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SIXTEENTH CONGRESS OF THE REPUBLIC ) ATE 19 DEC 2013 uy
OF THE PHILIPPINES ) tae te fry]
me ta
First Regular Session ) ane J
3647

HOUSE BILL NO.

AN ACT ESTABLISHING THE SCOPE AND PROCEDURE FOR
PHILIPPINE SHIP REGISTRY, RECOGNITION AND
ENFORCEMENT OF MARITIME CLAIMS, AND LIMITATION OF
LIABILITY, AS WELL AS PROVIDING ESSENTIAL INCENTIVES,
WHICH COLLECTIVELY WILL PROMOTE A COMPREHENSIVE
AND ORDERLY PHILIPPINE SHIP REGISTRY SYSTEM FOR THE
REGULATION OF VESSELS CARRYING THE FLAG STATE.

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled,

EXPLANATORY NOTE

While we have always taken pride that the Philippines is widely
known to be a major supplier of global maritime professionals on board
vessels in the many parts of the world, records will show however that
we only have about 200 vessels registered under the Philippine flag.

Other countries have attracted many foreign owned vessels to

register under their flag states by reason of their simplified system of
registration and the appealing incentives they offer.

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Thus, this bill aims to help our country become more competitive
and allow us to encourage more ship owners in other parts of the world
to register their vessels under our flag state. In order to achieve this, we
first must recognize that presently, there is a lack of a particular law
completely addressing the registry system in the Philippines, which has
been a perennial source of confusion and disorder. Clearly, there is a
necessity to formulate policies and rules that adhere to the global
standards and maritime conventions, particularly on ship registry.

Primarily, this bill will provide a legal framework for the rules on
ship registry and the enforcement of maritime claims and limitations of
liability. Once the system is organized, ample protection will be
extended equally to ship owners carrying the Philippine flag and all
other parties who have a legitimate claim against them. At the outset,
this will benefit all our present domestic ship owners who are already
registered under the Philippine registry.

Second and equally important, this bill endeavors to provide
incentives to all vessels duly registered under the Philippine registry.
Surely, a simple yet all-encompassing law compliant with the
international standard, defining with specifity the appropriate system
on registration, and providing for better incentives will encourage more
Filipino ship owners to do wide business trading and shipping in the
country flying the Philippine flag. Ultimately, our country will likewise
attract more foreign ship owners to register their vessels under
Philippines flag state. This will in turn boost more the economy of our
country,

The enactment of a law is merely a beginning towards achieving a
dream for our country to be among the globally competitive ship
registry of choice in the world and be a real maritime power.

‘Representative
ANGKLA

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SIXTEENTH CONGRESS OF THE REPUBLIC _)
OF THE PHILIPPINES )
Regular Session )

HOUSE OF REPRESENTATIVES
House Bill No. id.

Introduced by ANGKLA Partylist Representative JESULITO A, MANALO.

AN ACT ESTABLISHING THE SCOPE AND PROCEDURE FOR
PHILIPPINE SHIP REGISTRY, RECOGNITION AND
ENFORCEMENT OF MARITIME CLAIMS, AND LIMITATION OF
LIABILITY, AS WELL AS PROVIDING ESSENTIAL INCENTIVES,
WHICH COLLECTIVELY WILL PROMOTE A COMPREHENSIVE
AND ORDERLY PHILIPPINE SHIP REGISTRY SYSTEM FOR THE
REGULATION OF VESSELS CARRYING THE FLAG STATE.

Be it enacted by the Senate and the House of Representatives of the
Philippines in Congress assembled,

Title 1
General Provisions

Chapter 1
Policies

Section 1. Short Title. - This Act shall be known as the
“Philippine Ship Registry System Act”.

Section 2. Declaration of Policy. - It is the policy of the State:

a, To ensure that Filipino owned and manned maritime fleets or
vessels are strengthened and assisted to meet the minimum global
standards for reliability, safety, competitiveness, and effectiveness;

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b. To provide protection to our merchant marine fleets, and help
expand Philippine international trade;

c. To encourage Philippine vessel acquisition, development,
modernization and expansion through systemized and sustainable
programs;

d, To implement policies that will attract more ship owners to
register under Philippine flag, thus ensuring the country’s
economic growth.

Section 3. Implementing Agency. - This Act shall be implemented
by the Maritime Industry Authority or MARINA, through a specific
section or department within its office that shall be created solely for
the purpose of implementing the provisions of this Act.

Chapter 2
Definitions

Section 4. Definition of Terms. - For the purpose of this Act,

a. “Arrest” shall mean the attachment of a vessel by judicial process
through an order of a competent court in order to secure the
enforcement of a maritime claim, which attachment shall produce the
effect of detaining or restricting the removal of a ship in execution or
satisfaction of a judgment;

b, “Bareboat charter” shall mean a contract for the lease of a ship, for
a stipulated period of time, by virtue of which the bareboat charterer has
complete possession and control of the ship, including the right to
appoint the master and crew of the ship, for the duration of the lease;

c. “Bareboat charterer” or “charterer” may be used interchangeably
and shall refer to any person, commercial partnership or corporation
which bareboat charters a Philippine flag vessel from another Philippine

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national, or a vessel of foreign registered in a compatible registry, for its
own use;

d. “Certificate of Philippine Registration” shall mean the document
of registration of a vessel registered in accordance with Section 20 of this
Act;

e. “Claimant” shall mean a person who asserts that a maritime claim
exists in his favor;

f. “Court” or “Philippine court” or “competent court” may be used
interchangeably and shall refer to a court of appropriate jurisdiction
within the territory of the Philippines;

g. “De-registration” shall refer to the act of deleting a ship from the
Registry of Ships of the Philippines and the cancellation of the
Certificate of Philippine registry in accordance with Title II, Chapter 5 of
this Act;

h. “Foreign flag vessel” shall refer to a ship which is registered under
the laws of a country other than the Philippines and which is authorized
to fly the flag of that country;

i, “Foreign registry” shall mean the registry of ships of a country
other than the Philippines;

j. “Maritime claim” shall refer to any of the claims provided in
section 88 of this Act;

k, “Maritime Industry Authority” or “MARINA” shall refer to the
government agency created in accordance with Presidential Decree No.
474, as amended;

1. “Maritime lien” shalll refer to a charge that attaches to a ship which
rises from a maritime claim against the ship, its owners, charterers,

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managers, or operators that results in a demand for indemnity or
remuneration from the ship or its owners, charterers, managers or
operators and is enforceable by judicial action;

m.“Mortgagee” shall refer to the person, whether natural or juridical,
in whose favor a ship mortgage is created in order to secure a principal
obligation;

n. “Mortgagor” shall refer to a ship owner who constitutes a ship
mortgage over a vessel or a vessel under construction registered in its
name in order to secure the fulfillment of a principal obligation;

o. “Philippine Flag Vessel” shall mean any vessel duly registered
under Philippine Laws and authorized to fly the Philippine flag;

p. “Philippine national” shall refer to any individual who is a citizen
of the Philippines, or a commercial partnership or corporation
organized under the laws of the Philippines, at least 60% of the capital
of which is owned by citizens of the Philippines;

q. “Registration” shall refer to the act of entering a ship in the
Registry of Ships of the Philippines in accordance with Title II, Chapter
1 of this Act;

