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STANDARD MATTERS


IT’S NOT JUST THE FISCAL ADVANTAGES ONE SHOULD LOOK AT WHEN DECIDING ON A FLAG STATE, YOU NEED TO CONSIDER THE POLITICAL STABILITY AND LONG TERM REPUTATION TOO WORDS: CLAIRE GRIFFITHS


S


o, the owner is in a dreamy mood just after supper. He and his wife are sitting on the terrace watching their children filling in the white blanks of their new Flag Ship State colouring books. “Which flag state shall I choose for our new yacht?” he asks them. “Mozambique!” cries the boy. “With the AK-47 and bayonet!” “I like Bhutan with the dragon,” says his daughter “Look! He’s lovely!” His wife smiles, “Maybe you should get some sound advice. It might actually matter quite a bit.”


Wise words from the Mrs. Because the flag that flutters on the back of a yacht matters. A lot.


To explain the pros and maybe cons of various flag states ONBOARD talks to some flag representatives and law firms dealing with private and commercial superyacht activities.


CHOOSING A FLAG STATE Binta Jallow, from the BVIs says, “A yacht owner looking to register his yacht has as many options as anyone wishing to buy a yacht. Therefore some thought and research has to be carried out by the owner or their representatives before he decides on a flag that would suit him. It is usual practice to consult a legal professional for


advice.” Some of the questions Jallow hopes the expert would ask include: Where does the owner reside? The EU has some very complex taxation rules. Where would the owner want to operate the vessel? The US Coast Guard has rules that are different from other international requirements. However, if operating only in the Caribbean then there are not many challenges. Is the vessel for pleasure or commercial use? What nationality are the crew? How is the boat financed? Will there be a mortgage on the vessel? Where was the yacht built, by whom, when and where was it delivered?


It’s important to choose a registry with a good reputation. Choosing a registry with a poor reputation or one targeted by Port States could have a detrimental effect on the smooth running of the vessel. Dr Silvana Zammit Partner for Global Property, Yachts and Jets at Chetcuti Cauchi Advocates explains, “Yacht owners need to choose a flag registry that is safe and secure, both economically and politically. Stability is key. Just view the MoU White list, you’ll see that jurisdictions such as Malta and the UK are two of the most sought after registries, with Malta being the largest in Europe. And remember that a poor record will inevitably affect the decisions of the future lenders and underwriters.”


“One must consider the political stability and reputation of the registry. Owners should find out where disputes can be settled and under what jurisdiction.” Advises Jallow, “The choice of the registry will come to the fore only when the yacht encounters disputes and problems. Will the yacht get Consular access in distant foreign ports? Will the yacht get naval protection in piracy and strife prone areas? Will the yacht get security information from the flag state? These are some of the questions that a yacht owner must ask before deciding on a suitable ship register.”


Once the yacht owner decides on what is important for him/her then the relative merits of the flags can be compared. Mag. Virna Ayala echoes this advice: “Choose a ship registry that offers security, transparency and rapidity to owners. Where you would be sure all your rights will be respected because there is legal security and a real legal system under the flag and with courts specialised in maritime law. This is fundamental in your flag choice.”


PRIVATE OR COMMERCIAL? Should it run as a private or commercial vessel is a simpler question to answer: Explains Jallow, “There are very strict


112 | SUMMER 2019 | ONBOARD


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