The Real and Hypothecary

Nature of Maritime Law

The real and hypothecary nature of maritime law
essentially means that no vessel, no liability.

Maritime Law (also known as Admiralty Law) is defined as a
system of law concerning navigation and commerce. It also covers
the agreements between sovereign nations over customs and
practices relating to shipping. Cases to which it applies include the
ownership and operation of vessels, the rights and duties of
captain or master and the crew, as well as the transportation of
goods or persons by water.
Maritime Law should not be confused with the Law of the Sea
since the latter belongs to the realm of public international law
while maritime law is a branch of private law especially that of
commercial law.
Maritime or admiralty law is likewise different from civil law and
even from commercial law in general basically because of the real
and hypothecary nature of maritime law.
What then is the meaning of the phrase "real and hypothecary
nature of maritime law"?
The phrase would be better understood by looking into the history
of maritime law and commerce.
The doctrine actually originated in Europe during the time when
their early merchants have started to look overseas for the
expansion of their trade business and for the exploration of new
sources of raw materials for the supply of European manufacturing
concerns. The prevailing condition of the maritime trade and sea
voyages during the medieval ages was marked by innumerable
hazards and perils.The adhered rule then is that when a merchant
or group of merchants venture in a voyage and thereafter their ship
sinks, the unfortunate investors can then be held liable by their
creditors to the extent of all their individual assets. Without the
principle of limited liability, a ship owner and investor in maritime
commerce would run the risk of being ruined by the bad faith or
negligence of his captain, and the apprehension of this would be
fatal to the interest of navigation.Thus, the investors can easily go
bankrupt and be buried in debts for even a single unfortunate
voyage. This high risk have created a deterrent effect to the
merchants to invest in maritime commerce. This also brought an
adverse effect in shipbuilding.
In order to remedy the situation and hence to encourage
investments in maritime commerce and shipbuilding, the
lawmakers of the various nations in Europe have formulated their
respective versions but essentially the same doctrine of limited
liability. It was deemed necessary to confine the liability of the
owner or agent arising from the operation of a ship to the vessel,
equipment, and freight, or insurance, if any, so that if the ship
owner or agent abandoned the ship, equipment, and freight, his
liability was extinguished. No ship, no liability.
But one may ask, why use the terms, "real" and "hypothecary"?
The term "real" signifies that the extent of liability of those involved
in maritime commerce and also the claims of their counterparties
are both determined by the value of the ship and its load, the very
res or real property involved in the endeavor.
On the other hand, the term, "hypothecary" implies that shipowner
can free himself from liability arising from maritime commerce by
hypothecating the ship in favor of the claiming parties. To
hypothecate means to pledge as a security.
In sum, the real and hypothecary nature of maritime law states that
the shipowners or agents liability is merely coextensive 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.
But in recent times, jurisprudence have already carved out some
exceptions from this rule. These are:
1. where the injury or death of a passenger is either due to the fault
of the shipowner or the concurring negligence of the ship captain
and the owner;
2. where the vessel is insured;
3. in cases of workmen's compensation claims
The court in cases where the above exceptions were carved out,
fairly noted that because of the advances in shipbuilding
technologies in recent times, modern ships as compared to those
which were existing at the time when the doctrine was formulated,
are far better equipped in withstanding the ordinary perils of
maritime voyage. This crucial fact is said to have rendered
obsolete the doctrine of limited liability thus necessitating the
gradual phasing out of the rule.
References:
Yangco v. Laserna, 73 Phil. 330 (1941)
Dela Torre v. Court of Appeals, G.R. No. 160088, July 13, 2011
Chua Yek Hong v. IAC, G.R. No. 74811, Sept. 30, 1988