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THIRTEENTH CONGRESS OF THE REPUBL.IC 
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OF THE PHILIPPINES 
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First Regular Session 
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S E N A T E  
S. No. 
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Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
P. D. 1521, otherwise known as the Ship Mortgage Decree of 1978, is 
considered inadequate with regard to providing the framework for the 
enforcement of claims on maritime assets because it does not cover maritime 
liens. 
This bill, which drew from the services of maritime law experts from the 
Comife Mark Time Infernationale seeks to upgrade the Philippine law covering 
claims on maritime assets to international standards. 
It is said that the efficient operation of free markets is hinged on the 
existence of legal institutions that assure every individual of his property rights 
and of a recourse to the legal system for the enforcement of those rights. 
This bill provides such a foundation for the effective operation of the 
shipping industry by defining the various claims against the owner of a maritime 
asset, and clarifying the order of priorities among those claims. In so doing, the 
rights of parties involved in the shipping industry, such as workers, shippers, 
passengers, and banks extending mortgage financing for the acquisition of ships 
are more adequately defined and protected. 
In view of the foregoing, early passage of this bill is earnestly requested. 
L L ,  
SERGIO OSMENA 111 
Senator 


THIRTEENTH CONGRESS OF THE REPUBLl 
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”04 &iff M 
P5 1116 
OF THE PHILIPPINE 
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First Regular Session 
Introduced by Senator S. R. Osmefia 111 
AN 
TO BE KNOWN AS “THE MARITIME 
1998” 
Be it enacted by the Senate 
Philippines in Congress Assembled: 
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SECTION I. Title. - This Act 
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and Ship Mortgage Act of 2004.” 
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I ACT 
LIEN AND SHIP MORTGAGE ACT OF 
and House of Representatives of the 
shall be known as the “Maritime Liens 
CHAPTER I - Maritime Liens 
SEC 2. Definition of Terms. - The terms used in this Act shall have the 
following meaning: 
(a) Vessel, ship or watercraft - means: 
i) a barge, lighter, bulk carrier, passenger ship, freighter, tanker, 
container ship, fishing boats, or other artificial contrivance utilizing any 
source of motive power designed, used or capable of being used as 
means of transportation by water including its apparel and 
appurtenances ; or 
ii) a structure, whether completed or in the course of completion for use 
as a vessel, ship or watercraft; or 
iii) an aircraft or hovercraft when waterborne and capable of being utilized 
as means of transportation by water. 
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b) Maritime Lien - is a claim constituted by virtue of this Act which 
unconditionally attaches as a privileged claim upon maritime property 
whether disclosed or not, wherever it maybe found, enforceable by an 
action in rem. 
c) Preferred Mortgage - is a mortgage validly executed in accordance 
with the provisions of this Act on the vessel permanently or temporarily 
registered, enrolled or licensed under the laws of the Philippines. 
d) Foreign Mortgage - is a mortgage which relates to a ship when it is 
registered in a country other than the Philippines and shall include any 
hypothec which relates to such a ship validly executed in accordance 
with the documentation laws of its nations and duly registered in a 
public register in the port of registry. 
e) Maritime Property - means a vessel in being, its cargo, freight and 
sub-freight. 
9 Necessaries - means things incorporated or furnished into the vessel 
because they are required for her ordinary needs after it is built and 
equipped and starts upon her voyage which includes repairs, needs 
services and materials required for the maintenance of operation 
thereof except those which go into its original construction and which 
are necessary to its completion. 
g) Philippine-registered vessel - means a vessel registered or enrolled or 
licensed under the laws of the Philippines, whether permanently or 
temporarily. 
