June 25, 2009

Marine Liability Act

The Marine Liability Act (MLA), which came into force on August 8, 2001, is the principal legislation dealing with the liability of shipowners and ship operators in relation to passengers, cargo, pollution and property damage. Its intent is to set limits of liability and establish uniformity by balancing the interests of shipowners and other parties.

The amendments to the MLA in Bill C-7 have three main objectives:

1.   Accede to or ratify marine oil pollution conventions

The passage of the Bill C-7 will make it possible for Canada to ratify two international maritime conventions on liability and compensation for marine oil pollution damage. The Minister of Foreign Affairs will proceed with their accession or ratification.

The first convention is the Supplementary Fund Protocol of 2003 to the 1992 International Oil Pollution Compensation Fund. It provides an additional tier of compensation for damages resulting from the spill of persistent oil (mainly crude oil) from tankers, to the International Oil Pollution Compensation Fund, of which Canada has been a member since 1989. Acceding to this convention will increase the current level of compensation for oil pollution damage caused by tankers in Canada from about $500 million to about $1.5 billion per incident.

The second convention, the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001, deals with oil pollution from the bunkers of all ships other than tankers. Bunker fuel is considered to be any fuel used in the propulsion and operation of the ship and is carried on all motorized vessels. As a result, it is more frequently involved in pollution incidents than spills from oil tankers. Ratification of this convention would enable Canada to rely on the compulsory insurance provisions introduced in the convention as a means of ensuring that the shipowner has the necessary coverage in the event of a bunker oil spill.

2.   Address industry concerns

Bill C-7 addresses the liability of shipowners and operators involved in the marine adventure tourism industry.

During consultations in 2005-2006, industry stakeholders raised many concerns about the liability regime introduced in 2001, which applied equally to both commercial passenger vessels, and marine tourism enterprises and operators. The regime also provided that waivers of liability often used in adventure tourism, would no longer be valid. This loss of a standard risk management practice, combined with new limits of liability introduced in 2001, made insurance unaffordable or commercially unavailable to some tourism operators.

Accordingly, Bill C-7 excludes the marine recreational industry from Part 4 of the Act, in recognition of the unique nature of this recreational industry. By excluding marine adventure tourism from Part 4 of the MLA, the sector would be placed in the same position it was in prior to 2001. This enables operators to purchase adequate insurance against the same limits of liability that always applied to them in Part 3 of the MLA and would give them the same flexibility to use waivers of liability as they had in the past.

With respect to passengers carried on board all other commercial vessels, Bill C-7 also provides for the development of regulations in order to introduce compulsory insurance requirements for commercial passenger vessels, such as cruise ships, ferries and tour boats operating in Canada only.

3.   Reform and modernize Canadian maritime law

Bill C-7 also introduces several other reforms to Canadian maritime law, including the following:

• The establishment a general limitation period of three years in federal law for maritime claims where a limitation period does not currently exist. A limitation period is the period of time in which a claimant can take legal action before such action becomes time-barred.

• The creation of a maritime lien over foreign vessels for unpaid invoices to ship suppliers operating in Canada. Maritime liens currently exist in Canada with respect to crew wages, collisions, salvage and port charges, but not for ship suppliers. Contrary to the situation in Canada, U.S. law specifically grants a U.S.-based ship supplier a maritime lien on a vessel for unpaid bills, thereby giving an advantage to U.S. ship suppliers over their Canadian competitors that may be supplying the same vessel when it calls at a Canadian port. Under the current arrangement, a U.S. lien would be recognized in Canadian courts ahead of any mortgages or similar claims made by Canadian ship suppliers, who are treated as unsecured creditors.

• The harmonization of the French and English text with regards to sistership arrest in the Federal Courts Act.