Notes on Transportation

1 S.A. PANDITA NOTES ON TRANSPORTATION
TRANSPORTATION
Maritime Law – the system of laws which “particularly
relates to the affairs and business of the sea, to ships,
their crews and navigation, and to marine conveyance of
persons and property.”
Real and Hypothecary nature – the liability of the carrier
in connection with losses related to maritime contracts
is confined to the vessel, which is hypothecated for such
obligations or which stands as guaranty for their
settlement.
Limited Liability Rule: No vessel, no liability – the ship
owner’s or agent’s liability is merely co-extensive with his
interest in the vessel such that a total loss thereof results
in its extinction. The total destruction of the vessel
extinguishes maritime liens because there is no longer
any res to which it can attach.
Note: The ship agent shall also be civilly liable for
indemnities in favor of third persons but he may exempt
himself by abandoning the vessel with all her equipment
and the freight it may have earned during the voyage.
Coverage of limited liability:
1. Liability to third person;
2. Acts of captain; and
3. Collisions.
If the vessel is co-owned, the limited co-owned, the
limited liability to third persons shall be satisfied by the
co-owners.
Exceptions to limited liability:
1. Where the injury or death to a passenger is due either
to the fault of the shipowner, or the concurring
negligence of the shipowner and the captain;
2. Where the vessel is insured; and
3. Workmen’s compensation claims.
The total destruction of the vessel extinguishes a
maritime lien, as there is no longer any risk to which it
can attach, the total destruction of the vessel does not
affect the liability of the owner for repairs of the vessel
completed before its loss.

the goods it had on board in order to invoke the limited
doctrine.
Limited liability rule does not apply to insurance claims.
Abandonment of the vessel, its appurtenances and
freightage is an indispensable requirement before the
shipowner or ship agent can enjoy the benefits of the
limited liability principle. If the carrier does not want to
abandon the vessel, then he is still liable even beyond the
value of the vessel.
Protest – is the written statement by the master of the
vessel or any authorized officer, attested by proper
officer or a notary, to the effect that damages has been
suffered by the ship.
Requirements:
1. When the vessel makes an arrival under stress;
2. Where the vessel is shipwrecked;
3. Where the vessel has gone through a hurricane or the
captain believes that the cargo has suffered damages or
averages; and
4. Maritime collisions.
In collisions, maritime protest must be made within
24hrs after a collision and the circumstances of the
collision are declared or made known before a
competent authority at the point of accident or the first
port of arrival if in the Philippines or the Philippine consul
in a foreign country.
Admiralty of Jurisdiction - the jurisdiction of courts of
law over cases concerning ships.
RTC has jurisdiction in all actions in admiralty and
maritime jurisdiction where the demand or claim
exceeds 300,000 pesos 0r, in Metro Manila, where such
demand or claim exceeds 400,000 pesos. If the amount
is less than the jurisdictional amount in RTC, the
jurisdiction over admiralty and maritime lien cases are
with the Metropolitan Trial Courts, MTC or MCTC.
Test to determine whether a case comes within the
admiralty and maritime jurisdiction of a court:
1. Locational test

The limited liability rule applies if the captain or the crew
caused the damage or injury.

=> Maritime and admiralty jurisdiction, with a few
exceptions, is exercised only on contracts made upon the
sea and to be executed thereon.

The carrier or shipowner has the burden of showing that
it exercised extraordinary diligence in the transport of

2. Subject matter test

2 S.A. PANDITA NOTES ON TRANSPORTATION
=> The criterion in determining whether a contract is
maritime depends on the nature and subject matter of
the contract, having reference to maritime services and
transactions.

navigation shall or may be impeded or obstructed or
increase the level of pollution of such water

Penalty of forfeiture due to smuggling provided the
following conditions are present:

1. Cases of emergency imperiling life or property, or
unavoidable accident, collision or stranding or in any
cases which constitute danger to human life or property
or a real or property or a real threat to vessels, aircraft,
platforms, or other man-made structure, or if dumping
appears to be the only of averting the threat;

1. The vessel is “used unlawfully in the importation or
exportation of articles into or from” the Philippines;
2. The articles are imported to or exported from any “any
Philippines port or place, except a port of entry; or
3. If the vessel has a capacity of less than 30 tons and is
“used in the importation of articles into any Philippines
port or place other than a port of the Sulu Sea, where the
importation in such vessel may be authorized by the
Commissioner, with the approval of the department
head.”
Marine Pollution Decree of 1976 - it is hereby declared
a national policy to prevent and control the pollution of
seas by the dumping of waste and other matter which
create hazards to human health, harm living resources
and marine life, damage amenities, or interfere with the
legitimate uses of the seas within the territorial
jurisdiction of the Philippines.
Prohibited acts under the law:
1. Discharge, dump, or suffer, permit the discharge of oil,
noxious gaseous and liquid substances and other harmful
substances from or out of any ship, vessel, barge, or any
other floating craft, or other man-made structures at sea,
by any method, means or manner, into or upon the
territorial and inland navigable waters of the Philippines;
2. Throw, discharge or deposit, dump, or cause, suffer or
procure to be thrown, discharged, or deposited either
from or out of any ship, barge, or other floating craft or
vessel of any kind, or from the shore, wharf,
manufacturing establishment, or mill of any kind, any
refuse matter of any kind or description whatever other
than that flowing from streets and sewers and passing
therefrom in a liquid state into tributary of any navigable
water from which the same shall float or be washed into
such navigable water; and
3. Deposit or cause, suffer or procure to be deposited
material of any kind in any place on the bank of any
navigable water, or on the bank of any tributary of any
navigable water, where the same shall be liable to be
washed into such navigable water, either by ordinary or
high tides, or by storms or floods, or otherwise, whereby

Exceptions:

2. If there is probability that the damage consequent
upon such dumping will be less than would otherwise
occur; and
3. Except as otherwise permitted by regulations
prescribed by the National Pollution Control Commission
or the Philippine Coast Guard.
Discharge – includes, but is not limited to, any spilling,
leaking, pumping, pouring, emitting, emptying or
dumping but does not include discharge or effluent from
industrial or manufacturing establishments, or mill of any
kind.
Dumping – means any deliberate disposal at sea and into
navigable waters of wastes or other matter from vessels,
aircraft, platforms or other man-made structures at sea,
including the disposal of wastes or other matter directly
arising from or related to the exploration, exploitation
and associated off-shore processing of sea bed mineral
resources unless the same is permitted and/or regulated
under the decree.
Oil – any kind or in any form including but not limited to,
petroleum, fuel oil, sludge, oil refuse , and oil mixed with
wastes other than dredge spoil.
Navigable waters – the waters of the Philippines,
including the territorial sea and inland waters which are
presently, or be in the future susceptible for use by
watercraft.
Vessel – every description of watercraft, or other
artificial contrivance used, or capable of being used, as a
means of transportation on water.
Refuse – garbage, waste, wood residues, sand, lime
cinder ashes, offal, nightsoil, tar, dye stuffs, acids,
chemicals and substances other than sewage and
industrial wastes that may cause pollution.
Passengers – includes any person while embarking on,
on board, or disembarking the ship.

3 S.A. PANDITA NOTES ON TRANSPORTATION
Maritime accident – an event which involves a fire,
explosion, grounding, collision/contact/capsizing/tilting,
sinking and other similar occurrences resulting in death.

Types of acquisitive prescription:

Vessel or watercraft – any 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 a means of transportation operating either as a
common carrier, including fishing vessels, except:

2. Extra-ordinary

i.) those owned and/or operated by the Armed Forces of
the Philippines and by foreign governments for military
purposes; and

1. The person who claims ownership must be in
continuous possession;

ii.) banca, sailboats and other waterborne contrivance of
less than three gross tons capacity and not notarized.

3. Possession must be in good faith.

1. Ordinary

Ordinary prescription requires continuous possession in
good faith for three years. Extra-ordinary prescription,
possessor is in bad faith, is ten years.
Requisites for Ordinary Prescription:

2. Possession must be for a period of three years; and

1. Passenger Ship – I a ship which carries more than
twelve passengers.

Co-owner, lessee, usufructuary, trustee cannot be
possessors in good faith in they are in possession as such.
They recognize the ownership or right of another
person/s.

2. Cargo Ship – is any ship which is not a passenger ship.

Sale of a vessel includes:

3. Tanker – is a cargo ship constructed or adapted for the
carriage in bulk of liquid cargoes of an inflammable
nature.

The rigging, masts, stores and engine of a steamer which
at the time belongs to the vendor.

Kinds of Vessels:

4. Fishing Vessel – a vessel used for catching fish, whales,
seals, walrus or other living resources of the sea.
5. Nuclear Ship – a ship provided with a nuclear power
plant.
6. New Ship – a ship keel of which is laid or which is at a
similar stage of construction on or after the date of
coming into force of the SOLAS 1974.
7. Existing Ship – a ship which is not a new ship.
Gross Tonnage – the measure of the overall size of a ship.
Net Tonnage – the measure of the useful capacity of a
ship.
Vessels are considered personal property under the civil
law and common law, although occasionally referred to
as a peculiar kind of personal property.
Vessels may be acquired or transferred by any means
recognized by law. Thus, vessels may be sold, donated
and even be acquired through prescription.
The acquisition of a vessel must appear in a written
instrument, which shall not produce any effect with
respect to third persons if not inscribed in the registry of
vessels.

Nationality of Vessels – Vessels that are duly registered
in the Philippines are considered Philippine Flag vessels.
Flag of Convenience. UNCLOS provides that there must
be a genuine link between the state and the ship in order
to confer nationality over the ship. In the absence
thereof, it is reflected in either the absence of or minimal
regulation of the registered vessels by the country where
the vessels are registered. Philippines is not a “Flag of
Convenience country.”
Vessels are now registered in the Maritime Industry
Authority. It is presumed that the person who is
registered owner of the vessel is presumed to be the
owner of the vessel. The sale or transfer of the vessel is
not binding on third persons unless the same is
registered.
Domestic ownership – ownership vested in citizens of
the Philippines or corporations or associations organized
under the laws of the Philippines at least 60% of the
capital stock or capital of which is wholly owned by
citizens of the Philippines.
Homeport – the port where the vessel is registered or
enrolled provided, registration shall be effected at the
port
where
the
principal
office
of
the

4 S.A. PANDITA NOTES ON TRANSPORTATION
shipowner/operator is located and/or at the terminal
port of the vessel.
Domestic Trade – the carriage of passengers and/or
cargoes between two or more ports and places in the
Philippines by the use of vessel either as common or
contract carrier or for exclusive company/own use
including operations within bays and rivers and other
inland waterways.
Overseas Trade – The transport of goods and/or
passengers vessel operations outside of the Philippine
territorial waters, including those calls at Philippine ports
from the foreign ports and vice versa.
MARINA shall maintain a registry of vessels to be known
as “REGISTER OF PHILIPPINE VESSELS.” It shall be open
for inspection by the public. Separate registers shall be
maintained for overseas or domestic vessels.

law as security for a debt or claim subsisting from the
moment the debt arises with right to have the ship sold
and debt paid out of the proceeds.
Preferred claims. Preferred mortgage lien should have
priority over all claims against the vessel, except the
following claims:
1. Expenses and fees allowed and costs taxed by the
court and taxes due to the government;
2. Crew’s wages;
3. General Average;
4. Salvage; including contract salvage;
5. Maritime Liens arising prior in time to the recording of
the preferred mortgage;
6. Damages arising out of tort; and

Bareboat chartered ships may be registered in the
Philippines for international voyages.

7. Preferred mortgage registered prior in time.

Bareboat charter – a contract for the lease of a ship for
a stipulated period not less than 1 year, by virtue of
which the lessee has complete possession and control of
the ship including the obligation to appoint the Master
and the other crew of the ship for the duration of the
lease.

Executory Contract Doctrine. A lien does not attach for
breach of an executory contract even though the
contract is the type which normally gives rise to a lien.
Liability arises in admiralty for breach of contract but if
the parties have performed his obligation, his remedy
against the other is only for breach in an action in
personam.

Ship’s Manifest. Manifest is a declaration of the entire
cargo. It is to furnish custom officers with a list to check
against, to inform the revenue officers what goods are
being brought into a port of the country on a vessel.
Hence, Manifest is not required if the vessel carries with
it a bill of lading.

Waiver of Lien. Furnishers of repairs, supplies, towage,
use of dry dock or marine railway, or other necessaries,
or the mortgagee, are not prevented from waiving their
right to a lien, or in the case of a preferred mortgage lien,
to the preferred status of such lien, at any time by
agreement or otherwise.

Manifest shall be required for cargo and passengers
transported from one place or port in the Philippines to
another only when one or both of such places is a port of
entry. It is imposed on every vessel from a foreign port.

An action upon an obligation created by law must be
brought within 10 years from the time the right of action
accrues. Hence, enforcement of a maritime lien imposed
by special la prescribes in 10 years.

Ship’s log/logbook – the official record of a ship’s voyage
which its captain is obligated by law to keep wherein he
records the decisions he has adopted, a summary of the
performance of the vessel, and other daily events it is a
respectable record that can be relied upon when the
entries therein are presented in evidence.

Laches may also lie if there was unreasonable delay on
the part of claimant in asserting its rights.

A copy of an official entry in the logbook is legally binding
and serves as an exception to the hearsay rule.

1. The necessaries must have been furnished to and for
the benefit of the vessel;

Maritime lien – a privileged claim on a vessel for some
service rendered to it to facilitate its use in navigation. It
is a special property right in a ship given to a creditor by

2. The necessaries must have been necessary for the
continuation of the voyage of the vessel;

Maritime liens for necessaries. Requirements for a
maritime lien for necessaries which is enforceable by
suit in rem:

3. The credit must have been extended to the vessel;

5 S.A. PANDITA NOTES ON TRANSPORTATION
4. There must be necessity for the extension of the
credit; and
5. The necessaries must be ordered by persons
authorized to contract on behalf of the vessel.
The following persons shall be presumed to have
authority from the owner to procure repairs, supplies,
towage, use of dry dock or marine railway, and other
necessaries for the vessel:
1. The managing owner;
2. Ship’s Husband;
3. Master; or
4. Any person to whom the management of the vessel at
the port of supply is entrusted.
Maritime Tort – Civil wrongs committed on navigable
waters. As a general rule, any conduct which is tortuous
under the general law and which is connected with the
ship or its uses creates a maritime lien. It includes claims
and personal injury claims resulting from defective
appliances, improper construction or negligence of the
ship’s crew give rise to maritime lien.
Salvage lien. It may either be one arising ex contractu or
that imposed by Act No. 2616. Salvage is give preference
because of the benefit conferred in preserving the value
of the vessel and the cargo.
Subrogation. PNB vs. CA, a third person who satisfies the
obligation to an original maritime lienor ma claim from
the debtor because the third person is subrogated to the
rights of the maritime lienor over the vessel.
If the proceeds of the sale should not be sufficient to pay
all creditors included in one number or grade, the
residue shall be divided among them pro rata.
Who may constitute preferred ship mortgage?
Any citizen of the Philippines, or any association or
corporation organized under the laws of the
Philippines, at least 60% of the capital of which is
owned by citizens of the Philippines may freely
constitute a mortgage or any lien or encumbrance on his
or its vessels and its equipment with any bank or other
financial institutions, domestic or foreign.
Purpose: the loan secured by the ship mortgage must be
for purpose of financing the construction, acquisition,
purchase or initial operation of vessels. The purpose is
important in determining the presence of preference.

