CODE OF COMMERCE

ARTICLE 573. Merchant vessels constitute property which may be acquired and
transferred by any of the means recognized by law. The acquisition of a vessel
must appear in a written instrument, which shall not produce any effect with
respect to third persons if not inscribed in the registry of vessels.

The ownership of a vessel shall likewise be acquired by possession in good

faith, continued for three years, with a just title duly recorded. In the absence
of any of these requisites, continuous possession for ten years shall be
necessary in order to acquire ownership.

A captain may not acquire by prescription the vessel of which he is in

command.

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[With respect to Article 573, read P.D. No. 474, Sections 3 & 12(h)

Presidential Decree No. 474

PROVIDING FOR THE REORGANIZATION OF MARITIME FUNCTIONS IN THE

PHILIPPINES, CREATING THE MARITIME INDUSTRY AUTHORITY, AND FOR
OTHER PURPOSES

Section 3. Definition of Terms. The terms, as used, in this Decree, shall have
the following meaning, unless the context of the particular usage of the term
indicates otherwise;

a. "Maritime Industry", briefly referred to as "industry" in the broadest concept

of the term. All enterprises engaged in the business of designing, constructing,
manufacturing, acquiring, operating, supplying, repairing and/or maintaining
vessels, or component parts thereof; of managing and/or operating shipping
lines, stevedoring arrastre and customs brokerage services, shipyards,
drydocks, marine railways, marine repair shops, shipping and freight forwarding
agencies and similar enterprises.

b. "Vessels" or "Watercraft" Any barge, lighter, bulk carrier, passenger ship

freighter, tanker, container ship, fishing boats or other artificial contrivance
utilizing any source of motive power, designed, used or capable of being used
as a means of water transportation operating either as common contract
carrier, including fishing vessels covered under Presidential Decree No. 43,
except (1) those owned and/or operated by the Armed Forces of the Philippines
and by foreign governments for military purposes, and (ii) bancas, sailboats and
other waterborne contrivance of less than three gross tons capacity and not
motorized.
c. "Philippine national" A citizen of the Philippines; or a partnership or
association wholly owned by and composed of citizens of the Philippines; or a
corporation organized under the laws of the Philippines of which at least sixty
per cent of the capital stock outstanding and entitled to vote is owned and held
by Philippine citizens; or a trustee of funds for pensions or other employee
retirement or separation benefits, where the trustee is a Philippine national
and at least sixty per cent of the funds will accrues to the benefit of the
Philippine nationals: Provided, That where a corporation and its non-Filipino
stockholders own stock in an enterprise, at least sixty percent of the members
of the governing board of both corporations must be Philippine nationals.

d. "Philippine flag vessel" A vessel or watercraft registered under Philippine

laws.

e. "Foreign flag vessel" A vessel or watercraft registered under the laws of a

country other than the Philippines.

f. "Philippines shipping companies" Philippine nationals registered and licensed

under the laws of the Philippines to engage in the business of overseas and/or
domestic water transportation.

Section 12(h). Approve the sale, lease or transfer of management of vessels

owned by Philippine Nationals to foreign owned or controlled enterprises.

-------------------------------------

ARTICLE 574. Builders of vessels may employ the materials and follow, with
respect to their construction and rigging, the systems most suitable to their
interests. Ship owners and seamen shall be subject to what the laws and
regulations of the public administration on navigation, customs, health, safety
of vessels, and other similar matters.

ARTICLE 575. Co-owners of vessels shall have the right of repurchase and
redemption in sales made to strangers, but they may exercise the same only
within the nine days following the inscription of the sale in the registry, and by
depositing the price at the same time.

-------------------------------------

[With respect to Article 575, read Article 1620 of Civil Code]

Article 1620. A co-owner of a thing may exercise the right of redemption in

case the shares of all the other co-owners or of any of them, are sold to a third
person. If the price of the alienation is grossly excessive, the redemptioner
shall pay only a reasonable one. Should two or more co-owners desire to
exercise the right of redemption, they may only do so in proportion to the share
they may respectively have in the thing owned in common. (1522a)
------------------------------------

ARTICLE 576. In the sale of a vessel it shall always be understood as included

the rigging, masts, stores and engine of a streamer appurtenant thereto, which
at the time belongs to the vendor. The arms, munitions of war, provisions and
fuel shall not be considered as included in the sale.

