PART II MARITIME LAW
Chapter 6 GENERAL CONCEPTS
MARITIME LAW
 The system of laws which particularly relates to the
affairs and business of the sea, to ships, their crews
and navigation, and to marine conveyance of persons
and property.
Includes:
 Book II, Code of Commerce (Maritime Commerce
 Act No. 2616 (The Salvage Law)
 C.A. No. 65 (Carriage of Goods by Sea Act)
 P.D. 1521 (Ship Mortgage Decree of 1978)
 R.A. 9295 (The Domestic Shipping Act of 2004)
 Other special laws relating to maritime commerce
ORIGINS OF SHIPPING
 Man’s first use of the sea started 3,000 years ago –
Fishing developed into highly organized activity.
 At that time, ships were used to carry large and
heavy piece of cargo which neither man nor beast of
burden can carry.
 In one account, the Queen of Ancient Egypt move her
stone obelisks weighing 700 tons through the entire
length of Egypt on the Nile River.
 Egyptians were credited in revolutionizing shipping
when they invented the SAIL.
 But it is the ROMANS who conceived the basic principle
of marine transport on economic dimension of shipping
when they found out that carting a large quantity of
grain to the empire’s frontier 75 miles away would cost
more than to ship it by sea.
CODE OF HAMURRABI
 In 2000 BC, Babylonian Ruler Hamurrabi codified the
following maritime laws on:
- Marine Collisions
- Bottomry
- Reimbursement for Leased Watercraft
DEVELOPMENT OF UNIVERSAL MARITIME LAW
 Phoenician’s Sea Law
 Code of Rhodes, which regulated Greek Commerce
for a very long time
 Roman Maritime Law
RHODIAN - ROMAN MARITIME LAW
 1st Section (MARE) – Deals with the sea and concerns
of public law of the sea. Mare liberium did not exist
yet.
 2nd Section (NAVIS) – Deals with the ship and
enunciates the classification of watercrafts into
freighter or passenger vessels and seagoing or inland
crafts.
 3rd Section (MERX) – Deals with cargo and the
admiralty principles as known today.
 4th Section (OBLIGACIONES) - Deals with the
responsibilities of ship owners and masters.
 5th Section (ACTIONS) – Deals with dispute
settlement arising from shipping transactions.
EVOLUTION OF MODERN LAW ON MERCHANT SHIPPING
 1896: Comite Maritime Internationale (CMI) organized
for the purposed of unification of merchant marine
rules.
 Conference Diplomatique De Droit Maritime (Brussels) -
16 International Conventions and protocols
approved, i.e. collision at sea, salvage, bill of lading,
carriage of goods by sea, etc.
UN AGENCIES IN MARITME LAW
 International Maritime Organization (IMO) –
established the Technical Regulation of Shipping.
 United Nations Conference on Trade and
Development (UNCTAD) – established the Economic
Regulations of Shipping.
 International Labor Organization (ILO) – established
the International Merchant Labor Regulations
Standards.
 UN Conferences – Established UNCLOS (1982),
Geneva Conventions on the Law of the Sea
(1958/1960)
REAL AND HYPOTHECARY NATURE MARITIME LAW
 That which distinguishes the maritime from the civil
law and even from the mercantile law in general is
the REAL AND HYPOTHECARY nature of the
former, and the many securities of a real nature that
maritime customs from time immemorial, the laws,
the codes, and the later jurisprudence, have provided
for the protection of the various and conflicting
interest which are ventured and risked in maritime
expeditions. [Phil. Shipping Co. v. Vergara, G.R. No.
16000, June 1, 1906]
MEANING OF REAL AND HYPOTHECARY NATURE
 The liability of the carrier in connection with losses
related to maritime contracts is confined to the vessel,
which is hypothecated for such obligations or which
stands as the guaranty for their settlement.
 NO VESSEL, NO LIABILITY RULE.
SUMMARY OF THE NATURE OF MARINE TRANSACTIONS
 REAL – A vessel is essentially a personal property
because it is movable. But the Supreme Court
characterized maritime transactions as having a real
nature insofar as these transactions are similar to
transactions over real property with respect to
effectivity against third persons which are effected
through registration. Registration of vessels now
lodged at MARINA.
 HYPOTHECARY – The liability of the owner of the
vessels is limited to the vessel itself. If he vessel sinks,
generally the liability of the owner is extinguished,
although he may have other properties
EVIDENCE OF REAL NATURE OF MARITIME LAW
 Limitation of the liability of the agents to the actual
value of the vessel and the freight money; and
 Right to retain the cargo and the embargo and
detention of vessel even in cases where the ordinary
civil law would not allow more than a personal
action against the debtor or person liable. [Luzon
Stevodoring v. CA, 156 SCRA 169]
Aboitiz Shipping v. General Accident
Fire Ins., 217 SCRA 359
 Held:  The rights of vessel owner or agent under the
Limited Liability Rule are akin to those of the rights
of shareholders to limited liability under our
Corporation Law.
 In both insolvency of a corporation and the sinking of
a vessel, the claimants or creditors are limited in their
recovery to the remaining value of accessible assets.
Monarch Insurance v. CA,
333 SCRA 71
 The Limited Liability Rule in Maritime Law has not
been rendered obsolete by the advances in modern
technology which have considerably lessen the risks
involved in maritime trade, and the courts continue
to apply the said rule in appropriate cases.
ICTSI v. PRUDENTIAL
GUARANTEE, 320 SCRA 244
 Held:  As both nature of the function and the place of their
performance, an arrastre operator’s service are
clearly not maritime in character.
 The legal relationship between an arrastre operator
and a consignee is akin to that between a
warehouseman and a depositor.
PROVISIONS ON LIMITED LIABILITY RULE
 Art. 587, CoC: The ship agent shall also be civilly
liable for the indemnities in favor of third persons
which may arise from the conduct of the captain in
the care of the goods which he loaded on the vessel;
but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it
may have earned during the voyage.
 Art. 590: The co-owners of the vessel shall be civilly
liable in the proportion of their contribution to the
common fund for the results of the acts of the
captain, referred to in Art. 587.
Each co-owner may exempt himself from this
liability by the abandonment, before a notary, of that
part of the vessel belonging to him
 Art. 643 (Ibid): If the vessel and her cargo should
be totally lost, by reason of capture or wreck, all
rights shall be extinguished, both as regards the
crew to demand any wages whatsoever, and as
regards the ship agent to recover the advances
made.
 If a portion of the vessel or of the cargo, or both,
should be saved, the crew engaged on wages,
including the captain shall retain their rights on
the salvage, so far as they go, on the remainder
of the vessel as well as on the amount of
freightage of the cargo saved;
 But sailors who are engaged on shares shall not have any
right whatsoever on the salvage of the hull, but only on
the portion of the freightage saved. If they should have
worked to recover the remainder of the shipwrecked
vessel they shall be given from the amount of the
salvage an award in proportion of the efforts made and
to the risks encountered in order to accomplish the
salvage.
 Art. 837 (Ibid): The civil liability incurred by the
shipowners in the cases prescribed in this section, shall
be understood as limited to the value of the vessel with
all her appurtenances and freight.
 Notes: Art. 837 applies to collision cases only.
EXCEPTIONS
 Where the injury or death to a passenger is due either
to the fault of the ship owner or to the
CONCURRING NEGLIGENCE OF THE SHIP
OWNER AND THE CAPTAIN.
 Where the vessel is insured.
 In workmen’s compensation claims.
 Where vessel is partially lost.
 Liability on repairs made prior to the loss of the
vessel.
 Foreclosure of mortgage on the ship
SHIPOWNER’S FAULT
 The well-entrenched rule in our jurisprudence is that
a ship owner may be held liable for injuries to
passengers notwithstanding the exclusively real and
hypothecary nature of Maritime Law, if fault can be
attributed to the ship owner. [Negros Navigation v.
CA, 281 SCRA 534]
CONCURRENT NEGLIGENCE OF SHIPOWNER & CAPTAIN
 Although the ship agent is liable for the negligent act
of the captain in the care of goods loaded on the
vessel, this liability can be limited through
abandonment of the vessel, its equipment and
freightage as provided in Art. 387.
 Nonetheless, there are exceptional circumstances
wherein the ship agent could still be held answerable
despite the abandonment as where loss or injury was
due to fault OF SHIPOWNER AND CAPTAIN.
Manila Steamship v. Abdulhman,
100 Phil. 32
Facts:  Abdulhaman bought a submarine chaser of WWII
vintage, which he converted into a passenger ship.
The chaser, being at fault collided with a new steel
vessel of Manila Steamship and it sank. Manila
Steamship sued to recover damanges as Adbulhaman
had other properties.
 The latter put up the defense that his liability was
extinguished by the loss of the chaser.
 It was proven that the chaser, being of a certain
tonnage, should have been commanded by one
having qualifications of captain and not a mere
patron.
Held:  Abdulhaman is still liable. The hypothecary nature will
not apply when the ship owner is personally at fault due
to:
- Lack of proper equipment; or
- Lack of proper technical training of the officers and
crew.
PARTIAL LOSS
 In the event the vessel is not entirely lost, the
hypothecary nature of the maritime transaction
under Art. 837 of the Code of Commerce will not
apply, unless the shipowner or agent abandons the
vessel. [Luzon Stevedoring v. CA, 156 SCRA 169]
REPAIRS ON VESSEL
 The limited liability rule in maritime law does not
apply in case where the liability was for repairs on
the vessel that was completed before her loss.
[Government of P.I. v. Insular Maritime Co.. 45 Phil. 805]
LOSS COVERED BY INSURANCE
 Where vessel is at fault sinks but is insure, the
insurance takes the place of such vessel.
 The liability subsists but only to the extent of the
insurance proceeds.
 The excess is still subject to the hypothecary rule.
[Pedro Vazquez v. CA, 138 SCRA 553]
Abueg v. San Diego, 77 Phil. 32
Facts:  A vessel of San Diego, a shipping operator, sank and
one crew member died. When the heirs of the
deceased sought compensation under the Workmen’s
Compensation Law, San Diego put up the defense of
the hypothecary nature of maritime transactions to
avoid liability.
