policies or activities relating to conduct prohibited by section 5.1, must take all reasonable care to ensure that the vessel and all persons on board the vessel comply with section 5.1. “Operator” in relation to a vessel means “a person other than an owner who has, either by law or by contract, the possession and use of the vessel.”

As of August 2023, penalties for vessels of 7,500 deadweight tonnes or over in contravention of section 5.1 (person or vessel depositing a substance that is harmful to migratory birds) are as follows:
  • If the Crown proceeds by way of summary conviction: for a first offence, to a fine of not less than CAD 100,000 and not more than CAD 4,000,000.  For a second or subsequent offence, to a fine of not less than CAD 200,000 and not more than CAD 8,000,000.
  • If the Crown proceeds by way of indictment: for a first offence, to a fine of not less than CAD 500,000 and not more than CAD 6,000,000.  For a second or subsequent offence, to a fine of not less than CAD 1,000,000 and not more than CAD 12,000,000.
In addition to the section 5.1 offences mentioned above, there are specific offences under section 5.2 dealing with, among other things, the willful destruction or alteration of certain ship board documents, and participating in the making of false entries in documents required to be maintained under the MBCA or the CSA (e.g. an oil record book). These offences generally require proof of intent. The penalty amounts as of August 2023 can be found in the table linked below.

The court may impose a fine less than the above minimum amounts if it is satisfied that the minimum fine would cause undue financial hardship on the convicted person.

Finally, if the offence is committed or continued on more than one day then the person or vessel that committed the offence may be convicted for a separate offence for each day on which it is committed or continued.

Please see here for a table of fines.

The AWPPA applies to all “ships” as defined as “any description of vessel or boat used or designed for use in navigation without regard to method or lack of propulsion” and deals with the prevention of pollution in arctic waters which are defined essentially as Canada’s internal waters, territorial sea and exclusive economic zone above the 60th parallel of north latitude, and east of the 141st meridian of west longitude. It sets out offences and punishments for discharging “waste” in Arctic waters and sets powers given to pollution prevention officers to enforce the AWPPA and its associated regulations. Significantly, this legislation has provisions that expose both the owner of a ship and the owner of the cargo to potential liability.

Section 2 defines “waste” as follows:
(a) any substance that, if added to any water, would degrade or alter or form part of a process of degradation or alteration of the quality of that water to an extent that is detrimental to their use by man or by any animal, fish or plant that is useful to man, and
(b) any water that contains a substance in such a quantity or concentration, or that has been so treated, processed or changed, by heat or other means, from a natural state that it would, if added to any other water, degrade or alter or form part of a process of degradation or alteration of the quality of that water to the extent described in paragraph (a)

Section 4(1) prohibits a person or ship from depositing waste or permitting the deposit of waste of any type except as authorized by regulations made under the AWPPA.

Any person or ship found to have violated section 4(1) may be liable to a fine not exceeding CAD 5,000 (in the case of a person) or CAD 100,000 (in the case of a ship).  If the violation continues for more than one day, each day will be considered as a separate offence.

Section 5(1) of AWPPA (as well as the associated regulations) require that any person who has deposited or is in danger of causing a deposit of waste by reason of an accident or other occurrence must forthwith report the deposit or occurrence to a pollution prevention officer.  In addition, section 5(2) requires a master of any ship that “has deposited waste in contravention of subsection 4(1), or that is in distress and for that reason is in danger of causing any deposit of waste” to forthwith report that deposit or condition of distress to a pollution prevention officer.

The AWPPA also provides for civil liability. Section 6 provides that “the owner of any ship that navigates within the arctic waters and the owners of the cargo of any such ship” are jointly and severally civilly liable for the costs and expenses taken by the Government of Canada to repair or remedy and condition that resulted from the deposit of the waste or to reduce or mitigate any damage that resulted or may reasonably be expected to result from the deposit or for the actual loss or damages incurred by other persons.

Pursuant to section 16(1) of the Arctic Waters Pollution Prevention Regulations, C.R.C., c. 354 (the “Regulations”), the maximum liability of a ship owner and cargo owners in respect of an occurrence or series of occurrences resulting in a deposit of waste that causes loss or damage is  2,000 gold francs x ship tonnage, up to a maximum of 210 million gold francs (less any costs and expenses reasonably incurred to repair or remedy and condition that resulted from the deposit of the waste or to reduce or mitigate any damage that resulted or may reasonably be expected to result from the deposit

Converting gold francs to SDRs to CAD as required by the Canada Shipping Act Gold Franc Conversion Regulations, as at 23 August 2023, 210 million gold francs is equivalent to approximately CAD 25,055,000.

In addition to the above, a ship may be found guilty of several other offences, including but not limited to navigating within a shipping safety control zone contrary to regulations or failing to comply with reasonable directions given by pilots, may attract fines not exceeding CAD 25,000. Depending on the time of year and the location in the Arctic, different sizes and classes of vessels may be required to comply with some or all of the requirements of the Arctic Shipping Safety and Pollution Prevention Regulations, S.O.R./2017-286, including the requirement to have an ice navigator onboard.

Part 6 of the MLA deals specifically with civil liability in respect of ship source pollution.  As summarized at the beginning of this document, the MLA incorporates into Canadian law a number of conventions including the CLC, Fund Convention 1992, Supplementary Fund Protocol and the Bunkers Convention.