He LSE OF REPRESENTATIVES

SEVENTEENTH CONGRESS OF THE REPUBLIC)
OF THE PHILIPPINES )

First Regular Session )

9
HOUSE BILL no_10°3

CISTRATION UNIT

BILLS AND INDEX SERVICE

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.

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.

‘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.

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|


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.

= ANGKLA

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SEVENTEENTH CONGRESS OF THE REPUBLIC _)
OF THE PHILIPPINES )

First Regular Session )

HOUSE OF REPRESENTATIVES

1025

House Bill No.

Introduced by ANGKLA Party-list 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 I
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;

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

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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 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;

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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, 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. “Mortgage” shalll 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;

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x “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 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;

v. “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 I.
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;

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

(3) 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;

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(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 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.

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(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;

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

(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;

(0) it complies with the applicable provisions that govern the safety and security
of Philippine ships and persons on board;

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

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

(0 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,

Page 9 of 33


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.

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.

(5) 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;

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

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

(8) 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 shalll 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 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

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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.

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. - Exrors 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.

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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:

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

(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;
(8) ship is sold for scrapping:

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

(2) 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 offices of MARINA and

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online. All documents and information provided in connection with the registration
ofa 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 cettificate has been issued by the former flag State to the effect that the
ship has been de-registered; or

(2) Acettificate 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.

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.

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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 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 Ill
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 shalll be expressly stated.

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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;

(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, shalll be furnished to any person.

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Title Il
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 shij

(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

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

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

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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, hypotheques, and charges.
No other claim shall take priority over such maritime liens or over such mortgages,
hypotheques, 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 rank
equally 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 shall be paid out of the proceeds of the sale
before all other claims secured by maritime lien on the ship.

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.

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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:

(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
toa 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) a claim 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.

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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.

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.

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

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Ifa 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.

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;

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(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
(8) 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 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

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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;

(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;

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(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.

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

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(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;

(0) the date of the mortgage; and

(a) 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.

Title IV
Limitation on Liabi

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:
(1) Ship owners;
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(2) Ship operators;
(3) Bareboat charterers;
(4) Ship managers;

(5) Salvors with respect to claims set forth in subsections (d), (e) 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:

(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;

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

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(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 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 for in 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,

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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.

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 shalll be calculated as
follows:

(1) Inrespect 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;

(vb) Fora 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 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 and Communication, may by regulation revise
the limits of liability provided for in this section to align such limits with applicable

Page 28 of 33


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 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.

Page 29 of 33


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

(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,

Page 30 of 33


subsections (a), (b), (c), (d) of (e) 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 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 III _of this Act in order
to satisfy a claim which is enforceable against the fund or any 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;

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(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) At the port of discharge in respect of damage to cargo; or
(©) Atthe 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 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.

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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 - Every 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 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,

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