The vendor shall be under the obligation to deliver to the purchaser a certified
copy of the record sheet of the vessel in the registry up to the date of the sale.

ARTICLE 577. If the alienation of the vessel should be made while it is on a

voyage, the freightage which it earns from the time it receives its last cargo
shall pertain entirely to the purchaser, and the payment of the crew and other
persons who make up its complement for the same voyage shall be for his
account.

If the sale is made after the vessel has arrived at the port of its destination,
the freightage shall pertain to the vendor, and the payment of the crew and
other individuals who make up its complement shall be for his account, unless
the contrary is stipulated in either case.

ARTICLE 578. If the vessel being on a voyage or in a foreign port, its owner or
owners should voluntarily alienate it, either to Filipinos or to foreigners
domiciled in the capital or in a port of another country, the bill of sale shall be
executed before the consul of the Republic of the Philippines at the port where
it terminates its voyage and said instrument shall produce no effect with
respect to third persons if it is not inscribed in the registry of the consulate.
The consul shall immediately forward a true copy of the instrument of
purchase and sale of the vessel to the registry of vessels of the port where
said vessel is inscribed and registered.

In every case the alienation of the vessel must be made to appear with a
statement of whether the vendor receives its price in whole or in part, or
whether he preserves in whole or in part any claim on said vessel. In case the
sale is made to a Filipino, this fact shall be stated in the certificate of
navigation.

When a vessel, being on a voyage, shall be rendered useless for navigation, the
captain shall apply to the competent judge on court of the port of arrival,
should it be in the Philippines; and should it be in a foreign country, to the
consul of the Republic of the Philippines, should there be one, or, where there
is none, to the judge or court or to the local authority; and the consul, or the
judge or court, shall order an examination of the vessel to be made.

If the consignee or the insurer should reside at said port, or should have
representatives there, they must be cited in order that they may take part in
the proceedings on behalf of whoever may be concerned.
ARTICLE 579. After the damage to the vessel and the impossibility of her being
repaired, in order to continue the voyage had been shown, its sale at public
auction shall be ordered, subject to the following rules:

1.The hull of the vessel, its rigging, engines, stores, and other articles shall be
appraised, after making an inventory, said proceedings to be brought to the
notice of the persons who may wish to take part in the auction.

2.The order or decree ordering the auction to be held shall be posted in the
usual places, an announcement thereof to be inserted in the Official Gazette
and in two of the newspapers of the largest circulation of the port where the
auction is to be held, should there be any. The period which may be fixed for
the auction shall not be less than twenty days.

3. These announcements shall be repeated every ten days, and their

publication shall be made to appear in the records.

4. The auction shall be held on the day fixed, with the formalities prescribed in
the common law for judicial sales.

5. If the sale should take place while the vessel is in a foreign country, the
special provisions governing such cases shall be observed.

ARTICLE 585. For all purposes of law not modified or restricted by the
provisions of this Code, vessels shall continue to be considered as personal
property.

ARTICLE 589.If two or more persons should be part owners of a merchant

vessel, a partnership shall be presumed as established by the coowners. This
partnership shall be governed by the resolutions of the majority of the
members.

If the part owners should not be more than two, the disagreement of views, if
any, shall be decided by the vote of the member having the largest interest. If
the interests are equal, it should be decided by lot.The person having the
smallest share in the ownership shall have one vote; and proportionately the
other part owners as many votes as they have parts equal to the smallest one.

A vessel may not be detained, attached or levied upon in execution in its

entirety, for the private debts of a part owner, but the proceedings shall be
limited to the interest which the debtor may have in the vessel, without
interfering with the navigation.

