Purpose
This discussion paper will help Transport Canada collect your views on a proposal to make regulations under the Marine Liability Act and parts of the Wrecked, Abandoned or Hazardous Vessels Act Administrative that set the amounts of administrative monetary penalties (fines) and the classification of violations. The discussion paper also includes potential criteria that could be used by enforcement officers to increase the penalty from the minimum amount. Your feedback on these issues will help us further develop the proposed regulations.
When it comes to ship-source oil spills or incidents that involve hazardous and noxious substances, shipowners and compensation funds financed by cargo owners cover the costs of eligible losses and damage.
Shipowner liability and insurance
Under the Marine Liability Act and the Wrecked, Abandoned or Hazardous Vessels Act, shipowners are strictly liable up to a limit based on the size of their ship for oil pollution damage and the cost of locating, marking and removing a wreck. Owners of ships of a certain size are also legally required to maintain insurance or other financial security and carry a State issued certificate as proof that they can cover their liabilities.
Under the Marine Liability Act, carriers engaged in the transport of passengers by water are liable for death or personal injury from a marine accident. The Regulations Respecting Compulsory Insurance for Ships Carrying Passengers require operators that carry passengers by water to maintain an insurance coverage of at least $250,000 per passenger and carry proof of insurance, to help cover claims of personal injury or death after an accident.
Compensation funds
Once a shipowner’s limit of liability has been reached or if a shipowner can’t meet their liabilities, there are national and international funds set up to cover eligible claims of loss and damage. These funds are financed by levies placed on cargo owners.
Canada is a member of the International Oil Pollution Compensation Funds, which cover loss and damage due to spills of persistent oil from tankers. Canada has also ratified the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea (Hazardous and Noxious Substances Convention) which will create a Hazardous and Noxious Substances Fund, once it comes into force. The fund will provide compensation in the event of an incident that involves hazardous and noxious substances, including non-persistent oil, and other substances like chemicals, liquefied natural gas, and liquefied petroleum gas.
Canada also has the Ship-source Oil Pollution Fund, which provides compensation for ship-source oil spills in Canada from any type of ship. In addition to providing compensation, the domestic fund makes Canada’s contributions to the International Oil Pollution Compensation Funds and will also make contributions to the oil account of the Hazardous and Noxious Substances Fund, once it’s established. For the Ship-source Oil Pollution Fund, no levy has been charged since 1976 and the Government of Canada has no plans to reimpose the levy at this time.
However, if the Minister of Transport were to deem it necessary to reestablish the levy, who would pay into the Ship-source Oil Pollution Fund?
- Receivers or exporters of more than 150,000 tonnes of persistent oil in Canada by sea per calendar year
- Receivers or exporters of more than 20,000 tonnes of non-persistent oil in Canada by sea per calendar year
Receivers of hazardous and noxious substances other than oil do not pay a levy to the Ship-source Oil Pollution Fund, but would be required to contribute directly to the Hazardous and Noxious Substances Fund once it comes into force. The Hazardous and Noxious Substances Fund would also be directly responsible for making sure that receivers pay their contributions. Canada would use internal processes to work with the Fund to make sure that any companies with outstanding contributions pay them.
Reporting under the Marine Liability Act
In support of the above obligations, every year, the Marine Liability Act and the Marine Liability and Information Returns Regulations require receivers or exporters of oil and receivers of hazardous or noxious substances to report to Transport Canada on the type and amount of product they receive or export in a year. Transport Canada shares the information on oil receipts with the Ship-source Oil Pollution Fund to help determine how much the fund owes to the International Oil Pollution Compensation Funds.
A separate annual report is made by Transport Canada to the International Maritime Organization to determine the total amount of hazardous and noxious substances received in states that are party to the Hazardous and Noxious Substances Convention to help determine when that convention will come into force, and to determine what fund contributors should be levied. Once the Hazardous and Noxious Substances Convention comes into force, these annual reports will be made to the new Hazardous and Noxious Substance Fund to determine the contributions to be paid.
Who needs to report to Transport Canada?
- Receivers or exporters of more than 150,000 tonnes of bulk persistent oil in Canada by sea per calendar year
- Receivers or exporters of more than 17,000 tonnes of bulk non-persistent oil in Canada by sea per calendar year
- Receivers of more than 17,000 tonnes of bulk liquefied petroleum gas in Canada by sea per calendar year
- Receivers of any amount of liquefied natural gas (LNG) in Canada by sea per calendar year
- Receivers of more than 17,000 tonnes of any other bulk hazardous or noxious substance in Canada by sea per calendar year
Click here for more information on submitting an annual information return report.
