Madam Chair, ladies and gentlemen of the committee, thank you for inviting me to testify today as part of your study of Bill C-64.
Let me start by saying a few words about the compensation fund. It was created in 1989 under the Marine Liability Act. It is a special account in the accounts of Canada and into which monthly interest is paid by the Minister of Finance. Today, its capital stands at more than $400 million.
The fund is therefore fully capitalized, but the money must be used strictly for the purposes for which it was constituted. Those purposes are to provide compensation for damages caused by ship-source oil pollution, as well as to pay Canada's annual contribution to the International Oil Pollution Compensation Funds. So the administrator of the fund is the only person able to authorize payments from the fund. The administrator is appointed by the Governor in Council and is totally independent. Only the Federal Court can review his or her decisions.
The notion of “polluter pays“ is the program's key principle. This is the context in which the compensation fund provides claimants with access to an additional form of justice by avoiding the need for them to go before the courts, and by providing them with compensation of up to $172 million per accident. After that, the fund sues the polluter.
What is our experience with vessels and wrecks of concern? First, I have to underline that the fund seldom has to pay for oil pollution damages caused by vessels of over 1,000 tonnes. These incidents will normally be indemnified directly by the ship's insurer, as insurance is compulsory for such ships.
The vast majority of the fund's claims portfolio is linked to incidents involving vessels and wrecks of concern. These incidents represent two-thirds of the claims received by the fund and 80% of the final settlement cost paid by the fund over the past decade. This was actually documented in this report, which is on our website. We can leave a sample with the committee as well.
Only 2.2% of the amount settled with claimants over the period of the incidents involving these ships was recovered from the responsible party. The pollution costs of these vessels are escalating. These vessels are essentially vessels under 300 tonnes, such as fishing vessels or ex-fishing vessels, tugs, barges, and pleasure crafts.
Many claims we receive are linked to wreck removal. When the wreck removal operation is triggered by an oil spill incident or imminent risk of spill, we may pay the reasonable costs of preventing oil pollution damages or cleaning up oil pollution damages that are incidental to wreck removal operations. We will not pay for the actual removal or dismantling of the wreck unless the ship itself has become an oily waste, typically an old wooden vessel that has become impregnated with oil, becoming a kind of oil sponge.
What are the potential impacts of Bill C-64 on the fund's claims portfolio? When in force, Bill C-64 should help limit the number of claims brought to the fund, especially with respect to oil damages caused by wreck removals. The benefits should be felt for ships between 300 and 1,000 tonnes, for which the costs of dealing with the oil pollution risk incidental to a wreck removal operation will be borne by the wreck removal insurance. As mentioned, ships over 1,000 tonnes must already be covered by insurance for bunker fuel pollution.
However, in and by itself, Bill C-64 will likely have a marginal impact on our claims portfolio for the following reasons. First, the act will apply only to future occurrences and not to the existing inventory. Second, most of the ships that cause claims to the fund are below 300 tonnes, with no mandatory insurance. Third, many claims are caused by ships that are abandoned or dilapidated vessels, not “wrecks” within the meaning of the convention. Fourth, small vessels and pleasure crafts are the least regulated segments of the Canadian fleet. They are an important and uninsured source of vessels of concern and of oil pollution, and they are an important source of claims with the fund. Fifth, the polluter pays principle is difficult to uphold in circumstances where the owner cannot be identified.
Pending the implementation of other initiatives complementary to Bill C-64—and we know that a number of such initiatives are in the process of being developed or implemented—the fund expects to keep receiving a steady flow of claims linked to ships and wrecks of concern.
Ladies and gentlemen of the committee, I will be pleased to answer your questions.
