Marine Liability and Compensation: Oil Spills

Since the 1970s, the number of ship-source oil spills and the volume of oil released during these spills has decreased by 95%, thanks to marine safety improvements. However even with a lower risk, we’re still improving the way compensation is provided for damage caused by oil spills.

In 2018, Canada took a significant step to improve our system for compensating victims of ship-source oil pollution. This included changes to the Marine Liability Act to make sure compensation is available for victims and responders of ship-source oil pollution caused by any type of oil from any type of ship.

Eligible claims, including environmental remediation, are now 100% compensable no matter the size of the spill.

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Compensation for Ship-source Oil Spills in Canada

Liability and compensation for ship-source oil pollution in Canada is based on international conventions developed by the International Maritime Organization which make sure the polluter pays.

Polluters are financially responsible, even if the spill is accidental. The system is not based on penalties or criminal charges. If a shipowner’s insurance doesn’t cover the full costs of pollution, there are also international and domestic funds available, which are financed by the oil industry.

Spills from Oil Tankers

If a shipowner’s oil tanker spilled its cargo in Canadian waters, they would be liable for up to $162 million depending on the size of their ship.Footnote * If the costs of the spill were more than the shipowner’s limit of liability, additional compensation could be paid by international funds financed by industry and distributed by the International Oil Pollution Compensation Funds (IOPC Funds). A total of $1.37 billion is available from shipowners and the IOPC Funds.Footnote *

If the costs of ship-source oil pollution are more than the amount of compensation available from the international conventions, Canada’s Ship-source Oil Pollution Fund (SOPF) can help make sure all victims are compensated. There’s no limit to the amount of compensation available from the SOPF for eligible claims.

Smaller Incidents

Even in smaller incidents, like when a ship spills the fuel it uses to propel itself, the shipowner is liable up to a limit that is based on the ship’s size. The larger the ship, the higher the limit of liability. For example, a shipowner is liable to provide compensation of up to $500,000 for ships not exceeding 300 gross tonnes, and over $66.9 million for ships larger than 70,000 gross tonnes.Footnote *

The Ship-source Oil Pollution Fund

Canada’s domestic oil spill compensation fund is the Ship-source Oil Pollution Fund (SOPF), which is funded by industry.

The SOPF provides compensation for oil pollution damage caused by any type of oil spill from any type of vessel, even when the cause of the spill is not known. Any person in Canada who has suffered a loss, or incurred costs related to oil pollution damage in Canadian waters can file a claim directly with the SOPF.

Once a claim is assessed and paid, the Administrator of the SOPF is required to take all reasonable steps to recover compensation from the polluter. These recovered amounts go back into the SOPF’s accounts and help make sure that industry-funded compensation is available in the event of future spills. There are no costs or fees to submit a claim directly to the SOPF.

How should claims be submitted?

To be entitled to compensation, you must provide:

  • A description of the incident
  • A description of the loss or damage that you’ve suffered or the cost that you’ve incurred because of the incident

You should present your claims with supporting documentation like:

  • invoices
  • photographs
  • explanatory notes
  • account ledgers

It’s important that the documentation is complete and accurate in order for the claim to be processed. For more information on how to submit a claim, please visit the Ship-source Oil Pollution Fund’s website or visit our webpage on how to get compensation for a ship-source spill.

You should submit your claim as soon as you know your total costs after an incident. The SOPF will accept eligible claims up to two years from the date of the pollution damage, but no more than five years after the date of the incident.

The Small Claims Process

The SOPF has a new, faster process where claims less than $35,000 submitted within one year of damage can be paid within 60 days. Documentation isn’t needed when submitting the claim, but once compensation has been paid, you may need to provide supporting documentation for your claim up to three years after the date of the oil pollution damage.

 

What is Eligible for Compensation?

The following types of loss or damage are accepted:

Pollution Prevention Measures

Compensation is available for expenses for preventive measures even if no oil pollution occurs, as long as there was a serious and imminent threat of oil pollution damage. Any reasonable steps taken after an incident to prevent or minimize pollution damage are also eligible.

Example: A ship grounds, its hull cracks and trained responders from a local First Nation deploy a boom to prevent pollution.

Clean-up Costs

Compensation can help recoup the cost of reasonable clean-up measures.

Example: If wildlife is oiled in a spill, reasonable costs associated with the cleaning and rehabilitation of the animals, such as birds, mammals and reptiles, are accepted.

Property Damage

Compensation is available for reasonable costs of cleaning, repairing or replacing property that has been contaminated by oil.

Example: If ship-source oil pollution has contaminated fishing gear, compensation is available for cleaning or repairing the equipment.

Fisheries Losses

You can submit a claim for the loss of profit related to commercial and recreational fisheries, aquaculture and fish processing sectors.

Example: If a fishery closes, a licensed commercial fishery can claim their loss of revenue.

Tourism Losses

The local tourism industry can submit a claim for their loss of profit, if the loss was caused by ship-source oil pollution.

Example: Ship-source oil pollution contaminates the beach nearest to a hotel and for that reason its normal vacancy rate is affected. Hotel owners can make a claim for that loss.

Environmental Remediation

Compensation is available to cover the costs of reasonable environmental reinstatement work, which could include post-spill studies like an assessment of environmental impacts, aimed at speeding up the natural recovery process.

Example: The cost of a study to establish the extent of environmental damage to decide whether remediation measures are necessary and feasible.

 

Food, Social and Ceremonial Losses

If an Indigenous group or person can’t access the resources they need for food, social and ceremonial purposes because of ship-source oil pollution, they may submit a claim for compensation.

The ability to harvest fish and other aquatic species for food, social or ceremonial purposes is important to the culture of many Indigenous people in Canada, who have raised concerns about their ability to exercise their right to harvest in the event ship-source oil pollution in their territory.

The goal of the Marine Liability Act is to restore the lives of claimants to pre-spill standard and does not prevent or limit claims related to Aboriginal fishing losses.

For example, if a fishery is closed because of a ship-source oil spill, Indigenous groups with Communal Fishing Licenses can claim for costs of getting fish for food, social or ceremonial purposes. This would include:

  • Buying fish from an outside supplier, or
  • Additional costs of arranging access and fishing at another location

In some cases, the Ship-source Oil Pollution Fund can provide compensation ahead of losses that haven’t occurred, but will most certainly occur. For example, if someone usually fishes for themselves or their family, but can’t safely fish because of a ship-source spill, they may submit a claim to the SOPF for future losses. This lets the victims of ship-source oil pollution buy the fish and resources they need to replace what they can’t catch themselves.

Claims for compensation need to be made within the timeframes set out in the Marine Liability Act and documentation needs to be provided to show what expenses have been reasonably incurred because of a pollution incident.

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