1. “Register of Ships of the Philippines” or “Register” or “Registry”
may be used interchangeably and shall refer to the official public
register maintained by the Maritime Industry Authority which shall
hold the record of all vessels under Philippine laws;

s. “Record of Ship Mortgages and Encumbrances” shall refer to the
public record maintained by MARINA containing all details of the
vessel's mortgage and encumbrances, as will be further described in
details hereafter;

t. “Seagoing vessel” shall refer to any Philippine flag vessel of 500
gross tons or more, authorized to carry passengers or cargo, or both, in
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trade between a Philippine port and a foreign port, or between two
foreign ports;

u. “Ship manager” shall mean any person, commercial partnership
or corporation to which the technical or commercial management, or
both such technical and commercial management, of a ship has been
entrusted by the ship owner and for that purpose is in charge of the
operation of the ship which may include, but shall not be limited to,
vessel maintenance and upkeep, crewing and passenger and cargo
solicitations;

y. “Ship mortgage” shall mean a contract executed by the owner of a
ship creating a security interest over a particular vessel or a vessel under
construction in order to secure the performance of a principal obligation;

w. "Ship owner” shall refer to any person, commercial partnership or
corporation authorized to own, operate, manage, control, lease or
charter out, or otherwise engage in the business of shipping;

x. “Ship operator” shall refer to any person, commercial partnership
or corporation authorized to operate, manage or control a ship owned
by another;

y. “Tonnage” or “Gross tonnage” may be used interchangeably
unless otherwise indicated and shall refer to the ship's gross tonnage
calculated in accordance with the tonnage measurement rules provided
in the applicable international convention on the tonnage measurement
of ships;

z. “Vessel” or “ship” may be used interchangeably and shall refer to
any boat, craft or artificial contrivance capable of floating in water,
designed to be used, or capable of being used, as a means of water
transport for the carriage of passengers or cargo, or both, utilizing its
own motive power of that of another, and shall include a ship under
construction and for purposes of this Act shall continue to be considered
as personal property. It excludes fishing vessels defined and regulated

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under existing laws and bancas, sailboats, and other water-borne
contrivance of less than three gross tons and not motorized; Provided,
that this does not include those owned and/or operated by the Armed
Forces of the Philippines and by foreign governments for military
purposes; Provided further, that mobile offshore platforms used in
petroleum exploration and development, such as mobile offshore
drilling units and offshore production platforms, shall be considered as
ships when they are mobile and not affixed to the seabed.

Title II,
Ship Registry

Section 6. The Philippine Ship Registry. The Philippine Ship
Registry is hereby established, through which the State confers
nationality, exercises its jurisdiction, protects and enforces private
rights, and undertakes the national and international responsibilities of
a flag State, over all ships flying the Philippine flag.

The Registry is comprised of the Register of Ships and the Record
of Ship Mortgages and Encumbrances. It shall be maintained by the
MARINA in accordance with the provisions of this Act, and the rules
and regulations that may be issued pursuant thereto. There shall be one
Registry for all domestic and international flag vessels.

Chapter I.
Registration of Ships
Section 7. Register of Ships. - A Register of Ships shall be kept and
maintained by MARINA, which shall record essential ship information,

including but not limited to the following:

(1) name of the ship and its previous name and register, and its
previous owner, if any;

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(2) place or port of registration or home port and the official number
or mark of identification of the ship;

(8) international call sign of the ship, if assigned;
(4) IMO number assigned to the vessel, if applicable;
(6) name of the builders, place and year of built;

(6) description of the main technical characteristics of the ship,
including gross and net tonnage;

(7) name, address and, as appropriate, the nationality of the owner;

(8) date of deletion or suspension of the previous registration of the
ship;

(9) name, address and, as appropriate, the nationality of the bareboat
charterer and/or operator of the ship; and

(10) particulars of any mortgages or other similar encumbrances and.
charges upon the ship.

Section 8. Effect of Registration. - Registration of a ship under the
Philippine registry:

(1) confers upon it the nationality and status of a Philippine ship;
(2) entitles it to the protection of the Philippine flag;
(3) imposes on it the duty to fly the Philippine flag; and

(4) obliges it to abide by all applicable laws, decrees, orders, rules
and regulations of the Philippines.

Section 9. One Ship, One Registry Rule.- A ship may be registered
with only one ship register at any one time. Before entering the ship in

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the Register, MARINA shall assure itself that any previous registration
has been deleted, or that the ship has been de-registered from any
foreign registry.

In the case of a foreign flag ship under bareboat charter, MARINA
shall ensure that the right to fly the flag of the former flag State is
suspended for the duration of its registration with the Philippine
Registry. Registration shall issue only upon the production of evidence
indicating the suspension of its previous registration and nationality
under the former flag State, and indicating the particulars of any
registered encumbrances entered in the previous registry.

It is the duty of the owner, master, or agent of every ship in the
Register to inform MARINA of any change in the facts pertaining to the
ship and entered therein.

Section 10, Who May Register.-

(1) All ships operating within the maritime territory and
jurisdiction of the Philippines, except transient foreign flag ships subject
to such regulations as MARINA may prescribe, are mandated to be
registered with the Philippine Registry, provided that it meets the
conditions for the grant of registration imposed by this Act and the
regulations pursuant hereto, This mandatory registration under the
Philippine Flag is particularly required in the following:

(a) The ship is five hundred (500) gross tons or more;

(b) The ship is owned by a qualified person, as may be determined
by MARINA;

(©) The ship meets the requirements on safety, security, marine
environmental protection, crew nationality, training, certification and
competency, and crew welfare.

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(2) Any other ship, including a foreign-owned ship, may also be
registered in accordance with this Act, provided the following
conditions are present:

(a) itis used only in international voyages;

(b) it is managed by a qualified person residing in the Philippines,
as may be determined by MARINA;

(6) it complies with the applicable provisions that govern the safety
and security ofPhilippine ships and persons on board;

(a) it complies with the applicable provisions that govern the terms
and conditions of employment on board Philippine flag vessels; and

(©) a majority of the crew are citizens or permanent residents of the
Philippines, to the extent prescribed in regulations made by MARINA.

(f) it is preferred that the ship owner, manager, operator, or bareboat
charterer, on one hand, and all its crew officers, and employees have a
valid, subsisting and duly implemented collective bargaining agreement
that conforms to international labor standards, rules and conventions. In
such case additional incentives for payment of tax tonnage shall be
granted to the registered foreign-owned vessel, as stated in section 25
hereof.

Section 11. Licensure. - Every ship, regardless of size, intending to
engage in the carriage of passengers or cargo, or both, between ports
and places, in the coastal, internal, inland or sheltered waters of the
Philippines, shall apply for a license to operate, Provided, that such ship
is owned by a citizen of the Philippines or a corporation or association
organized under the laws of the Philippines at least 60 percent (60%) of
whose capital is owned by such citizens and the ship meets the other
conditions for the grant of the license imposed by this Code and the
regulations pursuant hereto.