Held:  San Diego is still liable. Workmen’s compensation is an
exception to the hypothecary nature of maritime
transactions in view of two reason, to wit:
(1) The Code of Commerce was promulgated in 1880
while the Workmen’s Compensation Law was enacted in
1925. In case of conflict, the latter prevails.
(2) Provisions on hypothecary nature of maritime
transactions contained in the Code of Commerce are
general provisions while that in Workmen’s
Compensation Law are specific. In case of conflict,
specific provisions of law prevail.
Loadstar Shipping v. CA,
315 SCRA 339
Held:  Failure of common carrier to maintain in seaworthy
condition its vessel involved in a contract of carriage
is a clear breach of its duty prescribed in Art. 1755 of
the Civil Code.
 The doctrine of limited liability will not apply.
ABANDONMENT OF VESSEL
 Abandonment of the vessel, its appurtenances and
freightage is an indispensable requirement before the
shipowner can enjoy the benefits of the limited
liability principle.
 In case of collision, abandonment of the vessel is
necessary in order to limit the liability of the
shipowner or the agent to the value of the vessel, its
appurtenances and freightage earned in the voyage.
 Only instance abandonment is dispensed with is
when the vessel was entirely lost. [Phil. Shipping Co.
v. Garcia, 6 Phil. 281
Protest
 A written statement by the master of a vessel or any
authorized officer, attested by a proper officer or a
notary, to the effect that damages has been suffered
by the ship.
 Protest is required under the Code of Commerce in
the following cases:
1. Arrival under stress
2. Shipwrecked
3. Gone through a hurricane or the captain believes
that the cargo has suffered damage or average
4. Maritime collisions
PCG MC 06-90 (When Marine
Protest is required)
 Actual physical damage to property exceeding one
thousand pesos;
 Material damage affecting seaworthiness or efficiency
of a vessel;
 Stranding, grounding or sinking of the vessel or fire
on board;
 Loss of life;
 Injuring causing any persons to remain incapacitated
for a period in excess of seventy (70) hours, except
injury to harbor workers not resulting from vessel
equipment casualty;
 Any deviation from her course or delay beyond the
control of the master.
 Any serious breach of charter party terms if
committed by any party other than the ship’s crew
as refusal to load, unduly delaying of loading, loading
improper cargo, refusal to pay discharge fees, refusal
to accept bill of lading in form signed by the master.
 Failure of consignee to take deliver of cargoes or fails
to discharge cargo thereof or pay freight in
accordance with charter party bill of llading terms.
 Arrival of vessel under stress; and
 To provide additional information relevant to the
incident or circumstances, which may give rise or
may have given rise to suspicion on the negligence or
incompetence of the master or crew
Admiralty Jurisdiction
 RTC or MTc, depending on the amount of the
demand or claim.
 Amount determines jurisdiction of the court.
 The proceeding is in rem.
Chapter 7 Vessels
Ship or vessel
 Ship or Vessel - means any kind, class or type of craft
or artificial contrivance capable of floating in water,
designed to be used, or capable of being used, as a
means of floating in water transport in the domestic
trade for the carriage of passengers or cargo, or both,
utilizing its own motive power or that of another.
[R.A. 9295]
Tucker v. Alexandroff [183 U.S. 424,
438, 22 S.Ct. 195, 201, 46 L.Ed. 264]
 “A ship is born when she is launched, and lives so
long as her identity is preserved. Prior to her
launching she is a mere congeries of wood and iron
....
 In the baptism of launching she receives her name,
and from the moment her keel touches the water she
is transformed ....
 She acquires a personality of her own.”
Prescriptive Period on Vessels
 Acquisitive prescription: Good faith – 4 years; bad
faith – 8 years. Prescription doesn’t run in favor the
captain since he holds the position that of a trustee.
[Art. 573]
 Right of pre-emption and legal redemption available
to co-owners to be exercised within 30-days from
sale of the vessel. [Art. 575]
Rules on Co-ownership of Vessel
 Co-ownership of vessel gives rise to a partnership
ipso jure. No agreement is needed before a
partnership is created. {Note: This is one instance of
a partnership coming into existence by mere
operation of law. Another instance when there is
commingling of similar good of fungible nature.}
 Majority may perform acts of administration but acts
of ownership require the concurrence of all the coowners.
 Majority is determined in accordance to the following:
1 vote given to the co-owner who contributed the
least capital, 2 votes to the one who gave double, et
sequitur.
Importance of the Definition
 The word ‘vessel’ (Spanish: buque or nave) was not
intended to include all ships, craft or floating
structures of every kind without limitation, and the
provisions of that section should not be held to
include minor craft engaged only in river and bay
traffic.
 The word ‘nave’, which is used inter-changeably with
‘buque’ means a “SHIP, A VESSEL WITH DECKS AND
SAILS. A deck is not a feature of the smallest types
of watercraft.
 Such type of watercraft is not contemplated in Art.
835 requiring protest in case of collision. [Lopez
v.Dureolo, 52 Phil. 229]
 It is therefore clear that a passenger on a boat like
the Jison, in the case before us, is not required to
make protest as a condition precedent to his right of
action for the injury suffered by him in the collision
described in the complaint. Art. 835 does not apply.
 Nevertheless, under Article 836, it is provided that
want of protest cannot prejudice a person not in a
condition to make known his wisher.
 An individual who has suffered a compound fracture
of the femur and received other physical injuries
sufficient to keep him in a hospital for many months,
cannot be supposed to have been in a condition to
make protest within 24-hours of such occurrence.
Peculiar nature of vessels (Philippine
Refining Co. v. Jarque, G.R. 41506, Mar.
25, 1935)
 Vessels are considered personal property under civil
law. Similarly under the common law, vessels are
personal property although referred to as a peculiar
kind of personal property.
 Since the term personal property includes vessels,
they are subject to mortgage agreeably to the
provisions of the Chattel Mortgage Law (Act No.
1508, Sec. 2).
 The only difference between a chattel mortgage of a
vessel and of other personalty is that it is not now
necessary for a chattel mortgage of a vessel to be
noted in the register of deeds, but it is essential that
a record of documents affecting title to a vessel be
entered in the record of the Collector of Customs
(now with MARINA by virtue of M.C. 90) at the port
of entry (now at the port of registry, in case of
coastwise vessel).
 Otherwise, a mortgage on a vessel is generally like
other chattel mortgages as to its requisites and
validity.
Mortgage of Ship (P.D. 1521)
 Sec. 3. Mortgage of Vessel of Domestic Ownership;
records –
(a) No mortgage is valid in respect to such vessel
against any person other than the mortgagor, his heir
or assign, and a person with actual notice thereof
unless recorded with the PCG (now MARINA)
 Sec. 4. Preferred Mortgages: Mortgage is preferred
based on the date of recording if:
- It is recorded with PCG (MARINA)
- An affidavit in good faith is filed together with the
record of mortgage.
- No waiver of preferred status.
Suit in Admiralty
(Sec. 10. P.D. 1521)
 Preferred mortgage constitutes as a lien upon the
vessel. In case of default, the mortgage lien may be
enforced by SUIT IN REMAINING ADMIRALTY,
wherein the vessel itself may be made a party
defendant and be arrested in accordance with Sec.
11.
 Original jurisdiction: CFI (now depending on the
amount of the claim)
 Requirement of notice by publication and actual
notice to:
- the master or other ranking officer, or caretaker of
the vessel; and
- Any person who has recorded a notice of claim of
an un-discharged lien upon the vessel.
Arrest of Vessels
[Sec. 11, P.D. 1521]
 Upon filing of petition for judicial foreclosure of a
Preferred Ship Mortgage or immediately thereafter,
 Applicant may apply ex-parte for an order for the
arrest of the mortgaged vessel.
 Judge to immediately issue arrest order, if it is made
to appear by affidavit of the applicant, or of some
other person who personally know the facts that a
default in the mortgage has occurred and that
applicant files a bond executed to the adverse party
in an amount to be fixed by the judge, not exceeding
the applicant’s claim, conditioned that the latter will
pay all the costs which may be adjudged to the
adverse part and all damages sustained.
Procedure in discharge of arrest
(Sec. 12, P.D. 1521)
 File counter-bond in an amount double of the claim;
or
 Apply for order on the ground of improper or
irregular issuance of order.
Extrajudicial Foreclosure of Vessel
(Sec. 14, P.D. 1521)
 Applicable provisions in Chattel Mortgage Law
govern.
 For purpose of taking possession of the vessel, the
foreclosing creditor to secure from RTC Judge of the
province where the vessel may be our or where the
creditor or debtor resides, an order for the arrest or
seizure of the vessel.
 Upon issuance of the order, the sheriff to
immediately take possession of the vessel for the
purpose of foreclosure and sale.
Foreign Ship Mortgage
(Sec. 15, P.D. 1521)
 Preferred mortgage in foreign ship includes those
duly recorded by virtue of Sec. 4 (supra) and:
 Preferred mortgage lien in foreign ship is subordinate
to maritime liens for repairs, supplies towage, use of
drydock or marine railway, or other necessaries
performed or supplied in the Philippines.
How proceeds of sale disposed
(Sec. 17, P.D. 1521)
 Preferred mortgaged lien takes priority over all claims
against the vessel. Exceptions:
1. Expenses and fees allowed and costs taxed by the
court and taxes due to the government.
2. Crew’s wages.
3. General average.
4. Salvage, including contract salvage.
5. Maritime liens arising prior in time to the recording of
the preferred mortgage.
6. Damages arising out of tort.
7. Preferred mortgaged registered prior in time.
 If proceeds of the sale is not sufficient to pay all
creditors included in one number or grade, the
residue shall be divided among them pro rata.
 All credits not paid, whether fully or partially shall
subsist as ordinary credits enforceable by personal
action against the debtor.