ARTICLE 591.All the part owners shall be liable, in proportion to their

respective ownership, for the expenses for repairing the vessel, and for other
expenses which are incurred by virtue of a resolution of the majority. They shall
likewise be liable in the same proportion for the expenses for the maintenance,
equipment, and provisioning of the vessel, necessary for navigation.
ARTICLE 592. The resolution of the majority with regard to the repair,
equipment, and provisioning of the vessel in the port of departure shall bind the
minority, unless the minority membersrenounce their interests, which must be
acquired by the other co-owners, after a judicial appraisement of the value of
the portion or portions assigned. The resolutions of the majority relating to the
dissolution of the partnership and sale of the vessel shall also be binding on
the minority.

The sale of the vessel must be made at public auction, subject to the
provisions of the law of civil procedure, unless the co-owners unanimously
agree otherwise, saying always the right of repurchase and redemption
provided for in Article 575.

ARTICLE 593. The owners of a vessel shall have preference in her charter over
other persons, under the same conditions and price. If two or more of them
should claim this right, the one having the greater interest shall be preferred;
and should they have equal interests, the matter shall be decided by lot.

ARTICLE 606. If the captain should be a co-owner of the vessel, he may not be
discharged unless the ship agent returns to him the amount of his interest
therein, which, in the absence of agreement between the parties, shall be
appraised by experts appointed in the manner established in the law of civil
procedure.

ARTICLE 607. If the captain who is a co-owner should have obtained the
command of the vesselby virtue of a special agreement contained in the
articles of association, he may not be deprived of his office except for the
causes mentioned in Article 605.

ARTICLE 608. In case of the voluntary sale of the vessel, all contracts between
the ship agent and the captain shall terminate, reserving to the latter his right
to the indemnity which may pertain to him, according to the agreements made
with the ship agent. They vessel sold shall remain subject to the security of the
payment of said indemnity if, after the action against the vendor has been
instituted, the latter is found to be insolvent.

------------------------------

Presidential Decree No. 761

AMENDING SECTION EIGHT HUNDRED SIXTY OF THE TARIFF AND CUSTOMS
CODE OF THE PHILIPPINES, AS AMENDED, BY ALLOWING THE REGISTRATION
OF VESSELS THE OWNERSHIP OF WHICH IS VESTED IN CORPORATIONS OR
ASSOCIATIONS, AT LEAST SIXTY PERCENT OF THE CAPITAL STOCK OR
CAPITAL OF WHICH BELONG TO CITIZENS OF THE PHILIPPINES, AND FOR
OTHER PURPOSES

Section 1. Section 806 of the Tariff and Customs Code of the Philippines, as
amended, is hereby amended to read as follows:

Sec. 806. Certificate of Philippine Registry. Upon registration of a vessel of

domestic ownership, and of more than fifteen tons gross, a certificate of
Philippine registry shall be issued for it. If the vessel is of domestic ownership,
and of fifteen tons gross or less, the taking of the certificate of Philippine
registry shall be optional with the owner. "Domestic ownership, as used in this
section means ownership vested in citizens of the Philippines or corporations
or associations organized under the laws of the Philippines at least sixty per
centum of the capital stock or capital of which is wholly owned by citizens of
the Philippines, and, in the case of corporations or associations which will
engage in coastwise trade the president or managing directors thereof shall be
such citizens: Provided, That the members of the crew of the vessel, except
specialized fishing vessels, shall all be citizens of the Philippines, Provided,
That the certificate of Philippine registry issued to a vessel prior to the
approval of this Code shall not be affected; Provided, further, That any vessel of
more than fifteen gross tons which on February eight, nineteen hundred and
eighteen, had a certificate of Philippine registry under existing law, shall
likewise be, deemed a vessel of domestic ownership if there has been no
change in its ownership or if the capital of the association or capital stock of
the corporation owning such vessel has not been transferred to persons
who are not citizens of the Philippines and if any such vessels should have
been totally lost through shipwreck, collision or any other marine disaster
while being lawfully operated, it may be replaced with another vessel of the
same or lesser tonnage by the same person, association or corporation owning
and operating same by virtue of this section, under such terms and conditions
as may be prescribed by the Maritime Industry Authority consistent with public
policy and with the view of its utility for government service in case of war or
any public emergency: Provided, further, That the controlling interest of the
association or corporation shall not be considered as held by the citizen of the
Philippines; (a) if less than sixty percent of the capital or capital stock is held
by such citizens or such capital or capital stock is subject to any trust or
fiduciary obligation in favor of any person not a citizen of the Philippines; (b) if
less than sixty percent of the capital or capital stock in said association or
corporation entitled to vote is in the hands of citizens of the Philippines; (c) if
by means of (a) any contract or agreement, more than forty percent of the
capital or capital stock can be voted directly or indirectly in favor of any person
not a citizen of the Philippines: or (d) if by other means, the control of more
than forty percent of the capital or capital stock of the association or
corporation is conferred upon or allowed to be exercised by any person not a
citizen of the Philippines."

