LIMITATION OF LIABILITY IN MARITIME ACCIDENTS: ‘THE PHILIPPINE EXPERIENCE, By cane! Domingo G. Casio’ Introdvetion ‘The Philippines an archipelago composed of 7,10islan. Seid islands ae linked ith each tbe by ships carrying argo and zastengers similar to Greece: As sch, itis its feir share of marin casualties and acidents which involve the loss of Faman lives and property which sinounts to mallioes of oll. One this catulty happens the shipowner involved may have to pay these loses in fll causing financial ruin to him if ot forthe limitation lability principle which Kets the shipowners Uibiliy up tothe value of the vessel, er freight or insurance proceeds, if any. ‘The Philippines tas adopted various rules and procedure as regards to the imitation lial: inthe event ofa masts accent, as follows 1. Where the comtace fr carriage of goods by sea involves foreign trade the provisions of Section 4 (5) of the Casiage of Goods By Sea Act {COG ‘SA»] (Commonweal Act No. 65) limits the lability 3 the shipownet up © USS500 per packsge or in case of goods not ehiped in packages, per customary fight unt orth equivalent of tat sum in ober currency. unless the nate and value ef such goods have len declared ty the shipper before shipment end inserted in the bill of lading. This decantion if embodied in 4 Panne of Cp Saez Heros & Gas whichis args ew Fe in te Phipps Mr Cosilo tas extensive eseence ia ese are collars, lon cago ching peor inj, seece clam, sh Gancing a arict "epson under te Phe lg- Me Caio chlo Scene in Bese ‘Adninscaon BSBA) pe dt Bacto of Lave (LIB) dg fen te Uiesty fe Paige: He hls « Mase of taws QM) tom New Yck Univers and& enews in Advance Martine Law tom fe City of Landon aye. Hewes wih the Londo firm of Snir Rose and Temperey fn (982 twas Pes fhe Mantine Law Associaton ofthe Pliner 1985 He bs wed al mecigs of he Marine Law Asocton ofthe Und Stns in Olan (189), Sete (1993, “nan, Berm 953) en in Pm Des (1997.the bl of lading, shall be rina facie evidence, bt shall not be conetusve on he ari, 2 When he casa invalves domestic rade, he lined Baily pe. tines embodied inthe Philpine Code of Commerce of 1896(thesCona aniculaly. Aricles $87, $90 and 837, which limits the Isbiiy of oo ‘ipower p tthe valu of te vessel vith al hor fight sid ease [oceasifany. This is known inthe Philippines as te seal and brew hay principle in maritime laws: ands 3 Where the carrer end the shipper ae able to contractually agree ond fx the former’ lisilty which in no case shall be below the seinen ‘mounts ander COGSA ox under the atorecied provisions of eC Many race counties in the woelé have, in one Torm or anche, ‘dented the liability ele in favor of shipowners covering mactine canes Such as, England, United States, and Canade. The limfaionlobines oe {us of thee markime countries covers mast all maine naucaes {mbodied for example, i the Brussels Convention of 1957 rat imitation ofthe Libilty of Owners of See-Going Ships eed the Uoivg ‘Stetss Fedral Limitation Liability Act, whch pemineath porake Artie (Grussels Convention of 1957) 1. The owner ofa St-going ship may Lint his laity in accordance Fut Article 3 of this Convention in respect of claims arising rom ao of he Polowing occurences anes the occurrence pving rae tothe chin ang ‘om he etal fault oF privity ofthe owner (2) lass of lif of, or persona injury to any person being cared in the ‘ip. ad lows of or damage to, any propety om board the hig, (©) oss of life of or personal injury to, anyother perion, whether on lind wate ae of or dunage to ay other prope or infngemen aan {as stad bythe at, neglect or dean of any peso on Sod he oe, for whose sc. neglect or default the owner i esponsible or tos pera ress he ship fs whose at, neglect or deal he wer i ore bl, Provided, however, that in regard to the act, neplec oc default inne ain (©) any obligation or lability imposed by aw relating to the removal of rsck and arising fom or in connection with the rating tonal oy es tion of any ship which s snk, stranded a abandoned including sothug which may be onboard such sip) and any obligation or ibility rising ‘ut ef damage caused o arbour works, basins and navigable waterways, ' Encerpt from the US. Feder Limitation of Liability Act See. 183. The liblity ofthe owner of any vese, whether Ametic foreign for any person of any person or any property, goo, or meth shipped or put on board such vese, ot foc any las, mater, or thing, lor, aint, or forfeitre, done occasioned, er incurred, witout the privity 0 \nowiedge of such owner or owners sal not exceed the amount oF Value of the intaest of such owner in Sich vestl, and her freight then pending Timay interest you to know that aside from the 1957 Brussels Convention there 28 two (2) othe limitation conventions, manly, the 1924 Convention which involves the value of the vessel, her accessories and freight andthe 1976 Coovention which increased the limits of hibits but caleuated the sae in units of account bad onthe IMF special drawir ahs, Unfors. rately the Philippines has not signed or acceded i any ofthese imitation ability conventions. istory of the Limited Lisbility Principle ‘The history ofthe limited lability of shipowners as been cleryexplal- ‘ed bythe Armetican juss, Me Junie Brown, in the ease of The Main v2 ‘Willams (152 US122, cited ia Benedict on Acmirahy) regeding ls historical buackgreund, a follows: By the common la, as administered both in England and America, the personal liability ofthe owner of veel for damage ky collision isthe fame as in other cass of negligence, and i limited ony bythe amount sf ‘he loss und by his ability to espand. The evi law to, a wells the nee ait Iaw made no éstinedon in thie particular favor of shipowners [ordi the ancient laws of Olen or Wshy or the Hanse owns suggest sry Festcton upon such liability. Indeed is ailficl. fot impossible ty when ani where the estictions of te mode aw cciginated. They ae found inthe Consolato del Mare, which i wo separate chapters, expressly limits the inkl ofthe part owner tothe value of his shar in the ship. Vinnius nearly continental writer, tates that bythe law ofthe land the owners were not chargeable beyond the value of the ship and te things that wee In i ‘The Herseatic Ordinance of 1644 also pronounced the goods ofthe owner Aischarge fom claims for damages by te sle ofthe ship o pay them, But however the practice eriginaed, it appear, by the end othe Sevenceath century. to have become firmly established among the lading maritime ‘ations of Europe, since the French Ordinance of 1681, which hs served sx ‘mode! for most of the modern maritime codes, deslred tha the owners ofti shall be answerable forthe cs fh ans, bt aD scarp Ueretrom upon rlioqushing the sip and ig ‘The Reasons Behind the Limited Liaitty Rule of Shipowners eg imited ally principle had its ergin in the prevailing conditions Seine wade and sea voyages daring the medenal spe whee oo Seapnee, ay, so that if he shipowner or agent tandenl baie ST Beea LEI his linty was exigushed(Abuep we Sur Dene 40.6, 80, in ston, xno ves, ne lining ‘AS mentioned by Benedict in his tree, «The Law of Amesian Adie aly, thus hs cousheve sought itept these ates inthe lighof thir egin SE Ruoses, nd have asa sid thatthe law of line lang on Se onstrued iberaly in favor of the shipowner. They have enpharear aes cc euzots of i lessaton were so promaethe bung chahin oat sasencatta Pons enengedin he busines of navgationn a oes Rea in ships and ther employnen in conmmercer, no ores, y rae might become effective Jes ilppnes, Arce $87 of te Code regures he fom oh aan coment ofthe vessel othe creditor or any cliimant The elec of sonra Fant to extinguish the Labi ofthe shioowner and thtseen nes engeament is made, suc labilyis ot extnguthed, or erent Petes is a confit of opinion, i seas tht abendonnioe tant nAbandonment can be made ony bythe shipovner and the shipagent In eases of co- ownership, aco-owner may exempt himself rom liablty by the sandonment of the prof the vessel belonging to him. Abandonment ace rade exnnot be refused by the creditor. In other words, the lability ofthe Shipageat or shipowner in Connection with martine conus in confined to theres, 1. the vessel, which, soto speak, is hypathecated foe such obliga. tos, oc 1 the guarantee for theis settlement. Asa rule subject to certain cncetions. i the vessel is lost, the shipowner end the shipepent have no ‘mote ibility. And where the vessel isnot ls, te shipowner or shipagent ‘may absndon the vessel to the creditors in eatifaction of tht clay at mentioned above. The shipowner isnot personal ale ‘The law of imitation of ably is an important pa ofthe maritime laws of amon all shipping counres. Although this law has been adopted Inthe Phibppies, it must be emphasized thatthe limited ability provided in the Cove snot identical tothe Limitation of Liebilty taut in such well-se, eloped maritime courtries cg. England, US. and Canada Ths, twill be seca tat the Code provisions only covers Liability for eallisons (Art 833) ‘mjunes to third party (Ar. 587) and acts ofthe captin (At. 890) nthe other hind, the Limitation of Liability Statute of most marine counties covers almost all maritime carulties. As shown by the aforeted Seston 183 ofthe U.S. Federal Limitation of Liability Act. ‘Unde: Philippine ln shipowners may limit ter ibility tothe value of thei investment (ie. ship) only inthe following instances (1) Collison {© injures to third party; and (3) act