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Section 12. Conditions for Registration. - No ship shall be
registered unless the following conditions are present, as determined by
MARINA in accordance with this Act and regulations issued related
hereto:

(1) Proof of Ownership.- There must be satisfactory proof of
ownership and/or management by qualified persons.

(2) Seaworthiness.- A ship must comply with the general
requirements for age, safety, security, navigation, manning, and
protection and preservation of the marine environment in accordance
with national and international standards for ships.

(3) Manning. A ship must be manned by a crew with such level of
skills and competencies as may be necessary in accordance with
applicable international maritime conventions, rules, and standards as
well as national law and regulations.

(4) Labor and social conditions.- A ship must meet the labor and
social standards required by applicable international labor conventions,
rules and standards as implemented by MARINA.

(6) Management.- A ship must be managed by a person or entity
that is under the effective jurisdiction of the State.

(6) Payment of fees and dues.- No ship shall be registered without
payment of the corresponding registration fees and tonnage dues as
may be imposed by the State.

Section 13. Documentary Requirements. - Every ship owner, master
or agent wishing to enroll a vessel for registry under the Philippine flag
shall submit to MARINA the following documents:

(1) A written application for registration;

(2) A documentary proof of ownership over the vessel;

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(8) Proof of authority to enroll the ship for registry, if
applicable;

(4) A copy of a certification issued by a classification society
showing the ship is in class, if existing and applicable; and

(6) Such other necessary documents that may be required by
MARINA.

Section 14. Issuance of Certificate of Philippine Registration. No
application for a Certificate of Philippine Registration shall be approved
and issued until MARINA has been satisfied that all the conditions and
documents required and mandated for registration under this Act or
regulations issued hereto have been complied with. MARINA or its
deputized authority shall inspect the vessel and all its documents and
ensure that it is qualified for registration under this Act.

A certificate of Philippine registry shall be valid for a period of no
more than three (3) years, and may be continuously renewed for a
similar period provided the all the requirements for registration or its
renewal are met.

In case of a bareboat chartered vessel, the certificate of Philippine
registration shall be valid for a period of no more than three (3) years or
the period of the bareboat charter, whichever is shorter.

Section 15. Types of Registration.- Registration of a ship may be
permanent, provisional, or temporary in nature.

(1) Permanent Registration.- Except as provided in the succeeding
sections, the registration of a ship and issuance of a Certificate of
Philippine Registration is deemed to be permanent until the ship is
actually de-registered or deleted from the Register.

(2) Provisional Registration.- Ships constructed and/or acquired
abroad, before being brought to the Philippines, may be issued a

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Provisional Certificate of Philippine Registration and a provisional
tonnage certificate for conduction purposes.

(3) Temporary Registration.- The following may be issued a
Temporary Certificate of Philippine registration:

(a) Any ship about to be built, or under construction in the
Philippines;

(b) Any ship owned and/or operated by an entity duly registered
with the Board of Investments under pertinent investment laws, rules
and regulations, to be used exclusively for the purpose of transporting
raw materials and/or finished products within Philippine waters as an
essential element and operation in the manufacturing, processing, or
other business activity or project registered by such entity with the
Board of Investments; Provided, that such temporary registration
applies only for the duration of such business activity or project, and
shall not exceed one year, renewable for another year; Provided further,
that the type of ship used or service undertaken cannot be provided by a
Philippine ship owner;

(©) Any ship that is operated and managed under a bareboat charter;
Provided, that in case of a foreign flag vessel bareboat-chartered by a
qualified person for operation in Philippine waters, the ship may be
temporarily registered with the Registry for the duration of the charter;
Provided further, that for the duration of temporary registration with
the Philippines, any registration with a foreign flag State is suspended;
and Provided finally, that no ship under a bareboat charter shall be
registered if, after the effectivity of its charter, it has undergone
extensive structural modification in a manner that affects its safety and
seaworthiness.

Section 16. Markings, Name and Homeport. All ships duly
registered according to the provisions of Act shall have their respective
names plainly marked upon each side of the bow and the stern; and the
homeport and IMO number upon the stern.

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Section 17. Change in Ownership of Ships. - In case of a sale of a
Philippine flag ship, the transferee shall present the bill of sale or other
certificate evidencing the transfer of ownership to MARINA within
fifteen (15) days after its execution, for appropriate recording in the
Register.

Section 18. Correction of Errors in the Registry. - Errors in
recording made in the Register shall be corrected in the following
manner:

(1) Mere clerical errors without any effect on the meaning and
substance of the document shall be corrected by the appropriate and
designated officer of MARINA who shall write the correction above the
errors and initial it.

2) Any mistake or error that might affect the meaning and
substance of the documents shall be corrected by order of MARINA
after notice to, and hearing of, the interested parties.

Section 19. Reconstitution of Lost Certificate. - If the certificate of
Philippine registration of a ship is lost or damaged, the owner, master or
agent thereof may file an application with MARINA for the issuance of a
replacement certificate. The replacement certificate shall indicate that
the original certificate is considered cancelled and revoked. If after the
issuance of the replacement certificate, the lost original certificate of
Philippine registry is found, it shall be the duty of the owner, master,
agent or any person having possession of the original certificate to
surrender it to MARINA.

Section 20. Cancellation or Revocation of Ship Registration. -The
registration of a Philippine flag vessel shall be cancelled from the
Register, and its corresponding Certificate of Philippine Registration
shall be revoked in any of the following cases:

(\) Certificate of Philippine Registration was illegally or
fraudulently obtained;

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(2) ship is sold, transferred and/or assigned to a person not
qualified to register ships in the Philippines under the provisions of this
Title or as may be determined by MARINA;

(3) in case of transfer of ownership over the ship, the new
transferee or assignee has properly applied for change of ownership and
is determined by MARINA as a qualified person to register ships;

(4) ship is sold by the order of a competent court;
(6) ship is sold for scrapping;

(6) ship is determined by MARINA to be unsafe and
unserviceable beyond repair;

(7) the bareboat charter of the ship has expired, or has been
cancelled or terminated for any reason, in which case the cancellation
from the register of ships and revocation of the certificate of Philippine
registry shall be automatic;

(8) ship has been declared lost or missing pursuant to a written
and notarized notice submitted by the owner, master, or agent of a
Philippine flag vessel to MARINA, containing advice of such loss and
the probable cause thereof;

(9) gross violations of the safety, security, environment and other
standards or requirements set by MARINA;

(10) ship owner, manager, agent or bareboat charterer is proven to
have given or submitted to MARINA fabricated information or
fraudulent documents relative to the registration or settlement of their
fees or taxes;

(11) ship has engaged in illegal activities.

Section 21. Inspection of the Register. - The Register of Ships shall
be open to public inspection during ordinary business hours, in the

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offices of MARINA and online. All documents and information
provided in connection with the registration of a ship are considered
public documents. Upon request and payment of reasonable fees,
authenticated copies of any document or instrument required to be filed
under this Act and pertinent rules and regulations, or extracts thereof,
shall be furnished to any person.