Section 2. The above definition of "domestic ownership" notwithstanding, an

enterprise duly registered with the Board of Investments, under R.A. 5186 or
6135, whether or not entirely owned by foreign nationals, may register its own
vessels under the provision of the section immediately preceding if such
vessels are to be used exclusively to transport its own raw materials and
finished products in Philippine waters as an incident to its manufacturing,
processing or business activity registered with the Board of Investments and
certified to by said Board as an essential element in the operation of the
registered project.

Section 3. Any provision of the law, decree, executive order, or rules and
regulations to the contrary notwithstanding, the Maritime Industry Authority is
hereby vested with the exclusive authority over the registration and
documentation of Philippine vessels, as well as the issuance of all certificates,
licenses or other documents necessary or incident to such registration and
documentation.

Section 4. The Maritime Industry Authority shall be subject to approval by the

Office of the President, issue such rules and regulations implementing the
provisions of this decree.

Section 5. All laws, decrees, executive orders, or rules and regulations, or parts
thereof, inconsistent with this Decree are hereby repealed or modified
accordingly.

Section 6. This Decree shall take effect immediately.

------------------------------

CA 65 - COGSA

TITLE I - Section 1. When used in this Act

(a) The term "carrier" includes the owner or the charterer who enters into a
contract of carriage with a shipper.
(d) The term "ship" means any vessel used for the carriage of goods by sea.

---------------------------------

CIVIL CODE

Article 1132. The ownership of movables prescribes through uninterrupted

possession for four years in good faith.

The ownership of personal property also prescribes through uninterrupted

possession for eight years, without need of any other condition.With regard to
the right of the owner to recover personal property lost or of which he has been
illegally deprived, as well as with respect to movables acquired in a public sale,
fair, or market, or from a merchant's store the provisions of Articles 559 and
1505 of this Code shall be observed. (1955a)

Article 1484. In a contract of sale of personal property the price of which is

payable in installments, the vendor may exercise any of the following remedies:
(1) Exact fulfillment of the obligation, should the vendee fail to pay;
(2) Cancel the sale, should the vendee's failure to pay cover two or
moreinstallments;
(3) Foreclose the chattel mortgage on the thing sold, if one has been
constituted, should the vendee's failure to pay cover two or more installments.
In this case, he shall have no further action against the purchaser to recover
any unpaid balance of the price. Any agreement to the contrary shall be void.
(1454-A-a)

Article 1485. The preceding article shall be applied to contracts purporting to

be leases of personal property with option to buy, when the lessor has deprived
the lessee of the possession or enjoyment of the thing. (1454-Aa)

Article 1486. In the case referred to in two preceding articles, a stipulation that
the installments or rents paid shall not be returned to the vendee or lessee
shall be valid insofar as the same may not be unconscionable under the
circumstances. (n)

-------------------------------

Republic Act No. 7471

AN ACT TO PROMOTE THE DEVELOPMENT OF PHILIPPINE OVERSEAS

SHIPPING

SECTION 1. Title. — This Act shall be known and cited as the

"PhilippineOverseas Shipping Development Act."