Suit in Personam in Admiralty upon
Default (Sec. 18. P.D. 1521)
 Allows the creditor to bring suit in personam in
admiralty against the mortgagor for the amount of
the outstanding mortgage indebtedness even if
secured by the vessel.
 If the debt is also secured by other realty or
personalty, the creditor may proceed upon the same.
Maritime Lien for Necessaries
(Sec. 21, P.D. 1521)
 Repairs, supplies, towage, use of drydock or marine
railway, or other necessaries were furnished to the
vessel.
 The work is done on orders of the ship owner or
person authorized by the owner.
 Such credit must be alleged or proved that it was
given to the vessel.
 Enforceable by suit in rem.
MARINA M.C. 100 (Guidelines on Annotation/Cancellation of
Mortgage)
 Documentary requirements:
 Letter of Intent & Duly accomplished applicationform;
 Duly notarized mortgage contract;
 Proof of payment of documentary stamp tax with the
BIR; and
 Original copy of CO and CVR.
Note: The annotation of mortgage to be reflected at the
back of the CVR and CO.
Other applicable MARINA regulations
on vessels
 M.C. No. 48 – Measure to control overcrowding/
overloading and scalping of tickets in the interisland
vessels.
 M.C. No. 72 – Guidelines on the Implementation of at
least 10-minute film on safety features of each
specific passenger/passenger-cargo vessels as
amended by M.C. No. 136.
 M.C. No. 83 – Guideline on the issuance of
endorsement certificates in accordance with the
STCW (Standards for Training, Certification and
Watchkeeping) 1978 Convention.
 M.C. No. 89 – Implementing guidelines for vessel
safety regulations as amended by 89-B.
 M.C. No. 114 – Preventive Safety Measure and other
concerns
 M.C. No. 123 – Wearing of lifejackets during boarding
and/or prior to departure by all passenger vessels
with open deck accommodation.
 M.C. No. 135 – Rules on the implementation of voice
tape on the safety features of a vessel.
 M.C. No. 143 – Rules and regulations to implement
the International Safety Management (ISM) Code in
Domestic Shipping ( M.C. No. 159 for NSM).
Republic Act 9295
The Domestic Shipping
Development Act of 2004
State policies on shipping
(Sec. 2)
 (a) promote Filipino ownership of vessels operated
under Philippine flag;
 (b) attract private capital to invest in the shipping
industry by creating a healthy and competitive
investment and operating environment;
 (c) provide necessary assistance and incentives for
the continued growth of the Philippine domestic
merchant marine fleet;
 (d) encourage the improvement and upgrading of the
existing domestic merchant marine fleet and Filipino
crew to meet international standard;
 (e) ensure the continued viability of domestic
shipping operations; and
 (f) encourage the development of a viable
shipbuilding and ship repair industry to support the
expansion and modernization of the Philippine
domestic merchant marine fleet and its strict
adherence to safety standards which will ensure the
seaworthiness of all sea-borne structures.
Important terms in R.A. 9295 & IRR
 Domestic Shipping - means the transport of
passengers or cargo, or both, by ships duly registered
and licensed under Philippine law to engage in trade
and commerce between Philippine ports and within
Philippine territorial or internal waters, for hire or
compensation, with general or limited clientele,
whether permanent, occasional or incidental, with or
without fixed routes, and done for contractual or
commercial purposes.
 Domestic Trade - means the sale, barter or exchange
of goods, materials or products within the
Philippines.
 Domestic Ship Operator" or "Domestic Ship Owner" -
means a citizen of the Philippines, or a commercial
partnership wholly owned by Filipinos, or a
corporation at least sixty percent (60%) of the capital
of which is owned by Filipinos, which is duly
authorized by the Maritime Industry Authority
(MARINA) to engage in the business or domestic
shipping.
 Shipper - means any person, partnership or
corporation who shall procure for itself the services
of a domestic ship operator for the carriage of its
cargo in the domestic trade upon payment of proper
compensation.
 Certificate of Public Convenience - means the license
or authority issued by MARINA to a domestic ship
operator to engage in domestic shipping.
 Cargo Handling Equipments - means any machinery
gear or equipment used by the ship operator or a
duly authorized and licensed port operator to service
or handle cargo, on board the vessel, at the pier, or
in the terminal or container yard such as, but not
limited to, cranes, forklifts, top lift, stacker, tractor
heads, containers, pallet boards, and the like,
including all spare parts, replacement parts,
appurtenances, accessories, articles, supplies, and
material thereof.
 Shipbuilding - means the design, construction,
launching and outfitting of all types of ships and
watercraft;
 Ship repair - means the overhaul, refurbishment,
renovating, improvement, or alternation of the hull,
machineries, equipment, outfits and components of
all types of ships;
 Shipyard - means the shipbuilding or repair facilities
which have the capability to lift vessels above the
waterline in order to effect ship work vessels,
appendages, structure, machinery and equipment.
Investment incentives to domestic
shipping industry (Sec. 4)
 (a) Exemption from value-added tax on the
importation and local purchase of passenger and/or
cargo vessels of one hundred fifty (150) tons and
above, including engine and spare parts of said
vessels.
 Vessels to be imported must comply with the age
limit requirement, at the time of acquisition counted
from the date of the vessel’s original commissioning,
as follows: 1) For passenger and/or cargo vessels,
the age limit is fifteen (15) years old, 2) For tankers,
the age limit is ten (10) years old, and 3) For highspeed
passenger craft, the age limit is five (5) years
old;
 (b) Exemption from value-added tax on the
importation of life-saving equipment, safety and
rescue equipment and communication and
navigational safety equipment, steel plates, and other
metal plates including marine-grade aluminum plates,
used for transport operations.
CONDITIONS IN THE GRANT OF (a) & (b):
 Not manufactured domestically in sufficient quantity,
of comparable quality and at reasonable prices;
 Directly imported by a MARINA-registered domestic
shipping operator;
 Reasonably-needed and will be used exclusively by
the registered domestic shipping operators in its
transport operations;
 Approval of a MARINA was obtained prior to the
importation of said articles;
 Valid up to ten (10) years from effectivity.
Deregulation of the Domestic
Shipping Industry (Sec. 8)
 Domestic ship operators authorized to establish their
own domestic shipping rates provided that effective
competition is fostered and public interest is served.
 MARINA shall monitor all shipping operations and
exercise regulatory intervention where it is
established, after due process that public interest
needs to be protected and safeguarded.
Safety Standards
(Sec. 9)
 All vessels shall at all times be in seaworthy
condition, properly equipped with adequate lifesaving,
communication, safety and other equipment,
operated and maintained in accordance with the
standards set by MARINA, and manned by duly
licensed and competent vessel crew.
 The MARINA given the power to inspect vessels and
all equipment on board vessels to ensure compliance
with safety standards.
Jurisdiction of MARINA
(Sec. 10)
 Register vessels;
 Issue certificates of public convenience, or any
extensions or amendments thereto, authorizing the
operation of all kinds, classes and types of vessels
in domestic shipping: Provided, That no such
certificate shall be valid for a period of more than
twenty-five (25) years;
 Modify, suspend or revoke at any time, upon notice
and hearing, any certificate, license or accreditation
it may have issued to any domestic ship operator;
 Establish and prescribe routes, zones of areas of
operations of domestic ship operators;
 Require any domestic ship operator to provide
shipping services to any coastal area, island or
region in the country where such services are
necessary for the development of the area, to meet
emergency sealift requirements, or when public
interest so requires;
 Set safety standards for vessels in accordance with
applicable conventions and regulations;
 Require all domestic ship operators to comply with
operational and safety standards for vessels set by
applicable conventions and regulations, maintain its
vessels in safe and serviceable condition, meet the
standards of safety of life at sea and safe manning
requirements, and furnish safe, adequate, efficient,
reliable and proper service at all times;
 Inspect all vessels to ensure and enforce compliance
with safety standards and other regulations;
 Ensure that all domestic ship operators shall have
the financial capacity to provide and sustain safe,
reliable, efficient and economic passenger or cargo
service, or both;
 Determine the impact which any new service shall
have to the locality it will serve;
 Adopt and enforce such rules and regulations which
will ensure compliance by every domestic ship
operator with required safety standards and other
rules and regulations on vessels safety;
 Adopt such rules and regulations which ensure the
reasonable stability of passengers and freight rates
and, if necessary, to intervene in order to protect
public interest;
 Hear and adjudicate any compliant made in writing
involving any violation of this law or the rules and
regulations of the Authority;
 Impose such fines and penalties on, including the
revocation of licenses of, any domestic ship
operator who shall fail to maintain its vessels in
safe and serviceable condition, or who shall violate
or fail to comply with safety regulations;
 Investigate any complaint made in writing against
any domestic ship operator, or any shipper, or any
group of shippers regarding any matters involving
violations of the provisions of this Act;
 Upon notice and hearing, impose such fines,
suspend or revoke certificates of public
convenience or other license issued, or otherwise
penalize any ship operator, shipper or group of
shippers found violating the provisions of this Act;
and
 Issue such rules and regulations necessary to
implement the provisions of this Act: Provided, That
such rules and regulations cannot change or in any
way amend or be contrary to the intent and purposes
of this Act.
Prohibited Acts and Practices of
Domestic Ship Operators (Sec. 16)
 Operate without a valid certificate of public convenience,
accreditation or other form of authority required by this Act;
 Refuse to accept or carry any passenger or cargo without
just cause;
 Fail to maintain its vessels in safe and serviceable condition,
or violate safety rules and regulations;
 Fail to obtain or maintain adequate insurance coverage;
 Fail to meet or maintain safe manning requirements; and
 Such other acts which the MARINA shall determine, after
due notice and hearings, to be detrimental or prejudicial to
the safety, stability and integrity of domestic shipping.
CPC Issuance (Sec. 2, Rule IV, IRR of
R.A. 9295 on Deregulation)
 Power of MARINA to issue CPC or any
amendments/extensions/renewals.
Requirements:
 Economic and beneficial effect which the proposed
service shall have to the port, province or region
which it proposes to serve; and
 Financial capacity of the domestic
shipowner/operator to provide and sustain safe,
reliable, adequate, efficient and economical service in
accordance with the standards set by government
regulations.
