PHILIPPINES Law and Practice Contributed by: Valeriano Del Rosario, Daphne Ruby Grasparil, Patrick Sarmiento and Maria Francesca Bautista, VeraLaw
approved by the Admiralty Court, in an amount sufficient to cover the arresting party’s claims. While a letter of undertaking or a foreign bank’s guarantee are not expressly mentioned, the same may be offered by the defendant and, if accepted by the plaintiff, may be allowed by the court in the exercise of its discretion. 4.10 Procedure for the Judicial Sale of Arrested Ships During the pendency of the action, the applicant shall pay all port charges, fees and expenses for preservation and maintenance of the ship or cargo during its arrest until its release or sale. After final judgment and upon motion of the pre - vailing party, the Admiralty Court may direct the sale (at a public auction) of a ship or cargo which has been subject of a Warrant of Arrest and has remained in custodia legis due to failure to file the appropriate bail bond. For this purpose, the Admiralty Court shall cause the appointment of one or more appraisers who shall assign a value of the ship or cargo and assist the sheriff in the sale of the property. If there are numerous prevailing parties in an action in rem, a motion may be filed before the court to determine the priority of the claims against the proceeds of the sale of the ship or cargo. In determining the priority of claims, the court shall consider the relevant laws such as, but not limited to, the Ship Mortgage Decree of 1978, which gives preferred status to duly con - stituted mortgages over the vessel. 4.11 Insolvency Laws Applied by Maritime Courts The Philippines’ insolvency law is Republic Act No 10142, also known as the Financial Rehabili - tation and Insolvency Act of 2010 (FRIA). FRIA
provides procedures for the different types of rehabilitation and liquidation proceedings. Under FRIA, when a petition is filed and com - menced by or against a distressed debtor, a stay or suspension order is issued and has the fol - lowing effects: • it suspends all actions or proceedings, in court or otherwise, for the enforcement of claims against the debtor; • it suspends all actions to enforce any judg - ment, attachment or other provisional rem - edies against the debtor; • it prohibits the debtor from selling, encumber - ing, transferring or disposing of in any manner any of its properties except in the ordinary course of business; and • it prohibits the debtor from making any payment of its liabilities outstanding as of the commencement date except as may be provided therein. The suspension order under FRIA takes prec - edence over admiralty proceedings filed against the distressed owner. As such, the admiralty pro - ceedings will be suspended and cannot contin - ue without an order from the insolvency court. 4.12 Damages in the Event of Wrongful Arrest of a Vessel To apply for a Warrant of Arrest, the applicant is required to give a bond or security executed in favour of the Admiralty Court in the amount of 30% of the claim (but in no case less than PHP5 million). This bond is conditioned on the arresting party paying all the costs which may be adjudged to the adverse party and all damages which the adverse party may sustain by reason of the arrest, if the court finally adjudges that the applicant was not entitled thereto.
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