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the

Government of the Philippines to:

(a) Develop and maintain a Philippine Metropolitan Marine composed of well-

equipped, safe and modern vessels most suited for, Philippine requirements
and conditions, manned by qualified Filipino officers and crew, and owned and
operated under the Philippine flag by citizens of the Philippines or by
associations or corporations organized under the laws of the Philippines, at
least sixty percent (60%) of the capital of which is owned by citizens of the
Philippines;

(b) Assist in the development, recovery and expansion of Philippine overseas

shipping capable of meeting the requirements of the expanding international
trade of the Philippines;

(c) Provide assistance to Philippine Shipping enterprises and encourage the

long range vessel acquisition development modernization and expansion
through private investments without direct government financial assistance;
and

(d) Create a Healthy climate to attract private enterprises.

SECTION 3. Definition. — As used this Act:

(a) "Philippine overseas shipping" means the transport of goods and/or

passengers by a ship owned and operated under the Philippine flag by a
Philippine shipping enterprise, except when the ship is operated solely
between ports in the Philippines;

(b) "Philippine shipping enterprise" means a citizen of the Philippines or an

association or corporation organized under the laws of the Philippines, at least
sixty percent (60%) of the capital of which is owned by citizens of the
Philippines and engaged exclusively in Philippine overseas shipping;

(c) "MARINA" means the Maritime Industry Authority;

(d) "Monetary authority" means the Central Bank of the Philippines and any
other agency in charge of foreign exchange controls; and

(e) "Regulation" means the rules and regulations promulgated pursuant to

Section 10 hereof.

SECTION 4. Foreign Exchange Requirements. — Foreign exchange requirements

of Philippine Shipping enterprises for the purchase of oceangoing vessels for
registration under the Philippine flag, for repair or improvement of vessels, for
importation of engines, spare parts, accessories, supplies, containers and for
other expenses required for the operation of vessels in foreign ports or in the
high seas, when recommended by the MARINA, shall be made available to the
Philippine shipping enterprise subject to the regulations.

SECTION 5. Acquisition of Oceangoing Vessels. — Philippine shipping

enterprises may likewise acquire oceangoing vessels for Philippine overseas
shipping upon approval by the MARINA, subject to the guidelines prescribed in
the regulations: provided, that:

(a) The funds utilized in the acquisition of the vessel are financed from sources
other than the Philippine banking system;
(b) No guaranty of the monetary authority or of any Philippine government or
private financial institution is granted or extended for the purpose;
(c) The vessel serves as sole collateral for the financing of the vessel and no
other asset of the Philippine shipping enterprise is pledge, mortgaged, or used
as security in case of default;
(d) All foreign exchange requirements for the servicing of the loan, the
operation, maintenance and repair of the vessel, the purchase of supplies and
related equipment shall be financed solely from earnings derived from the
operation of the vessel and no foreign exchange shall be made available by the
monetary authority and the Philippine banking system for these purposes;
(e) Mortgage documents and/or other financial agreements shall be filed with
the monetary authority and such other government agencies in charge of such
mortgage formalities; and
(f) Any excess foreign exchange earning shall be inwardly remitted and
surrendered to the Philippine banking system.

SECTION 6. Exemption from Import Duties and Taxes. — The importation by a

Philippine shipping enterprise of oceangoing vessels for registration under the
Philippine flag shall be exempt from the payment of import duties and taxes.
The spare parts for the repair and/or overhaul of vessels shall likewise be
exempt from the payment of import duties and taxes provided, that such items
are destined or consigned either to:

(a) A Philippine dry-docking or repair facility, accredited by the MARINA and

registered as a customs-bonded warehouse, which will undertake the
necessary repairs and works on the vessel; and

(b) The vessel in which the items are to be installed: provided That, if such
items are found in locations other than the two (2) aforementioned ones or in
places not authorized by customs, the person or entity in possession of such
items shall be subject to full duties and taxes, including surcharges and
penalties.