h) Owner - means the registered owner, demise charterer, manager or 
operator of the vessel against whom claims had been filed in respect of 
loss of life or personal injury occurring on land or on water in direct 
connection with the operation of the vessel or claims based on tort and 
not capable of being used on contract has been filed in respect of loss 
or damaged to property occurring, whether on land or on water, in 
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SEC. 3. Claims Secured by Maritime Liens - 
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liens on the ship: 
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(a) claims for salvage, wreck removal and contribution in general 
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average; 
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of the ship; 
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(c) wages and other sums due to the master, officers and other members 
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of the ship’s crew with respect to their employment on board the ship; 
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(d) claims against the owner based exclusively on tort with respect to loss 
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or damage to property occurring, whether on land or in water, in direct 
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connection with the operation of the ship; 
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(e) port, canal and other waterway dues, tonnage dues, light dues, 
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pilotage dues and other public taxes dues and charges of the same 
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character; 
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(9 cost incurred by the government, national or local, in preventing, 
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mitigating or eliminating pollution by oil, or otherwise, within the 
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2) A ship can still be charged with a maritime lien although it has 
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become derelict or has been reduced to a wreck. 
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No maritime lien shall attach to the ship securing any claim which 
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arises out of or results from the radioactive properties or a 
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combination of radioactive properties with toxic, explosive or other 
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hazardous properties of nuclear fuel or of radioactive product or 
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waste. 
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direct connection with the operation of the vessel which, in both 
circumstances, constitute a maritime lien under this Act. 
(I) 
The following claims in relation to a ship shall be secured by maritime 
(b) claims against the owner with respect to loss of life or personal injury 
occurring on land and on water, in direct connection with the operation 
territorial waters and exclusive economic zone of the Phiiippines. 
3) 
SEC. 4. Priorify Befween Maritime Liens. - 
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(I) The maritime liens set out in paragraph 1 Section 3 hereof shall rank 
in the order listed therein subject, however, to prior claims which 
arose out of salvage, wreck removal and contributions to general 
average; 
Maritime liens which secure claims for salvage, wreck removal and 
contributions in general average shall take priority over all maritime 
liens which have attached to the vessel whether prior or subsequent 
to the time when the operations giving rise to the said liens were 
performed: Provided, however, That port, canal and other waterways 
dues, tonnage, lighthouse and pilotage dues and public taxes and 
costs incurred by the government for preventing, mitigating or 
eliminating pollution by oil shall have been initially satisfied; 
(3) The maritime liens which secure claims for salvage, wreck removal 
and contributions in general average shall rank in the inverse order of 
the time when the claims secured thereby accrued. 
Claims for 
contributions in general average shall be deemed to have accrued on 
the date on which the general average act was performed; claims for 
salvage or wreck removal shall be deemed to have accrued on the 
date on which the salvage or wreck removal operation were 
terminated. 
(2) 
SEC. 5. Nature of Maritime Liens - (1) Maritime liens shall arise whether 
the claims secured by such lierls are against the owner or against the demise 
charterer, manager or operator of the ship. 
(2) Maritime liens, whether original, assigned or subrogated, shall follow 
the ship notwithstanding any change of ownership or of registration. 
SEC. 6. Assignrnenf or Subrogation - The assignment of or subrogation 
to a claim secured by a maritime lien shall entail the simultaneous assignment of 
or subrogation to such maritime lien. 
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SEC. 7. Extinction of Maritime Liens. - (1) Maritime liens shall be 
extinguished after a period of one year from the time when the claims secured 
thereby arose unless, prior to the expiry of such period, the ship has been 
arrested, such arrest leading to a forced sale or the provision of a satisfactory 
security for the release of such ship from arrest. 
(2) The period of one year shall not be subject to suspension or 
interruption, provided however, that the time shall not run during the period that 
the person exercising the lien is legally prevented from arresting the ship. 
SEC. 
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Enforcement of a Maritime Lien. - (1) A person having a 
maritime lien under Sec. 3 hereof may enforce that maritime lien by bringing a 
proceeding in rem against the ship to which the maritime lien attaches the court 
having jurisdiction over the latter, within one year from the time when the claims 
secured thereby arose, The person bringing such proceedings shall be entitled to 
apply to the court ex parte for an order for the arrest of the ship to the maritime 
lien. 