Section 22. De-registration of Ships. - A ship which is or has been
registered in another State shall not be eligible for permanent
registration in the Philippines, unless:

(1) A certificate has been issued by the former flag State to the
effect that the ship has been de-registered; or

(2) A certificate has been issued by the former flag State to the
effect that the ship will be de-registered on the day when such new
registration is effected.

Except in case of forced sales, a Philippine flag vessel shall not be
de-registered without the written consent of all holders of registered
mortgages.

Chapter II
Taxes and Fees

Section 23. Processing Fee. - A processing fee shall be paid by the
owner, master or agent of the ship sought to be registered when the
application for registration or when a renewal thereof is filed. The
processing fee shall be collected to cover administrative costs for
handling and processing the application. The processing fee shall be in
such reasonable amount as may be determined by MARINA.

Section 24. Registration fee. - A registration fee shall be payable
by the ship owner master or agent when the ship is first entered in the
Registry and shall be paid when the Certificate of Philippine
Registration is issued. The registration fee shall be fixed in such
reasonable amount as determined by MARINA.

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Section 25. Tonnage Tax Fees. - An annual tonnage tax fee shall
likewise be paid by the owner, manager or bareboat charterer of the
vessel in order for the issuance and continued possession of a valid and
subsisting certificate of Philippine registration. The annual tonnage tax
fee shall be computed at the rate of US$0.10 per net register tonnage or
its equivalent in Philippine Peso based on the present or latest exchange
rate posted by the Bangko Sentral ng Pilipinas on the date of payment of
the tonnage tax fees. The ship owner, master, or agent shall have the
option whether to pay in US dollars or in Philippine Peso.

For foreign-owned vessels, if the owner, manager, or agent has
satisfactorily established with MARINA compliance of the conditions
stated in section 10 paragraph 2 (e) and (f) hereof, they shall enjoy an
additional incentive. In such case, the tonnage tax fees due from them
shall be reduced to the rate of US$0.08 per net register tonnage or its
equivalent in Philippine Peso based on the present or latest exchange
rate posted by the Bangko Sentral ng Pilipinas on the date of payment
of the tonnage tax fees, Provided that if MARINA determines that the
conditions for the additional incentive is violated or proof shown for its
existence is fabricated, the certification of Philippine registration may be
revoked, in accordance with section 20 paragraph 10 hereof.

Section 26. Adjustments in Fees and Taxes. - MARINA may
review the rates for the processing fee, registration fee, and tonnage tax
fees from time to time and with the approval of the Department of
Transportation and Communication, may, by regulation, adjust or
increase the fees, but for a reasonable amount.

Section 27. Exemption from duties and taxes, - The importation
by the owner, manager, agent or bareboat charterer of a vessel, and the
spare parts and equipment needed for the repair and maintenance of
such vessel shall be exempt from the payment of import duties and
taxes, value added taxes and all other pertinent taxes.

In the case of a registered foreign-owned vessel, which is not
doing trading and business within Philippine waters, the annual

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tonnage tax fees they pay shall be in lieu of any income tax due from the
ship owner, manager, agent or bareboat charterer and the withholding
tax due on the lease or bareboat charter fees earned by the ship owner.
Likewise, all crewing personnel of the registered foreign-owned vessel
shall be exempt from income tax and all other taxes that may be
imposed on their salaries and remunerations received by reason of or in
connection with their employment with the ship owner, manager or
bareboat charterer of the registered foreign-owned vessel.

Chapter III
Record of Ship Mortgages and Encumbrances

Section 28. Record of Ship Mortgages and Encumbrances. -
MARINA shall maintain a Record of Ship Mortgages and Encumbrances
containing the details and documents regarding all transfers, mortgages,
encumbrances, or other documents proving or affecting the title to any
ship registered in the Register of Ships. All documents, certificates,
receipts, or acknowledgments canceling or satisfying any such
obligations in whole or in part shall likewise be recorded. The date and
time of recording shall be expressly stated.

Section 29. Effect of Recording. - In order to be valid and
enforceable, every mortgage, encumbrance, or other right over a
Philippine flag vessel, whether permanent or temporary in nature, in
favor of a person other than the registered ship-owner or his agent, must
be entered into the Record. Priority in time of recording determines the
priority in rights between different rights-holders.

Section 30. Requirements of Recording. - A ship mortgage,
encumbrance, or other right shall be entered into the Record upon
submission to MARINA of the following:

(1) A copy of the contract or other instrument evidencing such

mortgage, encumbrance, or other rights, which contain all the essential
details thereof;

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(2) A copy of the Certificate of Philippine Registration;

(3) Incase of a ship under construction, a copy of its Temporary
Certificate of Philippine Registration, or if such has not yet been issued,
a declaration stating the ship's name, the location of the shipyard, the
yard number, and the dimensions and appropriate deadweight of the
vessel upon completion.

Section 31. Annotation of Mortgages and Encumbrances. - Upon
request of the mortgagee, holder of the right, or his agent, and
submission of the necessary documents required in this Act for
recording, MARINA shall cause the annotation of a ship mortgage,
encumbrance, or other right on the back of the corresponding Certificate
of Philippine Registry of the vessel concerned, referring to the entry
number, date and time of entry, and nature or subject matter of the
document as contained in the Record.

If a new or replacement certificate is issued, the annotations upon
the previous certificate shall automatically be transferred and annotated
upon the back of the new or replacement certificate.

Section 32. Rights Over Vessels Under Construction. - Any rights
in respect to a vessel under construction in the Philippines may be
entered and recorded after the keel has been laid or equivalent
construction work has been performed.

Section 33. Inspection of the Record. - The Record shall be open to
public inspection during ordinary business hours in the offices of
MARINA and online. Upon request and payment of reasonable fees,
extracts from the Record of Ship Mortgages and Other Rights, and/or
authenticated copies of any document or instrument required to be filed
under this Title and/or pertinent rules and regulations, or extracts
thereof, shall be furnished to any person.

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Title I
Maritime Liens and Encumbrances

Chapter 1.
Maritime Liens

Section 34. Nature of Maritime Liens. - Maritime liens arise and
are enforceable whether the claims secured by such liens are against the
owner, or against the demise or other charterer, manager or operator of
the ship. Except in case of forced sale of the ship, the maritime liens shall
follow the ship notwithstanding any change of ownership, registration,
or flag.

Section 35. Claims Secured by Maritime Liens. - The following
claims in relation to a ship shall be secured by maritime liens on the
ship:

(1) claims for wages and other sums due to the master, officers
and other members of the ship's complement in respect of their
employment on the ship;

(2) claims in respect of loss of life or personal injury occurring,
whether on land or on water, in direct connection with the operation of
the ship;

(3) claims based on tort and not capable of being based on
contract, in respect of loss or damage to property caused by the
operation of the ship other than loss of or damage to cargo, containers
and passengers! effects carried on the ship;

(4) claims for port, canal, and other waterway dues, tonnage
dues, light dues, pilotage dues, other public taxes, dues and charges of
the same character; and

(6) claims relating to the salvage, wreck removal and contribution
in general average.

