Focus on Philippines: Garnishment

Date: 11/10/2016
Author: Tony Nicholson & Stephen Michaels

Around a third of the world’s 1.2 million seafarers are Filipinos. They contribute around US$6 billion a year to the Philippine economy. Developments in the country’s employment laws are therefore of key importance to shipowners.

In this second part of our Focus on Philippines series, UK Club Senior Claims Director, Tony Nicholson, who also chairs the Philippine working group of the International Group of P&I Clubs’ personal injury subcommittee, and Senior Claims Executive Stephen Michaels look at the issue of Garnishment & the International Group’s ESCROW proposal.

GARNISHMENT (Enforcement of the NLRC or NCMB’s “final & executory” decisions) & the International Group’s ESCROW Proposal

The Association has been very active within the International Group in leading efforts to find an equitable solution to the problem of Garnishment, which is the legal term relating to the collection of a monetary judgement on behalf of a Claimant, from a Defendant. In the Philippines, this routinely occurs whilst the case is pending resolution before the higher courts, following the issuance of a Writ of Execution by the lower court (NLRC or NCMB) in relation to their “final & executory” decision, and is central to our Members' many concerns relating to crew claims in this jurisdiction. A Writ of Execution can be enforced against the Manning Agents’ assets, including their bank account(s) and/or the Club LoU that may have been provided in support of the Bond filed locally, when appealing a Labor Arbiter’s decision.

The UK Club has been collating data on behalf of the IG for the past 8 ½ years, in order to understand the damage caused to Members, and, more importantly, to evidence this damage, in support of the need to bring fairness, balance and integrity to the legal system, through the adoption of the International Group’s ESCROW proposal.

The ESCROW proposal simply works with the law in providing a mechanism for the execution of decisions rendered by the NLRC or NCMB, whereby the judgement award is deposited in escrow, pending the outcome of the case before the higher courts, or agreement is reached with regards to a genuinely amicable settlement, rather than a settlement under duress. Legal title to the money still rests with the employer, but the Claimant holds beneficial title. As importantly, the proposal supports what is already strongly encouraged within the Philippine legal system, namely Conciliation and Mediation, and what is central to any healthy legal system, an active Supreme Court.

The two charts below highlight how the Garnishment issue has developed across the IG since November 2009 up to March 2016. It is important to recognise that this data reflects only the quantifiable damage (the “tip of the iceberg”) caused to Members of the IG, where notwithstanding the enforcement of the NLRC or NCMB’s decision, the Member has pursued the matter before the higher Courts and either overturned, or favourably modified the lower Court’s decision. It does not consider the far more significant, but unquantifiable damage, caused when Members feel compelled to settle cases under duress, when confronted with a Writ of Execution, thereby negating the possibility of achieving a favourable decision before the higher Courts.

In the 29 months leading up to March, 2016, 154 new cases have been recorded, representing more than USD 11,750,000 that has been paid by employers during that period alone, and which, due to the overturning or modifying of the awards in the higher courts, they are entitled to recover. As of March 2016, the IG recorded a total of 252 such cases, totalling more than USD 18,000,000. However, less than USD 40,000 has been recovered through the process of Restitution, although there are some more, albeit modest recoveries, to be added in the near future. Nevertheless, this still reflects a de minimis recovery, equal to only 0.42% of the total amount due back to Members, in cases which have attained Finality before the higher courts.

Should we witness the quantifiable damage seen over the past 29 months sustained going forward, then we can expect to see the total exceed USD 40,000,000 within the next 5 years. Yet this projection does not consider the adverse impact we believe will become more evident over the next 12 months, giving consideration to amendments to the Migrant Workers Act (Republic Act 1022) in 2010,  which stipulate that for OFW’s (Overseas Filipino Workers) with Collective Bargaining Agreements, any claim shall be submitted for voluntary arbitration (NCMB).

The IG’s Escrow proposal has gained significant support locally and internationally and a further Bill has been filed by Congressman Manalo, which hopefully will be seen as complementing the Seafarers’ Protection Act, which seeks to adopt the Escrow proposal, and thereby bring the debate and the legislative changes necessary to the fore.

Part one of the Focus on Philippines series can be found here: 

For more information please contact Tony Nicholson. Tony is part of The People Claims Syndicate which  handles all P&I/Defence matters relating to crew, stevedores, passengers, stowaways, refugees and third party visitors involving injury, illness, death, drug smuggling, immigration fines, loss of or damage to effects of crew/others and occupational disease.

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