Amendment to CPC
(Sec. 3, Rule IV IRR)
 Permanent Addition or Deletion of a route/port/link;
or,
 Permanent Addition/ Reduction/ Replacement of
Ship/Fleet or Change in Ship’s Name; or,
 Permanent Addition/ Reduction/ Replacement of
Ship/Fleet or Change in Ship’s Name; or,
 Change in name of the
entity/corporation/partnership/cooperative.
Validity of CPC
(Sec. 5, Rule IV IRR)
Years of Operation Validity of CPC
More than 10 years 25 years
More than 5 years up to 10
years
15 years
5 years and below 10 years
Qualification Requirements
(Sec. 6, Rule IV, IRR)
 Must be a MARINA-registered shipowner/operator
per MARINA MC 79/79-A or their subsequent
amendments.
 Must be financially capable to provide and sustain
safe, reliable, adequate, efficient and economical
service in undertaking the proposed shipping
service.
Formula on Financial Capability: Capitalization = (Equity
– fixed assets net of long-term liabilities) + total
depreciation
 Must provide a service that has economic and
beneficial effect on the port, province or region it
proposes to serve.
Jurisdictional Requirements
(Sec. 8, Rule IV, IRR)
 Affidavit of publication with the newspaper
clipping;
 Copy of the whole newspaper where the Order was
published;
 Photographs showing proof of the required posting
of Order.
Safety Standards
(Sec. 1, Rule VI, IRR)
 All ships shall, at all times, be in seaworthy condition
as to their hull and machinery
 Properly outfitted with adequate navigational aids
and equipment, firefighting, life-saving,
communication, and other safety
appliances/equipment.
 Operated and maintained in accordance with
prescribed standards, and manned by duly licensed
and competent ship crew.
Rates
(Sec. 1, Rule VIII, IRR)
 Domestic shipowners/operators are authorized to
establish/fix their own domestic shipping rates,
passenger or cargo rates or both.
 Limitation: Effective competition is fostered and
public interest is served.
 Effectivity: 7 calendar days from the date of
publication.
Conditions in Fixing Rates
(Sec. 2, Rule VIII, IRR)
 Shipowners/operators with Entity/Company CPC to
submit under oath with the MARINA their Notice for
the adoption of initial/ subsequent upward or
downward adjustment of deregulated rates in a
prescribed form.
 The notice shall indicate, among others, the name of
covered ship(s), authorized route(s)/link(s), rate(s)
per route/link and the grounds for the adjustment.
Publication Requirement of
Adjusted Rates
 The notice shall be published in any of the five (5)
major newspapers of national circulation, if the
route(s)/area(s) of operation to be served is national
and/or inter-regional in scope.
 If the route(s)/area(s) to be served is local or intraregional in
scope, publication in a newspaper of local
circulation is sufficient.
 And, posting of the notice in in all conspicuous places
at the affected port(s), vessel(s), company premises,
passenger terminals and ticketing office(s).
Instances Warranting MARINA
Intervention (Sec. 4, Rule VIII, IRR)
 Monopoly of a route/link, lack of effective
competition in a route/link, and practices which
constitute combinations in restraint of trade.
 Any complaint against the rates charged and/or
services rendered by the shipowners/operators
provided sufficient basis/justification is submitted.
 Any adverse findings/recommendations as a result
of monitoring activities undertaken by the MARINA.
 Other analogous instances.
Compulsory Insurance Coverage
(Sec.1, Rule IX, IRR)
 (1) Not less than Php 200,000.00 per manifested
passenger;
 (2) Adequate insurance coverage for cargo, in an
amount to be computed in accordance with existing
laws, rules and regulations, and the total amount of
such coverage shall be equivalent to the total cargo
capacity being offered by the vessel.
 (3) If a domestic shipowner/operator should offer
both passenger and cargo service, then the total
insurance coverage shall be in the total sum
equivalent to that stipulated in paragraphs (1.1)
and (1.2) of this Section.
Amount of Insurance If Operating
more than (1) ship
 The amount equivalent to the total authorized
number of passengers, or total cargo capacity, or
both, of the largest operating ship.
 But must not exceed the value of such ship.
Prohibited Acts
(Sec. 1, Rule XII, IRR)
 Operating without a valid certificate of public
convenience, accreditation or other form of authority.
 Refusal to accept or carry any passenger or cargo
without just cause, except for tramp operations.
 Failure to maintain the vessels in safe and
serviceable condition, or violation of the safety rules
and regulations.
 Failure to obtain or maintain adequate insurance
coverage.
 Failure to meet or maintain safe manning
requirements.
 Failure to submit the required Quarterly Report and
an audited Annual Report of Operations and
Finances, attaching the copy of the Official Receipt
(OR) of Quarterly and Monthly Common Carriers Tax
Payments to the Bureau of Internal Revenue.
 Other detrimental or prejudicial to the safety,
stability and integrity of domestic shipping.
 Those prohibited acts defined in existing MARINA
Circulars.
Powers of MARINA
(Rule XIV, IRR)
 Power to Investigate
 Power to Hear and Adjudicate
 Power to Issue Summons
Rules on Appeals to MARINA Regional
Offices’ CPC Decisions (Rule XV, IRR)
 Order, ruling, decision or resolution rendered by
MARINA Regional Office relating to CPC application
 MR – 15 days from receipt;
 If denied, appeal to Administrator – 15 days from
receipt.
 If denied by MARINA Administrator:
- ADMINISTRATIVE APPEAL to the MARINA Board
within 15 days from receipt; or
- Special Civil Action on Certiorari with CA within 30
days from receipt.
All other Decisions
 MR – 15 days from receipt;
 If denied, appeal to MARINA Administrator – 15 days
from receipt.
 If denied by MARINA Administrator:
ADMINISTRATIVE APPEAL to the MARINA Board
within 15 days from receipt.
Perfection of Appeal
 File a Notice of Appeal with the MARINA
Administrator and the concerned CO/MRO
Director/OIC.
 Copy to be served upon the adverse party.
 Within 15 days from receipt of the appealed from
decision, etc.
 Payment of Docket Fee of P1,000.
Temporary Take-Over of Operations
(Sec. 1, Rule IX, IRR)
 In times of national emergency;
 When the public interest so requires;
 Under reasonable terms prescribed by the Flag state;
 Flag state may temporarily take over or direct the
operations of any vessel engaged in domestic trade
and commerce or prescribe its rates or routes of
operation.
 Immediately upon the cessation of the emergency,
the State shall immediately reinstate to the domestic
shipowner/operator the operation of the ship under
the same terms and conditions existing prior to the
occurrence of the emergency.
Chapter 8
Persons Who Take Part In Maritime Commerce
Ship owner and Ship agent
 Ship owner – the person primarily liable for damages
sustained in the operation of vessel.
 Ship agent – the person entrusted with provisioning
of the vessel, or who represents her in the port in
which she happens to be.
 Both are civilly liable for the acts of the captain and
for the obligations contracted by the him to repair,
equip, and provision the vessel. [Art. 586, Code of
Commerce]
Domestic Shipowner/operator
 A citizen of the Philippines, or a commercial
partnership wholly owned by Filipinos, or a
corporation at least sixty percent (60%) of the capital
of which is owned by Filipinos, which is duly
accredited by the MARINA under Memorandum
Circular No. 79/79-A or their subsequent
amendments to engage in the business of domestic
shipping, which may include cooperative or
association duly registered with relevant government
agency. [IRR, R.A. 9295]
Captain and Masters
 Captain – those who govern vessels that navigate the
high seas or ships of large dimensions and
importance, although they may be engaged in
coastwise trade.
 Masters – those who command smaller ships
engaged exclusively in the coastwise trade.
Note: For purposes of maritime commerce, both have
the same meaning, i.e. they command ships.
Powers & Functions of Captains
(Masters)
 Nature of his position: confidential and managerial.
 3 distinct roles he performs:
(1) As general agent. If he is also a co-owner, his
agency becomes one coupled with interest. He may
not be dismissed if he is a co-owner or the
partnership agreement stipulates as a condition as
ship captain [see Art. 602 & 606 -607];
(2) As commander and technical director of the
vessel; and
(3) As representative of the country under whose flag
he navigates.
Vessel Pilot
 A person duly qualified, and licensed, to conduct a
vessel into or out of ports, or in certain waters.
 In a broad sense, the term ‘pilot’ includes:
- Those whose duty it is to guide vessels into or out
of ports, or in particular waters; and
- Those entrusted with navigation of vessels on the
high seas.
 Compulsory pilotage is enforced in the Port of Manila,
Port of Cebu, Port of Tacloban, among others.
Pro Hac Vice Nature of Position of
Pilot
 Under English and American authorities, generally
speaking, the pilot supersedes the master for the
time being in the command and navigation of the
ship, and his order must be obeyed in all matters
connected with her navigation.
 He becomes master pro hac vice and should give all
directions as to speed, course, stopping and
reversing, anchoring, towing and the like.
 And when a licensed pilot is employed in a place
where pilotage is compulsory, it is his duty to insist
on having effective control of the vessel or to decline
as pilot. [Far Eastern Shp., v. CA, G.R. No. 130068, Oct.
1, 1998]
Occasions When Master May Interfere or Even Displace Pilot
 When Pilot is obviously incompetent or intoxicated;
 In cases of danger which pilot does not foresee;
 In all cases of great necessity.
 To advise or offer suggestions to the pilot considering
that he is still in command of the vessel, except so
far as her navigation is concerned.
 To see that there is sufficient watch on deck and that
the men are attentive to their duties, etc.
 Failure on the part of the Master to comply with
above duties makes him personally liable for resulting
damage cause. [Ibid]
Liability of Pilot
 Rule: a pilot is personally liable for damages caused
by his own negligence or default to the owners of the
vessel and to third parties for damages sustained in a
collision.