Page 21 of 42


Section 36. Claims Not Secured by Maritime Liens. - No maritime
lien shall attach to a ship to secure claims for damages in connection
with the carriage of oil or other hazardous or noxious substances by sea
for which compensation is payable to the claimants pursuant to
international conventions, local laws, or compulsory insurance, or those
which arose out of or which resulted from the radioactive properties or
a combination of radioactive properties with toxic, explosive or other
hazardous properties of nuclear fuel, or of radioactive produce or waste.

Section 37. Priority of Maritime Liens. - The maritime liens set
out in Section 35 hereof shall take priority over registered mortgages,
hypothéques, and charges, No other claim shall take priority over stich
maritime liens or over such mortgages, hypothéques, or charges except
as may be specifically provided under this Act. The maritime liens set
out in each of sub-sections (a) to (d) of Section 29 hereof shall
rankequally as between themselves.

Section 38. Maritime Liens in case of Salvage, Wreck Removal, or
General Average Acts. - Maritime liens securing claims for salvage,
wreck removal and contribution to general average shall take priority
over all other maritime liens which have attached to the ship prior to the
time when the operations giving rise to the said liens were performed.

Such liens shall rank in the inverse order of the time when the
claims secured thereby accrued. Claims for contribution to general
average shall be deemed to have accrued on the date on which the
general average act was performed, while claims for salvage shall be
deemed to have accrued on the date on which the salvage operation was
terminated.

In the event of a forced sale of a wreck of a ship, following its
removal by MARINA, the costs of such removal shalll be paid out of the
proceeds of the sale before all other claims secured by maritime lien on
the ship.

Page 22 of 42


If at the time of the forced sale, the vessel is in the possession of a
ship-builder or a ship-repairer who enjoys a right of retention, such a
ship-builder or ship-repairer shall surrender possession of the ship to
the purchaser but is entitled to obtain satisfaction of his claim out of the
proceeds of the sale after the satisfaction of the claims of holders of
maritime liens mentioned in Section 29 hereof.

Section 39. Extinguishment of Maritime Liens. - Maritime liens
shall be extinguished after a period of one (1) year from the time when
the claims secured thereby arose unless, prior to the expiration of such
period, the ship has been arrested and the ownership thereof transferred
through a forced sale ordered by a competent court or tribunal.

The period of one (1) year shall not be subject to suspension or
interruption; Provided, that the time shall not run while the person
enforcing, the lien is prevented from arresting the ship legally or by
circumstances beyond his control.

Maritime liens which arose prior to the effectivity of this Code
shall be extinguished one (1) year after the date of such effectivity.

Section 40. Rights of Retention. - The following persons, when in
possession of ship or ship that is under construction, shall have the right
to retain such ship or ship under construction, without need of a court
order:

(1) a shipbuilder, to secure claims arising out of the construction
of, or other work carried out in relation to the ship; and

(2) a ship repairer, to secure claims arising out of the repair of,
including the modification, conversion or reconstruction of the ship, or
other work carried out in relation to the ship, affected during such
possession.

Section 41. Extinguishment of Rights of Retention. - The rights of
retention under the preceding section shall be extinguished when:

Page 23 of 42


(1) the claim in respect of which said right has been exercised is
met or is otherwise discharged;

(2) the ship ceases to be in the possession of the ship-builder or
ship-repairer as the case may be; or

(3) the competent court orders the release of the ship.

Section 42. Assignment or Subrogation. - The assignment of or
subrogation to a claim secured by a maritime lien results in the
simultaneous assignment of or subrogation to such maritime lien.

Claimants holding maritime liens may not be subrogated to the
compensation payable to the owner of the ship under an insurance
contract.

Section 43. Exclusions. - The provisions of this Title shall not
apply to:

(1) aclaim for the enforcement of a maritime lien that is already
the subject of a pending case and which is sought to be enforced under
the provisions of Pres. Decree No.1521, or the Ship Mortgage Decree, at
the time of the effectivity of this Code;

(2) amaritime lien which arose prior to the effectivity of this Act,
unless such lien has already prescribed.
Chapter II
Ship Mortgages

Section 44, Application.-The provisions of this Chapter shall
apply to every mortgage wherever executed in respect of:

(1) a ship that is registered in the Philippines, or

(2) aship that is under construction in the Philippines.
Page 24 of 42


Section 45. Subject of a Ship Mortgage.- Unless otherwise
stipulated, a ship mortgage shall include all the property of the
mortgagor which is appropriated to the ship and on board at the time
when the mortgage contract is entered into, or which is later substituted
for such property.

In case the ship is under construction, the ship mortgage shall
include all materials, machinery and equipment owned by the
mortgagor that are within the premises of the builder's yard and
distinctly identified as intended to be incorporated into the ship under
construction.

Section 46. Formal Validity.- A ship mortgage shall not be valid
unless it is made by or with the consent of the owner of the ship or ship
under construction, and in writing and signed by the mortgagor and
mortgagee. However, the ship mortgage may be validly made in the
form of an electronic document as defined by law. Except as otherwise
expressly provided in this Act, no other document for formal validity
shall be required in order for the ship mortgage to be binding and
effective upon the mortgagor and mortgagee.

Section 47. Registration of Ship Mortgages. Every mortgage of a
ship that is registered or under construction in the Philippines shall, on
proper application, be registered in the Record of Mortgages and
Encumbrances established in Section 28 hereof. If such a mortgage is not
registered, it shall be unenforceable against the ship and third persons.

All entries in the Register of Mortgages and Encumbrances
pertaining to the mortgage of a ship shall be annotated on the back of
the Certificate of Philippine Registration, stating the time and date of
transfer and the nature and subject matter of the encumbrance. All ship
mortgages shall be registered in the order in which they are filed,
indicating the date and time of registration.

MARINA shall, upon the registration of a mortgage, issue two
official copies of the relevant entry in the Registry to the mortgagor.

Page 25 of 42


Each official copy of the entry shall bear the official time and date of the
registration of the mortgage.

If a ship mortgage is transferred or materially amended or if one
mortgage is substituted for another, the transfer, amendment or
substitution shall likewise be entered into the Record. Any transfer,
amendment or substitution that is not entered into the Record shall be
unenforceable against the ship and third persons.

Section 48. Disclosure by the Mortgagor.- Upon request of the
mortgagee prior to the execution of the mortgage to which they are
parties, the mortgagor shall provide in writing the details of any prior
ship mortgage and any maritime lien that is known to the mortgagor,
upon the ship which is the subject of the ship mortgage.

Section 49. Priority between Ship Mortgages.- Ship mortgages
shall rank in the order of their being recorded with the Registry, the
earlier before the latter.

Section 50. Notification of De-registration of Subject of Ship
Mortgage. - Except in case of a forced sale upon order of a competent
court, the de-registration of a ship shall not be permitted unless all
registered ship mortgages are first deleted, or the written consent of all
holders of such mortgages is obtained.

Where the de-registration of the ship is obligatory according to the
provisions of this Act or its implementing regulations, MARINA shall
notify the holders of registered ship mortgages of the pending de-
registration in order to enable such holders to take appropriate action to
protect their interests. Unless the said holders consent to a shorter
period, the de-registration shall not be implemented until after a lapse of
a reasonable time from notification in writing, which shall be not less
than three (3) months.