Formal Requirements: The ship mortgage must be
recorded or registered, otherwise the same is void
except as to the parties or their heir and assigns or
persons with actual notice.
Fleet Mortgage. There may be mortgage on two or more
vessels. The mortgage may provide for separate
discharge of each vessel by the payment of a portion of
mortgage indebtedness. The amount of such portion of
such payment shall be endorsed upon the documents of
the vessel.
Arrest and Foreclosure. Upon the default of the obligor,
the preferred ship mortgaged may be foreclosed in a suit
in admiralty. Upon filing of a petition for foreclosure, the
Court may order the arrest of the vessel upon ex-parte
application duly supported by an affidavit of a person
who knows the facts and upon filing of a bond.
Foreclosure is only an alternative remedy. The
mortgagee may likewise avail of the alternative remedy
of specific performance in a suit in personam in
admiralty.
The shipowner is the person who is primarily liable for
damages sustained in the operation of the vessel.
Naviero – indicates the person who is liable. It has been
construed to include the shipowner, ship agent and even
the charterer who is considered s owner pro hac vice.
Ship Agent – the person entrusted with the provisioning
of the vessel, or who represents her in the port in which
she happens to be. The ship agent is jointly and severally
liable with the owner.
Extent of Liability. The joint and several liability applies
to both for breach of contract and extra-contractual
obligation such as tort. Indeed, the ship owner, even
though he is not the owner, is liable in every way to the
creditor for losses and damages, without prejudice to his
right against the owner, the vessel and its equipment and
freight. The liability is subject to the limited liability rule.
The shipowner and ship agent are liable in certain cases
even if the captain has exceeded his authority if the
proceeds of an obligation redounded to the benefit of
the vessel.
Liability for extra-contractual obligations. Article 587
imposes obligation in favor of third persons directly on
the shipowner and ship agent. The owner and ship agent
are liable for the tortuous acts of his agent. The
shipowner and the ship agent, in turn, can make the

6 S.A. PANDITA NOTES ON TRANSPORTATION
captain liable for his negligence. This is based on the
contract of carriage.
If the cause of action is quasi-delict, there is vicarious
liability on the part of the shipowner.
Powers of Ship Agent:
1. Can enter into contracts to provision the ship;
2. He can purchase necessary supplies and fuel that are
necessary for a particular voyage.
3. Representation of the vessel includes the right to
represent the vessel in any action in a court or tribunal.
Captain – those who govern vessels that navigate the
high seas or ships of large dimensions and importance,
although they are engaged in the coastwise trade.
Masters – those who command smaller ships engaged
exclusively in the coastwise trade.
Qualifications of captains, masters or patrons:
1. Must be a Filipino;
2. Have the legal capacity to contract in accordance with
this code;
3. Prove the skill, capacity, and qualifications necessary
to command and direct the vessel. As established by
marine or navigation laws, ordinances or regulations;
and
4. Must not be disqualified according to the same for the
discharge of the duties of the position.
3 distinct roles of the Captain:
1. He is a general agent of the shipowner;
2. He is also the commander and technical director of the
vessel; and
3. He is a representative of the country under whose flag
he navigates.
Powers of the Captain or Master or Patron of a vessel:
1. To appoint or make contracts with the crew in the
absence of the ship agent, and to propose said crew,
should said agent be present; but the ship agent may not
employ any member against the captain’s express
refusal;
2. To command the crew and direct the vessel to the port
of its destination, in accordance with the instructions he
may have received from the ship agent;

3. To impose, in accordance with the contracts and with
the laws and regulations of the merchant marine, and
when on board the vessel, correctional punishment upon
those who fail to comply with his orders or are wanting
in discipline, holding a preliminary hearing on the crimes
committed on board the vessel on the seas, which crimes
shall be turned over to the authorities having jurisdiction
over the same at the first port touched;
4. To make contracts for the charter of the vessel in the
absence of the ship agent or of its consignee, acting in
accordance with the instructions received and protecting
the interest of the owner with utmost care;
5. To adopt all proper measures to keep the vessel well
supplied and equipped, purchasing all that may be
necessary for the purpose, provided there is no time to
request instruction from the ship agent;
6. To order, in similar urgent cases while on a voyage, the
repairs on the hull and engines of the vessel and in its
rigging and equipment, which are absolutely necessary
to enable it to continue and finish its voyage; but if he
should arrive at a point where there is a consignee of the
vessel, he shall act in concurrence with the latter.
To comply with his obligation, how may the captain
raise funds?
1. By requesting said funds from the consignee of the
vessel or correspondents of the ship agent;
2. By applying to the consignees of the cargo or to those
interested therein;
3. By drawing on the ship agent;
4. By borrowing the amount required by means of a loan
on bottomry;
5. By selling a sufficient amount of cargo to cover the sum
absolutely indispensable for the repair of the vessel and
to enable it to continue its voyage.
Obligations which are inherent in the office of the
captain:
1. To have board before starting on a voyage a detailed
inventory of the hull, engines, rigging, spare-masts,
tackle, and other equipment of the vessel; the royal or
the navigation certificate; the roll of the persons who
make up the crew of the vessel, and the contracts
entered into with them; the lists of passengers; the bill
of health; the certificate of the registry proving the
ownership of the vessel and all the obligations which
encumber the same up to that date; the charter parties

7 S.A. PANDITA NOTES ON TRANSPORTATION
or authenticated copies thereof; the invoices or manifest
of the cargo, and the memorandum of the visit or
inspection by experts, should it have been made at the
port of departure.
2. To have a copy of this code on board;
3. To have three folioed and stamped books, placing at
the beginning of each one memorandum of the number
of folios it contains, signed by the maritime authority,
and in his absence by the competent authority.
4. Before receiving cargo, to make with the officers of the
crew and to experts; if required by the shippers and
passengers, an examination of the vessel, in order to
ascertain whether it is water-tight, with the rigging and
the engines in good condition, and with the equipment
required for good navigation, preserving under his
responsibility a certificate of the memorandum of his
inspection, signed by all those who may have taken apart
therein;

duties. He shall not spend the night away from the vessel
except for serious causes or by reason of official
business;
8. To represent himself, when making a port in distress,
to the marine authority if in the Philippines and to the
consul of the Republic of the Philippines if in a foreign
country, before 24 hours have elapsed, and to make a
statement of the name registry, and port of departure of
the vessel, of its cargo, and the cause of arrival which
declaration shall be visaed by the authority or the consul,
if after examining the same it is found to be acceptable,
giving the captain the proper certificate proving his
arrival in distress and the reasons therefor. In the
absence of the maritime authority or of the consul, the
declaration must be made before the local authority;
9. To take the necessary steps before the competent
authority in order to record in the certificate of the vessel
in the registry of vessels the obligations which he may
contract in accordance with Article 583;

The experts shall be appointed, one by the captain of the
vessel and another by those who request its
examination, and in case of disagreement a third shall be
appointed by the marine authority of the port or by the
authority, exercising his authority;

10. To place under good care and custody all the papers
and belongings of any members of the crew who might
die on the vessel, drawing up a detailed inventory, in the
presence of passengers, or, in their absence, of the
members of the crew as witnesses;

5. To remain constantly on board the vessel with the
crew while the cargo is being taken on board and to
carefully watch the stowage thereof; not to consent to
the loading of any merchandise or matter of a dangerous
character, such as inflammable or explosive substances,
without the precautions which are recommended for
their packing, handling and isolation; not to permit the
carriage on deck of any cargo which by reason of its
arrangement, volume, or weight makes the work of the
sailors difficult, and which might endanger the safety of
the vessel; and if, on account of the nature of the
merchandise, the special character of the shipment, and
principally the favorable season in which it is undertaken,
merchandise may be carried on deck, he must hear the
opinion of the officers of the vessel and have the consent
of the shippers and of the ship agent;

11. To conduct himself according to the rules and
percepts contained in the instructions of the ship agent,
being liable for all that which he may do in violation
thereof;

6. To demand a pilot at the expense of the vessel
whenever required by the navigation, and principally
when he has enter the port, canal, or river, or has to take
the roadstead or anchoring place with which neither he
nor the officers and crew are acquainted;

14. To remain on board, in case the vessel is in danger,
until all hope to save it is lost, and before abandoning it,
to hear the officers of the crew, abiding by the decision
of the majority; and if the boats are to be taken to, he
shall take with him, before anything else, the books and
papers, and then the articles of the most value, being
obliged to prove, in case of the loss of the books and
papers, that he did all he could to save them;

7. To be on deck on reaching land and to take command
on entering and leaving ports, canals, roadsteads, or
rivers, unless there is a pilot on board discharging his

12. To inform the ship agent from the port at which the
vessel arrives, of the reason of his arrival, taking
advantage of the semaphore, telegraph, mail, etc., as the
case may be; to notify him of the cargo he may have
received, stating the names and domiciles of the
shippers, freightage earned, and amounts borrowed on
the bottomry loan; to advise him of his departure, and of
any operation and date which may be of interest to him;
13. To observe the rules with respect to situation, lights
and maneuvers in order to avoid collisions;

8 S.A. PANDITA NOTES ON TRANSPORTATION
15. In case of wreck, to make the proper protest in due
form at the first port of arrival, before the competent
authority or the Philippine consul, within 24 hours,
specifying therein all the incidents of the wreck, in
accordance with subdivision 8 of this article; and
16. To comply with the obligations imposed by the laws
and regulations on navigation, customs, health, and
others.
The kinds of books which must be carried by the captain
on board the vessel:
1. In the first book, which shall called “logbook,” he shall
enter day by day the condition of the atmosphere, the
prevailing winds, the courses taken, the rigging carried,
the power of the engines used in navigation, the
distances covered, the maneuvers executed, and other
incidents of navigation; he shall also enter the damage
suffered by the vessel in her hull, engines, rigging, and
tackle, no matter what its cause may be, as well as the
impairment and damage suffered by cargo, and the
effect and importance of the jettison, should there be
any; and in cases of serious decisions which require the
advice or a meeting of the officers of the vessel, or even
of the crew and passengers, he shall record the decisions
adopted. For the information indicated he shall make use
of the binnacle book and of the steam of engine book
kept by the engineer;
2. In the second book called the “accounting book,” he
shall record all the amounts collected and paid for the
account of the vessel, entering specifically article by
article, the source of the collection and the amounts
spent for provisions, repairs, acquisitions of equipment
or goods, fuel, food, outfits, wages and other expenses
of whatever nature they may be. He shall furthermore
enter therein a list of all the members of the crew, stating
their domiciles, their wages and salaries, and the
amounts they may have received on account, directly or
by delivery to their families; and
3. In the third book, called “freight book,” he shall record
the loading and discharge of all the goods, stating their
marks and packages, names of the shippers, and the
freightage they give. In this same book he shall record
the names and place of sailing of the passengers, the
number of packages in their baggage, and the price of
passage.
Liability of Captains and Masters. The captain shall be
civilly liable to the ship agent, and the latter to third
persons who have made contracts with the former;

1. For all the damages suffered by the vessel and its cargo
by reason of want of skill or negligence on his part. If the
misdemeanor or crime has been committed, he shall be
liable in accordance with the Penal Code;
2. For all the thefts committed by the crew, reserving his
right of action against the guilty parties;
3. For the losses, fines, and confiscations imposed an
account of violation of customs, police, health, and
navigation laws and regulations.
4. For the losses and damages caused by mutinies on
board the vessel or by reason of faults committed by
crew in the service and defense of the same, if he does
not prove that he made timely use of all his authority to
prevent or avoid them;
5. For those caused by the misuse of the powers and nonfulfillment of the obligations pertaining to him in
accordance with Articles 610 and 612;
6. For those arising by reason of his going out of his
course or taking a course which he should not have taken
without sufficient cause, in the opinion of the officers of
the vessel, at a meeting with the shippers or
supercargoes who may be on board;
No exceptions whatsoever shall exempt him from this
obligation
7. For those arising by reason of his voluntarily entering
a port other than that of his destination, outside of the
cases or without the formalities referred to in Article
612;
8. For those arising by reason of the non-observance of
the provisions contained in the regulations on situation
of lights and maneuvers for the purpose of preventing
collisions.
Pilot – is a person duly qualified, and licensed, to conduct
a vessel into or out of ports, or in certain waters. It
includes: 1.) those whose duty it is to guide vessels into
or out of ports, or in particular waters, and 2.) those
entrusted with the navigation of vessels in high seas.
Generally, a person taken on board at a particular place
for the purpose of conducting a ship through a river, road
or channel, or from a port.
Compulsory pilotage – States possessing harbors have
enacted laws or promulgated rules requiring vessels
approaching their ports to take on board pilots licensed
under the local law.

9 S.A. PANDITA NOTES ON TRANSPORTATION
Duties and responsibilities of Pilot and Pilots’
Association:
1. Pilot shall be held responsible for the direction of a
vessel from the time he assumes his work as a pilot
thereof until he leaves it anchored or berthed safely, free
from the shoal; provided, that his responsibility shall
cease at the moment the master neglects or refuses to
carry out his instructions; and
The pilot supersede the master for the time being in the
command and navigation of the ship, and his orders must
be obeyed in all matters connected with her navigation.
He becomes the master pro hac vice and should give all
directions as to speed, course, stopping, and reversing,
anchoring, towing and the like. And when a licensed pilot
is employed in a place where pilotage is compulsory, it is
his duty to insist on having effective control of the vessel,
or to decline to act as pilot.
A pilot is personally liable for damages caused by his own
negligence or default to the owners of the vessel, and to
third parties for damages sustained in a collision. Such
negligence of the pilot in the performance of duty
constitutes a maritime tort.
Note: The fact that the pilot is a member of an
association does not make the association jointly and
severally liable. Article 2180 of the CC does not apply
because there is no employer-employee relationship.
The Code of Commerce provides that:
The complement of a vessel shall be understood as all
persons on board, from the captain to the cabin boy,
necessary for the management, maneuvers, and service.
The complement shall include the crew, the sailing
mates, engineers, stokers and other employees on board
not having specific designations BUT it shall not include
the passengers or the persons whom the vessel is
transporting.
Minimum safe manning. It is not enough that the
officers manning the merchant vessel have all the
qualifications imposed by the Philippine Merchant
Marine Officers Act and other special laws or regulations.
It is also required that there is sufficient number of
officers and crew that are serving in the vessel.
Other Officers and crew under the Code of Commerce:
1. Sailing Mate or Chief Mate;
2. Second Mate;
3. Marine Engineer;

4. Crew; and
5. Supercargoes.
Chief Mate or Sailing Mate – The second chief of the
vessel. The second in command, next only to the captain
of the vessel.
What are the requisites to be a sailing mate?
1. To have the qualifications required by the marine or
navigation laws or regulations; and
2. Not to be disqualified in accordance therewith for the
discharge of his duties.
What are the duties of a Sailing Mate?
1. To watch over the preservation of the hull and rigging
of the vessel, and to take charge of the preservation of
the tackle and equipment which make up her outfit,
suggesting to the captain the repairs necessary and the
replacement of the goods and implements which are
rendered useless and are lost;
2. To take care that cargo is well-arranged, keeping the
vessel always ready for maneuver.
3. To preserve order, discipline, and good service among
the crew, requesting the necessary orders and
instructions of the captain, and giving him prompt
information of any occurrence which the intervention of
his authority may be necessary;
4. To assign to each sailor the work he is to do on board,
in accordance with the instruction received and to see
that it is promptly and accurately carried out; and
5. To take charge under inventory of the rigging and all
the equipment of the vessel, if it should be laid up, unless
the ship agent has ordered otherwise.
Supercargoes - shall discharge on board the vessel the
administrative duties which the ship agent or the
shippers may have assigned to them; they shall keep an
account and record of their transactions in a book which
shall have the same conditions and requisites as required
for the accounting book of the captain, and they shall
respect the latter in his capacity as chief of the vessel.
The powers and responsibilities of the captain shall
cease, when there is a supercargo, with regard to that
part of the administration legitimately conferred upon
the latter, but shall continue in force for all acts which
are inseparable from his authority and office.

10 S.A. PANDITA NOTES ON TRANSPORTATION
Supercargoes may not, without special authorization or
agreement, make any transaction for their own account
during the voyage, with the exception of the ventures
which, in accordance with the custom of the port of
destination, they are permitted to do.
Neither shall they be permitted to invest in the return
trip more than the profits from the ventures, unless
there is an express authorization from the principals.
Charter Party – a contract whereby an entire ship, or
some principal part of the said ship, is let by the owner
thereof to a merchant or the person for a specified time
or the use for the conveyance of goods, in consideration
of the payment of freight.

*Charterer may subcharter the entire vessel to a third
person but only in the event that there is no prohibition
in the original charter regarding any subcharter.
*Part Owners of the vessel are not precluded from
chartering the same for their own commercial purposes.
*Ship Agent is not allowed to make contracts for a new
charter unless he is properly or duly authorized by the
owner, or by virtue if an authority given by a resolution
of the majority of the co-owners.

1. Bareboat or Demise Charter; and

*Captain or Master, it is one of his inherent powers of
the captain or master of the vessel to enter into valid and
binding charter parties, but only in the event of absence
of the ship agent or consignee, and only if the said
captain or master acts in accordance with the
instructions of the agent or owner and protects the
latter’s interest.

2. Contract of Affreightment;

Requisites of a valid charter party:

Kinds of Charter Parties:

a.) Time Charter; and

1. Consent of the contracting parties;

b.) Voyage Charter.