of the cptsin. How bout the other casuals of te seas enccunered by shipowners, ef. wreck removal, so, Tution, cargo claims, fire losses, et? Untontunasly, the Code does not rove ay provision to prtect shipowaers ans hese potent habies, [Exceptions tothe Limited Liability Rule Based on decisions rendered by the Philippine Supreme Cort, the doc tne of limited lability des not apty inthe following circumstances: (Where Shipowner is at Fault. The spplication othe «limited ability» oct ofthe maritime law is premised on the cocition thatthe death of ‘or injary to the passenger occured by reason ofthe fault or negligence of the captain oly. If such dexth a injury ied othe shipowner's oun fat or negligence, the doctine does not apply, and shsndonment of te vessel will not absolve him of lability. "The linked libilty doctrine applies ot ‘only to she goods but also tn all cases like death at injury to Parsenges\eherin the sipowner or agent may property be held ible forthe neaigent lick acts othe expan (Yangeo ¥ Laceoa oi) ema be ase this point shat Anicle S87 speaks only of situations where the fault of ‘negligence is commited solely bythe eaptsin In eases where the shipowner ‘a Iewise blamed, Article SB7 doesnot 2) Comperatin Act. Te provisions of tie Code shave no room inthe sppleation of he Workmen's Compensation Act which secks to improve, and ims atthe amelioration ofthe condition of laborers and employees. I. in nor the libilty forthe damage ot loss ofthe caro o injzy to oF death a possengerby or though the misconduct ofthe captain ox mate of the sips nor the libility from the lose of the ship as a result of colon, nor the responsibly forthe wages of the crew, bu ibility created by a saute to compensate emplayees and laborers in ceses of ijy received by oF infited upon them, while engaged inthe performance of thet wore or trmpioyment, orthe heirs and dependents of seh laborers and employees in the event of dent caused by tele employtren. Sach compenniton has nothing to do vith the provisions of the Code of Commerce regarding marie commerce. Is a item in the cost of preucton which mun be included in the budget of any well-managed incustrym (Abst vs. San Diego, ‘tia, ) Labi for repairs of and provsion’ng the vestel effected before ‘the loss ofthe veel. The Philippine Supceme Court nthe case of Govern. ‘ment vs Insular Martine Co. (5 Phil 805) held that The rights and liabilities of owners of vessel andthe vessel elf ae liable for necessary repairs. Naturally, the tol detuction of the vessel ‘extinguishes a maritime lien, a8 there is no longer any resto which W can attach, But the teal desretion of the vesel doesnot aflet the Tal of ‘he owners fr repairs of the vestl completed before is fxs, (4) Where shevesseis insured. However ieeems that this ean exepon ‘in te sense that e creditor may sill cover tut not from the shipigent ot shipowner bu guns the insurer where the recevery is limited othe unt insurance (Chen Yek Hong vs. IAC, 166 SCRA 183), ‘imitation Lisblty with regards to Foreign Trade ‘As mentioned above, Sec. 4 (5) of COGSA limits the lability ofthe shipowner in an amount nt exceeding US$S00 per package o in cae ofthe 20046 not shipped in packages, per customary freight ant or the equivalent of that sam in other currency, unles the nature and vale of sch goods have been declared by the shipper befoe shipment and inserted in the bil of ladingCCOGSA was adopted to standactize the terms of oct il of lading in {utero create international uniformity to lit the care’ wary «f seawonines and to incest the earier’s bility to USS500 per paca ‘rcusiomaty feight unit while atthe sme ine to imit ences cotne pect to srl packages of great valer Hence, the purpose of the pen pckegelimvation is to remin a proper balance between the righ ne respeasbliies of the carrier onthe one hand, andthe rights and Sepone Dit of the claimant onthe other. The per package liao apertor e Dgain between carers and shippers where non-tesponsiiliy asses ee ‘no longs valid ands certain standard of care is mponed on carne, fet In Fenn carers benefit from a maxim per package limitation (Tey oc te Cargo Claims», 29 ody. 434). ‘Moreover, COGSA was made applicable to contracts for carriage of goods by sea to and from Phillppne port in foreign trade provided the it cnnea ‘be construed to repeal of limi he application of the Code Under COGSA, the bass of the itation of te cavers ably depends on whether the cargos contained in wpackage> ris shipped wpe: cstenery freght unt, The phrase «per customary fight unite in the light of ts epsative bhscony riers toa uni of quantiy, weight or measurement Adda he fight unt should be one hat swell known in the shipping indy oe feast known to the