Questions and Answers

What is the purpose and function of the Fund?

The Fund is the Canadian fund established for the purpose of ensuring the payment of claims for marine oil pollution that originates from ships. The system is designed to cover the risk of non-payment by the shipowner who is responsible for pollution. It also covers claims for damage and clean-up costs where the identity of the ship that caused the discharge of oil cannot be established, i.e., a mystery spill. Finally, as fund of first recourse at the election of the claimant, the Fund provides an alternative access to justice: its Administrator receives, assesses and settles claims, then goes against the shipowner for recovery of the amount paid.

Who may file a claim with the Administrator of the Fund?

As provided by legislation, any person in Canada including private corporations, municipalities, provinces or the Crown, may file a claim with the Administrator respecting loss, damage, costs and expenses resulting from ship-source pollution. After the Administrator investigates and pays a claim, he or she has a duty to take reasonable measures to recover from the owner of the ship, or any other applicable source, the compensation paid to claimants from the Fund.

Must a claimant suffer property damage in order to claim for economic loss?

No. For example, if a community suffers an economic downturn as a direct result of a ship-source oil spill, any local businesses that can demonstrate an economic loss caused by the spill will be eligible for compensation.

Is compensation available for cultural losses within Indigenous communities?

The Administrator’s interpretation of economic loss covers cultural and ceremonial uses, to the extent that such usage is negatively affected by a ship-source oil pollution incident. In such cases, compensation would extend to the cost of reasonable replacement alternatives. If such a claim were made, the Administrator would almost certainly seek expert assistance during the assessment process in order to better understand and quantify the loss in question.

How difficult is it to submit a claim and can you get help to do it?

Our Claims manuals are easy to use and will help you through the process. Most claimants are able to submit their claims without the need for professional help. However, with large or complex claims, it may be helpful to obtain the advice or assistance of a lawyer or other professional. If this assistance is reasonably necessary, it may be compensated.

What was the original funding mechanism for the Fund and how is the Fund currently maintained?

The Fund succeeded the Maritime Pollution Claims Fund (MPCF) established in 1973. The money in the original MPCF – collected by levy on oil imported into or shipped from a place in Canada from 1972 to 1976 – was transferred to the new Fund in 1989, a special account established in the accounts of Canada to which interest is credited monthly by the Minister of Finance.

How much money was paid out of the Fund to settle Canadian claims during the fiscal year?

During the year 2019-2020, the Administrator paid out $2,671,902 for Canadian claims.

How many claims did the Administrator receive in 2019-2020 and for what aggregate value?

The Administrator received 37 claims for an aggregate value of over $1.8M.

What was the average and spread of claims received in 2019-2020, by amount?

The average value per claim was $50,468; however, 79% of the claims received were below $50,000. The highest claim received this year was for $381,296. Table 1 of the Annual Report, for the spread of the 37 claims received in 2019-2020, by amounts, refers.

Who has claimed with the Fund in 2019-2020?

The Canadian Coast Guard (CCG) was the claimant in the majority of cases (34 out of 37); while one claim was from a private business and two were filed by Indigenous groups.  Table 2 of the Annual Report, Spread of the 37 claims received in 2019-2020, by claimants, refers.

What was the success rate of claimants in terms of percentage of their claim?

On average, claimants were offered 69% of what they asked for. Table 6 of the Annual Report, Percentage of amount paid (including interest) vs. claimed, refers.

Why is there a difference between the amount offered and the amount paid (which is always higher than the amount offered)?

Section 116 of the Marine Liability Act provides that claimants are entitled to interest on their claim from the day their damage occurred. The interest is calculated and paid at the time of the payment by the Administrator and on the basis of the amount of the offer made by the Administrator and accepted by the claimant. Due to the compounded delays of filing the claim, assessing it and agreeing to the offer, interest may accrue over a period of several years.

What is the geographical spread of the Fund’s portfolio?

The Canadian Incident Portfolio Map found at pp. 8-9 of the Annual Report shows the geographical spread of the Administrator’s active files in 2019-2020. British Columbia is the province where the Administrator has the highest number of active files, followed by Newfoundland & Labrador

How much time does it take a claimant to receive an offer after his/her claim has been received by the Administrator’s Office?

In 2019-2020, 69% of the offer letters were issued by the Administrator’s Office within three months of receiving the claim, and 94% were sent within six months.  However, 2 offers were sent more than one year after receiving the claims. These were for large and complex claims, involving further investigation and back and forth discussions between the claimant and the Administrator’s Office. Note that statutory interest accrues in favour of the claimant during the claim assessment process. (Table 5 of the Annual Report indicates the timelines for assessment of the claims.)