 Negligence of Pilot is known as ‘MARITIME TORT’
 As held In Far Eastern Shipping:
 In the United States, the owners of a vessel are not
personally liable for the negligent acts of a
compulsory pilot, but by admiralty law, the fault or
negligence of a compulsory pilot is imputable to the
vessel and it may be held liable therefor in rem.
 Where, however, by the provisions of the statute the
pilot is compulsory only in the sense that his fee
must be paid, and is not in compulsory charge of the
vessel, there is no exemption from liability.
 Even though the pilot is compulsory, if his negligence
was not the sole cause of the injury, but the
negligence of the master or crew contributed thereto,
the owners are liable.
 But the liability in rem does not release the pilot from
the consequences of his own negligence. The
rationale for this rule is that the master is not entirely
absolved of responsibility with respect to navigation
when a compulsory pilot is in charge.
Other Officers and Crew
 Deck Officer – an officer qualified in accordance with
the provision of the International Convention on
Standards of Training, Certification and
Watchkeeping for Seafarers (STCW) 1978, as
amended, Chapter II.
 Chief Engineer – a senior licensed marine engine
officer responsible for the mechanical propulsion and
the operation and maintenance of the mechanical
and electrical installations of the ship.
 Engineer Officer – an officer qualified in accordance
with the provision of (STCW) 1978, as amended,
Chapter III.
 Radio Officer –a person holding an appropriate
certificate issued and recognized by the MARINA
under the provisions of the Radio regulations.
 Ratings – a member of the ship’s crew other than the
master or an officer.
 Major Patron (MAP) – a marine deck officer duly
registered and certificated to act as officer or master
of vessel of not more than 500 GT navigating in the
major coastwise trade routes within the territorial
limits of the Philippines.
 Minor Patron (MIP) – a marine deck officer duly
registered and certificated to act as officer or master
of vessel of not more than 250 GT navigating within
a specified body of water in the minor coastwise
trade route in the Philippines.
 Marine Diesel Mechanic (MDM) – a person authorized
by MARINA to operate and maintain the ship’s diesel
engines or the qualification/license to act as such.
 Supercargoes – administrative officers of the ship
with duties to keep an account and record of their
transaction. Powers and duties of the captain with
regard to that part of the administration shall cease
when thee is a supercargo.
 Supernumerary - a person who is not a regular
member of the crew but performing functions
appropriate to the certificate possessed.
Chapter 9 Charter Party
Definition of a Charter Party
 A written contract whereby the ship owner or the
ship agent leases the vessel to transport passengers
or cargo for a fixed price. [Art. 652, Code of Commerce]
 A contact by which an entire ship or some principal
part thereof, is left by the owner to another person
for a specified time or use. [Caltex Philippines, Inc. v.
Sulpicio Lines, Inc., 315 SCRA 709]
National Union Fire Insurance v. Stolt-Nielsen Phil., 184 SCRA
682
Held:  Where BL has been issued covering goods shipped
aboard a vessel under a charter party, and charterer
remains the holder of the BL, it operates as a receipt
for the goods, and as document of title passing the
property of the goods, but not as varying the
contract between the charterer and ship owner.
 The BL becomes merely a receipt and not the
contract of carriage in a charter of the entire vessel.
Ouano vs. CA, 211 SCRA 740
Held:  Even if a charter party has a condition against
subchartering, and the vessel was in fact sub-chartered
without knowledge on the part of the sub-charterer
of the prohibition, no cause of action arises in favor
of the owner of the vessel against the sub-charterer.
 Neither does such owner have any lien against the
cargo of sub-charterer.
 Carrier has a lien on the goods only while he retains
possession of the goods
Obligation of the Charterer
 Charterer, before transporting its cargo, is of no
obligation to ensure that the vessel it chartered
complied with all legal requirements. The duty rests
upon the common carrier as it is the one engaged in
‘public service’. [Caltex v. Sulpicio Lines, infra]
Important Terms Used in Charter Party
 Primage – the bonus to be paid to the captain after a
successful voyage.
 Demurrage – A penal clause intended to compensate
the owner of the vessel for its non-use.
 Lay days – The period when the vessel will be
delayed in port for loading and unloading.
 Deadfreight –The portion of the cargo under a
charter not loaded. It is also used as the amount
recoverable by the ship owner from the charterer for
that portion of the ship’s capacity that the latter
failed to occupy despite the stipulation in the charter
party.
Cases on Demurrage
 In its strict sense, demurrage is the compensation
provided for in the contract of affreightment for the
detention of the vessel beyond the lay time or that
period of time agreed on for loading and unloading of
cargo and is given to compensate the ship owner for
the non-use of the vessel. [National Steel v. CA, 283
SCRA 45]
 Demurrage is the sum fixed in a charter party as
remuneration to the ship owner for the detention of
his vessel beyond the number of days allowed by the
charter party for loading or unloading or for sailing.
[NFA v. CA, 311 SCRA 700]
NFA v. CA, 311 SCRA 700
 The shipper or charter is liable for the payment of
demurrage claims when he exceeds the period of
loading or unloading as agreed upon or the agreed
lay days. The period for such may or may not be
stipulated in the contract. A charter party may either
provide for a fixed lay days or contain general or
indefinite words such as ‘customary quick dispatch’ or
‘as fast as the steamer can load’.
 Customary quick dispatch implies that loading and
unloading of the cargo should be within a reasonable
period of time. Due diligence should be exercised
according to the customs and usages of the port or
ports of call.
 The circumstances obtaining at the time of loading
and unloading are to be taken into account.
 When the provision is for ‘demurrage/dispatch:
NONE’ it will be deemed a waiver of the right to claim
demurrages.
 Delay in loading or unloading, to be deemed as
demurrage, runs against the charterer as soon as the
vessel is detained for an unreasonable length of time
from the arrival of the vessel because no available
berthing space was provided for the vessel due to the
negligence of the charterer or by reason of the
circumstances caused by the fault of the chartere.
Keng Hua Paper Products v. CA, 286 SCRA 257
Held:  A claim for demurrage by carrier involves an
obligation NOT ARISING from a loan or forbearance
of money. The applicable interest rate is 6% P.A.
pursuant to Art. 2209, NCC.
 When the BL does not specify the demurrage
amount, and the total amount claimed by the carrier
increased as the days went by, the total amount
demanded cannot be deemed to have been
established with reasonable certainty until the trial
court rendered its judgment. Hence, the 6% is to be
computed from the date of the trial court’s decision
imposing demurrage charges against the consignee.
Kinds of Charter Party
 Contract of Affreightment – one whereby the owner
of the vessel leases a part or all of its space to haul
goods for others. It is a contract for special services
to be rendered by the ship owner. The ship owner
RETAINS the possession, command and navigation of
the ship, the charterer merely having use of the
space in the vessel in return for his payment.
 Bare-boat or Demise Charter – where the shipowner
turns over possession of his vessel to the charterer,
with the latter undertaking to provide the crew,
victuals, supplies and fuel during the term of the
charter. Charterer is owner PRO HAC VICE.
Two Classes of Contract of Affreightment
 Voyage Charter –The vessel is leased to the
chartered for a single voyage only;
 Time Charter – The vessel is leased for a fixed period
of time.
Substantive Provisions Relating to
Charter Party
 If charterer’s cargo is not sufficient to fill up 3/5 of
the capacity of the vessel, carrier has the right to
unload the cargo and put it on a smaller vessel at the
expense of the charterer. If cargo exceeds 3/5 of the
cpacity, the carrier cannot exercise the right. [Arts.
670 & 671, CoC]
 If vessel has been chartered in whole by one party,
the owner cannot receive the cargo of any other
person as the charter party becomes an exclusive
contract. [Art. 672]
 The owner of the vessel is liable to the charterer for
damages in case the captain unduly delays the
voyage. [Art. 673]
 If charterer brings more than that agreed upon, the
carrier may accept the increase in cargo and demand
increase of freightate provided the vessel is not
overloaded. [Art. 674]
 If vessel has been chartered to load cargo in another
port and upon arrival in that port there is no cargo
delivered, the captain has two options:
a) Look for other cargo; or
b) After expiry of lay days there is still no cargo, the
captain should file a marine protest and return to
home port in full ballast. The charterer should pay
freightage in full. [Art. 675]
 No right to freightage if charterer can prove that the
vessel is not in condition to navigate. [Art. 676]
 Charter may sub-charter where there is no express
prohibition. [Art. 679]
 Charterer who cannot fill the vessel is liable for full
freightage. [Art. 680]
 Charterer is liable for damages if loaded cargo
subjects the vessel to forfeiture or confiscation.
Under Art. 356, carrier can open the packages of
shipper to find out whether they contain items which
may subject the vessel to forfeiture. [Art. 681]
 If merchandise should have been shipped for
purpose of illicit commerce, and were taken on board
with knowledge of the person from whom the vessel
was chartered or of the captain, the captain is jointly
liable with the ship owner for all the losses which
may cause the other shippers. [Art. 682]
 Where the vessel is in need of repairs, chartere must
wait until vessel is repaired. [Art. 683]
 Before beginning of the trip, charterer may unload
the cargo by paying ½ of the freightage. [Art. 685 in
relation to Art. 688]
 Charterer is under obligation to pay the freightage
after the discharge of the cargo. [Art. 686]
 Charterer and shippers cannot abandon the cargo
unless it consist of liquids and ¾ leaks out due to
inherent defect of the cargo and with not more than
¼ remaining in the container. [Art. 687]
Other rules affecting charter party
and cargo
 If merchandise sold to make necessary repairs,
charterer shall still pay for the freightage. [Art. 659]
 If merchandise is jettisoned, lost at sea or seized by
pirates, no obligation to pay freightage. Considered
as general average. [Arts. 660 & 661]
 Merchandise damaged due to inherent defect: pay
full freightage. [Art. 663]
 Where payment is based on weight and the cargo
increases in weight during the voyage, the charterer
must pay the increase. [Art. 664]
 Cargo carried is subject to retaining lien by the ship
owner. Retaining lien – while in possession; Carrier’s
lien – subsists up to 30 days from date of release of
cargo. [Arts. 665 - 667]
Valid Rescission By Charterer of Charter Party (Arts. 688 –
690, CoC)
 Before loading by paying ½ of the freightage agreed
upon. The consent of ship owner is NOT NECESSARY.