2. An existing vessel which should be placed at the
disposition of the shipper;

Bareboat Charter or Demise, the shipowner leases to the
charterer the whole vessel, transferring to the latter the
entire command, possession and consequent control
over the vessel’s navigation, including the master and
the crew, who thereby become the charterer’s servants.
In a time charter, the vessel is leased to the charterer for
a fixed period of time, whereas in a voyage charter is
leased for a single or particular voyage. In both the time
and voyage charters, which are said to be contracts of
affreightment, the charterer hires the vessel only, either
for a determinate period of time or for a single or
consecutive voyage, with the shipowner providing for
the provisions of the ship, the wages of the master and
crew, and the expenses for the maintenance of the
vessel.
What is the effect of charter on character of carrier?
Generally, the character of the common carrier as is not
affected by the charter party if the same is a contract of
affreightment.
Who may make charter?
The owner or owners of the vessel, either in whole or in
majority part, who have legal control and possession of
the vessel, may validly enter into charter parties with a
charterer. A third person called a broker may intervene
in the execution of the charter between the principals.

3. Freight; and
4. Compliance with the formal requirements prescribed
under Art. 652 of the Code of Commerce which include
the requirement that the charter party must be 1.) in
writing, 2.) drawn in duplicate and 3. ) signed by the
parties.
Primage – referred to in paragraph 9 refers to payment
for the use of the equipment belonging to the captain.
Port of Unloading. The port of destination where the
cargoes will be unloaded must be stipulated in the
Charter Party. However, the parties may also provide
that the charterer is given the option of discharge at one
or more ports within a geographic range.
Demurrage – a sum of money due by express contract
for the detention of the vessel in loading or unloading,
beyond the time allowed for that purpose in the charter
party.
Lay Days – The period stipulated for loading and
unloading.
Computation of lay days. The stipulated lay days do not
begin to run against the consignee until the vessel has
arrived at berth or other usual and customary place for

11 S.A. PANDITA NOTES ON TRANSPORTATION
loading or unloading, and is in actual readiness to
discharge its cargo in accordance with its legal obligation.
If no lay day is provided for in the charter party, it is
understood that the charterer will unload and discharge
the cargoes within a reasonable time or with reasonable
diligence.
Deadfreight – where the charterer failed to occupy the
leased portion of the vessel, he may thereby be made
liable by the shipowner for the deadfreight that
occurred.
Effect of bill of lading. If a bill of lading was issued by the
shipowner to the charterer, the charter party still
governs their rights and the bill of lading may be used as
proof of receipt of the goods. As between the parties, the
bill of lading is still a proof of receipt of the goods but the
terms and conditions of the contract are in the charter
party.
Bottomry – is a contract whereby the owner of a ship
borrows for the use equipment or repair of the vessel,
for a definite term, and pledges the ship as security, with
the stipulation that if the ship is lost during the voyage or
during the limited time on account of the perils
enumerated, the lender shall lose his money.
Respondentia – where the goods, or some part thereof,
are hypothecated as security for a loan, the repayment
of which is dependent upon maritime risks.
Distinguish Bottomry or Respondentia from Simple loan
Bottomry or Respondentia
1. The rate of interest is
not subject to the Usury
Law on account of the
extraordinary
risks
involved
2. There must be a marine
risk, the existence of which
must be duly established
3. It must be executed in
accordance with form and
manner required in the
Code of Commerce
4. It must be recorded in
the registry of vessels in
order to bind third persons
5. Preference is extended
to the last lender if there
be several lenders, on the
theory that were it not for

Simple loan
1. The rate of interest
must not exceed the
ceiling fixed by the Usury
Law
2. there need not be
such risks involved
3. The formal requisites
regarding contracts in
general would apply

the last lender, then prior
lenders would not have
been benefited from the
preservation
of
the
security
When simple loan applies?
If the lender should prove that he loaned an amount
which is larger than the value of the object liable for the
bottomry loan due to fraudulent means employed by the
borrower, the loan shall be valid only for the amount at
which the object is appraised by experts, and the surplus
principal shall be repaid as if it were a simple loan, with
legal interest thereon.
Who has the authority to constitute loan on bottomry?
The shipowner may secure a loan on bottomry upon his
ship, although in the case where he is only a part owner,
any bottomry that he may contract shall be limited only
to the extent of his interest in the vessel.
Who has the authority to constitute loan on
respondentia?
The cargo owner shall have the right to enter into a loan
on respondentia involving his cargo. The captain may not
contract a loan on respondentia, if he does, such a loan
would be void and the principal interest, and costs of the
contract shall be chargeable to his private account, and
he may be discharged altogether as ship captain by the
shipowner.
Form or the loans on bottomry and respondentia:
1. By means of a public instrument;
2. By means of a policy signed by the contracting parties
and the broker taking part therein; and
3. By means of a private instrument.
The loans may be constituted jointly or separately:
1. On the hull of the vessel;
2. On the rigging;

4. No such registration is
required

3. On the equipment, provisions, and fuel;

5. The first lender, as a
general rule, enjoys
preference
over
subsequent ones

5. On the merchandise loaded.

4. On the engine, if the vessel is a steamer; and

Averages in General:

12 S.A. PANDITA NOTES ON TRANSPORTATION
1. All extraordinary or accidental expenses which may be
incurred during the voyage in order to preserve the
vessel, the cargo, or both.

Deliberate Sacrifice – There must be voluntary sacrifice
of a part for the benefit of the whole in order to justify
general average contribution.

2. Any damage or deteriorations which the vessel may
suffer from the time it puts to sea from the port of
departure until it casts anchor in the port of destination,
and those suffered by the merchandise from the time
they are loaded in the port of shipment until they are
unloaded in the port of their consignment.

Successful sacrifice. No general contribution can be
demanded if the vessel and other cargo that are sought
to be saved were in fact not saved.

Classification of Averages:
1. General or Gross Average; and
2. Simple or Particular average.
Simple Average – it shall include all the expenses and
damages caused to the vessel or to her cargo which have
not inured to the common benefit and profit of all
persons interested in the vessel and her cargo. If the
damage caused is not a general average, the same can be
considered particular average.

Art. 860. If, notwithstanding of merchandise, breakage
of masts, ropes and equipment, the vessel shall be lost
running the same risk, no contribution whatsoever by
jettison of gross average shall be proper.
The owners of the goods saved shall not be liable for the
indemnification of those jettisoned, lost, or damaged.
The proper steps and authority for making the sacrifice:
In order to incur the expenses and cause the damages
corresponding to gross average,
1. There must be a resolution of the captain;

Who shall borne the damages?

2. Adopted after deliberation with the sailing mate and
other officers of the vessel; and

The owner of the goods that suffered the damage bears
the loss.

3. After hearing the persons interested in the cargo who
may be present.

General Average – It shall include all the damages and
expenses which are deliberately caused in order to save
the vessel, its cargo or both at the same time, from real
and known risk.
Requisites of General Average:
1. There must be a common danger;
2. That for the common safety part of the vessel or the
cargo or both is sacrificed deliberately;
3. That from the expenses or damages caused follows the
successful saving of the vessel and cargo; and
4. That the expenses or damage should have been
incurred or inflicted after taking proper legal steps and
authority.
Common Danger – both the ship and the cargo, after has
been loaded, are subject to the same danger, whether
during the voyage, or in the port of loading or unloading;
that the danger arises from the accidents of the sea,
dispositions of the authority, or faults of men, provided
that the circumstances producing the peril should be
ascertained and imminent or may rationally be said to be
certain and imminent.

If there is an objection, the captain should consider
certain measures necessary, they may be executed
under his responsibility, without prejudice to the rights
of the shippers to proceed against the captain before the
competent judge or court, if they can prove that he acted
with malice, lack of skill, or negligence.
If the persons interested in the cargo, being on board the
vessel, have not been heard, they shall not contribute to
the gross average, their share being chargeable against
the captain, unless the urgency of the case should be
such that the time necessary for previous deliberations
was wanting.
The order in case the captain shall direct the jettison
and shall order the goods cast overboard:
1. Those which are on deck, beginning with those which
embarrass the maneuver or damage of the vessel,
preferring, if possible, the heaviest ones with the least
utility and value; and
2. Those which are below the upper deck, always
beginning with those of the greatest weight and smallest
value, to the amount and number absolutely
indispensable.
Who bears general average?

13 S.A. PANDITA NOTES ON TRANSPORTATION
The gross or general average shall be borne by those who
benefited from the sacrifice. Contribution may also be
imposed on the insurers of the vessel or cargoes that
were saved as well as lenders on bottomry or
respondentia.
Insurers. Insurers of the vessel, of the freightage and of
the cargo shall be obliged to pay for the indemnification
of the gross average, insofar as is required of each one of
the object. Insurer is also liable for any general average
in the proportion to the contribution attaching to his
policy value where said value is less than the contributing
value of the thing insured.
Lenders on bottomry and respondentia shall suffer, in
proportion to their respective interest, the general
average which may take place in the goods on which the
loan is made.
Who is entitled to indemnity?
The owner of the goods which were sacrificed is entitled
to receive the general average contribution.
However, the following goods, even if sacrificed, are
not covered:
1. Goods carried on deck, unless the rule, special law or
customs of the place allow the same;
2. Goods that are not recorded in the books or records of
the vessel; and
3. Fuel for the vessel if there is more than sufficient for
the voyage.
What is the effect of negligence of the common carrier?
Common carriers cannot limit their liability for injury or
loss of goods when such injury or loss was caused by its
own negligence.
Apportionment. After the amount of the gross average
has been determined in accordance with the provisions
of the code, it shall be distributed pro rata among the
goods which are to cover- the same.
Art. 846. Those interested in the proof and liquidation
of averages may mutually agree and bind themselves at
any time with regard to the liability, liquidation, and
payment thereof.
In the absence of agreements, the followings
rules shall apply:

1. The proof of the average shall take place in the port
where the repairs are made, should any be necessary, or
in the port of unloading;
2. The liquidation shall be made in the port of unloading,
if it is a Philippine port;
3. If the average occurred outside the jurisdictional
waters of the Philippines, or the cargo has been sold in a
foreign port by reason of an arrival under stress, the
liquidation shall be made in the port of arrival; and
4. If the average has occurred near the port of
destination, so that said port can be made, the
proceedings mentioned in Rules 1 and 2 shall be held
there.
Collision – an impact or sudden contact of a moving body
with an obstruction in its line of motion, whether both
bodies are in motion or one stationary and the other, no
matter which, in motion. Strictly speaking, it refers to the
contact of two moving vessels.
3 divisions of zones in collision:
1. Covers all the time up to the moment when the risk
of collision may be said to have began. Within this zone,
no rule is applicable because none is necessary. Each
vessel is free to direct its course as it deems best without
reference to the movements of the other vessel;
2. Covers the time between the moment when the risk
of collision begins and the moment when it has become
a practical certainty;
3. Covers the time of actual collision.
What is Error in Extremis?
The third zone covers the period in which errors in
extremis occur; and the rule is that the vessel which has
forced the privileged vessel into danger is responsible
even if the privileged vessel has committed an error
within that zone.
Thus, it is during the time when the vessel was passing
through the third zone that it changed its course to port
in order to avoid, if possible, the collision, the act may be
said to have been done in extremis, and, even if wrong,
the sailing vessel is not responsible for the result.
COLREGS. The existing international agreement with
respect to collision in high seas. It is the International
Regulations for Preventing Collisions at Sea which was
formulated by the International Maritime Organizations.

14 S.A. PANDITA NOTES ON TRANSPORTATION
What is the rule on liability with respect to collision?
Collision is not governed by quasi-delict. Liability in
collision cases are still negligence based. In other words,
courts are still called upon to determine the negligence
of the persons involved in order to impose liability.
The rule on contributory negligence and the doctrine of
last clear chance is not applicable in collision cases. Each
must suffer its own damage if both of them are negligent.
Specific rules under the Code of Commerce:
1. One Vessel at Fault. If a vessel should collide with
another through or the fault, negligence, or lack of skill
of the captain, sailing mate, or any other member of the
complement, the owner of the vessel at fault shall
indemnify the losses and damages suffered, after an
expert appraisal.
2. Both Vessel at Fault. If the collision is imputable to
both vessels, each one shall suffer its own damages, and
both shall be solidarily responsible for the losses and
damages occasioned to their cargoes.
3. Party at Fault cannot be determined (Inscrutable
Fault). Each party shall also bear his own damage in cases
in which it cannot be determined which of the two
vessels has caused the collision. They are also solidarily
responsible for the losses and damages occasioned to
their cargoes.
4. Cause is Fortuitous Event. If a vessel should collide
with another, through fortuitous event or force majeure,
each vessel and its cargo shall bear its own damages.
5. Third Person at Fault. If a vessel should be forced by a
third vessel to collide with another, the owner of the
third vessel shall indemnify the losses and damages
caused, the captain thereof being civilly liable to said
owner.
What happens if the vessel sinks on the way to port?
A vessel, upon being run into, sinks immediately, as well
as that which, having been obliged to make a port to
repair the damages caused by collision, is lost during the
voyage or is obliged to be stranded in order to be saved,
shall be presumed as lost by reason of collision.

have the right to be indemnified by the pilots, without
prejudice to the criminal liability which the latter may
incur.
What is the extent of liability when the value of the ship
and its appurtenances should not be sufficient to cover
all liabilities?
When the value of the ship and its appurtenances should
not be sufficient to cover all liabilities, the indemnity due
by reason of death or injury of persons shall have
preference.
Note: The passenger can file 3 cases at once but cannot
ask for damages in 3 cases, only 1.
What is the rule if the collision happened in foreign
waters?
If the collision should take place between Philippines
vessels in foreign waters, or if having taken place in the
open seas, and the vessels should make a foreign port,
the Consul of the Republic of the Philippines in said port
shall hold a summary investigation of the accident,
forwarding the proceedings to the Secretary of the
Department of Foreign Affairs for continuation and
conclusion.
Protest. Collision is one of the cases when protest is
necessary.
The action for the recovery of losses and damages arising
from the collisions cannot be admitted if a protest or
declaration is not presented within 24 hours before the
competent authority of the point where the collision
took place, or that of the first port of arrival of the vessel,
if in the Philippine territory, and to the Consul of the
Republic of the Philippines if it occurred in a foreign
country.
With respect to damages caused to persons or to cargo,
the absence of protest may not prejudice the persons
interested who were not on board or were not in a
condition to make known their wishes.
Note: Protest does not apply to small boat engaged in
river and bay traffic and inland navigation.
What are the instances when protest is mandatory?

What is the rule if there is presence of pilots on board?

Requirement of protest applies to:

Art. 834. If the vessels colliding with each other should
have pilots on board discharging their duties at the time
of the collision, their presence shall not exempt the
captains from the liabilities they incur, but the latter shall

1. All persons engaged in traffic upon the waters of the
Philippines; and

15 S.A. PANDITA NOTES ON TRANSPORTATION
2. That the defendant has as much right to insist upon
compliance with this provision of the code where the
damages were done to a boat operated by the
Government as if such boat had been operated by a
private individual or company.
Does the limited liability rule apply in collision cases?
Yes. The real and hypothecary nature of maritime law
limits the liability of the shipowner and ship agent to the
value of the vessel in collision cases.
Arrival under stress – It is the arrival of a vessel at the
nearest and most convenient port which was decided
upon after determining that there is well-founded fear of
seizure, privateers, or pirates or by reason of any
accident of the sea disabling it to navigate.
What are the steps to be taken in the determination of
the propriety of an arrival under stress (When is arrival
under stress proper)?
1. The captain should determine during the voyage if
there is well founded fear of seizure, privateers and
other valid grounds;
2. The captain shall then assemble the officers;
3. The captain shall summon the persons interested in
the cargo who may be present and who may attend but
without right to vote;
4. The officers shall determine and agree if there is well
founded reason after examining the circumstances. The
captain shall have the deciding vote;
5. The agreement shall be drafted and the proper
minutes shall be signed and entered in the log book; and
6. Objections and protest shall likewise be entered in the
minutes.
Note: The lawfulness of the arrival under stress
determines if damages will be shouldered by the
shipowner and ship agent.
When is arrival under stress improper?
1. If the lack of provision should arise from the failure to
take the necessary provisions for the voyage according
to usage and customs, or if they should have been
rendered useless or lost through bad stowage or
negligence in their care;
2. If the risk of enemies, privateers, or pirates should not
have been well-known, manifest, and based on positive
and provable facts.