What was the Fund’s balance in the special accounts of Canada on March 31, 2020?

The balance in the Fund was close to $410 million ($409,971,174).

What is the maximum liability of the Fund for all claims from one oil spill?

Since December 13, 2018, the Fund no longer has any per-occurrence limit of liability.

If the Minister now re-imposed a levy on shipments of contributing oil, what would be the amount of the levy?

First of all, no levy has been imposed for the Fund and its predecessor MPCF since 1976. However, in accordance with the Marine Liability Act, the Minister of Transport had statutory power to impose a levy of 53.38 cents per metric tonne of contributing oil during the fiscal year 2019-2020. The levy is indexed annually to the consumer price index and has been adjusted to 54.45 cents per metric tonne as from April 1, 2020.

What are the benefits of being a Member State to the 1992 International Conventions and to the Supplementary Fund Protocol?

  1. The Conventions provide for three cumulative layers of liability in case of tanker spills in the waters of a state party to the convention:
  • the 1992 CLC provides for the shipowner’s mandatory insurance up to its limit of liability;
  • the 1992 IOPC Fund Convention provides for up to approximately $534 million per incident (including the shipowner’s limit of liability);
  • the 2003 Supplementary Fund provides for up to an additional $900 million (approximately) per incident.

Together, these three layers of indemnification provided by the international conventions provide for up to some $1.4B per tanker spill incident involving persistent oil.

It should be noted that the exact amount of the various layers of indemnification provided for by the Conventions, depend on the exchange rate in effect at the time of the incident.

How much did the Fund pay to the International Fund in the fiscal year 2019-2020?

$554,235 – Section 1.4 of the Administrator’s 2019-2020 Annual Report refers.

How much has the Fund paid to the International Funds since Canada first became part of the international regime in 1989?

Over $57.5M million ($57,665,925).

How much has the International Regime paid out for Canadian oil spill incidents since 1989?

$11,791,848 was paid for costs and expenses incurred respecting the Rio Orinoco, which grounded on Anticosti Island, October 16, 1990.

How is the Fund different from the International Funds to which Canada is a party?

The International Funds are available only to spills of persistent oil from sea-going tankers. The Ship-source Oil Pollution Fund is unique in that it not only covers sea-going tankers, but it is intended to pay claims regarding oil incidents from all classes of ships such as, general cargo vessels, cruise ships, ferries, tug or barges, fishing vessels or pleasure craft. The Fund covers any type of oil incident from ship-source, for both persistent and non-persistent oil. In addition, the Fund also applies to so-called mystery spills, where the identity of the ship that caused the discharge cannot be established.

What is the benefit of being party to the Bunkers Convention?

Canada is party to the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Bunkers Convention).

The implementation of the international bunker rules in Canada requires that all ships having a gross tonnage greater than 1,000 must maintain insurance or other financial security that allows claimants for oil pollution caused by such ships to go directly against the insurer or other person providing financial security. This feature is of some significance in non-tanker spills handled by the Fund.

Now that the Nairobi International Convention on the Removal of Wrecks is in force in Canada as of July 30, 2019, would claimants need to seek compensation from the insurance held by the shipowner first, then go to the Fund?

Provided a person in Canada suffered damages as a result of ship-source oil pollution, that person would have every right to submit a claim directly to the Administrator. Nevertheless, when a claimant has a statutory right of direct action against an insurer (as in cases covered by the Nairobi Convention), the Administrator checks with claimants to see if they wish to settle directly with the insurer. Where claimants decide to go directly to an insurer, the Administrator keeps the claim file in abeyance, only proceeding with assessment if the claimant does not reach a satisfactory settlement with the insurer.

In 2019-2020, how much was recovered by the Administrator against responsible parties, and in how many files?

In 2019-2020, the Administrator recovered a total of over $1M ($1,051,004). Some 79 files were at various stages of recourse action during the year, including 24 court cases
(pp. 20-22 of the Annual Report refer).

What is Fund 3.0?

Under Fund 3.0, new responsibilities have been given to the senior counsel who leads the Fund’s in-house legal unit and manages its portfolio of incident files. This allows the Administrator to focus more on strategic orientations, policies and guidelines, while remaining the ultimate decision maker. Fund 3.0 is also an effort to develop an in-house legal team to directly represent the Administrator in litigation matters. This effort is particularly significant for recovery actions. The reduced cost of using an in-house legal team to institute and pursue legal proceedings, as compared to relying exclusively on external counsel paid per hour, increases the scope of matters in which efforts can be reasonably pursued to recover from parties responsible for ship-source oil pollution.