There shall be no other requirements for formal validity except as
stated in the preceding paragraphs.

Page 26 of 42


Chapter III
Enforcement of Mortgage

Section 51. Grounds to Enforce a Ship Mortgage.- A mortgagee
shall be entitled to enforce the security represented by the ship under a
mortgage in the following cases:

(1) The mortgagor defaults in the discharge of the indebtedness
or other obligations secured by the ship mortgage;

(2) The mortgagor or any person in possession of the mortgaged
property substantially prejudices the security of the mortgagee by any
act or omission;

(3) The mortgagor commits any breach of the mortgage contract
which, by the terms of the contract, entitles the mortgagee to enforce the
security.

Section 52, Remedies of Mortgagees.- The enforcement of the
security under the mortgage may be carried out by:

(1) Arresting the ship subject to the mortgage and applying for an
order for its forced sale by competent court; or

(2) Foreclosing the mortgage; or
(3) Any other manner stipulated in the mortgage contract.

Section 53. Arrest and Forced Sale of a Ship.-A mortgagee entitled
to enforce his mortgage, or a person exercising a maritime lien, may
bring a proceeding, in rem against the ship which is the subject of the
mortgage or to which the maritime lien attaches, as the case may be,
before a competent court having jurisdiction over the ship.

‘The petitioner shall be entitled to apply to the court ex parte for an
order for the arrest of said ship. The petitioner's claim shall be
supported by an affidavit stating the circumstances which entitle him to

Page 27 of 42


enforce the mortgage or lien. An affidavit executed abroad must be duly
authenticated. If the affidavit satisfactorily establishes the petitioner's
claim, the competent court shall order the arrest of the ship.

The court may require the petitioner to post a bond or other
security before issuing the order of arrest. If so required, the bond or
security shall not exceed the amount of the mortgage debt or lien.

The court shall, after judgment, order the forced sale of the ship to
satisfy the claim, unless the ship has been released in accordance with
the next succeeding section.

The rules on preliminary attachment under the Rules of Court
shall not apply in the arrest of ships.

Section 54. Release of Arrested Ship.-The court shall not release
the arrested ship prior to rendition of judgment unless the mortgagor,
the owner of the ship, or any person authorized to act on his behalf or of
any other person interested in the ship:

(1) applies to the court for an order releasing the ship from arrest,
by making a cash deposit, and if the same is not possible upon
presentation of competent evidence, by filing a counter-bond or security
in an amount double the value of the claim, to secure the payment of
any judgment that the mortgagee may recover in the action, or

(2) proves that the arrest was improperly or irregularly made.

Section 55. Notice of Forced Sale of a Ship. - Prior to the forced
sale of a ship, the court shall give, or cause to be given, at least thirty
(30) days prior notice of the time and place of such sale, either in
customary or electronic form, to the following:

(1) all holders of registered mortgages;

(2) such holders of maritime liens whose claims have been
notified to the court and have not expired;

Page 28 of 42


(3) all other persons having an interest in the ship, whose interests
have been notified to the court.

Section 56. Effect of Forced Sale of a Ship In the event of the
forced sale of a ship, all mortgages, except those assumed by the
purchaser with the consent of the holders, and all liens and other
encumbrances of whatsoever nature, shall cease to attach to the ship but
shall attach to the proceeds of sale; Provided, that at the time of the sale,
the ship is in the jurisdiction of the Philippines, and the sale has been
effected in accordance with the laws of the Philippines.

Any charter party or contract for the use of the ship in existence at
the time of the forced sale shall be deemed to be terminated, without
prejudice to any claim the charterer may have against the owner of the
ship at the time of the sale.

Section 57. Bankruptcy Does Not Affect Ship Mortgage. ~The
mortgage of a ship is not affected by the bankruptcy or rehabilitation of
the mortgagor after the date of the registration of the mortgage.

Section 58. Distribution of the Proceeds.-The costs awarded by
the competent court and expenses arising out of the arrest and sale of
the ship shall be paid first out of the proceeds of such sale. Thereafter,
the following claims shall be satisfied out of the balance of the proceeds
of the sale in the order herein enumerated, observing also the preference
among each category of claims, established in Sections 35 and 37 on
maritime liens and Section 47 on ship mortgages:

(1) maritime liens;

(2) registered mortgages; and

(3) rights of retention.

In case of deficiency, the mortgagee shall be entitled to file a suit in

personam against the mortgagor.
Page 29 of 42


Section 59. Certificate of Release,-When a ship registered in the
Philippines has been the object of a forced sale in the Philippines,
competent court having jurisdiction shall, at the request of the
purchaser, issue a certificate to the effect that the ship is sold free of all
mortgages, maritime liens, and other encumbrances, except those
assumed by the purchaser.

Upon the production of the above-mentioned certificate, MARINA
shall delete all registered mortgages from the Registry, except those
assumed by the purchaser, or issue a certificate of de-registration for the
purpose of registration, as the case may be.

Section 60. Effect of the Forced Sale of a Ship in Foreign States.
The forced sale in a foreign state of a ship registered in the Philippines
shall be recognized and effective in the Philippines, provided that the
procedure for such forced sale in that foreign state substantially
corresponds to the appropriate procedure set out herein.

Chapter IV
Foreign Liens and Mortgages

Section 61. Foreign Maritime Liens.- A claim governed by the law
of a state other than the Philippines and recognized by such law as
giving rise to a maritime lien or right of a similar nature against the
owner, or against the demise or other charterer, manager or operator of
a ship, shall be recognized by and enforceable in the Philippines;
Provided said claim constitutes or corresponds substantially to a claim
set out in this Title. The provisions of this Title relating to maritime liens,
including priority, ranking of liens between themselves, and
enforcement, shall also apply to such claims.

Section 62. Foreign Mortgages.- A foreign mortgage, or any
mortgage or hypothec which relates to a ship of foreign registry, shall be
recognized and enforceable in the Philippines, provided that:

(1) such mortgage has been effected and registered or otherwise
Page 30 of 42


recorded in accordance with the law of the state where the ship is
registered;

2) such register and any instruments or documents which are
required to be deposited are open to public inspection, and that extracts
of the register and copies of such instruments are obtainable from the
registrar, and

(3) either the register or the loan agreement specifies:

(a) the name and address of the person in whose favor the
mortgage has been effected or that it has been issued to bearer;

(b) the amount secured by the mortgage or the manner of
calculating said amount;

(©) the date of the mortgage; and

(d) such other particulars which, according to the law of the state
where the ship is registered, determine the rank in regard to other
registered mortgages.

All matters relating to the procedure for enforcement of foreign
mortgages shall be governed by this Act.

Section 63. Priority and Ranking of Foreign Mortgages.- Foreign
mortgages shall be subordinate to maritime liens as set out in this Act.

The ranking of foreign registered mortgages as between

themselves, and their effect as regard to third parties, shall be governed
by the law of the state where the ship is registered.

