56 items found for "" Speaking Volumes Speaking Volumes Browse the website of any large brokerage and you will find numerous vessels said to have a “GT” of 499. This refers to Gross Tonnage. Owners of these are relieved from having to comply with a raft of regulations which apply to chartered vessels of 500 GT and above. Not doing so can lead to the yacht being detained and will lead to insurance policies being invalid. To be clear, this paper isn’t suggesting that the relevant safety regulations shouldn’t apply to certain larger yachts - it’s just that Gross Tonnage creates peculiar regulatory thresholds which can lead to compromised designs. Whether or not owners are looking to shave money off compliance costs, designers certainly consider there to be a market for such “paragraph” yachts. Keep in mind, also, that many such safety regulations don’t apply to private (i.e. non-chartered) yachts - even though they require the same number of permanent, full-time crewmembers. WHAT IS GROSS TONNAGE? The word ‘tonnage’ here does not mean weight. It is derived from the old English term ‘tun’ meaning a large wooden barrel – used for measuring, storing and transporting wine, oil or honey. They usually held 252 gallons, but other sizes were common. As it happens, a tun of wine weights about one long ton, which is 2240 pounds or 1016 kg, but the key point is that Gross Tonnage reflects volume – not weight, mass or displacement. Gross Tonnage is an abstract, unitless calculation, being the vessel’s total enclosed volume but modified by a logarithmic factor based on that volume. It was a compromise which met the needs of the shipping community of the 1960s. Yet these arcane rules still govern the design and specification of certain yachts over half a century later. Crucially, the figure is calculated as much as it is measured. It is defined by the Regulation 3 of Annex I of the International Convention on Tonnage Measurement of Ships, 1969 (normally abbreviated to “ITC 69”) by the formula: GT=K1V Where: V = the total volume of all enclosed spaces of the ship in cubic metres, and K1 = 0.2 + 0.02 log10V (or as set out in Appendix 2 of ITC 69) Calculating this requires a good grasp of both naval architecture and mathematics. UNDERLYING RATIONALE The reason why volume is used rather than weight is that, historically, ships were measured in order to calculate taxes. Aside from warships, all vessels were cargo ships of some description. And the easiest and fairest way to fund port operations and levy foreign trade was to tax ship owners according to cargo carrying capacity and, therefore, profitability. Overall vessel size was not the key factor. The same principles were applied to later passenger ships. Different countries used a variety of methods, which is why the ITC 69 was needed. This also did away with Gross Register(ed) Tonnage (GRT) - a measure of total internal capacity which is confused with GT even to this day – and at least ten other key measurements in use internationally. PROBLEMS CAUSED Inevitably, there is pressure on ship designers to minimise enclosed volume and reduce Gross Tonnage-based taxes and dues. Such amounts are minimal on relatively small vessels, such as yachts, but squeezing beneath a particular tonnage threshold seems to be a common aim. This can lead to freeboards (the distance between the waterline and the deck) being reduced to the minimum legal requirement. In turn, this reduces the available reserve buoyancy – those internal areas, above the waterline, which can be made watertight in the event of an emergency and help keep the vessel afloat for longer. Further, crew areas are reduced to the bare minimum in terms of floor space and headroom, and engine rooms are made as small as possible with machinery crammed in. Most pertinently for yachts, sterns tend to be cut off and slab-sided, sheer (the curving of the main deck upwards towards bow and stern) is reduced or eliminated, and swathes of the upper decks are given over to sundecks. Arguably, yachts are less elegant as a result. SHORT-TERM SOLUTION? Help could be at hand – if only more ship registry officials knew where to look. Regulation 1(3) of Annex I of ITC 69 states – arguably, in effect – that where there are “novel” aspects of a vessel’s design these aspects can be ignored when calculating Gross Tonnage. There is a small number of precedents for this in the context of trading ships, but this loophole does not appear to have been exercised when assessing yachts. This is surprising given that the latter are usually, almost by definition, full of novel features be they aesthetic elements or technical innovations. While there is Regulation 1(3) is written in vague terms, individual ship registries’ determination as to what “novel” means is definitive. Article 11 of ITC 69 makes it clear that tonnage certificates must be accepted at face value by other port states. It is perhaps surprising how this apparent loophole hasn’t been exploited more – especially by those registries marketing themselves at large yacht owners. But it would be better to change the rules than bend them. LONG-TERM SOLUTION The shortcomings of ITC 69 have been raised with the International Maritime Organisation (IMO), over the years, in respect of various types of cargo ships. Yet the convention has yet to be amended. Ship registries and owners have observed that too little or too much tonnage tax is being paid relative to other vessels of a similar displacement – depending on the point of view. The IMO’s view is that it doesn’t control tonnage tax and is unable to disallow the use of the gross tonnage in its calculation as this is a matter for individual port authorities. The most promising alternative has been mooted by the Australian government. Known informally as the “maritime real estate” and more formally as “Register Tonnage”, this is simply the length overall x breadth x summer draught. This seems fair as ports can charge ships on the basis of the amount of the port they take up, and the amount of dredging required. Yacht owners will need to work with trading ship owners in order to bring pressure to bear on the IMO. The procedure for amending the ITC 69 is particularly lengthy and involved. But surely worthwhile if yacht owners are going to put an end to this bureaucratic tail waging a very expensive dog. CONCLUSION No one system of measurement is going to satisfy all owners. ITC 69 is a compromise which has endured where numerous previous regimes have not. From a regulatory perspective, for nearly all trading and passenger vessels size doesn’t matter: all regulations will apply. And rightly so. Crew have every right to work in a safe and comfortable environment, and third parties have every right not to suffer the effects of collisions and pollution. But large, crewed yachts are different. Very few even existed when ITC 69 was drafted. Their crew live in comfortable quarters and are well paid (competition for the most able crewmembers ensures this). It can’t be right for yacht designers to be working around a figure to which vessel measurements form just one part, and which in any event attempts to satisfy the needs of a trading shipping community from a bygone era. It will be useful for Members to engage with ship registries at the outset regarding, via the Club Secretary, about Regulation 1(3) and what it could mean for the design of their yacht. Return to top Thank you to all our Members who provided perspectives for this white paper. It’s time to free ourselves from a tun of unnecessary paperwork. In this white paper, drawn up at the suggestion of, and following consultations with, some of our Members, our General Secretary considers what Gross Tonnage is, why it’s used as the primary regulatory threshold, and what workarounds could be utilised to circumvent its blunt impact. 8 February 2019 Last revised minutes 4 Reading time minutes 4 Reading time 8 February 2019 Last revised It’s time to free ourselves from a tun of unnecessary paperwork. In this white paper, drawn up at the suggestion of, and following consultations with, some of our Members, our General Secretary considers what Gross Tonnage is, why it’s used as the primary regulatory threshold, and what workarounds could be utilised to circumvent its blunt impact. Gross Tonnage (GT) is the key factor in determining which regulations apply, and this is vital to ensuring that insurance policies remain valid . GT is based on the total enclosed volume of the yacht and is derived from historical measurements used for taxation. The use of GT as a regulatory threshold can lead to compromised designs as owners and designers aim to minimize ongoing mangement costs. There is a loophole in the regulations that allows "novel" aspects of a yacht's design to be ignored when calculating GT, but this option has not been widely utilized. A potential alternative to GT is "Register Tonnage," which considers the physical dimensions of the yacht, and, as owners, perhaps we should engage with ship registries and pressure the International Maritime Organisation to change the regulations. You can also read about Down with Superyachts? Questions or comments? Please contact us Join the discussion over in the Club's group You can also read about Down with Superyachts? Questions or comments? Please contact us Events Calendar One For The Money This page aims to list all yacht-related events which may be of interest to our Members and their representatives. Click on any listing to go straight to the organiser's website. You can also see a map here . The Club has no commercial relationships with any organisers. Listings are not endorsements. Events can be subject to change or cancellation without notice, and may not take place every year. Please check with the organisers directly before making any arrangements. Have we missed an event? Please tell us . South Pacific Superyacht Rendezvous Fiji 30 August 2024 27 August 2024 to Maxi Yacht Rolex Cup Porto Cervo 9 September 2024 3 September 2024 to Cannes Yachting Festival Cannes 15 September 2024 10 September 2024 to Southampton International Boat Show Southampton 22 September 2024 13 September 2024 to Ibiza JoySail Ibiza 22 September 2024 19 September 2024 to Genoa International Boat Show Genoa 24 September 2024 19 September 2024 to Monaco Yacht Show Monaco 28 September 2024 25 September 2024 to Les Voiles de Saint-Tropez Saint-Tropez 6 October 2024 28 September 2024 to Croatia Yacht Show Zadar 2 October 2024 1 October 2024 to Olympic Yacht Show Lavrion 13 October 2024 10 October 2024 to Understanding Superyacht & Business Jet Tax Barcelona ​ 15 October 2024 Rolex Middle Sea Race Valletta 26 October 2024 19 October 2024 to Improving Yacht Crew Retention & Welfare US Fort Lauderdale ​ 29 October 2024 Fort Lauderdale International Boat Show Fort Lauderdale 3 November 2024 30 October 2024 to International Charter Expo Amsterdam 15 November 2024 13 November 2024 to METSTRADE Amsterdam 21 November 2024 19 November 2024 to Abu Dhabi International Boat Show Abu Dhabi 24 November 2024 21 November 2024 to Superyacht Summit Türkiye Istanbul 27 November 2024 26 November 2024 to Gulf Superyacht Summit Dubai 5 December 2024 4 December 2024 to Antigua Charter Yacht Show English Harbour 9 December 2024 4 December 2024 to Kata Rocks Superyacht Rendezvous Phuket 7 December 2024 5 December 2024 to Rolex Sydney Hobart Yacht Race Programme Sydney & Hobart 31 December 2024 6 December 2024 to Thailand International Boat Show Phuket 12 January 2025 9 January 2025 to boot Düsseldorf Düsseldorf 26 January 2025 18 January 2025 to Bahamas Charter Yacht Show Nassau 2 February 2025 29 January 2025 to Superyacht Design Festival Kitzbühel 4 February 2025 2 February 2025 to Discover Boating Miami International Boat Show Miami 16 February 2025 12 February 2025 to Dubai International Boat Show Dubai 23 February 2025 19 February 2025 to Superyacht Challenge Antigua Antigua 9 March 2025 5 March 2025 to St Barths Bucket St Barths 16 March 2025 13 March 2025 to Superyacht Technology Show Barcelona 19 March 2025 18 March 2025 to Palm Beach International Boat Show West Palm Beach 23 March 205 20 March 2025 to China (Shanghai) International Boat Show Shanghai 2 April 2025 30 March 2025 to Singapore Yachting Festival Singapore 13 April 2025 10 April 2025 to Les Voiles de St Barth St Barths 19 April 2025 13 April 2025 to MYBA Charter Show Sanremo 1 May 2025 28 April 2025 to East Med Multihull & Yacht Charter Show Poros 2 May 2025 29 April 2025 to Palma Superyacht Village Palma 3 May 2025 30 April 2025 to BI World Superyacht Awards Venice ​ May 2025 Mediterranean Yacht Show Nafplion 7 May 2025 3 May 2025 to TYBA Yacht Charter Show Göcek 13 May 2025 9 May 2025 to Blue Design Summit La Spezia 15 May 2025 13 May 2025 to British Motor Yacht Show Southampton 18 May 2025 15 May 2025 to Limassol Boat Show Limassol 25 May 2025 22 May 2025 to Sanctuary Cove International Boat Show Gold Coast 25 May 2025 22 May 2025 to Venice Boat Show Venice 2 June 2025 29 May 2025 to Newport Charter Yacht Show Rhode Island 25 June 2025 22 June 2025 to Cowes Week Isle of Wight 8 August 2025 2 August 2025 to Balearic Superyacht Forum Palma ​ TBC Explorer Yachts Summit Monaco ​ TBC Giorgio Armani Superyacht Regatta Porto Cervo ​ TBC Improving Yacht Crew Retention TBC ​ TBC International Yacht & Aviation Awards Cannes ​ TBC Managing Tomorrow’s Superyacht Monaco ​ TBC Opportunities in Superyachts Valletta ​ TBC PalmaVela Palma ​ TBC Safe Harbor Race Weekend Rhode Island ​ TBC Salon Nautico Internacional de Barcelona Barcelona ​ TBC SeaYou Yacht Sales & Charter Days Genoa ​ TBC South Coast Powerhouse Summit Southampton ​ TBC Superyacht Investor London London ​ TBC Superyacht Summit Adria TBC ​ TBC Superyacht UK Technical Seminar London ​ TBC The Long Lunch Auckland ​ TBC The Superyacht Cup Palma ​ TBC Events Map wHERE iT'S AT This page aims to map all yacht-related events which may be of interest to our Members and their representatives. You can also see a list of events, in date order, here . The Club has no commercial relationships with any organisers. Listings are not endorsements. Events can be subject to change or cancellation without notice, and may not take place every year. Please check with the organisers directly before making any arrangements. Map locations are approximate. Have we missed an event? Please tell us . Document Authentication Document Authentication 8 August 2024 Last revised minutes 6 Reading time When a deal’s on the table, it can be annoying to be asked not only for endless documents but for documents which must be authenticated in seemingly arcane ways. In the case of Bills of Sale, there’s no often no choice: it’s what many ship registries require for (re)registration. Providing authenticated documents doesn’t have to take too much additional time or resources: it just takes planning and forethought. minutes 6 Reading time 8 August 2024 Last revised When a deal’s on the table, it can be annoying to be asked not only for endless documents but for documents which must be authenticated in seemingly arcane ways. In the case of Bills of Sale, there’s no often no choice: it’s what many ship registries require for (re)registration. Providing authenticated documents doesn’t have to take too much additional time or resources: it just takes planning and forethought. Ensuring document authenticity is crucial to prevent fraud and confirm the validity and irreversibility of transactions, particularly in high value purchases like yachts. As it's easy to fake documents, multiple methods and cross-checks are necessary to build confidence in their authenticity, though no method is fool-proof. A certified copy is a true copy of an original document, usually certified by a lawyer or company director, but it doesn’t confirm the original document’s genuineness. Notarisation is the verification, certifying, and sealing of documents, which is mandatory in some jurisdictions to make documents valid and enforceable. Legalisation involves government bodies authenticating the signature or seal on a document, especially for international use, often requiring an apostille certificate if both countries are Hague Convention signatories. Certification must be done by authorized individuals like lawyers or company officials, and deliberate false certification can lead to serious legal consequences. The correct wording and format for certification and notarisation must be used, often specified by the third party requiring the document. Notaries follow strict procedures, including checking IDs and corporate documents, and may require translations for documents in foreign languages. Even notarised and legalised documents can be forged, so further verification through online searches and government registers is recommended. Proper planning and adherence to authentication requirements can prevent delays and ensure compliance with legal and registration needs, particularly for documents like Bills of Sale. Certification must be done by authorized individuals like lawyers or company officials, and deliberate false certification can lead to serious legal consequences. The correct wording and format for certification and notarisation must be used, often specified by the third party requiring the document. Notaries follow strict procedures, including checking IDs and corporate documents, and may require translations for documents in foreign languages. Even notarised and legalised documents can be forged, so further verification through online searches and government registers is recommended. Proper planning and adherence to authentication requirements can prevent delays and ensure compliance with legal and registration needs, particularly for documents like Bills of Sale. Ensuring document authenticity is crucial to prevent fraud and confirm the validity and irreversibility of transactions, particularly in high value purchases like yachts. As it's easy to fake documents, multiple methods and cross-checks are necessary to build confidence in their authenticity, though no method is fool-proof. A certified copy is a true copy of an original document, usually certified by a lawyer or company director, but it doesn’t confirm the original document’s genuineness. Notarisation is the verification, certifying, and sealing of documents, which is mandatory in some jurisdictions to make documents valid and enforceable. Legalisation involves government bodies authenticating the signature or seal on a document, especially for international use, often requiring an apostille certificate if both countries are Hague Convention signatories. When yachts are bought, there’s much which needs to be proven by the seller before the buyer feels comfortable handing over a considerable sum. Who is the vessel actually owned by? Has the owner (if a company) formally resolved to sell the vessel – and appointed an individual to represent it at the closing and sign the necessary paperwork? The list goes on. And that list must be included in the sale agreement. To be presented with documents is one thing, but how do buyers know that such documents are what they appear to be? This is especially important when it comes to a selling company’s incorporation and powers: originals of the vessel’s own documentation can be provided, but the selling company will not usually be providing originals of its incorporating documentation. No single method of authentication is foolproof, as the authenticating documents, certificates, seals and signatures can themselves all be forged with ease. It’s about building sufficient confidence, combining different approaches and cross-checking with other sources where possible. It’s always good to avoid unnecessary bureaucracy and expense, but keep in mind that third parties, such as yacht registries, may need documents to be authenticated in a particular way. Whatever methods are chosen, these need to be agreed upon at the outset. Now let’s look at the main methods. CERTIFICATION What is a certified copy? A certified copy is an accurate, complete and current copy (usually a photocopy, scan or photo) of an original document. It’s used when it’s not practical or possible to produce the original document. The certified copy will include a statement that it is a true copy of the original as at the date certified. Crucially, it does not certify that the original document is genuine, only that it is a true copy of the original. Who can certify a document? The certifying person is usually a lawyer or, in the case of a document relating to a company, a director or secretary of that company. If the document is also needed by a third party then it’s worth checking with that third party who can and can’t certify. In the United Kingdom, if an authorised person deliberately falsely certifies a document as being a true copy of the original, they can go to prison for up to 18 months. What’s the correct format? Any third party needing the copy may also specify the wording used. If not, the following wording is usually acceptable: “I [insert full name of the certifying person] certify that this document is a true and complete copy of the original.” In the case of photographic identification, the following could be used: “I [insert full name of the certifying person] certify that this document is a true and complete copy of the original and a true likeness of the individual [insert name].” The certifying person will then need to sign, write his or her full name under the signature, and add their law firm’s name and address. Finally, the date is added. The exact wording and format can vary, but the essential elements must be there. Provided all pages are attached together, then there’s not normally any need to certify each page – with the notable exception of Powers of Attorney, all pages of which must, in the UK, be certified "I certify this is a true and complete copy of the corresponding page of the original". Fees for certification There is no set fee for certification: fees must be fair and reasonable and will reflect time spent. NOTARISATION What is notarisation? The job of a notary (also known as a notary public) is to prepare, attest or certify documents (originals or copies) under an official seal, especially for use in certain jurisdictions. Notaries are usually (but not necessarily) qualified lawyers. Why is notarisation needed? Notarisation may seem unnecessary – given that a far wider range of professionals can just certify copies – but it’s simply part of the legal landscape in some countries. Failing to notarise can render a document invalid or unenforceable. What does notarisation involve? At the outset, notaries must also comply with anti-money laundering (AML) and data protection legislation, so it’s useful to have documents likely to be needed readily available so as to avoid unnecessary delays. Individuals involved will need to provide photographic identification. Where an individual presents corporate documents for notarisation, the company’s constitutional documents must also be presented, along with a Power of Attorney empowering that individual, and the appropriate resolutions. The relevant document is read in full in the notary's presence. If a foreign language document is to be notarised, a translation may be needed. A notary can only authenticate a document drawn up in a foreign language if they are satisfied as to its meaning. Scrivener notaries must be fluent in at least one language other than English. Once satisfied, the notary adds his or her notarial certificate to the document being notarised. The specific form of the certificate will depends on who needs the document to be notarised, and this information needs to be obtained beforehand. The notarial certificate is then signed by the notary and sealed with the notary's official seal. The notary keeps a set of the originals, or copies of all documents that they make, which then serves as a permanent record. These records must be made available to anyone with a right to see them including the notary's client and any other party involved. The final document should not be taken apart (for example, to scan) as notarised documents which have been tampered may not be accepted by the party requiring it. E-notarisation is available in some jurisdictions, which can make the whole proves much quicker. LEGALISATION What is legalisation? Certification and even notarisation isn’t good enough for some recipients. After all, who’s to say that the certifier or notary is duly qualified? And so it is that such document (in practice, normally notarised) may need to be ‘legalised’. This is the process by which one government body authenticates the signature, seal and/or stamp to the satisfaction of another country’s government body. As with the other forms of authentication, a failure to legalise a document may mean that the document is invalid or unenforceable (or both) in the jurisdiction where it is to be relied on. Who can legalise a document? Who needs to legalise the document in one country depends on the whether that county, and the recipient’s country, have both ratified the Hague Convention of 1961 Abolishing the Requirement of Legalisation for Foreign Public Documents (commonly known as the Hague Convention). 91 countries are signed-up at present. Where both are Hague Convention countries, then a standardised ‘apostille’ certificate can be obtained, relatively quickly and inexpensively. In the UK, this is done by sending the document to the Legalisation Office of the Foreign, Commonwealth and Development Office (FCDO). The FCDO checks the notary's or certifier’s name and signature against its register. If all’s in order, an apostille is applied to the document and it’s returned. The increasing use of e-apostilles is reducing fees and turnaround time, but it’s worth checking how long it could take in advance and planning accordingly. Where one country isn’t a Hague Convention signatory, then it’ll be up to the recipient’s country’s local embassy or consulate to legalise the document. Under their rules, it may also be necessary to obtain a Hague Convention apostille beforehand. The parties can arrange legalisation themselves. Legalisation can also be arranged by a notary on the parties' behalf. This is often preferable as the notary will be familiar with the process. FURTHER VERIFICATION Certified copies, notarial certificates and apostilles can all be, and occasionally are, forged. At least apostilles issued by the FCDO, for example, can be checked online on a special UK government website, if the apostille date and number are available. More broadly, it makes sense to conduct broad online searches into individuals and companies. Increasingly, company documents can be viewed on, or downloaded directly from, online government company registers and/or third party corporate information providers. The UK has long-since provided a wealth of company information. Now many classic offshore jurisdictions also provide extensive information which can be used to cross-check directorships and constitutional documents. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Corporate Ownership Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Corporate Ownership Types of Insurance Types of Insurance 26 March 2023 Last revised minutes 8 Reading time The type of insurance you need depends on the size of your yacht – and how you use it. Various types of cover can be combined within one product. Having insufficient cover can breach local laws, but be careful not to buy cover you don’t need. And make sure you understand the role of the company you’re buying the policy through. minutes 8 Reading time 26 March 2023 Last revised The type of insurance you need depends on the size of your yacht – and how you use it. Various types of cover can be combined within one product. Having insufficient cover can breach local laws, but be careful not to buy cover you don’t need. And make sure you understand the role of the company you’re buying the policy through. Large yacht ownership involves various risks, and insurance coverage is available to mitigate those risks. Compulsory insurances are required by port authorities, including third-party liability cover for yachts over 300 gross tonnes. Protection & Indemnity (P&I) Clubs provide liability coverage and support for yacht owners, often combined with Freight, Demurrage & Defence (FD&D) cover. Employers' liability insurance is required under UK law for the legal owner's liability for employee injuries. Maritime Labour Convention (MLC) requirements include liability coverage for repatriation, outstanding salaries, and occupational injury-related payments for crew. Crew welfare insurance covers medical costs and financial repercussions for crew members in case of illness or accidents. Oil pollution insurance is necessary to cover the legal owner's liability for oil spills caused by crew members. Wreck removal insurance is required by some countries and mandates coverage for the costs of removing wrecks. Hull & Machinery insurance covers loss or damage to the yacht, its engines, equipment, fittings, and accessories. Additional coverage options include war & strikes, fine art & valuables, subsea equipment, kidnap & ransom, project risk, and project liability insurance. Crew welfare insurance covers medical costs and financial repercussions for crew members in case of illness or accidents. Oil pollution insurance is necessary to cover the legal owner's liability for oil spills caused by crew members. Wreck removal insurance is required by some countries and mandates coverage for the costs of removing wrecks. Hull & Machinery insurance covers loss or damage to the yacht, its engines, equipment, fittings, and accessories. Additional coverage options include war & strikes, fine art & valuables, subsea equipment, kidnap & ransom, project risk, and project liability insurance. Large yacht ownership involves various risks, and insurance coverage is available to mitigate those risks. Compulsory insurances are required by port authorities, including third-party liability cover for yachts over 300 gross tonnes. Protection & Indemnity (P&I) Clubs provide liability coverage and support for yacht owners, often combined with Freight, Demurrage & Defence (FD&D) cover. Employers' liability insurance is required under UK law for the legal owner's liability for employee injuries. Maritime Labour Convention (MLC) requirements include liability coverage for repatriation, outstanding salaries, and occupational injury-related payments for crew. Here we’re looking at the various risks which large yacht ownership entails, and the cover available. Individual policies go by various names, and multiple risks are sometimes covered by one product, especially for smaller vessels. Compulsory insurances are considered first, followed by discretionary coverage. Many port authorities require not only cover, but also immediate proof in the form of certificates, so make sure these are issued simultaneously with insurance documentation. THIRD PARTY LIABILITY Risk Risk of the legal owner’s liability to third parties, while your yacht is in service. Required For yachts of 300 gross tonnes or more, third party liability cover is required by, and in accordance with, the Merchant Shipping (Compulsory Insurance of Shipowners for Maritime Claims) Regulations 2012 (UK) and Directive 2009/20/EC on the insurance of shipowners for maritime claims (EU). Most port states and private marinas require third party cover. Remarks Offered as Third Party Liability (TPL) insurance, or as broader Protection & Indemnity (P&I) cover - particularly for larger yachts. Historically, because third party claims can be so large (think oil spills), commercial ship owners joined together to form Protection & Indemnity Clubs, known as P&I Clubs. The larger ones are members of the International Group which has liability pooling arrangements to cope with the largest claims. Operating on a mutual not-for-profit basis, meaning that members can be asked to pay additional amounts to make the books balance, yacht owners can be an awkward fit. Some Clubs now offer fixed-premium cover. P&I Clubs in particular have claims handlers and foreign correspondents able to provide immediate advice following an incident, and can provide useful loss prevention guidance. In the unlikely event of a yacht being detained at a port following, for example, an accidental diesel discharge, the club will also have the known and respected financial muscle to provide security and allow the yacht to be released while the claim is processed at a later date. This support can be extremely useful in helping to keep a charter schedule on track, especially where problems are encountered in exotic destinations where local insider knowledge and contacts are vital. Although owners and managers should always ensure that they make the most of the Clubs’ support, this network is often overlooked. It can be packaged with Freight, Demurrage & Defence (FD&D) cover, which combines hands-on legal support provided by P&I Club in-house lawyers, and cover for external legal advice. EMPLOYERS’ LIABILITY Risk Risk of the legal owner’s liability for bodily injury or disease sustained by any of its employees and arising out of and in the course of their employment. Required Required within the waters of, and yards within, Great Britain under the Employers' Liability (Compulsory Insurance) Act 1969 as supplemented by the Employers' Liability (Compulsory Insurance) Regulations 1998, in respect of any employee ordinarily resident in Great Britain. Remarks This is a specific requirement of United Kingdom law, but similar requirements apply in many other jurisdictions, such as under the Jones Act in the United States. Cover will usually already be provided by a P&I Club (if applicable) so make sure you’re not paying for separate employers’ liability unnecessarily. Your broker should be able to advise you of cover limits applicable. It’s easy for dayworkers to become employees for the purposes of the law – even though they aren’t formally employed as crew or otherwise. MLC REQUIREMENTS Risk Risk of the legal owner’s liability for repatriation of crew and associated essentials, liability for outstanding salaries, etc, and liability for contractual payments for death or long-term disability due to an occupational injury, illness or hazard. Required Required in respect of all chartered yachts, where the Maritime Labour Convention 2006, as amended, (MLC) is in force, and aboard yachts registered in countries applying the MLC, pursuant to Regulation 2.5 Standard A2.5.2 Paragraph 9 and Regulation 4.2 Standard A4.2.1 paragraph 1(b) of MLC. Remarks Cover will usually already be provided by a P&I Club (if applicable) so make sure you’re not paying for separate MLC cover unnecessarily. Your broker should be able to advise you on whether such cover is needed. CREW WELFARE Risk Risk of a crewmember being unavailable for work for longer than necessary. Required Some elements may be required by law. Remarks Typically covers treatment costs, and financial repercussions, for crew in the event of illness or accident – whether on duty or not, and whether on board or ashore. Cover varies considerably, and there may be some elements of the cover which overlaps with, or includes, employers’ liability insurance and/or cover required by MLC. Beyond legal requirements, unless you’re prepared to pay this out of your own pocket, it makes sense to insure against crew accidents and medical treatments costs. It’s a benefit which is appreciated and may help to ensure that crew with minor injuries can return to work as soon as possible. OIL POLLUTION Risk Risk of the legal owner being held liable for the criminal acts of crewmembers in causing oil pollution, and the effects and costs of cleaning up. Required Insurance is usually required in respect of all yachts over 1,000 GT by the International Convention on Civil Liability for Bunker Oil Pollution Damage 2001, but liability under this convention extends to vessels of all sizes. May also be required by other local laws, such as the United States Oil Pollution Act 1990. Remarks Fines and clean-up costs can be enormous, and the spectre of criminal liability – potentially meaning that beneficial owners cannot shelter behind an owning company – means that you must be clear that the requisite cover is in place. Cover is normally provided by P&I Clubs, and Blue Cards, proving cover, can normally be obtained on request. Fines can be issued for not carrying proof on board. WRECK REMOVAL Risk Risk of the legal owner being fined for not being insured against the costs of wreck removal. Required Insurance can be required in respect of all yachts of 300 GT and over – by a small but growing number of countries – under the Nairobi International Convention on the Removal of Wrecks 2007. It can also be mandated by local laws. Remarks Cover is normally provided by P&I Clubs, and Blue Cards, proving cover, can normally be obtained on request. Fines can be issued for not carrying proof on board. HULL & MACHINERY Risk Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories. Required Not normally required by law. Remarks The term Hull & Machinery is a little misleading since the whole yacht will be covered, not just the hull and ‘machinery’ – a shipping term essentially meaning the engine and sterngear. The precise scope of cover will vary. Check, for example, whether fine art and valuables are covered, as well as your other personal effects and those of guests and crewmembers. Be aware of conditions in respect of named storms, and geographical cruising limits. Also check whether tenders are covered. Aircraft and submersibles carried on board are normally excluded. WAR & STRIKES Risk Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories, caused by war, terrorism, insurrection and strikes, and not covered by your Hull & Machinery policy. Required Not normally required by law. Remarks While cruising in a war zone isn’t going to provide the most relaxing experience, this fills gaps in the Hull & Machinery policy which may exclude passages through waters known for piracy, and damage caused where volatile political demonstrations spill over into harbourside areas. FINE ART & VALUABLES Risk Risk of loss of, or damage caused to, works of art and other valuable items, installed or carried on board your yacht, and not covered by your Hull & Machinery policy. Required Not normally required by law. Remarks Because the sky could otherwise be the limit to losses – and because yacht insurance has its roots in commercial shipping, works of art and other valuable items are normally excluded from Hull & Machinery policies. This insurance fills that gap. Be alert of the need to agree item descriptions and valuations at inception. SUBSEA EQUIPMENT Risk Risk of loss of, or damage caused to, submersibles being carried on board your yacht, and not covered by your Hull & Machinery policy. Required Not normally required by law. Remarks Submersibles being too specialist a risk for many underwriters, they are normally excluded. KIDNAP & RANSOM Risk Risk of you having to pay for crisis response, negotiation services and ransoms in the event of a kidnapping. Required Not normally required by law. Remarks While damage caused to your yacht, by pirates, should be covered by Hull & Machinery or War & Strikes Risks, costs associated with any resulting kidnapping are not. This insurance looks to plug that gap. PROJECT RISK Risk Risk of loss of, or damage caused to, your yacht, its engines, equipment, fittings and accessories, while being built. Required Not normally required by law. Remarks Hull & Machinery insurance is for yachts that have been completed – not in-build projects. The builder will insure the project (and this should have been addressed in the build agreement ) but the builder’s cover may be limited. This cover looks to plug that gap, as well as covering parts and equipment in storage at the yard and awaiting installation. PROJECT LIABILITY Risk Risk of the legal owner’s liability to third parties, while your yacht is being built, refitted or repaired. Required May be required by law. Remarks While the builder’s insurances should provide cover in respect of its own contractors and employees, it will not normally cover your project manager(s), crewmembers and contractors which you engage in respect of the project, and its tenders. You may have specific employers’ liability insurance obligations, or the local equivalent. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Understanding the Contract Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Understanding the Contract MYBA MOA Clause by Clause MYBA MOA Clause by Clause 9 December 2022 Last revised minutes 11 Reading time Other standard forms are in use, but the poorly drafted and incomplete MYBA Memorandum of Agreement (MOA) remains the standard agreement for the sale and purchase of yachts, used by brokers large and small, whether a member of that organisation or not. Before considering what needs to be added, let’s look at what’s there at the outset. minutes 11 Reading time 9 December 2022 Last revised Other standard forms are in use, but the poorly drafted and incomplete MYBA Memorandum of Agreement (MOA) remains the standard agreement for the sale and purchase of yachts, used by brokers large and small, whether a member of that organisation or not. Before considering what needs to be added, let’s look at what’s there at the outset. The article focuses on the MYBA Memorandum of Agreement (MOA) November 2008 edition, which is the most commonly used contract in large yacht sales and purchases. The MOA should not be accepted at face value, and it is crucial to amend and supplement it before any transaction takes place. Clause 14 allows the seller to negotiate with other potential buyers as long as no commitments are made, even after signing the MOA. Clause 15 removes the statutory buyer protection provided by the Sale of Goods Act 1979 (as amended), and it is important to clarify the meaning of "warranty" in this context. The list of things that the vessel should be "free and clear of" in Clause 15 should be expanded to avoid ambiguity and potential disputes. Clause 16 highlights the importance of maintaining an inventory of the vessel's items, especially for larger vessels, and clarifies the consequences of rejecting the inventory. Clause 17 emphasizes the mandatory nature of making the vessel available for sea trials and surveys, and precautions should be taken to prevent conflicting charter arrangements. Clause 18 requires the seller to provide specific documents known as "Addendum One" that prove compliance with regulations and establish the vessel's value and validity of the sale. The list of things that the vessel should be "free and clear of" in Clause 15 should be expanded to avoid ambiguity and potential disputes. Clause 16 highlights the importance of maintaining an inventory of the vessel's items, especially for larger vessels, and clarifies the consequences of rejecting the inventory. Clause 17 emphasizes the mandatory nature of making the vessel available for sea trials and surveys, and precautions should be taken to prevent conflicting charter arrangements. Clause 18 requires the seller to provide specific documents known as "Addendum One" that prove compliance with regulations and establish the vessel's value and validity of the sale. The article focuses on the MYBA Memorandum of Agreement (MOA) November 2008 edition, which is the most commonly used contract in large yacht sales and purchases. The MOA should not be accepted at face value, and it is crucial to amend and supplement it before any transaction takes place. Clause 14 allows the seller to negotiate with other potential buyers as long as no commitments are made, even after signing the MOA. Clause 15 removes the statutory buyer protection provided by the Sale of Goods Act 1979 (as amended), and it is important to clarify the meaning of "warranty" in this context. This article considers the MYBA MOA, clause by clause. We’re looking at the November 2008 edition, because this is most commonly used. It’s available online. The February 2005 edition is still occasionally used and a 2021 electronic edition, featuring a few nips and tucks, has been published but is not yet in widespread use. The key takeaway is that, despite its official appearance, the MOA must not be accepted at face value, and no transaction should ever take place without the MOA being amended and supplemented. The MOA clauses themselves are in an illogical sequence, but are looked at in numerical order nevertheless. CLAUSES 1-13 The first two pages contain Clauses 1 to 13 in the form of boxes for the relevant details. A format commonly used in the commercial shipping sector. The attention to detail is immediately obvious: assuming “G.R.T.” is meant to mean Gross Register(ed) Tonnage, this is a term which was consigned to history long ago by the International Convention on Tonnage Measurement of Ships 1969. Clause 1 refers to "banking days" without reference to a specific location. And it may be wise to not to leave Clause 5 blank in the context of Clause 25 and Clause 38 : buyers may not want to pay a pay a deposit to the seller’s statutorily unregulated broker. CLAUSE 14 While this clause commits seller to the sale process, the seller isn’t prevented from negotiating with other would-be buyers – as long as no commitments are made with any such third party. Having signed the MOA, if the buyer comes under pressure from a broker to improve on the deal – as other would-be buyers are circling – this can be ignored. CLAUSE 15 While, in law, the term “warranty” has a specific meaning, it appears under this context – confusingly – that it simply means “represents”. This clause is important as the ordinary statutory buyer protection provided by the Sale of Goods Act 1979 (as amended) is normally removed by Clause 34 . Compared to the sale agreements for trading ships, the list of things which has to be “free and clear of” is a bit simplistic and limited – and should be expanded to include charters, mortgages, writs and port state and other administrative detentions rather than leave scope for argument over what “encumbrance” encompasses in the context of the MOA. The seller needs to ensure that anything of this kind is affecting the vessel: it’s not good enough to expect that the buyer will come across details of these in the public domain. Releasing the vessel from such encumbrance is a prerequisite to the sale completing as set out in Clause 30 . Where any such only comes to light after completion, the seller obliged to indemnify the buyer – which is of no use where the seller’s a company the only asset of which was the vessel just sold. Hence the need for a guarantee from a bank or the seller’s beneficial owner. Under Clause 15, the seller also represents that it(or he/she) is the legal registered owner of the vessel, with title to and the right to sell the vessel – and this will remain the case right up to the point of delivery to the buyer. This is the case anyway under section 12(1) of the Sale of Goods Act 1979 (as amended) in spite of Clause 34 which only excludes statutory protection “in relation to the VESSEL, fault or errors in her description or her quality or her fitness, for any particular purpose”. CLAUSE 16 The larger the vessel, the greater the inventory, and the longer it’s going to take to compile or update and check. This should be produced or updated as soon as the vessel is placed on the market, having regard to Clause 21 , as the buyer’s surveyor will need to check the items off against it as part of the pre-purchase survey. Once agreed on, the inventory forms part of the sale agreement. Clause 16 is silent as to consequences of rejection of the inventory by the buyer, but it seems likely that the agreement itself will be unaffected – and it’s still open for the buyer to reject under Clause 26 . Regarding significant works of art, sculptures, equipment, tenders and toys, it’s helpful to obtain a clear understanding of what’s staying on board (and, as importantly, what's not) before the MOA is signed. CLAUSE 17 While self-explanatory, this clause makes it clear that making the vessel available for a Clause 26 sea trial and Clause 27 survey is mandatory, not a nice-to-have, and the seller must take care that a charter broker does not arrange for a charter to take place which might prevent this. CLAUSE 18 While this clause simply sets out that the “Addendum One” documents must be provided by the seller, the MOA doesn’t come with Addendum One – or any addenda for that matter. The documents are so much more than mere paperwork: they are evidence that the vessel complies with certain regulations. Non-compliance may require major works to be carried out. Certain documents will be needed for re-registration and for proving title – without which the vessel may be worth less or even worthless. The sale itself could be invalidated where the correct corporate authorities and powers of attorney aren’t in place. And such documents may need to be authenticated in a particular way(s) in order to be accepted by the vessel’s new or existing flag state. CLAUSE 19 Unusually for the MOA, this clause is self-explanatory. Keep in mind that “berthing fees and crew’s wages” are implicitly not an exhaustive list. CLAUSE 20 This clause makes clear that where the seller fails to deliver the vessel (that is, in the legal sense of the word ‘deliver’) per Clause 21 or documentation per Clause 18 then all bets are off and the agreement is cancelled. However, as will be seen with regard to Clause 30 , all that’s needed with broad compliance with Addendum One - there’s no mention of the documentation needing to be authenticated as the buyer may require – or even to be effective at all. CLAUSE 21 The vessel must be delivered in the condition it was in at the time of the Clause 9 / Clause 26 sea trial and Clause 9 / Clause 27 condition survey, making this a sale of the vessel on an ‘as was’ basis – not ‘as-is’. ‘Delivery’ in this clause means the transfer of physical possession, rather than the vessel being moved. The vessel may have to be delivered elsewhere than at its usual mooring – usually for tax purposes – after which it’ll head straight back to its berth. While the financial consequences for the buyer of having the vessel delivered in the wrong place could lead to an unexpected Value Added Tax liability of up to 25% of the sale price, it seems that delivering elsewhere than that stated in Clause 11 will only entitle the buyer to claim damages. By contrast, the delivery date is a contractual condition breach of which allows the buyer to cancel the agreement: this is clear from the use of the phrase “time being of the essence” in Clause 12 . How this element of Clause 21 is affected by Clause 35 - which deals with force majeure events - isn't clear. By listing in Clause 21 various specific items which are to be included in the sale, those items not listed are, arguably, excluded. It would have been better simply to state “with everything belonging to the VESSEL on board and on shore” or some such – at least the scope for disagreement would have been reduced. CLAUSE 22 As risk of loss of, or damage to, the vessel passes under this clause immediately upon delivery, the buyer must make sure that suitable cover has been obtained well in advance. CLAUSE 23 This may seem like an obvious provision, but keep in mind that where the seller is a company which is in liquidation it may require authorisation to sell the yacht. CLAUSE 24 The companion to Clause 14 this clause commits the buyer to the sale process. The buyer may only exit from the deal - should the buyer have a change of heart - will be as the agreement allows. CLAUSE 25 While the “four banking days” clock only begins to tick once the agreement has been signed, as with Clause 1 , the term “banking days” isn’t defined in terms of any particular country’s banks. And that’s a problem as a failure to pay is breach of contract, allowing the seller to terminate and sue for damages – which could be an amount equivalent to the unpaid deposit. It’s not the case that the deposit needs to be paid for the agreement to come into effect. It’s also unclear whether the date of signature is included or excluded in the four-day period. Buyers must be aware of, and take into account, the time taken for identity checks and anti-money laundering to be carried out. CLAUSE 26 One of the many ways in which the drafting of the MOA leaves much to be desired is Clauses 26 and 27 – which between presuppose that the vessel is in the water at the outset. Of course, large yachts can be out of the water for months at a time. No sensible owner would normally place his or her pride and joy on the market while she’s on the hard: often parts of the interior will have been covered-up or removed while works are ongoing, but if the sale is urgent there may be no choice. Where the vessel is out of the water, the necessary amendments will have to be detailed. Assuming the vessel is in the water when the MOA is agreed, then the seller must make her available for a sea trial of up to four hours. This does not mean that the seller is obliged to make all necessary arrangements. It’s unclear, for example, who would be responsible for ordering pilots if required. While this clause fails to mention this, the buyer would be well advised to arrange for a surveyor to attend to examine certain aspects of the vessel’s performance which can’t be tested out of the water. How easily the main engine(s) and gensets start, and how much smoke is emitted at various engine temperatures, for example, typically can’t be tested as the engine’s heat exchangers require the vessel to be in the water, and the engines should be tested under load. Following the sea trial, the buyer may then elect not to go ahead with the purchase – although it’s not clear whether the grounds for this are for any reason (i.e. the saloon cushions are the wrong colour or a similar trivial reason) or whether the reason must relate to the performance of the vessel during the sea trial. To be effective, the buyer must ensure that the rejection is: In writing; To the seller or broker; Within 24 hours of the sea trial; and Submitted as a formal notice in compliance with Clause 43 . CLAUSE 27 It should not be underestimated how difficult it can be to find at short notice a suitably qualified surveyor, appropriately insured, with availability, who the buyer can be reasonably confident will be thorough and independent. It may not be advisable to go along with the seller’s broker’s suggestion. Yard space and facilities may also be a premium – especially out of season. It is also usually be advisable for samples to taken of the engine’s lubricating oil for laboratory analysis. Elemental spectroscopy of the oil can reveal premature engine wear, while the presence of water might indicate a gasket or heat exchanger seal failure. Combined with testing for acidity a picture can be built of the seller’s crew’s approach to equipment maintenance. Differences in results for two identical engines can be an obvious cause for concern. It’s crucial to consider timescales for surveying and testing before dates are set in stone in the MOA. The object of the survey is only to discover defects which haven’t already been disclosed to the buyer in writing – although the buyer may wish to ascertain the nature and extent of disclosed defects. It’s not clear when the nature and extent of such defects is such that it could be considered that these defects haven’t actually been disclosed. While a “defect” is determined in Clause 27 to be a defect which “affect(s) the operational integrity of the VESSEL or her machinery or her systems or renders the VESSEL unseaworthy”. There’s no definition of “operational integrity” either in the MOA or in the law generally. Unseaworthiness is also not defined in the MOA. Broadly, as a matter of law, a vessel is unseaworthy when she is not reasonably fit in all respects to encounter the ordinary perils of the seas – but this still leaves plenty of scope for factual and legal argument. Where such an undisclosed defect is found by the surveyor, the buyer must choose one of the option given in (a) paragraph (a), bearing in mind that such notice must be given: In writing; To the seller or broker; Within seven days of the completion of the survey; and In conformity with Clause 43 . If the buyer elects for the seller to carry out remedial works, then it would be wise to set a realistic date for the completion of these, rather than just rely on the “without undue delay” provision. CLAUSE 28 This clause makes clear that the notice provisions in Clause 26 and Clause 27 must be complied with to the letter – failing which the vessel will have been accepted. CLAUSE 29 While it is hard to imagine circumstances where the vessel is damaged as a result of the captain complying with a request from the buyer during a sea trial, given the captains duty of care to the seller, it is conceivable that the buyer’s surveyor causes damage. This underlines the importance of checking that the surveyor carries suitable insurance. CLAUSE 30 Completion (more often known as ‘closing’) is the final stage of the sale and purchase process, during which payment of the balance is made, and the vessel and documents are delivered to the buyer. Subject to any Clause 27 notice or Clause 35 force majeure event, the Clause 12 completion date is the date on which the buyer must pay the balance. There is no mention of this also being the date upon which the seller must receive the funds, but it’s clearly in everyone’s interests for payment to be made as quickly as possible. The currency, bank details and payment method should be agreed in Addendum One and expressly made conditions of the agreement to be strictly adhered with. Payment is required as soon as the Addendum One documents have been tendered to the buyer – seemingly even if they are defective in terms of their effectiveness or authentication, as long as they comply with their descriptions set out in Addendum One. CLAUSE 31 This clause elaborates on Clause 25 . It’s odd that these two clauses aren’t drafted as a single clause for greater clarity. CLAUSE 32 This clause elaborates on Clause 23 . Again, it’s odd that these two clauses aren’t also drafted as a single clause for greater clarity. CLAUSE 33 While it used to be considered bad luck to change the name of a yacht, the MOA copies the now standard practice in the shipping industry to change name upon change of ownership. It’s as good to be aware of this clause, given that it is the default position. Given the amount of equipment on board bearing the yacht’s name, logo or monogram, the expense of compliance isn’t to be underestimated. An oil tanker’s name can be changed with a paintbrush: a modern yacht will almost certainly have a custom-made, illuminated name which must be installed and the immediate surrounding area filled and repainted as required. The standard seven days may be no way near long enough. That said, the seller is going to face an uphill task in proving what losses may have followed from any delay in remaining. CLAUSE 34 In the normal course of events, sections 13, 14 and 15A of the Sale of Goods Act 1979 (as amended) will apply to the sale and purchase of the vessel. Under these sections, goods sold must corresponded with the seller’s description of them, they must be of satisfactory quality, fit for purpose, etc. But parties are free, subject to certain statutory limitations, to agree to exclude such provisions. And this is what Clause 34 aims to do. It succeeds in this aim, albeit in respect of corporate buyers : individual buyers are ‘consumers’ meaning that these sections cannot be excluded. This clause does not affect the seller’s Clause 15 warranty. CLAUSE 35 This clause sets out what the parties are to do where certain external events beyond their control delay the sea trial, survey or closing. As the law aims to ensure that the parties carry through with the deal, force majeure clauses are interpreted restrictively and against the party seeking to rely on them. And even then, that party must then prove that it used reasonable endeavours to minimise the delay. CLAUSE 36 This is a standard so-called boilerplate clause, which are normally placed after all the commercial terms. But MYBA, it seems, likes to do things differently. CLAUSE 37 Though detailed, Clause 37 is self-explanatory and requires no further explanation. CLAUSE 38 While Clause 5 presupposes that the stakeholder will be a broker, the seller should think long and hard about whether it’s wise to place money at the disposal of a statutorily unregulated party which is acting for the buyer. It is increasingly common for funds to be placed with the buyer’s lawyer – which also alleviates the broker from the increasing bureaucracy associated with satisfying anti-money laundering rules. Even then, the choice of lawyer is important. CLAUSE 39 This otherwise self-explanatory clause only applies where the parties agree that the bottom should be painted with antifouling and anodes replaced. Notably, it makes no mention of more modern and environmentally-friendly antifouling wraps. Where there is significant fouling but the sacrificial anodes do not require replacing, there could be a cathodic grounding fault which the surveyor should investigate. The anodes are implicitly those on the hull, shafts and rudders – rather than those within the raw-water side of the engines’ cooling systems. CLAUSE 40 Arbitration is a way of setline disputes in private, which is no less effective than going through the public courts potentially in the media spotlight. Missing from the MOA is a specific reference to the arbitration being conducted in accordance with the London Maritime Arbitrators Association (LMAA) terms – which allow for different levels of procedural complexity according to the amount in issue. CLAUSE 41–44 These are standard boilerplate clauses, but the reference to the “telefax” is now obviously very outdated and needs amending. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Document Authentication Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Document Authentication Damn Lies and Statistics Damn Lies & Statistics Imagine the scene. It’s November 2022. You’re a high-ranking governmental delegate at the 27th United Nations Climate Change conference in Sharm el-Sheikh. You represent a Mediterranean nation, and answer directly to the Minister of State. Within broad pre-set limits, you have free reign to negotiate and agree to tabled proposals. Over your morning cappuccino at a harbourside café, you peruse a report prepared by a diligent civil servant. Incredibly, it seems as if ‘superyachts’ are responsible for more greenhouse gases even than private jets. Who knew? And there are tens of thousands of such jets around the world. Something must be done. The civil servant points to a report by Oxfam, a highly respect international NGO, entitled Carbon billionaires The investment emissions of the world’s richest people . It states: “ Another study drew on public records to estimate that in 2018 emissions from the private yachts, planes, helicopters and mansions of 20 billionaires generated on average about 8,194 tonnes of carbon dioxide (CO2e). ” FURTHER REINFORCEMENT Oxfam’s report credits an academic paper as its source: “ B. Barros and R. Wilk. (2021). The outsized carbon footprints of the super-rich ”. Ever diligent, your civil servant has already found this paper online. It’s by Professor Richard Wilk and PhD candidate Beatriz Barros, no less. They claim “ Among the many possessions of billionaires, large “superyachts” are by far the largest producers of greenhouse gases. Three-quarters of the billionaires in our sample owned a yacht with an average length of 276 feet (84 meters), and their average carbon equivalent emissions were 7,018 tons per year. ” Wow – these superyachts are huge, with a carbon footprint to match. You ask the civil servant how many billionaires there are in the world. She taps away on her laptop and replies that Forbes’ 36th Annual World’s Billionaires List: Facts And Figures 2022 states that there are now 2,668 billionaires in the world. Oh my goodness – if that’s the output from just 20, how much CO2 are 2,668 yachts going to produce? I mean, they must nearly all have one – right? But how respected is Barros & Wilk’s paper? The civil servant Googles. She finds a Financial Times article entitled Superyachts aim to go green – but at what cost? in which it’s says “ Research by anthropologists Beatriz Barros and Richard Wilk of Indiana University into the carbon footprints of the super-rich found that yachts contributed an outsized share of the carbon emissions of the billionaires who own them — far more than their private jets or mansions .” The FT. Well that’s that then. As politicians, we must act – and fast. We must tax these superyachts out of existence. You finish your cappuccino and head over to the conference venue with a purposeful stride. REALITY CHECK But dig a little deeper, and you’ll also find that Wilk & Barros’s sample comprised just twenty billionaires. That’s right. Twenty. They even admit that, “ This is not in any way a representative sample of billionaires. ” Indeed not. Moreover, their “average” yacht with a length of 84 metres is likely to have a gross tonnage of, say 2,500. In fact, the actual average gross tonnage of all 30+ metres yachts sold in 2021 was just 440 (source: SuperYacht Times, The State of Yachting 2022 ). As it was outside the scope of their studies, Wilk & Barros calculated fuel consumption using a 2018 paper by Luisa Menano de Figueiredo, The Yacht of 2030 – which looked, according to Wilk & Barros, at the cruising records of just ten yachts. Wilk & Barros do not explain their methodology. Had they looked more closely at de Figueiredo’s paper, in fact just eight yachts (not ten) were tracked, for a 90-day period, while in the Caribbean – as this was all the AIS data available. And de Figueiredo’s paper only concerned motor vessels – not sailing yachts. MORE NONSENSE Indeed, a misleading body of academic literature is starting to build. Respected academics Lynch, Long, Stretesky & Barrett, from the University of South Florida, Oklahoma State University, Northumbria University and Eastern Michigan University respectively stated in their 2019 academic paper Measuring the Ecological Impact of the Wealthy: Excessive Consumption, Ecological Disorganization, Green Crime, and Justice that “ Specifically, we draw attention to assessing aspects of ecological footprints of super yachts, super homes, luxury vehicles, and private jets. Taken together, the construction and use of these items in the United States alone is likely to create a CO2 footprint that exceeds those from entire nations. These results are not necessarily surprising but suggest that excessive consumption practices of the wealthy may need to be reinterpreted as criminal when they disrupt the normal regeneration and reproduction of ecosystems by generating excessive ecological disorganization. ” Strong stuff. Specifically, this paper states “ From available data, we estimated that an average (71 meter) SY uses about 107,000 gallons gasoline/year and produces 2.1 million pounds of carbon dioxide emissions annually .” As set out above, 71 metres is, of course, way above average. And specific data sources aren’t given – as one might expect. Instead, there’s a list of references at the end. The only one relating to yachts is given as “ Mathew, Jerin. 2015. “True Cost of Owning a Super Yacht.” International Business Times, May 15. Retrieved April 19, 2019 (http://www.ibtimes.co.uk/true-cost-owning-super-yacht-1498302). ” This is a short report publicising a fun, marketing infographic produced by an insurance company. That infographic states that a 71-metre yacht will consume (exactly) 500 litres of diesel per hour, and the owner will spend precisely $400,000 on fuel. Not a cent more and not a cent less. Etc. General sources are listed at the bottom of the infographic, including Wikipedia and superyachtfan.com. A fun piece of marketing, but hardly data to form a foundation for erudite scholarship. More recently, a paper by Wang, Maidment, Boccolini and Wright, of Solent University in the UK, stated in their paper Life cycle assessment of alternative marine fuels for super yacht that, " There is little argument that, with an estimated average cost of US$275 million only the wealthiest individuals in the world can afford to purchase and operate a superyacht (Alicia, 2015). " An estimate which is inaccurate by a factor of, say, ten - at least - by which has been recycled without question or fact-checking. CONCLUSION It’s easy to dismiss such works as politically motivated tirades by joyless, virtue-signalling lecturers, with a jaundiced worldview. Yet the figures generated are taken at face-value not only by climate activists but by respected journalists. As owners, we need to collect accurate data, and present it clearly, alongside information about our many and various yacht-based climate research and conservation initiatives. Return to top Thank you to all our Members who provided perspectives for this white paper. The media is full of data about the carbon footprint of large yachts. This data is taken as gospel by campaign groups. After all, the journalists refer to published, peer-reviewed academic papers. And these are clever people, right? Well it appears not. Or least their political jaundice means that they’re not fussed about fact-checking. If we’re not careful, policy makers may regard such research as correct and unchallengeable. 23 November 2022 Last revised minutes 5 Reading time minutes 5 Reading time 23 November 2022 Last revised The media is full of data about the carbon footprint of large yachts. This data is taken as gospel by campaign groups. After all, the journalists refer to published, peer-reviewed academic papers. And these are clever people, right? Well it appears not. Or least their political jaundice means that they’re not fussed about fact-checking. If we’re not careful, policy makers may regard such research as correct and unchallengeable. There is a growing body of misleading academic literature on the ecological impact of luxury items. Yet the figures generated by such studies are taken at face value by climate activists and journalists. A recent academic report suggests that 'superyachts' emit more greenhouse gases than private jets, concluding with a call for action. The report, in turn, refers to a study by academics Barros and Wilk, claiming that superyachts owned by billionaires have significant carbon footprints. However, the sample size of the study is small and not representative, and the average yacht size mentioned is much larger than reality, and fuel consumption calculations are based on limited data. We, as onwers, need to be collecting accurate data and provide clear information about yacht-based climate impact. You can also read about Speaking Volumes Questions or comments? Please contact us Join the discussion over in the Club's group You can also read about Speaking Volumes Questions or comments? Please contact us Blue is the New Green Blue is the New Green Whether or not you are persuaded about the underlying causes of global temperature rises, a critical mass of democratically-elected leaders are now convinced. Protests no longer take the form of marches and placard-waving. Increasingly, activists are taking direct action. Their websites and image-curation are becoming more slick. They have an increasing grasp of public relations and social media. For now, the campaigns are self-defeating. Their disruption alienates the wider public as traffic jams build, meetings are missed and emergency services disrupted. But, increasingly, protests have started to target symbols of conspicuous consumption, such a ‘luxury’ car dealerships. And why stop at cars? Why not business jets? Why not… ‘superyachts’? At least the general public won’t be inconvenienced. And the messages can be conflated with broader political messages as well. It's beginning to happen. The blockading of general aviation terminals is becoming more commonplace. Then there was a protest at Port Vauban, Antibes, followed by one at the Superyacht Forum in Amsterdam. Massive nearby commercial airports and ports are being ignored. And while the underlying data used in academic papers owes is, to say the least, paper-thin - see our white paper Damn Lies & Statistics - the trajectory of this movement is clear. SHORT-SIGHTEDNESS In the case of yachts, this fury is short-sighted. The more time one spends afloat, the more one is aware of the amount of pollution entering the sea and the food chain – especially in the form of plastics. Not only do they bear witness first-hand, the owners of large yachts are better placed than anyone to actually address the issues beyond making changes to their own habits. They are likely to own companies which can enforce rapid behavioural change on a massive scale. Or they may own media outlets which band the drum of change. Or they may know politicians who can enact change. It is impossible not to be moved by the beauty of the marine environment, or outraged at seeing it compromised. Owners are in the position to act across a spectrum of environmental issues. NIGHTMARE SCENARIO Far-fetched today, but picture a possible scene a few years from now. A resolute Greta Thunberg, her outlook still binary and adolescent, implores her social media followers to flock to the Mediterranean – to picket ports en masse. WhatsApp groups coordinate the protests. Social media livestreams go viral. High-profile celebrity charterers cancel their summer bookings for fear of being “cancelled” themselves. The French, Italian and Spanish governments cave in to a vocal minority and introduce punitive taxes in berths and bunkers. Youngsters are discouraged from training for a role working on yachts. The costs of ownership spiral, and the assets themselves devalue alarmingly. Even financiers and insurers begin to withdraw from the market for fear of a popular backlash and a corresponding commercial impact on other business lines. TESTBEDS FOR CHANGE We have seen various new low and no-carbon yacht propulsion technologies being proposed in recent years. The 3D renderings are impressive and the press releases compelling. But this is cutting little ice with the campaigners, who just claim that this is “greenwashing”. It is incumbent on everyone within the yachting industry to urge environmental campaigners to see the broader picture of maritime transport. According to the Organisation for Economic Co-operation and Development (OECD), around 90% of traded goods are carried by sea . Yet shipping is a naturally conservative business: investments are large and the returns uncertain. The last thing trading ship owners want to do is to dabble in unproven green technology – unless obliged to by law. Any why are lawmakers going to change the law if the no technology hasn’t been proven on a smaller scale? PAST MISTAKES The yachting industry has, it must be said, singularly failed to portray the correct message to the wider society. We have worked project to project, season to season, sale to sale. Most information put out has been about yachts’ specification and features. It’s been about the wow factor – about one-upmanship, where bigger is better and consumption is king. Aside from all exciting new research going on, there are dozens of environmental and other philanthropic initiatives quietly being undertaken by owners. Yet the wider public knows nothing about this. SHORT-TERM STRATEGY Doing nothing is not an option. Carbon neutral schemes for yachts have been around since the mid 2000s. Taking up such schemes is – quite literally – the least we, as owners, can do. We also need to engage with the general media, and help them understand that, in terms of technological development, yachting is to shipping what haute couture is to everyday fashion. The wonderful work of organisations such as SeaKeepers needs to be known about far more widely – and more owners need to involve themselves. Ports and marinas also need to take advice and make preparations to ensure that, in so far as the law allows, any protests which prevent crew or suppliers going about their daily business are shut down as rapidly as possible before these patterns of behaviour become entrenched and emulated. LONG-TERM STRATEGY In the long term, those making bold claims with regard to truly viable carbon-neutral power sources need to make the investment necessary to bring these project to fruition. Aside from the tech, the refuelling infrastructure and regulatory framework must be developed. And insurance underwriters need to be onboard. For too long, owners have failed to act coherently in the face of a growing threat to our cherished liberties and way of life. It’s time to make blue the new green. Return to top Thank you to all our Members who provided perspectives for this white paper. If, as owners, we are to continue to enjoy the freedoms and privileges we currently enjoy – without interruption or stigmatisation – then we need to engage with those who are beginning to target our assets and way of life. Quietly, we need to educate the press and policymakers about yachting’s current and potential positive impact on the environment generally in shipping in particular. 21 November 2022 Last revised minutes 4 Reading time minutes 4 Reading time 21 November 2022 Last revised If, as owners, we are to continue to enjoy the freedoms and privileges we currently enjoy – without interruption or stigmatisation – then we need to engage with those who are beginning to target our assets and way of life. Quietly, we need to educate the press and policymakers about yachting’s current and potential positive impact on the environment generally in shipping in particular. Recent years have seen an increase in protests and direct action by climate activists. They are targeting symbols of conspicuous consumption, including luxury car dealerships and large yachts. However, this fury against yachts is short-sighted. We, the owners, have a unique position to address environmental issues. We can help to enforce behavioral change through our companies and media outlets. The yachting industry needs to portray a different message to the wider society, highlighting our environmental and philanthropic initiatives. Taking up carbon neutral schemes is the least we can do. We should engage with the media to showcase technological developments and initiatives like SeaKeepers. Ports and marinas should prepare to handle protests swiftly to prevent disruption. In the long term, investment is needed in viable carbon-neutral power sources, refueling infrastructure, and regulatory frameworks. We must act coherently to protect our liberties and way of life. You can also read about Damn Lies & Statistics Questions or comments? Please contact us Join the discussion over in the Club's group You can also read about Damn Lies & Statistics Questions or comments? Please contact us A Flood Not a Trickle A Flood Not a Trickle By far the majority of large, permanently-crewed yachts in existence today have only been launched since 2000. They’re new, and their positive impact is poorly understood by the general public, pressure groups and authorities alike. Yachts are increasingly becoming the targets of conflated environmental and political protests. As well as causing inconvenience in the short term, politicians may, in the long term be more reluctant to allow more marina developments, for example. After all, a small numbers of owners can only wield a small number of votes. It’s clear that yachting’s positive impact is woefully underestimated and misunderstood. Being confrontational will be counterproductive. As owners, we don’t want yachts to be on the political agenda. They exist, after all, for quiet enjoyment. But it’s as well to be prepared, with facts and figures at the ready, to respond to false accusations. And we may need to educate stakeholders and agitators quietly behind the scenes. PORTALS FOR THE REDISTRIBUTION OF WEALTH The most fundamental error is to consider a yacht purely as an asset – rather than a place of employment and worker accommodation. They are communities of individuals, most of whom are very well paid, and many of them are also entrusted to spend significant amounts of their employer’s hard-earned money. Whatever one’s views on the technical efficacy of trickle-down economics as part of a macroeconomic strategy, the boost to coastal economies is difficult to ignore. And this isn’t money being paid to an élite of lawyers and investment managers: it’s being paid directly into the accounts of waterside retailers and suppliers. Who, in turn, buy stock, employ staff and pay tax, leading to a significant quasi-Keynesian multiplier effect. BUYERS ALREADY PAY A PREMIUM Yachts are easy targets, because they are perceived – rightly – as being luxurious. But luxury isn’t just about opulence. Luxury is the combination of desirability and scarcity. Taking this to an extreme to illustrate the point, consider an expensive 50 year-old single malt Scotch whiskey. It’s matured in white oak barrels which – very slowly – allow some of the liquid to evaporate. There’s less and less of it as the years pass. So if this is what your heart desires you’ll pay more for it. The whiskey may or may not be any better than a 10 year-old dram, but it’s subjectively more desirable and objectively much scarcer. A yacht’s component parts are made in small numbers and/to an unusual specification. Producing them can be risky and unattractive for suppliers so they will demand higher prices. And precious few yards have the experience or equipment to craft the vessels themselves. All of this means that buyers pay significant premiums for yachts. As Mark Twain put it in The Adventures of Tom Sawyer (1876): " Tom … had discovered a great law of human action, without knowing it – namely, that in order to make a man or a boy covet a thing, it is only necessary to make the thing difficult to attain. " MODEST CREW BACKGROUNDS Long gone are the days when crewmembers came from privileged backgrounds – perhaps the children of the owner’s friends, or just sporty types whose leisure and social lives centred around prestigious yacht clubs. Like owners today, crew come from a wide variety of backgrounds – maybe having grown up in workaday towns situated far from the sea. They also come from all over the world, and must adapt quickly to a life afloat. The Owners Club is actively looking into ways to widen further the appeal of a career working on yachts – helping to make the industry as professional and meritocratic as possible. STATE-OWNED HARBOURS Mooring fees – together with harbour dues and associated services costs – form a significant outgoing for many yachts. While most marinas operate on a concession basis, it is usually the government or local municipal authority which owns the facility, and to whom the operator pays significant sums. These boost local coffers which are used to pay for vital local services which the whole community benefit from. REDUCING DEMAND FOR PROPERTY Recent decades have seen demand for property rise steeply. And as, in the most part, they stopped making land years ago, prices have risen accordingly. Starting in European capitals, a ripple effect then affects all parts of the relevant country. The result is property which is too expensive for most first-time buyers. They end up without a physical stake in society. Their lives are more transient, less settled and less secure. At the top of the property-owning tree, the world’s wealthiest can own multiple residences, each of which is perhaps only occupied for part of the year. Reducing a property portfolio in favour of a yacht purchase reduces demand at the highest end of the market, which should – eventually – reduce inflationary pressures at the bottom. Not by much, one suspects, but every little helps. HIGHLIGHTING MARINE POLLUTION The more time one spends afloat, the more one is aware of the amount of pollution entering the sea and the food chain – especially in the form of plastics. The owners of large yachts are better placed than anyone to actually address the issues beyond making changes to their own habits. They are likely to own companies which can introduce behavioural changes on a massive scale. Or they may own media outlets which bang the drum of change. Or they may know politicians who can enact change. It is impossible not to be moved by the beauty of the marine environment, or outraged at seeing it compromised. Owners are in the position to act. YACHTS INSPIRE SOCIETY French philosopher Roland Barthes wrote in Mythologies (1957): “ I think that cars today are almost the exact equivalent of the great Gothic cathedrals; I mean the supreme creation of an era, conceived with passion by unknown artists, and consumed in image if not in usage by a whole population which appropriates them as a purely magical object. ” In today’s context, this description applies to yachts far more than cars. And such sentiment is nothing new. Economist and key Enlightenment figure Adam Smith opined in his 1759 book The Theory of Moral Sentiments : “ The pleasures of wealth and greatness … strike the imagination as something grand and beautiful and noble, of which the attainment is well worth all the toil and anxiety which we are so apt to bestow upon it .” And so it is that, by symbolising wealth and success, yachts serve to inspire entrepreneurs to redouble their efforts. They encourage everyone inclined to do so, to work hard, take risks and use their imaginations. OWNERS INSPIRE CREWMEMBERS Owners’ energy, work ethic and meritocratic outlook often rubs off on the crewmembers who work for them. As crew usually do not have to pay income tax, and have little in the way of daily outgoings, when the time comes for them to come ashore they often do so with sufficient capital set aside to fund a new business. Many such enterprises will be related to yachting, but some will have nothing to do with their previous seagoing careers. Either way, yet more of the owners’ capital will be injected into economies far and wide. CONCLUSION Since the detention of certain Russian-owned yachts in early 2022, it looks at last as if large yachts can be rehabilitated from being seen in the popular imagination as icons of oligarchy to that which they were in previous times: symbols of success and the rewards for hard work and entrepreneurial élan. The possibility of future minority kickback shouldn’t be ignored. The benefits of yacht ownership are manifold for society generally. It is incumbent us owners to ensure, by supporting the Club and its aims, that all stakeholders understand the scope and extent of such benefits. The good news will be developed and deployed as needed. Other than that, let’s just get on enjoying the fruits of our labours and investments. To quote Eleanor Roosevelt: “ The purpose of life is to live it, to taste experience to the utmost, to reach out eagerly and without fear, for newer and richer experience .” Return to top Thank you to all our Members who provided perspectives for this white paper. It is possible that political protests targeted at yachts and yachting infrastructure become more common. But such outcries are based on a complete ignorance about the nature and scope of the societal benefits flowing from ownership. It is up to us owners to inform and educate, as and when this is needed, and undertake research to support axiomatic assertions. 15 November 2022 Last revised minutes 6 Reading time minutes 6 Reading time 15 November 2022 Last revised It is possible that political protests targeted at yachts and yachting infrastructure become more common. But such outcries are based on a complete ignorance about the nature and scope of the societal benefits flowing from ownership. It is up to us owners to inform and educate, as and when this is needed, and undertake research to support axiomatic assertions. Large, permanently-crewed yachts face misconceptions and challenges related to their environmental impact and public perception. It is important for us, as owners, to understand and communicate the positive aspects of yachting to counter this. Yachts are not just assets; they are floating communities, providing employment and contributing massively to local economies. Crewing provides employment for indivuals from all backgrounds. Yacht purchases can also reduce demand for expensive property and inspire society as symbols of success. We are in a position to drive environmental change through our businesses. Yachts can also inspire crewmembers to pursue entrepreneurial endeavors. Ownership should be seen as a positive contribution to society, and we have a responsibility to promote and educate others about its benefits. You can also read about Blue is the New Green Questions or comments? Please contact us Join the discussion over in the Club's group You can also read about Blue is the New Green Questions or comments? Please contact us Down With Superyachts Down With Superyachts? "When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean—neither more nor less." "The question is," said Alice, "whether you can make words mean so many different things." "The question is," said Humpty Dumpty, "which is to be master—that's all." Lewis Carroll, Through the Looking Glass (1871) While there is no legal definition of what a ‘superyacht’ is, this doesn’t stop some unilaterally deciding what it is: > 24 metres in length overall - Superyacht UK > 24 metres in length with full-time captain and crew – Burgess Yachts ≥ 24 metres in loadline length and commercially operated – Warsash Maritime School > 98 feet (29.87metres) in Length - The New Yorker > 30 metres in length – Superyacht Times > 30.48 metres in length overall – Offshore Racing Congress > 45.72 metres in length with a draught of ≥ 3 metres - Port Authority of New South Wales Generally, we know what we mean by the term: a pleasure vessel which, for regulatory reasons and on account of its sheer size, needs a permanent, full-time crew. This is the point at which, irrespective of size, the vessel isn’t just an asset but a place of employment and worker accommodation – all rolled into one. Large yachts, with a full-time crew, have been around since the dawn of the 20th century. But the term ‘superyacht’, and the now lesser-used label ‘megayacht’, have only been in widespread use since the mid-1980s. Looking back at the yachting journals of the 1980s, it’s clear that the terms ‘superyacht’ and ‘megayacht’ were simply applied to distinguish between larger vessels which were owner-operated and smaller ones which were not. It was used by brokers and journalists as hyperbole – long before digital media and online videos allowed size, style and pedigree to speak for themselves. This was an age – let’s not forget – when many owners not only sailed some of the larger yachts themselves but often built or at least fitted them out themselves, too. Fast forward to 2000, and there were still only a fraction of the number of large yachts is use compared to today. It was an industry still largely unknown to those not involved. Most brokers and many captains knew each other. Except for some opportunist paparazzi, most journalists paid little regard. A USEFUL DESCRIPTION To be fair, ‘superyacht’ is a useful term – within the industry itself. When an owner can afford crew, he or she can afford to pay for, say, paint of a higher quality but needing a more exacting application standards. A superyacht insurance policy will take account of the owner’s role as an employer and the vessel’s function as a workplace. But such details can be contained deep within a product’s specification.The term has a kudos all of its own. They are, after all, impressive and effortlessly cool. It makes sense to appropriate the term to distinguish oneself as a services supplier. It adds marketplace swagger – although there has been a tendency, for example, for shipping lawyers with little understanding of the market or business models to label themselves as superyacht lawyers. AN UNWELCOME LABEL? Time and again, however, since the early 2010s, environmentalists – and politicians looking to combine green virtue signalling with the politics of envy – have used the term superyacht in a pejorative sense. Rarely, if ever, do they simply refer to yachts: “ Specifically, we draw attention to assessing aspects of ecological footprints of super yachts [sic], super homes, luxury vehicles, and private jets. Taken together, the construction and use of these items in the United States alone is likely to create a CO2 footprint that exceeds those from entire nations .” Lynch, Long, Stretesky & Barrett: Measuring the Ecological Impact of the Wealthy: Excessive Consumption, Ecological Disorganization, Green Crime, and Justice (2019) “ Among the many possessions of billionaires, large “superyachts” are by far the largest producers of greenhouse gases. ” Barros & Wilk: The outsized carbon footprints of the super-rich (2021) “ Superyacht sale surge prompt fresh calls for curbs on their emissions ” The Guardian , 4 October 2022 “ Superyachts aim to go green – but at what cost? ” Financial Times , 1 September 2022 “ THE SUPERYACHT INDUSTRY IS A SINKING SHIP ” - Extinction Rebellion protestors’ banner unfurled during The Superyacht Forum, 16 November 2022 NOT WANTED & NOT NEEDED Informal discussions with Club Members reveal that many just do not like the term superyacht. It has nowadays, for some, the wrong connotations. It’s become a target as well as a description. A lot of owners neither want nor need the perceived kudos which attaches to the term. In short, they have nothing to prove. Their vessels just happen to be larger than most, more or less in proportion to their net worth. WHERE DO WE GO FROM HERE? Perhaps the industry needs to bite the bullet and do away with the term superyacht. Remember when The Superyacht Report was just called The Yacht Report? Maybe it's time to change back. Yes, rebranding is expensive, but such changes may prove far less expensive than not evolving. Brand refreshment is a regular necessity. When the next one’s due, let’s drop the ‘super’ and just call a yacht a yacht. It’s not about trying to make large yachts somehow less conspicuous. It is about removing the popular and mistaken distinction between yachts and superyachts, and instead viewing one being merely a subset of the other. Return to top Thank you to all our Members who provided perspectives for this white paper. We’re not suggesting an end to superyachts of course, just the label. Because, increasingly, the term is also being used pejoratively by some, and as a target by others. And that’s just not helpful to us owners. Is it time to rethink and rebrand? 18 November 2022 Last revised minutes 4 Reading time minutes 4 Reading time 18 November 2022 Last revised We’re not suggesting an end to superyachts of course, just the label. Because, increasingly, the term is also being used pejoratively by some, and as a target by others. And that’s just not helpful to us owners. Is it time to rethink and rebrand? The term "superyacht" has many definitions, but none in law. The term gained widespread use in the mid-1980s to distinguish larger, crewed vessels from smaller ones. The word has become associated with luxury and prestige. In recent years, however, environmentalists and politicians have used the term in a negative way, linking it to excessive consumption and greenhouse gas emissions. Informal discussions amoung our Members reveals that many of us feel we neither want nor need the perceived kudos associated with the term. Some suggest doing away with the term "superyacht" altogether and simply calling them yachts. Rebranding may be costly, but it could be a worthwhile change for the industry to make. You can also read about A Flood not a Trickle Questions or comments? Please contact us Join the discussion over in the Club's group You can also read about A Flood not a Trickle Questions or comments? Please contact us Oh Referee Oh Referee! 1 March 2024 Last revised minutes 7 Reading time Obtaining a reference for a candidate makes a lot of sense, especially in the yachting sector where standards of service are so subjective. There is a common misunderstanding among shoreside employers that they are only allowed to confirm dates of employment and role(s). This is incorrect. You may be obliged to provide one, and refences for captains and crew are commonly sought and given in any event. But care must be taken when providing them. minutes 7 Reading time 1 March 2024 Last revised Obtaining a reference for a candidate makes a lot of sense, especially in the yachting sector where standards of service are so subjective. There is a common misunderstanding among shoreside employers that they are only allowed to confirm dates of employment and role(s). This is incorrect. You may be obliged to provide one, and refences for captains and crew are commonly sought and given in any event. But care must be taken when providing them. Employers commonly make job offers contingent upon satisfactory references, which should be explicitly stated in the offer letter. Employers may be obligated to provide subjective references if it's customary in their industry or contractually specified. Not providing references could lead to claims of discrimination or breach of trust. References can come from individuals or corporate entities and can be either written or oral. Using third-party services like Superyacht References is recommended. Employers should ensure accuracy, fairness, and compliance with data protection laws when providing references. Policies should be established and adhered to. References should include employment duration, roles, and may cover performance, disciplinary history, and reasons for departure. Comments on suitability must be based on first-hand experience only. Employers have a duty to provide accurate and impartial references. Negligent misstatement and defamation risks exist, so references should be substantiated and labelled as private and confidential. Providing references involves handling personal data, necessitating compliance with data protection regulations. Guidance on this should be sought. Employers should disclose poor disciplinary records and ongoing proceedings in references to avoid liability for providing misleading information. Employers often include disclaimers of liability in references, though they don't absolve liability for fraud or deceit by the provider. Employers should establish clear policies on who can provide references, permissible content, and record-keeping requirements. Having template references attached to policies is recommended. Employers have a duty to provide accurate and impartial references. Negligent misstatement and defamation risks exist, so references should be substantiated and labelled as private and confidential. Providing references involves handling personal data, necessitating compliance with data protection regulations. Guidance on this should be sought. Employers should disclose poor disciplinary records and ongoing proceedings in references to avoid liability for providing misleading information. Employers often include disclaimers of liability in references, though they don't absolve liability for fraud or deceit by the provider. Employers should establish clear policies on who can provide references, permissible content, and record-keeping requirements. Having template references attached to policies is recommended. Employers commonly make job offers contingent upon satisfactory references, which should be explicitly stated in the offer letter. Employers may be obligated to provide subjective references if it's customary in their industry or contractually specified. Not providing references could lead to claims of discrimination or breach of trust. References can come from individuals or corporate entities and can be either written or oral. Using third-party services like Superyacht References is recommended. Employers should ensure accuracy, fairness, and compliance with data protection laws when providing references. Policies should be established and adhered to. References should include employment duration, roles, and may cover performance, disciplinary history, and reasons for departure. Comments on suitability must be based on first-hand experience only. It makes sense to make any offer of employment conditional upon obtaining satisfactory references. For the avoidance of doubt, this should be phrased in the job offer letter as being acceptable to the employer and not just satisfactory in a general sense. References can be given either personally or on behalf of the employer, and may be written or oral. But take care. It has been known, for example, for candidates just to give the telephone number of a friend who poses as the captain of a current or previous yacht, so it’s wise to engage an independent third party such as Superyacht References . MUST YOU PROVIDE A REFERENCE? As a present or former employer, you can be obliged to provide a subjective reference (beyond confirming dates of employment and role(s)) if there is an express obligation to do so in the employment contract, or because it’s customary in a particular industry – and is, therefore, an implied contractual term. It is, of course, very much the custom for yacht captains and departmental heads to provide references. Indeed, it’s poor form in yachting not to do so, and a refusal can be bad for a captain and/or boat’s reputation. If it’s going to be your policy, as employer, not to provide subjective references, then you should make this your formal policy, and stick to it, to avoid potential claims of discrimination or breach of the implied trust and confidence. In particular, if an employee (or former employee) has previously initiated discrimination proceedings against the employer, or alleges unlawful discrimination, a refusal to furnish a reference could lead to an additional claim of victimisation. 10 PRACTICAL TIPS ON GIVING A REFERENCE When furnishing a reference, you, as an employer, should ensure that: No statements are inaccurate The reference offers a fair overview but does not need to include every detail The reference does not convey a misleading impression The reference does not unfairly portray the subject in a negative light The subject is informed of any complaints or performance issues referred to Information regarding absence adheres to the employer's data protection obligations Comments on performance or absence abide by disability discrimination law The reference is marked as being private and confidential and for the addressee only Your policies on the subject are adhered to If providing just dates and job roles, your policy of only providing this should be referred to REFERENCE CONTENTS A reference should always set out the duration of employment and specific role(s) undertaken. The reference may also encompass other matters, such as performance, disciplinary history, perceptions of attitude and integrity, punctuality and the reason for departure. Any comments on suitability for a new role must always be – expressly – restricted to first-hand experience only. If the employee was dismissed, then this should be outlined accurately, as a favourable reference may weaken an employer's defence against an unfair dismissal claim. Maintaining consistency in providing references to different employees is vital to mitigate any allegations of discrimination or victimisation. GENERAL DUTIES When providing a reference, you (in reality, of course, your captain or head of department) must exercise reasonable care to ensure that the information provided is accurate and impartial, and does not create a false impression. There is no requirement for references to contain extensive details or be exhaustive in scope. Particular care must be taken when remarking on performance or sickness, as these could lead to a claim for disability discrimination. Employers bear legal responsibility for the content of corporate references since they are provided on the employer's behalf. So it's advisable to establish a [policy] outlining who can provide references, and the permissible content. The legal implications remain the same whether the reference is given verbally or in writing. NEGLIGENT MISSTATEMENT A referee can face legal action for negligent misstatement if it provides an inaccurate reference. Essentially, employers providing references must exercise reasonable care in their preparation. Failure to do so could render the employer liable if the employee suffers harm due to the reference. In particular, opinions expressed in the reference must be supported by the facts. DEFAMATION A false statement that damages a person's reputation in the eyes of reasonable members of society could constitute defamation – either in the form of a libel (if written) or slander (if oral). As long as the employer believed the reference to be accurate, and provided without malice, the claim for defamation won’t get far. Referees should therefore substantiate their comments where possible, demonstrating their truthfulness or honest belief in their accuracy. Further protection can be provided by labelling references " Private and Confidential " and " for the addressee only ". MALICIOUS FALSEHOOD An employee could also pursue a claim for malicious falsehood against a referee if he or she can demonstrate that the reference includes false statements published with malice (meaning the maker knew the statements were false or showed reckless disregard for their truth). While defamation safeguards reputation, malicious falsehood safeguards economic interests. LIABILITY TO THE RECIPIENT It’s easy to provide a polite, even glowing reference – especially in respect of a colleague and friend with whom the provider has spent many months together in the confines of a yacht. But risks can arise from an employer, especially through the agency of a captain or departmental head, providing an excessively positive reference. Previous employers automatically owe a duty of care to the recipient of the reference, to make sure that it is accurate. A well-worded disclaimer should be added just in case of any inaccuracies. DATA PROTECTION Providing a reference typically means handling personal data, and those involved must abide by the UK GDPR and the Data Protection Act 2018. Guidance for employers is provided in the (outdated, but still useful) Information Commissioner's Office (ICO) Employment Practices Code . Helpfully, Part two of the Code provides recommendations for employers issuing references, including establishing and communicating a clear policy regarding who can provide corporate references and under what circumstances. The Code advises against providing confidential references about an employee unless their explicit consent is obtained. It is vital to maintain the security of references and securely dispose of them when an employee leaves the organization, unless retention is required by law. DISCIPLINARY MATTERS It’s always going to be a contentious area, but it’s clear from cases on the point that have reached court that employers should disclose a poor disciplinary record, and details of any ongoing disciplinary proceedings, or risk being liable for providing a misleading reference. Unresolved disciplinary issues should also be mentioned, as not to do so could mean providing an incomplete picture. Adding a disclaimer is advisable. DISCLAIMERS It's customary for employers to add a disclaimer of liability – often specifically in respect of any negligent misstatement. This is usually effective as far as liability to the recipient is concerned, and is well worth adding, but it must such a disclaimer wouldn't absolve liability for fraud or deceit, meaning the employer cannot knowingly or recklessly make false statements. POLICIES Finally, employers ought to establish a well-defined written reference policy, outlining Which individuals are authorised to provide references; How references may be provided (in particular whether oral references may be given); The permissible content; and Any prohibited content. Having a template reference annexed to the policy is a useful further measure, and there should also be an obligation for records to be kept of oral references provided. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Commission or Kickback? Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Commission or Kickback? Keep it Classy Keep it Classy 10 May 2023 Last revised minutes 3 Reading time While adherence to classification society Rules is often mandatory, don’t think of these organisations as being there to impose health and safety restrictions and add to an already considerable mound of paperwork. They have their limitations, but they are useful sources of technical knowhow, and their experts can add real value to your build. minutes 3 Reading time 10 May 2023 Last revised While adherence to classification society Rules is often mandatory, don’t think of these organisations as being there to impose health and safety restrictions and add to an already considerable mound of paperwork. They have their limitations, but they are useful sources of technical knowhow, and their experts can add real value to your build. Classification societies establish and apply standards (Rules) for design, construction, and maintenance of yachts, focusing on technical aspects. Building and keeping a yacht in Class can boost resale value and ensure compliance with Flag State requirements and insurance policies. Classification societies can provide additional consultancy services during builds and refits, assisting with design development. The connection between classification and insurance dates back to the 17th century, with societies like Lloyd's Register providing vessel information to underwriters. The leading classification societies are members of the International Association of Classification Societies (IACS), which aids in developing regulations. Societies have limitations, including their focus on physical aspects and potential reliance on sampling instead of full examinations due to their experience with larger ships. Claims against societies for mistakes during the build or regular surveys can be challenging due to the choice of law, historical links to specific countries, and liability exclusions in the agreement. When choosing a society, consider membership in IACS, acceptance by insurance underwriters, openness to new ideas, and a deep understanding of large yachts. Establish a good working relationship with the society's surveyor, considering them as an integral part of the build team. Classification does not guarantee build quality or vessel maintenance; it primarily focuses on technical compliance. Societies have limitations, including their focus on physical aspects and potential reliance on sampling instead of full examinations due to their experience with larger ships. Claims against societies for mistakes during the build or regular surveys can be challenging due to the choice of law, historical links to specific countries, and liability exclusions in the agreement. When choosing a society, consider membership in IACS, acceptance by insurance underwriters, openness to new ideas, and a deep understanding of large yachts. Establish a good working relationship with the society's surveyor, considering them as an integral part of the build team. Classification does not guarantee build quality or vessel maintenance; it primarily focuses on technical compliance. Classification societies establish and apply standards (Rules) for design, construction, and maintenance of yachts, focusing on technical aspects. Building and keeping a yacht in Class can boost resale value and ensure compliance with Flag State requirements and insurance policies. Classification societies can provide additional consultancy services during builds and refits, assisting with design development. The connection between classification and insurance dates back to the 17th century, with societies like Lloyd's Register providing vessel information to underwriters. The leading classification societies are members of the International Association of Classification Societies (IACS), which aids in developing regulations. Classification societies (sometimes known just as ‘Class’) are privately-organised groups of engineers and surveyors. They are experts in the technical aspects of yacht construction and maintenance. Their principal role is to research, establish and apply standards (known as ‘Rules’) for design, building and maintenance. The Rules are highly detailed, covering the integrity of the hull, machinery and key safety systems. Depending on your yacht’s size, and whether it’s going to be chartered-out, your chosen Flag State, may require the vessel to be built according to Rules, and, on launching, be kept ‘in Class’. Societies also offer additional consultancy services, going beyond basic classification, during builds and refits. Building to Rules and keeping your yacht in Class can boost the resale value whether or not it is chartered. Where must, as a matter of law, be kept in class, then failing to do so may invalidate insurance policies. Even before the build agreement is signed, the society can review the proposed plans, and in particular any novel features or materials. As well as assessing Rule compliance, they can assist with design development – in a relatively cost-effective way, too. CLASS & INSURANCE The connection between classification and insurance goes back a long way. The oldest society, Lloyd's Register , was named after a 17th-century London coffee house that was frequented by merchants, ship owners and insurance underwriters. Keen to encourage patrons to stay longer, coffee house owner, Edward Lloyd, printed and circulated industry news. The customers set up the Society for the Registry of Shipping in 1760, with the aim of recording information about vessel quality, thereby enabling the underwriters to make more informed decisions about risk. The records were listed, rated and classed in the Society’s Register Book. Subscriptions generated by the Register Book paid for surveyors to examine the vessels. Today, the leading 11 societies are all members of the International Association of Classification Societies (IACS) - a non-governmental organization covering over 90% of the world’s shipping tonnage. IACS is a non-governmental organization, which helps the International Maritime Organization to develop regulations. LIMITATIONS Societies have two principal limitations. Firstly, they only consider the physical aspects of the yacht and its equipment, not how they are used. Secondly, because they are more used to examining ships ten times the volume of even the largest yachts, there can be a reliance on sampling rather than full examinations: things can be missed. Classification doesn’t automatically assure build quality or vessel maintenance. LIABILITY Society surveyors are human and make mistakes. An owner might want to claim against a society where there has been a mistake made during the build process. More common are omissions made during the regular surveys, especially where the maintenance of the yacht ‘in Class’ is a reason underpinning a purchase. The latter may be an important route to getting compensation, given that the societies are large organisations with deep pockets, whereas the seller is often just an owning company with no other assets once the vessel is sold. What makes claims against societies difficult is that while commercial parties often automatically choose English law, the societies all have historical links to particular countries, and often insist on the law of their ‘home’ country. Further, there are still no international conventions on this subject, despite some initiatives. The choice of law is normally agreed in the contract, of course, but this may not automatically be respected by certain courts, and such a choice may be meaningless to third party buyer who was not party to original contract for classification services. Societies will, where possible, expressly exclude their own liability in the terms of the agreement with the owner. These attempts have largely been upheld. Amazingly, terms will commonly state, for example, that the society ‘does not warrant the accuracy of any information or advice supplied…’ and ‘…will not be liable for any … act, omission, error, negligence, or … any inaccuracy in any information or advice given’. Indeed, the society may also state if there has been negligence on their part, then they will compensate the owner, but only up to the amount of the society’s fees paid – which will usually be a fraction of the damages sought. CHOICE OF SOCIETY You should choose a society which: Is a member of IACS, Is acceptable to the proposed insurance underwriter, Is receptive to new ideas and solutions, and Really understands large yachts. The last point is particularly important where your build includes novel designs or materials. Much can be at the discretion of the society’s surveyor, so a good working relationship is vital. Think of the surveyor as an integral part of your build team. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Engage a Builder Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Engage a Builder The Brokers Role The Brokers' Role 2 September 2020 Last revised minutes 5 Reading time Yacht brokers play an essential role in the sale and purchase market. Reputable brokers know the current market, how to market the vessel, how much for and to whom. While they can also be engaged to represent buyers, this article looks at their role as the seller’s representative. minutes 5 Reading time 2 September 2020 Last revised Yacht brokers play an essential role in the sale and purchase market. Reputable brokers know the current market, how to market the vessel, how much for and to whom. While they can also be engaged to represent buyers, this article looks at their role as the seller’s representative. Yacht brokers are generally unregulated in most parts of the world, allowing anyone to become a broker without barriers to entry. Due diligence is essential for prospective yacht buyers to assess the credibility and ethics of brokerages and individual brokers. Brokers often prefer to work under a Central Agency Agreement, granting them exclusive rights to market the yacht and ensuring a return on their investment. It is important for buyers to verify if the broker they are dealing with is the Central Agent to avoid complex communication chains. The exclusivity term in the Central Agency Agreement can be negotiated, but sufficient time should be given to the broker for marketing and selling the vessel. Even if a sale is not directly related to the broker's efforts, they may still be entitled to a commission during the agreement period. Joint Central Agency Agreements may involve multiple agents deciding on marketing and commission splits, requiring careful consideration. Disputes between sellers and brokers often arise due to vague or ambiguous broker instructions. Standard terms and conditions provided by brokers should be examined carefully to understand the scope of services and any limitations or exclusions. Yacht brokers have fiduciary duties to act in the best interest of their principals, exercise reasonable care and skill, and avoid conflicts of interest. Even if a sale is not directly related to the broker's efforts, they may still be entitled to a commission during the agreement period. Joint Central Agency Agreements may involve multiple agents deciding on marketing and commission splits, requiring careful consideration. Disputes between sellers and brokers often arise due to vague or ambiguous broker instructions. Standard terms and conditions provided by brokers should be examined carefully to understand the scope of services and any limitations or exclusions. Yacht brokers have fiduciary duties to act in the best interest of their principals, exercise reasonable care and skill, and avoid conflicts of interest. Yacht brokers are generally unregulated in most parts of the world, allowing anyone to become a broker without barriers to entry. Due diligence is essential for prospective yacht buyers to assess the credibility and ethics of brokerages and individual brokers. Brokers often prefer to work under a Central Agency Agreement, granting them exclusive rights to market the yacht and ensuring a return on their investment. It is important for buyers to verify if the broker they are dealing with is the Central Agent to avoid complex communication chains. The exclusivity term in the Central Agency Agreement can be negotiated, but sufficient time should be given to the broker for marketing and selling the vessel. In most parts of the world, yacht brokers aren’t regulated in law. There are no barriers to entry. Anyone can set themselves up as one – and many frequently do. Some brokers are not averse to offering insurance, for example, without the necessary regulatory permits to do so – which often paints an accurate picture of their approach to professional ethics and legal niceties. Recommendations are useful, but prospective buyers need to conduct due diligence on both brokerages and individual brokers. CENTRAL AGENTS As well as working under their own terms and conditions, brokers usually prefer to work under a Central Agency Agreement – under which they have the exclusive right to market the yacht. This gives them peace of mind and will encourage them to do their best to sell the vessel, safe in knowledge that – unless the vessel fails to sell at all – they will see a return on their investment. As a prospective buyer, you should ensure that the broker you are dealing with is indeed the Central Agent: otherwise an unnecessary and inefficient chain of communications can be set up which makes negotiating that much more complex, lengthy and uncertain. MYBA, for example, produces its own approved, standard Central Agency Agreement which is reasonably fair if somewhat simplistic. The exclusivity term of the Central Agency Agreement is a matter of negotiation, but the broker should be afforded a sufficient chance to market and sell the vessel – keeping in mind the yacht show calendar, the vessel’s usual mooring location and the time needed to produce promotional materials, videos, etc. Crucially, under such agreement the broker is usually entitled to commission where the yacht is sold during the period of its currency – even if the sale had nothing to do with the broker’s efforts. Perhaps the seller has a business associate looking to buy her – or a regular charterer is looking to make her his own: if these are realistic possibilities, the agreement will need amending. Alternatively, the seller may prefer to appoint more than one central agent under a Joint Central Agency Agreement, with multiple agents deciding between themselves how the vessel is to be marketed and the commission split. Attention must still be paid to what is to happen where a sale occurs regardless of the joint central agents’ efforts. Disputes between sellers and brokers most often occur because of the vagueness of, or ambiguities contained in, the broker's instructions. Brokers may also seek to regulate the relationship between them and their clients with ‘standard’ terms and conditions. Any prospective client would be urged to examine these carefully, and take advice, to ensure that there are no misunderstandings about the scope of the services being supplied – and the limitation and exclusions which may apply. Any clauses seeking to exclude or limit liability will be subject to laws governing unfair contract terms – and so cannot necessarily be taken at face value. Further, in the unlikely event that the seller is an individual, rather than a company, the terms must usually comply with the Consumer Rights Act 2015 which seeks to ensure that contracts within its remit are, broadly, as fair as possible. In providing brokerage services, a legal agent/principal relationship is established. This means that the relationship between seller and broker is governed not only by the written arrangements made in the brokerage agreement, but by the unwritten (as far as the parties are concerned) law of agency. Well understood by lawyers, but not necessarily by the parties, there can be obligations owed by broker to the seller, and vice versa, of which one or neither is completely unaware. INTERMEDIARY BROKERS Sometimes, central agents just don’t have sufficient market penetration. Perhaps they just don’t have the necessary geographic or cultural reach, or it’s just that their little black book doesn’t have the right numbers in it. They may use other brokers (known as intermediary or sub brokers) and/or other parties to reach the ear of the prospective client. While this should be avoided, for the reasons touched on above, sometimes it’s unavoidable if an opportunity isn’t to be lost. While intermediary brokers have no contractual connection with the seller, they nevertheless have certain rights and obligations. The law recognises the intermediary broker’s right (unless other arrangements have been agreed between them and the Central Agent) to be paid a commission – but only where such broker introduces the buyer to the purchase opportunity, and – crucially – was thereby the, or an, “effective cause” of the sale. In determining where an intermediary broker’s’ actions formed an effective cause rather than simply a cause, the question is whether the party actually brought about the relationship between the buyer and seller. There is no clear set of principles which can be distilled from the many legal cases on this subject. Whether such broker is the effective cause simply depends on the facts of each case – but such an effective cause will be very readily implied by the courts. The intermediary broker does not have to complete or even take part in the negotiations which do take place, nor arrange any meeting, nor persuade either party to enter into the contract. Commission will still be due where the price agreed is lower than that originally put forward. REASONABLE CARE & SKILL Under section 13 of the Supply of Goods and Services Act of 1982, the broker will have an automatic legal duty to exercise reasonable care and skill in performing its services - subject to any express terms of the brokerage agreement. What constitutes reasonable care and skill is what one would expect of a competent yacht broker. In court, independent and authoritative expert testimony would likely be sought to establish what such expectations are and whether these have been met. Intermediary brokers also owe sellers a duty to exercise reasonable care and skill – even in the absence of a direct contractual link. FIDUCIARY DUTIES As agents, brokers owe their principals other particular legal duties, including acting in good faith, and not acting in its own interest (or that of a third party) without the principal's consent. It’s no excuse that the principal would have consented had he or she been asked. COMMISSION There can be confusion regarding the extent to which broker must disclose third party commissions paid, by the broker, in connection with each sale. The courts have accepted that – in the commercial shipping world at least – market practice encompasses the paying of commission, by brokers, to intermediary brokers and other third parties, as part of the broker’s own outgoings. The broker is not required to disclose such costs to his principal unless specifically requested. But (and it’s a big but!) brokers must ensure that their actions do not lead to anyone breaching the provisions of the Bribery Act. It is easy to foresee circumstances under which a captain of the yacht for sale receives a commission without the consent of his employer – thereby committing a criminal offence to which the broker is then an accessory. BROKER AS STAKEHOLDER Under the MYBA Memorandum of Agreement (MOA), the seller’s broker normally acts as ‘stakeholder’ – holding the deposit. This is typical of many such standard sale agreements. The broker must distribute the funds upon the occurrence of certain events listed in the agreement – and must not follow the instructions of other parties including the broker’s own client. Surprisingly, there’s nothing in the MYBA MOA obliging the broker to keep funds in a separate client account, nor pay interest on the cash it holds. PAYING THE BROKER Under the MYBA sale form, the seller must pay the commission directly to the broker(s) identified in the MOA, on successful completion of the sale, or where the sale is not finalised but the seller and the buyer agree a sale within two years of the sale agreement. The broker is made a party to the agreement for certain purposes – giving it the right to enforce those clauses relating to commission. Where the broker isn’t party to the sale agreement, a right of enforcement may be provided by the Contracts (Rights of Third Parties) Act of 1999, which grants a third party the right to enforce a contract under certain circumstances. What practical use this would be where the seller is an owning company which has just sold its only asset and distributed the resulting funds is another matter. COMPLAINTS Where owners are dissatisfied with a broker’s behaviour, it is often worth seeing if matters can be brought to satisfactory conclusion without the need for litigation. Brokers are often members of associations which may have their own codes of conduct, and may have a complaints mechanism. Professional indemnity insurance may be required, and a conversation with underwriters may focus minds especially where there is a substantial policy excess. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about MYBA MOA Clause by Clause Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about MYBA MOA Clause by Clause Difficult Guests Difficult Guests 3 October 2017 Last revised minutes 3 Reading time Just because charterer guests have paid a great deal of money for the exclusive use of a superyacht, this does not mean that he (or she) has the right to do with the boat and crew as he pleases. A Member recently sought advice with regard to redress following a charter during which guests behaved in a way which was at best depraved – and at worst illegal. minutes 3 Reading time 3 October 2017 Last revised Just because charterer guests have paid a great deal of money for the exclusive use of a superyacht, this does not mean that he (or she) has the right to do with the boat and crew as he pleases. A Member recently sought advice with regard to redress following a charter during which guests behaved in a way which was at best depraved – and at worst illegal. In the absence of an agreement stating otherwise, the broker marketing the yacht is considered the owner's agent and must act in the owner's best interests. Once the broker books the charter, the owner is bound by the charter agreement and must provide the yacht to the charterer. The terms of the charter agreement are often based on the MYBA Charter Agreement, which allows the owner to back out only in exceptional circumstances and with financial consequences. The captain is required by law to refuse illegal instructions from the charterer, but there are other unsavory or immoral actions that may not be illegal. The MYBA form explicitly prohibits certain behaviors, such as causing nuisance or disrepute, commercial photo shoots, and harassment of crewmembers. Any breach of the charter agreement may entitle the owner to terminate the contract immediately and claim damages. The captain must raise issues with the charterer before the owner can terminate the contract, according to the MYBA Charter Agreement. Despite the challenges, chartering can help offset the costs of owning large yachts with the right guidance and support. The MYBA form explicitly prohibits certain behaviors, such as causing nuisance or disrepute, commercial photo shoots, and harassment of crewmembers. Any breach of the charter agreement may entitle the owner to terminate the contract immediately and claim damages. The captain must raise issues with the charterer before the owner can terminate the contract, according to the MYBA Charter Agreement. Despite the challenges, chartering can help offset the costs of owning large yachts with the right guidance and support. In the absence of an agreement stating otherwise, the broker marketing the yacht is considered the owner's agent and must act in the owner's best interests. Once the broker books the charter, the owner is bound by the charter agreement and must provide the yacht to the charterer. The terms of the charter agreement are often based on the MYBA Charter Agreement, which allows the owner to back out only in exceptional circumstances and with financial consequences. The captain is required by law to refuse illegal instructions from the charterer, but there are other unsavory or immoral actions that may not be illegal. Had the owner known who the charterer was, he would have never have agreed. The charter broker was aware of the charterer’s reputation but remained silent until just before the start of the charter. In the absence of agreement to the contrary, the broker marketing the yacht on behalf of the owner will often be, in law, the owner’s agent. As such, the broker must perform with the appropriate care and skill, and not allow any conflict between personal interests and those of the principal. By booking a charter with someone known to be unsuitable, it could be said that the broker wasn’t careful and just wanted the commission. THE AGREEMENT Once the broker has booked the charter, however, the owner will have been bound by the charter agreement, and is bound to provide his yacht to the charterer. The terms will have been set out in the charter agreement. The most common terms are those published by the Mediterranean Yacht Brokers Association (‘MYBA’), which have also been adopted by the American Yacht Charter Association. The MYBA Charter Agreement only allows the owner to back out as a result of circumstances beyond his control, on pain of reimbursing the owner plus an extra 50%. EDGY BEHAVIOUR While, subject to the charter agreement, the yacht is the charterer’s to do with as he pleases, the captain is obliged by law to refuse to comply with illegal instructions. However, there are many things a charterer may do which, while unsavoury or immoral, are not illegal. The MYBA form therefore expressly bans, for example, behaviour causing nuisance or disrepute, commercial photo shoots, and harassment of crewmembers. Member’s Experience: “ I have been chartering my yachts for more than 15 years and have maintained an excellent relationship with brokers and charterers. In fact, my yachts are considered some of the most successful yachts on the charter market. What has occurred is certainly an aberration and not to be confused with the excellent work the broker community has done these many years. ” Generally, any breach may allow the owner to treat the charter as having come to an end immediately and claim damages, or just claim damages afterwards, depending on how serious the breach is. But the owner must have suffered some sort of actual loss as a result of the breach: an upset crew may not be enough. RAISING ISSUES The MYBA Charter Agreement specifically requires the captain to raise issues with the charterer first, before the owner has a chance to terminate the contract. A failure to do this could arguably be seen as a waiver of the owner’s rights, and owners may wish to amend such standard form contracts. The Member was at pains to point out that these circumstances are unusual, commenting, “I have been chartering my yachts for more than 15 years and have maintained an excellent relationship with brokers and charterers. In fact, my yachts are considered some of the most successful yachts on the charter market. What has occurred is certainly an aberration and not to be confused with the excellent work the broker community has done these many years.” DON’T BE PUT OFF For all the pitfalls and hurdles, chartering can substantially offset the costs associated with the ownership of large yachts – with the right guidance and support. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about How to Charter Out Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about How to Charter Out The Build Process The Build Process 10 May 2023 Last revised minutes 4 Reading time Building a large, custom yacht is a complex process which must be carefully choreographed. There are a lot of specialists involved, and much which can wrong. Here we look at what construction actually involves, and why building your team at the outset is such a vital first step. minutes 4 Reading time 10 May 2023 Last revised Building a large, custom yacht is a complex process which must be carefully choreographed. There are a lot of specialists involved, and much which can wrong. Here we look at what construction actually involves, and why building your team at the outset is such a vital first step. Large yacht construction involves a tightly-controlled sequence of events, and adherence to classification society standards for welding and quality control. Machinery and larger systems must be installed before the superstructure is joined ot the hull. Filling, fairing, insulation, and the addition of cable trays and pipework must be carefully choreographed. Interior panels are prefabricated and should be removable for access and maintenance. The sooner the build captain is recruited the better. Project managers should be present at all stages of the build and provide progress reports. Crewmembers, other than the build captain, are engaged as the build nears completion, with the build captain overseeing recruitment. Insurance coverage should be clarified in the build agreement, including employer's liability insurance for crew. Sea trials are conducted to test the yacht's systems and performance, followed by formal legal delivery and a warranty period to address any issues that arise. Project managers should be present at all stages of the build and provide progress reports. Crewmembers, other than the build captain, are engaged as the build nears completion, with the build captain overseeing recruitment. Insurance coverage should be clarified in the build agreement, including employer's liability insurance for crew. Sea trials are conducted to test the yacht's systems and performance, followed by formal legal delivery and a warranty period to address any issues that arise. Large yacht construction involves a tightly-controlled sequence of events, and adherence to classification society standards for welding and quality control. Machinery and larger systems must be installed before the superstructure is joined ot the hull. Filling, fairing, insulation, and the addition of cable trays and pipework must be carefully choreographed. Interior panels are prefabricated and should be removable for access and maintenance. The sooner the build captain is recruited the better. Generally speaking, yachts are far more complex than working vessels of a similar size, and finishes must, of course, be of a far higher standard. Yard cleanliness and orderliness make ensuring this much easier. You’ll have gotten a feel for the builder’s work practices having visited beforehand . Once the build is underway, there’s a lot going on and a lot to go wrong. For steel-hulled yachts, huge plates are cut to shape before being assembled and welded into place. Steps must be taken in precisely the right order. Where the vessel will be classed, welders must be qualified in accordance with the classification society standards. The welds themselves must conform to measurable standards with tolerances measuring less than a millimetre. If it’s not right it must be corrected until it is. It can take a year and half to complete a bare 100-metre hull, during which about 1,000 tonnes of steel will be used. Superstructures are typically made from aluminium – requiring even greater welding skills. They are usually constructed in sections, away from the hull, then bonded together. Larger items of machinery, such as engines and generators, must be installed before superstructure encloses the internal spaces. The project will then typically be moved way from under the gantry cranes of the construction facility, to a fitting-out facility, where the machinery and systems will be fitted. The hull’s surface will be slightly rippled and will need filling and fairing: a skilled and labour-intensive process. The epoxy fillers, and paints covering them, are sensitive to temperature and humidity. Insulation, cable trays and pipework can now be installed – in exactly the right sequence. Interior panels are normally prefabricated by subcontractors, before being brought to the yard for installation. They will normally produce full-scale mock-ups of various interiors which you can check before they are installed. It’s important that the bulkhead and deckhead panels be removeable to allow access as needed for regular system maintenance. It's vital that photographs are taken during construction so that what’s behind the panels can be checked easily. SUPERVISION The builder will employ its own project manager(s), but with so much going on it’s easy to see why your project manager needs to be present at all stages of the build. Your project manager should compile monthly reports showing progress, with photos and detailing how this compares to the agreed time schedule. Your project manager should also know the build agreement inside-out, and must remind you of upcoming decision deadlines in good time. As with any large project, communication is key. ENGAGING CREW More and more crew are brought in as the build nears completion. The build captain is first – and in the case of larger projects may have been engaged at the outset. Where the build is on a more modest scale, the project manager also performs the role of build captain and may be the vessel’s first captain following launch. Build captains perform two roles: firstly they add a helpful seagoing captain’s perspective to the build, and secondly they recruit and oversee other crewmembers. The build captain will need excellent organisational skills, an analytical mindset and be a superb manager and motivator. Next comes the Chief Engineer, who can bring real value right away, followed by other heads of departments, who will be key in recruiting those who report to them – and may already have contacts waiting in the wings. Some hires may have been misjudged and just aren’t the right fit. This is to be expected. Not hiring crew until absolutely necessary can be a false economy. There’s much to be got ready before launch. Aside from completing the build, operational and regulatory procedures need to be established, and if these are rushed they may not be fit for purpose. INSURANCE The build agreement should be clear on when the build no longer bears the risk of damage occurring to the yacht, or the liabilities incurred to third parties. There should be no gaps in cover. Keep in mind, too, that you will need employers’ liability insurance in respect of crew as soon as they are engaged. While insurance brokers owe a legal duty to you, as insured, in reality they can value their commercial relationships with underwriters more. Indeed, some will expressly be your agent at the time of inception, but become the underwriter’s agent once a claim has been made. Be warned, and examine the policies in detail. TRIALS At last, your new yacht is complete and is ready for her first sea trial. You may like to come along – but it’s not going to be the most exciting cruise. Before she goes anywhere, there’s a dock trial. The generators and main engines are started and their cooling systems checked for leaks. Once the captain is satisfied that she is ready, she can head out to sea. Aboard will be representatives from the builder, subcontractors and classification society, as well as your own team. All kinds of objective measurements are made which can be checked against the contractual specification. The trial will take most of the day, or a few days for a large, complex vessel. DELIVERY At last your yacht is ready for formal, legal delivery. There may still be teething problems evident at the time of delivery, which the builder hasn’t had time to correct, but which you’re happy to live with for now. The scope and nature of such works must be formally agreed. The build documentation will have been examined and approved by your lawyer, and will be released to you against receipt of the penultimate payment – the final payment being made upon successful completion of the warranty period. WARRANTY PERIOD Because yachts are, in essence, a matrix of complex systems operating together in a harsh environment, it is inevitable that some systems will fail, or fail to perform as expected. The warranty period should be clearly set out in the build agreement. It is vital for crewmembers to inform the captain, and the captain to inform you and the builder, right away and in writing, of any faults. Documentation and record keeping are key. Keep in mind any notice formalities which must be observed. It's in the builder’s interests to work with you to create a yacht which will serve as a masterpiece – quite literally a shining example of what that yard is able to produce. Finding new clients is expensive and time-consuming. It’s far easier to keep existing clients happy and work towards selling them a larger yacht. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about A Firm Foundation Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about A Firm Foundation The ISM Code The ISM Code 18 May 2009 Last revised minutes 7 Reading time The International Management Code for the Safe Operation of Ships and for Pollution Prevention (‘ISM’) Code applies to a significant number of large yachts. Members may think they need have little to do with day-to-day logistics, but they would be well advised to familiarise themselves with the basics of the code. And there’s much to learn for Members owning yachts to which the Code does not apply. minutes 7 Reading time 18 May 2009 Last revised The International Management Code for the Safe Operation of Ships and for Pollution Prevention (‘ISM’) Code applies to a significant number of large yachts. Members may think they need have little to do with day-to-day logistics, but they would be well advised to familiarise themselves with the basics of the code. And there’s much to learn for Members owning yachts to which the Code does not apply. The Code developed by the International Maritime Organisation is mandatory for certain yachts flying the flag of a maritime nation and affects yachts calling at ports in these countries. The Code applies to yachts of at least 500 gross tonnage engaged in "trade," which includes chartered yachts. The Code requires the implementation of a safety management system (SMS) to ensure safety and pollution prevention. The responsibility for safety lies with the 'Company' that has assumed responsibility for the yacht's operation from the owner. The SMS consists of set procedures outlined in manuals held ashore and onboard the yacht. Non-conformities reported to the Company must be remedied, and the Company must keep itself informed and act if issues arise. Compliance with the Code also requires observance of other international and flag state safety regulations. A designated person ashore (DPA) is appointed to ensure compliance with the SMS and statutory requirements. The Company must obtain a Document of Compliance (DOC) and a Safety Management Certificate (SMC) to operate the yacht legally. The Code helps prevent pollution, but compliance is not guaranteed, and prosecutors and insurers may scrutinize the actual implementation and maintenance of safety systems. Non-conformities reported to the Company must be remedied, and the Company must keep itself informed and act if issues arise. Compliance with the Code also requires observance of other international and flag state safety regulations. A designated person ashore (DPA) is appointed to ensure compliance with the SMS and statutory requirements. The Company must obtain a Document of Compliance (DOC) and a Safety Management Certificate (SMC) to operate the yacht legally. The Code helps prevent pollution, but compliance is not guaranteed, and prosecutors and insurers may scrutinize the actual implementation and maintenance of safety systems. The Code developed by the International Maritime Organisation is mandatory for certain yachts flying the flag of a maritime nation and affects yachts calling at ports in these countries. The Code applies to yachts of at least 500 gross tonnage engaged in "trade," which includes chartered yachts. The Code requires the implementation of a safety management system (SMS) to ensure safety and pollution prevention. The responsibility for safety lies with the 'Company' that has assumed responsibility for the yacht's operation from the owner. The SMS consists of set procedures outlined in manuals held ashore and onboard the yacht. The Code was developed by the International Maritime Organisation and, being uncontroversial, has become a part of domestic law in most maritime nations. The Code is therefore mandatory on board certain yachts flying the ensign of such a country, under what is known as the ‘flag state’ law. It also affects certain yachts calling at ports in some of these countries, by virtue of the ‘port state’ law, even if it is not required by the flag state law. The Code does not apply to all yachts subject to a particular flag state law, however. It only applies to those of at least 500 gross tonnage (GT) which are engaged in ‘trade’. Yachts which are chartered will normally be considered to be engaged in trade. SCOPE The Code concerns a great deal more than just having the right number of fire extinguishers or liferafts. It requires owners (or their appointed managers) to put in place management systems which are designed to ensure that the yacht is operated with the utmost regard to safety and pollution prevention. A complete culture of safety and continual improvement must be created. RESPONSIBILITY Where the yacht is technically owned by a single-purpose offshore owning company, ultimate responsibility for safety can nevertheless still lie with the beneficial owner. Responsibility under the Code, however, is said to lie with the ‘Company’. The Company is the party which has assumed responsibility for the operation of the yacht from the owner: it must establish the appropriate policies, and provide the necessary resources and shore-based support. The Company could be anyone, but someone has to formerly agree to take on this role if the owner is to avoid liability. This is where the managers step in. Under the Code, arranging safety systems becomes a surprisingly specialised task. This is why the managers should be chosen, and engaged, with the utmost care and attention to detail. SYSTEM The Company must implement a safety management system (‘SMS’), consisting of set, verifiable procedures. These are tailored to the individual yacht, and should ensure that the yacht is run in a way which complies with the Code. The SMS is contained in sets of manuals, held both ashore and on board. They typically outline the system itself, state general safety and environmental policies, and describe the organisation of the Company. Shoreside manuals will set out the régime for audits, risk assessment and accident analysis. Shipboard manuals will also give the planning, operating and reporting procedures. They cannot just be left on the shelf like an engine manual, however. Port inspectors, for example, may examine the manuals and interview the crew, who will be expected to be both familiar with them and actually using them. Key operational procedures and corrections are planned and recorded, as well as being audited internally and externally. Taken out of context some procedures may appear almost laughably prescriptive. In fact, in the context of the Code, this process leads both to a continual process of refinement, and independently certifiable standards of conduct. NON-CONFORMITY Where a Code ‘non-conformity’ is reported to the Company but is not remedied, or if a blind eye is turned to it, or if the system is such that non-conformities go reported, the Company will be in breach of the Code. Before the Code was introduced, the owner or manager could have legitimately said that there may have been safety issues on board the yacht which they were not aware about. By contrast, the burden is now on the Company to keep itself informed and act if all is not in order. All roles are now more accurately defined, meaning that it is now much easier to assess after an incident who was responsible for what, and what they knew or should have known. FURTHER COMPLIANCE The Code also requires and ensures observance of other international and flag state safety regulations. The obvious example is the fire drill, which cannot be meaningfully conducted unless all the correct fire fighting equipment is present. In fact, compliance with the Code requires compliance with a considerable array of international maritime conventions, ranging from crew training to vessel stability. From the owner’s point of view, this is a good thing. DESIGNATED PERSON A formal line of communication must exist between the Company and the yacht. This is absolutely vital. The Company has to appoint a designated person ashore (normally abbreviated to ‘DPA’ or ‘DP’) to sit at one and of that line. His (or her) job is to keep an eye on the safe and efficient operation of the yacht as the SMS demands, and take all necessary steps to ensure compliance. The DP must also ensure that proper provision is made for the yacht to be manned, equipped and maintained such that it is fit to operate in accordance with both the SMS and whichever other statutory requirements are dreamt up from time to time. The role of DP is often combined with others such as Technical or Operations Manager. In order that the DP is able to do all this, he must have: Direct access to the highest level of the Company’s management; Sufficient authority to influence decision-making; and Appropriate knowledge and experience of the operation of the type of yacht in question. So important is the DP’s role, that he may be jailed by the flag state should he fail to discharge certain key responsibilities. Port states can also be merciless with a DP, even where the DP is based overseas. A DP based in Denmark, for example, was recently the subject to an indictment by the United States Department of Justice. As the DP can be called upon to take action at any time, a deputy may be appointed. Some managers have been known to appoint personal assistants or secretaries to this role. This is poor practice, and indicates a culture of profit over safety. Beyond the DP and his deputy, the Code states that the Company must ensure that all personnel involved with the SMS have an adequate understanding of the relevant rules, regulations, codes and guidelines. Safety used to be the Captain’s domain, or at least the buck stopped with him or her. In terms of the immediate safety of the yacht, this remains the case. As the Company bears the responsibility of Code compliance on behalf of the owner, the existence of the DP ensures that the Company cannot leave responsibility resting on the Captain’s shoulders. Captains and managers must work together to ensure an adequate and workable system is developed. This is enshrined in the preamble to the Code, which explicitly states that in matters of safety and pollution prevention it is the commitment, competence, attitudes and motivation of individuals at all levels that determines the end result. LIABILITY Before the Code was imposed, yacht managers tended to take on the role of owner’s agent. They might have assisted the owner’s accountants, but it was the Captain who had the most to do the owner. The arrangement was based on reducing hassle for owners as much as possible. This arrangement may still, of course, suit owners of yachts not subject to the Code. As managers must take up a more interfering and directing role by virtue of the Code, there is no scope for resentment of this on the part of the crew. Instead, comfort should be taken in the fact that liability is shared with those ashore, who must keep safety issues under close scrutiny, and make sufficient resources available. Nevertheless, the owner may wish to keep an eye on whether the manager’s style is becoming too autocratic, perhaps leading to a dissatisfied crew. CERTIFICATION Once auditors from the flag state have examined the SMS, both on paper and in practice, a Document of Compliance (‘DOC’) will be issued in respect of the Company. A Safety Management Certificate (‘SMC’) may then be issued in respect of the yacht managed by that Company, as long as the SMS has been successfully implemented on board. Both these documents must be in place for the yacht to be operated legally. They will be audited regularly. Because of the number of individuals involved in the planning, undertaking and recording of actions, and the independence of external auditors, deliberate falsifications are sure to highlight themselves. Where logs have been ‘flogged’, i.e. where false entries have been made with regard to, for example, hours worked, the DOC may be withdrawn immediately. APPEARANCES In comparison with trading ships, yachts may appear to have an unblemished safety record. This is a little illusory. Whilst crewmembers may exude joyful efficiency, and the yachts themselves are kept in immaculate condition, this can have more to do with complying with the owner’s aesthetic wishes than with the maintenance of a safety culture. Accidents involving yachts do happen: they tend, however, not to involve large scale loss of life or pollution, and are not especially newsworthy. That courteous crewmember may in fact have worked excessive hours during a busy charter season, or may have been left in command without the necessary experience or qualifications. INSURANCE Following an incident, insurers will consider their liability for the claim thoroughly. Standard insurance clauses typically allow an insurer to avoid paying out, if the yacht was subject to certain perils resulting from a lack of ‘due diligence’ by the yacht’s management. The actions of the Company will be open to scrutiny by the insurer seeking to establish whether due diligence was exercised, and will be subject to a post-incident analysis. The ISM Code paper-trail is the obvious starting point. All documents in the possession of the Company which may be useful to the insurer, including internal documents, may have to be made available in the event of litigation. Any conviction of the Company or DP for Code failings would provide the insurer with the best possible evidence of a failure to exercise due diligence. INSPECTIONS Inspections of yachts by port officials tend to occur less frequently than for trading ships. This is understandable given that yachts tend to wear more respectable ensigns, and it is normally the official policy at ports to concentrate inspections on vessels which are likely to pose the greatest hazard to that port and the surrounding coastline. Nevertheless, where safety failings lead to even trivial incidents, authorities may choose to detain or even take action against a yacht herself, making the use of standard liability-avoidance vehicles, such as companies and trusts, futile measures. The knock-on effects of breached charter agreements and all-round inconvenience are obviously best avoided. The fact that the Code also helps to prevent pollution is a very good thing as far as owners are concerned. Pollution in some jurisdictions can lead to surprisingly hefty fines and even imprisonment. Spotter planes can find offending yachts with ease, and it is surprising how far even the smallest quantity of fuel will spread across the water. Unfortunately, the Company cannot simply wave the DOC and SMC in the air and expect forgiveness from prosecutors or insurers. Whilst useful, neither guarantees compliance. They simply show that, at a particular point in time in the past, the SMS, as applied by the Company and on board the yacht, met the minimum internationally agreed standards. Further, the external audit which led to the award of the DOC and SMC will have been based only on samples, will not have taken that long, and will have been far from exhaustive. By contrast, once a prosecutor or insurance company is able to access the various manuals and records, these can be scrutinised against actual findings at their leisure. It has been recognised that less respectable flag states may chose to ignore their responsibilities and may be prepared to certify compliance in any event. CONCLUSION From a legal viewpoint, the Code can be the owner’s closest ally or most feared enemy, depending on just how successful its implementation and maintenance has actually been. Owners do least have the luxury of being able to buy-in the appropriate expertise. Arranging and maintaining Code safety systems is a highly specialised task, however, and owners should grasp the fundamentals of the Code, and choose the appropriate managers accordingly. Thereafter, they should consider whether the managers and crew are successfully working together: this required by the Code and is important for morale and staff retention. Although the implementation of the Code does involve more paperwork and expense, it is the consequence of concerns about ineffective safety management stretching back many decades. Full and successful implementation will go a long way to ensuring that physical safety and pollution risks are kept under control. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Port State Control Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Port State Control Conversion Agreements Conversion Agreements 10 August 2019 Last revised minutes 5 Reading time Converting working and naval ships into yachts can save time and money, and the results can be spectacular. Each project is unique and challenging. It is crucial that the terms agreed with the yard undertaking the work are clear, fair and practical. And each such agreement will be as unique as the project. minutes 5 Reading time 10 August 2019 Last revised Converting working and naval ships into yachts can save time and money, and the results can be spectacular. Each project is unique and challenging. It is crucial that the terms agreed with the yard undertaking the work are clear, fair and practical. And each such agreement will be as unique as the project. By choice, most shipping agreements, including yachting, are governed by English law regardless of the parties' location. Conversion agreements are subject to the Supply of Goods and Services Act 1982, which implies terms such as satisfactory quality and reasonable fitness for purpose. Yards must use reasonable care and skill in providing services, but it may not meet the high standards expected in yachts. Parties should seek legal advice to create fair and workable terms for conversion agreements. The price for conversion works is usually a fixed fee payable in installments, with adjustments for changes in specifications. The scope of works should be clearly defined, including repair and conversion components, with detailed technical specifications and objective performance standards. The agreement should address interface risks and allocate responsibility for inaccuracies in plans and specifications. A specific timeframe, known as the Redelivery Date, should be agreed upon, with provisions for liquidated damages and cancellation if the project overruns. Other key provisions include force majeure clauses, security arrangements, material ownership, insurance coverage, and warranty periods for remedying faults. The scope of works should be clearly defined, including repair and conversion components, with detailed technical specifications and objective performance standards. The agreement should address interface risks and allocate responsibility for inaccuracies in plans and specifications. A specific timeframe, known as the Redelivery Date, should be agreed upon, with provisions for liquidated damages and cancellation if the project overruns. Other key provisions include force majeure clauses, security arrangements, material ownership, insurance coverage, and warranty periods for remedying faults. By choice, most shipping agreements, including yachting, are governed by English law regardless of the parties' location. Conversion agreements are subject to the Supply of Goods and Services Act 1982, which implies terms such as satisfactory quality and reasonable fitness for purpose. Yards must use reasonable care and skill in providing services, but it may not meet the high standards expected in yachts. Parties should seek legal advice to create fair and workable terms for conversion agreements. The price for conversion works is usually a fixed fee payable in installments, with adjustments for changes in specifications. Most agreements in shipping (including yachting) are governed, by contract if not otherwise, by English law – no matter where in the world the parties are. Unlike shipbuilding agreements, which under English law are contracts for the sale and purchase of goods, conversion agreements are, broadly, contracts for the sale and purchase of labour combined with a supply of materials. As such, they are governed by the Supply of Goods and Services Act 1982 (as amended) and thereby subject to the same implied terms that apply to a contract for the sale of goods, namely that the materials must be of “ satisfactory quality ” and “ reasonably fit ” for any specific purpose expressly or implicitly disclosed to the yard. Further, in providing services, the yard must merely use “ reasonable care and skill ” – which the courts have determined means “ the ordinary skill of an ordinary competent [person] performing that particular art .” The result may be far from the highest standards of workmanship expected in the context of yachts. Far better, then, to agree to certain objective specifications being met. KEY PROVISIONS As with yacht building, there is no standard conversion agreement for parties to use and adapt. Elements of standard shipbuilding, and standard yacht refit, agreements could be used but the parties should take advice at the outset so that fair and workable terms are agreed – including some of the following key terms. PRICE Works are typically carried on for fixed fee, payable in instalments following the completion of particular stages of the conversion. Changes in specifications are reflected in adjustments agreed to the fee. Owners should insist on unit prices for labour and key materials being fixed at the outset, in order that the yard cannot raise these unduly in respect of additional works. SCOPE Setting out the scope of the works to be completed is key. There is no alternative to drafting a detailed technical specification – including plans, objective performance and/or finish standards to be achieved. It's helpful to divide the scope into two distinct components: A repair scope, setting out the elements needing repair following the thorough pre-purchase survey; and A conversion scope, setting out what needs to be added – or removed – in order for the vessel to become a yacht. The repair scope will need some inherent flexibility as the repairs themselves may reveal further issues which weren’t apparent during the survey, while the conversion scope can, and should, be very rigid. In addition, the conversion agreement will have to describe standards to be met by the yard in respect of the works. Vague standards often used in the context of trading vessels – such as “ first class ” shipbuilding standards – should be avoided, and objective standards used. Comparisons can be made to other existing vessels. But ideally, reference should be made to Classification Society Rules or other objective standards and measurements. There are few, if any, aspects which can’t be measured objectively – which is crucial especially where the yard isn’t used to the very high standards expected by yacht owners. Converting a vessel into a yacht may pose “interface risks”. These are the risks of a failure of materials and/or design where new materials and equipment are installed into an existing structure. So, if possible, the yard should bear such risks. Yards can require owners to warrant that plans and specifications of the vessel as it comes into the yard are accurate – meaning that additional expenses arising from any inaccuracies will be for the owner’s account. TIMEFRAME Parties will need to agree that the works should be finished by a specific date, typically referred to as the Redelivery Date – with fixed amounts of money (known by lawyers as “liquidated damages”) payable for each day that the project overruns. This avoids otherwise lengthy and expensive arguments about quantifying loss of use. And if the overrun goes beyond an agreed date, the owner must be allowed to cancel the agreement and take the vessel for completion elsewhere. Yards will need to prepare for the vessel’s arrival well ahead of time. In particular, other projects may need to be relocated within the yard to make space. Manpower will need to be arranged. Supplies will have been ordered and/or delivered, and third-party contractors may have been booked or will be on standby. The yard will therefore want to be notified of the actual arrival date – and be updated on her progress towards the yard – irrespective of the specific agreed starting date. The agreement will typically specify what will happen if the vessel is delivered late, with the yard usually being allowed to extend the contractual redelivery date by the same amount of time. Alternatively, the redelivery date may be replaced by an obligation on the yard’s part to finish the work and redeliver the vessel within a reasonable amount of time. FORCE MAJEURE Force majeure clauses automatically retard the redelivery date by an amount of time equivalent to that of the delaying event – where such event is due to certain circumstances beyond the yard’s control. As with the timeframe for the works, it is wise to have a long-stop date, beyond which the owner can cancel the agreement and take the vessel away elsewhere for completion. SECURITY It must be expressly agreed that the owner at all times retains title in the vessel, and all her machinery, equipment and items awaiting installation. Indeed, the owner may need to keep a skeleton crew on board, at least a build captain, for the duration of the works. The conversion agreement should also state that the owner acquires title to the works and equipment that are continuously added as the project progresses. As owner, should you wish to cancel the project prior to completion, your remedies are normally limited to removing your project for completion at a second yard, and suing the yard for any additional completion costs over and above the outstanding balance of the price agreed with the first yard. This will take time – especially where enforcement proceedings are required in the yard’s own jurisdiction – and some legal costs may not be recoverable. Far better, then, to obtain a performance guarantee or completion bond, giving security against major cost overruns when finishing the vessel elsewhere. MATERIALS With a steady throughflow of materials at the yard, there is scope for disagreement over who owns what at any given time. It is vital to establish this, as such materials must be insured, and protected from the yard’s creditors in the event of insolvency. The yard must ensure that such provisions in the conversion agreement do not contradict the terms under which such materials have been bought by the yard form third party suppliers. Where ownership has passed to the owner, the yard may want to have a contractual lien over such materials in case of a future non-payment by the owner. INSURANCE It’s vital that the owner and yard agree on how the risks of loss or damage to the vessel and materials will be covered. This includes owner-supplied items being stored ashore at the yard. Owners usually maintain their Hull & Machinery (first party) and Third Party Liability policies. And it’s vital not only to discuss the works in detail with insurance brokers , but to be as certain as possible that the underwriters themselves have been notified and agree to the scope of the works, which yard is to be used, etc. Particular attention must be paid to policy terms, especially any requiring the vessel to remain fully crewed at all times. It would be unwise to assume that underwriters will overlook such a requirement just because the vessel is subject to extensive works. WARRANTY A warranty period of twelve months is typical – during which the yard is contractually obliged to remedy faults arising – as is normally found in build agreements. However, the warranty will need to be carefully drafted to avoid disputes over whether is it the new or original parts or equipment which have failed, and if it’s the original elements whether this is due to the presence of the new elements. Yards will often only agree to limit its liability to the repair of its own defective materials or workmanship. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Conversion Projects Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Conversion Projects Build Your Team Build Your Team 10 May 2023 Last revised minutes 4 Reading time Life’s short: build a yacht. Seems simple enough. For some, only new will do. But building a large yacht is a complicated process, the result of which is a complex series of systems, which need to work reliably, and in harmony. With the right guidance, the process is an exciting and satisfying journey. If you’re not already a Member, your first step's to contact us so we can help you find the right people. minutes 4 Reading time 10 May 2023 Last revised Life’s short: build a yacht. Seems simple enough. For some, only new will do. But building a large yacht is a complicated process, the result of which is a complex series of systems, which need to work reliably, and in harmony. With the right guidance, the process is an exciting and satisfying journey. If you’re not already a Member, your first step's to contact us so we can help you find the right people. Exceptional projects require exceptional teams, and building a good working relationship with all team members from the start is essential. Small projects allow individuals to combine roles, especially in design. Trusted brokers with industry knowledge add value and may help in maintaining resale value. Exterior and interior designers, naval architects, and project managers are essential team members. Project managers coordinate efforts and seek compromises: some seagoing experience is helpful. Yachts are typically owned through companies for liability and privacy reasons. Cost savings can be achieved through proven hull designs and repurposing existing designs. Clear definitions of team roles, strict timescales, and engaging a lawyer with build experience are important. Project managers coordinate efforts and seek compromises: some seagoing experience is helpful. Yachts are typically owned through companies for liability and privacy reasons. Cost savings can be achieved through proven hull designs and repurposing existing designs. Clear definitions of team roles, strict timescales, and engaging a lawyer with build experience are important. Exceptional projects require exceptional teams, and building a good working relationship with all team members from the start is essential. Small projects allow individuals to combine roles, especially in design. Trusted brokers with industry knowledge add value and may help in maintaining resale value. Exterior and interior designers, naval architects, and project managers are essential team members. As with the counterparts building trading and passenger vessels, yacht builders tend to be conservative in their outlook. Why change what’s worked before? They’re also in business to make money and will look to save costs where they can – in particular by interpreting poorly-drafted build agreements to suit themselves. To a certain extent, builders’ yards are, in reality, pieces of waterside real estate where a multitude of suppliers and subcontractors come together to create the finished article. So putting the right team in place is a vital first step, whose members will advise, negotiate and integrate the efforts and wares of countless third parties. And the more exceptional the project, the more exceptional your team needs to be. All the participants need to be involved right from the start and an excellent working relationship must be built up and maintained. The smaller the project, the greater the scope for individuals to combine roles, especially when it comes to the vessel’s design. KEY TEAM MEMBERS Having decided on how and where they wish to use their yacht, a trusted broker is the best starting point for some Members. Trusted is the key word here. Brokers usually work on commission. Are they looking to build a relationship which could last many happy years, or are they just looking to complete the next deal? Good brokers will have excellent industry knowledge and will add real value. They are sounding boards for ideas, and arbiters of practicality and good taste: the latter two elements being essential in maintaining resale value. The next team members to have on board are the exterior and interior designers, plus a naval architect where a custom yacht is envisaged, and a project manager. Designers produce designs, not technical solutions. Even the most accomplished designers won’t know exactly how workable their designs are, and architects don’t always have an eye for design. So a project manager will also be needed to coordinate all their efforts, and – diplomatically – seek compromises here and there. The project manager should have recent seagoing experience, as captain or engineer, on a vessel of similar type and size. Everyone in the team – you included – need honest feedback on what is and isn’t going to work. Because yachts are sources of liability as well as being assets, and to provide privacy and make accounting easier, yachts are nearly always owned through companies. Trusts can provide an additional layer of secrecy, but keep in mind that obtaining justice can ce challenging in some far-flung jurisdictions should your expectations not be met. DON’T ECONOMISE Costs can be kept down by using a proven hull design. Many builders offer semi-custom yachts, where you’ll be making mostly aesthetic choices. If you want to stand out from the crowd, commercial and even military designs can be repurposed to make striking yachts. You need to be clear on who owns the intellectual property and that you have the right to use such designs. Some team roles can be taken on by the same individual or company. Exterior and interior design can be carried out by the same person – arguably leading to more harmonious aesthetics. But trying to save costs by omitting any of the core technical skills sets can have significant adverse effects. Oversights at this first stage can require expensive modifications later, causing lengthy delays. Everyone’s remit must be clearly defined and dovetailed, with strict timescales baked-in to their service contracts. Engaging a good lawyer, with build experience, is crucial here. DESIGN ESSENTIALS A yacht’s design will be determined, in part, by the minimum technical standards dictated by the Flag State , which in turn may require your yacht to be built in compliance with classification society Rules. These are based on internationally agreed-to standards, which must be adhered to if your yacht is going to ever to sail anywhere, and without which you will find it near impossible to insure the vessel. They vary according to length, internal volume and use. But such standards do not generally cover some aspects, such as preventive maintenance, which, over time, will help support the vessel’s condition and resale value. Remove the panels of any yacht and you’ll see an array of pipes, wires and items of equipment. If it’s too difficult or time-consuming to reach such items, they can be overlooked and, eventually, fail. The result is not just you and your guests being inconvenienced. Some repairs can be disproportionately expensive, and in extreme cases this can lead to your yacht not being accepted by a buyer when it’s time to sell. With regards aesthetics, most buyers are reasonably conservative. Avant garde designs are going to look newer for longer, and this will help to maintain their value. But when futuristic tips into plain weird the resale market shrinks rapidly and cost of ownership skyrockets. THE END RESULT Playwright George Bernard Shaw once quipped that reasonable people adapt themselves to the world, while unreasonable people adapt the world to themselves – hence progress depends on unreasonable people. Challenging the innate conservativeness of builders and regulatory authorities requires an experienced, imaginative and practical team. In the case of a full custom yacht, the end result of this exciting pre-build stage should be a design and specification you’re happy with, which is ready to be put out to tender with shortlisted builders, and a team ready to oversee the build. If a semi-custom or series production yacht is your preference, the result is a team which understands your vision and is ready to review, negotiate and modify the builders’ pre-existing designs and specifications. With your team in place, it's time to chose a Flag State , and possibly a classification society , before engaging a builder . Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Choose a Flag Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Choose a Flag Harassment Prevention Harassment Prevention 30 April 2024 Last revised minutes 8 Reading time Yachts bring employees together in close proximity, for long periods, working under pressure, like no other. Employers have always owed crewmembers various duties of care, but recent British legal developments oblige owners to be proactive in preventing sexual harassment. Prevention is better than cure. While these changes only apply to a minority of yachts and crewmembers, it's a step in the right direction and provides a useful industry benchmark. minutes 8 Reading time 30 April 2024 Last revised Yachts bring employees together in close proximity, for long periods, working under pressure, like no other. Employers have always owed crewmembers various duties of care, but recent British legal developments oblige owners to be proactive in preventing sexual harassment. Prevention is better than cure. While these changes only apply to a minority of yachts and crewmembers, it's a step in the right direction and provides a useful industry benchmark. Yachts create unique working conditions, bringing employees together closely for extended periods under high-pressure situations, making prevention of sexual harassment crucial. The #MeToo movement exposed systemic issues regarding sexual harassment in the workplace, prompting legal reforms to address these failings. Recent legal developments now oblige certain owners to proactively prevent this type of behaviour, emphasizing prevention over remedy. The UK’s Equality Act 2010 defines sexual harassment and places the burden on employers to demonstrate that they took reasonable steps to prevent it. UK employment law applies to crew based on their employment arrangements and connections to Great Britain, with distinctions between peripatetic and expatriate crew. The Act applies to crew working in or adjacent to Great Britain, regardless of their role or the yacht's size, private or commercial. As from October 2024, all employers must take "reasonable steps" to prevent sexual harassment, with significant penalties for non-compliance. The law provides no clear guidance on what constitutes reasonable steps, leaving employers to adopt a risk-based approach. The Equality & Human Rights Commission offers a seven-step guidance for employers, emphasizing policy development, engagement, risk assessment, reporting, training, complaint handling, and addressing third-party harassment. Creating an inclusive and respectful working environment not only fulfils legal obligations but also enhances crew satisfaction, guest experiences, and mitigates retention issues. The Act applies to crew working in or adjacent to Great Britain, regardless of their role or the yacht's size, private or commercial. As from October 2024, all employers must take "reasonable steps" to prevent sexual harassment, with significant penalties for non-compliance. The law provides no clear guidance on what constitutes reasonable steps, leaving employers to adopt a risk-based approach. The Equality & Human Rights Commission offers a seven-step guidance for employers, emphasizing policy development, engagement, risk assessment, reporting, training, complaint handling, and addressing third-party harassment. Creating an inclusive and respectful working environment not only fulfils legal obligations but also enhances crew satisfaction, guest experiences, and mitigates retention issues. Yachts create unique working conditions, bringing employees together closely for extended periods under high-pressure situations, making prevention of sexual harassment crucial. The #MeToo movement exposed systemic issues regarding sexual harassment in the workplace, prompting legal reforms to address these failings. Recent legal developments now oblige certain owners to proactively prevent this type of behaviour, emphasizing prevention over remedy. The UK’s Equality Act 2010 defines sexual harassment and places the burden on employers to demonstrate that they took reasonable steps to prevent it. UK employment law applies to crew based on their employment arrangements and connections to Great Britain, with distinctions between peripatetic and expatriate crew. It’s hard to believe that the #MeToo movement began way back in October 2017. And it’s by October 2024 that employers will have to abide by a set of new rules aimed at preventing sexual harassment in the workplace. The hashtag exposed not only the staggering scale of the problem but how the law was failing employees at every stage. It’s shameful that it’ll have taken seven years. But here we are. THE PRESENT POSITION The Maritime Labour Convention (applicable only to chartered yachts) already mandates that signatory states should take account of the latest version of the Guidance on eliminating shipboard harassment and bullying jointly published by the International Chamber of Shipping and the International Transport Workers’ Federation. That guidance does contain an example policy on general harassment, but it is so vague as to be almost meaningless. The Equality Act 2010 defines sexual harassment as any unwanted conduct of a sexual nature, which has the purpose or effect of violating dignity or creating an intimidating, hostile, degrading, humiliating or offensive environment. Those on the receiving end can bring an employment tribunal claim against their employer (and/or a court claim against their harasser). It’ll then be for the employer to demonstrate that they took “all reasonable steps” to prevent the harassment. In practice, it’s an uphill task to prove that such steps were taken. THE NEW DUTY The Equality Act 2010 has been amended, so that, from 26 October 2024 onwards, all employers must take “reasonable steps” to prevent sexual harassment of employees in the course of their employment. “Sexual harassment” means being subjecting someone to unwanted conduct of a sexual nature - and what constitutes that is for the tribunal to decide on the facts. Of course, sexual harassment is already outlawed, but employers are now under a positive duty to take reasonable steps to prevent it. An allegation of no such steps having been made, employers and are on the backfoot and must prove that they did indeed take such steps. And the new law is non-specific about from whom the crewmember must be protected. So as well as seeking to avoid harassment from fellow crew, reasonable steps must be taken to prevent crewmembers falling victim to unwanted sexual conduct by, say, charter guests. As well as awarding compensation, an employment tribunal may also apply a further uplift of up to 25% where it’s decided that the employer failed to take reasonable steps. This uplift applies to all the compensation awarded for any harassment (whether sexual or not). If the crewmember succeeds in a claim on multiple instances of various types of harassment, the uplift could have a significant effect. APPLICATION TO CREW Broadly, British employment law applies to crewmembers (including captains) ordinarily working in Great Britain. Visiting crews aren’t usually covered. For those working elsewhere, their employment arrangements are key. The law distinguishes between “peripatetic” crew, working on rotation, whose base is in Great Britain and from where they begin their “tours of duty” (who are covered by British employment law) and “expatriate” crew, who live and work abroad. The latter are unlikely to be covered, unless there’s a “sufficient connection” with Great Britain – just holding a UK passport isn’t enough. Employees who do not fit into the above categories, but who have "equally strong" connections with Great Britain and British employment law, might also be covered. There was found to be a sufficient connection, even where a crewmember was employed by a company based outside the UK, on a vessel which never entered UK waters, merely where her salary was paid into a UK bank account, she accounted to HMRC for tax, and the employment agreement was subject to English law and jurisdiction. More specifically (according to The Equality Act 2010 (Work on Ships and Hovercraft) Regulations 2011 ) the relevant parts of the Equality Act 2010 apply to any crewmember working (wholly or partly) within Great Britain or adjacent waters, where: The yacht is UK-registered and has a homeport in Great Britain, or The yacht is EEA member state-registered, and the crewmember is a citizen of Great Britain or of an EEA or designated state, and the legal relationship of the crewmember's employment is located within Great Britain, or the crewmember retains a sufficiently close link with Great Britain. The relevant parts also apply to any crewmember working outside Great Britain and adjacent waters, where: Where the crewmember is working on a yacht which is UK-registered and has a homeport in Great Britain, and The crewmember is a citizen of Great Britain or of an EEA or designated state, and the legal relationship of the crewmember's employment is located within Great Britain, or the crewmember retains a sufficiently close link with Great Britain. Where the Act applies, the crewmember’s role, and the size or use of the yacht (private or commercial) are irrelevant. And it doesn’t matter whether the contract is temporary or permanent – or even just on an informal, casual basis so long as the crewmember works on a personal basis. So dayworkers would be encompassed, but the employees of subcontractors would not. WHAT MUST BE DONE? The new law provides no steer whatsoever on what reasonable steps must be taken. Taking a risk-based approach, the tribunal would have before it a wealthy employer, employing typically young crewmembers, in a confined space, often working long hours and sometimes attending to guests whose inhibitions may have been relaxed by alcohol. So the tribunal’s expectations may be very high. Onboard cultures take time to change, and new policies take time to bed-in, so the time to start taking meaningful, tailored action is now. Helpfully, the Equality & Human Rights Commission has produced some guidance. It’s not definitive, but an employment tribunal could use it as a starting point when considering what steps should have been taken. The seven-step guidance can be summarised, and adapted for owners and managers, as follows. Remember that record-keeping is essential. Step 1: Develop an Effective Policy The policy should state that: All crewmembers are in need of protection, and are subject to and protected by the policy, Sexual harassment is unlawful and will not be tolerated, Harassment or victimisation is likely to lead to disciplinary action up to and including dismissal, and Aggravating factors, such as abuse of power over a more junior colleague, will be taken into account in deciding what disciplinary action will be taken. The policy should also: Define sexual harassment and provide clear examples of it - relevant to the environment of a professionally-crewed yacht, Include an effective procedure for receiving and responding to complaints of harassment, and Provide a commitment to review the policy at regular intervals and to monitor its effectiveness. The policy should go on to address third-party harassment, explaining clearly: That third-party harassment can result in legal liability on the part of the perpetrator and employer, That it will not be tolerated, That crewmembers are encouraged to report it, What steps will be taken to prevent it, and What steps will be taken to remedy a complaint and prevent it from happening again. Step 2: Engage Your Crew Conduct regular crew interviews, anonymous surveys and exit interviews. Captain, manager and the owner’s representative should have known open-door policies. Make sure that all crewmembers are verifiably aware of: How they can report sexual harassment Your sexual harassment policy, and The consequences of breaching the policy. Step 3: Assess & Reduce Risks While many of these will be obvious, you should consider and record factors that might increase the likelihood of sexual harassment and the steps that can be taken to minimise them, such as: Where are the power imbalances? Is there job insecurity for a particular group or role? Are crewmembers working alone? Are guests drinking significant amounts of alcohol? Which crewmembers have guest-facing duties? Is there a lack of diversity in your workforce? Step 4: Reporting Implement a reporting system (an online or independent telephone-based service) that allows crewmembers to raise an issue (anonymously or not). Explain clearly to all crewmembers: What is considered acceptable behaviour, How to recognise sexual harassment, and What to do if they experience or witness it. Step 5: Training Crewmembers should be trained on: What sexual harassment in the workplace looks like, What to do if they experience it, How to handle any complaints of harassment, and How to address third-party harassment from guests, suppliers, etc. Step 6: Actioning a Complaint Act immediately to resolve the complaint, taking into account how the crewmember wants it to be resolved. Respect the confidentiality of all parties. Protect the complainant from ongoing harassment or being victimised or harassed further during an investigation. If a crewmember makes a complaint of harassment that may be a criminal offence, you should speak to the individual about whether they want to report the matter. Only use confidentiality agreements where it is lawful, necessary and appropriate to do so. Always communicate the outcome of the complaint to the complainant in a timely manner. Step 7: Dealing with Third Parties Harassment by a third party, such as a guest or supplier’s employee, should be treated just as seriously as that by a colleague. Employers should take steps to prevent this type of harassment, including putting reporting mechanisms in place or assessing high-risk workplaces where staff might be left alone with guests. THE UPSIDES Owners must not see this change in the law as making life more difficult for them and their captains and managers. (Lack of) crew retention is a thorny, ongoing and expensive issue. Social media groups allow crew (anonymously) to name and shame poorly-managed yachts where unacceptable behaviour goes unchecked. In turn, such yachts will struggle to hire good quality crew to replace those who’ve had enough. Sexual harassment can ferment a toxic onboard atmosphere. By contrast, an inclusive and respectful working environment leads to happier crew and better owner and guest experiences. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Oh Referee! Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Oh Referee! The Build Agreement The Build Agreement 10 May 2023 Last revised minutes 10 Reading time Most builders have their own ‘just sign here’ standard build terms. They vary enormously in length and complexity. Such agreements often miss out important aspects and can be subject to local law and jurisdiction - whose courts may not be impartial and where you may struggle to find competent, specialist lawyers. Don’t sign them. Contact us for guidance. Given the amount of money at stake, such contracts should only be viewed as an opening to contractual negotiations. minutes 10 Reading time 10 May 2023 Last revised Most builders have their own ‘just sign here’ standard build terms. They vary enormously in length and complexity. Such agreements often miss out important aspects and can be subject to local law and jurisdiction - whose courts may not be impartial and where you may struggle to find competent, specialist lawyers. Don’t sign them. Contact us for guidance. Given the amount of money at stake, such contracts should only be viewed as an opening to contractual negotiations. Privacy concerns and the need for NDAs should be addressed early on with the engagement of an experienced lawyer. Payments should be made upon completion of build milestones, with independent surveyor signoff, and account for material costs, transport, and exchange rates. Security measures should be in place to protect against builder insolvency, including ownership transfer and guarantees from the builder's bank. Consider local legal requirements for ownership transfer and potential statutory liens by unpaid subcontractors. Clearly define the triggering events and duration of guarantees to ensure protection in case of builder insolvency or yacht issues. Establish clear and rigid procedures for change orders to avoid cost overruns and delays. Subcontractors should be carefully vetted, and the builder should remain liable for their mistakes. Materials should not be subject to title retention. Specify insurance requirements for the part-built project and ensure the wording is adequate and obtained from reputable insurers. Address force majeure events, their effect on the delivery date, and the need for a cap. Clarify buyer-ordered modifications' impact on delays. Ensure all correct legal documents for the yacht's registration are presented before final payment and agree on the place of legal delivery. Allow access for tests, inspections, and reasonable rectification of faults before delivery. Define criteria for acceptance or rejection of the yacht. Formal testing at sea is necessary to verify performance against specifications, and a margin of tolerance with incremental compensation may be agreed upon. Establish the buyer's right to refuse delivery if faults are not rectified, and differentiate between minor non-conformities and deliverable condition requirements. Warranty period should be agreed upon for materials and workmanship, and provisions for rectifying defects and compensation should be addressed. Dispute resolution mechanisms should include independent technical experts for technical matters and arbitration or litigation for non-technical or high-value disputes. Consider enforceability and confidentiality aspects when choosing between arbitration and litigation. Ensure all correct legal documents for the yacht's registration are presented before final payment and agree on the place of legal delivery. Allow access for tests, inspections, and reasonable rectification of faults before delivery. Define criteria for acceptance or rejection of the yacht. Formal testing at sea is necessary to verify performance against specifications, and a margin of tolerance with incremental compensation may be agreed upon. Establish the buyer's right to refuse delivery if faults are not rectified, and differentiate between minor non-conformities and deliverable condition requirements. Warranty period should be agreed upon for materials and workmanship, and provisions for rectifying defects and compensation should be addressed. Dispute resolution mechanisms should include independent technical experts for technical matters and arbitration or litigation for non-technical or high-value disputes. Consider enforceability and confidentiality aspects when choosing between arbitration and litigation. Privacy concerns and the need for NDAs should be addressed early on with the engagement of an experienced lawyer. Payments should be made upon completion of build milestones, with independent surveyor signoff, and account for material costs, transport, and exchange rates. Security measures should be in place to protect against builder insolvency, including ownership transfer and guarantees from the builder's bank. Consider local legal requirements for ownership transfer and potential statutory liens by unpaid subcontractors. Clearly define the triggering events and duration of guarantees to ensure protection in case of builder insolvency or yacht issues. Establish clear and rigid procedures for change orders to avoid cost overruns and delays. Subcontractors should be carefully vetted, and the builder should remain liable for their mistakes. Materials should not be subject to title retention. Specify insurance requirements for the part-built project and ensure the wording is adequate and obtained from reputable insurers. Address force majeure events, their effect on the delivery date, and the need for a cap. Clarify buyer-ordered modifications' impact on delays. An immediate concern usually not covered is privacy, which may, of course, be one of the reasons you’re looking to have a yacht built in the first place. An experienced lawyer must be engaged at the outset – not brought in at the last minute to cast an eye over what everyone else considers to be a done deal. And his or her priority will be to get NDAs in place with the builder. SPECIFICATION & COST There’s no point finding designers who pen the perfect yacht, which the builder then interprets in its own (possibly cost-cutting) way. Moreover, modifying a yacht retrospectively can be particularly time-consuming and expensive. An incorrectly interpreted specification might prevent a yacht being chartered out . So the design and specification, in compliance with specific Flag State regulations and classification society Rules (if applicable) must be set out in exquisite detail, and agreed – in principle – with the builder, along with the build cost. With this settled, attention can be turned to the principal elements of the build agreement. PAYMENTS It’s customary for payments to be made upon the completion of certain build milestones. This way, your exposure is minimised while the builder has sufficient cashflow. Whether or not a stage has been satisfactorily completed is a technical question, needing signoff from an independent surveyor instructed by you – not the builder. The first payment is made by way of a deposit before construction starts. With large projects taking years to complete, account should be made for fluctuations in materials costs and transport, and exchange rates. Placing the builder under real financial strain will be to no one’s advantage. SECURITY Consideration must be given to the consequence of the builder folding mid-build. It happens. Without agreement otherwise, the builder would be left with both instalments and an incomplete yacht as assets, with you standing at the end of a long line of creditors. So your security takes two forms. Firstly, ownership of the yacht is transferred to the buyer as it is built. Secondly, the builder supplies the buyer with guarantees, issued by the builder’s bank, for the refund of pre-delivery instalments, against which the buyer pays each such instalment. Such guarantee can also take the form of an insurance-backed Advance Payment Bond (remembering that banks can, on occasion, themselves go bust). Keep in mind that any transfer of ownership may be subject to formalities under local law – regardless of the build agreement’s law and jurisdiction – so it’s important to take local legal advice. If the worst does happen, in spite of all the financial due diligence you undertook, then you will still need to have the project moved elsewhere for completion, so check that, under local law, unpaid subcontractors aren’t automatically entitled to a statutory lien over the yacht and materials, which may prevent removal. It is vital to state in the contract that only ownership, and not risk (which may otherwise also automatically be transferred at the same time), is being transferred. If the yacht is being financed, it may also be possible to register a mortgage over the incomplete project in favour of the lender. As to the specific small print of the guarantee, the most important element is what triggers the ability of the buyer to make a demand for payment under it. The most favourable option is for the buyer to have the ability to make a demand by stating that there has been a default on the part of the builder, under the terms of the build agreement, which therefore merits payment. The builder or bank may wish instead to expressly state the particular events which could lead to payment. By far the most important triggering event which must be described in the guarantee is the builder’s insolvency. It will not be good enough, for example, for the guarantee to become payable only when a receiver has been appointed, or any dispute between buyer and builder is settled, as these may take many months or even years in some jurisdictions. Far better for the guarantee to become payable as soon as it can be shown that the builder is in financial difficulties. Moreover, the procedure for presenting the bank with a demand for payment should be simple and straightforward. And there’s no point in having a guarantee which offers high protection, but which expires too soon. Where a guarantor will only pay after the matter has been litigated (in the absence of settlement) the guarantee must last for a period of years to take account of lethargic court processes. A number of owners have, in the past, enjoyed using their own business acumen to diagnose mismanagement and their own capital to save it. But this takes time and may not lead to a solution. Moreover, if the builder survives until completion of the yacht, there may still be issues with the delivered yacht for which the buyer wants significant compensation, and may still need the protection of the guarantee. If it expires immediately upon delivery and sea trial, for example, then there will be virtually no time in which to decide whether or not demand payment, and calculate the appropriate figure. CHANGE ORDERS It may well be that it’s only when you see your yacht start to take shape that realise that the layout or specification could be improved. While there’s a temptation to discuss modifications orally – for convenience – cost overruns and disproportionate delays may result. Modification procedures must be clear, and rigidly adhered to. As large numbers of changes may also start to affect the builder’s other projects, the builder may want terms in the contract to the effect that such modifications will only take effect if the builder agrees to the proposed adjustment to the contractual price and delivery date. The builder may also want to reserve a right of refusal if other projects would be affected. Additional payments may also be required. Clearly, the builder could be put in an overly dominant position if such a clause was not well drafted. In the case of very large projects taking many years, you may also want to leave gaps in the specification to allow for last-minute choices of high-tech equipment. SUBCONTRACTORS It’s common to subcontract significant elements of the builds, but you must make sure that only approved third parties can be brought in. If there’s any doubt, ask your project manager to visit the subcontractors and their previous projects to assess quality. To avoid confusion, the builder should still be expressly liable for any of its suppliers' or subcontractors' mistakes. Further, the builder must be obliged to pay suppliers promptly, and the materials provided must not be allowed to be subject to any form of title retention – to prevent anything being reclaimed later. DAMAGE While the builder should be obliged to insure the part-built project, the quality and wording of that insurance must also be clearly specified if it’s to be worth more than the paper it’s written on. The Institute Clauses for Builders’ Risks policy wording is adequate, and security obtained on the Lloyd’s of London insurance market (or equivalent) should be insisted upon. The builder and buyer should be named as joint assured, with any claims payable to the builder and buyer as a reflection of their interests at the time of the claim. There will also be other matters to be considered in the event of the project being damaged. You should have the option of either cancelling the contract and being refunded payments made up to that point, or requiring the builder to use its insurance payout to carry on with the build, in spite of the enormous delays involved. Where the damage causes the project to be scrapped rather than just delayed, builders will normally be reluctant to agree to compensate buyers for the loss of their slot, and for any premium a speculative buyer hoped to make on the build. It is still open to buyers to seek separate insurance for this loss. A new delivery schedule will need to be agreed. FORCE MAJEURE Events beyond the control of the builder are known as ‘force majeure’ events. These may or may not be defined by law. Where they are not, the parties need to ensure that all possibilities are covered, and what their effect will be. Typically, the contractual delivery date will be extended, but the parties will need to clarify whether this is by reference to the number of days the force majeure event continued or the effect on the project’s critical path. Even where delay is caused by a force majeure, such latitude should be subject to a cap – so that the point where enough is enough is clear. The exception to this will be delays due to modifications ordered by the buyer. DELIVERY Sorting matters out with a builder after the final instalment has been paid can be especially difficult. It is crucial that all the correct documents relating to legal title are presented before payment is made. Otherwise the new yacht cannot be registered and will not be allowed to sail anywhere. The place of legal delivery may also have tax implications, and must be agreed. At the point of delivery, the yacht should not only function and appear as envisaged, but it should meet all the classification society and Flag State regulations, especially if it is going to be chartered. Build agreements should allow not only access to the builder for the buyer’s representative, but reasonable tests and inspections, including those to be undertaken at subcontractors’ and suppliers’ premises. The representative should be allowed to require the builder to rectify evident faults immediately. TESTING The newly completed yacht will have to be formally tested, at sea, to make sure that the performance matches the specification. This is the buyer’s opportunity to determine whether the yacht has been built in conformity with the agreed contractual specifications and meets the contractual performance criteria. The owner’s representative, Class and Flag State surveyors will attend these trials and sign off the individual test protocols. As no two yachts are ever identical, their performance in terms of displacement, speed, noise levels, vibration and range, are difficult to predict even whilst using the latest computer-aided design techniques, FEA (finite element analysis), CFD (computational fluid dynamics), tank testing and wind tunnel testing. A practical solution is to agree a small margin of tolerance followed by incremental compensation which the builder must pay if the performance criteria aren’t met but still fall within certain limits. This incremental approach can only be applied to a certain extent and thereafter the right of rejection must lie with the buyer. REJECTION Ultimately, if faults are not put right, the buyer must have the right to refuse delivery. So the build agreement must make it crystal clear whether a particular requirement is to have the legal status of a condition, entitling the buyer to refuse delivery – especially as small defects are simply inevitable in any large project. The laws of most jurisdictions are vague on such matters, involving considerations of whether the yacht is of ‘satisfactory quality’ and ‘reasonably fit’ for purpose, and therefore in a ‘deliverable’ condition. This problem is made much worse by the critical importance of aesthetic elements. The standard contractual term for the small and inevitable defects is a ‘minor non-conformity’. Usually, the buyer will be forced to accept delivery with the minor non-conformity list outstanding, under the proviso that the list is taken care of by the builder as soon as possible. WARRANTY Not all of your new yacht’s inevitable little faults will come to light during the trails. Only over time will all the equipment and systems be used in varying weather conditions. The builder should guarantee materials and workmanship for a period of warranty – at least a year – after delivery. Builders will usually agree to correct defects during this period, but not to compensate. The builder may demand that otherwise pre-existing legal rights are given up, and that once the warranty period has expired no further responsibility will rest with the builder. The builder may not wish to compensate for loss of use and charter income, and a detailed notification procedure may also have to be complied with. Such demands should be considered carefully. Where significant concessions are granted by the buyer, the contract should ideally provide for the last payment instalment to be withheld until the end of the warranty period. It may be necessary to bring the yacht into dry-dock, so the buyer must be entitled to have work carried out by a yard other than that in which she was built if cruising schedules are not going to be spoiled.. DISPUTES Disputes between the buyer and builder are most likely to be technical in nature. Even the lustre of paint, for example, can be objectively measured. As courts are better at deciding points of law rather than fact, it makes sense to decide which points would be better decided by an independent expert. A representative from the classification society, for example, is typically agreed on to decide points upon which the society has created technical rules, but the use of another mutually agreed third-party expert should also be agreed for other matters. The expert should be asked to provide an independent opinion, and not act as arbitrator. Arbitrators can decide upon matters of law and evidence, and this requires the expertise of an experienced legal expert. Matters which are non-technical, or which involve large sums, should be agreed to be arbitrated according to the rules of an established arbitrators’ association, or referred to court. The choice of arbitration or litigation may depend on the enforceability or otherwise of an arbitrator’s decision, compared with a court judgment, in the home states of the parties involved. Sometimes, an arbitrators’ decision will be the more powerful of the two, and – unlike court proceedings – arbitrations are confidential in nature. To include long-term flexibility, and an acceptance that some flaws will be evident in the finished product, into a cast-iron contract, is no easy task. Time spent discussing and agreeing on this at the start will be a sound investment compared with the potential arguments which bubble-up later on. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about The Build Process Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about The Build Process Leasing Overview Leasing Overview 22 October 2020 Last revised minutes 2 Reading time While the lender retains so much security, it also retains liability as registered owner, so it’s perhaps not surprising that pure leasing isn’t more popular. It does form the basis of various VAT-reduction and deferment schemes. Such schemes come and go, and are not covered here. Feel to contact us regarding tax avoidance. minutes 2 Reading time 22 October 2020 Last revised While the lender retains so much security, it also retains liability as registered owner, so it’s perhaps not surprising that pure leasing isn’t more popular. It does form the basis of various VAT-reduction and deferment schemes. Such schemes come and go, and are not covered here. Feel to contact us regarding tax avoidance. The arrangement involves a bank or leasing company (lessor) buying a yacht and becoming its legal owner. The lessor then bareboat charters the yacht to the lessee (owner) for an agreed period of time. The lessee pays instalments equivalent to the full value of the yacht plus a return on capital instead of interest on a loan. The lessee is considered the regulatory owner of the yacht. The lessee has exclusive possession and control of the yacht and must keep it in good working order. Insurance against loss or damage is the lessee's responsibility. The lessee is entitled to the warranties provided by the yard. The lessor is indemnified against liabilities related to being the registered owner. The lessee cannot sell the yacht as they do not own it. To terminate the lease, the lessee must pay the remaining instalments or a cancellation fee. The lessee has exclusive possession and control of the yacht and must keep it in good working order. Insurance against loss or damage is the lessee's responsibility. The lessee is entitled to the warranties provided by the yard. The lessor is indemnified against liabilities related to being the registered owner. The lessee cannot sell the yacht as they do not own it. To terminate the lease, the lessee must pay the remaining instalments or a cancellation fee. The arrangement involves a bank or leasing company (lessor) buying a yacht and becoming its legal owner. The lessor then bareboat charters the yacht to the lessee (owner) for an agreed period of time. The lessee pays instalments equivalent to the full value of the yacht plus a return on capital instead of interest on a loan. The lessee is considered the regulatory owner of the yacht. The bank or leasing company (known as the ‘lessor’) buys the yacht and is the legal, registered owner. Then the lessor, in effect, bareboat charters (so, without crew) it to the ‘owner’ (known as the ‘lessee’), over an agreed period of time. The lessee pays instalments equivalent to the full value of the asset over the term of the lease plus a return on capital to the lender, instead of interest on a loan. At the end of the lease, after the final payment has been made, the asset may be transferred to the lessee. FEATURES Typically, the lessee: Is the ‘owner’ of the yacht for regulatory purposes; Has exclusive possession and control of the yacht; Will be obliged to keep the yacht in good working order; Must insure the yacht against loss or damage; Will be entitled to the yard’s warranties; Must indemnify the lessor against liabilities stemming from the lessor being the registered owner; Cannot sell the yacht as it does not own it; and Must pay the remaining instalments, or a cancellation fee, to terminate the lease agreement. OTHER FORMS The Statement of Standard Accounting Practice SSAP 21 (Accounting for leases and hire purchase contracts) defines a finance lease as a lease which transfers ‘substantially all of the risks and rewards of ownership of the asset to the lessee’. The distinction is drawn with operating leases, common for aircraft, plant and equipment, where the risk in relation to the asset falls on the lessor rather than the lessee. An operating lease will be treated as being off balance sheet in the lessee’s accounts, and at the expiry of the lease term, the lessee is obliged to return the asset to the lessor and the asset’s residual value is of no concern to the lessee. Only relevant to smaller yachts and tenders, SSAP 21 also distinguishes a hire purchase contract, which allows the hirer to acquire legal title by exercising an option to purchase the asset – normally having paid an agreed number of instalments. SSAP 21 prescribes the accounting treatments, but note that accounting standards are being developed which will supersede SSAP 21. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Loans Overview Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Loans Overview Conversion Projects Conversion Projects 8 August 2018 Last revised minutes 2 Reading time While the refitting of an older yacht may appeal to some owners, others may prefer to go a stage further and upcycle a naval or other working vessel. These often have an attractive aesthetic born of practical necessity - which can be transformed into uniquely beautiful yachts, inherently well suited to cruising in unusual locations. minutes 2 Reading time 8 August 2018 Last revised While the refitting of an older yacht may appeal to some owners, others may prefer to go a stage further and upcycle a naval or other working vessel. These often have an attractive aesthetic born of practical necessity - which can be transformed into uniquely beautiful yachts, inherently well suited to cruising in unusual locations. Some commercial and surplus military vessels can be purchased at a fraction of the price of large yachts, creating interesting opportunities. Buying directly from the seller or their appointed broker is preferable to using an intermediary, which can lead to increased costs and communication issues. Refit and repair yards, rather than builders, are more likely to undertake conversion projects, providing more choice and negotiation power for owners. Conversion projects involve combining new and old designs into a single vessel, requiring integration and compliance with evolving regulations. Interfaces between old and new elements can present challenges during and after the conversion process. Structural changes can affect the distribution of pressures and forces, potentially compromising previously sound parts of the vessel. There is a risk of unexpected costs and lost commercial opportunities during conversions, leading to compensation payments from the yard. Yacht conversions require a measured approach to ensure high-quality fit and finish. Legal and practical issues specific to conversion projects should be addressed before entering into an agreement with the yard. Converting ships to yachts is a niche business, and experienced project management is crucial to ensure high standards and attention to detail. Structural changes can affect the distribution of pressures and forces, potentially compromising previously sound parts of the vessel. There is a risk of unexpected costs and lost commercial opportunities during conversions, leading to compensation payments from the yard. Yacht conversions require a measured approach to ensure high-quality fit and finish. Legal and practical issues specific to conversion projects should be addressed before entering into an agreement with the yard. Converting ships to yachts is a niche business, and experienced project management is crucial to ensure high standards and attention to detail. Some commercial and surplus military vessels can be purchased at a fraction of the price of large yachts, creating interesting opportunities. Buying directly from the seller or their appointed broker is preferable to using an intermediary, which can lead to increased costs and communication issues. Refit and repair yards, rather than builders, are more likely to undertake conversion projects, providing more choice and negotiation power for owners. Conversion projects involve combining new and old designs into a single vessel, requiring integration and compliance with evolving regulations. Interfaces between old and new elements can present challenges during and after the conversion process. Commercial vessels exist to fulfil particular roles. When no longer needed they become liabilities which are generally disposed of without delay – often at a fraction of the price of a similar-sized yacht. High-performance military vessels can also become dated or surplus to requirements as geopolitical sands shift, with government bureaucrats having little interest in maximising sale prices. Opportunities to purchase tend to arise on an ad hoc basis. As when buying a yacht, you should ensure that you’re dealing with the seller directly or the seller’s appointed broker. Using an intermediary broker leads to extended lines of communication, more costs and a greater chance of the purchase falling through. YARD CHOICE While conversions may involve the rebuilding of entire parts of the original ship, such projects are always unique, and cannot readily be fitted into a build slot. For this reason, it is generalised refit and repair yards rather than builders which tend to undertake the work. And, as there are more of the former than the latter, owners have more choice and can drive a harder bargain. PROJECT CHARACTERISTICS All conversion projects have a number of common characteristics. To a greater or lesser degree, they will all combine new and old designs into a single vessel, which must then function effectively as an integrated whole. All this against a backdrop of constantly evolving regulations governing specifications, materials and equipment. And so there will exist various interfaces between old and new elements which do not exist in the context of newbuilds. Issues may arise not only during the conversion process but well after the vessel has re-entered service in its new role. Depending on the extent of any structural changes, hydrodynamic forces may no longer be distributed as originally intended, possibly compromising previously sound parts. Even where the yard has provided a post-redelivery guarantee of workmanship and materials, it may be an unforeseeable aspect of the combination of old and new elements that leads to a fault – rather than a deficiency in the workmanship and (new) materials. When trading ships are converted from one role to another, there is always the risk that the project will cost more than expected because the works have taken longer than expected and charters and other commercial opportunities have been lost. A yard will often have to pay a fixed, daily rate in compensation as part of their agreement with the owner. The works can be rushed and/or the vessel not properly surveyed prior to agreeing a timescale. As the quality of fit and finish is paramount, a more measured approach is needed for yacht conversions. The unique characteristics of the conversion project give rise to a number of practical and legal issues that need to be considered and addressed before entering into any agreement with the yard. And sometimes even before acquiring the would-be project in the first place. PROJECT MANAGEMENT Converting ships to yachts is, to say the least, a niche business. Using yards more used to converting ships for use in one trade to another can lead to significant cost savings, but the high standards of workmanship and the attention to detail demanded by yacht owners can come as a surprise to the yard’s management. Various specialist third party contractors might be needed – and this may not be how the yard typically operates. It is therefore vital that owners have an experienced and effective project manager in attendance on a full-time basis. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Conversion Agreements Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Conversion Agreements Port State Control Port State Control 19 June 2011 Last revised minutes 3 Reading time As soon as you enter any country’s waters, you’re under an obligation to abide by all their laws. Detailed onboard examinations are used to check compliance. Port State Control (PSC) is the system of inspection by officials to check vessels’ condition and operation. Safety, security, environmental protection and seafarer welfare are the areas of interest. Port States can require defects to be put right, and detain vessels if necessary. This is all separate, and in addition to, any consideration of the tax status of the owner, beneficial owner and yacht. minutes 3 Reading time 19 June 2011 Last revised As soon as you enter any country’s waters, you’re under an obligation to abide by all their laws. Detailed onboard examinations are used to check compliance. Port State Control (PSC) is the system of inspection by officials to check vessels’ condition and operation. Safety, security, environmental protection and seafarer welfare are the areas of interest. Port States can require defects to be put right, and detain vessels if necessary. This is all separate, and in addition to, any consideration of the tax status of the owner, beneficial owner and yacht. The Paris Memorandum of Understanding on Port State Control (Paris MoU) includes European Union coastal countries, Canada, Croatia, Norway, and Russia, among others. The Netherlands Ministry of Infrastructure & Environment provides the secretariat for the Paris MoU. The Paris MoU introduced the New Inspection Regime (NIR) which aims to inspect 100% of all ships, including yachts, visiting ports in the Paris MoU region over a three-year period. Yachts are now included in the NIR and are subject to assessments regarding safety, health, and the environment. Vessels are categorized into High Risk Ships, Standard Risk Ships, and Low Risk Ships, determining the frequency of inspections. The risk categorization is based on factors such as previous inspections, vessel type and age, the yacht's manager's performance, and the country of registry. Inspections are not meant to disrupt cruising schedules but are necessary for compliance. Inspections focus on training, management systems, and the physical integrity of the yacht to ensure safety for the owner, guests, and crew. Preparation is key to a hassle-free inspection, including compliance with relevant rules, crew training, and detailed guidelines. Safety and security procedures must be followed, and honesty is crucial during inspections, as falsifying records or lying to officials is a serious offence. The risk categorization is based on factors such as previous inspections, vessel type and age, the yacht's manager's performance, and the country of registry. Inspections are not meant to disrupt cruising schedules but are necessary for compliance. Inspections focus on training, management systems, and the physical integrity of the yacht to ensure safety for the owner, guests, and crew. Preparation is key to a hassle-free inspection, including compliance with relevant rules, crew training, and detailed guidelines. Safety and security procedures must be followed, and honesty is crucial during inspections, as falsifying records or lying to officials is a serious offence. The Paris Memorandum of Understanding on Port State Control (Paris MoU) includes European Union coastal countries, Canada, Croatia, Norway, and Russia, among others. The Netherlands Ministry of Infrastructure & Environment provides the secretariat for the Paris MoU. The Paris MoU introduced the New Inspection Regime (NIR) which aims to inspect 100% of all ships, including yachts, visiting ports in the Paris MoU region over a three-year period. Yachts are now included in the NIR and are subject to assessments regarding safety, health, and the environment. Vessels are categorized into High Risk Ships, Standard Risk Ships, and Low Risk Ships, determining the frequency of inspections. All European Union coastal countries, and Canada, Croatia, Norway, and Russia, are party to the Paris Memorandum of Understanding on Port State Control (Paris MoU). The Hague-based Netherlands Ministry of Infrastructure & Environment provides the secretariat. There are 6 other MoU blocs worldwide. INSPECTION REGIME The Paris MoU New Inspection Regime (NIR) introduced a target of inspecting, over any three-year period, 100% of all the ships visiting ports and anchorages in the Paris MoU region. Yachts have been lumped-in with trading ships and ferries. The NIR applies to “ships”, which includes all yachts. Where a yacht is so small, or is not chartered, such that parts of the various maritime conventions (SOLAS, MARPOL, etc) do not apply, the PSC’s task is now to “…to assess whether the ship is of an acceptable standard in regard to safety, health or the environment.” Further, in assessing such vessels, account must be taken, “…of such factors as the length and nature of the intended voyage or service, the size and type of the ship…”. All vessels are deemed to fall into one of three risk profiles. High Risk Ships must be inspected 5 to 6 months after the last inspection, Standard Risk Ships 10 to 12 months after the last inspection and Low Risk Ships 24 to 36 months after the last inspection. Additional inspections, however, can also be triggered by overriding or unexpected factors. Time windows for the next periodic inspection re-start after any inspection. Where a window has come and gone without checks having been carried – because a yacht has not called at a participating port – that yacht will automatically be targeted on arrival. The risk categorisation is based on a number of factors – including the details and results of previous Paris MoU inspections, the vessels’ type and age, the performance of the yacht’s manager and the country of registry. In fact, for a yacht to be a Low Risk Ship, the flag must be approved and appear on the annual Paris MoU White List. The United States, Switzerland, Saint Vincent and the Grenadines, Panama, and the Netherlands Antilles all fail to make the List. Unless a yacht is a High Risk Ship, port officials have the option of undertaking an initial inspection – then deciding whether or not to carry out a detailed inspection. INSPECTIONS Inspections are not intended to interrupt cruising schedules. They are carried out because they have to be. Most officials in most ports will be polite and efficient, but they can make life difficult if they choose to. While nearly all large yachts are extremely well presented, it is the training and management systems – as well as the physical integrity of the vessel – which is being examined. Poorly-run vessels can still present a hazard to the owner, guests and crew: perhaps it is better that these issues are picked up sooner rather than later. PREPARATION It’s up to the yacht’s captain and manager to ensure that the relevant rules are being complied with and that all crewmembers know what do in an emergency. Detailed guidelines and instructions should already be laid out, where these are mandatory, in the Safety Management System and Ship Security Plan, but it’s how these and other forms of pre-prepared guidance translate into reality that’s key to a fast and hassle-free inspection. First impressions are crucial. Do all the deckhands and steward(ess)s automatically know to be especially courteous with the PSC inspector? They may not be wearing an official uniform, and could just be yet another supplier. They may not take kindly to being told to remove their shoes – so a box of disposable shoe covers kept by the passarelle will get the process off on the right foot. Safety and security procedures must be followed at all times: it is the checks that count – not the ticks. Even where a guest may be inconvenienced by a safety briefing, this will be as nothing compared to the yacht being detained later. Falsifying logs and records, or lying to officials, will constitute a serious criminal offence. It is always better to admit a failing than to cover it up: the inspectors have seen it all before. Members would be well advised to discuss the possibility of inspection with captains and managers sooner rather than later. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about The ISM Code Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about The ISM Code Loan Security Loan Security 4 April 2017 Last revised minutes 6 Reading time Without sufficient security in place, having provided a loan to a shell company to buy an expensive, mobile asset, lenders could be left out-of-pocket and finance would be impossible to obtain. While loan security can be found in various documents, the requirements themselves can always be traced back to the loan agreement. minutes 6 Reading time 4 April 2017 Last revised Without sufficient security in place, having provided a loan to a shell company to buy an expensive, mobile asset, lenders could be left out-of-pocket and finance would be impossible to obtain. While loan security can be found in various documents, the requirements themselves can always be traced back to the loan agreement. Unpaid crew, suppliers, and collision victims have liens over yachts, creating competing claims for lenders. Port authorities can detain a yacht for unpaid dues, further complicating the lender's position. Yards can have possessory liens on yachts if the owner hasn't paid for works carried out. Mortgages grant lenders rights against the yacht itself in the event of default, and they are the most important type of security. Mortgage registration is essential, either as a statutory mortgage or a common law mortgage, to establish priority and enforceability. Covenants and assignments supplement the mortgage document and dictate obligations and transfers of rights. Deeds of covenant and collateral security documents cannot be registered but are still important for additional protection. Non-statutory mortgages serve as a backup when statutory mortgages are invalid, but they have limitations in enforcement. Yacht registration is required, and the deed ensures the yacht remains registered throughout the mortgage term. Insurance covenants are crucial, and policies must cover the yacht and third-party liabilities to safeguard the lender's interests. Covenants and assignments supplement the mortgage document and dictate obligations and transfers of rights. Deeds of covenant and collateral security documents cannot be registered but are still important for additional protection. Non-statutory mortgages serve as a backup when statutory mortgages are invalid, but they have limitations in enforcement. Yacht registration is required, and the deed ensures the yacht remains registered throughout the mortgage term. Insurance covenants are crucial, and policies must cover the yacht and third-party liabilities to safeguard the lender's interests. Unpaid crew, suppliers, and collision victims have liens over yachts, creating competing claims for lenders. Port authorities can detain a yacht for unpaid dues, further complicating the lender's position. Yards can have possessory liens on yachts if the owner hasn't paid for works carried out. Mortgages grant lenders rights against the yacht itself in the event of default, and they are the most important type of security. Mortgage registration is essential, either as a statutory mortgage or a common law mortgage, to establish priority and enforceability. At the outset, it’s important to note that, with regards the yacht, the lender can still be left competing with the following who may automatically have claims against a yacht – which is why security has to be so wide-ranging: Unpaid crew and suppliers, collision victims, etc, all have liens over yachts Port authorities can have a statutory right to detain a yacht for unpaid dues Yards can have possessory liens where works have been carried for which the owner hasn’t paid: where the yacht is out of the water, it’s a case of no-cash-no-splash MORTGAGES A mortgage grants a lender (the ‘mortgagee’) rights against the yacht itself (known as rights ‘in rem’), rather than just against the owner (the ‘mortgagor’) in the event of default. While it still needs to be beefed-up by other types of security, such as covenants, and assignments of earnings and insurances, the mortgage is the most important type of security taken by a lender. Mortgages over yachts are known as ship mortgages to distinguish them from real estate mortgages. A mortgage can be taken over the whole yacht or just a number of the 64 available shares. MORTGAGE REGISTRATION The mortgagee’s power to sell the yacht in the event of default is specifically granted by statute. A mortgage is said to be ‘statutory’ where it has been set out and registered as prescribed by statute (in this case, regulation 57 of, Merchant Shipping (Registration of Ships) Regulations 1993 (SI 1993/3138) and paragraph 7 of Schedule 1 to the Merchant Shipping Act 1995. Otherwise, they are known as ‘common law’ mortgages but these are very unusual. A statutory mortgage can only be created over a yacht registered under Part I (but not the Part III ‘Small Ships Register’). The mortgagee will likely use a Form 4736 ‘Account Current’ statutory mortgage to secure not just the principal sum and interest but also costs and expenses. A Notice of Mortgage Intent MSF 4739 can be lodged in advance in order to record as early a date as possible for the mortgage: this is important when establishing the priority of debts in the event of later default. The mortgage is a brief document, just setting out the names of the parties, details of the yacht, and a short description of the secured obligation with reference to the agreement and the deed of covenant that supplements the mortgage. It must be lodged with the Registrar General of Shipping and Seamen, and the relevant fee paid. The Registrar will the register and returned the mortgage document. Where the mortgagor is a company registered in England and Wales, then, by virtue of section 860 of the Companies Act 2006, details of the statutory mortgage, the deed of covenant and any other security documents must be sent to the Registrar of Companies within 21 days, failing which such documents will be void as against a creditor, liquidator or administrator. COVENANTS & ASSIGNMENTS As the mortgage document itself is so brief, and there’s no scope for amending or adding to it, and also as the mortgage attaches to the yacht rather than the owner, it must be supplemented by covenants and assignments. Covenants dictate various dos and don’ts, and may be set out in the loan agreement and/or separately in a deed of covenant according to the lender’s house style. Assignments transfer rights from one party to another. The remainder of this article considers common covenants and assignments. For convenience, it is assumed that all covenants are set out in a deed. Unlike mortgages, deeds of covenant, and any other collateral security documents, cannot be registered with the Registrar of Ships. NON-STATUTORY MORTGAGE While a deed supports the mortgage, deeds can still have a clause by which the yacht is mortgaged. This is needed as a backup in case the statutory mortgage is invalid – which can be the case where, for example, the mortgage hasn’t been registered with the Companies Register. The deed will create a non-statutory mortgage which, while better than nothing, won’t be enforceable against a buyer who buys in good faith and isn’t aware of the mortgage, and will be ranked below a statutory mortgage should the mortgagor default. YACHT REGISTRATION The mortgagor will promise in the deed the yacht will be registered as a ship in the United Kingdom, and will remain, so, under the same registered name, for as long as the yacht is mortgaged. This is necessary as UK Part I ship registrations expire after only five years unless renewed. CHARGE REGISTRATION The deed will require, where the owner is a company registered in England or Wales, the mortgage to be registered as a charge with the United Kingdom companies register (known as Companies House). This is fallback requirement as the mortgagee isn’t going to leave anything to chance and will (or should) have registered the mortgage as soon as possible as not doing so risks the mortgagee loosing both the security and priority. INSURANCE Arguably just as important as the mortgage is the borrower’s covenants in respect of insurance, and policy assignments. In particular, the borrower covenants to: At the borrower’s expense, insure the yacht, for a value, on terms, and with an underwriter(s), all agreed with the lender. Comply with all policy terms throughout the term of the loan, including, of course, prompt payment of insurance premiums. Renew policies as needed to maintain cover. Not settle a claim without the lender’s consent It’s not only the yacht itself which must be insured, but third party liabilities which, if not satisfied, will expose the yacht itself to claims which might rank higher than the lender’s as mortgagee. Particular risks must also be covered, such as war risks, and mortgagee’s interest insurance. The latter provides cover where a failing on the borrower’s part means that other policies are rendered ineffective. For larger yachts, the policies must be assignable to the lender, and confirmation will have to be provided by underwriters that such assignments are noted on the policies and that proceeds of the insurance will be paid to the lender if necessary. For smaller yachts, it may be sufficient for the lender to be named as a co-assured on the policy. CLASSIFICATION SOCIETY An explanation as to the role of classification societies (often known as ‘class’) can be found here . Assuming the yacht must be classed, if the yacht isn’t maintained and surveyed as Class Rules stipulate, the yacht is said to be ‘out of class’ – which can lead to insurance policies being invalidated, as well as the yacht not being maintained properly. As this would jeopardise the mortgagee’s security, the deed of covenant will stipulate maintenance in class. REGULATORY COMPLIANCE Depending on the yacht’s length, gross tonnage and whether it’s registered for chartering, it will be subject to various regulations which help ensure it’s used safely. H ere’s a summary of those affecting your yacht . As well as being detained by port officials, non-compliance can render insurances void, which has obvious implications for the mortgagee’s financial security. Compliance with such regulations will be a key provision. INSPECTION As Class rules and flag state regulations only help to ensure the safe construction, maintenance and operation of the yacht, the mortgagee will want to have the opportunity to inspect the vessel to ensure that aesthetic aspects, and with them much of her value, are also being maintained. The mortgagee must therefore have a right to inspect, and this can be supported by a specific minimum value. MANAGEMENT While ‘yacht management’ can cover a broad spectrum of support services, regulations may require management of a specific type and quality, failing which the vessel may be off-cover for insurance purposes and liable to detention following a port state inspection. Managers also vary in approach and quality. Unsurprisingly, therefore, mortgagees will want to approve which manager is appointed. OPERATIONS The mortgagee may wish to restrict the movement of the yacht, not only by stipulating that she is to be kept out of waters close to areas known for piracy or adjacent to unstable countries, but also away from areas where actions in the event of default may be difficult or impractical. It may also be necessary for the deed to spell out that the yacht is to be used in a legal way – for example, not chartering out where the yacht is not registered as a commercial vessel and insured accordingly. CHARTERING An assignment of chartering income (if any) can be a helpful tool for a lender looking to recoup money, especially while awaiting the sale of a yacht in the event of default. Written notice will need to be served on the charterers – which can be commercially awkward for the borrower and a good incentive to keep on track with loan repayments. INCIDENTS Where any kind of incident occurs involving the yacht, whether that be a fire, grounding, flooding, or a legal action such as arrest or other formal court proceedings, the mortgagee will want to know right away, and the deed of covenant will reflect this. Crucially, liens can rank higher than a mortgage. MODIFICATIONS Refits don’t always improve or even add value to yachts: an owner’s ‘personal stamp’ can adversely affect value and may not even be carried in compliance with regulations. The mortgagee will want to know about, and if necessary veto, any proposed modifications. DISPOSAL While obvious, it needs to be set out in the deed of covenant that the mortgagor cannot sell the yacht while it provides security. COLLATERAL SECURITY As well as the mortgage and deed of covenant, the lender may want a mortgage or charge over the shares in the yacht owning company, involving share certificates being deposited with the lender, together with signed but undated stock transfers. Going one stage further, the lender may also require a personal guarantee from the beneficial owner. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Loan Enforcement Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Loan Enforcement Loans Overview Loans Overview 21 July 2015 Last revised minutes 2 Reading time The loan finance business model is as simple as it sounds: the owner borrows part of the purchase price from a bank or other lender, and is the legal, registered owner of the yacht. The lender takes security over the yacht. While most yacht loan agreements and associated documentation is complex, most of this relates to the lender’s security. minutes 2 Reading time 21 July 2015 Last revised The loan finance business model is as simple as it sounds: the owner borrows part of the purchase price from a bank or other lender, and is the legal, registered owner of the yacht. The lender takes security over the yacht. While most yacht loan agreements and associated documentation is complex, most of this relates to the lender’s security. Lenders typically use their own documentation, which may lack clarity and organization. The loan agreement outlines the availability of funds and conditions for repayment. Security provisions are crucial and can be detailed in the loan agreement and additional documents. Covenants in the loan agreement specify borrower obligations and restrictions, such as the sale and navigation of the yacht. Assignments of rights under insurance policies and charter earnings may be required. The mortgage on the yacht is registered as part of the loan agreement. Guarantees from third-party companies and beneficial owners provide additional security. Covenants and restrictions aim to ensure proper management, operational compliance, and insurance coverage. Choosing English law and jurisdiction is common in the ship finance sector due to expertise and favorable legal conditions. Opting for English law can save costs and promote amicable relationships among parties involved. The mortgage on the yacht is registered as part of the loan agreement. Guarantees from third-party companies and beneficial owners provide additional security. Covenants and restrictions aim to ensure proper management, operational compliance, and insurance coverage. Choosing English law and jurisdiction is common in the ship finance sector due to expertise and favorable legal conditions. Opting for English law can save costs and promote amicable relationships among parties involved. Lenders typically use their own documentation, which may lack clarity and organization. The loan agreement outlines the availability of funds and conditions for repayment. Security provisions are crucial and can be detailed in the loan agreement and additional documents. Covenants in the loan agreement specify borrower obligations and restrictions, such as the sale and navigation of the yacht. Assignments of rights under insurance policies and charter earnings may be required. Lenders will usually have their own ready-made documentation. While reasonably uniform in scope and contents, the taxonomy and readability usually leave much to be desired. Within the loan agreement, the loan clause sets out that the loan will be available, either in one lump sum where the yacht has already been built, or at certain newbuild milestones. Given that the lender’s not the owner, the security, detailed in the agreement, is comprehensive. Default events are set out in the loan agreement, to make clear the circumstances which will trigger the lender’s right to demand immediate repayment of the loan and what happens in the event such payment is not forthcoming. Finally, various standard boilerplate clauses in the loan agreement deal with key housekeeping matters, with the most important being the law and jurisdiction clause: parties must make sure they are taking advice from an experienced, insured lawyer duly qualified in the correct jurisdiction. SECURITY Security provisions make up most of the loan documentation, and can be set out both in the loan agreement and further documents: A covenants clause within the loan agreement, and/or a separate deed of covenant Assignments to the lender of the borrower’s rights under yacht’s insurance policies An assignment of the yacht’s charter earnings to the lender The mortgage on the yacht, registered pursuant to the loan agreement A guarantee from a third party company owned by the yacht’s beneficial owner A guarantee from the beneficial owner him or herself Covenants set out positive and negative promises on the part of the borrower. There is usually a restriction on the sale of the yacht, and restrictions the geographical navigation and use of the yacht – for example, the yacht may not be allowed to visit places where enforcement of loan could prove challenging. Chartering and operational management often may only be undertake on approved terms. Where management is deficient, insurance cover could be withdrawn and the lender’s security unnecessarily jeopardised. A more detailed analysis of the security requirements is set out here . LAW & JURISDICTION As, for historical reasons, the centre of the world’s ship finance sector is London, it makes sense to ensure that all the contractual relationships are governed by English law and subject to English jurisdiction. Although it is not easy to think of yachts as being ships, that is exactly what they are in the eyes of the law. A greater concentration of yachting lawyers and case-law, coupled with an innovative banking culture and a legal regime which encourages settlement, means that this choice may well save legal costs and maintain good relations among the parties. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Loan Security Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Loan Security Going Dark Going Dark 28 November 2022 Last revised minutes 4 Reading time The automatic identification system (AIS) is a tracking system that establishes the positions of ships, and fixed and floating objects, in real time. Used as a navigational aid, it also lets the world see a yacht’s position - which isn’t always what we owners want. There are times when ‘going dark’ is allowed and times when it’s not. minutes 4 Reading time 28 November 2022 Last revised The automatic identification system (AIS) is a tracking system that establishes the positions of ships, and fixed and floating objects, in real time. Used as a navigational aid, it also lets the world see a yacht’s position - which isn’t always what we owners want. There are times when ‘going dark’ is allowed and times when it’s not. The Automatic Identification System (AIS) enhances safety and security by providing positional information and supplementing radar for traffic situation awareness. AIS is used in search and rescue operations, providing accurate information on the position of survival craft. It automates mandatory ship reporting to port authorities or vessel traffic service stations. Ships over 300 gross tonnage engaged in international voyages are required by SOLAS regulations to be fitted with Class A AIS equipment. Local regulations may be significantly more stringent. Yachts not subject to SOLAS requirements can carry Class B AIS devices. AIS systems consist of a small box with VHF transmitters, receivers, and a central processing unit, connected to various shipborne sensors and navigation systems. It transmits static information, dynamic information updated from ship sensors, and voyage-related information. AIS should not be solely relied upon for collision avoidance and does not replace radar target-tracking. It can be switched off under certain circumstances, but the master should report it to the competent authority and restart it when the source of danger has disappeared. Failure to operate AIS may lead to penalties by port state authorities and insurance underwriters may claim the vessel was unseaworthy in case of a collision without AIS. AIS systems consist of a small box with VHF transmitters, receivers, and a central processing unit, connected to various shipborne sensors and navigation systems. It transmits static information, dynamic information updated from ship sensors, and voyage-related information. AIS should not be solely relied upon for collision avoidance and does not replace radar target-tracking. It can be switched off under certain circumstances, but the master should report it to the competent authority and restart it when the source of danger has disappeared. Failure to operate AIS may lead to penalties by port state authorities and insurance underwriters may claim the vessel was unseaworthy in case of a collision without AIS. The Automatic Identification System (AIS) enhances safety and security by providing positional information and supplementing radar for traffic situation awareness. AIS is used in search and rescue operations, providing accurate information on the position of survival craft. It automates mandatory ship reporting to port authorities or vessel traffic service stations. Ships over 300 gross tonnage engaged in international voyages are required by SOLAS regulations to be fitted with Class A AIS equipment. Local regulations may be significantly more stringent. Yachts not subject to SOLAS requirements can carry Class B AIS devices. AIS enhances safety and security in various ways. By plotting positional information provided by nearby vessels, it supplements the picture produced by radar, so enhancing traffic situation awareness. Many of the problems common to radar, such as clutter, target swap as ships pass close by and target loss following a fast manoeuvre, do not affect AIS. AIS is also used in search and rescue operations. Search And Rescue operators, on land, at sea and in the air, get more accurate information, especially on the position of survival craft. Further, because AIS is used to exchange data ship-to-ship and with shore-based facilities, it is useful in automating mandatory ship reporting to port authorities or vessel traffic service (VTS) stations. LEGAL REQUIREMENT By virtue of Regulation 19 of Chaprter V of the International Convention for the Safety of Life at Sea (SOLAS) 1974, as amended, all ships of 300 gross tonnage or more and engaged on international voyages must be fitted with Class A AIS equipment. In law, all yachts are ships – and it is irrelevant whether registered as a private or commercial vessel. Class B devices may be carried on yachts which are not subject to the SOLAS requirements. Certain national laws take this further. For example, US Federal law requires commercial vessels of just 65 feet and over to be fitted with a Class A AIS device. HOW IT WORKS The system is contained within a small box, containing one very high frequency (VHF) radio transmitter, various VHF receivers and a central processing unit. To this is attached antennae, and interfaces for heading, speed devices and other shipborne sensors, plus interfaces to radar, Automatic Radar Plotting Aids (ARPA), Electronic Chart System/Electronic Chart Display and Information System (ECS/ECDIS) and Integrated Navigation Systems (INS). There’s also a display and keyboard to input and retrieve data. The AIS can be connected either to an additional dedicated AIS display unit, possibly one with a large graphic display, or as an input to existing navigational system devices such as a radar display, ECS, ECDIS, or INS. INFORMATION SHARED The AIS information is transmitted continuously by a ship, and includes the following three types: Static information, which is entered into the AIS on installation and need only be changed if the ship changes its name, Maritime Mobile Service Identity (MMSI), location of the electronic position fixing system (EPFS) antenna, or undergoes a major conversion from one ship type to another; Dynamic information, which, apart from navigational status information, is automatically updated from the ship sensors connected to AIS; and Voyage-related information, some of which such as destination and estimated time of arrival (ETA) will need to be entered manually at the start of the voyage and kept up to date as necessary. INCOMPLETE PICTURE AIS doesn’t always give the complete picture, and – as with any navigational aid – should only be used by itself – especially for collision-avoidance. It doesn’t take the place of radar target-tracking. The officer of the watch (OOW) should always be aware that other ships, in particular smaller leisure craft, fishing boats and warships might not be fitted with AIS. The OOW should always be aware that AIS fitted on other ships as a mandatory carriage requirement might, under certain circumstances, be switched off on the master's professional judgement. SWITCHING OFF Details of yachts whose AIS is switched on maybe accessed by anyone, anywhere, simply by looking at MarineTraffic , VesselFinder or any of the other myriad of similar websites. Not all owners will be happy about this. According to the International Maritime Organisation’s Resolution A.1106(29) of 14 December 2015, entitled Revised Guidelines for The Onboard Operational Use of Shipborne Automatic Identification Systems (AIS): AIS should always be in operation when ships are underway or at anchor. If the master believes that the continual operation of AIS might compromise the safety or security of his/her ship or where security incidents are imminent, the AIS may be switched off. Unless it would further compromise the safety or security, if the ship is operating in a mandatory ship reporting system, the master should report this action and the reason for doing so to the competent authority. Actions of this nature should always be recorded in the ship's logbook together with the reason for doing so. The master should however restart the AIS as soon as the source of danger has disappeared. If the AIS is shut down, static data and voyage-related information remains stored. Restart is done by switching on the power to the AIS unit. Ship's own data will be transmitted after a two-minute initialization period. In ports AIS operation should be in accordance with port requirements. CONSEQUENCES Port state authorities will expect AIS to be operational, and may impose penalties for this not being the case – especially where there is a collision which AIS may have helped to avoid. Keep in mind, too, that non-compliance with more stringent local regulations will be punished . Even in international waters, where a yacht goes dark other than allowed by Resolution A.1106(29), while this may not be noticed by the flag state authority, if there’s a collision then insurance underwriters could claim that, without this important navigational aid working, the vessel was, in law, unseaworthy, and they are entitled to refuse payment. But going dark may not be intentional. Interference, weak radio signals and patchy satellite reception can all compromise AIS data exchange. Distinguishing intentional from unintentional signal drop-outs is difficult but not impossible. The frequency and regularity of drop-outs prior to a full blackout may be indicative. And the reason may not be malevolent. It is known, for example, that in certain parts of the world fishing vessels switch off AIS in order not to reveal productive catch areas to competitors. CONCLUSION Whether we, as owners, like it or not, AIS is governed by international convention – and it’s here to stay. If there are legitimate concerns then going dark may be permissible, but it’s as well to discuss this with the captain and insurance underwriter well in advance of a transit through waters in which it may be prudent or desirable. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about State Yachts Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about State Yachts How to Charter Out How to Charter Out 6 February 2011 Last revised minutes 5 Reading time There are two basic types of charter: those where the crew is provided by the owner and those where it is up to the charterer to provide the crew (known as ‘bareboat’ charters). Because of the complex crew certification requirements, larger yachts are rarely bareboat chartered although they may be the subject of such a charter as part of a complex finance and/or tax avoidance scheme. minutes 5 Reading time 6 February 2011 Last revised There are two basic types of charter: those where the crew is provided by the owner and those where it is up to the charterer to provide the crew (known as ‘bareboat’ charters). Because of the complex crew certification requirements, larger yachts are rarely bareboat chartered although they may be the subject of such a charter as part of a complex finance and/or tax avoidance scheme. Bareboat charters make the charterer responsible for crew actions and liabilities. Implied terms include yacht seaworthiness and compliance with descriptions. Yacht age doesn't excuse outdated safety and navigational equipment. Breach of charter terms may lead to charter termination or damages. Charterers can give instructions on the yacht's destination but not on seamanship matters. Charter rates may include additional expenses; attention to terms is important. Insurance is required for liabilities caused by the charterer; compliance with policies is crucial. Redelivery of the yacht must be prompt to avoid additional charges. Captains may have authority to make contracts on behalf of the owner. Owners should consider national and regional laws before placing a yacht on the charter market. Charter rates may include additional expenses; attention to terms is important. Insurance is required for liabilities caused by the charterer; compliance with policies is crucial. Redelivery of the yacht must be prompt to avoid additional charges. Captains may have authority to make contracts on behalf of the owner. Owners should consider national and regional laws before placing a yacht on the charter market. Bareboat charters make the charterer responsible for crew actions and liabilities. Implied terms include yacht seaworthiness and compliance with descriptions. Yacht age doesn't excuse outdated safety and navigational equipment. Breach of charter terms may lead to charter termination or damages. Charterers can give instructions on the yacht's destination but not on seamanship matters. Whether or not crew is provided makes a real difference to the legal positions of the parties. Generally, with bareboat charters, the charterer remains responsible as if he or she was the owner: since the crew are employees of the charterer and not of the owner, the acts and omissions of the crew are the responsibility of the charterer and not the owner, should the yacht, for example, be involved in a collision. Bareboat charterers can take comfort in the fact that the Limitation Conventions of 1957 and 1976 allow charterers to limit their liability for loss of life or personal injury to any person carried on board, loss of or damage to property, liabilities for dealing with a wrecked or abandoned yacht, and the infringement of any other non-contractual rights. IMPLIED TERMS Whatever the type of charter, the law will automatically imply further terms. These include conditions that the yacht is seaworthy and that she corresponds with the description given by or on behalf of her owner. Seaworthiness is taken to mean that the yacht, her equipment and crew (if any) must be able to cope with any foreseeable dangers. More specifically, in order to be seaworthy, the yacht must be as fit as an ordinary, careful owner would require at the start of any passage, taking into account all the likely circumstances of that passage. The age of the yacht is relevant, but age does not excuse having out-of-date safety and navigational equipment. All legal documents required must be held on board. The charter agreement may oblige the owner to maintain the yacht in a seaworthy condition for the whole duration of the charter rather than just the start. BREACH OF CHARTER Generally, a breach of any terms may allow the charterer to treat the charter as having come to an end immediately and claim damages, or just claim damages afterwards, depending on how serious the breach is, but the charterer must have suffered some sort of loss as a result of the breach. Just because the yacht is unseaworthy, for example, does not mean that the charterer can claim damages. The particular seaworthiness must have caused loss on the part of the charterer. This would certainly be the case, for example, if the yacht was detained because she did not have the correct papers on board. Moreover, the courts will, as a matter of law, overlook breaches that are so trivial as to be negligible. What is trivial, however, depends entirely on the facts. CHARTERERS’ INSTRUCTIONS Subject to the charter agreement (known by lawyers as a ‘charter party’) the yacht is the charterer’s to do with as he or she pleases. Accordingly, the charterer is entitled to give, and the captain is obliged to comply with, legitimate instructions as to where the charterer wishes the yacht to go. This also means that should the yacht be saved from misfortune, the charterer could be liable to pay the rescuers for their services. Unless a route proposed by the charterer will be inherently dangerous, the captain is bound to comply with the charterer’s request and must then use his navigational skills to avoid danger should it be encountered. Yet the charterer is not entitled to direct the captain on any matters of seamanship. In fact, the captain is not only entitled but also obliged to retain responsibility for all matters relating to the seaworthiness, navigation and the general safety of the vessel, and must refuse requests that might compromise these. A captain is also obliged to refuse to comply with instructions that are illegal under the laws governing the charter agreement. LITTLE EXTRAS While there is much else for the charterer to pay for aside from the hire, such other expenses are usually lumped in with the hire payment to produce the charter rate or fee. The charterer needs to pay close attention to the charter terms to avoid any unexpected bills, however. Quoted charter rates are normally inclusive of the brokers’ fees, but the charterer would be well advised to confirm this. MYBA AGREEMENT The most common terms are those published by MYBA (formerly the Mediterranean Yacht Brokers Association), which have also been adopted by the American Yacht Charter Association. On these terms, the operating costs of the yacht are in addition to the hire. The charterer must pay a self-explanatory Advance Provisioning Allowance, which must be topped up as required, although the captain is required to keep an eye on this expenditure. The charterer should be familiar with other key parts of the MYBA contract. DELAYS For various reasons beyond the owner’s reasonable control, the yacht may be delivered late to the charterer. The owner has 48 hours, or one tenth of the charter period – whichever is the shorter – in which to deliver the yacht for charter, with a proportionate refund being given, or the charterer may cancel the charter, but will only be entitled to a full refund. If the owner fails to deliver the yacht to the charterer, and the reason for this failure was within the owner’s reasonable control, then the charterer will be entitled to a full refund, plus an extra 50 per cent. The charterer may not, however, claim more, no matter how much inconvenience was caused. Should the owner choose to cancel before the start of the charter, the charterer will still only be entitled to a full refund plus 50 per cent. A chartering area is agreed, and the charterer is allowed to cruise for up to six hours per day within that area. Should the yacht break down or become disabled for any other reason, for any length of time over 48 consecutive hours or 10 per cent of the charter period – whichever is the shorter – the charterer has the option to terminate the agreement. INSURANCE Insurance is required against liabilities to third parties that may be caused by the charterer. In as much as the cover required is no less than that set out in the Institute Yacht Clauses in use in the London insurance market, owners may well wish to use these terms rather than any foreign alternatives to save future argument over what is or is not cover of such a standard. The charterer will still be liable, however, should the yacht or any crewmember be detained as a result of any illegal activity on the part of the charterer or any of his or her guests. The insurance policies for larger risks can be written in long-winded terms. In the event of a dispute arising between owner and insurer, unfamiliar terms can lead to doubt. While an owner who keeps the yacht for his or her own use may be given the benefit of any doubt as a consumer, where a yacht is chartered, this protection evaporates. The additional clause inserted by the insurer to allow the yacht to be chartered will usually take the form of a ‘warranty’ added to the policy, requiring the yacht to be skippered by a professional yacht captain. Being a warranty, if this is not abided by, the policy will be ineffective in its entirety. In the case of bareboat charters, the qualifications needed to be held by skipper-charterers will be set out in detail and, again, must be complied with to the letter. REDELIVERY Under the MYBA terms, the charterer should make sure that the yacht is redelivered back to the owner promptly, otherwise the charterer will be liable to pay the charter rate plus an extra 50 per cent, plus the owner’s resulting losses. There is also no agreed limit as to the amount that can be reclaimed should the charterer choose to cancel the contract. AUTHORITY A captain will often be given the authority to make contracts as the owner’s agent, as long as he or she is acting within his or her given authority. Where the yacht has been chartered and the charter agreement states that certain supplies, for example, are to be paid by the charterer, the owner will be liable to pay if the charterer doesn’t, even if the creditor knows of the existence of the charter agreement. POINTS TO CONSIDER Before a yacht is even placed on the charter market, there are a number of points owners should consider. Depending on the waters in which the yacht will be chartered, such activities will be affected by national laws and increasingly by capricious regional laws, especially in the Mediterranean. This may affect the number of guests allowed, safety requirements and the flag the yacht must sail under. Many flag states, in particular within the Red Ensign group, also have technical Codes of Practice applicable to chartered yachts, which can be expensive to comply with. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Difficult Guests Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Difficult Guests State Yachts State Yachts 28 June 2010 Last revised minutes 5 Reading time While discussion about building a new British royal yacht ebbs and flows, it is often forgotten that a significant number of the world’s superyacht fleet already consists of royal and presidential yachts. These vessels occupy a particular place in international maritime law – often acting as floating embassies and extending extravagant hospitality and prestige. And just as diplomats hold special privileges in foreign countries, so do state vessels. minutes 5 Reading time 28 June 2010 Last revised While discussion about building a new British royal yacht ebbs and flows, it is often forgotten that a significant number of the world’s superyacht fleet already consists of royal and presidential yachts. These vessels occupy a particular place in international maritime law – often acting as floating embassies and extending extravagant hospitality and prestige. And just as diplomats hold special privileges in foreign countries, so do state vessels. Diplomatic privileges grant state yachts immunity from seizure and delay. Immunity is based on negotiated reciprocal agreements and has a legal and political foundation. State yachts represent a nation and seizing them could be seen as a diplomatic insult. Different countries have varying laws regarding immunity for state yachts. The privilege is often restrictive, requiring proof that the yacht is a state yacht and the circumstances justify the immunity. Immunity protects owners from disputes such as unpaid bills. Arrests of state yachts are governed by the laws of the jurisdiction where the yacht is located. Arrests serve to detain the yacht until financial security is provided. The International Convention on Salvage may not apply to state yachts entitled to immunity. Action can be taken against individuals responsible for negligence, even if the yacht is immune. Immunity protects owners from disputes such as unpaid bills. Arrests of state yachts are governed by the laws of the jurisdiction where the yacht is located. Arrests serve to detain the yacht until financial security is provided. The International Convention on Salvage may not apply to state yachts entitled to immunity. Action can be taken against individuals responsible for negligence, even if the yacht is immune. Diplomatic privileges grant state yachts immunity from seizure and delay. Immunity is based on negotiated reciprocal agreements and has a legal and political foundation. State yachts represent a nation and seizing them could be seen as a diplomatic insult. Different countries have varying laws regarding immunity for state yachts. The privilege is often restrictive, requiring proof that the yacht is a state yacht and the circumstances justify the immunity. For yachts, these diplomatic privileges take the form of immunity from seizure and delay. But such immunity is not automatic: it arises only because in the past various governments have reached negotiated, reciprocal agreements. This is important because it means that the immunity has a legal as well as a political foundation. So it is therefore possible to state precisely what the extent of the privilege is in any given set of circumstances. So why have such immunity anyway? The answer is that, like warships, state yachts are the floating embodiment of a particular nation, and to try to ensnare such vessels in foreign legal proceedings could be seen as a slap in the face of a foreign country, and diplomatically embarrassing. To make sure such faux pas do not happen, the treatment of state yachts is enshrined in the national laws of most states. It is a similar concept to the legal sanctity of foreign embassies. LIMITS But a line has to be drawn somewhere with regard to foreign sovereign immunities, to prevent them being taken advantage of. So a distinction is drawn between activities undertaken using vessels which are commercial in nature, and those of a governmental or public nature. For yachts, ‘commercial’ means simply being chartered. While this tenet was enshrined in 1926 in the Brussels Convention on Immunity of State Owned Vessels and later in the 1972 European Convention on State Immunity and the 1982 Law of the Sea Convention, these conventions must still have been enacted into particular countries’ domestic law to have any effect: which means that the commercial/non-commercial principle is not uniformly applied. In the UK, the State Immunity Act 1978 strips immunity even where there is just an intention that the yacht be chartered – therefore encompassing charter positioning passages. In the US, the Foreign Sovereign Immunities Act 1976 allows for state yachts to be seized not only when being used commercially but also to enforce a mortgage on the vessel. In France, the courts have held that a vessel may be seized simply when it is not performing a public act of state – which in reality is most of the time. In most parts of the world, the privilege is what lawyers call ‘restrictive’ in nature – in other words, if you are seeking to rely on the privilege it’s up to you to demonstrate that your yacht is indeed a state yacht and the circumstances justify what you’re seeking to rely on. ARREST Being immune from seizure and delay is, almost literally, a ‘get out of jail free’ card for an owner who disputes a bill, for example. Seizing a yacht is a dramatic and effective method for recovering debts. There is nothing like it in land-based law. Normally, if you were to supply goods or services to a yacht, and weren’t paid, you could only sue the person or company with whom you agreed to deliver the supplies or do the work. Liens cut through contractual matrices. Arrests are governed by the law of the jurisdiction in which the yacht is situated at the time. The yacht’s flag and the nationality of the individual or company seeking redress usually makes no difference. The arresting court can also become the trial court, making it possible to ‘forum shop’ for a country with favourable laws. Bringing an action against a ship is a remedy which has been around since ancient times. It exists because, traditionally, ships were owned by their captains and if anyone who had supplied goods or services to the ship was left unpaid, the captain could sail off, never to be seen again. Some see arrest as a punishment in itself; it isn’t – it’s just a way of detaining the yacht in order to force the owner to provide financial security, which could be in the form of a cash deposit or bank guarantee. Then the yacht is free to leave. Contrary to popular belief, at no time is the yacht actually chained to the dock. The order is served on the yacht and if the captain attempts to leave he or she will be in contempt of court and criminally liable. In the UK, a warrant of arrest will not be issued against a state yacht where, by any convention or treaty, the UK has undertaken to minimise the possibility of arrest until notice has been served on a consular officer of that state. Many countries have made similar ad hoc bilateral agreements not to arrest each other’s state vessels, in spite of any immunity laws allowing for arrest where they are being used commercially. SALVAGE If a state yacht is found to be in need of salvage assistance, the International Convention on Salvage 1989 will not apply if the vessel is entitled to immunity. This means that, unless the state owner consents, it may be impossible to arrest a salvaged yacht if financial security is wanted pending the litigation or arbitration of any salvage claim. COLLISION Where a state yacht has been sailed negligently, perhaps causing a collision, it remains possible to bring an action against the officer in charge at the time personally for negligence, just as it would be in any other situation: individuals cannot normally shelter from immunity afforded to the yacht. CONTRACTS So what can a supplier of goods and services do to ensure that the vital right to arrest is retained? Contracts should always include a ‘law and jurisdiction’ clause, although it is surprising how often this is omitted, even by sophisticated suppliers. It is a simple matter to include an extension to such a clause so that the yacht’s owning company is not entitled to claim any immunity in relation to itself (or any of its assets) under any law or in any jurisdiction in connection with any legal proceedings relating to the agreement. The owner should also be asked to irrevocably agree not to claim – and waive – such immunity. As it is always open to the owner to claim that national laws providing immunity will trump whatever is written in the contract, there is no guarantee that such a clause will be effective, but it is the most any supplier can realistically do. ROYAL YACHTS To be clear, not all yachts owned by royalty will be royal yachts in the context of international law. In those jurisdictions where the royal family is part and parcel of the state itself, it will usually be clear whether or not a royal yacht is a state yacht. The situation becomes less lucid where the royal family has a purely symbolic role: some royal households, while subject to widespread popular support and approval, are in fact constitutionally separate from the states they ‘reign’. COMPANY OWNED Further, some state yachts are owned by private owning companies, perhaps based in popular offshore jurisdictions, usually just to ring-fence the yacht as a source of potential legal liability. Where this is the case, the legal owner will be the owning company, not the royal personality or state, so any immunity would fall away. Given this, it would be preferable for state yachts which are to be chartered to be owned within the traditional company owning structure. When ownership is through such a company, the normal rules regarding whether it is possible to view the individual ‘beneficial’ owner as the actual legal owner will apply. This is known as ‘lifting the corporate veil’. It is usually only possible to reveal the beneficial owner where there has been tax evasion or an intent to defraud creditors – which is hardly likely in the case of state yachts. CONCLUSION While it is worth bearing in mind the immunity that state yachts enjoy, it is important not to lose sight of the fact that their owners are more likely to remain solvent, and will certainly behave after an incident in a manner which could be described, quite literally, as diplomatic. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Engaging a Manager Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Engaging a Manager A Firm Foundation A Firm Foundation 10 May 2023 Last revised minutes 5 Reading time Many of our Members will already be familiar with the reasoning behind corporate ownership and the use of trusts. If that’s you, then feel free to skip to the next step of building your team . Too many buyers, however, still purchase in their own names. As well as raising privacy concerns, legal owners can be held liable for accidents and regulatory non-compliance. Corporate services aren’t cheap, but it’s a sensible choice when building and owning a large yacht. minutes 5 Reading time 10 May 2023 Last revised Many of our Members will already be familiar with the reasoning behind corporate ownership and the use of trusts. If that’s you, then feel free to skip to the next step of building your team . Too many buyers, however, still purchase in their own names. As well as raising privacy concerns, legal owners can be held liable for accidents and regulatory non-compliance. Corporate services aren’t cheap, but it’s a sensible choice when building and owning a large yacht. Companies have a seperate legal personality, which allows companies to buy and sell goods and services like people. Trusts are arrangements where property is held by a trustee for the benefit of a beneficiary, sometimes with the same person as the settlor and beneficiary. Companies and trusts can be used to protect assets, reduce tax exposure, and shield personal wealth. Yachts can be owned through companies to ring-fence liability and protect other assets of the owner. Yachts can still be arrested in cases of accidents, pollution allegations, or unpaid debts. Releasing a yacht release from arrest requires payment of the claim or providing acceptable security, often requiring a personal guarantee from the beneficial owner. Lifting the corporate veil may expose individuals involved in fraudulent or tax evasion. The use of nominees can help to protect the identity of real directors and shareholders. Privacy is not guaranteed, as international treaties and conventions may override privacy laws, and trusts aren't always recognized. Offshore jurisdictions offer tax-efficient and legal ways for multinational companies and yacht owners, but careful consideration of jurisdiction is essential for reputation, integrity, costs, rule of law, political stability, and practicalities of winding-up corporate structures. Lifting the corporate veil may expose individuals involved in fraudulent or tax evasion. The use of nominees can help to protect the identity of real directors and shareholders. Privacy is not guaranteed, as international treaties and conventions may override privacy laws, and trusts aren't always recognized. Offshore jurisdictions offer tax-efficient and legal ways for multinational companies and yacht owners, but careful consideration of jurisdiction is essential for reputation, integrity, costs, rule of law, political stability, and practicalities of winding-up corporate structures. Companies have a seperate legal personality, which allows companies to buy and sell goods and services like people. Trusts are arrangements where property is held by a trustee for the benefit of a beneficiary, sometimes with the same person as the settlor and beneficiary. Companies and trusts can be used to protect assets, reduce tax exposure, and shield personal wealth. Yachts can be owned through companies to ring-fence liability and protect other assets of the owner. Yachts can still be arrested in cases of accidents, pollution allegations, or unpaid debts. Releasing a yacht release from arrest requires payment of the claim or providing acceptable security, often requiring a personal guarantee from the beneficial owner. Companies are said by lawyers to have their own ‘legal personality’. This colourful phrase just means that they are able to buy and sell goods and services in just the same way as a human being. Although corporations were developed as a means to allow entrepreneurs to raise money and conduct business without risking their personal wealth, companies can also be used for non-commercial purposes – as vehicles for asset ownership. TRUSTS Trusts are a rather different concept. They have no such personality. They are simply an arrangement whereby property is handed over by one party (the ‘settlor’) to another (the ‘trustee’) for the benefit of another (the ‘beneficiary’), on the basis that the property will be held and used as the trustee wishes. The settlor and beneficiary can be the same person. Although legal title is actually transferred from the settlor to the trustee, the beneficiary’s rights are recognisable and enforceable by the courts. As with companies, the use of trusts has come along way since their invention: they were first used to protect the property of medieval knights while away on crusade. BENEFITS Now and then, yachts are involved in accidents. Liability could easily exceed the value of the yacht, and, should the owner be held liable, his or her other assets are at risk. More sensible, then, to ring-fence any such source of liability by owning the yacht through a company. Companies and trusts can also be used, quite lawfully, to reduce an individual’s apparent wealth and personal tax exposure, and to protect assets from creditors where the beneficial owner is asked to provide personal guarantees in respect of the financing of his or her commercial activities. With very limited exceptions, yachts must, by law, be registered somewhere. In some cases, including during the build stage. Shipping registers being open to inspection by the public, details of a yacht’s owner are readily available. Most owners just don’t like the idea of journalists – or perhaps even former spouses – knowing what they own. Although the identity of company directors and shareholders is often a matter of public record, many jurisdictions allow directorships and shares to be held in the name of nominees. LIMITATIONS No amount of corporate structing can prevent the arrest of the yacht itself. Where this happens, the yacht is legally prevented from leaving her mooring. Typically, police or customs officers present the yacht with the court papers – this is the process which used to involve the nailing of a writ to the mast. Yachts are often arrested following a collision, an allegation of pollution, or where a good or service has been provided to the yacht without the provider (including crew) having been paid. There is no need for judgment to have been given and there may be little or no warning before the yacht is arrested – potentially leaving the owner in an awkward and embarrassing position in the middle of a busy charter season. The only way to release the yacht from arrest is either to pay the claim or to provide security. Such security may only be acceptable if provided or supported by a large bank. In turn, the bank will require a personal guarantee from the yacht’s beneficial owner. On occasion it may be possible to look behind the company at the individuals involved. This is known as lifting the corporate veil. The laws of certain jurisdictions, for example, state that where it appears that, in the course of winding-up a bankrupt company, transactions have been carried out with the intent to defraud creditors, a court may declare the individuals involved liable. Criminal sanctions can also apply. Creditors here only includes those owed money at the time the transfer was made, excluding future creditors. The burden of proving the necessary intent lies with the creditors. The same principle applies where it looks as if a company was set up to frustrate a court order to freeze assets. The use of nominees only prevents the true identity of directors and shareholders being made available to the public. It is not normally possible to offload liability onto the nominees, and there is likely to be a clause in the agreement to set up the company, obliging the actual directors and shareholders to indemnify the nominees. Privacy cannot be entirely guaranteed in any event. Not unreasonably, international treaties on the exchange of information relating to criminal activities, including tax evasion, can allow require even the strongest privacy laws to be brushed aside. Further, although trusts are usually recognised in common law jurisdictions, and some countries are party to an international convention on the recognition of trusts, known as the Hague Trust Convention, trusts aren’t always recognised. One final drawback of buying through a company is that the laws which automatically protect consumers only applies to people - not to companies. Such laws are of limited value where a bespoke yacht is being built, but consumers will have ambigous build contract provisions interpreted in their favour. CHOICE OF JURISDICTION Offshore jurisdictions still have a reputation as being sunny places for shady people. In fact, virtually all the world’s leading multinationals use offshore companies and trusts to undertake business in a private, tax-efficient yet entirely legal way. ‘Offshore’ simply means a jurisdiction other the one someone is already resident or domiciled. They certainly don’t need to be far-flung islands – although many are as it can form a lucrative boost to otherwise tourist-dependent economies. In fact, a good example of an offshore centre is the United Kingdom – which was becoming increasingly popular long before Brexit. For yacht owners, the principal advantage of using a respectable, well-known offshore jurisdiction is that there is rarely the need to reinvent the wheel: they are geared up to provide yacht owning structures. As these activities often provide a sizeable proportion of foreign income, their governments make it a priority to make matters simple for those looking for this type of service. It is important to choose the jurisdiction(s) with care, however. No two are the same. There are bad apples in the barrel, especially with regards the integrity of local practitioners. With companies, but more particularly with trusts – where legal title is transferred to a local trustee who may have discretionary powers – there exists opportunities to extract more from their clients than had been expected. Other factors to consider include initial and ongoing costs (including local taxes), international reputation, and the strength of their rule of law – in other words how tough their courts are. Political stability is another important factor, as is the time zone, the exchange controls, and any escape provisions – which allow companies to change jurisdictions while maintaining their legal personality and trusts to be transferred without needing to be rewritten. Finally, the most overlooked aspect is the ease, timeframe and expense of winding-up a corporate structure when it’s no longer needed. Working with a local branch of an international legal or accounting group may provide reassurance, but on the other hand one may end up being steered towards just those places where they happen to have an office. Ideally, guidance in the earliest stages should be sought from an independent, trusted source, capable of providing an impartial, global overview. Reach out to our General Secretary if you need a steer. With the correct ownership structure in place, it's time to build your team . Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Build Your Team Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Build Your Team Loan Enforcement Loan Enforcement 3 March 2014 Last revised minutes 3 Reading time The loan agreement and/or the deed of covenant will provide that the ship mortgage will become enforceable following a defined default event. What constitutes default will be set out in the loan agreement – and will cover more than just a failure to make loan repayments. A breach of any term of the security documentation, in particular positive or negative covenants, can constitute a default. minutes 3 Reading time 3 March 2014 Last revised The loan agreement and/or the deed of covenant will provide that the ship mortgage will become enforceable following a defined default event. What constitutes default will be set out in the loan agreement – and will cover more than just a failure to make loan repayments. A breach of any term of the security documentation, in particular positive or negative covenants, can constitute a default. When there is a default, the lender may choose to waive it or demand that it be corrected by the borrower. The lender can enforce the mortgage through a deed of covenant that grants specific powers. The deed of covenant allows the lender to order the yacht to a specific port, manage the yacht, take possession of it, and sell it. The lender can use a power of attorney granted by the borrower to act on their behalf, including selling the yacht. Lenders have pre-existing rights, such as taking possession of the yacht or selling it when loan repayments are outstanding. Lenders can arrest the yacht through a court application, leading to a judicial sale that may attract higher prices. The lender is responsible for immediate expenses incurred after the arrest, such as crew salaries and mooring fees. The lender can apply for an order of sale before judgment, which involves appraisal, valuation, and advertising for sealed bids. If a default occurs during a charter, the lender's rights may be restricted if it interferes with the charter, but certain conditions must be met. The lender's claim as a mortgagee is prioritized over unpaid creditors with maritime liens and possessory liens. After a court sale, proceeds are distributed in a specific order. Lenders can arrest the yacht through a court application, leading to a judicial sale that may attract higher prices. The lender is responsible for immediate expenses incurred after the arrest, such as crew salaries and mooring fees. The lender can apply for an order of sale before judgment, which involves appraisal, valuation, and advertising for sealed bids. If a default occurs during a charter, the lender's rights may be restricted if it interferes with the charter, but certain conditions must be met. The lender's claim as a mortgagee is prioritized over unpaid creditors with maritime liens and possessory liens. After a court sale, proceeds are distributed in a specific order. When there is a default, the lender may choose to waive it or demand that it be corrected by the borrower. The lender can enforce the mortgage through a deed of covenant that grants specific powers. The deed of covenant allows the lender to order the yacht to a specific port, manage the yacht, take possession of it, and sell it. The lender can use a power of attorney granted by the borrower to act on their behalf, including selling the yacht. Lenders have pre-existing rights, such as taking possession of the yacht or selling it when loan repayments are outstanding. Where there is a default, the lender decide that the commercial relationship is worth saving. The lender may therefore choose to waive the default – either unconditionally or if the borrower complies with new conditions. Alternatively, the lender may demand that a default be put right by the borrower or even put things right itself and charge the borrower for this – such as renewing an insurance policy. If all else fails, the lender may press ahead with enforcement action. CONTRACTUAL ENFORCEMENT The deed of covenant sets out the lender’s enforcement powers, exercisable once the mortgage has become enforceable. This is on top of the rights existing in law anyway (set out below). Typical rights granted by the deed of covenant include the following: To order the captain to proceed to a port nominated by the lender – which will be within a jurisdiction where arresting the yacht is particularly easy or convenient; To manage the yacht, including chartering her out (assuming that the yacht is commercially registered and insured for chartering), and even replacing the entire crew if need be; To take possession of the yacht ahead of a sale, and take her to a jurisdiction where a relatively rapid sale can be concluded or where the lender will rank higher than other creditors; and To sell the yacht, either by public action or private sale. POWER OF ATTORNEY As well as the borrower’s covenants, the lender can use any power of attorney granted by the borrower to the lender, by which the lender can act in the borrower’s name to correct any default, or even go so far as to sell the yacht without much further ado. PRE-EXISTING RIGHTS Beyond the lenders rights which exist by virtue of the borrower’s covenants and any power of attorney, the law automatically gives lenders the ability to do any of the following: To take possession of the yacht, where the borrower has actually defaulted on loan repayments, or the lender’s security has been compromised as a result of the borrower’s (in)actions. In reality, this is rare as the lender will be on the hook for operational costs – even assuming that the lender has the relevant experience or can procure this at short notice. To sell the yacht, but only when the mortgage repayments are outstanding, and not simply where covenants have been breached: for this the lender will have to rely on the express provisions of the loan agreement and deed of covenant. To arrest the yacht, on application to the court, as a procedural step leading to the judicial sale of the vessel. A judicial sale may be preferred over a sale by the lenders this allows a buyer to but a yacht free from pre-existing liens and encumbrances – which benefits may help to boost the price of what will otherwise be something of a fire sale. The arrest of a yacht will result in the court’s officer, the Admiralty Marshal, incurring expenses right away, such as crew salaries, mooring fees and essential maintenance. The lender’s lawyer must provide a personal undertaking to pay such expenses, and will need a considerable sum paid to his or her firm on account. The lender will also need to arrange first and third party insurance if need be. Following arrest, the lender may apply to the court, even before judgment has been handed down, for an order for sale. The court order will contain instructions for the Admiralty Marshal to have the yacht appraised, valued and advertised for sale, typically on a sealed bid basis. The Admiralty Marshal’s Conditions of Sale will apply, under which – if the Admiralty Marshal accepts a sealed offer – the buyer must pay 10% right away and the balance within one week. CHARTERS Should a default occur when a charter has been booked or the she’s out on charter, the lender, as mortgagee, will be bound by the terms of charter, and prevented from exercising its rights under the mortgage, such as taking possession, arrest and/or sale, where doing so would interfere with the charter, as long as: Undertaking or completion of the charter doesn’t compromise the lender’s security; and The borrower is willing and able to complete the charter. PRIORITY Even with all the loan documentation, covenants, etc, in place, a lender’s claim as mortgagee is trumped by those with maritime liens such as unpaid crew, or those with a possessory lien such as a refit yard. This is the case even though neither maritime nor possessory liens can be registered anywhere. Mortgagees will take priority over all other unpaid creditors. The deed of covenant will usually stipulate that, following sale, the lender’s costs and expenses are paid first, then the outstanding principal and interest will be paid off. The borrower will then receive any amount left over. Following a court sale, the proceeds are distributed in the following order: Admiralty Marshal’s fees and expenses; Lender’s legal costs; Maritime liens; Possessory liens; Mortgages and charges over the yacht, in order of registration; and Statutory liens. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Leasing Overview Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Leasing Overview Engage a Builder Engage a Builder 10 May 2023 Last revised minutes 3 Reading time So you have your team in place. In the case of a full custom yacht, you have your design and specification to hand. And if it’s a semi-custom or series production yacht you’re going for, your team understands your vision and is ready to review, negotiate and modify the builders’ pre-existing designs and specifications. It’s time to shortlist the builders. minutes 3 Reading time 10 May 2023 Last revised So you have your team in place. In the case of a full custom yacht, you have your design and specification to hand. And if it’s a semi-custom or series production yacht you’re going for, your team understands your vision and is ready to review, negotiate and modify the builders’ pre-existing designs and specifications. It’s time to shortlist the builders. The asking prices of yachts depend on builder pedigree and size, with Northern Europe, France, Italy, and Turkey being viewed as having higher pedigree. Builders often subcontract parts of builds to suppliers, so effective build agreements and project management are crucial. Whittle down the short-list of builders by checking their available build slots and assessing their insurances and financial stability. Visit the builder's facilities to evaluate their cleanliness, safety, and organization, as well as the quality of their craftsmen and office facilities. Assess the builder's management team for communication and receptiveness to new concepts, as well as their flexibility in equipment suppliers and subcontractors. Consider the builder's financial security and willingness to have the build agreement subject to English law and jurisdiction. Choose a builder based on factors beyond the lowest bid, such as personal impression and team performance. Builders often request a Letter of Intent (LOI) before reserving a build slot, which outlines the price, payment terms, design, specification, and delivery timeframe. Clarify which parts of the LOI are binding and split it into a binding and non-binding section if necessary. Negotiate the build agreement after securing the LOI, taking legal advice before agreeing to any terms. Consider the builder's financial security and willingness to have the build agreement subject to English law and jurisdiction. Choose a builder based on factors beyond the lowest bid, such as personal impression and team performance. Builders often request a Letter of Intent (LOI) before reserving a build slot, which outlines the price, payment terms, design, specification, and delivery timeframe. Clarify which parts of the LOI are binding and split it into a binding and non-binding section if necessary. Negotiate the build agreement after securing the LOI, taking legal advice before agreeing to any terms. The asking prices of yachts depend on builder pedigree and size, with Northern Europe, France, Italy, and Turkey being viewed as having higher pedigree. Builders often subcontract parts of builds to suppliers, so effective build agreements and project management are crucial. Whittle down the short-list of builders by checking their available build slots and assessing their insurances and financial stability. Visit the builder's facilities to evaluate their cleanliness, safety, and organization, as well as the quality of their craftsmen and office facilities. Assess the builder's management team for communication and receptiveness to new concepts, as well as their flexibility in equipment suppliers and subcontractors. As your broker will have told you – or as you’ll have worked out by browsing online listings – the asking prices of yachts are dependent on builder pedigree as well as size. Broadly, builders in Northern Europe tend to be viewed as having the highest pedigree, followed by France and Italy and then Turkey. But this is much about perception than anything else. The reality is that many parts of the builds are subcontracted to suppliers who can place teams into any yard you wish. What’s key is an effective build agreement and project management. The use of well-known exterior and interior designers can add kudos and value. You’ll soon establish where your project can built. ASSESS THE CANDIDATES The short-list can be whittled down by making inquiries and establishing at the outset which of these builders have build slots available which suit your time horizon. The next task is to establish that the builder has the correct insurances and place and a strong balance sheet. A build taken on which was too ambitious or priced too keenly can quickly turn a prestigious name into a financial basket case. Some information will be publicly available, or an NDA can be put in place to allow you to examine more sensitive details. You should obtain a credit reference if possible. Then you should visit the builder in person. Modern yacht-building facilities are clean, safe, well-lit and orderly. Owners’ teams should have excellent office facilities, and there should be secure areas where owner-supplied items are clearly marked and stored. The workers are well-paid and highly-skilled craftsmen and women. It is (or should be) a far cry from many commercial and military shipyards. By meeting the builder’s management team, you can get a feel for their communicativeness, and their receptiveness to any new concepts you have in mind. You also need to assess the degree to which they are wedded to certain equipment suppliers and subcontractors in case you're considering alternatives. The builder will need to provide the right financial security and be open to having the build agreement subject to English law and jurisdiction: if it came to it, would you really receive justice in the builder’s local courts? You may well choose the builder you liked the look of, or whose team impressed you, over the one which came in with the lowest bid. RESERVE A SLOT It’s common practice for builders to request a Letter of Intent (LOI) from a prospective buyer before they’ll reserve a build slot. This stage is half-way between an informal expression of interest and a build agreement. The term is often used, but parties can be at odds about what the LOI means in practice and, in particular, the extent to which it’s going to bind the parties. As with many contracts in the international maritime sphere, the uncontroversial default choice of law for LOIs is that of England. Insistence on local laws should ring alarm bells. Under English law, contracts must be certain. Agreements to agree, and to negotiate in good faith, are unenforceable as they’re uncertain. The LOI can, and should, set out the price and payment terms, the design and specification, and the delivery timeframe. You may also want the right of first refusal for any earlier slots which become available. Depending on how these are drafted, each of these elements may or may not be binding. Different builders may have different expectations, but there is no overall consensus on this. The parties need to be clear on which parts are binding, and may be helpful to split the LOI into a binding and non-binding section. The degree to which you obtain certainty, while still retaining the flexibility to change or cancel the slot, is a matter of negotiation. Money may or may not change hands. If you haven’t had the owning company incorporated, the builder may want the LOI to be in your name personally. Whether you accede to such request is, of course, up to you, but the LOI must then contain a right for you to assign your interest over to the company upon incorporation. Never agree to an LOI before taking legal advice. With the LOI in place, it’s time to negotiate the build agreement . Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about The Build Agreement Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about The Build Agreement Whos Who Who's Who 3 January 2023 Last revised minutes 5 Reading time Buying insurance is an annual chore which you, as owner, no doubt leave to your yacht manager or captain. Some larger managers have in-house insurance specialists, but it’s fair to say that it’s often an area that is little understood. Here, we look at the various parties involved and their respective roles. minutes 5 Reading time 3 January 2023 Last revised Buying insurance is an annual chore which you, as owner, no doubt leave to your yacht manager or captain. Some larger managers have in-house insurance specialists, but it’s fair to say that it’s often an area that is little understood. Here, we look at the various parties involved and their respective roles. Large yacht insurance is provided by underwriters: other parties are merely part of the distribution channel. Insurance brokers should act on behalf of the insured - not underwriters - but are paid commission by underwriters. Some intermediaries may mislead clients into believing they are brokers when they are actually agents of underwriters. Other intermediaries may act as brokers during policy inception but switch to being underwriters' claims handlers during claims, leaving owners without the guidance they had expected to receive. Repackaging existing P&I cover to appear as an add-on can mislead clients and inflate costs. Underwriters prioritize profitability and may challenge large claims, causing significant delays and losses to the insured. It is crucial to verify the location and regulation of underwriters to avoid being left without coverage if they become insolvent. Insurance brokers are tightly regulated to prevent conflicts of interest, ensuring they act in the client's best interests. Brokers have a duty to exercise reasonable skill and care, identify the needed insurance, disclose material facts, and obtain suitable cover underwritten by a reputable underwriter. Acting as an unregulated insurance intermediary in the UK is a serious criminal offence; you should check that they're registered with the FCA . Underwriters prioritize profitability and may challenge large claims, causing significant delays and losses to the insured. It is crucial to verify the location and regulation of underwriters to avoid being left without coverage if they become insolvent. Insurance brokers are tightly regulated to prevent conflicts of interest, ensuring they act in the client's best interests. Brokers have a duty to exercise reasonable skill and care, identify the needed insurance, disclose material facts, and obtain suitable cover underwritten by a reputable underwriter. Acting as an unregulated insurance intermediary in the UK is a serious criminal offence; you should check that they're registered with the FCA . Large yacht insurance is provided by underwriters: other parties are merely part of the distribution channel. Insurance brokers should act on behalf of the insured - not underwriters - but are paid commission by underwriters. Some intermediaries may mislead clients into believing they are brokers when they are actually agents of underwriters. Other intermediaries may act as brokers during policy inception but switch to being underwriters' claims handlers during claims, leaving owners without the guidance they had expected to receive. Repackaging existing P&I cover to appear as an add-on can mislead clients and inflate costs. Look for large yacht insurance, and you’ll find all kinds of parties offering it. In fact, it’s only underwriters who provide cover. Everyone else is part of the distribution channel. The term ‘underwriter’ stems from the days when well-heeled individuals, happy to leverage their wealth as collateral, would sign underneath a description of the risk being insured. With some exceptions, you can’t buy cover from underwriters. They use agents to reach the market. Insurance brokers, by contrast, provide a service to those looking for insurance. Brokers act (or should be – they don’t always) in the insured’s interests, even though they are paid commission from underwriters. MARKET PRACTICES One particularly obnoxious practice is to infer that cover is being bought from a broker, whereas, in fact, that party – standing behind a well-marketed brand – is an underwriter’s agent. Another business model to be wary of is that the turncoat, where the intermediary acts as broker at the time of policy inception, but then acts as the underwriter’s claims handler when there’s a claim. The (legal) basis for this is often buried in the small print, but it’s of little help for the owner who, when needing to claim, is left without the guidance which might have been expected. Another unhelpful practice is to divide up and repackage cover so as to appear to add value. For example, third party liability insurance typically covers injury claims from guests – but this doesn’t prevent some from selling guest welfare insurance separately as an add-on. Relative to Hull & Machinery, P&I cover is relatively inexpensive and normally already provides owners with mandatory international cover. And – make no mistake – underwriters are there to turn a profit. They can, and will, challenge large claims, to a final and unappealable conclusion if necessary, in a legal process that can take years, with the insured incurring unrecoverable losses no matter the outcome. One trick is to pay smaller claims quickly and make a song-and-dance of doing so in their marketing materials, public relations and social media, giving the impression that all claims are handled in this way. THE UNDERWRITER Check carefully where the underwriter is based, and who’s regulating them. Should an underwriter become insolvent following a large claim, the owner would almost certainly be left high and dry. For this reason, underwriters based in the United Kingdom and European Union must maintain ‘solvency margins’, to ensure that their assets will cover their potential liabilities. Reinsurance provides further protection. Further afield, however, policyholders should consider just how much of a hit their underwriter could take. Given the expense of holding reserves, and with reinsurance typically accounting for a fair percentage of the premium, some underwriters could be tempted to cut corners. THE BROKER Given that they are paid on a commission basis, inherent potential conflicts of interest are tightly regulated in the UK by the Financial Conduct Authority (FCA). In particular, brokers must act honestly, fairly and in their clients' best interests – and communicate clearly, especially regarding fees and commission. Advice provided must be appropriate for the client and only suitable insurance, and level of cover, must be proposed. GENERAL DUTIES As well as regulatory duties, the law more generally requires brokers to exercise reasonable skill and care (with reference to what one would ordinarily expect from a member of that profession operating within the same market) – plus, there may be a specific contractual duty to source insurance of particular type or standard. OBTAINING COVER Brokers who hold themselves out as dealing or specialising in yacht insurance will owe the insured a duty of care to identify what insurance is needed. While not lawyers, they are expected to have a working knowledge of insurance law, be able to ask their client the right questions, and understand how any exclusion clauses may affect cover. They are under a duty of care to warn the insured of the duty to make a fair presentation to the underwriter, and the separate requirement to disclose material facts. Brokers should also indicate what sort of matters could be considered to be material and ask questions about facts that they know are material but the insured might not think to mention. They must also, when it comes to renewal, go through the same procedure that was carried out at the inception of the policy: they cannot just renew the policy and pick up their commission. While brokers must do everything reasonably possible in order to obtain or renew cover, there is no absolute obligation to do so. Brokers must act with reasonable speed, and obtain multiple quotes, if possible, to make certain that the insured pays no more than necessary. The cover which is obtained must be clear, suitable and meet the insured’s requirements – and has been underwritten by a suitable underwriter(s). ADVISING ON TERMS Crucially for owners of large, permanently-crewed yachts, which are subject to a myriad of regulations, brokers must draw their clients’ attention to any onerous or unusual terms or conditions, so that owners have the opportunity to ensure that they are able to comply with such requirements or, if possible, obtain alternative cover. CLAIMS HANDLING Generally, unless agreed otherwise, brokers must assist clients with making claims. As ever, the broker must act with due skill, care and diligence. Notably (these are issues commonly leading to disputes) the broker must ensure that time limits and notification requirements are complied with. Time limits can be very tight. Policies can also require, for example, a sworn proof of loss to be provided. A whole strategy must be in place for handling claims. OTHER INTERMEDIARIES Do not assume that non-specialist intermediaries such as yacht managers will add value. Some may simply extend chains of communication, increasing the risk of non-payment for non-disclosure of a material fact, while paying the manager’s commission will only increase premiums. Acting as an unregulated intermediary in the UK is a serious criminal offence, carrying a maximum two-year prison term and an unlimited fine for the individuals involved. You can quickly check whether anyone doing so is regulated by looking them up on the FCA's Financial Services Register . BE WARNED Always look beyond the slick websites, social media advertising and event sponsorships, and be clear about the role played about the party(ies) you’re dealing with. Seek written confirmation if you’re in any doubt. Also pay attention to where they’re located, who’s regulating them, and the law and jurisdiction applicable to the policy. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Types of Insurance Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Types of Insurance Commission or Kickback Commission or Kickback? 2 November 2013 Last revised minutes 3 Reading time As Members know, yachts aren’t run on shoestring budgets. And most of the money is spent not by them in person, but by their captains and other trusted third parties. In highly competitive marketplaces, there is an incentive to buy business with formal ‘commissions’, extravagant ‘thank you’s – or perhaps just a good old brown envelope. minutes 3 Reading time 2 November 2013 Last revised As Members know, yachts aren’t run on shoestring budgets. And most of the money is spent not by them in person, but by their captains and other trusted third parties. In highly competitive marketplaces, there is an incentive to buy business with formal ‘commissions’, extravagant ‘thank you’s – or perhaps just a good old brown envelope. The Bribery Act 2010 in the UK is considered one of the toughest anti-bribery laws globally, with similar principles found in the US Foreign Corrupt Practices Act. The Act applies extraterritorially, meaning that a crime can be committed even if the transaction occurs outside of the UK. There are four key offences under the Act: bribing, receiving a bribe, bribing a foreign public official, and failing to prevent bribery. Bribing involves offering or promising a financial or other advantage in exchange for improper performance of a function or activity, while receiving a bribe includes requesting or accepting such an advantage. Local practices should be disregarded when determining improperness, unless they are part of the written local law. Hospitality can be considered bribery if it is disproportionately generous, especially in industries focused on luxury. The offence of failing to prevent bribery applies to all commercial organizations, including companies and partnerships operating in the UK. Bribery crimes committed outside the UK can be investigated and prosecuted if there is a "close connection" to the UK, such as being a UK passport holder or ordinarily resident. The Serious Fraud Office (SFO) in the UK handles corruption allegations involving UK nationals or incorporated bodies overseas, and there is international cooperation in investigating and prosecuting bribery and corruption. The United States' Foreign Corrupt Practices Act allows payments to foreign public officials to expedite their duties, even if it violates local laws. Civil actions can also be taken against individuals involved in bribery, and a criminal conviction serves as proof of civil liability. Hospitality can be considered bribery if it is disproportionately generous, especially in industries focused on luxury. The offence of failing to prevent bribery applies to all commercial organizations, including companies and partnerships operating in the UK. Bribery crimes committed outside the UK can be investigated and prosecuted if there is a "close connection" to the UK, such as being a UK passport holder or ordinarily resident. The Serious Fraud Office (SFO) in the UK handles corruption allegations involving UK nationals or incorporated bodies overseas, and there is international cooperation in investigating and prosecuting bribery and corruption. The United States' Foreign Corrupt Practices Act allows payments to foreign public officials to expedite their duties, even if it violates local laws. Civil actions can also be taken against individuals involved in bribery, and a criminal conviction serves as proof of civil liability. The Bribery Act 2010 in the UK is considered one of the toughest anti-bribery laws globally, with similar principles found in the US Foreign Corrupt Practices Act. The Act applies extraterritorially, meaning that a crime can be committed even if the transaction occurs outside of the UK. There are four key offences under the Act: bribing, receiving a bribe, bribing a foreign public official, and failing to prevent bribery. Bribing involves offering or promising a financial or other advantage in exchange for improper performance of a function or activity, while receiving a bribe includes requesting or accepting such an advantage. Local practices should be disregarded when determining improperness, unless they are part of the written local law. In the United Kingdom, giving incentives and rewards may be a criminal offence – or not – according to whether it falls foul of the Bribery Act 2010. This law is widely recognised as the toughest of its kind in the world, but its principles are much the same in the rest of the world, including the United States’ Foreign Corrupt Practices Act. Significantly, under the Bribery Act, a crime may be committed even if the transaction takes place outside of the UK. This was already the effect of a small and little-known piece of anti-terror legislation introduced in 2001, but the globe-trotting aspects of the 2010 Act are clearer and more coherent. COMMISSIONS To be clear, a lot of commission arrangements are perfectly legal – but it’s easy to overstep the mark, and there can be a false assumption that formality means legality. The penalties for getting it wrong include an unusually long prison sentence and unlimited fines. OFFENCES There are four key offences: Bribing Receiving a bribe Bribing a foreign public official, and Failing to prevent bribery Bribing occurs when a person offers, gives, or promises to give, a financial or other advantage to someone else in exchange for ‘improperly’ performing a function or activity. Receiving a bribe is defined as requesting, accepting or agreeing to accept such an advantage. An activity will be ‘improperly’ performed when any expectation of good faith or impartiality has been breached, or when the function has been performed in a way not expected of a person in a position of trust. Helpful, this now clarifies what is expected when a commission is an overt element of any business model – even where this may lead to a reduced commission. GREASING PALMS So what about those instances where greasing palms to get things to happen is just the way things work? The Act states that local practises should be disregarded when deciding on improperness – unless they form part of the written local law. While the UK authorities are alive to the necessity of ‘facilitation payments’, official tolerance relates only to small payments, made by companies with the right bribery policies and procedures in place. HOSPITALITY Hospitality can constitute bribery if it is disproportionately generous. In an industry devoted to luxury, it can be easy for crewmembers to confuse the lifestyle of their wealthy employers with their own – and not think twice about receiving hospitality which, seen from afar, is completely over the top. PREVENTION The offence of failing to prevent bribery applies only to ‘commercial organisations’, but this includes any company or partnership carrying on any business in the UK. Conceivably, this could yacht owning companies managed from the UK. With regard to the first three offences, while crimes committed outside the UK (except on board UK-flagged vessels) are normally beyond the jurisdiction of the courts, this is not the case with bribery. Given its seriousness, it’s one of a unique group of crimes (along with terrorism and war crimes) that the authorities can and will investigate worldwide. All that’s needed is a ‘close connection’ with the UK – including just being a passport-holder or ordinarily resident. INVESTIGATION The UK’s Serious Fraud Office (SFO) acts as the focal point for any allegations of corruption by UK nationals or incorporated bodies overseas, while the City of London Police has an Overseas Anti-Corruption Unit with the specific function of supporting overseas corruption investigations undertaken by the SFO. The idea that prosecuting authorities have tentacles that can reach worldwide is not limited to the UK. As with many areas of the criminal law, most countries’ laws are broadly similar, and both European Union and United Nations conventions provide for international co-operation with regard to both the investigation and prosecution of bribery and corruption. UNITED STATES While the reach of law enforcers in the United States is equally global in nature, however, a slight difference can be seen in their approach, as the Foreign Corrupt Practices Act of 1977 allows payments to be made to foreign public officials to facilitate or expedite their performance of the duties they’re already bound to perform, even if this still violates local laws. So making a payment to an official to speed up a visa application, for example, would be acceptable. CIVIL ACTION In addition to the threat of prosecution, an owner may sue an employee or other agent for any loss – and, while a criminal conviction is not necessary for a civil action, it would be undeniable proof of civil liability. The owner may also be able to withdraw from the contract agreed to by the agent, whether or not he or she brings an action against the agent, and this option may be useful if, for example, the owner has managed to find a better deal elsewhere. CONCLUSION While it might seem that the authorities are coming down rather hard on corruption, it’s not because they are trying to spearhead some kind of moral crusade but simply because corruption distorts rational product and service choices, which can ultimately prevent the cream of the industry from rising to the top, distort markets and threaten economic growth. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Oh Referee! Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Oh Referee! Choose a Flag Choose A Flag 10 May 2023 Last revised minutes 4 Reading time The first question your naval architect is likely to ask is where your yacht will be registered. That registry’s regulations will do much to determine the design of your yacht. But, beyond that, the registry provides the legal framework for crew employment, and may determine how easily insurance and finance can be obtained. So research this in-depth rather than accepting your architect’s suggestion. minutes 4 Reading time 10 May 2023 Last revised The first question your naval architect is likely to ask is where your yacht will be registered. That registry’s regulations will do much to determine the design of your yacht. But, beyond that, the registry provides the legal framework for crew employment, and may determine how easily insurance and finance can be obtained. So research this in-depth rather than accepting your architect’s suggestion. Registering a yacht in a country's ship registry determines its nationality, owner's responsibilities, and compliance with laws and regulations. The choice of registry impacts insurance availability, financing options, chartering regulations, taxation requirements, scrutiny from port officials, and service provided. Unusual flags may reduce insurance options and increase premiums. Lenders require high maintenance and safety standards and confidence in the country's rule of law for financing agreements. Chartering requires compliance with international regulations, and certain registries have simplified safety codes for cost-effective compliance. Cabotage rules may require local registration for commercial operations in specific jurisdictions. Temporary Admission allows tax avoidance in the EU for non-commercial use, but specific advice is necessary. Scrutiny by port officials can cause delays and inspections may be prioritized based on flag categorization. Helpful registries with easily accessible regulations and guidance are preferred. Local agents and service providers can assist with overcoming time zone difficulties, but may come with additional costs and risks. Cabotage rules may require local registration for commercial operations in specific jurisdictions. Temporary Admission allows tax avoidance in the EU for non-commercial use, but specific advice is necessary. Scrutiny by port officials can cause delays and inspections may be prioritized based on flag categorization. Helpful registries with easily accessible regulations and guidance are preferred. Local agents and service providers can assist with overcoming time zone difficulties, but may come with additional costs and risks. Registering a yacht in a country's ship registry determines its nationality, owner's responsibilities, and compliance with laws and regulations. The choice of registry impacts insurance availability, financing options, chartering regulations, taxation requirements, scrutiny from port officials, and service provided. Unusual flags may reduce insurance options and increase premiums. Lenders require high maintenance and safety standards and confidence in the country's rule of law for financing agreements. Chartering requires compliance with international regulations, and certain registries have simplified safety codes for cost-effective compliance. With some limited exceptions, all yachts have to be registered in a country’s ship registry, and fly that nation’s maritime flag, known as an ensign. That registry is often know as the Flag State, especially to distinguish it from the Port State – the latter being the country where a yacht is located when not in international waters. Registration is about much more than just choosing a flag to wear on the stern: it’s what gives a yacht nationality and frames owner’s, manager’s and crewmembers’ responsibilities. The choice of registry affects the laws and regulations the owner must adhere to, the ready availability of insurance and finance, whether certain taxes must be paid and the attention port officials may pay the vessel. Registration can also prove ownership and is a requirement for international cruising. Notably, there are registries entry into which proves nothing in terms of title. Examples of these include Delaware and the United Kingdom Part III Small Ships Register. Fees and expenses for registration are relatively small, but choosing the wrong registry can be a very costly error. Making that selection is a complicated process requiring independent, expert advice. A trap for the unwary is the recommendation of a certain flag with which a naval architect, project manager or other adviser happens to be familiar – without due consideration of all the owner’s particular circumstances and wishes. SIX FLAGGING FACTORS While the registries themselves are state agencies, many popular ones are managed on a commercial basis and – to an extent – compete with each other. This is a good thing since levels of service must be raised above that which one might otherwise expect from the government departments of certain countries. However, there can also be an incentive to be overly flexible when it comes to the drafting and enforcement of safety regulations. To an extent, flag choice can come down to a process of elimination. Emotions can be a factor but it’s best to let head rule heart. Here are the six main factors you should consider: Insurance Finance Chartering Taxation Scrutiny Service INSURANCE All yachts should be insured and third party cover is normally mandatory. Underwriters will want to understand the risk they’re agreeing to cover, and key to this will be the flag. An unusual flag will not make insurance impossible to find, but it will reduce the number of underwriters with an appetite to write such business thereby pushing up premiums. FINANCE Some yachts are financed, by means of a lease or loan , as a means to free-up investment capital for owners’ businesses. As with insurers, lenders will be taking a financial and legal interest in the vessel, and will want to make sure that the owner abides by high maintenance and safety standards. Lenders will also need to have confidence in the rule of law in the country of registration itself, since the mortgages will be entered in the registry. CHARTERING For the protection of paying guests, chartering requires adherence to a wide range of international regulations. Fortunately, certain registries have created safety codes to simplify compliance which reduces cost and administration. Certification by a classification society is normally required above a certain size, although this size varies. Some owners may regard classification as expensive and unnecessary (and it may not be possible for some vessels not originally built to class rules) while others choose this route for peace of mind regardless of charter activity. Chartering isn’t possible at all with some flags when the vessel is over a certain size, for example Jersey and Guernsey. The existence of any cabotage rules should also be considered. These are protectionist measures requiring vessels operating commercially to be registered locally if not engaged in international voyages. The best example of this is the United States. If the plan was to charter in US waters there would no other real choice but to fly the Stars and Stripes. TAXATION If not being used commercially, it is possible – where the beneficial owner is not tax resident in or connected with the European Union – to avoid the payment of Value Added Tax and customs in the EU on the yacht itself, for up to 18 months, through Temporary Admission. However, this requires registration outside the EU amongst other conditions. It also requires detailed, specific advice to ensure that the correct information is given and at the right time. VAT can be up to 25% and charged on the hull value. Port officials may detain a vessel pending payment (and any fines and/or interest). SCRUTINY Any yacht can be boarded, at any time, by a port official whose job it is to make sure that all the paperwork is in order – which can be invasive and can cause unexpected delays. As their time and resources are limited, inspections are often prioritised according to flag. The Paris Memorandum of Understanding, for example, is a group of 27 European and North Atlantic nations which inspect safety, security and environmental standards of more than 18,000 vessels each year. Other similar such groups exist worldwide. Information is shared between members, and flags categorised into White, Grey and Black lists. White List categorisation should mean fewer inspections but does not lead to immunity altogether. SERVICE If a registry isn’t helpful and doesn’t make its regulations and guidance easily available, in a language which managers, captains and crew can understand, then as a matter of common sense it can be ruled-out. Local agents and corporate service providers can be used to overcome time zone difficulties, but at a cost and with the risk of misunderstandings and further delays. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Keep it Classy Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Keep it Classy Limiting Liability Limiting Liability 26 February 2011 Last revised minutes 5 Reading time Some liabilities, such as those arising from collisions or the injury of a guest or crew member, are obvious. Other liabilities are less obvious: a large wash made by excessive speed can damage both fixed and floating objects some distance away. Occasionally, it may be possible to limit liability just by spelling this out in a well-drafted charter agreement or employment contract. Often, however, there will be no such contractual relationship with an aggrieved party. minutes 5 Reading time 26 February 2011 Last revised Some liabilities, such as those arising from collisions or the injury of a guest or crew member, are obvious. Other liabilities are less obvious: a large wash made by excessive speed can damage both fixed and floating objects some distance away. Occasionally, it may be possible to limit liability just by spelling this out in a well-drafted charter agreement or employment contract. Often, however, there will be no such contractual relationship with an aggrieved party. Yacht owners who are considered the legal owners, rather than just beneficial owners, can be held personally liable for incidents involving their yacht, putting their other assets at risk. Effective insurance, known as Protection & Indemnity (P&I) insurance, is crucial to protect owners against liabilities to third parties. International conventions allow owners to limit their liability, which provides a maximum payout for insurers and encourages trade. The limitation figure for liability does not differentiate between trading ships and yachts, even though yachts are often worth more. International conventions have specific requirements and standards of behavior that must be met to qualify for limitation. The limitation amount is determined based on the tonnage of the yacht in most countries, except for Italy, the United States, and parts of South America. The 1957 and 1976 Limitation Conventions have subtle differences, such as the circumstances under which the right to limit can be lost. Besides the owner, charterers, managers, captains, crew, employees, salvors, and insurers may also have the right to limit liability under the conventions. Owners can set up a fund with a court or competent authority, depositing an amount up to the limitation, to prevent the yacht from being detained in the future and protect other assets. Jurisdictional issues can arise, and different jurisdictions may apply different conventions and rules, making it crucial to seek legal advice promptly and establish jurisdiction in a favorable location with a lower limitation figure. The limitation amount is determined based on the tonnage of the yacht in most countries, except for Italy, the United States, and parts of South America. The 1957 and 1976 Limitation Conventions have subtle differences, such as the circumstances under which the right to limit can be lost. Besides the owner, charterers, managers, captains, crew, employees, salvors, and insurers may also have the right to limit liability under the conventions. Owners can set up a fund with a court or competent authority, depositing an amount up to the limitation, to prevent the yacht from being detained in the future and protect other assets. Jurisdictional issues can arise, and different jurisdictions may apply different conventions and rules, making it crucial to seek legal advice promptly and establish jurisdiction in a favorable location with a lower limitation figure. Yacht owners who are considered the legal owners, rather than just beneficial owners, can be held personally liable for incidents involving their yacht, putting their other assets at risk. Effective insurance, known as Protection & Indemnity (P&I) insurance, is crucial to protect owners against liabilities to third parties. International conventions allow owners to limit their liability, which provides a maximum payout for insurers and encourages trade. The limitation figure for liability does not differentiate between trading ships and yachts, even though yachts are often worth more. International conventions have specific requirements and standards of behavior that must be met to qualify for limitation. Even though yachts tend to be the only asset of an offshore owning company, it is possible, after a serious incident, for the individual ‘beneficial’ owner to be seen as the legal owner. This means that all the beneficial owner’s other assets are at risk. The need for effective insurance against liabilities to third parties, often known as Protection & Indemnity (‘P&I’) insurance, is therefore all the more important. Fortunately, throughout much of the world, the law gives owners the opportunity to restrict their liability. This is for two reasons. Firstly, insurers are more comfortable giving cover if they know what their maximum pay-out could be. Secondly, it is normally government policy to encourage trade. The owners of trading ships are more likely to put to sea if they know what their maximum liability could be. As an English judge recently put it, a ship owner might be prepared to lose his shirt, but not his entire wardrobe. As far as limitation is concerned, the law does not distinguish between trading ships and yachts, and, even though yachts are usually worth much more than similar-sized trading ships, the limitation figure will still be the same. CONVENTIONS But with the appropriate insurance in place, why should the owner need to even think about limitation? The answer is that the international conventions providing the limitation require certain standards of behaviour to be met before granting this invaluable right. That way, it is hoped, the sea is made a safer place for everyone. To understand how the opportunity to limit can slip through the owner’s fingers, it is necessary to look a little more closely at the international rules. It used to be that an owner could give up his ship to a claimant and walk away. As the ship would have been the beneficial owner’s largest asset, this was as much as a claimant could sensibly hope for anyway. This principal survives in Italy, the United States and parts of South America, but in most other countries the tonnage of the yacht will determine the owner’s limit in purely financial terms. A few nations still have no limitation regime whatsoever. EXAMPLE For example, a 35-metre yacht, with a gross tonnage of 120, negligently rams a cargo ship at night. Neither sinks, although the ship requires repairs costing £500,000. A further £500,000 of cargo is damaged, and the time spent carrying out repairs costs the owner another £500,000 in lost business. The yacht owner’s total liability in the UK would be just £650,000 approximately, not £1,500,000. The exact figure is determined using a basket of major currencies, and therefore changes daily. Most countries are party to either the 1957 or 1976 Limitation Conventions. There are subtle but vital differences between the two. The 1957 Convention contains a lower limitation figure, but no limitation is allowed where an incident was the owner’s fault or was the result of something the owner knew about. The 1976 Convention sets a higher figure, but the right to limit will only be lost where the owner did (or failed to do) something with the actual intention of causing loss, or not caring whether or not loss will be caused. Whether or not ‘owner’ here refers to the beneficial owner who chooses to skipper his own yacht, will depend on how transparent the owning company will be to the courts concerned. CHARTERER & MANAGER Aside from the owner, the 1957 Convention allows a charterer or manager, and the captain, crew and any other employees, to limit liability. The 1976 Convention adds salvors and insurers to that list. Broadly, both Conventions limit claims for loss of life or personal injury to any person carried on board, loss of or damage to property, liabilities for dealing with a wrecked or abandoned yacht, and the infringement of any non-contractual rights. The Convention limits do not apply to payments to salvors, or claims by the captain, crew or any of the owner’s employees where the law, or the employment contact itself, does not limit liability. Each Convention has lower limits for property claims than for injury or loss of life. FUND Under the Conventions, where the owner could benefit from limitation, a fund can be set up with a court, or other competent authority. The owner can then make a deposit or present a guarantee of no more than the limitation amount. The setting up of the fund is not a prerequisite to limitation, but will help prevent the yacht being detained in future over the same incident, which would require the security to be provided anyway prior to release, seriously disrupting any charter. The owner’s other assets are also placed out of the reach. This is particularly important where a court considers the owner to mean the beneficial owner. Where the yacht has been detained as security for a claim before a fund is established, it will have to be released. JURISDICTION Of course, any Convention will only be as effective as the law implementing it allows. Details, even the limits themselves and those entitled to them, can vary, as countries embroider the Conventions with their own unique thinking. A claim may be subject to a number of possible jurisdictions, each applying different Conventions in different ways. What’s more, each jurisdiction applies it’s own rules in deciding whether or not their courts can hear a claim, and if so whether their own law should apply. Jurisdiction can be founded by an owner, by bringing a pre-emptive action, in a jurisdiction with a favourably low limitation. Otherwise, there is a risk that an aggrieved party may arrest the yacht in a less favourable jurisdiction, presenting a vague case at that stage, leading to the case being later tried in those courts. Jurisdictional arguments are highly complex and an adventure playground for unscrupulous lawyers looking to rack up large bills! Lawyers have also been known to contrive to keep the business in their own courts, even where this is not in the owner’s best interest. INSURANCE Insurance policies normally state that where the assured would have been entitled to limit liability, but failed, unreasonably, to take the necessary steps to do so, the insurers’ liability will not exceed what would have been the limitation figure. This implies that there is an obligation to ensure, if possible, that the claim is subject to a jurisdiction with a relatively low limitation figure. What’s more, the burden of proving that any failure to limit is not unreasonable often rests with the assured. The assured is also normally under a separate obligation to obtain the necessary legal advice and assistance, as and when required. ADVICE The important point is for owners (or their managers) to seek advice promptly in the event of an incident, in order for the jurisdiction to be established where the limitation is lowest. At the outset, a trusted lawyer in a reputable jurisdiction must be instructed, with the guidance and consent of the insurer, in order to work out a strategy for minimising liability. Other local lawyers in the most favourable jurisdiction can then be appointed. The insurers will have a network of reliable lawyers covering most maritime jurisdictions. Liaising with insurers, from the moment an incident occurs, will bring the insurers’ considerable expertise to bear and prevent the insurer from later claiming that the assured failed to do everything possible to limit liability. As well as being a source of unrivalled pleasure and prestige, yacht ownership also carries with it certain responsibilities. As long as owners appreciate the importance of taking timely advice, from a reputable source, and of liaising closely with their insurers, they can rest assured that they have done everything possible to limit any liability. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Piracy & Protection Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Piracy & Protection Staying Covered Staying Covered 10 May 2023 Last revised minutes 6 Reading time Compliance with the more obscure flag state regulations and local laws can sometimes seem like unnecessary hassle and expense. Yet if you, as owner, are to remain protected in the event of an accident, investing in detailed compliance may be money well spent. You also need to keep lines of communication with your insurance broker open. minutes 6 Reading time 10 May 2023 Last revised Compliance with the more obscure flag state regulations and local laws can sometimes seem like unnecessary hassle and expense. Yet if you, as owner, are to remain protected in the event of an accident, investing in detailed compliance may be money well spent. You also need to keep lines of communication with your insurance broker open. Warranties are requirements that must be fulfilled by the policyholder to manage risk in insurance situations. Breach of warranty no longer automatically avoids all liability for underwriters since 2016. Underwriters remain liable for losses occurring after a breach of warranty if it can be remedied. If a loss occurs while the insured is in breach of warranty and the breach increases the risk, underwriters can deny liability. Breach of warranty regarding past facts may permanently suspend the underwriter's liability. Identifying warranties in a policy is crucial as they can be expressed or implied by law. Popular policy forms include warranties related to the purpose of use, navigation limits, vessel control, etc. The warranty of legality is an important implied warranty that covers lawful adventures and lawful usage of the yacht. Seaworthiness may not be explicitly required in policies, but it can impact coverage and claims. Sensible precautions, such as using approved charter agreements and verifying crew qualifications, are recommended to ensure coverage and compliance with laws and regulations. Identifying warranties in a policy is crucial as they can be expressed or implied by law. Popular policy forms include warranties related to the purpose of use, navigation limits, vessel control, etc. The warranty of legality is an important implied warranty that covers lawful adventures and lawful usage of the yacht. Seaworthiness may not be explicitly required in policies, but it can impact coverage and claims. Sensible precautions, such as using approved charter agreements and verifying crew qualifications, are recommended to ensure coverage and compliance with laws and regulations. Warranties are requirements that must be fulfilled by the policyholder to manage risk in insurance situations. Breach of warranty no longer automatically avoids all liability for underwriters since 2016. Underwriters remain liable for losses occurring after a breach of warranty if it can be remedied. If a loss occurs while the insured is in breach of warranty and the breach increases the risk, underwriters can deny liability. Breach of warranty regarding past facts may permanently suspend the underwriter's liability. Warranties serve to manage risk in various situations. They are requirements that need to be fulfilled by the policyholder. Warranties can be promissory, where the policyholder commits to a specific action or condition, or they can affirm or deny the existence of certain facts. Simply labelling a term as a warranty is insufficient, and the courts will consider the parties' intentions as well. They can be set out in the policy, or are implied by law – for example that the yacht will be used for lawful purposes, and operated in a lawful manner. BREACHES OF WARRANTY Since 2016, the old ‘basis of the contract’ clauses have been abolished. This means that underwriters cannot automatically avoid all liability if an express warranty is breached. The underwriter is liable for losses that occurred before a breach of warranty – as was always the case. But now, if the breach can be remedied, the underwriter remains liable for losses that happen after the breach has been fixed. If a loss occurs while the insured is in breach of a warranty, and if (crucially) the breach actually increased the risk of the actual loss, underwriters can still deny liability. Once (if) the insured rectifies the breach before the loss happens, the insured will again be back on-cover. After a breach of a warranty, the insured is still responsible for paying the premium. However, underwriters may be cautious when demanding payment to avoid waiving their right to rely on the breach. If the breach cannot be rectified, such as a breach of warranty regarding past facts (e.g., previous insurance claims or losses), the liability of the underwriter remains permanently suspended, and the insured will not have had any cover. RECOGNISING WARRANTIES So, with such serious consequences flowing from a breach of warranty, it is vital to be able to identify what warranties apply to a policy. The trouble is that warranties can be expressed in the contract, but not actually described as a warranty. More worryingly, they can be implied automatically by law, without even having to be agreed upon. Thankfully, express warranties must at least be included in the policy, or must at least be contained in some document referred to in the policy. So in the event of a claim it wouldn’t be good enough for an underwriter to simply dust-off some previously unknown ‘standard’ terms and refuse to pay. They are normally added as a deliberate and obvious fundamental stipulation of the contract. While implied warranties cannot be found in policies, they are easy to ascertain from the UK’s Marine Insurance Act 1906, and we’ll consider the more important ones below. While it may seem narrow-minded just to look at English law, it’s worth considering that most of the world’s risks are insured on the London market, and most countries model their own insurance laws on this Act – sometimes word for word. Whereas express warranties tend to be specific, implied warranties can be overarching and vague; so there can be overlaps between them. But an express warranty will not exclude an implied warranty on a related matter, unless directly inconsistent with it. EXPRESS WARRANTIES The two most widely used policy forms, the Institute Yacht Clauses and the American Yacht Form, contain warranties that the yacht is only to be used for ‘private pleasure purposes’ and is not to be chartered unless the underwriters specifically agree. The Institute Yacht Clauses also frame agreed navigation limits and the vessel’s maximum speed as warranties. Other popular forms often demand that when the yacht is underway a competent person must be on board and in control of the vessel. In a 2006 English case, concerning a claim following a serious fire on board the motor yacht Newfoundland Explorer while she was laid up afloat in Fort Lauderdale, the court held that the phrase ‘warranted vessel fully crewed at all times’ meant that the owner had to keep at least one crew member on board the yacht 24 hours a day, subject to (i) emergencies rendering crew departure necessary, or (ii) necessary temporary departures for the purposes of performing crewing duties or related activities such as adjusting mooring lines. It wasn’t good enough to employ a captain who lived ashore 30 minutes away. History was repeated in 2008 with a fire on board another vessel, Resolute, whose crew lived nearby – and the court in that case came to the same conclusion. WARRANTY OF LEGALITY Arguably the most important warranty is not expressed, but implied. Under the UK’s Marine Insurance Act 1906 (and in the laws of many other nations) there is an implied warranty that: The ‘adventure’ (i.e. a charter or a period of use by the owner and/or crew) will be lawful; and The yacht will be used in a lawful manner – as far as the insured can control the matter. With regard to legality of the adventure, at one end of the spectrum a yacht will clearly not be covered where the owner uses it for smuggling. Problems arise where the owner has no knowledge of doing anything illegal. Illegality may stem from local law as well as the yacht’s flag state law: a yacht chartering in without a local charter licence may not be covered. One would also want to ensure that the complex US security regulations are complied with when entering their waters. As for the second part – using the yacht in a lawful manner – this is only an issue as far the owner can control it. Compliance with safety-related regulations, such as the International Safety Management (ISM) Code or the Red Ensign Group Yacht Code Large Yacht will be a prerequisite to the underwriter paying related claims. So important is the warranty of legality that breaches of it cannot be waived by a kind underwriter, neither can the parties agree to overlook it. The warranty of legality has been used to avoid payment even where the crew failed to keep a proper watch – as this was in itself a breach of international collision regulations. In one landmark case, a yard was also denied cover where fire destroyed yachts in the yard, but where the yard itself did not conform to municipal byelaws. SEAWORTHINESS As surprising as it may seem, where a policy is for a period of time (as nearly all are) rather than for a specific passage, there is no implicit requirement in law for your yacht to be maintained in a seaworthy state. While some policies overcome this by expressly obliging the owner to maintain the yacht in a seaworthy condition, some standard forms don’t. Where there’s no stated obligation to do so, the underwriter will not be liable for any losses arising from unseaworthiness if the yacht actually puts to sea in that state with the knowledge of the insured. Where, as is normally the case, the legal owner (and therefore the named insured) is an offshore company, perhaps held in trust, identifying the individual(s) with such knowledge is difficult. The managers are an obvious starting point. Whilst it is for the underwriters to prove such knowledge, not for the insured to disprove, a review of the documents and correspondence held by the ISM Code ‘designated person’ could prove fatal to the chances of a pay-out. Being in a seaworthy condition means just that: falling short, but nevertheless making every effort, will not do. Even if a policy does not insist on seaworthiness, this is likely to be examined by the underwriter in any event after a claim, as any material non-disclosure would still provide a separate route for invalidating the claim. Many flag states, in particular within the Red Ensign group, have technical Codes of Practice that apply specifically to large yachts and those which are chartered. These provide objective measures of unseaworthiness, but, whilst helpful, should not be considered as providing a complete description of what constitutes a seaworthy yacht. SENSIBLE PRECAUTIONS If you’re chartering your yacht out, underwriters may insist on the use of a charter agreement that has been specifically approved by them, or is in a standard industry format, such as that published by MYBA . Likewise, if you’re going to race your sailing yacht, you may net to provide advance notification. However you use your yacht, be sure to get written confirmation of the ongoing information needed by underwriters – and provide this clearly, verifiable and in good time. It's also vital to check that your yacht is operating in accordance with flag and port state laws, and that you have the paperwork to provide this. Check, also, that your crew have the qualifications they claim they have: there are various third parties which provide this standalone service. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Making a Claim Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Making a Claim Making a Claim Making A Claim 18 May 2023 Last revised minutes 4 Reading time It’s important to understand the claims process, in advance of an incident, to make sure that underwriters have no excuses when it comes to the crunch. If you’re an owner reading this because your yacht has just been involved in an incident, then you should contact us right away to make sure that you’re taking the appropriate advice. minutes 4 Reading time 18 May 2023 Last revised It’s important to understand the claims process, in advance of an incident, to make sure that underwriters have no excuses when it comes to the crunch. If you’re an owner reading this because your yacht has just been involved in an incident, then you should contact us right away to make sure that you’re taking the appropriate advice. You must notify the underwriter, through your broker if your're using one, of a loss - and provide evidence within a specified time frame or (if none) a reasonable period. You should take reasonable steps to minimize the loss in the event of an incident. You are responsible for proving the amount and scope of the loss and that it was caused by a covered peril. Both you and the underwriter have obligations of cooperation during the claims process. Underwriters must pay valid claims within a reasonable timeframe, and delays may result in additional damages payable to you. Subrogation allows the underwriter to recover money paid to the insured from the third party responsible for the loss. Settlements reached with the underwriter can be invalidated if fraudulent misrepresentation by the insured is later discovered. Double insurance can occur when both the yacht and its tender are insured separately, requiring coordination between insurers. Independent advice may be necessary, as your interests anf those of the underwriter are not aligned. You must not jeopardize the underwriter's subrogation rights by settling or abandoning a claim against a third party. Subrogation allows the underwriter to recover money paid to the insured from the third party responsible for the loss. Settlements reached with the underwriter can be invalidated if fraudulent misrepresentation by the insured is later discovered. Double insurance can occur when both the yacht and its tender are insured separately, requiring coordination between insurers. Independent advice may be necessary, as your interests anf those of the underwriter are not aligned. You must not jeopardize the underwriter's subrogation rights by settling or abandoning a claim against a third party. You must notify the underwriter, through your broker if your're using one, of a loss - and provide evidence within a specified time frame or (if none) a reasonable period. You should take reasonable steps to minimize the loss in the event of an incident. You are responsible for proving the amount and scope of the loss and that it was caused by a covered peril. Both you and the underwriter have obligations of cooperation during the claims process. Underwriters must pay valid claims within a reasonable timeframe, and delays may result in additional damages payable to you. In order to receive payment or obtain the benefit(s) specified in the contract, the insured must inform the underwriter that it has experienced a loss that it believes is covered by the contract, and provide evidence demonstrating that their claim is indeed covered by the contract. A specific claims procedure may be set out in the contract. Written notice may be required – which may need to be in a particular form. Notice must be given within any specified time frame, or otherwise within a reasonable period. If the notice provision is considered a condition precedent, the underwriter may be able to deny liability. CAUSATION The insured is normally responsible for proving, on a balance of probabilities: The amount and scope of their loss; and That their loss was ‘proximately caused’ by a peril covered by the policy, unless the policy states that the loss may be ‘directly or indirectly’ caused by such a peril (or similar). Quite often, losses involve a chain of events, one or more of which are excluded from coverage. Generally, if there are two proximate causes of loss, one covered and one not covered, the underwriter will be on the hook for that loss. But if the insured cannot establish which peril (covered or not covered) caused the loss, or if none of the causes appear inherently likely, there will be no coverage. DUTY TO CO-OPERATE The insurance contract normally obligations of cooperation for both the insured and the underwriter when a claim is filed. In the case of a liability policy, the underwriter is generally required to negotiate with third party claimants in good faith, taking into account the insured's best interests – and, if necessary, assume responsibility for defending against a third party claim. The insured, meanwhile, must not admit liability without the underwriter's consent – and must obtain the underwriter's approval before settling a third party claim. PAYING CLAIMS Underwriters must pay valid claims within a ‘reasonable’ timeframe. If there is a delay or failure to pay, the insured can sue for damages for any additional losses suffered. It’s up to the insured to establish that the payment was only made after an unreasonable delay. Where the underwriter has reasonable grounds to dispute the claim, the manner in which it handles the claim can be a relevant factor in determining whether the implied term of timely payment was breached. SUBROGATION When an underwriter pays out money to an insured under an indemnity policy, such as Hull & Machinery , the rules of ‘subrogation’ allow the underwriter to recover all or part of that money from the third party who caused the loss. Subrogation means that the underwriter can step into the insured's shoes and pursue the third party itself, seeking to recover what it’s just paid out. The underwriter can not only claim the rights of the insured but also any benefits awarded by a court, such as interest on judgment debts and costs. The right of subrogation can be explicitly stated in the insurance contract, but it is also a pre-existing legal right. As set out above, it is essential for the insured not to jeopardize the underwriter's subrogation rights by settling or abandoning the claim against the third party, as this could lead to the underwriter seeking damages from the insured. FRAUDULENT CLAIMS Underwriters are always alive to the possibility of fraud. They’re seen it all before. Even where a settlement has been reached between underwriter and insured, this can be invalidated where it’s later shown that there was a fraudulent misrepresentation by the insured. Underwriters have the option to terminate the insurance contract from the date of the fraudulent act - without refunding any premiums. This means that the underwriter can refuse liability for genuine losses or claims made after the fraudulent act. Claims made before the fraudulent act will be unaffected. DOUBLE INSURANCE Recent years have seen a rise the use of support yachts, carrying large tenders and helicopters. If close attention isn’t paid to the policies of both yacht and tender (itself often a large motor yacht), it is possible to end up in a situation where the tender is ‘double insured’. In the event of a loss, the insured generally has the freedom to choose under which policy to claim payment. However, this is subject to the terms and conditions of each insurance contract, and some policies may prevent the making of a claim if there is other insurance covering the same risk. Double insurance does not provide additional protection to the insured. Instead, it may complicate the claims process and require coordination between multiple insurers. If an underwriter pays out a claim under an insurance policy, it may have the right to seek a contribution from another underwriter that provided coverage for the same loss. CONCLUSION Should any incident ever arise, potentially involving damage to the yacht or liability to a third party, sitting back is not an option. The insured is usually under an express obligation to notify the underwriter, and do everything reasonable to minimise the loss. The advice of the underwriter or broker, at the initial stages of an incident, is therefore vital, but the interests of underwriter and insured not being one and the same, and it will be prudent for you to take independent advice, right away. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Who’s Who Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Who’s Who Engaging a Manager Engaging a Manager 18 May 2009 Last revised minutes 4 Reading time All large yachts are now subject to a considerable array of regulations, imposed both by the country whose flag they fly, and by the jurisdiction into which they sail. Thankfully, whilst complicated, most of these regulations have been agreed upon internationally. By contrast, there are no uniform principles governing yacht management. The intricate relationship between owner and manager must be set out in detail in the management agreement itself. minutes 4 Reading time 18 May 2009 Last revised All large yachts are now subject to a considerable array of regulations, imposed both by the country whose flag they fly, and by the jurisdiction into which they sail. Thankfully, whilst complicated, most of these regulations have been agreed upon internationally. By contrast, there are no uniform principles governing yacht management. The intricate relationship between owner and manager must be set out in detail in the management agreement itself. Good quality yacht management is vital, as owners can face fines, vessel detention, and criminal liability for breaching safety regulations. Sanctions can bypass corporate and trustee owning structures by being enforceable against the yacht itself. Managers should ideally agree to indemnify owners against third-party claims arising from their actions or inaction. Owners should ensure that managers have sufficient indemnity insurance to cover potential large claims. The Convention on Limitation of Liability for Maritime Claims may limit managers' financial liability in some cases. Managers may seek protection by being named as joint-assured or co-assured on the owner's insurance policy. Some managers may handle insurance, claims, and disputes for owners, requiring a detailed understanding of insurance law. Owners should ensure that managers act as "principals" rather than "agents" in contractual matters. Managers may outsource certain tasks, and the management contract should specify the tasks they have authority to sub-contract. The International Safety Management Code applies to commercially-operated yachts over 500 GT, and managers should assume responsibility under it. Managers may seek protection by being named as joint-assured or co-assured on the owner's insurance policy. Some managers may handle insurance, claims, and disputes for owners, requiring a detailed understanding of insurance law. Owners should ensure that managers act as "principals" rather than "agents" in contractual matters. Managers may outsource certain tasks, and the management contract should specify the tasks they have authority to sub-contract. The International Safety Management Code applies to commercially-operated yachts over 500 GT, and managers should assume responsibility under it. Good quality yacht management is vital, as owners can face fines, vessel detention, and criminal liability for breaching safety regulations. Sanctions can bypass corporate and trustee owning structures by being enforceable against the yacht itself. Managers should ideally agree to indemnify owners against third-party claims arising from their actions or inaction. Owners should ensure that managers have sufficient indemnity insurance to cover potential large claims. The Convention on Limitation of Liability for Maritime Claims may limit managers' financial liability in some cases. Naturally, as with any business relationship, the key to longevity lies in establishing at the very beginning exactly who is responsible for what. Yacht management agreements vary hugely from the very simple to the overly complex. Even those offered by the most prestigious brokerage houses can omit essential elements. The following is an overview of what a meaningful agreement should contain. INDEMNITY As well as having to pay fines for breaching regulations, or even having his yacht detained, an owner can be subject to criminal liability where safety regulations have been breached. By being enforceable against the yacht itself, sanctions can also sidestep corporate and trustee owning structures. As a starting point, therefore, the manager should ideally agree to indemnify the owner faced with third party claims which arose because of the manager’s actions or inaction. But there is no point handing some of the liability over to a manager, if that manager is an uninsured company without the assets to meet a large claim. In most cases, even if the individuals behind the company have been negligent, and own sufficient assets to make them worth suing, it is still only the management company which would be liable. Owners should therefore make sure that their manager carries sufficient indemnity insurance. LIMITATION Although managers may be able to limit their ultimate financial liability under the internationally-recognised Convention on Limitation of Liability for Maritime Claims 1976, there will still be many situations in which this will be unlimited. Understandably, therefore, a manager may wish to expressly cap liability to an owner in the contract itself. Although it is clearly in the interests of the owner to resist this, such a cap may be necessary to enable a manager to obtain indemnity insurance. INSURANCE Managers may seek protection from third party claims by being named as ‘joint-assured’ or ‘co-assured’ on an owner’s insurance policy, typically without significantly increasing the total premium. Whilst the manager’s premium savings can be passed onto the owner, as ‘joint assured’ the manager risks having to pay the owner’s unpaid premiums. As ‘co-assured’ the manager does not usually face this risk. This arrangement does not provide protection against claims by the owner. CLAIMS HANDLING Some managers may also like to add value by arranging insurance and handling the owner’s subsequent claims and disputes. This is not a matter of form-filling. It requires a detailed understanding of insurance law and practice. The owner should decide for himself whether the manager has the appropriately qualified staff. PRINCIPAL As far as possible, the owner should ensure that the manager agrees to deliver particular services as a fait accompli, rather than just provide advice and administrative support. This entails the manager contracting in its own name where possible, rather than the owner’s. To use the legal jargon, the manager should be obliged to act as ‘principal’ rather than ‘agent’ of the owner. Contractual disputes with third parties will not then have to involve the owner, subject to any liens which may have arisen on the yacht as a result of services rendered. OUTSOURCING After an owner has taken great care to appoint a reputable manager, there will be nothing to stop the manager then outsourcing responsibilities to anyone else. Of course, this may not be quite what the owner had in mind. The management contract should therefore state exactly what broad tasks the manager has the authority to sub-contract. Technical matters, such as the maintenance of specialist equipment, may be beyond even the crew’s or manager’s capabilities. Specifications and regulations do change over time, and the necessity for occasional expert third party advice should not be a cause for suspicion or alarm. ISM CODE The International Safety Management Code (more commonly, the ‘ISM Code’) applies to commercially-operated yachts over 500 GT. Although the ISM Code itself has no significant bearing on the balance of liabilities between owner and manager, it is vital to ensure that the manager assumes responsibility under it. This can be achieved by ensuring that the ‘Company’, as defined in the ISM Code, is said to be the manager in the relevant documentation. The ISM Code requires the Company to have such adequate resources immediately available, meaning that outside advice must be expressly obtainable without further permission where circumstances dictate. Further, a bespoke Safety Management System must have been developed, implemented and maintained. This is a lengthy and complex task. There is also a specific requirement under the ISM Code for a shore-based Designated Person to be appointed, whose role in an emergency is pivotal. It is not enough to leave safety management to the captain alone. Non-adherence may lead to the detention of the yacht by port authorities, and insurance being invalidated. CREW Crew members may prefer to be the employees or contractors of the manager rather than the owner, especially as they may have known the individuals at the management company for many years. Should the worst come to the worst, it is also best that the manager is responsible for terminating a contract of employment, or reassigning a crewmember, to prevent relations between the owner and the remaining crew being soured. Allowing a manager to employ the crew also allows for some comeback against an insured management company in the event of crew incompetence, rather than the individual crewmember who may not have much in the way of property or savings. Where the owner chooses to employ the crew, it must still be clearly stated in the contract of employment that the crewmember will obey all the manager’s reasonable orders, especially in connection with the operation of any compulsory Safety Management System in operation. The manager must agree to ensure that the crew meets the standards of training and medical fitness, as required by the yacht’s flag state, at all times. Manning levels must also be satisfactory. Ensuring that the crewmembers have a sufficient command of a common language is not just matter of practicality, but an ISM Code requirement. It should also be incumbent upon managers to ensure that drug and alcohol laws and polices are strictly adhered to. ACCOUNTS Managers must agree to allow their accounts relating to the particular yacht to be available for inspection by the owner. In some jurisdictions, such accounts may be seen as the property of the manager alone, encouraging litigation and forced disclosure in the event of a dispute. Indeed, the manager must agree to hand over all vital documents relating to the yacht when requested, so that these are not ‘ransomed’ in the event of a dispute. More generally, the obvious should never be overlooked. For example, it must be stated that the management agreement (and therefore fee payments) will end if the yacht is lost. Further, BALANCE Striking the right balance is never easy. Compromises are inevitable. In commercial ship management agreements, by comparison, managers typically agree to use their ‘best endeavours’ to provide management services to the owners in accordance with ‘sound management practice’ and to protect and promote the interests of the owners. This is a fair and time-honoured balance. ‘Best endeavours’ means nothing less than the best, although ‘sound management practice’ is said to envisage competing priorities for a manager handling more than one vessel, which may not be acceptable to a demanding yacht owner. CONCLUSION Most agreements are entered into in a spirit of genuine goodwill, at a time when a lawsuit couldn’t be further from the minds of the parties. This is especially so with yachts, which promise a temporary escape from the litigious business world. Yet it still requires attention to detail at the outset to ensure that this promise is fulfilled. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Limiting Liability Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Limiting Liability Corporate Ownership Corporate Ownership 8 August 2014 Last revised minutes 5 Reading time Traditionally, large yachts are owned through companies and trusts, typically based in small offshore locations. However, their use can still leave owners liable for non-compliance with the law. This article examines the reasons behind the tradition, and considers how effective companies and trusts can be at insulating the owner from the liabilities of ownership. minutes 5 Reading time 8 August 2014 Last revised Traditionally, large yachts are owned through companies and trusts, typically based in small offshore locations. However, their use can still leave owners liable for non-compliance with the law. This article examines the reasons behind the tradition, and considers how effective companies and trusts can be at insulating the owner from the liabilities of ownership. Companies have their own legal personality and can buy and sell goods and services like individuals. Trusts are arrangements where property is handed over for the benefit of another, with legal rights enforceable by the courts. Companies and trusts can help reduce personal tax exposure and protect assets, such as yachts. Owning a yacht through a company can ring-fence liability and protect other assets. Companies and trusts can isolate ownership in politically unstable countries or protect against creditors. Establishing transactions through a company provides personal liability protection for directors and shareholders. Yachts can be arrested following accidents, pollution allegations, or unpaid services, requiring payment or security to release them. 'Lifting the corporate veil' allows individuals involved in fraudulent transactions to be held liable. Companies cannot be used to evade legal obligations, and privacy may not be entirely guaranteed. Offshore jurisdictions are commonly used for private, tax-efficient business operations, and careful consideration is needed when choosing one. Yachts can be arrested following accidents, pollution allegations, or unpaid services, requiring payment or security to release them. 'Lifting the corporate veil' allows individuals involved in fraudulent transactions to be held liable. Companies cannot be used to evade legal obligations, and privacy may not be entirely guaranteed. Offshore jurisdictions are commonly used for private, tax-efficient business operations, and careful consideration is needed when choosing one. Companies have their own legal personality and can buy and sell goods and services like individuals. Trusts are arrangements where property is handed over for the benefit of another, with legal rights enforceable by the courts. Companies and trusts can help reduce personal tax exposure and protect assets, such as yachts. Owning a yacht through a company can ring-fence liability and protect other assets. Companies and trusts can isolate ownership in politically unstable countries or protect against creditors. Establishing transactions through a company provides personal liability protection for directors and shareholders. Companies are said by lawyers to have their own ‘legal personality’. This curious phrase just means that they are able to buy and sell goods and services in just the same way as an individual person. Although the idea was dreamt up to allow entrepreneurs to raise money without the fear of loosing all their remaining wealth should their business not succeed, companies can also be used in a non-commercial way to own assets – such as yachts. TRUSTS Trusts are a rather different concept. They have no such personality. They are simply an arrangement whereby property is handed over by one party (the ‘settlor’) to another (the ‘trustee’) for the benefit of another (the ‘beneficiary’), on the basis that the property will be held and used as the trustee wishes. Although legal title is actually transferred from the settlor to the trustee, the trustee’s and beneficiary’s rights are recognisable and enforceable by the courts. As with companies, the use of trusts has come along way since their invention – they were first used to protect the property of medieval knights while away on crusade. Although until recently a concept only recognised in United Kingdom Commonwealth countries and other former colonies, it is now possible to establish trusts in countries with very different legal traditions, such as China. BENEFITS Although establishing and administering either a company or a trust is not without expense, they make a lot of sense when it comes to buying and owning a yacht. Most importantly, companies and trusts can also be used, quite lawfully, to reduce an individual’s apparent wealth and subsequent personal tax exposure. Companies are also used to form the basis of VAT-avoidance structures, by putting the use of a yacht on a commercial basis and through the use of cross-border leases. Now and then, yachts are involved in accidents. Liability could easily exceed the value of the yacht, and, should the owner be held liable, his or her other assets are at risk. More sensible, then, to ring-fence any such source of liability by owning the yacht through a company. Similarly, companies and trusts can help to isolate ownership where wealth is derived from developing or otherwise unstable countries, where there is a risk of political rivals attempting to expropriate personal possessions. And for those in even the most stable surroundings, protection from creditors is usually desirable where the owner wants to indulge in large, commercial risk-taking. By law, yachts must be registered somewhere. Shipping registers being open to inspection by the public, details of a yacht’s owner are readily available. Most owners just don’t like the idea of tabloid journalists – or perhaps even former spouses – knowing what they own. Although the identity of company directors and shareholders is often a matter of public record, many jurisdictions allow directorships and shares to be held in the name of nominees. The beauty of undertaking transactions through a company is that it is the company that undertakes the transaction, not the directors or shareholders, meaning that the latter can bask safe in the knowledge that they are largely immune from personal liability. YACHT ARREST This comfortable state of affairs cannot, however, prevent the arrest of the yacht itself. Where this happens, the yacht is legally prevented from leaving her mooring. Typically, police or customs officers present the yacht with the court papers – this is the process which used to involve the nailing of a writ to the mast. Yachts are often arrested following a collision, an allegation of pollution, or where a good or service has been provided to the yacht without the provider (including crew) having been paid. There is no need for judgment to have been given and there may be little or no warning before the yacht is arrested – potentially leaving the owner in an awkward and embarrassing position in the middle of a busy charter season. The only way to release the yacht from arrest is either to pay the claim or to provide security. Such security may only be acceptable if provided or supported by a large bank. In turn, the bank will require a personal guarantee from the yacht’s ultimate owner. LIMITATIONS On occasion it may be possible to look behind the company at the individuals involved. This is known as ‘lifting the corporate veil.’ The laws of certain jurisdictions, for example, state that where it appears that, in the course of winding-up a bankrupt company, transactions have been carried out with the intent to defraud creditors, a court may declare the individuals involved liable. Criminal sanctions can also apply. ‘Creditors’ here only includes those owed money at the time the transfer was made, excluding future creditors. The burden of proving the necessary intent lies with the creditors. The same principle applies where it looks as if a company was set up to frustrate a court order to freeze assets. Further, companies cannot be used to circumvent legal obligations. This does not mean that individuals will be liable if the company’s legal obligations are breached, but if the company is set up just because a legal obligation (such as complying with safety requirements in respect of a large yacht) is inconvenient or expensive to comply with, then the veil could be lifted. The use of nominees only prevents the true identity of directors and shareholders being made available to the public. It is not normally possible to offload liability onto the nominees, and there is likely to be a clause in the agreement to set up the company, obliging the actual directors and shareholders to indemnify the nominees. Privacy cannot be entirely guaranteed in any event. Not unreasonably, international treaties on the exchange of information relating to criminal activities, including tax evasion, can allow require even the strongest privacy laws to be brushed aside. Property placed in a trust may still be made the subject of asset freezing orders and court judgments if a trust is not recognised, although if the property is physically located in the same country that the trust is administered from, this will be difficult. A number of countries, including the United Kingdom, are party to an international convention on the recognition of trusts, known as the Hague Convention, recognising trusts which conform to certain characteristics. JURISDICTIONS Offshore jurisdictions still have a reputation as being sun-baked islands where dodgy deals can be concluded in an unregulated financial free-for-all. Nothing could be further from the truth for the vast majority of commonly-used locations. In fact, virtually all the world’s leading multinationals use offshore companies and trusts to undertake business in a private, tax-efficient yet entirely legal way. ‘Offshore’ simply means a jurisdiction other the one someone is already resident or domiciled in for tax purposes. They certainly don’t need to be either sunny or insular, although many are as it can form a lucrative boost to otherwise small, remote and tourist-dependent economies. In fact, a good example of a growing offshore centre is the United Kingdom. For yacht owners, the principal advantage of using a respectable, well-known offshore jurisdiction is that there is rarely the need to reinvent the wheel: they are geared up to provide yacht owning structures. As these activities often provide a sizeable proportion of foreign income, their governments make it a priority to make matters simple for those looking for this type of service. It is important to choose the jurisdiction(s) with care, however. No two are the same. There are bad apples in the barrel, especially with regards the integrity of local practitioners. With companies, but more particularly with trusts – where legal title is transferred to a local trustee who may perhaps have discretionary powers – there exists opportunities to extract more from their clients than had been expected. CHOICE Other factors to consider include initial and ongoing costs (including local taxes), international reputation, and the strength of their rule of law – in other words how tough their courts are. Political stability is another important factor, as is the time zone, the exchange controls, and any escape provisions – which allow companies to change jurisdictions while maintaining their legal personality and trusts to be transferred without needing to be rewritten. Working with a local branch of an international legal or accounting group may provide reassurance, but on the other hand one may end up being steered towards just those places where they happen to have an office. Ideally, guidance in the earliest stages should be sought from an independent, trusted source, capable of providing a truly impartial, global overview. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about The Brokers' Role Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about The Brokers' Role Providing Information Providing Information 15 April 2023 Last revised minutes 4 Reading time When underwriters ask questions, you, the owner, must respond as accurately as possible. But there is also a positive duty on you, as insured, to speak up about matters which may affect the risk. It’s important not only to understand the nature and extent of that duty if you’re yacht is to stay covered, but also to ensure that your broker isn’t a weak link in the chain. minutes 4 Reading time 15 April 2023 Last revised When underwriters ask questions, you, the owner, must respond as accurately as possible. But there is also a positive duty on you, as insured, to speak up about matters which may affect the risk. It’s important not only to understand the nature and extent of that duty if you’re yacht is to stay covered, but also to ensure that your broker isn’t a weak link in the chain. Insurance contracts are based on the principle of the utmost good faith, requiring parties to provide honest and complete information. Underwriters may not have detailed knowledge of each specific risk, so insured individuals have a duty to disclose material information. A fair presentation of the risk includes disclosing all material circumstances or providing sufficient information to prompt further inquiries by a prudent insurer. Disclosure should be clear and accessible to the insurer, and statements must be made in good faith. Material circumstances are those that would influence a prudent insurer's judgment in determining whether to accept the risk and on what terms. The insured's knowledge refers to the company's senior management, including captains, departmental heads, and insurance brokers. Claims history, crewing arrangements, and yacht valuations are among the practical matters that need to be disclosed. Yacht valuations can be contentious, and a specific reference to the agreed value should be included in policies. Breaching the duty of fair presentation can lead to remedies for the underwriter if it directly influenced their decision to enter the contract. Consequences for breaching the duty of fair presentation vary based on intent, ranging from no liability with no premium return to reduced claim payment or returned premiums. The insured's knowledge refers to the company's senior management, including captains, departmental heads, and insurance brokers. Claims history, crewing arrangements, and yacht valuations are among the practical matters that need to be disclosed. Yacht valuations can be contentious, and a specific reference to the agreed value should be included in policies. Breaching the duty of fair presentation can lead to remedies for the underwriter if it directly influenced their decision to enter the contract. Consequences for breaching the duty of fair presentation vary based on intent, ranging from no liability with no premium return to reduced claim payment or returned premiums. Insurance contracts are based on the principle of the utmost good faith, requiring parties to provide honest and complete information. Underwriters may not have detailed knowledge of each specific risk, so insured individuals have a duty to disclose material information. A fair presentation of the risk includes disclosing all material circumstances or providing sufficient information to prompt further inquiries by a prudent insurer. Disclosure should be clear and accessible to the insurer, and statements must be made in good faith. Material circumstances are those that would influence a prudent insurer's judgment in determining whether to accept the risk and on what terms. No two insurance risks will ever be identical. Underwriters will know about yachts in general, but they cannot be expected to know the ins and outs of your particular vessel, which will be, to a greater or lesser extent, unique, and crewed, managed and operated in a distinctive way. So while most contracts work on the basis of buyer beware – with parties doing their own homework – insurance works on the opposite basis: there’s a positive duty to provide honest information. They are said to be contracts of ‘utmost good faith’. This is manifested in the insurer, in the case of yachts owned by companies (which cannot, by definition, be considered as consumers) being under a duty to make a ‘fair presentation’ of the risk. This duty obliges the insured to disclose material circumstances that it knows (or ought to know) or put a prudent underwriter on notice that it needs to make further enquiries. FAIR PRESENTATION A fair presentation is one where the insured discloses every ‘material circumstance’ which the insured knows or ought to know, or, failing that, gives sufficient information to put a (hypothetical) ‘prudent insurer’ on notice that it needs to make further enquiries for the purpose of revealing those material circumstances. Disclosure must be made in a manner which would be reasonably clear and accessible to that hypothetical prudent insurer. Facts must ‘substantially correct’ and statements of expectation or belief must be made in good faith. A circumstance will be material if it ‘would influence the judgement of a prudent insurer in determining whether to take the risk and, if so, on what terms’. This includes special or unusual facts relating to the risk, particular concerns which led the insured to look for cover, and anything which those specialising in yachting-related risks would generally understand as being something that should be included in a fair presentation of risk. Note that we are concerned with the judgement of a prudent insurer: the opinions of the actual underwriter concerned are irrelevant. The insured’s knowledge, in the case of an owning company, is taken to mean the company’s ‘senior management’, which will include captains and departmental heads, plus those making decisions about insurance (including insurance brokers or other intermediaries acting on the owner’s behalf – whether regulated or not – such as a yacht broker). A ‘reasonable search’ for relevant information must be made – including with third parties. This might include, for example, making inquires with classification societies. PRACTICAL MATTERS The claims history of both the legal and beneficial owner will almost certainly be material – even if the proposal form simply asks in respect of the ‘insured’s claims record. If you, as beneficial owner, have criminal convictions in respect of dishonesty then this should be disclosed. While it may be obvious whether or not a yacht requires crew, the nature and extent of crewing arrangements will need to be provided in detail. The captain’s CV/résumé may be requested. You should ask a third party services provider to verify the crewmember’s qualifications and stated experience. If a survey is needed, check whether that surveyor must have been approved by the underwriter and/or hold certain qualifications. VALUATIONS Yacht valuations can, and have, been a source of contention over the years. Policies can be unvalued but given the obvious room for disagreement, nearly all on the basis of a valuation agreed at the outset. There should be a specific reference to the value being agreed – not merely to a ‘sum insured’ or similar. Unless fraud can be proved, the fixed value is usually conclusive. Problems arise where owners pay over the odds at the outset, or where renewals haven’t taken account of depreciation, so that the resulting over-valuation risks being deemed to be a material misrepresentation. This will be the conclusion where the owner has no genuine belief that the value given was a true valuation. It would be wise to obtain an independent valuation, but – being subjective – this shouldn’t be treated as conclusive. CONSEQUENCES If the insured breaches the duty of fair presentation, the underwriter is entitled to a remedy only if it can demonstrate that the breach directly influenced its decision to enter into the insurance contract, or at all. To prove this influence, the underwriter must establish that, without the breach, it would not have entered into the contract or, at least, would have done so on different terms, such as a higher premium. If the breach of the duty of fair presentation was made deliberately or recklessly, the underwriter can walk away from liability entirely – not even pausing to return premiums paid. If the breach was neither deliberate nor reckless, and the underwriter would not have provided cover on any terms, then payment of claims can be refused but premiums paid must be returned. If the underwriter would have just charged a higher premium, then the amount payable on a claim may be reduced proportionately. CONSUMERS In the unlikely ( and unwise ) event that own your yacht personally, and it’s not chartered out or otherwise used for business purposes, then your position, as a consumer, is different to that set out above. It’s then up to underwriters to ask the questions and determine the risk. The insured simply has to exercise reasonable care not to make a misrepresentation when answering questions. There’s no obligation to volunteer information. TIPS & TRICKS Be sure that the insurance broker earns its commission and tells you everything you need to disclose. It is quite possible that your broker advises you poorly, and, as a result, you fail in your duty of fair presentation. In which case, the broker will be liable. Consider where the broker is based and how it is regulated. Obtaining the requisite information takes time, so plan ahead – including when it’s time to renew. Do not assume that the underwriter already has sufficient information: disclose all material information, even if it’s obvious. Be sure to respond fully to all questions raised. Avoid data dumping, and make sure that information is indexed, categorised or otherwise easily navigable. Keep an audit trail of the searches carried out and the enquiries made, to prove that you have conducted a reasonable search. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Staying Covered Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Staying Covered Understanding the Contract Understanding The Contract 18 April 2023 Last revised minutes 3 Reading time While your broker should understand and be able to explain policy terms to you, there can be ambiguity as to the role played by intermediaries. If you’re going to do your utmost to make sure that you remain covered, you need to be clear about the insurance contract itself, beyond deductible amounts. Underwriters are in business to make money and, despite marketing to the contrary, can and will fight larger claims. minutes 3 Reading time 18 April 2023 Last revised While your broker should understand and be able to explain policy terms to you, there can be ambiguity as to the role played by intermediaries. If you’re going to do your utmost to make sure that you remain covered, you need to be clear about the insurance contract itself, beyond deductible amounts. Underwriters are in business to make money and, despite marketing to the contrary, can and will fight larger claims. Where there's a dispute, ambiguous terms in a policy are construed in favour of the insured . Consumer protection may vary based on whether the insured uses the yacht privately or commercially. Insurance contracts consist of four types of terms: terms descriptive of the risk, exclusions, warranties, and conditions. Breach of warranty can release the underwriter from future liability or suspend coverage, while breach of a condition can lead to liability rejection or claims for damages. Terms descriptive of the risk define the perilscovered , and the insured must prove that the loss resulted from one of these perils. Exclusions limit the scope of coverage and suspend cover during the excluded circumstances. Warranties are fundamental terms that must be strictly followed, regardless of whether they are labeled as such. Conditions can be either conditions precedent (before coverage) or bare conditions (during the policy), and breach can result in different outcomes. The insured party must have an insurable interest in the matter being insured, typically the owner of the yacht. Other interested parties must be declared in the contract and can be entitled to notifications, but to claim directly, they need to be named as joint or co-insureds. Exclusions limit the scope of coverage and suspend cover during the excluded circumstances. Warranties are fundamental terms that must be strictly followed, regardless of whether they are labeled as such. Conditions can be either conditions precedent (before coverage) or bare conditions (during the policy), and breach can result in different outcomes. The insured party must have an insurable interest in the matter being insured, typically the owner of the yacht. Other interested parties must be declared in the contract and can be entitled to notifications, but to claim directly, they need to be named as joint or co-insureds. Where there's a dispute, ambiguous terms in a policy are construed in favour of the insured . Consumer protection may vary based on whether the insured uses the yacht privately or commercially. Insurance contracts consist of four types of terms: terms descriptive of the risk, exclusions, warranties, and conditions. Breach of warranty can release the underwriter from future liability or suspend coverage, while breach of a condition can lead to liability rejection or claims for damages. Terms descriptive of the risk define the perilscovered , and the insured must prove that the loss resulted from one of these perils. Insurance contracts must set out the risk, the duration of cover, the premium and the amount payable in the event of loss. That’s it. They don’t need to be set out in any particular way. And, aside from marine insurance, they don’t even need to be in writing. The policies for larger risks can be long-winded and written in rather theatrical terms. These old-fashioned words and phrases have well-known and judicially considered meanings and implications. In recent years, there has been a move towards simpler terminology – but such words may not have been considered in court. In the event of a dispute arising between insured and underwriter, unfamiliar terms can lead to doubt. If words are ambiguous, they will be construed in favour of the insured. Whilst an owner who keeps the yacht solely for private use may be given the benefit of any doubt as a consumer, where the vessel is chartered or otherwise maintained on a commercial basis for tax reasons, this consumer protection evaporates. Where words have a technical legal meaning, this definition will prevail, as will any definitions set out in the contract. Where there are rival meanings, the construction consistent with commercial common sense will triumph. The contract will also be construed in line with the purpose of the contract, such that insuring clauses are interpreted widely, and exclusions narrowly. TYPES OF TERMS Insurance contracts contain four types of terms. It’s important to know which category a term falls into, as this affects what happens where such terms aren’t complied with. The categories are: Terms descriptive of the risk; Exceptions and exclusions; Warranties; and Conditions. For those who already know a little about general contract law, the terms ‘warranty’ and ‘condition’ are used differently. In insurance law, a breach of warranty can discharge an underwriter from all future liability, or may suspend cover for the period during which the insured is in breach, rather than merely rise to a claim for damages. Breaching a condition can give the underwriter the right to reject liability – or claim damages. TERMS DESCRIPTIVE OF THE RISK These are terms that describe the risk, and so define the cover in terms of the perils insured against. The insured must prove that its loss was caused by one of these perils. EXCEPTIONS & EXCLUSIONS Exceptions and exclusions set limits on the scope of the risk. They have the effect of suspending cover while the excluded circumstances are in effect. WARRANTIES Warranties are fundamental terms and must be strictly complied with. They may or may not labelled as such, but exist where the insured declares that something will or will not be done, or that a condition has or has not been fulfilled, or that it holds a particular intention or belief. It used to be that underwriters made all kinds of terms warranties simply by including ‘basis of contract’ clauses. This is no longer allowed, but statements as to particular facts (past or present) can still be deemed to be warranties. CONDITIONS Conditions take the form of either: A ‘condition precedent’, which requires compliance by the insured before being on-cover, and which, if breached, allows the underwriter to reject liability altogether; or A ‘bare condition’, which requires compliance by the insured during the currency of the policy, and which, if breached, allows the underwriter to claim damages for any loss suffered as a result of a breach. Examples of a condition precedent might be the payment of the premium, or compliance with claim notification requirements, while a bare condition might take the form of an obligation to give prompt notice to the underwriter of any circumstance likely to give rise to a claim, or a requirement to co-operate with the underwriter in respect to a claim. Either way, the underwriter bears the burden of proving that a condition has been breached. And labelling a condition as such is not conclusive as to its status. INSURABLE INTEREST It may sound obvious, but the party taking out the insurance must be the owner of the yacht – not the beneficial owner. Otherwise, in law, the beneficial owner would merely be taking a bet. The insured is said to need to have an ‘insurable interest’ in the matter being insured. Other parties may have an interest which is insurable, and this must be declared in the contract. The noted party can be entitled to notification by the underwriter of changes to cover, cancellation or non-renewal. If such parties want to be able to claim directly from the underwriter, however, they need to be named either as joint or co-insureds in the policy. Joint insureds each have a contractual right to indemnity, perhaps because they both jointly own a yacht. But the wrongdoing of one joint insured can preclude a claim by the other (innocent) joint insured. A co-insured, such as a mortgagor bank, is not precluded from claiming under such circumstances. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Providing Information Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Providing Information Piracy and Protection Piracy & Protection 16 April 2010 Last revised minutes 4 Reading time Piracy raises a matrix of legal issues, just at the time when the consideration of these will be the last thing on anyone’s mind. This reinforces the desirability of taking advice in advance and, if necessary, placing a trained and equipped security team on board. For those with real concerns about security, compared with highways, houses and offices, yachts will always be – by far – the most secure location. minutes 4 Reading time 16 April 2010 Last revised Piracy raises a matrix of legal issues, just at the time when the consideration of these will be the last thing on anyone’s mind. This reinforces the desirability of taking advice in advance and, if necessary, placing a trained and equipped security team on board. For those with real concerns about security, compared with highways, houses and offices, yachts will always be – by far – the most secure location. Piracy is defined as any illegal act of violence, detention, or destruction committed by the crew or passengers of a private vessel against another vessel or persons/property on board, outside any country's territorial waters. Hotspots for piracy include the coasts of Indonesia, Somalia, Bangladesh, Nigeria and some South American countries. Insurance coverage for yachts usually has restrictions on cruising areas, and breaching these restrictions may void coverage . Insurers have a broader definition of piracy than the legal definition, as attacks are more likely to occur within territorial waters. Obtaining up-to-date information on current piracy hotspots is crucial, and insurers and maritime security firms can provide assistance. Maintaining vigilance and employing defence measures such as acoustic defence systems and strong-rooms are recommended for yachts in high-risk areas. The legality of carrying weapons depends on the laws of the flag state (where the yacht is registered) and the port state (where the yacht is located). Some countries allow firearms on board as part of the yacht's equipment, while others prohibit certain weapons entirely. Legal consequences and the use of firearms in self-defence can vary depending on the laws of the flag state, port state, and international criminal law. Recognizing pirates can be challenging, and preemptive action may have legal implications. Self-defence and defence of others must be reasonable and proportional to the perceived threat. Maintaining vigilance and employing defence measures such as acoustic defence systems and strong-rooms are recommended for yachts in high-risk areas. The legality of carrying weapons depends on the laws of the flag state (where the yacht is registered) and the port state (where the yacht is located). Some countries allow firearms on board as part of the yacht's equipment, while others prohibit certain weapons entirely. Legal consequences and the use of firearms in self-defence can vary depending on the laws of the flag state, port state, and international criminal law. Recognizing pirates can be challenging, and preemptive action may have legal implications. Self-defence and defence of others must be reasonable and proportional to the perceived threat. Piracy is defined as any illegal act of violence, detention, or destruction committed by the crew or passengers of a private vessel against another vessel or persons/property on board, outside any country's territorial waters. Hotspots for piracy include the coasts of Indonesia, Somalia, Bangladesh, Nigeria and some South American countries. Insurance coverage for yachts usually has restrictions on cruising areas, and breaching these restrictions may void coverage . Insurers have a broader definition of piracy than the legal definition, as attacks are more likely to occur within territorial waters. Obtaining up-to-date information on current piracy hotspots is crucial, and insurers and maritime security firms can provide assistance. Piracy is defined internationally by the United Nations Convention on the Law of the Sea, Articles 101–103. Although local laws may add to this definition, the crime essentially consists of: Any illegal act of violence, detention, or destruction, Committed for private ends, By the crew or passengers of a private vessel, Against another vessel or against persons or property on board another vessel, Which is outside any country’s territorial waters; or Any act of inciting or intentionally facilitating such an act. HOTSPOTS Attacks are logged on the website of Commercial Crime Services (CCS), a division of the International Chamber of Commerce. Currently, while the principal hotspots are to be found off the coasts of Indonesia, Somalia, Bangladesh and Nigeria, acts have been committed off the coasts of various South American countries and even in the Caribbean. INSURANCE Insurers are usually very strict about where yachts can and cannot cruise while remaining covered. Any breach of these restrictions will allow them to escape paying out in the event of a claim for absolutely anything. Once the owner has decided where he or she wishes to cruise, this must be disclosed to the insurer if it is outside the area permitted in the policy, and additional cover negotiated – the cost of which will reflect any perceived increase in risk. In common with the IMB, the definition of ‘piracy’ used by insurers is generally much wider than that given above. This is fortunate since, statistically, attacks are more likely to occur within a state’s own territorial waters – i.e. within 12 nautical miles of the adjacent shoreline. Although piracy risks are specifically covered by the standard ‘Institute Yacht Clauses (1/11/85)’, which are the most commonly-used first-party insurance terms, the risks should still be discussed with the broker anyway. Where, unusually, the policy is not subject to English law, then it may be prudent to take independent legal advice. INFORMATION Patterns of worldwide piracy fluctuate with the political stability and, to a lesser extent, the economic fortunes of adjacent states. It is imperative to obtain up-to-date advice on where the current trouble spots are. Insurers can help with this, although specialist maritime security firms can often provide more detailed information. It should be noted that the security industry is not well regulated in some countries, and firms’ services vary in quality. DEFENCE Although the advice to all yachts travelling in high-risk areas is to maintain particular vigilance, and defences such as acoustic defence systems, satellite-alert systems and strong-rooms are options, the question most commonly raised is whether weapons are, legally, an option. To decide what’s legal and what’s not, it’s necessary to know which countries’ laws apply to any given situation. One needs to consider both the ‘Flag State’ law and the ‘Port State’ law. The Flag State law is the law of the country where the yacht is registered: it governs what happens on board the yacht, wherever in the world the yacht is located, as if the yacht was a small, floating piece of that country. The Port State law is that of the country in whose territorial waters the yacht is located – not just in or around any particular port. EQUIPMENT To take the example of one of the most popular Flag States, the United Kingdom, weapons may kept on board, but not all types. Under the Firearms Act 1968, as amended, firearms (including shotguns) and associated ammunition normally require a licence for purchase and possession. A firearm and ammunition, however, can be possessed on board a yacht, if it forms part of that yacht’s ‘equipment’, without the need for such a licence. A police permit is still needed to bring the firearm to and from the yacht, and a licence required to purchase the firearm in the first place. Section 5 of the same Act still outlaws some weapons altogether for the general public, including: Automatic and semi-automatic weapons, Pump-action weapons, Pistols, other than flare guns, Rocket launchers, other than those used for line-throwing or signalling, Air guns using gas cartridges, and Pepper sprays, TASER®s, etc. Port States will have their own laws relating to possession and disclosure. Researching and complying with these can be difficult and expert advice is a must. ACTION Clearly, there is no point in having weapons on board unless someone is prepared to use them. Introducing them into the equation might change a confrontation into a shoot-out. Guns in untrained hands are not an option. It is also very difficult to work out in advance what the legal consequences of firing shots might be. Thankfully, this choice can be neatly sidestepped by placing a specialist security team on board just for the necessary passages. Shooting at someone whilst they are on another vessel potentially constitutes an act of violence committed on both vessels. The shooter will therefore be subject to the laws of both Flag States, plus that of the Port State if the shooting occurs within 12 nautical miles of the coast (although this limit may not be respected in all countries). Looking by way of example at the UK criminal law, which is followed in much of the world, the raising of a weapon at a suspected pirate, who in fact wasn’t, could constitute an ‘assault’, i.e. putting someone in fear of violence. Shooting a pirate (or otherwise harming him) could lead to charges of grievous bodily harm, where serious injury is caused. Where the pirate is unintentionally or intentionally killed, manslaughter or murder charges could follow. Obviously, a number of defences could be put forward in response, the most useful of which would be self-defence or the defence of another. The accused would not need to have retreated as far as possible before the act of self-defence. Indeed, an act of self-defence or the defence of another may be pre-emptive, given reasonable apprehension. If the threat of force would have been enough, it may be unreasonable to go ahead and use force. If one person on a yacht is threatened, all are can be seen as having been threatened. The force used in self-defence or in the defence of another must be ‘reasonable’ in the circumstances as the accused saw it. What is reasonable would be up to the jury and difficult to predict. The main practical problem is recognising whether or not the yacht is faced with pirates. Until they raise a weapon in your direction or commit any act of violence against anyone, they are just other seafarers. Attack first, and you risk becoming the pirate. Return to top Thank you to all our Members who contributed to this article. Unless otherwise stated, this article broadly describes, by way of illustration, the situation in the United Kingdom waters in respect of United Kingdom-registered vessels. This piece does not provide or replace legal advice. Questions or comments? Please contact us You can also read about Going Dark Join the discussion over in the Club's group Questions or comments? Please contact us You can also read about Going Dark The Owners Club | Advertise A Wealth of Opportunity The global fleet over 30 metres in length consisted of 5,396 superyachts in operation at the start of 2022 ... The total average final asking price for all used yachts sold, went up in 2021 to €11.8 million. The State of Yachting 2022 REACH THE GLOBAL ELITE Get In Touch Our Members are, by definition, some of the wealthiest people in the world. Working on the widely-accepted Ten Percent Rule, large yacht owners are together worth €637bn.* Which is slightly more than the annual GDP of, say, Sweden.* They are influencers in the truest sense. And now you can reach out to them and their gatekeepers through a platform which is independent and respected. *Sources: SuperYacht Times, The State of Yachting 2022, €(11.8m average value x 10 x 5,396 units), International Monetary Fund World Economic Outlook Database, April 2024 No Conflicts of Interest Contact Us Transparency and impartiality being central to the Club’s ethos and success, we will welcome advertising and sponsorship in this, our new website. We are not, however, a yachting media outlet and do not rely on advertising revenue. There are plenty of such platforms, and they do a great job. But we’re exclusively on the side of owners. In order to avoid any conflicts of interest, we cannot carry advertising in respect of yachts, or yachting products or services. If you’d like to explore promoting your non-marine business, please get in touch. The Owners Club | Secretariat At Your Service It’s a huge honour to be appointed. Having had many owners and managers as clients over the years, I am only too aware of the issues which need to be addressed. BENJAMIN MALTBY, GENERAL SECRETARY TRUSTED PROFESSIONAL CLUB SECRETARIAT We considered it important to have a regulated professional managing the Club and organising its affairs. We have therefore appointed an English lawyer as our General Secretary. He is a Partner at a leading international firm, regulated by the Solicitors Regulation Authority, the Financial Conduct Authority and the London Stock Exchange. Naturally used to maintaining client confidence, he has also provided expertise on the law and practice of yacht ownership to leading publications and broadcasters, including: Truly Independent Leadership FAQs The General Secretary’s role is to operate the Club at a high level, undertake research, provide guidance and draft the documents and agreements essential to yacht acquisition and ownership. Neither the Club nor General Secretary have vested interests in particular third party suppliers. We’re not beholden to particular yachting industry advertisers . So our approach is objective. Our contracts are fair, balanced and conducive to efficient, fuss-free ownership. I am a title 02 The Owners Club | Rules THEM'S THE RULES These Rules from an agreement between the Club on the one hand, and all Associates, Members and Governors and anyone using this website on the other. They establish a fair and balanced framework which governs respective rights and responsibilities. You’re bound by the Rules, so please take a moment to read them thoroughly. Please contact us if there’s anything you’d like clarified. 1. DEFINITIONS ​1.1. In the Rules the following words have the following meanings: 1.1.2. IP Rights: any and all intellectual property rights, whether registered or unregistered, including but not limited to any patents, trademarks, domain names, URLs, design rights, copyright, software rights, database rights, rights in and to business names, product names and logos, processes, trade secrets, confidential information and any similar rights in any jurisdiction. 1.1.3. Link(s): link(s), provided in the Website, to third party resources and businesses; 1.1.4. Material: information, articles, guides, documents and clauses, provided by Us, whether via the Website or otherwise; 1.1.5. Membership: a paid subscription granting You access to certain Material; 1.1.6. Our: belonging to, or emanating from, Us; 1.1.7. Rules: this present document, known as the Rules; 1.1.8. Staff: any employee or representative of The Owners Club, including but not limited to the Our General Secretary; 1.1.9. We, Us: The Owners Club; 1.1.10. Website: the website theownersclub.org, and all pages, parts and elements thereof; 1.1.11. You: You, whether Associate, Member or Governor of The Owners Club, or user of the Website, as the case may be, and Your employer or principal where you act on behalf of one; 1.1.12. Your: of or from You. ​ ​ 2. APPLICATION ​2.1. For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, You agree to be bound by all of the Rules. 2.2. By using the Website, or viewing, downloading, using, sending, storing or receiving, any Material, You agree to be bound by all of the Rules, as well as Our [privacy policy]. 2.3. You are responsible for ensuring that all persons who access the Website through Your internet connection are aware of all of the Rules and that they comply with them. ​ 3. MEMBERSHIP ​3.1. Memberships are for one year, payable monthly. 3.2. A Membership entitles You, for one year, subject to monthly Membership fee instalments having been paid to date, to access those parts of the Website which We may from time to time restrict access to those only with Membership, and to access and download certain Material. 3.3. On each anniversary of You joining Us, We will automatically renew Membership unless You have notified Us that You want to cancel Membership by emailing us at gensec@theownersclub.org. 3.4. We may store and when possible update Your payment method on file. It is Your responsibility to maintain current credit card information on file with Us. 3.5. We reserve the right to change Membership fees from time to time. 3.6. From time to time, we may also offer different Membership terms and benefits. 3.7. Membership fees are non-refundable. 3.8. You authorise Us, to collect, without notice, Membership fees using any valid payment source We have on record for You. 3.9. If You fail to provide a payment to Us in full and on time, or We are unable to obtain payment using Your designated payment, We may deem such a failure as notice of cancellation and cancel Membership immediately. 3.10 We may cancel Membership at any time where We consider that You are in breach of any part of the Rules. 3.11. You are responsible for ensuring all contact details You provide Us with are correct and up to date. 3.12. If You choose, or You are provided with, a user identification code, password or any other piece of information as part of Our security procedures, You must treat such information as confidential, and You must not disclose it to any third party. 3.13. We have the right to disable any user identification code or password, whether chosen by You or allocated by Us, at any time, if in Our reasonable opinion You have failed to comply with any of the provisions of these terms of use. 3.14. If You know or suspect that anyone other than You knows Your user identification code or password, You must notify Us promptly at gensec@theownersclub.org. ​ 4. WEBSITE ​4.1. You are responsible for making all arrangements necessary for You to have access to the Website. 4.2. You will not: 4.2.1. Use the Website for any purpose that is unlawful or prohibited by the Rules; 4.2.2. Use the Website in any manner which could damage, disable, overburden or impair the Website, or interfere with any other party’s use and enjoyment of the Website; or 4.2.3. Obtain or attempt to obtain any Material through any means not intentionally provided for on the Website. 4.3. We will use reasonable efforts to keep the Website available to You, but if necessary, We may suspend access to the Website, or close it indefinitely. We will not be liable if for any reason the Website is unavailable at any time or for any period. 4.4. The Website may include information and materials uploaded by other users of the Website, including to bulletin boards and chat rooms. Such information and materials have not been verified or approved by Us. The views expressed by other users of the Website do not represent Our views or values. ​ 5. VIRUSES ​5.1. We do not guarantee that the Website will be secure or free from bugs or viruses. 5.2. You are responsible for configuring Your information technology, computer programmes and platform to access the Website. You should use Your own virus protection software. 5.3. You must not: 5.3.1. Misuse the Website by introducing viruses, trojans, worms, logic bombs or other material that is malicious or technologically harmful. 5.3.2. Gain unauthorised access to the Website, the server on which the Website is stored or any server, computer or database connected to the Website. 5.3.3. Attack the Website via a denial-of-service attack or a distributed denial-of service attack. ​ 6. UPLOADING ​6.1. Any content You upload to the Website will be considered non-confidential and non-proprietary. You retain all of Your ownership rights in Your content, but You grant Us a licence to use, store and copy that content and to distribute and make it available to third parties. 6.2. We have the right to disclose Your identity to any third party who is claiming that any content posted or uploaded by You to the Website constitutes a violation of their intellectual property rights, or of their right to privacy. 6.3. You are solely responsible for securing and backing up Your content. 6.4. When You upload or post content to the Website, You grant Us the following rights to use that content: 6.4.1. A worldwide, non-exclusive, royalty-free, transferable licence to use, reproduce, distribute, prepare derivative works of, display, and perform that user-generated content in connection with the service provided by the Website and across different media, including to promote the site or the service, forever; and 6.4.2. A worldwide, non-exclusive, royalty-free, transferable licence for other users, partners or advertisers to use the content for their purposes, forever. ​ 7. LINKS ​7.1. Links are only provided for Your convenience and to help You identify and locate other resources that may be of interest to You. 7.2. We do not control, endorse or monitor the contents of any sites subject to a Link, including, without limitation, any further link contained in a site referenced by a Link, and any changes or updates to site referenced by a Link. 7.3. If You use any service provided on a site to which a Link refers: 7.3.1. We will not be responsible for any act or omission of any third party, including such third party’s access to or use of Your data; and 7.3.2. We do not warrant or support any product or service provided by the third party. 7.4. You may link to the Website home page, provided You do so in a way that is fair and legal and does not damage Our reputation or take advantage of it. 7.5. You must not establish a link in such a way as to suggest any form of association, approval or endorsement on Our part where none exists. 7.6. You must not establish a link to the Website in any website that is not owned by You. 7.7. Our site must not be framed on any other site, nor may You create a link to any part of the Website other than the home page. 7.8. We reserve the right to withdraw linking permission without notice. ​ 8. MATERIAL ​8.1. We do not guarantee that Material is correct, up-to-date, or suitable for particular persons or situations. 8.2. The Material may include inaccuracies or typographical errors. 8.3. From time to time, changes may be made to the Material, with or without You being notified. 8.4. Material must not be relied upon for legal, tax or financial decisions and You should consult an appropriate professional for specific advice tailored to Your situation. 8.5. Any templates within the Material are for use only as a starting point for the preparation of legal documents. They must be adapted by You to meet Your individual requirements. You should always take legal advice for Your specific situation. 8.6. We make no representations about the suitability, reliability, availability, timeliness, and accuracy of the Material. 8.7. All Material is provided ‘as is’ without warranty or condition of any kind including all implied warranties or conditions of satisfactoriness, fitness for a particular purpose, title and non-infringement. 8.8. You use the Material and the Website at Your own risk. 8.9. Neither Us nor any Staff will be liable to You or any other party for any losses or damages whatsoever or howsoever arising in connection with the Material or the Website, whether under contract or as a result of any misrepresentation, misstatement or tortious act or omission, including negligence. 8.10. Our and the Staff’s liability to You for any loss or damage, including any losses, damages, costs or expenses whatsoever or howsoever arising in connection with the use of the Material or Website, whether under the Rules or other Rules or as a result of any misrepresentation, misstatement or tortious act or omission, including negligence, is limited to damages of an amount equal to that received by Us from You for a year’s Membership. ​ 9. INTELLECTUAL PROPERTY ​9.1. We own and retain all rights, title, interest and IP Rights in relation to the Material. 9.2. Except in connection with the ownership or management of a yacht(s) which You own directly or indirectly or You manage, You must not reproduce, modify, translate or create derivative works of any Material. 9.3. Without exception, You may not sell, license, sublicense, rent, lease, distribute, copy, publicly display or publish any Material. ​ ​ 10. RELATIONSHIP ​10.1. We only provide a platform for information and self-help. 10.2. Material is provided for Your private use, does not constitute legal and/or financial advice and should not be relied upon as such. 10.3. We are not a regulated or unregulated law firm. Communications between You and Us or Staff will not be protected by legal professional privilege and may be disclosable to third parties. 10.4. No communications between You and Us or Staff constitute legal advice or can be relied on as such. 10.5. Use by You of the Website or Material does not establish a duty of care (either in tort or in contract) between You and Us or Staff, or create a lawyer-client relationship between You and Us or Staff. 10.6. Names of third parties are published on the Website or in Material, or provided to Members, for information purposes only. We do not endorse or recommend any third party nor do We make any warranty as to the qualifications or competency of any third party. 10.7. You agree that no joint venture, partnership, employment, or agency relationship exists between You and Us as a result of the Rules or Your use of the Website or the Material. ​ 11. SEVERANCE 11.1. If any part of the Rules is determined to be invalid or unenforceable under any applicable law, then the invalid or unenforceable provision will be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision will be deemed deleted. Following such modification or deletion, the remainder of the Rules will continue in effect. ​ ​ 12. REVISIONS ​12.1. We may revise the Rules from time to time, and will always post the most current version on the Website. By continuing to use or access the Website or Material, You agree to be bound by the most recent revision of the Rules. ​ 13. ENTIRE AGREEMENT ​13.1. Unless otherwise specified, the Rules constitutes the entire Rules between You and Us with respect to the matters covered by the Rules, and extinguishes all previous Ruless, arrangements, representations and understandings between You and Us, whether written or oral, relating such matters. ​ 14. ASSIGNMENT ​14.1. You must not assign or otherwise transfer any right granted under the Rules. We can freely assign Our rights under the Rules. ​ ​ 15. WAIVER ​15.1. A failure or delay by Us to exercise any right or remedy provided under the Rules or by law will not constitute a waiver of that or any other right or remedy, nor will it prevent or restrict any further exercise of that or any other right or remedy. ​ 16. THIRD PARTIES ​16.1. A person who is not a party to the Rules will not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Rules. ​ ​ 17. LAW & JURISDICTION ​17.1. The Rules and any dispute or claim arising out of or in connection with it or its subject matter or formation will be governed by and construed in accordance with English law. 17.2. The courts of England and Wales will have non-exclusive jurisdiction to settle any dispute or claim arising out of or in connection with the Rules or its subject matter or formation. Contact Us These Rules from an agreement between the Club on the one hand, and all Associates, Members and Governors and anyone using this website on the other. They establish a fair and balanced framework which governs respective rights and responsibilities. You’re bound by the Rules, so please take a moment to read them thoroughly. Please contact us if there’s anything you’d like clarified. 1. DEFINITIONS ​ 1.1. In the Rules the following words have the following meanings: 1.1.2. IP Rights: any and all intellectual property rights, whether registered or unregistered, including but not limited to any patents, trademarks, domain names, URLs, design rights, copyright, software rights, database rights, rights in and to business names, product names and logos, processes, trade secrets, confidential information and any similar rights in any jurisdiction. 1.1.3. Link(s): link(s), provided in the Website, to third party resources and businesses; 1.1.4. Material: information, articles, guides, documents and clauses, provided by Us, whether via the Website or otherwise; 1.1.5. Membership: a paid subscription granting You access to certain Material; 1.1.6. Our: belonging to, or emanating from, Us; 1.1.7. Rules: this present document, known as the Rules; 1.1.8. Staff: any employee or representative of The Owners Club, including but not limited to the Our General Secretary; 1.1.9. We, Us: The Owners Club; 1.1.10. Website: the website theownersclub.org, and all pages, parts and elements thereof; 1.1.11. You: You, whether Associate, Member or Governor of The Owners Club, or user of the Website, as the case may be, and Your employer or principal where you act on behalf of one; 1.1.12. Your: of or from You. ​ ​​ 2. APPLICATION ​ ​2.1. For good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, You agree to be bound by all of the Rules. 2.2. By using the Website, or viewing, downloading, using, sending, storing or receiving, any Material, You agree to be bound by all of the Rules, as well as Our privacy policy . 2.3. You are responsible for ensuring that all persons who access the Website through Your internet connection are aware of all of the Rules and that they comply with them. ​ ​ 3. MEMBERSHIP ​ ​3.1. Memberships are for one year, payable monthly. 3.2. A Membership entitles You, for one year, subject to monthly Membership fee instalments having been paid to date, to access those parts of the Website which We may from time to time restrict access to those only with Membership, and to access and download certain Material. 3.3. On each anniversary of You joining Us, We will automatically renew Membership unless You have notified Us that You want to cancel Membership by emailing us at gensec@theownersclub.org. 3.4. We may store and when possible update Your payment method on file. It is Your responsibility to maintain current credit card information on file with Us. 3.5. We reserve the right to change Membership fees from time to time. 3.6. From time to time, we may also offer different Membership terms and benefits. 3.7. Membership fees are non-refundable. 3.8. You authorise Us, to collect, without notice, Membership fees using any valid payment source We have on record for You. 3.9. If You fail to provide a payment to Us in full and on time, or We are unable to obtain payment using Your designated payment, We may deem such a failure as notice of cancellation and cancel Membership immediately. 3.10 We may cancel Membership at any time where We consider that You are in breach of any part of the Rules. 3.11. You are responsible for ensuring all contact details You provide Us with are correct and up to date. 3.12. If You choose, or You are provided with, a user identification code, password or any other piece of information as part of Our security procedures, You must treat such information as confidential, and You must not disclose it to any third party. 3.13. We have the right to disable any user identification code or password, whether chosen by You or allocated by Us, at any time, if in Our reasonable opinion You have failed to comply with any of the provisions of these terms of use. 3.14. If You know or suspect that anyone other than You knows Your user identification code or password, You must notify Us promptly at gensec@theownersclub.org. ​ ​ 4. WEBSITE ​ ​4.1. You are responsible for making all arrangements necessary for You to have access to the Website. 4.2. You will not: 4.2.1. Use the Website for any purpose that is unlawful or prohibited by the Rules; 4.2.2. Use the Website in any manner which could damage, disable, overburden or impair the Website, or interfere with any other party’s use and enjoyment of the Website; or 4.2.3. Obtain or attempt to obtain any Material through any means not intentionally provided for on the Website. 4.3. We will use reasonable efforts to keep the Website available to You, but if necessary, We may suspend access to the Website, or close it indefinitely. We will not be liable if for any reason the Website is unavailable at any time or for any period. 4.4. The Website may include information and materials uploaded by other users of the Website, including to bulletin boards and chat rooms. Such information and materials have not been verified or approved by Us. The views expressed by other users of the Website do not represent Our views or values. ​ ​ 5. VIRUSES ​ ​5.1. We do not guarantee that the Website will be secure or free from bugs or viruses. 5.2. You are responsible for configuring Your information technology, computer programmes and platform to access the Website. You should use Your own virus protection software. 5.3. You must not: 5.3.1. Misuse the Website by introducing viruses, trojans, worms, logic bombs or other material that is malicious or technologically harmful. 5.3.2. Gain unauthorised access to the Website, the server on which the Website is stored or any server, computer or database connected to the Website. 5.3.3. Attack the Website via a denial-of-service attack or a distributed denial-of service attack. ​ ​ 6. UPLOADING ​ ​6.1. Any content You upload to the Website will be considered non-confidential and non-proprietary. You retain all of Your ownership rights in Your content, but You grant Us a licence to use, store and copy that content and to distribute and make it available to third parties. 6.2. We have the right to disclose Your identity to any third party who is claiming that any content posted or uploaded by You to the Website constitutes a violation of their intellectual property rights, or of their right to privacy. 6.3. You are solely responsible for securing and backing up Your content. 6.4. When You upload or post content to the Website, You grant Us the following rights to use that content: 6.4.1. A worldwide, non-exclusive, royalty-free, transferable licence to use, reproduce, distribute, prepare derivative works of, display, and perform that user-generated content in connection with the service provided by the Website and across different media, including to promote the site or the service, forever; and 6.4.2. A worldwide, non-exclusive, royalty-free, transferable licence for other users, partners or advertisers to use the content for their purposes, forever. ​ ​ 7. LINKS ​ ​7.1. Links are only provided for Your convenience and to help You identify and locate other resources that may be of interest to You. 7.2. We do not control, endorse or monitor the contents of any sites subject to a Link, including, without limitation, any further link contained in a site referenced by a Link, and any changes or updates to site referenced by a Link. 7.3. If You use any service provided on a site to which a Link refers: 7.3.1. We will not be responsible for any act or omission of any third party, including such third party’s access to or use of Your data; and 7.3.2. We do not warrant or support any product or service provided by the third party. 7.4. You may link to the Website home page, provided You do so in a way that is fair and legal and does not damage Our reputation or take advantage of it. 7.5. You must not establish a link in such a way as to suggest any form of association, approval or endorsement on Our part where none exists. 7.6. You must not establish a link to the Website in any website that is not owned by You. 7.7. Our site must not be framed on any other site, nor may You create a link to any part of the Website other than the home page. 7.8. We reserve the right to withdraw linking permission without notice. ​ ​ 8. MATERIAL ​ ​8.1. We do not guarantee that Material is correct, up-to-date, or suitable for particular persons or situations. 8.2. The Material may include inaccuracies or typographical errors. 8.3. From time to time, changes may be made to the Material, with or without You being notified. 8.4. Material must not be relied upon for legal, tax or financial decisions and You should consult an appropriate professional for specific advice tailored to Your situation. 8.5. Any templates within the Material are for use only as a starting point for the preparation of legal documents. They must be adapted by You to meet Your individual requirements. You should always take legal advice for Your specific situation. 8.6. We make no representations about the suitability, reliability, availability, timeliness, and accuracy of the Material. 8.7. All Material is provided ‘as is’ without warranty or condition of any kind including all implied warranties or conditions of satisfactoriness, fitness for a particular purpose, title and non-infringement. 8.8. You use the Material and the Website at Your own risk. 8.9. Neither Us nor any Staff will be liable to You or any other party for any losses or damages whatsoever or howsoever arising in connection with the Material or the Website, whether under contract or as a result of any misrepresentation, misstatement or tortious act or omission, including negligence. 8.10. Our and the Staff’s liability to You for any loss or damage, including any losses, damages, costs or expenses whatsoever or howsoever arising in connection with the use of the Material or Website, whether under the Rules or other Rules or as a result of any misrepresentation, misstatement or tortious act or omission, including negligence, is limited to damages of an amount equal to that received by Us from You for a year’s Membership. ​ ​ 9. INTELLECTUAL PROPERTY ​ ​9.1. We own and retain all rights, title, interest and IP Rights in relation to the Material. 9.2. Except in connection with the ownership or management of a yacht(s) which You own directly or indirectly or You manage, You must not reproduce, modify, translate or create derivative works of any Material. 9.3. Without exception, You may not sell, license, sublicense, rent, lease, distribute, copy, publicly display or publish any Material. ​ ​ 10. RELATIONSHIP ​ ​10.1. We only provide a platform for information and self-help. 10.2. Material is provided for Your private use, does not constitute legal and/or financial advice and should not be relied upon as such. 10.3. We are not a regulated or unregulated law firm. Communications between You and Us or Staff will not be protected by legal professional privilege and may be disclosable to third parties. 10.4. No communications between You and Us or Staff constitute legal advice or can be relied on as such. 10.5. Use by You of the Website or Material does not establish a duty of care (either in tort or in contract) between You and Us or Staff, or create a lawyer-client relationship between You and Us or Staff. 10.6. Names of third parties are published on the Website or in Material, or provided to Members, for information purposes only. We do not endorse or recommend any third party nor do We make any warranty as to the qualifications or competency of any third party. 10.7. You agree that no joint venture, partnership, employment, or agency relationship exists between You and Us as a result of the Rules or Your use of the Website or the Material. ​ 11. SEVERANCE ​ 11.1. If any part of the Rules is determined to be invalid or unenforceable under any applicable law, then the invalid or unenforceable provision will be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision will be deemed deleted. Following such modification or deletion, the remainder of the Rules will continue in effect. ​ ​ 12. REVISIONS ​ ​12.1. We may revise the Rules from time to time, and will always post the most current version on the Website. By continuing to use or access the Website or Material, You agree to be bound by the most recent revision of the Rules. ​ ​ 13. ENTIRE AGREEMENT ​ ​13.1. Unless otherwise specified, the Rules constitutes the entire Rules between You and Us with respect to the matters covered by the Rules, and extinguishes all previous Ruless, arrangements, representations and understandings between You and Us, whether written or oral, relating such matters. ​ ​ 14. ASSIGNMENT ​ ​14.1. You must not assign or otherwise transfer any right granted under the Rules. We can freely assign Our rights under the Rules. ​ ​ 15. WAIVER ​ ​ 15.1. A failure or delay by Us to exercise any right or remedy provided under the Rules or by law will not constitute a waiver of that or any other right or remedy, nor will it prevent or restrict any further exercise of that or any other right or remedy. ​ ​ 16. THIRD PARTIES ​ ​ 16.1. A person who is not a party to the Rules will not have any rights under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of the Rules. ​ ​ 17. LAW & JURISDICTION ​ ​ 17.1. The Rules and any dispute or claim arising out of or in connection with it or its subject matter or formation will be governed by and construed in accordance with English law. 17.2. The courts of England and Wales will have non-exclusive jurisdiction to settle any dispute or claim arising out of or in connection with the Rules or its subject matter or formation. Contact Us The Owners Club | Discretion THE SOUL OF DISCRETION THE LAST GREAT LUXURY Privacy Policy Privacy is the last great luxury of our times. Highly prized by owners, it’s usually a contributing factor in buying a yacht. In an age where data has become a commodity, Members are glad to know that our discretion is absolute. Members' details are held in confidence by the Club’s General Secretary, and aren’t revealed to any third party, or other Members. The better part of valour being discretion isn’t just the Club’s guiding ethos. It’s a binding legal obligation. Some in the yachting industry can be fairly indiscrete. If we, as owners, are going to come together as a club, then we need to safeguard our privacy. This has been achieved. OWNER, 35M MY DISCRETION IS OUR DUTY Learn More Our General Secretary is an English lawyer, for whom discretion isn’t just a promise but a regulated professional requirement. Used to maintaining client confidentiality, he is a Partner at a leading international firm, regulated by the Solicitors Regulation Authority, the Financial Conduct Authority and the London Stock Exchange. The Club’s management company is registered with the United Kingdom Information Commissioner’s Office pursuant to the UK General Data Protection Regulation and the Data Protection Act 2018. By law, the data the Club holds must be held securely and protected against unlawful processing and accidental loss. The Owners Club | Contact REACH OUT CONNECT YOUR WAY Feel free to drop us a line gensec@theownersclub.org Connect with the General Secretary on LinkedIn here Chat directly with the General Secretary on WhatsApp here Follow our LinkedIn page here The Owners Club | Genesis A Fresh Start COMMON SENSE FOR UNCOMMON WEALTH FAQs Why is it that, while we can innovate, build strong businesses and drive economies forward, our voice as yacht owners remains so quiet? Sure, our brokers, managers and captains have our backs, but they’ve got their hands full. Who’s there to take a high-level view of ownership? Who’s there to provide guidance so we’re not each taking advice and reinventing the wheel? Who’s drafting the agreements and documents we have to have in place? Shouldn’t we be working together? Yes. It’s common sense. I can’t believe we’re all taking advice on pretty much the same things – crew employment, taxes, etc. It’s great to see owners and their reps come together like this. CAPTAIN 72m MY FROM COMPETITION TO COOPERATION Contact Us It all started with a chance meeting between two owners. Sitting on the rail of a Superyacht Cup competitor, they wondered why yachts were subject to so much regulation. Protecting seafarers on large ships, many of the complex rules are arbitrary and inconsistent when applied to smaller vessels. Could this be put right? Yes, if only we, the owners, could speak with one voice. And if coming together, let's share best practice, rather than seek expensive advice at every turn. And why not pool our considerable buying power to negotiate discounts? The Owners Club | Home WELCOME TO THE CLUB THE CONFLUENCE OF AFFLUENCE & INFLUENCE How it Started We are the worldwide association for the owners of large, permanently-crewed yachts often known as superyachts. The Club is fearlessly independent and has no connections with particular yacht builders, brokers, managers or suppliers. By pooling expertise and experience, we’re making ownership easier, more transparent and better value. The Club's a wonderful idea and long overdue. I've had teeth for years but that doesn't make me a dentist. I've had yachts for years, but I'm still glad of the opportunity to share knowledge and best practice, and help make ownership less opaque. OWNER, 42M MY GAINING KNOWLEDGE SHARING PASSION Secretariat As owners, we’re asking the same questions, to the same advisers, again and again. Or we’re asking our captains and managers, whose well-intentioned understanding can be out-of-date or based on hearsay. Members are free to consult the Club’s General Secretary about any aspect of ownership, from purchase, through crew employment and regulatory requirements, to a successful sale and on to bigger and better. About time! I can’t always justify taking advice on operational matters. If we can come together to share both expense and experience then that has got to be a good thing. OWNER'S REPRESENTATIVE, 35m SY GUIDANCE ON MATTERS WHICH MATTER Contact Us With the relevant Members’ permission, we’ve summarised some of the guidance provided previously by our General Secretary, for the benefit of other Members and the wider community. The information may not apply to your circumstances. If you need help in respect of specific situation, please contact us. I really like the concept. Shipping has BIMCO - and what do we have? Nothing of the sort. Let's blow away the smoke and smash the mirrors! SFO CEO TRANSPARENCY AUTHORITY CLARITY DISCOVER MORE Those prepared to stand by their promises should be happy to have their undertakings written down. Transparency promotes trust, eliminates misunderstandings and builds stronger relationships. Drafting agreements is time-consuming and rarely cost-effective for individual transactions, Members will soon have at their fingertips a growing suite of ready-made, plain-language documents. So we’ve commissioned a suite of ready-made, plain-language documents covering most aspects of ownership, plus practical guides on their use. Bringing owners together like this, it’s been hard to know where to begin. I think we’re starting in the right place with guidance and standardised agreements. These are what’ll make owning as straightforward as possible, as quickly as possible. OWNER'S REP / PROJECT MANAGER LET'S HAVE IT IN WRITING Contact Us Our standard contracts will be updated and fine-tuned regularly as the law develops, and Member feedback is received. And for those looking to take a more active role in improving the ownership experience, Governors can direct which particular issues should be addressed by the Club. If you’re good at making money, it makes sense to be good at spending it, too. It's about time superyacht owners came together to compare notes and join forces. CEO, LEADING MFO PROTECTING AND PROMOTING OWNERS’ INTERESTS FAQS By pooling expertise and harnessing our collective buying power, we’re going to make yachting more transparent and better value. As well as providing guidance and documentation, we’re bringing owners together to compare notes on particular products and services providers, and benefit from group discounts. We're also working to gain consultative status with the International Maritime Organisation, the regulatory agency of the United Nations. Previous 1 2 Next

Upcoming Events Thu, 30 May the test rsvp event / London Details 30 May 2024, 19:00 – 27 Jun 2024, 23:00 London, 420 Manchester Rd, London E14 9ST, UK teaser words dfds fsd fsd fsf sdf sdf sdfsdf sdf sdf sdfsdfsd fs fs dfsd fs Share Wed, 22 May test event name / London Details 22 May 2024, 00:00 – 30 May 2024, 00:00 London, Manchester Rd, London E14 9ST, UK test teaserlorem ipsum Share

Wed, 22 May | London test event name test teaserlorem ipsum Tickets are not on sale See other events Time & Location 22 May 2024, 00:00 – 30 May 2024, 00:00 London, Manchester Rd, London E14 9ST, UK Share this event