Levelling the Playing Field

in Domestic and
International Shipping:
Legal Issues
 Foreign and Domestic Ships
Compared
Domestic cost of operations taxes,
impost, duties, licenses compared to
foreign lines
Foreign and Domestic Ships
Compared
Drydocking:
Foreign Ships can drydock anywhere
Domestic Ships can only drydock in
MARINA registered shipyards (P.D. 1221)
World Bank data reveals that drydocking
in the Philippines is 40% higher than in
other countries, e.g. China, Japan, Korea
 Foreign and Domestic Ships
Compared
Section 2.All Philippine-owned and/or registered vessels shall
undertake all repairs, improvement, alteration, reconditioning,
conversion or drydocking with MARINA-registered ship repair yards,
provided that the Maritime Industry Authority may exempt any such vessel
from this requirement in any of the following cases:

1. When as a result of collision, grounding, heavy weather, breakdowns and

other perils of the sea occurring abroad, the vessel suffers damages
necessitating emergency and/or extraordinary repairs, and it is impracticable
that such vessel be brought to the Philippines for the needed repairs;

2. When on account of existing prior commitments or due to inadequacy or lack

of service facilities of MARINA-registered ship repair yards, as determined by
the Maritime Industry Authority, the repairs or works sought to be
undertaken on the vessel cannot be accommodated by such ship repair
yards;

3. When the Philippines is not one of the vessel's ports of call, in which case a
waiver from the said requirement must be obtained from the Maritime
Industry Authority;

4. All other meritorious cases as may be determined by the Maritime Industry

Authority.
 Foreign and Domestic Ships
Compared
Levelling the Playing Field Between
Domestic and Foreign Ships in the context of
Lifting Philippine Cabotage Laws by Allowing
Foreign Ships to Engage in Trade &
Commerce in Philippine Territorial Waters

SEC. 6. Foreign Vessels Engaged in Trade and

Commerce in Philippine Territorial Water. No
foreign vessels shall be allowed to transport
passengers or cargo between ports or places
within the Philippine Territorial Waters, except
upon the grant of Special Permit by the MARINA
when no domestic vessels is available or suitable
to provide the needed shipping service and public
interest warrants the same. (R.A. No. 9295)
 Foreign and Domestic Ships
Compared
Levelling the Playing Field Between
Domestic and Foreign Ships in the context of
Lifting Philippine Cabotage Laws by Allowing
Foreign Ships to Engage in Trade &
Commerce in Philippine Territorial Waters
Sec. 806. x x x "Domestic ownership, as used in this
section means ownership vested in citizens of the Philippines
or corporations or associations organized under the laws of
the Philippines at least sixty per centum of the capital stock
or capital of which is wholly owned by citizens of the
Philippines, and, in the case of corporations or associations
which will engage in coastwise trade the president or
managing directors thereof shall be such citizens x x x .
(Tariff & Customs Code of the Philippines, as amended by
P.D. No. 761)
 Foreign and Domestic Ships
Compared
Levelling the Playing Field Between
Domestic and Foreign Ships in the context of
Lifting Philippine Cabotage Laws by Allowing
Foreign Ships to Engage in Trade &
Commerce In Philippine Territorial Waters
Sec. 810.Privileges Conferred by Certificate of
Philippine Registry. A certificate of Philippine registry
confers upon the vessel the right to engage,
consistently with law, in the Philippine coastwise trade
and entitles it to the protection of the authorities and
the flag of the Philippines in all ports and on the high
seas, and at the same time secures to it the same
privileges and subjects it to the same disabilities as,
under the laws of the Philippines, pertain to foreign-
built vessels transferred abroad to citizens of the
 Foreign and Domestic Ships
Compared
Applicable Laws on Vigilance over Goods
and Passengers
Foreign Ships: Carriage of Goods by Sea Act
(Commonwealth Act No. 65)

Only Ordinary Due Diligence is required in the

vigilance over goods and the safety of passengers
(Section 3)

Section 3. (1) The carrier shall be bound, before

and at the beginning of the voyage, to exercise
due diligence to
 Foreign and Domestic
Ships Compared
(a) Make the ship seaworthy;

(b) Properly man, equip, and supply the ship;

(c) Make the holds, refrigerating and cooling

chambers, and all other parts of the ship in which
goods are carried, fit and safe for their reception
carriage and preservation.

(2) The carrier shall properly and carefully load,

handle, stow, carry, keep, care for, and discharge
the goods carried.
 Foreign and Domestic
Ships Compared
Legal Defenses in case of damage to the Cargo
Section 4. (1) Neither the carrier nor the ship shall be liable for
loss or damage arising or resulting from unseaworthiness unless
caused by want of due diligence on the part of the carrier to
make the ship seaworthy, and to secure that the ship is properly
manned, equipped, and supplied, and to make to the holds,
refrigerating and cool chambers, and all other parts of the ship
in which goods are carried fit and safe for their reception,
carriage, and preservation in accord-ance with the provisions of
paragraph (1) of section 3. Whenever loss or damage has
resulted from unseaworthiness, the burden of proving the
exercise of due diligence shall be on the carrier or other persons
claiming exemption under the section.
 Foreign and Domestic
Ships Compared
(2) Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from