3. If the defect of the vessel should have arisen from the
fact that it was not repaired, rigged, equipped, and
prepared in a manner suitable for the voyage, or from
some erroneous order of the captain; and
4. When malice, negligence, want of foresight, or lack of
skill on the part of the captain exist in the act causing
damage.
Who shall be liable for the expenses?
If the arrival under stress is proper, the shipowner and
the ship agent will only be liable for the expenses for the
same arrival. On the other hand, the shipowner and the
ship agent will be liable for the same expenses and, in
addition, they shall be solidarily liable for damages
caused to the cargoes by such arrival under stress.
What are the rules when there in unloading of cargoes
to make repairs?
If in order to make repairs to the vessel or because there
is danger that the cargo may suffer damage, it should be
necessary to unload, the captain must:
1. Request authorization from the competent judge or
court for the removal, and carry it out with the
knowledge of the person interested in the cargo, or his
representative, should there be any. The expenses shall
be for the account of the ship agent or owner;
2. In a foreign port, it shall be the duty of the Philippine
Consul, where there is one, to give the authorization.
They shall be chargeable against the owners of the
merchandise for whose benefit the act was performed.
If the unloading should take place for both reasons, the
expenses shall be divided proportionately between the
value of the vessel and that of the cargo.
Who shall take custody of the cargo?
The custody and preservation of the cargo which has
been unloaded shall be entrusted to the captain, who
shall be responsible for the same, except in cases of force
majeure.
What is the liability of the captain?
The captain shall be responsible for the damages caused
by his delay, if after the cause of the arrival under stress
has ceased, he should not continue the voyage.
If the cause of arrival should have been the fear of
enemies, privateers, or pirates, a deliberation and
resolution in a meeting of the officers of the vessel and

16 S.A. PANDITA NOTES ON TRANSPORTATION
person interested in the cargo who may be present, in
accordance with the provisions contained in Article 819,
shall precede the departure.
Shipwreck – the demolition or shattering of a vessel
caused by her driving ashore or on rocks and shoals in
the midseas, or by the violence of winds and waves in
tempests.
Salvage – a service which one person renders to the
owner of a ship or goods, by his own labor, preserving
the goods or the ship which the owner or those
entrusted with the care of them have either abandoned
in distress at sea, or are unable to protect and secure.
Kinds of Salvage Services:
1. Voluntary, wherein the compensation is dependent
upon success;
2. Rendered under a contract for a per diem or per
horam wage, payable at all events; and
3. Under a contract payable only in cases of success.
What is the rule when other persons saved the vessel or
its cargo?
When in case of shipwreck, the vessel or its cargo shall
be beyond the control of the crew, or shall have been
abandoned by them, and picked up and conveyed to a
safe place by other persons, the latter shall be entitled to
a reward for the salvage. Other person who assist in
saving the vessel or its cargo from the shipwreck shall be
entitled to a similar reward.
Elements in order for a salvage claim to be valid:
1. There must be a marine peril;
2. The service is voluntarily rendered and is not required
as an existing duty or from a special contract;
3. There must be success in whole or in part or that the
service rendered contributed to such success; and
4. The vessel is shipwrecked beyond the control of the
crew or shall have been abandoned.

3. He who shall have failed to comply with the provisions
of section 3.
Derelict – a ship or her cargo which is abandoned and
deserted at sea by those who were in charge of it,
without any hope of recovering it (sine spe recuperandi),
or without any intention of returning to it (sine animo
revertendi).
Note: The vessel sought to be salvaged is shipwrecked
beyond the control of the crew or abandoned, is present
when the vessel is considered a derelict.
Jetsam, Flotsam and Ligan are, unless abandoned, still
the property of their original owners.
Jetsam – are goods that were thrown off a ship which
was in danger.
Flotsam – are goods that floated off the ship while the
ship was in danger or when it sank.
Ligan – are goods left at sea on the wreck or tied to a
buoy so that they can be recovered later.
What is the basis of entitlement to salvage reward?
A salvage reward should neither be too liberal nor too
stingy. It should constitute a sufficient compensation for
the outlay and effort of the salvors.
Quantum Meruit is NOT applicable. Compensation
should not be viewed by admiralty courts merely as pay
on the principle of quantum meruit or as a remuneration
pro opera et labore, but as a reward given for perilous
services, voluntarily rendered, and as an inducement to
mariners to embark in such dangerous enterprise to save
life and property.
What are the basis of compensation to be rewarded for
salvage services?
1. The labor expended by the salvors in rendering the
salvage service;
2. The promptitude, skill, and energy displayed in
rendering the service and saving the property;

Who are the person not entitled to Salvage
Compensation?

3. The value of the property employed by the salvors in
rendering the service, and the danger to which such
property was exposed;

1. The crew of the vessel shipwrecked or which was in
danger of shipwrecked;

4. The risk incurred by the salvors in rescuing the
property from the impending peril;

2. He who shall have commenced the salvage in spite of
opposition of the captain or of his representatives; and

5. The value of the property salvaged; and

17 S.A. PANDITA NOTES ON TRANSPORTATION
6. The degree of danger from which the property was
rescued.
What are the rights and obligations of salvors and
owners?
1. If the ship and its cargo are saved together by the
salvor, the salvage allowance should be charged against
the ship and cargo in the proportion of their respective
values, as in the case of general average; and neither is
liable for the salvage due from other. Thus, in a personal
action which is brought against the owner of the ship, the
liability of the latter is limited to such part of the salvage
compensation due for the entire service as is
proportionate to the value of the ship. Not only is the
salvage charge a separate and divisible burden as
between the ship and cargo, but also as between
portions of the cargo belonging to different owners;
2. The salvor has a right of possession of a derelict for
purposes of a salvage claim;
3. When a vessel is found at sea, deserted, and has been
abandoned by the master and crew without the
intention of returning and resuming possession, she is, in
the sense of the law, derelict, abandoned, and the finder
who takes possession with the intention of saving her
gains a right of possession which he can maintain against
the true owner. However, while the salvor has the right
to retain the abandoned vessel or cargo until the salvage
is completed without interference from other persons, it
would not be so if the salvor has inadequate means. In
such case, the salvor is bound to accept additional
assistance from other salvors who may offer their
services;
4. The owner of the vessel which is a derelict does not
renounce his right to the property. There is no
presumption of an intention to abandon such property
rights on the part of such owner under the Salvage Law.
What the owner abandons temporarily is his right of
possession, which is thereby transferred to the salvor
who becomes bound to preserve the property with good
faith and bring it to a place of safety for the owner’s use;
5. The salvor who saves or picks up a vessel or
merchandise at sea, in the absence of the ship captain,
shipowner, or a representative of either of them, they
being unknown, shall convey and deliver the vessel or
merchandise as soon as possible, to the collector of
customs, if the port has a collector, and otherwise to the
provincial treasurer or municipal mayor;

6. The owner or his representative shall have a right to
the delivery of the vessel or things saved after the
salvage is accomplished, provided that he pays, or gives
a bond to secure the expenses and the proper reward.
The amount and sufficiency of the bond, in the absence
of agreement, shall be determined by the collector of
customs or by the judge of the Court of First Instance of
the province where the things saved may be found;
7. If the owner does not make any claim within 3 months
after the publication by the authorities of a salvage
report, the things saved shall be sold at a public auction,
the proceeds of which shall be deposited in the National
Treasury after deducting the expenses and the proper
reward to which the salvor is entitled. If 3 years lapses
without claim thereon, the salvor shall be entitled to half
of the deposit as his reward and the other half shall
pertain to the government;
8. The owner of the saving vessel is also entitled to the
salvage reward for the use of his vessel in rendering
salvage services even though he may not have been
present at the time the salvage service is awarded to the
owners of the salving vessel on account of the danger to
which the service exposes their property, and the risk
which they run of loss in suffering their vessels engaged
in such perilous undertaking; and
9. Reward is due not only to the owners of the salving
vessel but the captain and crew as well. Thus, if a vessel
or its cargo shall have been assisted or saved, entirely or
partially, by another vessel, the reward for salvage or
assistance shall be divided between the owner, the
captain, and the remainder of the crew of the latter
vessel, so as to give the owner a half, the captain a
fourth, and all the remainder of the crew other fourth of
the reward, in proportion to their respective salaries, in
the absence of an agreement to the contrary.
Maritime Lien. A salvor has an interest in the property
but it never goes, in the absence of a contract expressly
made upon the idea of debt due from the owner to the
salvor but upon the principle that the service creates a
property in the thing saved.
COGSA – Carriage Of Goods by Sea Act
The law of the country to which the goods are to be
transported shall govern the liability of the common
carrier for their loss, destruction or deterioration.
Note: COGSA can be applied in the Philippines, i.e. the
collision happened locally (the vessel travels from one

18 S.A. PANDITA NOTES ON TRANSPORTATION
city to another City), provided it is not contrary to our
law.
Goods – includes goods, wares, merchandise, and
articles of every kind whatsoever. However, it does not
include live animals and cargo which by the contract of
carriage is stated as being carried on deck and is so
carried.
Who are the parties in a carriage of goods?
1. Carrier; and
2. Shipper.
Note: International carriers are required to exercise
extraordinary diligence in the performance of their
contractual obligations.
What are the responsibilities of the carrier under
COGSA?
1. The carrier shall be bound before and at the beginning
of the voyage to exercise due diligence to –
a.) Make the ship seaworthy;
b.) Properly man, equip, and supply the ship; and
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.
3. After receiving the goods into his carrier, or the master
or agent of the carrier, shall, on demand of the shipper,
issue to the shipper a bill of lading showing among other
things –
a.) The loading marks necessary for identification
of the goods as the same are furnished in writing by the
shipper before the loading of such goods starts, provided
such marks are stamped or otherwise shown clearly
upon the goods if uncovered, in such a manner as should
ordinarily remain legible until the end of the voyage;
b.) Either the number of packages or pieces, or
quantity or weight, as the case may be, as furnished in
writing by the shipper; and
c.) The apparent order and conditions of the
goods: provided, that no carrier, master, or agent of the
carrier, shall be bound to state or show in the bill of

lading any marks, number, quantity, or weight which he
has reasonable ground for suspecting not accurately to
represent the good actually received or which he has had
no reasonable means of checking.
4. The shipper shall be deemed to have guaranteed to
the carrier the accuracy at the time of shipment of the
marks, number, quantity, and weight, as furnished by
him; and the shipper shall indemnify the carrier against
all loss, damages, and expenses arising or resulting from
inaccuracies in such particulars. The right of the carrier
to such indemnity shall in no way limit his responsibility
and liability under the contract of carriage to any person
other than the shipper.
The term Contract of carriage applies only to contracts
of carriage by sea covered by a bill of lading or any similar
document of title, insofar as such document relates to
the carriage of goods by sea, including any bill of lading
or any similar document as aforesaid issued under or
pursuant to a charter party from the moment at which
such bill of lading or similar document of title regulates
the relations between a carrier and a holder of the same.
When does a notice of claim be filed? When does it
prescribe?
The notice of claim must be made within three (3) days
from delivery if the damage is not apparent. It is not
mandatory. However, the prescriptive period of one (1)
year from the delivery for the filing of the case is a
condition precedent or mandatory.
Note: The 1 year prescriptive period does not apply to
cases of misdelivery or conversion.
What are the defenses and immunities available to the
common carrier?
1. Neither the carrier not the ship shall be liable for the
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 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.
Whenever loss or damage has resulted from
unseaworthiness, the burden of proving the exercise of
due diligence shall be on the carrier or other person
claiming exemption.
2. Neither the carrier nor the ship shall be responsible for
loss or damage arising or resulting from –

19 S.A. PANDITA NOTES ON TRANSPORTATION
a.) Act, neglect, or default of the master, mariner, pilot,
or servants of the carrier in the navigation or in the
management of the ship;
b.) Fire, unless caused by actual fault or privity of the
carrier;
c.) Perils, dangers, and accidents of the sea or other
navigable water;
d.) Act of God;
e.) Act of War;
f.) Act of Public Enemies;
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 representatives;
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 commotions;
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 or packing;
o.) Insufficiency or 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 servant 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 of the agents or servants of
the carrier contributed to the loss or damage.
3. The shipper shall not be responsible for loss or damage
sustained by the carrier or the ship arising or resulting
from any cause without the act, or neglect of the shipper,
his agent, or his servant; and

4. Any deviation in saving or attempting to save life or
property at sea, or any reasonable deviation shall not be
deemed to be an infringement or breach or this Act or of
the contract of carriage, and carrier shall not be liable for
any loss or damage resulting therefrom: Provided,
however, That if the deviation is for the purpose of
loading or unloading cargo or passenger it shall, prima
facie, be regarded as unreasonable.
Deviation is a breach of the contract of carriage. This
may mean breach of an express stipulation as to route of
the voyage. In the absence of stipulation, the voyage
may be taken to be the normal route of sailing between
port of loading and the port of discharge, as defined by
geography and by trade customs which parties are taken
to have incorporated by reference.
The shipowner and the ship agent MAY WAIVE THE
BENEFIT OF THE DEFENSES in its favor provided not only
under COGSA but also under other laws.
Civil Aviation - Refers to the operation of any civil aircraft
for the purpose of general aviation operations, aerial
work or commercial air transport operations.
Aeronautics/ Aviation - Refers to the Science and act of
flight.
Aircraft - any machine that can derive support in the
atmosphere from the reactions of the air other than the
reactions of the air against the earth's surface. It also
shall refer to Civil aircraft only and will not include State
or Public aircraft.
Philippine Aircraft - means an aircraft registered in the
Philippines in accordance with the requirements of the
Civil Aviation Authority Act of 2008.
Note: The Chicago Convention provides that Aircraft
have the nationality of the State in which they are
registered. Also, an aircraft cannot be validly registered
in more than one State, but its registration may be
changed from one State to another.
What is the TRUE TEST of whether one is a common
carrier by air?
Whether he holds out that he will carry for hire, so long
as he has room, goods of everyone bringing goods to him
for carriage, not whether he is carrying as a public
employment or whether he carries to a fixed place.
How does a registration established?
The Civil Aviation Authority shall:

20 S.A. PANDITA NOTES ON TRANSPORTATION
1. Establish and maintain a system for the national
registration of aircraft in the Philippines.

Note: The requirements for registration are similar to the
requirements in Land Registration.

2. Establish and maintain a system for the registration of
liens, mortgages or other interests in aircraft or aircraft
engines; and

Air Commerce or Commercial Air Operation – Refers to
and includes scheduled or non-scheduled air transport
services for pay or hire, the navigation of aircraft in
furtherance of a business, the navigation of aircraft from
one place to another for operation in the conduct of a
business, or an aircraft operation involving the transport
of passengers, cargo or mail for remuneration or hire.

3. Have sole authority to register aircraft and liens,
mortgages or other interests in aircraft or aircraft
engines.
What are the requirements to make an aircraft eligible
for registration?
1. The Aircraft is owned by or leased to a citizen or
citizens of the Philippines or corporations or associations
organized under the laws of the Philippines at least sixty
per centum (60%) of whose capital is owned by Filipino
citizens; and
2. The aircraft is not registered under the laws of any
foreign country.
EXCEPTIONS:
Foreign- owned or registered aircraft may be registered
if utilized by members of aero clubs organized for
recreation, sport or the development of flying skills as a
prerequisite to any aeronautical activities of such clubs
within the Philippine airspace.
Note: An application for aircraft registration shall be
made in writing, signed and sworn to by the owner or
lessee of any aircraft or aircraft engine eligible for
registration.
Who shall issue a Certificate of Registration?
The DIRECTOR GENERAL upon considering the
application for registration, find the aircraft or aircraft
engine eligible for registration, such aircraft shall be
registered under the provisions of this Act and the owner
thereof shall be issued a Certificate of Registration.
How is a registration revoked?
Any Certificate of registration may be revoked by the
Authority for any cause which renders the aircraft
ineligible for registration.
State of Registry - refers to the State on whose register
the aircraft is entered.
Note: All aircraft conveyance of Philippine Registry shall
be registered with the Civil Aviation Authority of the
Philippines (CAAP).