Administrative monetary penalty regime
In 2018, the Marine Liability Act was updated to introduce administrative monetary penalties (fines) for violating parts of the law. This gave the Government of Canada more ways to make sure that receivers or exporters of oil or hazardous or noxious substance meet their obligations. When the Wrecked, Abandoned or Hazardous Vessels Act came into force in 2019, it included administrative monetary penalties for violating parts of the law.
Administrative monetary penalties are financial penalties imposed when a person or company violates a law (legislation) or rule (regulation). It doesn’t involve a criminal prosecution. The fines aren’t supposed to be a punishment, but are to encourage people and companies to comply with Canada’s rules. The maximum fines are:
- $50,000 for a person, and
- $250,000 for a company.
These limits apply to each violation. Multiple violations can result in an amount that exceeds the limits of individual fines. The Marine Liability Act and the Wrecked, Abandoned or Hazardous Vessels Act also give Transport Canada the power to establish a range of penalties and determine the amount of the violation.
In addition, the Marine Liability Act and the Wrecked, Abandoned or Hazardous Vessels Act allow Transport Canada to detain vessels if the shipowner doesn’t have the required proof of insurance, financial security or a certificate issued by a State Party to international conventions (if required). In the event that someone moves a ship that’s detained, they could be subject to an administrative monetary penalty (fine).
Administrative monetary penalties aren’t usually the first step in making sure that people and companies comply with Canada’s laws and rules, but they’re one tool that Transport Canada can use.
Proposed regulations
Transport Canada is proposing regulations that will clarify the amount of the administrative monetary penalty. We are looking for feedback on how violations have been classified and the criteria that would be considered to increase the penalty from the minimum amount.
Classification of violations
Table 1 outlines the Marine Liability Act violations that could be subject to an administrative monetary penalty and includes a proposed classification for each violation.
These violations range from “serious” to “very serious” and this classification affects the minimum fine for each violation. The classification was determined by considering the intent behind the violation and the potential consequences.
Table 1: Violations, classifications and range of possible fines for violating the Marine Liability Act
| Item | Provision | Description | Classification | Possible fines |
|---|---|---|---|---|
| 1 | 74.4(2) | A person or company fails to file an information return for hazardous and noxious substances they received | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 2 | 74.4 (3) | A person or company violates parts of the regulations made for reporting hazardous and noxious substances received | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 3 | 114.1(2)(a) | A person or company fails to pay the levy for contributing oil they received | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 4 | 114.1(2)(b) | A person or company fails to pay the levy for non-persistent oil they received | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 5 | 114.1(2)(c) | A person or company fails to pay the levy for contributing oil they exported | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 6 | 114.1(2)(d) | A person or company fails to pay the levy for non-persistent oil they exported | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 7 | 114.2(1) | A person or company fails to pay an additional levy | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 8 | 117.1(1) | A person or company fails to file an information return for contributing oil and non-persistent oil they received | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 9 | 117.1(1.1) | A person or company fails to file an information return for contributing oil and non-persistent oil they exported | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 10 | 117.3(2) | A person or company blocks or hinders the administrator or knowingly makes a false or misleading statement to the administrator | Very serious | Person: $25,000 to $50,000 Company: $125,000 to $250,000 |
| 11 | 118(1) | A person or company fails to keep records and account books related to information returns at their place of business in Canada, or at any other place in Canada designated by the Minister | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 12 | 118(1.1) | A person or company fails to keep records and account books related to paying levies at their place of business in Canada, or at any other place in Canada designated by the Minister | Serious | Person: $5,000 to $10,000 Company: $25,000 to $50,000 |
| 13 | 118.1 | A person or company fails to provide information to the Minister as directed | Very serious | Person: $25,000 to $50,000 Company: $125,000 to $250,000 |
| 14 | 129 (7) | A person or company moves a ship that’s detained | Very serious | Person: $25,000 to $50,000 Company: $125,000 to $250,000 |
Table 2 outlines the Wrecked, Abandoned or Hazardous Vessels Act violations that could be subject to an administrative monetary penalty in accordance with these proposed regulations and includes a proposed classification for each violation.
These violations are classified as “very serious”, which impacts the minimum fine for each violation. The classification was determined by considering the intent behind the violation and the potential consequences.