(2) The court, once the ship subject to the maritime lien has been 
arrested pursuant to the court’s order, shall make an order for the force sale of 
the ship: Provided, That, the provision of this Act on the enforcement of ship 
mortgage shall be followed. 
(3) The provisions of this Act on the enforcement of mortgage shall 
likewise apply in cases involving enforcement of maritime liens in relation to the 
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arrest of a vessel subject to that lien: Provided, That, when reference is made to 
the maritime lien which is being enforced, the debtor or mortgagor and the 
creditor or mortgagee shall be, the owner of the vessel and the lien holder, 
CHAPTER 2 - Ship Mortgages 
SEC. 9. Application. - The provisions of this Chapter shall apply to every 
mortgage wherever executed which shall, moreover, be subject to Philippine law 
notwithstanding any agreement to the contrary in respect of: 
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a) a ship which is registered in the Philippines; or 
b) a ship which is under construction in the Philippines. 
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Subject of the Mortgage. - Subject to the terms of the 
mortgage contract: 
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a mortgage in respect of a ship 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; and 
a mortgage in respect of a ship under construction shall include all 
materials, machinery and equipment in the possession of the 
mortgagor which are within the premises of the builder's yard and 
distinctly identified as intended to be incorporated in the ship under 
construction. 
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SEC. 11. Formal Validity. - A mortgage shall not be valid, except as 
between the parties, unless it is: 
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made by or with the consent of the owner of the ship or ship under 
construct ion; and 
b) made in writing and 'signed by the mortgagor and mortgagee; 
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registered in accordance with Section 12 of this Act. 
SEC. 12. Registration of Mortgages - Every mortgage of a vessel which 
is registered in the Philippines or which is under construction in the Philippines 
shall be duly registered in the Record of Transfers and Encumbrances of Vessels 
in order to be valid and enforceable. The application for the registration of 
mortgage hereunder shall be accompanied by the following: 
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An authenticated copy of the mortgage contract or other similar 
instrument. 
2. Such forms as the Maritime Industry Authority, hereinafter referred to 
as the Authority, shall prescribe, signed by the mortgagor and setting 
out the following: 
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a) the name or description of the vessel being mortgaged; 
b) the name, nationality and place of residence of the owner of the 
vessel; 
c) the name of each mortgagor and each mortgagee 
d) the interest of the mortgagor in the vessel being mortgaged; 
e) the date of the mortgage contract; 
9 the extent of the mortgage as specified in the mortgage 
contract; and 
g) the maturity date of the mortgage and the conditions specified in 
the mortgage contract relating to the termination of the 
mortgage debt. 
3. An authenticated copy of the certificate of registration of the vessel; 
and 
4. In the case of a vessel under construction, a declaration stating; 
a) the name and location of the construction yard; 
b) the intended port of registration; 
c) the yard number; 
d) the dimension and approximate deadweight of the vessel on 
completion. 
Upon registration of a mortgage by the Authority as provided herein, an 
authenticated copy of the mortgage contract or other instrument shall be 
submitted to the Bangko Sentral ng Pilipinas. 
If the mortgage is transferred or materially amended as to any of the 
particulars in paragraphs (2) and (4) hereof, if one mortgage is substituted for 
another, the transfer, amendment or substitution shall be registered in the 
Record of Transfers and Encumbrances of Vessels in the same manner as 
above provided. 
Any transfer, amendments or substitution which is not 
registered as aforesaid shall be invalid and unenforceable. 
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SEC. 13. Annotation of Mortgages. - The Maritime Industry Authority 
shall, at the request of the mortgagee or his authorized agent, cause the 
annotation upon the Certificate of Philippine Registry of the Vessel subject to the 
mortgage the matters set out in’paragraph (2) of Sec. 12. 
If the vessel, in respect of which a mortgage has been made, holds only a 
Provisional Certificate of Philippine Registry and is abroad at the time of the 
registration of the mortgage, the annotation shall be made by such consular 
officer of the Republic of the Philippines as the Maritime Industry Authority shall 
direct. 