Page 31 of 42


Title IV
Limitation on Liability

Chapter 1
Right to Limit Liability

Section 64. Application. - The following may invoke the right to
limit their liability in accordance with the rules provided for in this Title
for the claims set out in the next succeeding section:

(\) Ship owners;

2) Ship operators;

(3) Bareboat charterers;

(4) Ship managers;

(6) Salvors with respect to claims set forth in subsections
(d), (©) and (f) of Section 66;

(6) Any person whose act, neglect or default the ship owner,
ship operator, bareboat charterer, ship manager or salvor is responsible
for; and

(7) Insurers who assume the liability of any ship owner, ship
operator, bareboat charterer, ship manager, or salvor.

‘They may heir right to limit liability against any claimant in a
judicial action who has sought the arrest of their vessels in order to
enforce a claim which is subject to limitation.

Section 65. Claims which are subject to limitation.~ The following,
claims made against the persons set forth in the preceding section or
against the ship, whatever the basis of liability may be, shall be subject
to the limitation of liability:

Page 32 of 42


(1) Claims in respect of loss of life or personal injury, or loss of
or damage to property, including damage to harbor works, basins,
waterways and aids to navigation, occurring on board or in direct
connection with the operation of the ship or with salvage
operations and consequential loss resulting therefrom;

(2) Claims in respect of loss resulting from delay in the carriage
by sea of cargo, passengers or their luggage;

(3) Claims in respect of other loss resulting from the
infringement of rights, other than contractual rights, occurring in
direct connection with the operation of the ship or of salvage operations;

(4) Claims in respect of loss or damage arising from the raising,
removal, destruction or the rendering harmless of a ship which is sunk,
wrecked or abandoned, including anything that is or has been on board
such ship;

(5) Claims in respect of loss or damage resulting from the
removal, destruction or the rendering harmless of the cargo of the ship;

(6) Claims in respect of measures taken in order to avert or
minimize loss for which the person liable may limit his liability in
accordance with this Title, and any further loss caused by such
measures.

Section 66. Claims not subject to limitation. - The following
claims shall not be subject to any limitation of liability in accordance
with this Title:

(1) Claims arising from the contract of salvage or from any
salvage operation rendered in accordance with relevant Philippine law
on salvage or any applicable international salvage convention,
including any claim for special compensation payable under a contract
of salvage, or any contribution in general average;

(2) Claims for oil pollution damage within the meaning of the
Page 33 of 42


applicable convention covering the civil liability for oil pollution
damage or any amendment thereto which is in force;

(3) Claims subject to any international convention governing or
prohibiting the limitation of liability for nuclear damage;

(4) Claims against the ship owner of a nuclear ship for nuclear
damage;

(5) Claims brought by employees against the ship owner,
ship operator, bareboat charterer, ship manager, or salvor, where the
duties of such employees are connected with the ship or with the
salvage operations, as the case may be, or their heirs, successors, or
assigns, if under the law governing the contract of employment, the ship
owner, ship operator, bareboat charterer, ship manager, or salvor is not
entitled to limit his liability in respect of such claims, or if the law
governing the contract of employment permits a limit of liability greater
than that provided forin this Title.

Section 67. Conduct barring limitation, - Any ship owner, ship
operator, bareboat charterer, ship manager or salvor, or any person
acting on their behalf, shall not been titled to limit liability if it is proven
that the loss resulted from the personal act or omission of such ship
owner, ship operator, bareboat charterer, ship manager, or salvor, or
any person acting on their behalf, and such actor omission was
committed with the intent to cause such loss, or it was done recklessly
and with the knowledge that such loss would probably result.

Section 68. Counterclaims; right to set off. When a ship owner,
ship operator, bareboat charterer, ship manager, or salvor, who is
entitled to limit his liability, has a counterclaim against the claimant
arising out of the same occurrence, their respective claims shall be set off
against each other and the limits of liability shall only apply to the
balance of the claim, if any. The right of set off can be invoked only if
both parties are entitled to limit their respective liabilities and their
respective claims do not fall within the provisions of sections 66 and 67
of this Act.

Page 34 of 42


Chapter 2
Limits of Liability
Section 69. General Limits. - The general limits of liability for
claims other than for passenger claims, arising from any distinct
occasion shall be calculated as follows:

(1) In respect of claims for loss of life or personal injury:

(a) 2,000,000 units of account for a ship with a tonnage not
exceeding 2,000 tons;

(b) For a ship with a tonnage in excess thereof, the following
amount in addition to that mentioned in (a):

For each additional ton from 2001 to 30,000 tons, 800 units of
account;

For each additional ton from 30,001 to 70,000 tons, 600 units of
account;

For each additional ton in excess of 70,000 tons, 400 units of
account

(2) Inrespect of any other claims:

(a) 1,000,000 units of account for a ship with a tonnage not
exceeding 2,000 tons;

(b) For a ship with a tonnage in excess thereof the following
amount in addition to that mentioned in (a):

For each additional ton from 2001 to 30,000 tons, 400 units of
account;

For each additional ton from 30,001 to 70,000 tons, 300 units of
Page 35 of 42


account;

For each additional ton in excess of 70,000 tons, 200 units of
account.

The Maritime Industry Authority, with the approval of the
Secretary of the Department of Transportation andCommunication,
may by regulation revise the limits of liability provided for in this
section to align such limits with applicable international maritime
conventions,

Section 70. Claims for loss of life in excess of the stipulated limit. -
If the amount calculated in accordance with subsection (a) of the
preceding section is insufficient to pay in full all the claims for loss of
life or personal injury, the amount calculated in accordance with
subsection (2) shall be available for the payment of the unpaid balance
of the claims under subsection (1).

In this case, the unpaid balance for claims for loss of life and
personal injury shall rank ratably with all other claims falling under
subsection (2); Provided, however, that if there should be any claim
arising from damage to harbor works, basins and waterways, and aids
to navigation, these shall be satisfied first before any other claim falling
under subsection (2) are satisfied, including any unsatisfied claims for
loss of life or personal injury.

Section 71. Salvor’s limit of liability when not operating from a
ship. - The limit of liability for any salvor who is not operating from any
ship or salvage tug, or who is operating solely on the ship to, or in
respect of, which he is rendering salvage services, shall be calculated in
accordance with the provisions of section 119 of this Act applying a
tonnage of 1,500 tons.

Section 72. Limit of liability for passenger claims.- The limit of
liability of a ship owner, ship operator, bareboat charterer, or ship
manager, for passenger claims relating to loss of life or personal injury
arising, out of any distinct occasion, shall be an amount equivalent to

Page 36 of 42


175,000 units of account multiplied by the number of passengers
which the ship is authorized to carry according to the ship's certificate.

Claims for loss of life or personal injury to passengers of a ship
shall mean any such claims brought by or on behalf of:

a. Any person carried on the ship under a contract of passenger
carriage; or

b. Any person carried on the ship who, with the consent of the
master, is accompanying a vehicle, or a shipment of live animals, or
other cargo which is covered by a contract for the carriage of goods.

Section 73. Formula for converting the unit of account to
Philippine Peso. - The unit of account mentioned in this Chapter shall
be converted to Philippine Pesos according to the value of the Philippine
Peso on the date the limitation fund is constituted, or payment is made,
or security is given. The equivalent value of the Philippine Peso shall be
calculated in accordance with the method of valuation applied by the
International Monetary Fund for its operations and transactions in effect
on the applicable date.