What are the types of Air Transportation?
1. Domestic Air Commerce - means and includes air
commerce within the limits of the Philippine territory.
2. Domestic Air Transport - means air transportation
within the limits of the Philippine territory.
3. Foreign Air Transport - refers to air transportation
between the Philippines and any place outside it or
wholly outside the Philippines.
4. International Commercial Air Transport - the carriage
by aircraft of persons or property for remuneration or
hire or the carriage of mail between any two (2) or more
countries.
Who are the persons involved in Air Transportation and
regulated by CAAP?
1. AIR CARRIER OR OPERATOR- the one who undertakes,
whether directly or indirectly, or by a lease or any other
arrangements, to engage in air transportation services or
air commerce. Air Carriers may either be a Philippine Air
Carrier or a Foreign Air Carrier.
2. Philippine Air Carrier - an aircraft who is a citizen of
the Philippines.
3. Foreign Air Carrier - means any operator, not being a
Philippine air operator, which undertakes, whether
directly or indirectly or by lease or any other
arrangement, to engage in commercial air transport
operations within borders or airspace of the Philippines,
whether on a scheduled or chartered basis.
4. Airman - individual who engages, as the person in
command or as pilot, mechanic, aeronautical engineer,
flight radio operator or member of the crew, in the
navigation of aircraft while under way and any individual
who is directly in charge of inspection, maintenance,
overhauling, or repair of aircraft, aircraft engine,
propellers, or appliances; and individual who serves in
the capacity of aircraft dispatcher or air traffic control
operator.

21 S.A. PANDITA NOTES ON TRANSPORTATION
What are the duties of the Civil Aeronautics Board?

What are the kinds of Freedom of the Air?

1. The CAB shall have the general supervision and
regulation of, the jurisdiction and control over, air
carriers, general sales agents, cargo sales agents, and
airfreight forwarders as well as their property, property
rights, equipment, facilities, and franchise, in so far as
may be necessary.

1. First Freedom of the Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State or States to fly across its
territory without landing (also known as a First Freedom
Right).

2. It shall have the authority to regulate air
transportation to recognize and preserve the inherent
advantages of, assure the highest degree of safety in and
foster sound economic conditions in such transportation,
and to improve the relations between, and coordinate
transportation by air carriers.
WHO MAY CHARTER AN AIRCRAFT?
1. By a person for his own use (including a direct air
carrier when such aircraft is engaged solely for the
transportation of company personnel or commercial
traffic in cases of emergency);
2. By a representative (or representatives acting jointly)
of a group for the use of such group (provided no such
representative is professionally engaged in the
formation of groups for transportation or in the
solicitation or sale of transportation services); or
3. By an airfreight forwarder holding a currently effective
permit.
What are the different classifications of Charter of
Aircraft?
1. On-route - service performed by an air carrier
between points between which said carrier is authorized
to provide service pursuant to its certificate of public
convenience and necessity or foreign air carrier permit;
Provided, however, that passenger charter trips by any
all-cargo carrier are not considered to be on-route
whether or not performed between points designed to
receive service by such carrier in its certificate or permit.
2. Off-route - any charter which is not on-route.
3. Pro-rata charter - a charter where the cost of which is
divided among the passengers transported.
4. Single entity charter - a charter the cost of which is
borne by the charterer and not by individual passengers,
directly or indirectly.
5. Mixed charter - a charter the cost of which is borne, or
pursuant to contract may be borne, partly by the charter
participants and partly by the charterer.

2. Second Freedom of the Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State or States to land in its
territory for non-traffic purposes (also known as
a Second Freedom Right).
3. Third Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State to put down, in
the territory of the first State, traffic coming from
the home State of the carrier (also known as a Third
Freedom Right).
4. Fourth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State to take on, in the territory
of the first State, traffic destined for the home State of
the carrier (also known as a Fourth Freedom Right).
5. Fifth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State to put down and to take
on, in the territory of the first State, traffic coming from
or destined to a third State (also known as a Fifth
Freedom Right).
The International Civil Aviation Organization
(ICAO) characterizes all "freedoms" beyond the Fifth as
"so-called" because only the first five "freedoms" have
been officially recognized as such by international treaty.
6. Sixth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, of
transporting, via the home State of the carrier, traffic
moving between two other States (also known as a Sixth
Freedom Right). The so-called Sixth Freedom of the Air,
unlike the first five freedoms, is not incorporated as such
into any widely recognized air service agreements such
as the "Five Freedoms Agreement".
7. Seventh Freedom of The Air - the right or privilege, in
respect of scheduled international air services, granted
by one State to another State, of transporting traffic
between the territory of the granting State and any third
State with no requirement to include on such operation
any point in the territory of the recipient State, i.e the

22 S.A. PANDITA NOTES ON TRANSPORTATION
service need not connect to or be an extension of any
service to/from the home State of the carrier.
8. Eighth Freedom of The Air - the right or privilege, in
respect of scheduled international air services, of
transporting cabotage traffic between two points in the
territory of the granting State on a service which
originates or terminates in the home country of the
foreign carrier or (in connection with the so-called
Seventh Freedom of the Air) outside the territory of the
granting State (also known as an Eighth Freedom
Right or "consecutive cabotage").
9. Ninth Freedom of The Air - the right or privilege of
transporting cabotage traffic of the granting State on a
service performed entirely within the territory of the
granting State (also known as a Ninth Freedom Right or
"stand alone" cabotage).
What are the
Transportation?

Obligations

of

Carrier

in

Air

Extraordinary diligence in air transportation includes the
obligation to make sure that the aircraft is airworthy,
that the vessel has a competent captain and crew, and
that the captain and his crew exercised extraordinary
diligence in operating the aircraft. It also includes: (1.)
that the carrier provides competent and well trained
crew; and (2.) that the carrier must take make sure that
the plane took the designated route.
Airworthiness - An aircraft, its engines, propellers, and
other components and accessories, are of proper design
and construction, and are safe for air navigation
purposes, such design and construction being consistent
with accepted engineering practice and in accordance
with aerodynamic laws and aircraft science.
Note: It is the responsibility of the registered owner or
operator of an aircraft to maintain the aircraft airworthy
conditions.
What is the Obligation of Carriers in taking care of the
baggage of the passengers?
The carrier must exercise due diligence in taking care of
the baggage of the passengers and the carrier will be
liable for any damage or transported to another place or
delay or lost altogether of any baggage.
What is the duty of the Carriers to Passengers?
The carrier must exercise extraordinary diligence to
passengers because the passengers in a contract of
carriage do not contract merely for the transportation;

they have a right to be treated with kindness, respect,
courtesy, and consideration. The operation of common
carrier is a business affected with public interest and
must be directed to serve the comfort and convenience
of passengers.
Breach of Contract – The failure without legal reason to
comply with the conditions of a contract.
Instances of breach of contract of carriage in air
transportation:
1. When the airline company dumped off a passenger
with confirmed reservation or downgraded the
passenger’s seat accommodation from one class to a
lower class. (Phil. Airlines, Inc. v Vicente Lopez, Jr.)
2. If the airline company upgraded the seat
accommodation of a passenger. (Cathay Pacific Airways,
Ltd v Spouses Vasquez)
3. If the carrier failed to make necessary arrangements
to transport the passenger on the first available flight if
the aircraft took a stopover due to fortuitous event.
(Japan Airlines v CA)
4. If the carrier failed to rebook or rerouting of flight of a
passenger after paying the necessary fees. (Northwest
Airlines v Catapang).
5. The carrier may be held liable for rude and
discourteous treatment of its passenger not only by the
crew inside the vessel but also the staff in the airport as
well as the staff in branch offices of the carrier.
What is the rule on boarding passengers?
The air carrier is duty bound to accept and board a
passenger with confirmed tickets if the passenger
presents himself on time in the airline counter in the
airport. There would be breach of contract on the part of
the carrier if its employees will refuse to accept the
passenger with confirmed tickets.
When may an operator deny the transportation of
passengers? If the passenger:
1. Refuses to comply with the instructions regarding exit
seating restrictions prescribed by the CAAP; and
2. Has handicap that can be physically accommodated
only by an exit row seat.
Note: An air carrier will not be liable if the passenger
failed to present himself on time in the airport counter,

23 S.A. PANDITA NOTES ON TRANSPORTATION
the burden of proving that the passenger is a “No Show”
passenger rests with carrier.

When is a passenger NOT eligible for Denied Boarding
Compensation?

Conditional Reservation Ticket – sold by a domestic
carrier on the basis of a tentative listing on a specific
flight, on a specific date, and a class of service and for
which space is conditionally reserved.

1. The flight is unable to accommodate him because of:
1.) Government requisition seat; 2) substitute of
equipment of lesser capacity when required by
operational and/ or safety reasons and/ or other causes
beyond the control of the carrier;

Confirmed Reserved Space – Space on a specific date
and on a specific flight and class of service of a carrier
which has been requested by a passenger and which the
carrier or this agent has verified, by appropriate notation
on the ticket as being reserved for the accommodation
of destination.
What is the Order of Priorities of passenger on oversold
flight?
1. Thru passenger over originating passenger Whenever a flight is scheduled via an intermediate
station, thru passenger on board said flight shall have
first priority at said intermediate station.
2. Connecting confirmed passenger – Connecting
confirmed passenger excluding stop-over passenger at
any station shall have second priority at the connecting
intermediate stations.
3. Originating confirmed passenger – Originating
confirmed passengers at any station shall have third
priority.
4. Passenger with conditional reservation tickets –
Passengers holding conditional reservation tickets shall
have fourth priority.
5. Chance passenger – Shall be accommodated on a first
come, first serve basis.
What is the rule on Denied Boarding Compensation?
 Passenger for domestic flights : 100% of the
value of the first remaining flight coupon + P
3,000
 Passenger for international flights: 100% of the
value of the first remaining flight coupon but not
exceeding P 1,500 or its equivalent in foreign
currency + P 5,000 or its equivalent in foreign
currency
Note: If accepted by the passenger, shall constitute
liquidated damages for all damages incurred as a result
of the carrier’s failure to provide the passenger with
confirmed reserved space

2. The flight is cancelled due to operational and/ or safety
reasons, force majeure, weather, strikes, or other causes
beyond the control of the carrier
3. The carrier arranges for comparable air transportation
or for the transportation accepted by the passenger,
which at that time either of such arrangements is made,
is scheduled to arrive at the place of the passenger’s next
stop-over not later than 3 hours (domestic flights) or 4
hours (international flights), from the scheduled time of
arrival of the flight on which he was denied boarding or
accommodation.
The Carrier shall:
1. Furnish a written statement quoting the terms,
conditions and limitations of the denied boarding
compensation
2. Tender a check of the amount of denied boarding
compensation (if accepted by the passenger)
What are the
passengers?

categories

of

unaccomplished

1. Denied boarding for lack of space on a flight otherwise
normally operated;
2. Denied boarding due to lack of space resulting from
equipment substitution to smaller aircraft; and
3. Denied boarding due to other exceptions under
Section 6 of Economic Regulation No. 7.
Note: Scheduled domestic air carriers are authorized to
sell conditional reservation tickets on fully book flights
where the passenger seeks reservation on that flight and
where space due to no-shows can still be reserved
subject to actual availability, provided, that the
passenger shall be informed of the nature and condition
of the ticket purchased and reservation made.
Travel Documents. It is the obligation of the passenger
to secure the appropriate travel documents. However,
the airline may be held liable if it is lost due to the
negligence of the airline’s employee.

24 S.A. PANDITA NOTES ON TRANSPORTATION
What is the rule on inspection of aircraft and cargo?

Class 2- Gases

1. Aircraft companies which operate as public utilities or
operators of aircraft which are for hire are authorized to
open and investigate suspicious packages and cargoes in
the presence of the owner or shipper or his authorized
representatives. If the owner or shipper or his authorized
representative refuses, the airline or air carrier is
authorized to refuse the loading thereof.

Class 3- Flammable liquids

2. The holder of the ticket issued by the airline or air
carrier and his hand carried luggage/s are subject to
search for, and seizure of, prohibited materials or
substances. If the holder refuses, he shall not be allowed
to board the aircraft.

Class 8- Corrosive substances

At what instances may the Director General detain Civil
Aircraft?
1) The aircraft may not be airworthy;
2) The airman may not be qualified or physically or
mentally capable for the flight; and
3) The operation would cause imminent danger to
persons or property on the ground.
What are the prohibited acts of any person that a
carrier must exercise its duty to inspect?
1. To compel a change in the course or destination of an
aircraft of Philippine registry;
2. To seize or usurp the control thereof, while it is in
flight;
3. To compel an aircraft of foreign registry to land in
Philippine territory; or

Class 4- Flammable liquids
Class 5- Oxidizing substances and organic peroxides
Class 6- Toxic and infectious substances
Class 7- Radioactive

Class 9- Miscellaneous Dangerous substances and
articles
Warsaw Convention:
Applies to all international transportation of persons,
baggage, or goods performed by an aircraft gratuitously
or for hire. One of its objectives is to regulate the
conditions of international transportation by air, in a
uniform manner.
International Transportation - is when:
1. The places of departure and the place of destination
are within the territories of two contracting countries,
regardless of whether there was a break in the
transportation or transshipment; and
2. The place of departure and the place of destination are
within the territory of a single contracting country, if
there is an agreed stopping place within a territory
subject to the sovereignty of another power, even if not
a party of the Convention.

4. To seize or usurp the control thereof, while it is in
within the said territory.

Note: The Period Covered by International
Transportation at the moment the baggage or goods are
placed in the charge of the carrier, regardless of place it
was surrendered.

It shall also be unlawful for any person, natural or
juridical:

What are the liabilities prescribed by the Warsaw
Convention?

1. To ship, load or carry in any passenger aircraft
operating as a public utility within the Philippine
territory, any explosives, flammable, corrosive or
poisonous substance or material; and

1. For damage sustained in the death or wounding of a
passenger, or for any bodily injury suffered by a
passenger while on board the aircraft or in the course of
any operations of embarking or disembarking. (Art 17)

2. For juridical persons: the liable persons shall be the
manager, representative, director, agent or employee
who violated, or caused, directed, cooperated or
participated in the violation.

2. For damage sustained in the destruction or loss of, or
damage to, any checked in baggage, or any goods, if such
damage was incurred during the transportation by air.
(Art 18 .1)

What are the classes of Dangerous Goods?
Class 1- Explosives

25 S.A. PANDITA NOTES ON TRANSPORTATION
=> For transportation of passengers- 250,000 francs
(terms of payment is in accordance to the court where
the case is filed)

performed entirely within the territory subject of the
sovereignty, suzerainty, mandate or authority of the
same High Contracting Party.

=> For transportation of checked in baggage, or goods250francs/kg

If an airline is a member of the International Air
Transport Association (IATA), it is part of the general pool
partnership agreement wherein each member act as
agent of each other in the issuance of tickets to
contracted passengers to boost ticket sales worldwide
and at the same time provide passengers easy access to
airlines which are otherwise inaccessible in some parts of
the world.

=> For objects which the passenger takes charge himself
– 5000francs per passenger
Note: The first and second limitations are subject to the
stipulations agreed upon by the carrier and
passenger/shipper.
Note: The above sums may be converted into any
national currency in round figures.
Tort Liability: When can a complaint for quasi-delict be
filed?
Complaint for quasi-delict may be filed in accordance to
the prescriptive period set forth in the Civil Code (4
years).
Warsaw convention does not provide for an exclusive
enumeration of instances when carrier is liable. It does
not provide for an absolute limit of liability and does not
preclude the application of the civil code and pertinent
local laws.
Note: The WC prohibits the carrier from availing of the
provisions that limit his liability, if the damage was
caused by his willful misconduct, or an act considered by
the forum to be its equivalent.
Venue for Action for Damages: (Jurisdictional in
Character)
1. The court where the carrier is domiciled;
2. The court where the carrier has its principal place of
business;
3. The court where the carrier has an establishment by
which the contract has been made; and

The issuing airline which acted as an agent of the other
airlines would be liable because the various legs of the
trip constitute a single operation. The obligation of the
ticket-issuing airline remains and will not cease even if
other airlines will in fact carry the passengers to in other
portions of the trip.
What is an Air Way Bill?
It is a bill of lading for air transportation. It is a complete
contract by and between the shipper and the carrier,
with the following elements:
1. Consent of the contracting parties;
2. Cost/consideration; and
3. Object (transportation of the cargo)
What does an Air Way Bill contain?
a) place and date of its execution, departure,
destination, payment;
b) agreed stopping places;
c) name and address of the consignor, first carrier,
consignee, and the person who is to pay it;
d) As to GOODS:


nature of the goods



number of the packages, the method of
packing and the particular marks or
numbers

Transportation to be performed by several successive
carriers shall be deemed to be one undivided
transportation, if it has been regarded by parties as a
single operation, whether it has been agreed upon under
the form of a single contract or a series of contracts.



weight, the quantity and the volume or
dimensions of the goods



apparent condition of the goods and of
the packing;

It shall not lose its international character merely
because one contract or series of contracts is to be

e) As to PRICE:

4. The court of the place of destination.
What is the rule on Successive Carriers?

26 S.A. PANDITA NOTES ON TRANSPORTATION

f)



freight



if the goods are sent for payment on
delivery, the price of the goods



amount of the value declared;

OTHERS:


number of parts of the air way bill;



documents handed to the carrier;



time fixed for the completion of the
carriage and a brief note of the route;



a statement that the ‘carriage is subject
to the rules relating to liability
established by the Convention’

1. To secure adequate, sustained service for the
public at least possible cost and protect the public
against unreasonable charges and poor, inefficient
service.
2. To protect and conserve investments which
have already been made for public service, and prevent
ruinous competition.
REGULATORY AGENCIES
1. DTC (Dept. of Transportation and Communications) The other agencies are under this department. It issues
certificates of public convenience for operation of
national railroad carriers.
2. LTFRB (Land Transportation Franchising Regulatory
Board) - for Land Transportation.

