Supreme Court: 10-centavo levy on oil, petroleum tankers constitutional

Ina Reformina, ABS-CBN News

Posted at Sep 13 2018 07:45 AM

MANILA - The Supreme Court (SC) has upheld the constitutionality of the establishment of an Oil Pollution Management Fund (OMPF) that shall be mainly sourced from imposing a levy of 10-centavos per liter for every delivery or transshipment of oil by tanker barges and tanker haulers to the Philippines.

In a 35-page decision, the high court granted a petition filed by the Department of Transportation (DOTr), Maritime Industry Authority (Marina), and Philippine Coastguard (PCG) against a trial court ruling that declared the imposed contribution unconstitutional.

The levy is mandated under Oil Pollution Compensation Act of 2007 or Republic Act 9483.

The law was passed to implement the International Convention on Civil Liability for Oil Pollution Damage (1969 Civil Liability Convention) and the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage (1992 Fund Convention), “to ensure that our enforcement agencies are capable of protecting our marine wealth and preventing harm from being caused to the people and their livelihood” in the event of an oil spill.

On April 12, 2016, its Implementing Rules and Regulations (IRR) was promulgated.

Under RA 9483, the OMPF shall be used to finance (a) immediate containment, removal and clean-up operations of the PCG in all oil pollution cases; and (b) research, enforcement and monitoring activities of the PCG, MARINA and Philippine Ports Authority, other ports authority bodies of the DOTr, Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources, and the Department of Energy (DOE).

The challenged provision of the law states that the 10-centavo levy shall be imposed on the first year of the law’s implementation; and the succeeding amount shall be jointly determined by Marina, other concerned government agencies, and representatives from owners and operators of oil tankers and barges.

On February 22, 2017, the Quezon City Regional Trial Court (RTC) branch 216 granted the petition filed by the Philippine Petroleum Sea Transport Association, Herma Shipping and Transport Corp., Islas Tankers Seatransport Corp., Mis Maritime Corp., Petrolift, Inc., Golden Albatross Shipping Corp., Via Marine Corp., and Cargomarine Corp. The RTC issued a permanent injunction in their favor.

These firms argued that the obligation to contribute to the OMPF solely imposed upon owners and operators of oil/petroleum tankers and barges violates their right to equal protection of the law and their right to due process.

The assailed provision was not contained in the international conventions sought to be implemented and the law was vague in terms of how to implement the levy, they added.

The RTC ruled that there is no clear and valid reason as to why the oil/petroleum tankers and barges are being treated differently from other vessels which may also have the potential to cause oil pollution. The RTC held that “all potential marine pollutants should be required to contribute to the OMPF."

In elevating their case to the SC, the government agencies argued that the collection of the OMPF did not violate the constitution and other laws. They also maintained that “public interest in protecting the marine wealth of the country warrants the imposition of the 10-centavo impost.”


In its decision, the high court stressed that the creation of the OMPF should not be viewed as “a burdensome cross that respondents (owners, operators of oil tankers and barges) have to bear.”

“Rather, it is an opportunity for them to have an important role in the protection of the environment which they navigate and directly utilize in the conduct of their business. It is but proper and timely to remind respondents that the conduct of a business is a mere privilege which is subject to the regulatory authority of the state,” the tribunal added.

Preliminarily, the SC noted a defect in the petition for declaratory relief filed by the firms before the RTC in the absence of any “actual case” of controversy. The high court explained that what should have been filed was a petition for certiorari to determine grave abuse of discretion on the part of government.

The SC, however, decided to proceed to rule on the merits of the case as it saw that “the need to finally resolve the issues involved in this case far outweighs the rigid application of the rules “


The high court thumbed down the firms’ allegation of violation of their right to the equal protection of laws, as it stressed that RA 9483 was passed to implement the two international conventions which both “only expressly cover ‘sea-going vessel and seaborne craft of any type whatsoever constructed or adapted for the carriage of oil in bulk as cargo.’”

There was also no violation of their right to due process, as the SC excplained that respondent firms have the burden to prove that the imposition of the levy is arbitrary, oppressive, excessive, and confiscatory.

“Most importantly, it must be borne in mind that the impost provided in Section 22 is not a revenue-raising tax intended to supplement the government's treasury. What Section 22 does is to regulate the conduct of the business of owners and operators of oil tankers and barges by imposing upon them the duty to contribute to the protection of Philippine waters which they directly use in the conduct of their trade, and which they expose to a risk of possibly irreparable destruction brought about by the spillage or leakage of the product that they carry and profit from," the court said.


The firms argued that since RA 9483 was passed to implement the 1992 Civil Liability and the 1992 Fund Conventions, the creation of the OPMF must be found in said conventions for it to be validly included in the local law.

The high court, however, stressed that the conventions do not only cover damage claims by affected individuals but also all amounts encompassed by "pollution damage.”

“The conventions, therefore, also cover damage to property, containment, clean-up, and rehabilitation. Thus, the policy underpinning the establishment of the OPMF in Section 22(a) of RA 9483 and its IRR is wholly consistent with the objectives of the conventions,” the SC said.

“In other words, by creating the OPMF, Congress sought to ensure that our enforcement agencies are capable of protecting our marine wealth and preventing harm from being caused to the people and their livelihood by reason of these unfortunate events… oil spill response and containment is directly connected to compensation for damages brought about by the incident,” it added.


Contrary to the firms’ claim of vagueness, the SC ruled that RA 9483 was clear in setting the standard and parameters for the fixing of the levy:

the purposes for which the fund was set up;

the OMPF shall be used to finance (A) immediate containment, removal and clean-up operations of the PCG in all Oil pollution cases, and (b) research, enforcement and monitoring activities of relevant agencies (PCG, MARINA and PPA, other ports authority of the DOTr, DENR EMB, DOE);

90-percent of the fund shall be maintained annually for the specified activities;

any amounts appropriated for the OMPF under the General Appropriations Act shall be used exclusively for the specified activities; and

in no case shall the fund be used for personal services expenditures except for the compensation of those involved in clean-up operations.

“The rate of impost should, thus, be enough to accumulate an amount that, when combined with the funds that will be derived from the appropriations under the GAA, grants, donations, and endowment from various sources, domestic or foreign, can sufficiently enable our agencies to fulfill their duty of protecting the country's marine wealth and the stakeholders by ensuring that any damage caused by oil spills is minimal and the resulting cost can be fully or adequately covered by the conventions,” the SC said.

“It is also important to note that congress included the representatives from the owners of tankers barges, tankers haulers, and ship hauling oil and/or petroleum products as part of the group tasked to determine the rates for the following years. In so doing, congress not only valued their inputs but also gave them an avenue to protect their businesses by ensuring that the effect of the imposition on the private sector would be factored in and not seen as mere recommendations.”

The high court stressed that a few business adjustments need to be made for the protection of the environment for future generations “and all must share in this responsibility.”