Section 74. Aggregation of claims for loss of life and personal
injury and for other claims, - The limits of liability for loss of life and
personal injury and for other claims determined in accordance with
section 69 hereof shall apply to the aggregate of all claims which arise
on any distinct occasion against:

(1) The ship owner, ship operator, bareboat charterer, or ship
manager and any person whose act, neglect or default such ship owner,
ship operator, bareboat charterer or ship manager is responsible for; or

2) The ship owner, ship operator, bareboat charterer, or ship
manager of a ship rendering salvage services from a ship or the salvor
or salvors operating from a salvage tug, and any person whose act,
neglect or default the ship owner, ship operator, bareboat charterer, ship
manager or salvor is responsible for; or

Page 37 of 42


(3) The salvor who is not operating from a ship or salvage tug or
who is operating solely on the ship to, or in respect of, which the salvage
services are rendered and any person whose act, neglect or default
the salvor is responsible for.

Chapter 3
Limitation Fund

Section 75.Creation of a limitation fund.- Any person entitled to
limit his liability in accordance with section 64 and who is alleged to be
liable for a claim provided in section 65 hereof may, at any time during
the hearing of the case or after the arrest of his vessel, constitute a fund
with the court in which legal proceedings have been instituted for the
satisfaction of the claim subject to limitation.

The fund shall be in an amount equivalent to the limits of liability
set forth in sections 69, 71 and 72 hereof, as the case may be, together
with any interest due thereon from the date of the occurrence giving rise
to the liability until the date of the creation of the fund. The total
amount of the fund shall be subject to the rules on aggregation of claims
set forth in section 74 of this Act.

Any fund created shall be available only for the payment of claims
in respect of which limitation of liability can be invoked.

Section 76. Form of the fund, - The fund may be created, either by
depositing the sum with a bank or other financial institution designated
by the court, or by providing, a bond, or other security acceptable to
the court.

The fund constituted by any of the persons mentioned in section
64, subsections (a), (b), (), (d) or (¢) shall likewise be deemed
constituted in favor of the persons mentioned in subsection (f) and (g) of
that section.

Section 77. Distribution of the fund, - Subject to the provisions
Page 38 of 42


of sections 69 and 70 hereof, the limitation fund shall be distributed
among the claimants in proportion to their claims against the fund as
determined by the court.

Section 78 Subrogation of rights. - If at any time before the fund
is distributed the ship owner, ship operator, bareboat charterer, ship
manager or salvor, or their respective insurers, settles a claim made
against and payable by the fund, such person shall, up to the amount
paid, acquire by subrogation the rights which the claimant would have
enjoyed under this Title.

Section 79. Contingency fund for expected claim. -Where the ship
owner, ship operator, bareboat charterer, ship manager, or salvor, or
their respective insurers, establishes that it may be compelled to pay a
claim, at a later date, whether in whole or in part, and because of such
payment, the ship owner, ship operator, bareboat charterer, ship
manager or salvor, or their respective insurers, would have enjoyed a
right of subrogation if the claim had been paid before the fund was
distributed, the court having jurisdiction over the claim and in which
the fund has been constituted may order that a sufficient sum from the
fund be provisionally set aside to enable the person who has been
subrogated to the rights of the claimant to enforce his claim against the
fund at such later date.

Section 80. Bar to other actions. - Where a limitation fund has
been constituted in accordance with section 75 hereof, any person
having made a claim against the fund shall be barred from enforcing
such claim against any other assets of the persons mentioned in section
64 hereof and on whose behalf the fund has been constituted.

Section 81. Release from arrest after the constitution of the
limitation fund. - After a limitation fund has been constituted in
accordance with section 75 of this Act, any ship or other property,
belonging to a ship owner, ship operator, bareboat charterer, ship
manager or salvor on whose behalf the fund has been constituted, which
has been arrested or attached in accordance with Title II] of this Act in
order to satisfy a claim which is enforceable against the fund or any

Page 39 of 42


other bond or security given, may be released from arrest at the
discretion of the court.

Such release shall however be mandatory if the limitation fund
has been constituted:

(1) At the port where the occurrence took place;

(2) If the occurrence took place out of port, at the first port of
call of the ship after such occurrence;

(3) At the port of disembarkation in respect of claims for loss of
life or personal injury;

(4) Atthe port of discharge in respect of damage to cargo; or
(6) At the port where the arrest is made.

The provisions of this section and of the immediately preceding
section shall apply only if the claimant may bring a claim against the
limitation fund before the court administering that fund and the fund
is actually available and freely transferable to the claimant in respect of
the claim.

Title V
Final Provisions

Section 82. Implementing Rules and Regulations - MARINA shall
issue such administrative rules and regulations as may be necessary to
implement the provisions of this Act.

Section 83. Administrative Offenses and Penalties. -To ensure
faithful compliance with the rules and regulations issued in accordance
with the preceding section, MARINA, through summary administrative
proceedings, may identify, prohibit, and penalize such acts and activities
that may reduce the efficiency and reliability of the Philippine Ship

Page 40 of 42


Registry, impede the effectiveness of the exercise of Philippine
jurisdiction and control over Philippine flag vessels, or otherwise
interfere with its duties and responsibilities as a flag, State and the
implementation of this Title.

For this purpose, MARINA is authorized to impose an
administrative fine of not less than Ten Thousand Pesos (PhP10,000.00)
but not more than Five Hundred Thousand Pesos (PhP500,000.00), as
well as the penalty of suspension, cancellation, or revocation of the
relevant certificates, for violations of this Code and such rules and
regulations that it may issue pursuant to this Title.

The range of fines shall be subject to review and revision every
five (5) years from the date of effectivity of this Code, but in no case
shall any increase exceed an amount equivalent to twenty percent (20%)
of that previously imposed.

Section 84. Repealing Clause. - All existing laws, orders, decrees,
rules and regulations or part thereof inconsistent with the provisions of
this Act are hereby repealed or modified accordingly.

Section 85. Separability. - If, for any reason, any section,
subsection, clause or term of this Act is held to be illegal, invalid, or
unconstitutional, such parts not affected by such declaration shall
remain in full force and effect.

Section 86. Transitory Provisions - TEvery ship currently
registered under the laws of the Philippines and granted the privilege to
fly its flag shall be deemed to be registered under this Act in so far as its
registration is not inconsistent with the provisions of this Act and such
registration shall continue to be valid until its expiration unless sooner
revoked by the Maritime Industry Authority. Any ship mortgage
entered into in accordance with the provisions of the Ship Mortgage
Decree or the Chattel Mortgage Law shall continue to be valid and
effective and its registration shall be transferred to the Maritime
Industry Authority in accordance with the provisions of this Act.
Nothing in the transfer shall change or in any way alter or affect any

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preference a registered mortgage may enjoy or the original date on
which such mortgage was entered in the registry.

Section 87. Effectivity Clause- This Act shall take effect fifteen

(15) days from its publication in at least two (2) national papers of
general circulation.

Approved,