Maritime Commerce Revised

7/27/2019 Maritime Commerce Revised

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Legal and Tax Aspect of BusinessTuesday, 6-9 PM

Atty. Leopoldo San Buenaventura

Clark Oliver C. Cortez


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Characteristics of MaritimeTransactions

Real A vessel is essentially a personal property becauseit is moveable. However, the Supreme Courtcharacterized maritime transactions as similar totransactions over real property which are effectedthrough registration.

HypothecaryIf the vessel sinks, the liability of the owner isextinguished.

Arrastre operations are not maritime

Arrastre - the operation of receiving, conveying, andloading or unloading merchandise on piers


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Exception to Hypothecary Nature of Maritime Transactions

Would not apply when ship owner at fault

Case 1: Central Shipping Co. vs. Insurance Co. of N.A.

Facts: The vessel carrying logs was lost at sea due tomonsoon and the improper securing of logs.Can the ship owner be excused from liability for theloss of vessel based on fortuitous event?

Held: No. Monsoon is a seasonal occurrence and couldhave been anticipated and prepared for.


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Case 2: Manila Steamship vs. Abdulhaman

Facts: Abdulhaman bought a submarine chaser of WWIIvintage, which he converted into a passenger vessel.

The chaser, being at fault, collided with a new steelvessel of Manila Steamship Co and it sank (chaser).

MS sued to recover for damages as Abdulhaman hasother properties. Abdulhaman put up the defense hisliability was extinguished by the loss of the chaser.

It was proven that the chaser, being of a certaintonnage, should have been commanded by one havingthe qualifications of Captain and not a mere patron.

Held: Abdulhaman is still liable. The hypothecary nature will

not apply when the shipowner is personally at faultdue to: a) Lack of proper equipment b) Lack of proper technical training of the officersand crew


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Would not apply to repairs of vessel

Would not apply to vessel being made a collateral

Liability under labor code

Case: Abueg vs. San Diego

Facts: A vessel of San Diego, a shipping operator, sank and acrew member died. When the heirs of the deceased soughtcompensation under the Workmens Compensation Law , SanDiego put up the hypothecary nature of maritime transactions asdefense to avoid liability, since the vessel sank.

Held: San Diego is still liable since workmens compensation isan exemption to the hypothecary nature.

Would not apply to extent covered by insurance

- If vessel at fault sinks but is insured, the insurance takes place of such vessel; hence liability subsists, but only to the extent of theinsurance proceeds, the excess is still hypothecary


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Summation on exceptions:

The Limited Liability Rule is subject to the following:

a) The passengers injury or death is due either to fault of the ship owner or to the concurring negligence of the shipowner and the captain

b) The vessel is insured

c) In workmens compensation claims

Ship Mortgage Act of 1978 authorizes for the purpose of financing the construction, acquisition, purchase or initialoperations of vessels, the constitution of a mortgage or any other lien on the vessel or its equipment with any

financing institution


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Charter Party

A written contract whereby the ship owner or theship agent leases the vessel to transportpassengers or cargo for a fixed price.

A contract by which an entire ship or someprincipal part thereof, is leased by the owner toanother person for a specified time or use.


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Classifications of Charter Party

1. Contract of Affreightment

2. Bareboat or demise charter


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Contract of Affreightment

The owner of a ship or other vessel leases the whole or part to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of thepayment of freight.

Two types of Contract of Affreightment:

Time charter - vessel is leased to charterer for a fixedperiod of time

Voyage charter ship is leased for a single voyage


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Bareboat / Demise Charter

The charterer mans the vessel with hisown people and becomes, in effect, the

owner of the voyage or service stipulated,subject to liability for damages caused bynegligence.


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Comparison between Contract of Affreightmentand Bare Boat or Demise Charter

CONTRACT OF

AFFREIGHTMENT

BARE BOAT

CHARTER

VOYAGE OWNER SHIP OWNER CHARTERER

COMMAND SHIP OWNER CHARTERER

CREW SHIP OWNER CHARTERER

SUPPLIES SHIP OWNER CHARTERER

LIABILITY SHIP OWNER CHARTERER


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OTHER PROVISIONS RELATING TOCHARTER PARTY

Art 670 If charterers cargo is not sufficient to fill 3/5 of the capacity of the vessel, the carrier has the right tounload the cargo and put it on a smaller vessel at theexpense of charterer.

Art 671 if the charterers cargo exceeds 3/5 of thecapacity of the vessel, the carrier cannot exercise Art 670

Art 672 if the vessel is chartered in whole by one party,the owner cannot receive the cargo of any other personbecause the charter party is an exclusive contract.

Art 673 the owner of the vessel is liable to the charterer for damages in case the captain unduly delays the voyage


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Art 674 if the charterer brings more than the agreed upon, thecarrier may accept the increase in cargo and demand increase infreightage provided the vessel is not overloaded

Art 675 - if the vessel has been chartered to load cargo in another port and upon arrival in that port there is no cargo delivered, thecaptain has two alternatives: a) look for another cargo b) if after laydays has expired, the captain should file a marine protest andreturn to home port in full ballast. The charterer pays the freight infull

Art 676 - no right of freightage if charterer can prove that vessel isnot in condition to navigate.