PUBLIC UTILITY - is a business or service engaged in
regularly supplying the public with some commodity or
service of public consequence such as electricity, gas,
water, transportation, telephone, or telegraph service.
The term implies PUBLIC USE and SERVICE.

3. LTO (Land Transportation Office) - Registration of
drivers and motor vehicles

PUBLIC SERVICE - service includes every person that now
or hereafter may own, operate, manage, or control in the
Philippines, for hire or compensation, with general or
limited clientele, whether permanent, occasional or
accidental, and done for general business purposes, any
common carrier, with or without fixed route and
whatever may be its classification, engaged in the
transportation of passenger or freight or both, canal,
irrigation system gas, electric light, heat and power,
water supply power, petroleum, sewerage system, wire
or wireless communication systems, wire or wireless
broadcasting stations and stations and other similar
public service.

5. Philippine Coast Guard - concerned with safety in
water transportation

Note: Public utility and public service are used
interchangeably. Public service is a broader concept, it
embraces public service.
May a Public Utility not be a Public service?
YES. As it may not be a part of the enumeration in the
Public service act and therefore not subject to restriction
of the Public Service Commission or other successor
board or agency but still subject to the constitutional
requirements.
What is the purpose of the Public Service Law?
To subject public service to state control and regulation.
Specifically, the primary purpose of its enactment is
twofold, namely:

4. MARINA (Maritime Industry Authority) - Water
transportation

6. NTC (National Telecommunications Commission) communication
utilities
and
services,
radio
communications systems, wire or wireless telephone
and telegraph systems, radio and television broadcasting
systems and other similar public utilities.
7. ERC (Energy Regulatory Commission) - electric or
power companies.
8. National Water Resources Council - water resources
9. CAB (Civil Aeronautics Board) - air transportation
particularly its economic aspects
10. CAAP (Civil Aviation Authority of the Philippines) maintenance and operation of airports and other similar
facilities; registers aircrafts and other incidents
concerning the same and provides safety regulations in
air transportation.
11. Philippine Ports Authority - wharves and ports.
What is the bases of regulation of public utilities?
Founded upon the police power of the State and statutes
prescribing rules for the control and regulation of public
utilities are considered valid exercise thereof. The
exercise of police power is justified because whenever
private property is used for a public purpose and is

27 S.A. PANDITA NOTES ON TRANSPORTATION
affected with public interest, it ceases to a juris privati
only and becomes subject to regulation. The regulation
is to promote the common good.
Ownership - Relation in law by virtue of which a thing
pertaining to one person is completely subjected to his
will in everything not prohibited by law or the
concurrence with the rights of another.
Ownership of Public Utilities distinguished from
Ownership of Facilities
Ownership
Utilities

of

Public Ownership of Facilities

- Subject to regulation by - In the case of Tatad v.
the State.
Garcia Jr., the Supreme
Court clarifies that the
-Concerned Government limit imposed by the
Agencies may impose Constitution on foreign
certain requirements to equity applies to the
person or entities who operation of a public
wish to operate as public utility
and
not
to
utilities.
ownership of the facilities.
- Includes capitalization - One can own facilities
requirement and other without operating them as
similar impositions.
a public utility, or
-May exist independently conversely, one may
and separately from the operate a public utility
owning
the
ownership of the facilities without
facilities used to serve the
public.
REGULATION OF RATES
Includes the regulation of the rates that they are
charging the public. This aspect of regulation is in line the
policy of the State to protect the public against arbitrary
and excessive rates while maintaining the efficiency and
quality of service rendered.
NON-DELEGATION
The power to fix the rates of public utilities is a power
that has been delegated to the regulatory administrative
agencies. As such, it cannot be further delegated by the
said administrative agencies. As explained in the case of
Kilusang Mayo Uno Labor Center v. Hon. Jesus Garcia,
under section 16(c) of the Public Service Act, the
Legislature delegated to the defunct Public Service
Commission the power of fixing the rates of public
services. Respondent LTFRB, the existing regulatory body
today, is likewise vested with the same under Executive

Order No. 202 dated June 19, 1987. x x x However,
nowhere under the aforesaid provisions of law are the
regulatory bodies, the PSC and LTFRB alike, authorized to
delegate that power to a common carrier, a transport
operator, or other public service.
PROHIBITION AGAINTS DISCRIMINATION
The law prohibits any common carrier from making or
giving any unnecessary or unreasonable preference or
advantage to any particular person, company, firm,
corporation or locality, or any particular kind of traffic, or
to subject any particular person, company, firm,
corporation, or locality, or any particular kind of traffic,
to any undue or unreasonable prejudice or
discrimination whatsoever. As ruled by the Supreme
Court in the old case of United States v Pascual Quinajon
and Eugenio Quitorio, It is not believed that the law
prohibits common carrier from making special rates for
the handling and transportation of merchandise, when
the same are made for that purpose of increasing their
business, and to manage their important interests upon
the same principles which are regarded as sound, and
adopted in other trades and pursuits.
Standard in Fixing Rates
The ONLY standard which the legislature is required to
prescribe for the guidance of the administrative
authority is that the rate must be reasonable and just.
Fixing Rates for Electric Companies:
3 major factors to consider:
1.) Rate of return;
2.) Rate base; and
3.) The return itself or the computed revenue to be
earned by the public utility based on the rate of return
and rate base.
What are the two methods in rate determination
adopted by the LTFRB?
1. Add-on method – is adding the established minimum
fare (0.75) per succeeding kilometre multiplied by the
distance travelled in excess of 4km. and 5km.
respectively; and
2. Straight Computation method – is the process by
which the actual distance travelled is multiplied by the
authorized fare per succeeding kilometre of 0.25
centavos.

28 S.A. PANDITA NOTES ON TRANSPORTATION
Provisional Increase. Administrative agency may be
authorized by law to approve provisionally, when
demanded by urgent public need, rates of public utilities
without a hearing.
Requirements to the application for provisional rate
adjustment under EPIRA
1. Applicant must file with the ERC a verified application/
petition for rate adjustment. It must indicate that a copy
thereof was received by the legislative body of the LGU
concerned and include a certification of the notice of
publication in a newspaper of general circulation in the
same locality;

When is a legislative franchise necessary?
It is dependent on the enabling law of the enterprise
sought to be pursued i.e. in the operation of radio and
television broadcasting companies, it is required a
legislative franchise before a certificate of public
convenience can be issued.
What are the requirements for the issuance of
Certificate of Public Convenience?
Sec. 15 and 16(a) of the Public Service Act issued initial
requirements, but were modified by subsequent special
laws.

2. Within 30 days from receipt of the application/
petition or publication, any consumer affected or the
LGU concerned may file its comment on the application/
petition, as well as on the motion for provisional rate
adjustment;

1. The applicant must be a citizen of the Philippines, or a
corporation or co-partnership, association or joint stock
company constituted and organized under the laws of
the Philippines, at least 60% of the stock of paid-up
capital of which belong entirely to citizens of the
Philippines;

3. If a comment is filed, ERC must consider such comment
in its action on the motion, together with the documents
submitted by the applicant in support of its application/
petition. If no comment is filed, ERC shall resolve the
provisional adjustment;

2. The applicant must be financially capable of
undertaking the proposed service and meeting the
responsibilities incident to its operation; and

4. There is no need for the ERC to conduct a hearing on
the motion for provisional rate adjustment. It is sufficient
that it consider the written comment, if there is any;
5. ERC must resolve the motion for provisional rate
adjustment within 75 days from the filing of the
application/ petition; and
6. Thereafter, the ERC must conduct a full-blown hearing
on the application/ petition not later than 30 days from
date of issuance of the provisional order. Effectively, this
provision limits the lifetime of provisional order to only
12 months.

3. The applicant must prove that the operation of the
proposed public service and the authorization to do
business will promote the public interest in a proper and
suitable manner.
What does the term convenience and necessity mean?
Both terms are held not to be separable. It does not
mean or require an actual physical necessity or an
indispensable thing. As long as it will meet a reasonable
want of the public and supply a need which the existing
facilities do not adequately afford.

Authority to Operate as Public Utility

Other Rules and Policies used by the Administrative
body concerned in determining who among a number
of applicants is entitled to a certificate:

Authority and control of public utility is a prerogative of
the legislature. Franchise is a legislative grant; it can be
made directly by the legislature or by any of its properly
constituted instrumentalities.

1. The prior operator rule- regulating agency protects
the first licensee’s investment and will not be subjected
to ruinous competition. Provided that he has rendered
satisfactory service.

Franchise and Certificate of Public Convenience
distinguished

2. The prior applicant rule- When other conditions are
equal, the order of filing of application is considered.

A franchise is a grant or A CPC is a form of
privilege
from
the regulation
through
sovereign power.
administrative agencies.

3. The protection of investment rule- the protection of
the investment of the operators of public utilities from
unfair, unjustified, and ruinous competition.

29 S.A. PANDITA NOTES ON TRANSPORTATION
4. The third operator rule- is a variation of the prior
operator rule, instead of one operator, there are two
prior operators who are rendering sufficient service.
Free Competition:
May work against the application of different policies like
the prior operator rule and prior applicant rule.
Monopoly is shunned. In Eastern Telecommunications
Philippines Inc. v. International Communication
Corporation (G.R. No. 135992, July 23, 2004), the role of
telecommunications industry cannot be understated.
Sensing the need to abrogate their dominion, the
government formulated policies in order to create an
environment conducive to the entry of new players.
In Republic of the Philippines v. Republic Telephone
Corporation., Inc. (G.R. No. 64888, November 28, 1996),
free competition in the industry may also provide an
answer to a much-desired improvement in the quality
and delivery of this type of public utility. After all, no
public utility has a constitutional right to a monopoly
position in view of the constitutional proscription that no
franchise certificate or authorization shall be exclusive in
character or shall last longer than fifty years.
What is the NATURE of Certificate of Public
Convenience?
=> When not considered a property:
A mere privilege that is always a subject to the regulation
of the State.

the Public Service Law, a certificate of public
convenience can be sold by the holder thereof because
it has considerable material value and is considered as
valuable asset.
In Pangasinan Transportation Co. v. PSC (70 Phil 221)
Although there is no doubt that it is private property, it
is affected with public interest and must be submitted to
the control of the government for the common good.
In Lugue v. Villegas (L-22545, Nov. 28, 1969, 30 SCRA
409)
Insofar as the interest of the state is involved, a
certificate of public convenience is does not confer upon
the holder any proprietary right or interest or franchise
in the route covered thereby and in public highways
In A.L. Ammen Transportation Co. v. Golingco (43 Phil
280)
With respect to other persons and other public utilities,
a certificate of public convenience as property, which
represents the right and authority to operate its facilities
for public service, cannot be taken or interfered without
due process of law.
Appropriate actions may be maintained in courts by the
holder of the certificate against those who have not been
authorized to operate in competition with the former
and those who invade the rights which the former has
pursuant to the authority granted by the Public Service
Commission.

Insofar as the state is concerned a certificate of public
convenience constitutes neither a franchise nor a
contract, confers no property right, and is a mere license
or privilege.

What are the instances when certificate of public
convenience not required?

A common carrier who holds such certificate does not
acquire a property right in the route covered thereby.

2. Vehicles drawn by animals and bancas moved by oar
or sail, and tugboats and lighters;

Does not confer upon the holder any proprietary right or
interest or franchise in the public highways. Revocation
would likewise not deprive one of any vested right. The
certificate of public convenience is granted with so many
strings attached. New and additional burdens, alteration
of the certificate and even revocation thereof are
reserved to the state.

3. Airships within the Philippines except as regards the
fixing of their maximum rates on freight and passengers;

1. Warehouses;

4. Radio companies except with respect to the fixing of
rates; and

=> When considered a property:

5. Public services owned or operated by an
instrumentality of the national government or by
government owned or controlled corporation, except
with respect to the fixing of rates.

In Raymundo v. Luneta Motor Co., et al., (58 Phil. 889)

Transfer of Certificate

A certification of public convenience is included in the
term “property” in the broad sense of the term. Under

30 S.A. PANDITA NOTES ON TRANSPORTATION
The law requires the approval of the Public Service
Commission in order that a franchise or any privilege
pertaining thereto may be sold or leased without
infringing the certificate issued to the grantee. The law
requires that that before approval is granted, there
should be a public hearing with notice to all interested
parties in order that the commission may determine if
there are good and reasonable grounds justifying the
transfer or lease of the property covered by the
franchise, or if the sale or lease is detrimental to the
public interest.
Without the requisite approval, the transfer is not
binding against the Public Service Commission and in the
contemplation of the laws the grantee continues to be
responsible under the franchise in relation to the
commission and to the public.
Registered Owner Rule - applies if the transfer of
franchise was not approved by the regulating agency.

-

This includes the right to give the parties
concerned NOTICE and HEARING

-

Notice and hearing are the safeguards of
administrative due process even in admin
proceedings

-

guaranteed by the Constitution itself

-

non-observance
will
invalidate
administrative proceedings.

-

Exemptions are in Sec17.

Sec17. Proceedings without previous hearing –
a) To investigate any matter concerning any public
service as regards matters under its jurisdiction;


compliance with this Act;



prohibit from operating without secured
certificate of public convenience and
payment of fees;



revocation and cancellation of any acquired
rights

Revocation of Certificate
Since the holding of a certificate of public convenience is
a mere privilege, the same certificate may be revoked by
administrative agency concerned. The Supreme Court:
Sustained the cancellation of certificate of public
convenience where: (1) the holder is a mere dummy
(Pecson v. Pecson, 78 Phil. 522); (2) the operator ceased
operations and placed his vehicles on storage (Paredes v.
Public Service Commission, L-7111, May 30, 1955); (3)
the operator totally abandoned the service (Collector v.
Buan, L-11438, July 31, 1958)
Revocation not justified if there is no showing of willful
and contumacious violation of the law and rules (e.g. the
cancellation of certificate of authority cannot be justified
by the mere fact that the taxicab was used by escaping
hold-uppers, Manzanal v. Ausejo, G.R. No. 31056, August
4, 1988)
Vicarious liability cannot be invoked because the
proceeding for cancellation is neither a criminal
prosecution nor an action for quasi-delict i.e. there is no
ground to hold the operator liable for the driver’s act.
Note: National Telecommunications Commission has no
power to cancel certificates of public convenience that it
issued to the holders of the duly-issued legislative
franchises in the broadcast industry.
PUBLIC SERVICE ACT NO. 146
DUE PROCESS:

the

b) Payment of the actual expenses incurred by the
Commission in any investigation.
c) Appraise and value the property of public service.
d) Examination of any appliance used for the measuring
its service.
e) To permit street railway to change its gauge to
standard steam railroad.
f) To grant special permits.
g) To require books and accounting system.
h) Require annual reports of finances and operations.
i) Require to file a statement in writing (name, title of
office, address, authority, power and duties of officers
and supervisors)
j) To require compliance with the laws of the Philippines.
k) To investigate accidents that may occur on its
property.
l) To require to file schedules of rate, toll fare or charge
made, and itineraries.
DOTC – Department
Communications

of

Transportation

and

31 S.A. PANDITA NOTES ON TRANSPORTATION
Powers and Functions:
a. Formulate and recommend national policies and
guidelines for the preparation and implementation
of integrated and comprehensive transportation and
communications systems at the national, regional
and local levels;
b. Establish and administer comprehensive and
integrated programs for transportation and
communications, and for this purpose, may call on
any agency, corporation, or organization, whether
public or private, whose development programs
include transportation and communications as an
integral part thereof, to participate and assist in the
preparation and implementation of such program;
c. Assess, review and provide direction to
transportation and communication research and
development programs of the government in
coordination with other institutions concerned;
d. Administer and enforce all laws, rules and
regulations in the field of transportation and
communications;
e. Coordinate with the Department of Public Works and
Highways in the design, location, development,
rehabilitation,
improvement,
construction,
maintenance and repair of all infrastructure projects
and facilities of the Department. However,
government corporate entities attached to the
Department shall be authorized to undertake
specialized telecommunications, ports, airports and
railways projects and facilities as directed by the
President of the Philippines or as provided by law;
f. Establish, operate and maintain a nationwide postal
system that shall include mail processing, delivery
services, and money order services and promote the
art of philately;
g. Issue certificates of public convenience for the
operation of public land and rail transportation
utilities and services;
h. Accredit foreign aircraft manufacturers and/or
international organizations for aircraft certification
in accordance with established procedures and
standards;
i. Establish and prescribe rules and regulations for
identification of routes, zones and/or areas of
operations of particular operators of public land
services;
j. Establish and prescribe rules and regulations for the
establishment, operation and maintenance of such
telecommunications facilities in areas not
adequately served by the private sector in order to

k.