Mere notice to him is sufficient. {Note: This is the 1st
distinction between charter party and in ordinary
lease. In lease, none of the parties may unilaterally
cancel the contract without paying the full
consideration plus damages};
 When the vessel is not up to the capacity agreed
upon or the flag under which she sails differs from
that agreed upon. No obligation to pay the
freightage.
 When the vessel is not place at the disposal of the
charterer. No obligation to pay the freightage.
 When the vessel returns due to pirates or to bad
weather and charterer decides to unload. He must
pay the full freightage.
 When the vessel returns for repairs. If repairs take
less than 30 days, charterer must pay in full the
freightage; if it exceeds 30 days, he must pay that
portion of the freightage proportionate to the
distance covered.
Total Rescission by the Ship owner (Art. 689)
 When the charterer fails to load the vessel and lay
days have expired. In this case, charterer is under
obligation to pay ½ of the freightage.
 When the owner sells the vessel and the new owner,
despite knowledge of the charter party, decides to
load the vessel with his own cargo. There is no
obligation on the part of the ship owner to
compensate the charterer. But if the new owner has
no cargo to load, he must respect the charter party.
{Note: This is the 2nd distinction between charter
party and in ordinary lease. In ordinary lease
contract, if the buyer of the object of lease was
aware of the lease, he must respect the contract.}
Total Rescission Due to Fortuitous Event (Art. 690)
 War
 Blockade
 Prohibition to receive cargo
 Embargo of vessel by a Government
 Inability of vessel to navigate due to no fault of the
captain or ship agent.
Chapter 10 Bottomry & Respondentia Concepts of Bottomry &
Respondentia
 Bottomry: A maritime contract whereby the owner of
a ship borrows for the use, equipment or repair of
the vessel, for a definite term, and pledges the ship
(or the keel or bottom of the ship pars pro toto) as
security, with the stipulation that if the ship is lost
during the voyage or during the limited time on
account of the perils enumerated, the lender shall
lose his money.
 Respondentia: A maritime contract where it is the
goods, or some part thereof, are hypothecated as
security for a loan, the repayment of which is
dependent upon maritime risks.
Distinguished from Simple Loan
 Firstly, in bottomry & respondentia, rate of interest is
not subject to the Usury Law on account of the
extraordinary risks involved while in simple loan, the
rate of interest must not exceed the ceiling fixed by
the Usury Law (note: read now as unconscionable).
 Secondly, in the former, there must necessarily be a
marine risk, the existence of which must be duly
established while there is no need for such risk under
the latter.
 Thirdly, in the former, it must be executed in
accordance with form and manner required in the
Code of Commerce while in the latter, the formal
requisites on contract apply.
 Fourthly, loan on bottomry or respondentia must be
recorded in the registry of vessels in order to bind
third persons while no such registration is required in
simple loan.
 Lastly, in the former, preference is extended to the
last lender if there are several lenders upon the
theory that were it not for the last lender, then the
prior lenders would not have benefited from the
preservation of the security. Whereas in the latter,
the first lender, as a general rule, enjoys preference
over subsequent ones. [Art. 730, CoC]
Characteristics/Common Elements of Bottomry &
Respondentia
 Exposure of security to marine peril. [Art. 732]
 Obligation of debtor conditioned only upon the safe
arrival of the security at the point of destination.
Who May Contract Bottomry or Respondentia
 Bottomry: General rule – only the owner. If owner is
absent – the captain. [Art. 728]
 Respondentia: only the owner of the cargo.
Hypothecary Nature of Bottomry &
Respondentia (Art. 731)
General Rule:
 The loss of the security, i.e. vessel in bottomry or
cargo in respondentia, extinguishes the obligation.
Exceptions:
 Due to inherent defect (cargo);
 Due to barratry on the part of the captain, i.e.
malfeasance;
 Due to fault or malice of borrower;
 Vessel was engaged in contraband; and
 Cargo loaded different from that agreed upon.
Other Relevant Provisions on
Bottomry & Respondentia
 No bottomry on the salaries of the crew. [Art. 725]
 If loan given in excess of security through
overvaluation by borrower, the excess must be
returned with legal interest. [Art. 726]
 When respondentia loan is not all utilized for the
cargo, the excess must be returned. [Art. 727]
 If the security in bottomry or respondentia is not
subject to a marine peril, it becomes an ordinary
loan. [Art. 729]
 Lenders of bottomry and respondentia must
contribute to the general average once jettison has
made possible the safe arrival of the security. [Art.
732]
 Exposure to marine peril takes place from the time
the anchors are a weighed at the port of departure
until anchors are dropped at the port of destination.
[Art. 733]
 In case of shipwreck and there is salvage, loan will
depend on the repayment on what may be salvaged.
[Art. 734]
 The concurrence of bottomry loan with insurance, the
insurable interest of the owner of the vessel is the
value of the vessel less the loan in bottomry, in
reference to Sec. 101 of the Insurance Code. [Art.
735]
 Failure to pay the premium on time of bottomry or
respondentia loans gives rise to liablility for legal
interest (delay ex re). [Art. 736]
Chapter 11 Averages
Average Defined
 Any damage deliberately caused, or any expense
deliberately incurred due to a marine peril and
because of which the vessel and/or cargo is saved.
 Art. 806: All extraordinary or accidental expenses
which may be incurred during the voyage in order to
preserve the vessel, the cargo, or both.
 Excludes: Petty and ordinary expenses incident to
navigation, e.g., pilotage, lighterage, towage,
anchorage, inspection, health, quarantine, lazaretto
[i.e., quarantine station for maritime travellers] , and
other so-called port expenses, costs of barges and
unloading until the merchandise is place in the wharf,
and any other usual expenses in navigation.
Kinds of Average
 Particular (or Simple) Average – All the damages and
expenses caused to the vessel or to her cargo which
have NOT INURED TO THE COMMON BENEFIT AND
PROFIT of all the persons interested in the vessel and
her cargo. The damages sustained shall be borne by
the owner of the vessel or the goods only. [Art. 809]
 General Average – All the damages and expenses
which are DELIBERATELY caused in order to save the
vessel, its cargo or both, AT THE SAME TIME, from
REAL AND KNOW RISKS. [Art. 811]
Examples of Particular Average (Art. 809)
 Losses suffered by the cargo from the time of its
embarkation until it is unloaded, either on account of
inherent defect of the goods or by reason of an
accident of the sea or force majeure, and the
expenses incurred to avoid and repair the same.
 Losses and expenses suffered by the vessel in its
hull, rigging, arms, and equipment, for the same
causes and reasons, from the time it puts to sea from
the port of departure until it anchors and lands in the
port of destination.
 Losses suffered by the merchandise LOADED ON
DECK, except in coastwise navigation, if the marine
ordinances allow it.
 The wages and victuals of the crew when the vessel
is detained or embargoed by legitimate order or force
majeure, it the charter has been contracted for a
fixed sum for the voyage.
 The necessary expenses on arrival at a port, in order
to make repairs or secure provisions.
 The lowest value of the goods sold by the captain in
arrivals under stress for the payment of provisions
and in order to save the crew, or to meet any other
need of the vessel, against which the proper amount
shall be charged.
 The victuals and wages of the crew while the vessel
is in quarantine.
 The loss inflicted upon the vessel or cargo by reason
of an impact or collision with another, if it is
accidental and unavoidable. If the accident should
occur through the fault or negligence of the captain,
the latter shall be liable for all the losses caused.
 Any loss suffered by the cargo through the fault,
negligence, or barratry of the captain or of the crew,
without prejudice to the right of th owner to recover
the corresponding indemnity from the captain, the
vessel, and the freightage.
Requisites of General Average
 There must be common danger;
 That for the common safety, part of the
vessel or of the cargo or both is sacrificed
DELIBERATELY;
 That from the expenses or damages caused
follows the successful saving of the vessel
and cargo; and
 That the expenses or damages should have
been incurred or inflicted after taking proper
legal steps and authority
Procedure in General Average
 Before the loss is caused or the expenses incurred,
the captain must call a meeting with the chief mate
and other officers and any cargo owner who may be
on board;
 They shall decide by voting on a resolution of the
captain. If majority disagrees with the captain, the
latter shall have the final decision;
 The minutes must be entered in the deck log book,
signed by all the persons present and stating in detail
all the goods jettisoned and the injuries caused to
those kept on board;
 Copy of the minutes to be filed within 24 hours after
arrival at first port of entry.
Examples of General Average
 The goods or cash invested in the redemption of the
vessel or of the cargo captured by enemies,
privateers, or pirates, and the provisions, wages, and
expenses of the vessel detained during the time the
settlement or redemption is being made.
 The goods jettisoned to lighten the vessel, whether
they belong to the cargo, to the vessel, or to the
crew, and the damage suffered through said act by
the goods which are kept on board.
 The cables and masts which are cut or rendered
useless, the anchors and the chains which are
abandoned, in order to save the cargo, the vessel or
both.
 The expenses of removing or transferring a portion of
the cargo in order to lighten the vessel and place it in
condition to enter a port or roadstead, and the
damage resulting therefrom to the goods removed or
transferred.
 The damage suffered by the goods of the cargo by
the opening made in the vessel in order to drain it
and prevent its sinking.
 The expenses caused in order to float a vessel
intentionally stranded for the purpose of saving it.
 The damage caused to the vessel which had to be
opened, scuttled or broken in order to save the cargo.
 The expenses for the treatment and subsistence of
the members of the crew who may have been
wounded or crippled in defending or saving the
vessel.
 The wages of any member of the crew held as
hostage by enemies, privateers, or pirates, and the
necessary expenses which he may incur in his
imprisonment, until he is returned to the vessel or to
his domicile, should he prefer it.