If a new certificate or a full certificate is issued to a vessel by the Authority 
any annotation upon the old or provisional certificate of a mortgage, which 
remains undischarged at the time of the issuance of the new or full certificate 
shall be transferred to and annotated upon such new or full certificate. 
SEC. 14. Publication of Mortgage. - The Maritime Industry Authority 
shall, upon the registration of a mortgage, issue two (2) official copies of the 
relevant entry in the Record of Transfers and Encumbrances of Vessels relating 
to the mortgage which has been registered, to the mortgagor named in the 
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registration of the mortgage. 
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above; and 
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2) an authenticated copy of the vessel’s Certificate of Registry duly 
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application. 
Each official copy of the entry shall bear the official date of the 
The mortgagor shall take all reasonable steps to exhibit in a prominent 
place on board the vessel subject to the mortgage: 
1) at least one of the official copies issued under the first paragraph 
containing the annotation of the mortgage. 
Failure to exhibit the copies as specified above shall not affect the validity 
or enforceability of the mortgage. 
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mortgage; and 
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SEC. 15. Transparency of Records - The mortgagor upon request by the 
mortgagee before the execution of the mortgage to which they are parties, shall 
give details in writing to the mortgagee of: 
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any prior mortgage on the vessel which is to be the subject of the 
2) any maritime lien to which the said vessel is subject, which are known 
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to the mortgagor. 
The Record of Transfers and Encumbrances of vessels kept by the 
Maritime Industry Authority shall be open to public inspection during ordinary 
business hours and subject to such reasonable regulations as to access as the 
Authority may prescribe. 
The Maritime Industry Authority, at the request of any person and on the 
payment of such reasonable fees as the Authority shall fix, shall provide: 
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Extracts from the Register of Entries contained therein setting out the 
details mentioned in paragraphs 2 and 4 of Sec. 12 of this Act; and 
2) Authenticated copies of any document or instrument integrated or 
referred to therein, which is required to be lodged under paragraphs 1 and 2 of 
Sec. 12 of this Act. 
SEC. 16. De-registration of the Ship Subject to a Mortgage. - Except as 
otherwise provided for in this Act, a ship registered in the Republic of the 
Philippines shall not be de-registered without the written consent of all holders of 
registered mortgages. 
SEC. 17. Right to Enforce the Mortgage. - (I) 
A mortgagee shall be 
entitled to foreclose on the security represented by the Ship under a mortgage if: 
a) the mortgagor defaults in the discharge of the indebtedness or other 
obligations secured by the mortgage; or 
b) the mortgagor or any person in possession of the mortgaged property 
substantially prejudiced the security of the mortgagee by any act or 
omission; or 
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SEC. 18. Arrest Leading to Forced Sate. - 
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c) the mortgagor commits any breach of the mortgage contract which, by 
the terms of the contract, entitles the mortgagee to foreclose on the 
(2) The foreclose on the security under the mortgage contract in the 
circumstances referred to in paragraph ( 1 )  hereof may be affected by: 
a) 
arresting the ship subject to the mortgage and applying to the court 
for an order for its forced sale in accordance with this Act; or 
in any other manner permitted by the mortgage contract. 
b) 
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A mortgagee entitled to enforce his mortgage may bring proceeding in 
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rem against the ship which is the subject of the mortgage before the court having 
jurisdiction over the ship within one year from the time when the grounds which 
entitle the mortgagee to enforce the mortgage arose. The mortgagee shall be 
entitled in such proceedings to apply to the court ex parte for an order for the 
arrest of the mortgaged ship. 
(2) A mortgage who applies to the court for an order of arrest shall file in 
support of his claim an affidavit stating the circumstances upon which the 
mortgagee relies as entitling him to enforce the mortgage. 
If the affidavit 
establishes this to the satisfaction of the court, the court shall make an order for 
the arrest of the mortgaged ship. 
