UK P&I Club hits out at ‘quirks’ in the Philippine legal system

The UK P&I Club has hit out at the Philippine legal system’s failure to look after one of the nation’s key exports, namely its seafarers.

In a release, Tony Nicholson, senior claims director at the insurance firm, commented: “Filipino seafarers make an immense contribution to the world’s ocean-going merchant shipping fleet and their home country. Unfortunately this is somewhat overshadowed by continuing frustrations within the Philippine legal system.”

Nicholson outlined how “ambulance-chasing” lawyers are succeeding with what he called “spurious” claims against employers before the National Labor Relations Commission and National Conciliation and Mediation Board (NCMB).

“Due to a quirk in the Philippine legal system, the arbitration awards must be paid by employers, regardless of whether they wish to contest them. Over the past eight years more than 250 arbitration decisions have been successfully appealed by employers. However, and perhaps not surprisingly, very little of the £18 million they have unjustly paid out has yet to be recovered – and probably never will be. Fortunately, things are beginning to change – starting with new legislation against ambulance-chasing lawyers,” Nicholson said.

The new Seafarers’ Protection Act is designed to protect Filipino seafarers and their families from the unscrupulous practices of such lawyers and came into force on May 21 this year. Under the new law, any individual or group – whether lawyers or not – found to be soliciting directly or via agents will be imprisoned for one to two years and/or fined PHP50,000 to 100,000 ($1,000 to $2,000). In addition, legal fees are now capped at 10% of the total amount awarded.

In addition to the new ambulance-chasing legislation, steps are also being taken to put an end to the problem of enforced payment of arbitration awards in the event the employer wishes to appeal. The International Group of P&I Clubs has recorded 252 cases over the past eight years in which arbitration awards totalling £18m have been overturned or modified in favour of the employer by the Court of Appeals or Supreme Court, yet less than $40,000 has so far been recovered through the process of restitution.

“If the recent pattern of awards and appeals continues, the total to be recovered could reach over $40 million within the next five years,” Nicholson predicted.

The International Group has formally proposed an alternative Escrow system to replace this process. When an employer wishes to dispute an arbitration decision, the judgement amount would be deposited in an Escrow account pending the decision of a higher court. This would also leave the door open to an amicable settlement being agreed at any time during the pendency of the case before the higher court. Legal title to the money in the Escrow account would rest with the employer but the claimant would hold beneficial title.

Concluding, Nicholson noted: “The new Seafarers’ Protection Act means Filipino seafarers and their families should now be protected from losing up to 60% of their contractual compensation entitlements due to the unscrupulous practices of ‘ambulance-chasing’ lawyers. The new law should also reduce the number of spurious claims being encouraged by such lawyers. However, given the lack of impartiality of the arbitration bodies, in particular the NCMB, and the rising number of maritime labour cases being referred to them, it seems likely that the quantifiable damage suffered by employers will continue to rise. The significant frustrations felt by employers and the damage suffered as a consequence will only be overcome if the Escrow proposal is adopted and enacted into law.”


Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.
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