 The wages and victuals of the crew of a vessel
chartered by the month, during the time that it is
embargoed or detained by force majeure or by order
of the government, or in order to repair the damage
caused for the common benefit.
 The depreciation resulting in the value of the goods
sold at arrival under stress in order to repair the
vessel by reason of gross average.
 The expenses of the liquidation of the average.
Who Will Contribute for the General Average
 Those who benefited from the sacrifice: the ship
owner and owners of the cargoes that were saved.
 Contribution may also be imposed on the insurers of
the vessel or cargoes that were saved as well as
lenders on bottomry or respondentia.
Who Are Entitled To The General Average
 All the owners whose goods were sacrificed pro rata.
Exceptions:
 Goods carried on deck unless the law or
customs of the place allow such stowage.
 Goods that are not recorded in the books or
records of the vessel.
 Fuel for the vessel if there is more than
sufficient fuel for the voyage.
American Home Assurance v. CA, 208 SCRA 343
Held:  A particular average presupposes that the loss or
damage is due to an inherent defect of the goods, an
accident of the sea, or a force majuere or the
negligence of the crew of the carrier governed by the
Code of Commerce.
 The claims for damages due to the negligence of the
common carrier are governed by the Civil Code
provisions on common carriers.
Magsaysay Inc. vs. Agan, 96 Phil. 504
 Facts: An interisland vessel of petitioner sailed from
Manila to Aparri. The vessel entered the Aparri river
where she stopped to load and unload. Overnight, a
sand bar formed at the mouth of the river. On her
way out, the vessel hit the sand bar and got stuck. A
tug boat was sent by the owner to town the vessel.
In Manila, the captain demanded from Agan and
other cargo owners to reimburse him for the
expenses of hiring the tugboat.
 Held: Particular average only. The cargo was not
benefited since it was not perishable nor the cargo
owner in a hurry. Even assuming it was general
average, the captain did not call the meeting.
Philippine Home Assurance v. CA, 257 SCRA 468
Facts:  A vessel, with cargo on board, caught fire due to a
small flame coming from the acetylene cylinder which
were stored in the accommodation area near the
engine room and which exploded despite efforts to
extinguish the fire. The vessel was subsequently
towed to port with the expenses of having the cargo
transshipped to port of destination was charged to
the consignees. Petitioner sought recovery as
subrogee.
 Held: The consignee of the cargo cannot be made to
share with the carrier for additional freight and
salvage charges.
 Fire cannot be considered a natural disaster or
calamity since it almost always arises from some act
of man. It cannot be an act of God unless caused by
a lightning or a natural disaster or casualty not
attributable to human agency.
 While the facts of the case may technically fall within
the purview of general average, the formalities
prescribed were not complied with. Consequently,
the carrier’s claim for contribution from the
consignees cannot be enforced.
Jettison of Cargo
 Cargo on deck shall be first to be jettisoned followed
by those from the lower deck then those of bigger
bulk but of smaller value. [Art. 815]
 Cargo jettisoned, to be entitled to reimbursement for
general average, must be covered by a bill of lading.
[Art. 816]
 Expenses to lighten a vessel by the transfer of goods
to other vessels is general average. Also when there
is fire on port and there is need to sink the vessel to
save the goods. [Arts. 817 & 818]
Liquidation of Average
 Whether general or particular average, the
person benefited by the damage or expense
incurred must contribute his proportionate
share, to be determined by the amount of
damages or expenses incurred and
apportioned among the those benefited in
proportion to the value of their property save.
 In particular average, it is implied that there
is only one interest involved and the
proportion pertains to him 100%.
The York-Antwerp Rules
 Allow deck cargo on coastwise shipping but prohibits
it on overseas trade.
 Hence, a deck cargo stowed on deck, with consent of
the shipper in an overseas trade must always
contribute to general average. But if it is the one
jettisoned, it will not be entitled to reimbursement.
 On the other, a deck cargo stowed on deck in a
coastwise trade with consent of the shipper while
also must contribute to general average is likewise
entitle to reimbursement if jettisoned.
Chapter 12 Collisions
Collision & Allision
 Collision – occurs when both vessels are on
motion.
 Allision – happens when one of the vessels is
stationary.
 Rule on Collision: The guilty vessel shall pay
for the damage caused by the collision.
Exception: If guilty vessel sinks due to the
hypothecary nature of maritime transactions.
Exception to exception: When there is
negligence of ship owner [see Abdulhaman
case]
Five Cases Covered by Collision/ Allision
 One vessel is at fault – Vessel at fault is liable for the
damage caused to the innocent vessel as well as to
the damage suffered by the owners of cargo of both
vessels.
 Both vessels at fault – Each vessel must bear its own
loss, but the shippers of both vessels may go against
the ship owners, being solidarily liable to them.
 Vessel at fault is unknown – Same rule when both
vessels are at fault.
 Third vessel at fault – Same rule as when one vessel
is at fault.
 Fortuitous Event – No liability; res perit domino.
Three stages in Collision
 When the 2 vessels approach each other, i.e. when
the risk of collision may be said to have begun.
 When the risk of collision begins up to the moment
when it has become a practical certainty.
 Time between the moment when collision has
become a practical certainty and the moment of
actual contact.
Note: The foregoing rule was laid down in Urrutia v.
Baco River Plantation, 26 Phil. 623 to apply the
doctrine of last clear chance. But this ruling was
abandoned in Williams v. Yangco, 27 Phil. 68 (infra)
Williams v. Yangco, 27 Phil. 68 (1914)
Held:  The doctrine of last clear chance is inapplicable for
marine collision since the rule of liability in this
jurisdiction for maritime accidents such as that now
under consideration is clearly, definitely, and
unequivocally laid down in Art. 827 of the Code of
Commerce.
 Under the rule, the evidence disclosing that both
vessels were at fault gives neither of the owners an
action against the other for the loss or injury
sustained by their respective vessel.
Villacarlos v. Everett Steamship, 4 CA Reports 961
Facts:  A fishing vessel of Philippine registry collided with a
vessel from Europe. The foreign vessel was at fault
but its owner was beyond the jurisdiction of the
courts. The owner, however, had a shipping agent in
the Philippines who, nonetheless denied liability.
Held:  The agent is liable in the absence of the ship owner.
The shipping agent or naviero acts as owner in the
absence of the ship owner.
 Code of Commerce uses the word ‘buque’ in
reference to collision of vessel, i.e.a draft with deck.
A fishing vessel here had no deck, hence, not a
buque so that Art. 835 on marine protest does not
apply.
 Failure of the captain of the fishing vessel to file
marine protest does not bar recovery.
Duty of the Overtaking or Crossing Vessel
(Sulpicio Lines v. CA, 305 SCRA 478)
 Under Rule 24-C of the Regulations for Preventing
Collision at Sea, the duty of overtaking or crossing
vessel to keep out of the way subsists even if the
overtaking vessel cannot determine with certainty
whether she is at forward or aft more than two
points from the vessel being overtaken.
 In case of collision, it would be beyond cavil that the
overtaking vessel must assume responsibility as she
was in a better position to avoid the collision.
 She should have blown its horn or given signs to
warn the other vessel that she was overtaking her.
When moving vessel strikes stationary
object (Far Eastern Shipping v. CA, 297 SCRA 30)
Held:  American evidentiary rule provided for a presumption
of fault against a moving vessel that strikes a
stationary object, such as a dock or navigational aid.
 In admiralty, this presumption does more than
merely require the ship to go forward and produce
some evidence on the presumptive matter. The
moving vessel must show that it was without fault or
that the collision (allision) was occasioned by the
fault of the stationary object or was the result of
inevitable accident.
Doctrine on In Extremis
 Also known as ‘Agony of the Moment Defense’
 Applies when a ship is placed in sudden peril through no
fault of its own and is forced to take "evasive maneuvers that
may be a violation of a rule."
Doctrine of Inevitable Accident
 Applies when the cause of the collision was a cause not
produced by the vessel, but a cause of which the vessel
could not avoid.
Chapter 13 Arrival Under Stress & Shipwrecks
Steps To Be Taken In Determination Of Propriety Of Arrival
Under Stress
 Captain to determine during voyage if there is wellfounded
fear of seizure, privateers or other valid
grounds.
 He then assembles all the officers.
 He summons the persons interested in the cargo who
are present and who may attend. They have no right
to vote.
 Officers to be determined and agree if there is wellfounded
reason after examining the circumstances.
The captain has the deciding vote.
 Agreement to be drafted and minutes to be signed
and entered in the deck log book. Also objections.
Instances of Arribada
 Lack of provision or fuel
 Pirates
 Inability to navigate.
Note: If the lack of fuel or provision is not due to lack of
foresight, or the fear of pirates is well-founded or the
inability to navigate is not attributable to fault of captain or
crew, then these arrivals under stress becomes particular
average of the vessel. Shippers must wait. No damage needs to
be paid to the shippers. But if due to bad faith, the damages
must be paid to shippers for delay and the vessel bears the
loss.
Improper Arribada
 If lack of provisions should rise from the failure to
take the necessary provisions for the voyage
according to usage and customs, or if they should
have been rendered useless or lost through bad
stowage or negligence in their care.
 If the risk of enemies, privateers, or pirates should
not have been well-known, manifest, and based on
positive and provable facts.
 If the defect of the vessel should have arisen from
the fact that it was not repaired, rigged equipped,
and prepared in a manner suitable for the voyage, or
from some erroneous order of the captain.
 When malice, negligence, want of foresight, or lack
of skill on the part of the captain exists in the act
causing the damage.
 Expenses. [Art. 820, Code of Commerce]
Shipwreck (Agrounding)
 The demolition or shattering of a vessel caused by
her driving ashore or on rocks and shoals in the
midseas, or by the violence of winds and waves in
tempests.
Rules on Shipwrecks (Arts. 840-845)
 Losses/deterioration due to shipwreck or stranding to
the account of the owners & ship owner.
 If caused by malice, negligence, or lack of skill of the captain
or because vessel put to sea was insufficiently repaired and
equipped: Shippers candemand indemnity from the captain.