(3) The court shall require the mortgagee applying for an order to provide 
a guarantee or other security in a form satisfactory to the court as a pre-condition 
for the issuance of the order sought. The guarantee or security shall be for such 
sum, not exceeding the extent of the mortgage debt, as the court considers 
appropriate. 
(4) The mortgagor or any person authorized to act on his behalf or any 
other person interested in the ship may, at any time after the order of arrest has 
been granted, apply to the court for an order releasing the ship from arrest. The 
Court shall not order the release of the ship under this paragraph unless the 
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mortgagor provides a counter-guarantee or security in a form satisfactory to the 
court in an amount equal to the full extent of the mortgage debt: Provided, That 
the full extent of the mortgage shall mean the outstanding balance of the 
mortgage debt. 
(5) Subject to paragraph (4), the court, once the mortgaged ship has been 
arrested pursuant to the court’s order, shall make an order for its forced sale in 
accordance with this Act. 
(6) Where on an application the mortgagor satisfies the court that the 
order of arrest was improperly and irregularly made, the court shall order the 
release of the ship and notwithstanding the paragraph (4) shall not require the 
provision of a counter-guarantee or security. 
(7) The Supreme Court pursuant to this Act shall provide for the 
regulations and the procedure to be applied in respect of applications for the 
arrest and forced sale of the ship under this section, in particular: 
a) the procedure in relation to the ex parte application 
b) the procedure in relation to the provision of a guarantee or security, or 
of a counter-guarantee or security; 
c) the procedure for the application for the release of a ship from arrest; 
d) the arrangement of and procedure for a forced sale. 
SEC. 19. After ordering a forced sale, whether under Section 18 above 
or pursuant to any power vested in court, and prior to the forced sale of a ship, 
the court shall give, or cause to be given, at least thirty (30) days written notice of 
the time and place of such sale to: 
a) All holders of registered mortgagors; 
b) Such holders of maritime liens by virtue of this Act whose claims have 
been notified to the court; 
c) All other persons having an interest in the ship which interest has been 
notified to the court; and 
d) The registrar of the registry in which the vessel is registered. 


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CHAPTER 3 - Right of Retention 
SEC. 20. Rights of Retention. - (1) The following persons, when in 
possession of a ship or one which is under construction, shall have the right to 
retain possession of the same, as follows: 
a) a shipbuilder, to secure claims arising out of the construction of, or 
other work carried out in relation to the ship; and 
b) a ship repairer, to secure claims arising out of the repair of, or other 
work carried out in relation to the ship, effected during such possession. 
(2) The right of retention shall be extinguished when: 
a) the claim in respect of which the said right has been exercised is met 
or is otherwise discharged, in accordance with the provisions of the 
new civil code on the extinguishment of obligations; 
b) the ship ceases to be in the possession of the shipbuilder or ship 
repairer as the case maybe; or 
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the court issues an order that the ship is to be released. 
CHAPTER 4 - Forced Sale 
SEC. 21. Effect of the Forced Sale of Ship. - (1) In the event of the 
forced sale of the 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 be transferred and shall attach to 
the proceeds of sale: Provided, That: 
a) at the time of sale the ship is in the jurisdiction of the Philippines; and 
6) the sale has been effected in accordance with the law of the 
Philippines 
Any charter party or contract for the use of the ship, in existence at the 
time of the forced sale, shall 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. 
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(2) 
Unpaid taxes of whatever kind or class which accrues to the vessel 
and the costs incurred in the arrest and subsequent sale of the vessel shall be 
paid first out of the proceeds of such sale. 
CHAPTER 5 - Priority between claims 
SEC. 22. Preference of Credits. - (I) The balance of the proceeds of 
sale, in respect of the ship sold, shall be distributed among the holders of 
maritime liens, the registered mortgagee and the rights of retention in 
accordance with the provisions of Sections 3, 12 and 19 and the order of priority 
therein set out to the extent to satisfy their claims as assessed by the court. 
(2) 
When a ship registered in the Philippines has been the object of a 
forced sale in the Philippines, the court having jurisdiction shall, at the written 
request of the purchaser, issue a certificate to the effect that the ship is sold free 
of all mortgages and all maritime liens and other encumbrances, except those 
amused by the purchaser. 