l.

m.

n.

o.

p.

q.

r.

s.

render such domestic and overseas services that are
necessary with due consideration for advances in
technology;
Establish and prescribe rules and regulations for the
operation and maintenance of a nationwide postal
system that shall include mail processing, delivery
services, money order services and promotion of
philately;
Establish and prescribe rules and regulations for
issuance of certificates of public convenience for
public land transportation utilities, such as motor
vehicles, trimobiles and railways;
Establish and prescribe rules and regulations for the
inspection and registration of air and land
transportation facilities, such as motor vehicles,
trimobiles, railways and aircrafts;
Establish and prescribe rules and regulations for the
issuance of licenses to qualified motor vehicle
drivers, conductors, and airmen;
Establish and prescribe the corresponding rules and
regulations for the enforcement of laws governing
land transportation, air transportation and postal
services, including the penalties for violations
thereof, and for the deputation of appropriate law
enforcement agencies in pursuance thereof;
Determine, fix and/or prescribe charges and/or rates
pertinent to the operation of public air and land
transportation utility facilities and services, except
such rates and/or charges as may be prescribed by
the Civil Aeronautics Board under its charter, and, in
cases where charges or rates are established by
international bodies or associations of which the
Philippines is a participating member or by bodies or
associations recognized by the Philippine
government as the proper arbiter of such charges or
rates;
Establish and prescribe the rules, regulations,
procedures and standards for the accreditation of
driving schools;
Administer and operate the Civil Aviation Training
Center (CATC) and the National Telecommunications
Training Institute (NTTI); and
Perform such other powers and functions as may be
prescribed by law, or as may be necessary,
incidental, or proper to its mandate or as may be
assigned from time to time by the President of the
Republic of the Philippines.”

LTFRB – Land Transportation
Regulatory Board.

Franchising

and

32 S.A. PANDITA NOTES ON TRANSPORTATION
Powers and Functions:
a. To prescribe and regulate routes of service,
economically viable capacities and zones or areas of
operation of public land transportation services provided
by motorized vehicles in accordance with the public land
transportation development plans and programs
approved by the Department of Transportation and
Communications;
b. To issue, amend, revise, suspend or cancel Certificates
of Public Convenience or permits authorizing the
operation of public land transportation services provided
by motorized vehicles, and to prescribe the appropriate
terms and conditions therefor;
c. To determine, prescribe and approve and periodically
review and adjust, reasonable fares, rates and other
related charges, relative to the operation of public land
transportation services provided by motorized vehicles;
d. To issue preliminary or permanent injunction, whether
prohibitory or mandatory, in all cases in which it has
jurisdiction, and in which cases the pertinent provisions
of the Rules of Court shall apply;
e. To punish for contempt of the Board, both direct and
indirect, in accordance with the pertinent provisions of,
and the penalties prescribed by, the Rules of Court;
f. To issue subpoena and subpoena duces tecum and
summon witnesses to appear in any proceedings of the
Board, to administer oaths and affirmations;
g. To conduct investigations and hearings of complaints
for violation of the public service laws on land
transportation and of the Board's rules and regulations,
orders, decisions and/or rulings and to impose fines
and/or penalties for such violations;

Franchising and Regulatory Offices shall use every and all
reasonable means to ascertain facts in its case speedily
and objectively and without regard to technicalities of
law and procedures, all in the interest of due process;
j. To fix, impose and collect, and periodically review and
adjust, reasonable fees and other related charges for
services rendered;
k. To formulate, promulgate, administer, implement and
enforce rules and regulations on land transportation
public utilities, standards of measurements and/or
design, and rules and regulations requiring operators of
any public land transportation service to equip, install
and provide in their utilities and in their stations such
devices, equipment facilities and operating procedures
and techniques as may promote safety, protection,
comfort and convenience to persons and property in
their charges as well as the safety of persons and
property within their areas of operations;
l. To coordinate and cooperate with other government
agencies and entities concerned with any aspect
involving public land transportation services with the end
in view of effecting continuing improvement of such
services; and
m. To perform such other functions and duties as may be
provided by law, or as may be necessary, or proper or
incidental to the purposes and objectives of this
Executive Order.
LTO (Land Transportation Office) - shall “control as far as
they apply, the registration and operation of motor
vehicles and the licensing of owners, dealers,
conductors, drivers and similar matters.”
Functions of LTO:
1. Inspection and Registration of Motor Vehicles;

h. To review motu proprio the decisions/actions of the
Regional Franchising and Regulatory Office herein
created;

2. Issuance of Licenses and Permits;

i. To promulgate rules and regulations governing
proceedings before the Board and the Regional
Franchising and Regulatory Office: Provided, That except
with respect to paragraphs d, e, f and g hereof, the rules
of procedure and evidence prevailing in the courts of
laws should not be controlling and it is the spirit and
intention of said rules that the Board and the Regional

4. Adjudication of Traffic Cases.

3. Enforcement of Land Transportation Rules and
Regulations; and

CAB – Civil Aeronautics Board
Powers and Functions:
1. Licensing of domestics and international airlines, the
latter with the approval of the President;

33 S.A. PANDITA NOTES ON TRANSPORTATION
2. Regulation of fares and rates for the carriage of
persons and property;
3. Enforcement of the economic provision of RA 776;
4. Authorization of navigation of foreign aircraft in the
Philippines;
5. Participation in the negotiation of air agreements
covering exchange of air rights;
6. Approval or disapproval of mergers, consolidation,
interlocking relationship and inter-airline agreement;
7. Regulation of air accounting practices and
development of air carriage reporting system;
8. Maintenance of public record of tariffs, schedules and
other materials required to be filed by air carriers;
9. Assure protection of the public by requiring the
performance of safe and adequate air service,
eliminating rate discrimination, unfair competition and
deceptive practices in air transportation;
10. Suggest corrective measures to improve safety in air
commerce; and
11. Review, reverse, modify or affirm on appeal the
administrative decision or order of the Assistant
Secretary for Air Transportation on matters pertaining
to:
a. Grounding of airmen and aircraft;
b. Revocation of any certificate or denial by the
Assistant Secretary of any certificate; or
c. Imposition of civil penalty or fine by the
Assistant Secretary in connection with the violation of
any provision of RA 776.

(e) Exercise appellate powers on any decisions, findings
and rulings of the Director General, to issuesubpoena ad
testificandum or subpoena duces tecum requiring the
attendance and testimony of witnesses in any matter or
inquiry pending before the Board and require the
production of books, papers, contracts, agreements and
all other documents submitted for purposes of this
section to be under oath and verified by the person in
custody thereof as to the truth and correctness of data
appearing in such books, papers, tariffs, contracts,
agreements and all other documents;

CAAP – Civil Aviation Authority of the Philippines

(i) Invest such of the Authority's funds that are not
immediately required for operating expenses, or other
immediate obligations in any business venture the Board
may deem appropriate, or in such secured note,
government securities, and other negotiable
instruments that satisfy the guidelines prescribed by the
Board. Funds of the Authority shall be deposited in such
commercial and universal banks as the Board may
determine, subject to the requirements of existing laws.
The Board shall designate the officials authorized to
deposit in or withdraw funds from such depository
banks;

Powers of the CAAP:
(a) Provide comprehensive policy guidance for the
promotion and development of the Philippine aviation
industry, as provided for in this Act;
(b) Ensure that the Authority performs its functions in a
proper, efficient and effective manner;
(c) Decide the objectives, strategies and policies of the
Authority in accordance with the provisions of this Act;
(d) Determine the organizational structure of the
Authority in accordance with the provisions of this Act,
establish a human resources management system based
on merit and fitness, and adopt a rational compensation
and benefits scheme;

(f) Exercise appellate powers to order the taking of
depositions in any proceeding, or investigation, pending
before the Board at any stage of such proceeding or
investigation;
(g) Use available services, equipment, personnel and
facilities of other agencies of the Philippine Government,
on a reimbursable basis when appropriate and, on a
similar basis, to co-operate with those agencies in the
establishment and use of services, equipment and
facilities of the Authority;
(h) Use the property of the Authority in such a manner as
may appear to the Authority to be requisite,
advantageous or convenient with a view to making the
best use of any of the property of the Authority in
relation to its functions under this Act;

(j) Promulgate rules and regulations as may be necessary
in the interest of safety in air commerce pertaining to the
issuance of the airman's certificate including the
licensing of operating and mechanical personnel, type
certificate for aircraft, aircraft engines, propellers and
appliances, airworthiness certificates, air carrier
operating certificates, air agency certificates, navigation
facility and aerodrome certificates; air traffic routes;

34 S.A. PANDITA NOTES ON TRANSPORTATION
radio and aeronautical telecommunications and air
navigation aids; aircraft accident inquiries; aerodromes,
both public and private-owned; construction of
obstructions to aerodromes; height of buildings;
antennae and other edifices; registration of aircrafts;
search and rescue; facilitation of air transports;
operations of aircrafts, both for domestic and
international, including scheduled and non-scheduled;
meteorology in relation to civil aviation; rules of the air;
air traffic services; rules for prevention of collision of
aircrafts, identification of aircraft; rules for safe altitudes
of flight; and such other rules and regulations, standards,
governing other practices, methods and/or procedures
as the Director General may find necessary and
appropriate to provide adequately for safety regularity
and efficiency in air commerce and air navigation;
(k) Impose and fix reasonable charges and fees for the
use of government aerodromes or air navigation
facilities; for services rendered by the Authority in the
rating of any aerodrome or air navigation facilities, civil
aviation schools and instructors, aircraft repair stations,
and aircraft radio and aeronautical telecommunications
stations;
(l) Fix the reasonable charges to be imposed in the use of
privately-owned air navigation facilities and aerodromes;
(m) Adopt a system for the registration of aircraft as
hereinafter provided;
(n) Determine and fix, landing fees, parking space fees,
royalties on sales or deliveries, direct or indirect, to any
aircraft for its use of aviation gasoline, oil and lubricants,
spare parts, accessories and supplies, tools, other
royalties, fees or rentals for the use of any of the
property under its management and control;

(r) Formulate rules and regulations concerning
compliance of the carrier and the public for the safe
transport of goods and materials by air pursuant to
international standards or Annexes to the Chicago
Convention; and
(s) In coordination with the appropriate government
agency tasked to provide airport security, shall:
(1) Prescribe reasonable regulation requiring
that all passengers and all property intended to
be carried in the aircraft cabin in commercial air
transport be screened by weapon-detecting
procedure or facilities employed or operated by
employees or agents of the air operator or
foreign air operator prior to boarding the aircraft
for such transportation;
(2) Prescribe such other reasonable rules and
regulations requiring such parties, methods and
procedures as the Director General may find
necessary to protect persons and property
aboard aircraft operating in commercial air
transport against acts of criminal violence and
aircraft piracy; and
(3) To the extent practicable, require uniform
procedures for the inspection, detention, and
search of persons and property in domestic
commercial air transport and international
commercial air transport to assure their safety
and to assure that they will receive courteous
and efficient treatment by air operators and
their agents and employees.
MARINA – Maritime Industry Authority
Functions:

(o) Approve the annual and supplementary budget plan
and utilization of retained revenue;
(p) Exercise the corporate powers granted to the
Authority;
(q) Upon its own initiative or the recommendation of the
Director General or an application of a private person,
grant exemption from the requirements of observing
rules or regulations issued in accordance with this
Act: Provided, That said grant of exemption is not
prejudicial to flight safety;

a. Develop and formulate plans, policies, programs,
projects, standards, specifications and guidelines
geared toward the promotion and development of
the maritime industry, the growth and effective
regulation of shipping enterprises, and for the
national security objectives of the country;
b. Establish, prescribe and regulate routes, zones
and/or areas of operation of particular operators of
public water services;
c. Issue Certificates of Public Convenience for the
operation of domestic and overseas water carriers;

35 S.A. PANDITA NOTES ON TRANSPORTATION
d. Register vessels as well as issue certificates, licenses
or documents necessary or incident thereto;
e. Undertake the safety regulatory functions pertaining
to vessel construction and operation including the
determination of manning levels and issuance of
certificates of competency to seamen;
f. Enforce laws, prescribe and enforce rules and
regulations, including penalties for violations
thereof, governing water transportation and the
Philippine merchant marine, and deputize the
Philippine Coast Guard and other law enforcement
agencies to effectively discharge these functions;
g. Undertake the issuance of licenses to qualified
seamen and harbor, bay and river pilots;
h. Determine, fix and/or prescribe charges and/or rates
pertinent to the operation of public water transport
utilities, facilities and services except in cases where
charges or rates are established by international
bodies or associations of which the Philippines is a
participating member or by bodies or associations
recognized by the Philippine Government as the
proper arbiter of such charges or rates.
i. Accredit marine surveyors and maritime enterprises
engaged in shipbuilding, shiprepair, shipbreaking,
domestic and overseas shipping ship management
and agency;
j. Issue and register the continuous discharge book of
Filipino seamen;
k. Establish and prescribe rules and regulations,
standards and procedures for the efficient and
effective discharge of the above functions;
l. Perform such other functions as may now or
hereafter be provided by law."
PCG – Philippine Coast Guard
Powers and Functions:
(a) To enforce regulations in accordance with all relevant
maritime international conventions, treaties or
instruments and national laws for the promotion of
safety of life property at sea within the maritime
jurisdiction of the Philippines and conduct port state
control implementation;
(b) To inspections on all merchant ships and vessels,
including but shall not be limited to inspections prior to
departure, to ensure and enforce compliance with safety
standards, rules and regulations;

(c) To detain, stop or prevent a ship or vessel which does
not comply with safety standards, rules and regulations
from sailing or leaving port;
(d) To conduct emergency readiness evaluation on
merchant marine vessels;
(e) Subject to the approval of the Secretary of the DOTC,
to issue and enforce rules and regulation for the
promotion of safety and life and property at sea on all
maritime-related activities;
(f) To coordinate, develop, establish, maintain and
operate aids to navigation, vessel traffic system,
maritime communications and search and rescue
facilities within the maritime jurisdiction of the
Philippines;
(g) To remove, destroy or low to port, sunken or floating
hazards to navigation, including illegal fish and vessels, at
or close to sea lanes which may cause hazards to the
marine environment;
(h) To issue permits for the salvage of vessels and to
supervise all marine salvage operations, as well as
prescribe and enforce rules and regulations governing
the same;
(i) To render aid to persons and vessels in distress and
conduct search rescue in marine accidents within the
maritime jurisdiction of the Philippines, including the
high seas, in accordance with applicable international
conventions. In the performance of this function, the
PCG may enlist the services of other government
agencies and the merchant marine fleet;
(j) To investigate the inquire into the causes of all
maritime accidents involving death, casualties and
damage to properties;
(l) To assist in the enforcement of laws on fisheries,
immigration, tariff and customs, forestry, firearms and
explosives, human trafficking, dangerous drugs and
controlled chemicals, transnational crimes and other
applicable laws within the maritime jurisdiction of the
Philippines;
(m) To board and inspect all types of merchant ships and
watercrafts in the performance of this functions;

36 S.A. PANDITA NOTES ON TRANSPORTATION
(n) To enforce laws and promulgated and administer
rules and regulations for the protection of marine
environment and resources from offshore sources or
pollution within the maritime jurisdiction of the
Philippines;
(o) To develop oil spill response, containment and
recovery capabilities against ship-based pollution;

v. To provide services (whether on its own, by
contract, or otherwise) within the Port Districts
and the approaches thereof, including but not
limited to - berthing, towing, mooring, moving, slipping, or
docking any vessel;
- loading or discharging any vessel;

(p) To grant, within the capabilities and consistent with
its mandate, requests for assistance of other
government agencies in the performance of their
functions;
(q) To organize, train and supervise the PCG Auxiliary
(PCGA) for the purpose of assisting the PCG in carrying
out its mandated functions; and
(r) To perform such other functions that may be
necessary in the attainment of the objectives of this Act.
PPA – Philippine Ports Authority

- sorting, weighing, measuring, storing,
warehousing, or otherwise handling goods.
vi. To exercise control of or administer any
foreshore rights or leases which may be vested
in the Authority from time to time.
vii. To coordinate with the Bureau of Lands or
any other government agency or corporation, in
the development of any foreshore area.
viii. To control, regulate, and supervise pilotage
and the conduct of pilots in any Port District.