immediate pats. I contrat, package/contter ould ‘be sensibly related tothe unit in which the shipper packed ihe och ana escrbed them. nota large metal objet, furetnally a par of te sip, ie which the caries caused them tobe contained, Sach container msi be sien the stme meaning and clasiicaion as a apackager and the seco fcgh unt. In one Philippine Supreme Court case, etiled «Eastrn Shi, ‘ing Uns ine. ACs (150 SCRA 463) the cout determined themeanieg of rackages in reference to the number of earons thd not the cananec, (hich is known to us as either 20 footer of 40 footer) should Be condone 2% the shipping unit subject to the USSS00 limitation of ality ‘imitation of Liability ia Domestic Trade Articles 586, 387 and 497 of the Code ees out the limited lability Principle in the Philippines, Ths ‘Ax. 587, The ship agen shall alo be civilly liable fo he Indemnitis in ‘vor of tied persons which may aise from the conduct oF the capa the cate ofthe goods which loded on the ress; but he muy exempt msl chetefom by abandoning the vessel with all he equipment and the freight it may have heard dung the voyege.‘Art. 590. The co-owrer of vesel shall be cil ible nthe proportion ofthc interests in the common fd fr the resus ofthe act ofthe captain refered ton Aricle $87. Each co-owner may exempt himself fom this liability bythe abandon: ‘ment, before a notary, ofthe part ofthe vesel belonging to him. ‘At 837. One of the important principles of admiralty law isthe socalled limite liability of shipowners and ship agents. As, $86,587 and S88 ofthe code of commerce mak the shipowner and ship agen clvlly lable forthe apain’s cts. But such Hibility 1k leited to he vessel, its freight and Insurance, according to as. 587, 590 and 837 of the Code «As mentioned elie the limited ability rule ted up withthe ocaled real ind bypothecary nature of maitime ln. Ronghly, this means that maritime law the vessel oe re isthe one tat answer for the shipowners ‘bligtions and thereore is iby is imited tothe vse. Te shipowner should not become perscnally liable with his othr property for obligations ‘fginating ia the operation ofthe vessel. The ship's hypothected et wer, for hs obligations conrecied with its operation. «No versel, no lability, ‘expreses in sum the limbed lability rule andthe eal and hypothecary nate of maritime I “Te limited tabtty male extends tothe shipagent. The definition of the ariel status ofthe agent cleared the doubt which existed 4 othe extent ‘of the civil ibility, both of the shipagent and oF the owner ofthe vessel. ‘Sch ibiiy is limited to the value of the vessel and oer things epperai= ning thereto. ‘The lawl ets and oligatons ofthe captain bseficil tothe vessel my be enforced as against tte agent forthe reason tat such obligetions arise ‘rom the contract of agency, provided thatthe captain does not exceed his suthonty. But sto any lbltyincuted by the captain thr hie acs, te ship ‘agsat is simply sobsidiaily civilly liable. Ths tab is limited to the ‘ese I! does no extend further For this reason, the Code makes the agent Hable the extent ofthe value ofthe vekel a the codes ofthe principal ‘arte nations provide, withthe vesel, not individually. Thus, the owner ofthe vestet at faut in a solsion is ible for indemnification tothe owner ‘ofthe vessel which was aot st fault bat the former is ot reared to pay ‘such inemifieation forthe reason thatthe obligation tus incurred hasbeen extinguished on account of the loss of the thing bound forthe payment thereo, Is not tue that even ifthe vessel at fault wa: lost, the owner could be ‘eld isle under An. $37 of the Code of Commerce provided the vessel'svalue wee ascertinable. The value refrredtoia the atc presupposes that the vessel is existing, and not value tepals ofthe vessel's los. the hipowner or agent may in any way beheld civilly lable tall for ‘ayy to or death of passenger arising fom the negligence of the captain ta cs of collisions or shipwrecks, his Ubi is merely coextensive with his antecet in te vessel such that afta oss thereat rests nis extinction ‘AS the Philippine Supreme Cour held in Monarch Insurance Company Inc! vs. Court of Appeals (GR. No. 92735, kane f, 2000): ‘The provision accords a shipowner or aft the right of abandonment nd by necessary implication, his lability Is confined to that which be ented as of right 0 abandon «the vessel vith al her equipments and the fivght it may have earned during the voyages. I is ue tht the article appears to deal only withthe lined laity of be shipowners or agents for damages arising fom the misconduct ofthe capain inthe cate ofthe goods which the vesiel cares, but thls a mere deficiency of language of the Morequoted us tothe effect that notwithstanting the