7/29/2019 Hypotecarhy Nature of Maritime Commerce

1/1

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 theircounterparties 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 coextensiv e

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.