 The goods saved from the wreck to be specially bound for the
payment of the expenses of the respective salvage.
 If several vessels sail under convoy, and any of them should
be wrecked, the cargo saved will be distributed among the rest
in proportion to the amount which each one is able to take.
 If any captain should refuse, without sufficient cause,
to receive what may correspond to him, the captain
of the wrecked vessel to enter a marine protest
against him.
 If it is not possible to transfer to the other vessels
the entire cargo of the vessel wrecked, the goods of
the highest value and smallest volume to be saved
first. Designation to be made by the captain with
concurrence of his officers.
 The captain taking on-board the goods saved from
the wreck to continue his course to the port of
destination and upon arrival he should deposit the
goods for disposal to their owners.
 In case the captain changes his course, and if he can
unload them at the port of which they were
consigned, he may make said port if the shippers or
supercargoes present and the officers and
passengers of the vessel consent thereto. But he is
not required to do so even if he has the consent
during time of war or when the port is difficult and
dangerous to make.
 The owners of the cargo to defray all the expenses of
this arrival and the payment of the freightage.
 If cannot be, proceed to judicial sale complying with
the formalities and on publicity.
Chapter 14 Salvage
Definition and Philosophy of Salvage
 Salvage is a service which one person renders to the owner of
a ship or goods, by his own labor, preserving the goods or the
ship which the owner or those entrusted with the care of them
have either abandoned in distress at sea, or are unable to
protect
and secure.
 Salvage Law provides for the compulsory reward to those
who brave the perils of the sea to save the cargo or vessel in
order to encourage such services. Whether the owner of the
property save likes it or not, he must give a reward. The
maximum amount is
50% of the value of the property save.
Kinds of Salvage Services
 Voluntary – compensation is dependent on the success.
 Under contract for a per diem or per horam wage,
payable at all event.
 Under contract for compensation payable only in case
of success.
Requisites For Salvage Reward
 Valid object of salvage.
 Such object must be exposed to marine peril.
 Must be rendered voluntarily.
 Must be successful.
Derelict
 A vessel or cargo badly damaged and abandoned by
the crew to the mercy of the sea.
 Mere abandonment does not make such vessel or
cargo res nullius.
 Proper procedure must be followed by the salvors to
be entitled of the reward.
Procedure In Derelict
 If vessel is abandoned, salvor must tow her to the nearest
port where it will be delivered to the municipal treasurer or
collector of customs who will advertise the fact of salvage.
 If owner of salvaged vessel or cargo appears, he may take
possession of vessel or cargo and pay the reward amount not
exceeding 50% of the value of the vessel.
 Reward is determined by considering:
- the value of the property save; zeal employed; danger posed
to the salvors; number of persons who took part; services
render; and expenses incurred.
 If no claim for the vessel is made within 3 months after
publication, the municipal treasurer to sell the property
salvaged at public auction. The reward and expenses will be
deducted from the proceeds. The balance to be deposited with
the treasury.
 If no one claims for the balance after 3 years, ½ will go to the
salvors and the other half to thegovernment.
 If one vessel saves another:
 - ½ to the ship owner of the saving vessel.
- ¼ to the captain
- ¼ to the crew
Honorio Barrios v. Go Thong & Co., G.R. L-17192,
 Facts: Go Thong is the owner of a vessel plying the route
from Mindanao to Cebu. The engine of his vessel conked out
while she was in the middle of the sea. The captain radioed the
owner and was advised that a sister ship was on its way to tow
the vessel. The sea at the time was calm. The radio message
was picked up by another vessel which thereafter proceeded to
the stranded vessel of Go Thong. The captain agreed that the
vessel be towed. The owner of the towing vessel knew the
owner of the stranded vessel. He waived charges of towing. But
the captain
and the crew the responding vessel complained of their
respective ¼ shares in the reward.
 Issue: Was there salavage or towage?
 Held: There was no salvage because there was no marine
peril at the time. There was no danger for the stranded ship.
The sea was calm and a sister ship was nearby. Hence, no
reward is due. Also, there is no need for compensation for the
towage because ofthe waiver of the towing vessel.
Chapter 15 COGSA
History of COGSA
 Originally passed by Congess of the US on April 16,
1936 as Public Act No. 521.
 Adopted by the Phil Commonwealth on October 22,
1936 as Commonwealth Act No. 65.
 When the New Civil Code took effect on August 30, 1950, it
became the primary law on carriage of goods by sea.
 Art. 1753, NCC: The law of the country to which the goods
are to be transported shall govern the liability of the common
carrier for their loss, destruction ordeterioration.
 COGSA remains suppletory law for international trade
Chapter 16 Public Service Laws
Meaning and Concept of Public Utility
 A business or service engaged in regularly supplying the
public with some commodity or service of public consequence
such as electricity, gas, water, transportation, telephone or
telegraph service. [National Power Corporation v. Court of
Appeals, G.R.No. 112702, September 26, 1997]
 In a very real sense, a public utility is engaged in public
service-- providing basic commodities and services
indispensable to the interest of the general public. [Republic v.
Meralco, G.R. No. 141314
 When, therefore, one devotes his property to a use in which
the public has an interest, he, in effect grants to the public an
interest in that use, and must submit to the control by the
public for the common good, to the extent of the interest he
has thus created. [Kilusang Mayo Uno Labor Center v. Hon.
Jesus B. Garcia Jr., G.R. No. 115381, December 23, 1994
citing Pantranco v. Public Service Commission, 70Phil.221]
Constitutional Provisions
 Public utilities – must be owned by Filipino citizen or
60% owned by Filipino citizens. [Art. XII, Sec. 11]
 Mass media – must 100% Filipino.
 Government take-over: In times of national emergency, when
the public interest so requires, the State may, during the
emergency and under reasonable terms, temporarily take over
or direct the operation of any privately owned public utility or
business affected with public interests. [Art. XII, Sec. 17]
 Operation of vital industries: The State, may, in the interest
of national welfare or defense, establish and operate vital
industries and upon payment of just compensation, transfer to
public ownership utilities and other private enterprises to be
operated by the government. [Art. XII, Sec. 18]
 Prohibition against monopolies: The State shall regulate or
prohibit monopolies when the public interest so requires; no
combination in restraint of trade or unfair competition shall be
allowed. [Art. XII,Sec. 19]
Public Service
 Includes every person who may own, operate,manage, or
control in the Philippines for hire or compensation, with
general or limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, railroad, street railway, fraction railway,
subway motor vehicle, steamboat, or steamship line ferries,
and water craft, shipyard, ice plant, electric light, heat and
power or any other public utility. [Sec.13(b), Act. 146]
PAL V. CAB, 270 SCRA 538
 Held: The terms ‘convenience and necessity’ if used
together is a statute, are usually held not to be
separable, but are construed together. Both words
modify each other and must be construed together.
The word ‘necessity’ is so connected, not as an additional
requirement but to modify and qualify what might otherwise be
taken as the strict significance of the word necessity.
 Public convenience and necessity exists when the proposed
facility will meet a reasonable want of the public and supply a
need which the existing facilities do not adequately afford.
 It does not mean or require an actual physical
necessity or an indispensable thing.
 The use of the word ‘necessity’, in conjunction with ‘public
convenience’ in a certificate of authorization to a public service
entity to operate, does not in any way modify the nature of
such certification, or the requirements for the issuance of the
same.
 It is the law which determines the requisite for the issuance
of such certification, and not the title indicating the
certificates.
Public Utilities
 Public utilities are privately owned and operated businesses
whose services are essential to the general public. They are
enterprises which specially cater to the needs of the public and
conduce to their comfort and convenience. As such, public
utility services are impressed with public interest and concern.
The same is true with respect to the business of common
carrier which holds such a peculiar relation to the public
interest that there is superinduced upon it the right of public
regulation
when private properties are affected with public interest,
hence, they cease to be juris privati only.
 When, therefore, one devotes his property to a use in which
the public has an interest, he, in effect grants to the public an
interest in that use, and must submit to the control by the
public for the common good, to the extent of the interest he
has thus created. [Kilusang Mayo Uno Labor Center v. Hon.
Jesus B.
Garcia Jr., G.R. No. 115381, December 23, 1994 citing
Pantranco v. Public Service Commission, 70Phil.221]
Difference Between Operation of a
Public Utility and Ownership of Facilities
 While the Constitution in no uncertain terms requires a
franchise for the operation of a public utility, it does not
require a franchise before one can own the facilities needed to
operate a public utility so long as it does not operate them to
serve the public.
 In law, there is clear distinction between the operation of a
public utility and the ownership of the facilities and equipment
used to serve the public.
Telecommunications Radio Industry Broadcasting
 Broadcast is an undertaking the object of which is to
transmit over-the-air commercial radio or television messages
for reception of a broad audience in ageographic area.
Cable Television Operations (E.O. 436, Sept. 9, 1997)
 Classified as mass media
Essential components:
 Reception facilities which extract the broadcast signal
from the air, or microwave transmission.
 Input equipment, which converts and amplifies the
signal received; and
 Distribution system, which consists of feeder or trunk lines
originating from the input equipment; smaller distribution
cables which carry the signal to the immediate vicinity of the
subscriber; and drop lines which carry the signal into the
subscriber’s premises.
Electronic Commerce Act
Internet and Value Added-Services
 Electronic Mail (Email) –
 Bulletin Board System (BBS) –
 World Wide Web (www)
Mass Media
Electric Power Industry Reform Act of 2001 (R.A. 9136)
Build-Operate-Transfer Law (R.A.
6957, as amended by R.A. 7718)
BOT Schemes
 Build-Operate-and-Transfer (BOT
 Build-and-Transfer (BT)
 Build-Own-Operate (BOO)
 Build-Lease-Transfer (BLT
 Build-Transfer-and-Operate (BTO)
 Contract-Add-and-Operate (CAO)
 Develop-Operate-and-Transfer (DOT)
 Rehabilitate-Operate-and-Transfer (ROT)
 Rehabilitate-Own-and-Operate (ROO)