language of the afore, ‘quoted provision, the benefit of Hinitedlabilty therein proved for, applica ‘mal cases wherein the shipowner or agent may propery be hel Liable for the negligent or let acts ofthe captain. «Vo vessel, no lability, expres in a mush the limited lability re, ‘The shipowners or agents laity is rerely coextensive with his intrest in the vessel such that total loss thereof ress in its extinction. The otal estrocion of the vessel extinguishes mariime liens because thee is no longer any res to which it an atch, This detrn is based onthe real end hypovhecary nature of maritime law which tas it origin in the prevaling conditions ofthe maritime trade and sea voyage dating the medieval ages ‘auended by innumerable hazards and perl, ermay not be amis 0 state that the right ofthe vessel owner or agent der the limited lsblty rule ae clorly alin t> those ofthe right of the Shareholders to limited ibility under corporation law. The Philippine Six ‘rome Cour in the case of Aba Shipping Corporation vs. GAFLAC (217 SCRA 255) held ‘The rights of a vessel ower or agen unr the Limited Libiity Rate ‘a akin 1 those of the rights of shareholders to liited liability under out ‘corporation law. Both are privileges grated by ste, and while ot abeo. Ite, must be swepe aside only in the established existence of the most compelling of reasons. In the abuence of sch eatons, this Cour chooses to exert prudence and shall not sweep such sgh’ wide on mere whitn or surmise, for even in the existence of cause to do s0, such incursion ie efntely punitive in nature and mast never be taken lig.12 Or Po the ighs of pats tsi against an agent or onner cao te BB tr nt encagh to satty the tly oF nae repre RE Sh individ! ere may and inate Tha tay sete mounts of thei respective claims, is dave ve oe and peed ae i lloned to rcover Fly thu favecng thoes ere sich a a laims sone the prejudice of hos nhu sone naa te naman, such ceo oo woulda so Beale gan ce hat ee glia tarchlders, but mast limit tet ewe fs Dente fe tne ofthe corporation Tus in he cee of pes Development Bank of Rial eat ited, We he dew ‘ae ae eat 8s ey of ection of adgment i warned by picket Pond bak was laced ude rected. Teen oe Popa, Sad uly dept thease of aponden beaks eee Back eras devoitors and creory tine, es pty nea eet aaa te (63 SERA 114), afer he Money Bear Reece atcalar voyage dati ine Septem: Courtine GAFLAC case et ou he procera sans ae stertng the doctrine bythe shower and how eee ould cbiain their respective share thertrom cer . 2 ea at here thes ned calle llama pcp.ofthe inrurance and pending feighage should now be deposed in rest. Moreover petiioner should insite the necesiary limitation and distrib tiot action Befare the proper admirals court within 15 days fom finaly 9 [ies decision, hereater deposit with the proceeds from the insurance ‘corypany and pending feghuge inorder to safeguard the same pending final resouon of al insides, fr final prosating and setiement thereat (Un. Genconnp supplied) Benefits ofthe Limited Libility Printple in Maritie Law ‘There are many benefits deived from the limited lisbilty principe sas 1. ttencourages the shipowners o investi shipping which, if otherwise ‘hey would not invest elhet money in ship since thei bilities would fa rceed their investments therein: 2 shipowners are abl to calculate beforehind the amount to damages hat hey wil pay 3. there is stability in Philippine mame nw and jrisprodence arising ‘these principles which confor with otber marie countries 4 instead of multiplicity of suits there will nly be one liitation proces ‘ing where all claimants may file their respective claims and share inthe ‘roeceds ofthe vessel or insurance; and, 5. more importantly, his principle harmonizes with that ofthe principles ‘in corporation lw where Hiality ofthe investor i limited to the veel Disadvantages There are disadvantages which arise ot ofthe limited liability principle, ame: 1.claimant ae nt fully compensated for thir losses: 2, shipowners ae able to seck refuge on this defense which cous will Invariably uphold whic, in turn, contributes 0 te shipownen’ lay fa the ‘upkeep and maintenance oftheir vessels which wil perhaps explain the poce endions prevailing on he vessel. It his cancion, the worst peace time ‘maine disaster ocured inthe Philippines in 1987 with regards tothe sinking ofthe MV «Dota Pars whew over 4000 ives were kt far exceeding he loses ofthe famous «Titanic. Ths marine casualty is recorded inthe Guiness Book of Wield Record asthe Worst marime disaster in peace time which may hive ‘ele from the shpowne's lant in maining the vest’ class.foregoing discusion of the sdvantages and disadvan Principle, the advantages far outwsigh the dacedeoee