Table 2: Violations, classifications and range of possible fines for violating certain parts of the Wrecked, Abandoned or Hazardous Vessels Act
| Item | Provision | Description | Classification | Range |
|---|---|---|---|---|
| 1 | 82 (7) | A person or company moves a ship that is detained for not having a Wreck Removal Convention Certificate | Very serious | Person: $25,000 to $50,000 Company: $125,000 to $250,000 |
| 2 | 82 (8) | A person or company grants clearance to a vessel before a detention order related to a Wreck Removal Convention Certificate has been rescinded | Very serious | Person: $25,000 to $50,000 Company: $125,000 to $250,000 |
Calculating the penalty
Calculating the penalty starts with a minimum fine. For a serious violation, the minimum amount is $5,000 for a person and $25,000 for a company. For a very serious violation, the minimum amount is $25,000 for a person and $125,000 for a company.
The fine is then determined by examining various criteria, which can increase the amount of the fine. We’re considering whether these criteria should be included in the regulations or a policy document. Enforcement officers would be able to adjust the fine from the minimum amount based on the criteria in Table 3.
Enforcement officers would look at both the positive and the negative criteria to determine the amount of the fine, but the amount would always fall within the fine range (in other words, no less than the minimum fine and no more than the maximum fine).
Table 3: Criteria for adjusting administrative monetary penalties
| Number | Criteria |
|---|---|
| 1 | The person or company who committed the violation has a history of non-compliance in the previous 7 years for obligations under the Marine Liability Act or certain parts of the Wrecked, Abandoned or Hazardous Vessels Act |
| 2 | The person or company who committed the violation has been issued an administrative monetary penalty in the previous 7 years |
| 3 | The person or company derived any competitive or economic benefit from the violation |
| 4 | The person or company made reasonable efforts to mitigate or reverse the violation’s effects |
| 5 | There was negligence on the part of the person or company who committed the violation |
| 6 | The person or company provided reasonable assistance to the Minister with respect to the violation |
| 7 | The person or company, after becoming aware of the violation, promptly reported the violation to the Minister |
| 8 | The person or company took steps to prevent recurrence of the violation |
Scenario 1
Company A receives ammonium nitrate and fails to file their information return this year. Company A understood they were required to report, but did not fulfil this obligation. The minimum or base amount of the fine would be $25,000.
Negative factors that affect the fine:
- The company also failed to file their information returns in the last 3 years
- The company didn’t take any steps to avoid repeating the violation
- The company didn’t make a reasonable effort to correct their mistake
- The company understood that they were required to report, but still did not report
- The company didn’t answer Transport Canada’s questions with respect to the violation
Neutral factors that affect the fine:
- The company hasn’t been issued a fine in the last 7 years
- The company didn’t derive any competitive or economic benefit
- The company didn’t report their violation to the Minister
Positive factors that affect the fine:
- n/a
Looking at the negative, neutral and positive factors, the enforcement officer could decide to increase the fine for Company A to the maximum amount of $50,000.
Scenario 2
Company B recently bought a company that receives contributing oil and failed to file their information return this year. When Transport Canada told the company they were required to report, Company B said they would report, but would need several months to put in place a system to properly track the oil receipts. This would keep Canada from fulfilling our reporting obligations to the International Oil Pollution Compensation Funds. The minimum or base amount of the violation would be $25,000.
Negative factors that affect the fine:
- n/a
Neutral factors that affect the fine:
- The company didn’t have a reporting obligation last year
- The company hasn’t been issued a fine in the last 7 years
- The company submitted their report several months after the due date
- The company didn’t derive any competitive or economic benefit
- There was no negligence from Company B as they were not aware that they were violating the legislation
- The company only became aware of the violation when told by Transport Canada
Positive factors that affect the fine:
- The company answered Transport Canada’s questions with respect to the violation
- The company created new systems to prevent the violation being repeated
Looking at the negative, neutral and positive factors, the enforcement officer could determine that the administrative monetary penalty for Company B would stay at $25,000.
Summary
The table summarizes minimum fine and fine range for serious and very serious violations.
Table 4: Range of monetary penalties for serious and very serious violations
| Classification | Minimum fine | Fine range |
|---|---|---|
| Serious violation, person | $5,000 | $5,000 to $10,000 |
| Serious violation, company | $25,000 | $25,000 to $50,000 |
| Very serious violation, person | $25,000 | $25,000 to $50,000 |
| Very serious violation, company | $125,000 | $125,000 to $250,000 |
We look forward to receiving your feedback on this proposed approach for administrative monetary penalties under the Marine Liability Act and parts of the Wrecked, Abandoned or Hazardous Vessels Act.
Please email your feedback to MarineLiability-ResponsabiliteMaritime@tc.gc.ca by January 20, 2025.