Local manufactures or dealers who sell machinery, equipment, materials and

spare parts to a Philippine shipping enterprise shall be entitled to tax credits
for the full amount of import duties and taxes actually paid thereon, or on parts
or components thereof, subject to the approval of the Secretary of Finance,
upon the recommendation of the MARINA.

SECTION 7. Exemption from Income Tax. — A Philippine shipping enterprise

shall be exempt from payment of income tax on income derived from Philippine
overseas shipping for a period of ten (10) years from the date of approval of this
Act: provided, that:

(a) The entire net income, after deducting not more than ten percent (10%)
thereof for distribution of profits or declaration of dividends, which would
otherwise be taxable under the provisions of Title II of the National Internal
Revenue Code, is reinvested for the construction, purchase, or acquisition of
vessels and related equipment and/or in the improvement of modernization of
its vessels and related equipment in accordance with the regulations; and

(b) The cumulative amount so reinvested shall not be withdrawn for a period of
ten (10) years after the expiration of the period of income tax exemption or
until the vessel or related equipment so acquired have been fully paid,
whichever date comes earlier. Any amount not so invested or withdrawn prior
to the expiration of the period stipulated herein shall subject to the
corresponding income tax, including penalties, surcharges and interests.

SECTION 8. Registration and Deletion of Vessels. — All vessels owned by

Philippine shipping enterprises and availing of the incentives under this Act
shall be registered under the Philippine flag. Said vessels can only be deleted
from the Philippine registry after the MARINA has determined that:

(a) No other Philippine shipping enterprise is interested in acquiring the vessel;

or
(b) The vessel has to be scrapped.

SECTION 9. Requisition of Vessels. — The President of the Philippines may, in

times of war and other national emergency, requisition absolutely or
temporarily, for any naval or military purpose, any and all vessels of the
Philippine registry. The Government shall pay the owner or operator of the
vessel, based on normal conditions at the time of requisition;

(a) The fair market value, if the vessel is taken absolutely, or

(b) The fair charter value, if the vessel is taken temporarily. In case of
disagreement, such fair value shall be determined by an arbitration committee
composed of:
(c) One (1) member to be appointed by the MARINA;
(d) One (1) member to be appointed by the owner or operator of the vessel; and
(e) One (1) member to be appointed by the two (2) members so appointed.

The decision of the arbitration committee shall be final and binding on both
parties.

SECTION 10. Rules and Regulations. — The MARINA, in consultation with the
monetary authority and the Department of Finance, shall jointly formulate and
promulgate the rules and regulations necessary for the implementation of this
Act taking into consideration the policies and programs of the Government for
the development of the Philippine overseas shipping.

SECTION 11. Annual Report. — The MARINA, in coordination with the monetary
authority and the Department of Finance, shall submit an annual report to the
President of the Philippines and the Congress of the Philippines on the
implementation of this Act, which report shall include:

(a) The amount of foreign exchange earned, acquired and spent by Philippine
shipping enterprises;
(b) The amount of income tax and import duties and taxes for which exemption
have been granted;
(c) The additional oceangoing vessels constructed, purchased or acquired, the
improvement made thereon and the additional related equipment procured; and
(d) Such other information as the MARINA may deem necessary or the
President of the Philippines may require.

SECTION 12. Penal Provisions. — Violation of the provisions of this Act or the
rules and regulations promulgated to implement the same shall be punished by
a fine of not more than Ten thousand pesos (P10,000) or imprisonment for not
more than five (5) years, or both such fine and imprisonment, at the discretion
of the court.

If the violation is committed by an association or corporation, the penalties

prescribed hereunder shall be imposed on the president the chief executive
officer and the other officials and employees responsible for the violation.

If the violation is committed by a government official or employee, he shall, in

addition to the penalties prescribed hereunder, be dismissed from the
government service with all administrative penalties accessory thereto.

SECTION 13. Repealing Clause. — All laws, executive orders, regulations, or

parts thereof, inconsistent with the provisions of this Act are hereby repealed,
amended or modified accordingly.