Art 679 Charterer may sub-charter

Art 680 Charterer who cannot fill the vessel is liable for fullfreightage

Art 681 Charterer is liable for damages if loaded cargosubjects the vessel to forfeiture or confiscation. Carrier canopen the packages of shipper to find out whether they containitems which may subject the vessel to forfeiture.


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Rescission by Charterer

Before loading the vessel, cancel unilaterally by paying of freightage agreed upon.

When the vessel is not up to the capacity agreed upon or the flag under which it sails differs from that agreed upon.

When the vessel is not placed at the disposal of the vesselwithin the period agreed upon

When the vessel returns due to pirates or bad weather andthe charterer decides to unload but he must pay fullfreightage.

When the vessel returns for repairs if repairs takes lessthan 30 days, pay freightage for voyage out; if it exceeds30 days freightage must be paid in proportion to thedistance covered.


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Rescission by Owner

When the charterer fails to load thevessel and lay days expired; thecharterer must still pay freightage.

When the owner sells the vessel, andthe new owner, despite his knowledgeof the charter party decides to load the

vessel with his own cargo. But shouldthe new owner not have any cargo, hemust respect the charter party.


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Total Rescission Due to Fortuitous Event

War BlockadeProhibition to receive cargoEmbargo of vessel by GovernmentInability of vessel to navigate due tono fault of captain or ship agent.


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BOTTOMRY AND RESPONDENTIA

Common Elements:

Exposure of security to marine perilsObligation of debtor conditioned only upon safearrival of the security at the point of destination

Who may Contract?

BottomryGeneral rule: Owner of the vessel

If Owner is absent: The Captain

RespondentiaOnly the owner of the cargo


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AVERAGES

Average is defined as a damagedeliberately caused, or an expensedeliberately incurred due to a marineperil and which has resulted in savingof vessel and/or cargo.

General Average where both vessel

and cargo were saved

Particular Average where only vesselor cargo was saved.


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Collision

Art. 826 states that the guilty vessel must pay for the damage caused by collision, except if the guiltyvessel sinks because of its hypothecary nature.

Collision when both vessels are movingAllision when one of the vessels is stationary


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Five cases covered by Collision and Allision

1. One Vessel at Fault such vessel is liable for damage caused to innocent vessel as well asdamages suffered by the owners of cargo of both vessel.

2. Both Vessel at Fault each vessel must bear its own loss, but the shippers may go againstthe ship owners who will be solidarily liable.

3. Vessel at Fault Not Known same rule as (2)4. Third Vessel at Fault Same rule as (1)5. Fortuitous Event No liability. Each bears its

own loss.


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Case: Villacarlos v Everett Steamanship

Facts: A fishing vessel of Philippine registry collided with avessel from Europe. The foreign vessel was at faultbut its owner was beyond the jurisdiction of thecourts. The owner, however, had a shipping agent inthe Philippines (Everett) but which denied liability

because it was only an agent.

Held:The agent was fully liable in the absence of theshipowner. The shipping agent acts as owner in the

latters absence.


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Salvage Law

Salvage Law provides for compulsoryreward to those who brave the perils of thesea to save cargo or vessel in order to

encourage such services. Whether theowner of the property saved likes it or not,he must give a reward, the maximum of which is 50% of the true value of propertysaved.


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Four Requisites for Salvage Rewardto be Warranted

1. There must be a valid object of salvage

2. Such subject must have beenexposed to marine peril

3. Salvage services must be renderedvoluntarily

4. Salvage effort must be successful


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DerelictA vessel or cargo badly damaged and abandoned by thecrew to the mercy of the sea.

Case: Barrios vs. Go Thong

Facts: Go Thong was the owner of a vessel plying the routefrom Mindanao to Cebu. The engine of the vesselstopped while the vessel was in the middle of the sea.The captain radioed and was told that a sister ship wason its way to tow the vessel. The sea was calm. Theradio message was picked up by another vessel whichapproached the stranded vessel and offered to tow it.

The captain of the vessel agreed and the vessel wastowed. The owner of the towing vessel knew the owner of the stranded vessel and so the former waived thecharges. But the captain and crew of the towing vesselcomplained about their respective share in the reward.


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Issue : Was there salvage or towage?

Held : There was no salvage becausethere was no marine peril. There wasno danger; the sea was calm and asister ship was nearby. Hence, therewas no reward due. No compensation

for towage was due on account of thewaiver.


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Domestic Shipping Development Actof 2004

The Act was enacted in recognition of the vitality of the shipping industry tothe economic development of our

country, and recognized the need togrant the industry the necessaryincentives to ensure the continuedviability of, and encourageinvestments in the domestic shippingindustry.


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Incentives for Domestic Ship Operators

Vat exemption within 10 years from effectivity of the Act on importation and local purchase of passenger and cargo vessels of 150 tons andabove including the engine and its spare parts,life-saving, safety and rescue, communication

and navigational safety equipment, and other equipment used for transport operations.

Net operating loss carry-over for the next 3consecutive taxable years

Accelerated Depreciation


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Incentives for Shipbuilding and ShipRepairs

Vat exemption on importation of capital equipment,machinery, spare parts, and other materials to beused for the construction, repair, and renovation of the vessel operated in domestic trade.

Net operating loss carry-over for the next 3consecutive taxable years.

Accelerated Depreciation


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Thank you!

Documents

Maritime Commerce Revised