Canada: The HNS Convention 2010 Is Coming To Canada

Last Updated: December 23 2013
Article by Graham Walker and Robert Wilkins

Most Read Contributor in Canada, September 2016

Although it is not yet in force, Canada is taking steps to implement the International Convention on Liability and Compensation for Damage in Connection with the Carriage of Hazardous and Noxious Substances by Sea 2010, commonly termed the "HNS Convention". On October 18, 2013, Bill C-3, Safeguarding Canada's Seas and Skies Act was introduced in First Reading in the House of Commons. Part 4 of the Bill (sects. 28 to 56) would amend Part 6 the Marine Liability Act in order to bring the bulk of the HNS Convention into force in Canada in due course for most vessels.

The HNS Convention provides a regime of liability and compensation for pollution damage from ships, including:

  • damages caused by hazardous and noxious substances carried by the vessels,
  • risks of fire and explosion, including loss of life or personal injury;
  • loss of or damage to property outside the ship;
  • economic losses resulting from contamination (e.g. losses in fishing and tourism);
  • loss or contamination of the environment;
  • the costs of preventive measures (e.g. clean-up) and further loss or damage caused by them;
  • costs of reasonable measures of reinstatement of the environment.

Any damage caused during the international or domestic carriage of HNS by any seagoing vessels in the territory, including the territorial sea, of a State Party to the Convention is covered. The Convention also covers pollution damage in the EEZ or equivalent area of a State Party. There is also coverage for damage (other than pollution damage) caused by HNS carried on board seagoing vessels of State Parties when they are outside the territory or territorial sea of any state.

Unlike the CLC and Fund Convention on marine oil pollution, on which it is largely modelled, the HNS Convention covers far more pollutants, a total of some 6,500 substances. These include lists of substances covered by various IMO Conventions and Codes, notably:

  • oils;
  • other liquid substances defined as noxious or dangerous;
  • liquefied gases;
  • liquid substances with a flashpoint not exceeding 60°C;
  • dangerous, hazardous and harmful materials and substances carried in packaged form;
  • solid bulk materials defined as possessing chemical hazards;
  • the residues left by the previous carriage of HNS, other than those carried in packaged form.

Like the CLC and Fund Convention, the HNS Convention establishes a two-tier regime of compensation. Tier 1 is provided by the shipowner and tier 2 by the HNS Fund. The liability of the shipowner is strict, with few defences, and its exact quantum depends upon the gross registered tonnage of the vessel, up to a maximum amount of 100 million SDRs (approx. C$160 million) for damage caused by bulk HNS and 115 million SDRs (approx. C$184 million) for damage caused by packaged HNS or by both bulk HNS and packaged HNS.

The specific limitations of the shipowner are as follows:

The owner's limitation may only be broken by proof that the damages resulted from the owner's personal act or omission committed with intent to cause the damage or recklessly with knowledge that the damage would probably result. No claim for compensation may be made against crewmembers, pilots, charterers, salvors, and their servants and agent, unless it is proven that the damage was caused by their personal acts or omissions committed with intent to cause the damage or recklessly and with knowledge that the damage would probably result. The shipowner, however, retains its recourse in damages against any third party who caused the HNS incident. Up to two-thirds of the available compensation is reserved for claims for loss of life and personal injury, which have priority over other claims.

Compulsory insurance applies, so that the ship must carry on board a certificate of insurance issued by a State Party, indicating that the owner has coverage for its liability under the Convention. That insurance, which will ordinarily be provided by a protection and indemnity club, must also provide for direct action against the insurer.

The HNS Fund will pay claims where the damage costs exceed the shipowner's limit of liability under tier 1 or where the shipowner is not liable for the damages, as well as where there is no or insufficient insurance cover or where the owner is financially incapable of meeting its obligations. The Fund provides compensation up to a maximum of 250 million SDRs (approx. C$400 million) per incident, including the shipowner's portion.

Bill C-3 would vest the Admiralty Court (ordinarily, the Federal Court of Canada) with exclusive jurisdiction over all matters relating to the constitution and distribution of the limitation fund, and the Court would have the power to stay proceedings in other courts and to make related orders.

The receivers of contributing cargo in each State Party are liable to pay annual contributions (levies) to the HNS Fund if they have received specified quantities of HNS in the preceding calendar year. They must report annually on the HNS they have received. Each State Party must determine the rate of such levies. State Parties are required to report the HNS cargoes received in their territories in each calendar year and to ensure that the name of any person liable to pay levies appears on a list to be established by the Director of the HNS Fund. State Parties are responsible for levies lost as a result of non-submission of reports by persons liable to pay them. States must report their contributing cargoes upon ratifying the Convention, then annually to the IMO Secretary-General until the Convention enters into force and thereafter annually to the Director of the HNS Fund. Sanctions may be established for failure to comply with these reporting obligations.

An electronic system, the HNS Convention Cargo Contributor Calculator (HNS CCCC), has been developed to assist States and potential contributors to identify and report contributing cargoes covered by the Convention. Whether or not a substance falls within the definition of HNS can be ascertained by either the name of the substances or its United Nations number.

Bill C-3 also requires the Ship Source Oil Pollution Fund (SSOPF) to pay compensation where the owner is not liable for the pollution damages or where the quantum of the damages exceeds the owner's and HNS Fund's limitations or where the owner is financially incapable of meeting its obligations and they are not recoverable from the Fund. The necessary powers are conferred on the SSOPF Administrator. Bill C-3 also regulates the collection of levies required by the Convention and the reporting requirements, and provides for sanctions for various offences.

The Convention is not yet in force internationally. That will happen only 18 months after 12 States (including at least four States with not less than 2 million units of gross tonnage) have expressed their desire to be bound, and when those persons in such States who would be liable to contribute to the HNS Fund shall have received at least 40 million tonnes of contributing cargo to the General Account of the Fund during the preceding calendar year. If Bill C-3 is duly enacted in its present form, it may well be brought into force on the date when the Convention comes into effect internationally.

BLG will follow developments related to the implementation of the HNS Convention 2010 as they unfold and will keep clients aware of those likely to affect their shipping operations.

N.B.: The foregoing is only a summary of some of the provisions of the Convention. The full text should be consulted for any question of interpretation.

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