(3) 
Upon the production of a certificate given under paragraph (2) 
hereof, the registrar of Philippine Registry of Ships shall delete all registered 
mortgages, except those assumed by the purchasers, and register the vessel in 
the name of the purchasers ‘or issue a certificate of de-registration for the 
purpose of registration, as the case may be. 
SEC. 23. Priorify Befween Kinds of Claims. (I) Claims in relation to 
maritime lines, rights of retention and mortgages under this Act rank in the 
following order: 
a) maritime liens; 
b) mortgages registered in accordance with this Act; 
c) rights of retention; and 
d) other mortgages. 
(2) 
The claims referred to in paragraphs (a), (b) and (c) of paragraph 
(I) of this Section shall rank before all other claims on, or in respect of, the ship 
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CHAPTER 6 
SEC. 24. Maritime Liens in Respect of 
Governed by Foreign 
Law. - (1) A claim against the owner or against the demise or other charterer, 
manager or manager or operator of a ship being claim which is governed by the 
law of a state other than the Philippines and which is recognized by the law as 
giving rise to a maritime lien, or right of a similar nature shall be recognized by 
and enforceable in a court of the Philippines in the same manner as the claims 
set out under this Act. 
(2) A claim referred to in paragraph (1) shall not be recognized or enforced 
by any court in the Philippines unless, according to the law of the Philippines, 
that claim constitutes or corresponds substantially to a claim set out under this 
Act. 
(3) 
Where a claim is recognized and enforced by a court in the 
Philippines, the provisions of this Act in relation to maritime lines, and in 
particulars, concerning priority, the ranking of liens between themselves and 
enforcement, shall apply to such a claim as they apply to claims governed by the 
law of the Philippines. 
SEC. 
25. 
Foreign Mortgages. - (I) 
A foreign mortgage shall be 
recognized and enforceable in a court of the Philippines: Provided That: 
a) 
such mortgage has been affected and registered or otherwise 
recorded as valid and existing in accordance with the law of the State 
where the ship is registered; 
the registry in which the mortgage is registered or recorded and any 
instruments or documents which are required to be deposited with 
the registry in accordance with the laws of the State where the ship is 
registered, are open to public inspection, and that extracts of the 
register and copies of such instruments are obtainable from the 
registrar; and 
b) 
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c) 
either the register or any instrument referred to in paragraph (b) 
above specifies: 
i) 
the name and address of the person in whose favor the 
mortgage has been effected or that it has been to bearer; 
ii) either the amount secured by the mortgage or the manner of 
calculating such amount; 
iii) the date of the mortgage; and 
iv) such other particulars which, according to the law of the State 
where the ship is registered, determine the rank as regards other 
registered or recorded mortgages. 
(2) The ranking of registered or recorded mortgages as between 
themselves and their effect with regard to third parties shall be determined 
according to the law of the State where the ship is registered. 
(3) All matters other than ranking of mortgages relating to the procedure 
for the enforcement of a foreign mortgage in the Philippines shall be governed by 
the existing and pertinent laws of the Philippines and the provisions of this Act: 
Provided, That, foreign mortgages on vessels registered in the Philippines 
pursuant to a bareboat charter agreement but executed prior to such registration 
may or may not be governed by the law of the Philippines. 
Sec. 26. Repealing Clause. - All law, executive orders, decrees, rules 
and regulations, or par thereof, contrary to or inconsistent with the provisions of 
this Act are hereby repealed or modified accordingly. 
SEC. 27. Separability Clause. - If, for any reason or reasons, any part 
or provision of this Code shall be held to unconstitutional or invalid, other parts or 
provisions hereof which are not affected thereby shall continue to be in full force 
and effect. 
SEC. 28. Effecfivify Clause. - This Act shall take effect fifteen (15) days 
after its publication in the Official Gazette or at least two national newspapers of 
general circulation.