The Marine Liability Act (MLA) makes provision for the Ship-source Oil Pollution Fund (SOPF) and the appointment of the Administrator to administer that fund.
Liability and compensation for ship-source oil pollution in Canada is governed by Part 6 of the MLA, Statutes of Canada 2009, Chapter 21. The legislation classifies claims for oil pollution caused by ships into three categories:
Claims governed by the 1992 Civil Liability Convention (CLC) and the 1992 Fund Convention, as supplemented by the Supplementary Fund, being essentially spills originating from oil tankers;
Claims governed by the 2001 Bunkers Convention;
All claims for ship-source oil pollution not governed by the first two regimes.
The claims falling into the first category arise out of spills from tankers carrying persistent oil. Claims in the second category arise out of spills from ships’ bunkers. Claims in the third category arise from oil spills caused by any ship in waters under Canadian jurisdiction (internal waters, territorial waters, exclusive economic zone) that do not fall into the first two categories.
In respect to all three categories of claims, the shipowner is the primary party responsible to pay compensation and is subject to strict liability, meaning that it can only escape liability on the basis of a very limited number of defences set out in the international conventions and in the MLA. The shipowner does, however, enjoy the right to limit its liability in accordance with rules set out in the CLC, in the case of tanker spills governed by that convention and in all other cases by general limitation of liability rules set out in Part 3 of the MLA.
The SOPF performs two functions with respect to claims for ship-source oil pollution damage. Claimants may file their claims with the Administrator (the first resort function) who is obliged to investigate and assess the claim and make an offer of compensation to the extent that he finds the claim to be established. In the event that compensation is paid out of the SOPF, the Administrator steps into the shoes of the claimant (subrogation) and must take all reasonable measures to recover the amount from the shipowner, the international funds or any other party that may be responsible for the oil spill that gave rise to the claim. If the claimant chooses to make its claim directly against the shipowner and its insurer and the international funds, where applicable, the SOPF is available to pay compensation to the extent that the claimant has not been adequately compensated (last resort function).