Powers and Duties:
(a) The corporate duties of the Authority shall be:
i. To formulate in coordination with the National
Economic and Development Authority a
comprehensive
and
practicable
Port
Development plan for the State and to program
its implementation, renew and update the same
annually in coordination with other national
agencies.
ii. To supervise, control, regulate, construct,
maintain, operate, and provide such facilities or
services as are necessary in the ports vested in,
or belonging to the Authority.

ix. To provide or assist in the provision of training
programs and training facilities for its staff or
staff of port operators and users for the efficient
discharge of its functions, duties, and
responsibilities.
x. To perform such acts or provide such services
as may be deemed proper or necessary to carry
out and implement the provisions of this Decree.
(b) The corporate powers of the Authority shall be as
follows:
i. To succeed in its corporate name.
ii. To sue and be sued in such corporate name.

iii. To prescribe rules and regulations,
procedures, and guidelines governing the
establishment, construction, maintenance, and
operation of all other ports, including private
ports in the country.
iv. To license, control, regulate, supervise any
construction or structure within any Port
District.

iii. To adopt, alter, and use a corporate seal
which shall be judicially noticed.
iv. To adopt, amend, or repeal its by-laws.
v. To create or alter its own organization or any
Port Management Unit, and staff such an
organization or Port Management Unit with
appropriate and qualified personnel in
accordance with what may be deemed proper or

37 S.A. PANDITA NOTES ON TRANSPORTATION
necessary to achieve the objectives of the
Authority.

NTC – National Telecommunications Authority
Powers:

vi. To make or enter of any kind or nature to
enable it to discharge its functions under this
Decree.
vii. To acquire, purchase, own, lease, mortgage,
sell, or otherwise dispose of any land, port
facility, wharf, quay, or property of any kind,
whether movable or immovable.
viii. To exercise the right of eminent domain, by
expropriating the land or areas surrounding the
Port of harbor, which in the opinion of the
Authority, are vital or necessary for the total
development of the Port District.
ix. To levy dues, rates, or charges for the use of
the premises, works, appliances, facilities, or for
services provided by or belonging to the
Authority, or any other organization concerned
with port operations.
x. To reclaim, excavate, enclose, or raise any part
of the lands vested in the Authority.
xi. To dredge or provide dredging services, within
a Port District of elsewhere.
xii. To acquire any undertaking affording or
intending to afford facilities for the loading and
discharging or warehousing of goods in the Port
Districts.
xiii. To supply water or bunkers for ships.
xiv. To obtain insurance for or require the
insurance of any property, movable or
immovable, belonging to the Authority and/or
goods in the custody of the Authority.
xv. To do all such other things and to transfer all
such business directly or indirectly necessary,
incidental or conducive to the attainment of the
purposes of the Authority.
xvi. Generally, to exercise all the powers of a
corporation under the Corporation Law insofar
as they are not inconsistent with the provisions
of this Decree.

1. Grant Certificate of Public Convenience and Necessity/
Provisional Authority to install, operate and maintain
telecommunications, broadcast and CATV services;
2. Grant licenses to install, operate and maintain radio
stations;
3. Allocate/sub-allocate and assign the use of radio
frequencies;
4. Type-approve/type-accept all radio communications
and broadcast equipment;
5. Conduct radio communication examination and issue
radio operator’s certificate;
6. Prepare, plan and conduct studies for policy and
regulatory purposes;
7. Monitor the operation of all telecommunication and
broadcast activities;
8. Enforce applicable domestic and international laws,
rules and regulations, prosecute violations thereof,
impose appropriate penalties/sanctions;
9. Issue licenses to operate land, maritime, aeronautical
and safety devices; and
10. Perform such other telecommunication/broadcast
related activities as may be necessary in the interest of
public service.
Responsibilities of NTC under RA 7925:
a) Adopt an administrative process which would facilitate
the entry of qualified service providers and adopt a
pricing policy which would generate sufficient returns to
encourage them to provide basic telecommunications
services in unserved and underserved areas;
b) Ensure quality, safety, reliability, security,
compatibility
and
inter-operability
of
telecommunications facilities and services in conformity
with standards and specifications set by international
radio and telecommunications organizations to which
the Philippines is a signatory;

38 S.A. PANDITA NOTES ON TRANSPORTATION
c) Mandate a fair and reasonable interconnection of
facilities of authorized public network operators and
other providers of telecommunications services through
appropriate modalities of interconnection and at a
reasonable and fair level of charges which make
provision for the cross subsidy to unprofitable local
exchange service areas so as to promote telephone
density and provide the most extensive access to basic
telecommunications services available at affordable
rates to the public;
d) Foster fair and efficient market conduct through, but
not limited to, the protection of telecommunications
entities from unfair trade practices of other carriers;
e) Promote consumers welfare by facilitating access to
telecommunications services whose infrastructure and
network must be geared towards the needs of individual
and business users;
f)
Protect
consumers
against
misuse
of
telecommunications entity's monopoly or quasimonopolistic powers by but not limited to the
investigation of complaints and exacting compliance
with service standards from such entity; and
g) In the exercise of its regulatory powers, continue to
impose such fees and charges as may be necessary to
cover reasonable costs and expenses for the regulation
and supervision of the operations of telecommunications
entities.
Powers of NTC under RA 7925:
1. To authorize, supervise, regulate and monitor the
operation of public telecommunication services and
broadcast services;
2. To authorize service rates for public
telecommunication services;
3. To undertake frequency management activities and
ensure effective use of the radio spectrum which is a
limited natural resource;
4. To undertake the registration and licensing of radio
transceivers and stations including radio stations for
commercial, maritime, aeronautical, broadcast, common
carrier, amateur, personal and government radio
communication services;
5. To establish, promulgate, implement and enforce
technical standards as well as rules and regulations for
the effective use of telecommunication and broadcast
facilities;
6. To provide technical advisory assistance to other
government agencies and other entities on matters
regarding telecommunications. Foster a healthy

competition environment in the telecom-medications
sector;
7. Establish a stable, transparent, speedy and fair
administrative process, giving due regard to the
observance of due process;
8. Manage and administer the radio frequency spectrum,
including the imposition of reasonable spectrum usage
fees;
9. Deregulate rates when the market is highly
competitive and move towards cost-based rates;
10. Democratize the ownership of telecommunications
and broadcasts services; and
11. Register value-added service providers.
ERC – Energy Regulatory Board
Functions of ERC:
(a) Enforce the implementing rules and regulations of
this Act;
(b) Within six (6) months from the effectivity of this Act,
promulgate and enforce, in accordance with law, a
National Grid Code and a Distribution Code which shall
include, but not limited to, the following:
(i) Performance standards for TRANSCO O & M
Concessionaire, distribution utilities and suppliers:
Provided, That in the establishment of the performance
standards, the nature and function of the entities shall
be considered; and
(ii) Financial capability standards for the generating
companies, the TRANSCO, distribution utilities and
suppliers: Provided, further, That such standards are set
to ensure that the electric power industry participants
meet the minimum financial standards to protect the
public interest. Determine, fix, and approve, after due
notice and public hearings the universal charge, to be
imposed on all electricity end-users pursuant to Section
34 hereof.
(c) Enforce the rules and regulations governing the
operations of the electricity spot market and the
activities of the spot market operator and other
participants in the spot market, for the purpose of
ensuring a greater supply and rational pricing of
electricity;
(d) Determine the level of cross subsidies in the existing
retail rate until the same is removed pursuant to Section
74 hereof;
(e) Amend or revoke, after due notice and hearing, the
authority to operate of any person or entity which fails
to comply with the provisions hereof, the IRR or any
order or resolution of the ERC. In the event a divestment

39 S.A. PANDITA NOTES ON TRANSPORTATION
is required, the ERC shall allow the affected party
sufficient time to remedy the infraction or for an orderly
disposal, but in no case exceed twelve (12) months from
the issuance of the order;
(f) In the public interest, establish and enforce a
methodology for setting transmission and distribution
wheeling rates and retail rates for the captive market of
a distribution utility, taking into account all relevant
considerations, including the efficiency or inefficiency of
the regulated entities. The rates must be such as to allow
the recovery of just and reasonable costs and a
reasonable return on rate base (RORB) to enable the
entity to operate viably. The ERC may adopt alternative
forms
of
internationally-accepted
rate-setting
methodology as it may deem appropriate. The ratesetting methodology so adopted and applied must
ensure a reasonable price of electricity. The rates
prescribed shall be non-discriminatory. To achieve this
objective and to ensure the complete removal of cross
subsidies, the cap on the recoverable rate of system
losses prescribed in Section 10 of Republic Act No. 7832,
is hereby amended and shall be replaced by caps which
shall be determined by the ERC based on load density,
sales mix, cost of service, delivery voltage and other
technical considerations it may promulgate. The ERC
shall determine such form or rate-setting methodology,
which shall promote efficiency. In case the rate setting
methodology used is RORB, it shall be subject to the
following guidelines:
(i) For purposes of determining the rate base, the
TRANSCO or any distribution utility may be allowed to
revalue its eligible assets not more than once every three
(3) years by an independent appraisal company:
Provided, however, That ERC may give an exemption in
case of unusual devaluation: Provided, further, That the
ERC shall exert efforts to minimize price shocks in order
to protect the consumers;
(ii) Interest expenses are not allowable deductions from
permissible return on rate base;
(iii) In determining eligible cost of services that will be
passed on to the end-users, the
ERC shall establish minimum efficiency performance
standards for the TRANSCO and distribution utilities
including systems losses, interruption frequency rates,
and collection efficiency;
(iv) Further, in determining rate base, the TRANSCO or
any distribution utility shall not be allowed to include
management inefficiencies like cost of project delays not
excused by force majeure, penalties and related interest
during construction applicable to these unexcused
delays; and

(v) Any significant operating costs or project investments
of the TRANSCO and distribution utilities which shall
become part of the rate base shall be subject to
verification by the ERC to ensure that the contracting and
procurement of the equipment, assets and services have
been subjected to transparent and accepted industry
procurement and purchasing practices to protect the
public interest.
(g) Three (3) years after the imposition of the universal
charge, ensure that the charges of the
TRANSCO or any distribution utility shall bear no cross
subsidies between grids, within grids, or between classes
of customers, except as provided herein;
(h) Review and approve any changes on the terms and
conditions of service of the TRANSCO or any distribution
utility;
(i) Allow the TRANSCO to charge user fees for ancillary
services to all electric power industry participants or selfgenerating entities connected to the grid. Such fees shall
be fixed by the ERC after due notice and public hearing;
(j) Set a lifeline rate for the marginalized end-users;
(k) Monitor and take measures in accordance with this
Act to penalize abuse of market power, cartelization, and
anti-competitive or discriminatory behavior by any
electric power industry participant;
(l) Impose fines or penalties for any non-compliance with
or breach of this Act, the IRR of this Act and the rules and
regulations which it promulgates or administers;
(m) Take any other action delegated to it pursuant to this
Act;
(n) Before the end of April of each year, submit to the
Office of the President of the Philippines and Congress,
copy furnished the DOE, an annual report containing
such matters or cases which have been filed before or
referred to it during the preceding year, the actions and
proceedings undertaken and its decision or resolution in
each case. The ERC shall make copies of such reports
available to any interested party upon payment of a
charge which reflects the printing costs. The ERC shall
publish all its decisions involving rates and
anticompetitive cases in at least one (1) newspaper of
general circulation, and/or post electronically and
circulate to all interested electric power industry
participants copies of its resolutions to ensure fair and
impartial treatment;
(o) Monitor the activities in the generation and supply of
the electric power industry with the end in view of
promoting free market competition and ensuring that
the allocation or pass through of bulk purchase cost by
distributors is transparent, non-discriminatory and that

40 S.A. PANDITA NOTES ON TRANSPORTATION
any existing subsidies shall be divided pro-rata among all
retail suppliers;
(p) Act on applications for or modifications of certificates
of public convenience and/or necessity, licenses or
permits of franchised electric utilities in accordance with
law and revoke, review and modify such certificates,
licenses or permits in appropriate cases, such as in cases
of violations of the Grid Code, Distribution Code and
other rules and regulations issued by the ERC in
accordance with law;
(q) Act on applications for cost recovery and return on
demand side management projects;
(r) In the exercise of its investigative and quasi-judicial
powers, act against any participant or player in the
energy sector for violations of any law, rule and
regulation governing the same, including the rules on
cross-ownership, anti-competitive practices, abuse of
market positions and similar or related acts by any
participant in the energy sector or by any person, as may
be provided by law, and require any person or entity to
submit any report or data relative to any investigation or
hearing conducted pursuant to this Act;
(s) Inspect, on its own or through duly authorized
representatives, the premises, books of accounts and
records of any person or entity at any time, in the
exercise of its quasi-judicial power for purposes of
determining the existence of any anti-competitive
behavior and/or market power abuse and any violation
of rules and regulations issued by the ERC;
(t) Perform such other regulatory functions as are
appropriate and necessary in order to ensure the
successful restructuring and modernization of the
electric power industry, such as, but not limited to, the
rules and guidelines under which generation companies,
distribution utilities which are not publicly listed shall
offer and sell to the public a portion not less than fifteen
percent (15%) of their common shares of stocks:
Provided, however, That generation companies,
distribution utilities or their respective holding
companies that are already listed in the PSE are deemed
in compliance. For existing companies, such public
offering shall be implemented not later than five (5)
years from the effectivity of this Act. New companies
shall implement their respective public offerings not
later than five (5) years from the issuance of their
certificate of compliance; and
(u) The ERC shall have the original and exclusive
jurisdiction over all cases contesting rates, fees, fines and
penalties imposed by the ERC in the exercise of the above
mentioned powers, functions and responsibilities and

over all cases involving disputes between and among
participants or players in the energy sector.
Local Water Utilities Administration
Administration shall have the power and duty to
establish standards for local water utilities and adopt
rules and regulations for the enforcement thereof. The
Administration shall vigorously consult and coordinate
its actions with all government agencies active in the
areas of public works and all other concerned agencies in
the promulgation of these standards. Said standards and
regulations shall include the following:
(a) Water Quality. - Minimum drinking water standards
including a uniform testing and reporting system. Said
standards shall include bacteriological, chemical and
physical parameters;
(b) Design and Construction. - Minimum criteria for the
design and construction of new or additional facilities for
water supply, treatment, transmission and distribution,
and for wastewater collection, treatment and disposal;
(c) Equipment, Materials and Supplies. - Standards for
the optimum selection and effective utilization of
equipment, materials and supplies by local water and
sewer utilities;
(d) Operations and Maintenance. - Standardized
procedures for operating and maintaining equipment
and facilities;
(e) Personnel. - The training of personnel who operate or
manage local water utilities. For this purpose, at least a
majority of the personnel of a local water district must
have satisfactorily completed appropriate training
courses, programs or seminars conducted by the
Administration, and must be holders of a certificate of
completion or competence, as the case may be, before a
certificate of conformance is issued to the water district.
For certain positions which the Administration may
specify, only those persons possessing, or in the case of
subsequent appointments, only persons who will
undergo training and shall have obtained within six
months, a certificate of completion or competence, as
the case may be shall be appointed. (As amended by Sec.
32, PD 768)
(f) Organization. - Organizational and institutional
criteria to assure independent operation and funding of
local water utilities.
(g) Accounting. - A uniform accounting system with
uniform chart of accounts. Said standard and regulations
also shall include stipulated levels of internal reporting to
local water utility management.