a) Act, neglect, or default of the master, mariner, pilot, or the

servants of the carrier in the navigation or in the management
of the ship;

b) Fire, unless caused by the actual fault or privity of the carrier;

c) Perils, dangers, and accidents of the sea or other navigable
waters;

d) Act of God;
e) Act of war;
f) Act of public enemies;
 Foreign and Domestic
Ships Compared
g) Arrest or restraint of princes, rulers, or people, or seizure
under legal process

h) Quarantine restrictions;

i) Act or omission of the shipper or owner of the goods, his

agent or representative;

j) Strikes or lockouts or stoppage or restraint of labor from

whatever cause, whether partial or
general;Provided,That nothing herein contained shall be
construed to relieve a carrier from responsibility for the
carrier's own acts;

k) Riots and civil commotion;

 Foreign and Domestic
Ships Compared
l) Saving or attempting to save life or property at sea;

m) Wastage in bulk or weight or any other loss or damage arising

from inherent defect, quality, or vice of the goods;

n) Insufficiency of packing;

o) Insufficiency of inadequacy of marks;

p) Latent defects not discoverable by due diligence; and

q) Any other cause arising without the actual fault and privity of
the carrier and without the fault or neglect of the agents or
servants of the carrier, but the burden of proof shall be on the
person claiming the benefit of this exception to show that
neither the actual fault or privity of the carrier nor the fault or
neglect of the agents or servants of the carrier contributed to
the loss or damage.
 Foreign and Domestic Ships
Compared
Prescriptive Period For Filing Action in the event of
Damage to the Cargo One (1) Year [Section 3, (6),
paragraph 4, COGSA
In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is
brought within one year after delivery of the goods or the
date when the goods should have been delivered:
Provided, That if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery
of the goods or the date when the goods should have
been delivered.
 Foreign and Domestic Ships
Compared
Domestic Ships engaged in Public Transport
Requirement of Extra-Ordinary diligence in the vigilance
over the goods and safety of passengers
Article 1732. Common carriers are persons, corporations,
firms or associations engaged in the business of
carrying or transporting passengers or goods or both,
by land, water, or air, for compensation, offering their
services to the public.
Article 1733. Common carriers, from the nature of their
business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported
by them, according to all the circumstances of each case.
 Foreign and Domestic Ships
Compared
Prescriptive Period:
Article 1144. The following actions must be brought within
ten years from the time the right of action accrues:

(1) Upon a written contract;

(2) Upon an obligation created by law;

(3) Upon a judgment.

Article 1145. The following actions must be commenced within
six years:

(1) Upon an oral contract;

(2) Upon a quasi-contract.

 Foreign and Domestic Ships
Compared
Stringent Provisions of the Civil Code on
Common Carriers:
SUBSECTION 2. Vigilance Over Goods
Article 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any
of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or

calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the

containers;

(5) Order or act of competent public authority.

 Foreign and Domestic Ships
Compared
Stringent Provisions of the
Civil Code on Common
Carriers:
Article 1735. In all cases other than those
mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding
article, if the goods are lost, destroyed or
deteriorated, common carriers are presumed to
have been at fault or to have acted negligently,
unless they prove that they observed extraordinary
diligence as required in article 1733.
 Foreign and Domestic Ships
Compared
Stringent Provisions of the Civil
Code on Common Carriers:
Article 1739. In order that the common carrier may be
exempted from responsibility, the natural disaster must
have been the proximate and only cause of the loss.
However, the common carrier must exercise due diligence
to prevent or minimize loss before, during and after the
occurrence of flood, storm or other natural disaster in
order that the common carrier may be exempted from
liability for the loss, destruction, or deterioration of the
goods. The same duty is incumbent upon the common
carrier in case of an act of the public enemy referred to in
article 1734, No. 2.
 Foreign and Domestic Ships
Compared
Stringent Provisions of the Civil Code on
Common Carriers:
Safety of Passengers
Article 1755. A common carrier is bound to carry the passengers
safely as far as human care and foresight can provide, using the
utmost diligence of very cautious persons, with a due regard for all
the circumstances.
Article 1756. In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755.
Article 1757. The responsibility of a common carrier for the safety of
passengers as required in articles 1733 and 1755 cannot be
dispensed with or lessened by stipulation, by the posting of notices,
by statements on tickets, or otherwise.
 Foreign and Domestic Ships
Compared
Stringent Provisions of the Civil Code
on Common Carriers:
Safety of Passengers
Article 1759. Common carriers are liable for the death of
or injuries to passengers through the negligence or wilful
acts of the former's employees, although such employees
may have acted beyond the scope of their authority or in
violation of the orders of the common carriers.

This liability of the common carriers does not cease upon

proof that they exercised all the diligence of a good father
of a family in the selection and supervision of their
employees.
 Foreign and Domestic Ships
Compared
Levelling the Playing Field Between
Domestic and Foreign Ships in the context of
Lifting Philippine Cabotage Laws by Allowing
Foreign Ships to Engage in Trade &
Commerce In Philippine Territorial Waters

How?
Subject foreign ships to the same tax
regime, government regulatory
restrictions, etc. as domestic ships;

Or,
Subject the domestic ships to the same tax
regime, government regulations, etc. as