Marine liability and compensation: Limitation of liability for maritime claims

About 70 to 80% of the goods Canadians buy and use are brought to us by ship: we depend on marine shipping for our economy and way of life. When you take into account the amount of goods that are carried by water, it becomes easy to understand the role that limiting shipowner liability plays in supporting maritime trade and our economy.

Why protect marine trade?

Marine shipping contributes around $30 billion to Canada’s economy every year. Canadian businesses need access to world markets and they need marine shipping to get their products to other countries. About 80% of Canada’s marine trade is with countries outside of North America. Marine transportation is also often the only way to supply remote Canadian communities that rely on vessels for essential goods.

Why limit liability?

“Liable” means responsible by law. Here, liability refers to how much money a shipowner could be responsible to pay if they’re involved in an incident at sea.

Limiting the liability of shipowners lets them maintain insurance coverage and helps make their costs more predictable. It also helps victims of a marine incident by making sure that shipowners have money available to compensate for losses and damages. It can help speed up the process, without forcing victims to go through a long court case.

To be compensated for losses or damages, victims of a marine incident in Canadian waters have up to three years from the date of the incident to submit a claim against the shipowner.

In Canada, the International Maritime Organization’s 1996 protocol to the 1976 Convention on Limitation of Liability for Maritime Claims is part of Canada’s Marine Liability Act. It provides a legal system for limiting shipowner liability.

If a vessel has an incident in Canadian waters, the owner can seek to limit their liability under the Convention, whether a claim is for:

  • death
  • personal injury
  • property damage

Both the Marine Liability Act and Convention apply to ships in Canadian waters up to 200 nautical miles offshore.

Who can limit their liability?

Under the Convention, shipowners and salvors can limit their liability from a maritime claim.

In this context “shipowners” include the:

  • owner
  • charterer
  • manager, or
  • operator of a seagoing ship

A salvor is any person that provides services connected with salvage operations, like:

  • raising a ship
  • removing a ship
  • destroying a ship, or
  • rendering a ship harmless

This applies to ships that have:

  • sunk
  • wrecked
  • stranded
  • been abandoned, and
  • anything on board the ship that the salvor tries recover

If it’s proven that loss or damage resulted from a shipowner or salvor’s actions, or omission, committed recklessly, with intent to cause a loss, or with knowledge that the loss was likely, then their right to limit their liability could be broken.

What is a maritime claim?

Claims for compensation under the Convention are known as maritime claims. These include claims for:

  • death or personal injury of passengers, not covered by Part 4 of Marine Liability Act, including people:
    • on board a pleasure craft
    • participating in adventure tourism
    • on manually propelled vessels and
    • training to sail
  • loss or damage to property and infrastructure

Related claims could include claims for:

  • a loss of rights (other than contractual rights)
  • damage caused by removing, destroying, or securing cargo on a ship
  • steps taken by someone who isn’t liable to avoid or reduce losses
  • losses caused by actions taken to limit losses or damage
  • anything that is or has been on board a ship

The Convention does not limit claims that are:

  • for oil pollution damage covered by the International Convention on Civil Liability for Oil Pollution Damage, 1992
  • for nuclear damage
  • made by ‘servants’, like heirs and dependents, whose duties relate to the ship or the salvage operations
  • against the shipowner and relate to raising, removing, destroying or rendering harmless a ship which is:

What are the limits of liability?

Shipowners can limit their liability based on the size of their ship.

Limit of liability for property damage

Limit of liability for property damage
Limit of liability for property damage

Shipowners can limit their liability based on the size of their ship.

Gross Tonnage of Vessel Amount of Insurance Needed*
Ships less than 300 $500,000
Ships between 300 and 2,000 $2.72 million
Ships between 2,000 and 30,000 +$1,086 more per tonne
Ships between 30,000 and 70,000 +$815 more per tonne
Ships above 70,000 +$543 more per tonne

*These values are in Canadian dollars. They were calculated based on Special Drawing Rights, which is a unit of account created by the International Monetary Fund, as of January 2, 2020. The actual amount of compensation available will change depending on conversion rates calculated from the date of an accident.

Limit of liability for loss of life or personal injury

Limit of liability for loss of life or personal injury
Limit of liability for loss of life or personal injury

Shipowners can limit their liability based on the size of their ship.

Gross Tonnage of Vessel Amount of Insurance Needed*
Ships less than 300 $1 million
Ships between 300 and 2,000 $5.43 million
Ships between 2,000 and 30,000 +$2,172 more per tonne
Ships between 30,000 and 70,000 +$1,629 more per tonne
Ships above 70,000 +$1,086 more per tonne

*These values are in Canadian dollars. They were calculated based on Special Drawing Rights, which is a unit of account created by the International Monetary Fund, as of January 2, 2020. The actual amount of compensation available will change depending on conversion rates calculated from the date of an accident.

The Marine Liability Act also sets out limits of liability for ships under 300 gross tonnes. Their limit of liability depends on the type of claim. The limits of liability for vessels under 300 gross tonnes are explained in more detail in section 28 and 29 of the Act.

What if a ship is damaged?

Under the Convention, owners of docks, canals, and ports can limit their liability for damage caused to a ship, cargo, or other property on board. The maximum liability is the higher amount, either:

  • $2,000,000, or
  • the amount of money calculated by multiplying $1,000 by the gross tonnage of the largest ship within the area of the dock, canal or port where the owner had control or management at the time of the accident, or within five years of the accident

If you need more information or have any questions, please email us: MarineLiability-ResponsabiliteMaritime@tc.gc.ca

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