It’s not just about flying a good looking flag off the transom, one needs to focus on a host of particulars, but above all, you need a registry that will deliver a high level of service that will keep the vessel moving without interruption
There are many things future yacht owners should consider before selecting the flag to drape over the back of the boat. Not least among them are communication and reputation. It’s not much good having a flag state representative who you can never get hold of. And it’s even worse choosing a flag that happens to be black listed on the Paris Memorandum of Understanding of Port State Control(MoU). Not only for safety standards and transparency but those are already two very good reasons.
Billionaire Samir Mane might sentimentally choose his home state’s flag to register his yacht, but he would be unwise to do so; Albania is on the Black List.
Representatives of two of the best known Red Ensign Group (REG) members, the MCA and the Isle of Mann ponder some of the questions that might spring to mind when owners decide on the right ‘Duster’.
BRASS TACKS
Amanda Marshall is Large Yacht Services (LYS) Survey Manager at the UK’s Maritime and Coastguard Agency (MCA), She says, “The inability to contact a technical representative at Flag when needed creates major headaches for captains and yacht managers and can ruin a cruising experience. The LYS team ensures this does not happen at the UK Flag.” The UK Flag is also widely respected for providing a robust maritime safety standard and transparent operation. Says Marshall, “This means foreign port state authorities are less likely to check and board UK Flagged vessels in their waters as they know that the likelihood is that the UK flagged yacht is the safest yacht there.” Professional, experienced crew are also less likely to want to work onboard a yacht registered with a less reputable flag state.
Marshall adds, “Crew understand that working on a UK flagged yacht is likely to provide them with the safest, most professional, and most protected working environment. The Covid crisis has highlighted that when most needed, some Flag states have not answered the call for their seafarers. The UK is extremely proud to have been the leading Flag Administration in seafarer welfare response during the Covid crisis.”
Katrina Matheson from Maritime Cook Islands lists as a priority, a history of high safety standards, the extensive network of multilingual agents and surveyors across the globe, together with its White List status as the main benefits of its registration. It is also important that Flag procedures (e.g. re-registration, liability insurance, certification) should be as straightforward as possible with minimal bureaucracy and ease of fee structure, which ideally would be a one-off payment. At MCA most processes can be completed on-line and LYS are working towards offering yacht clients a one-off flat fee for all Flag related services.
Cameron Mitchell works at Isle of Man Ship Registry. He says that finding a flag state that will work with you rather than against you is key: “You need to consider whether the ownership structure of the yacht is acceptable to the flag state – many have restrictions on nationality and type of ownership vehicle.”
CHARTER OR PRIVATE
When considering commercial (charter) yacht status, it is important to know what set of rules the flag state will apply to your yacht. Most likely, the flag state will need to have developed a Yacht Code such as the REG Yacht Code which is the most up to date and comprehensive yacht code available and the code used at the Isle of Man Ship Registry. Owners should also consider whether the yacht can comply with the flag state’s yacht code as some requirements will relate to the build characteristics of the yacht. Fees and taxes also come into the mix. Explains Mitchell,”Cheaper is not always better but what is important is clarity so that you know what you are paying and when. Some registries will have hidden additional fees for issuing all sorts of documents and services that are not apparent when flagging in.”
Commercial yachts used for charter must be certificated to the REG Yacht Code along the lines of merchant shipping convention rules. Private yachts don’t need to meet these standards. But many private yacht owners choose to voluntarily meet the Large Yacht Code to ensure that their family are going to sea on as safe a vessel as can be provided. Says Marshall, “At MCA LYS we do not differentiate between commercial yachts and voluntary compliance yachts – all are provided with the same high level of service and contact.”
Mitchell at IOM adds, “You may also find that crew prefer to work on a yacht that offers the protection of MLC. One must also bear in mind that private yachts are not exempt from all regulations. Depending on the tonnage of the vessel in question, you still have to consider compliance with MARPOL, minimum safe manning and COLREGs for instance.”
Matheson from Maritime Cook Islands explains that “Owners who wish to charter their yachts need to comply with commercial safety, crewing and operating standards including MLC. Private yachts have less mandatory requirements, but we implement the highest possible safety standards for both private and commercial.”
PICK ME
And another thing… flag state yacht registries aren’t sweet shops: You can’t just go and pick the one you fancy; they need to want you too. At MCA, for example, eligibility has expanded in the past few years and companies registered in 120 countries are now able to register UK ships. The IOM list of qualifying countries includes all EU/EEA countries and major yachting territories. Says Mitchell at IOM, “It should be noted that nationality restrictions apply only to the registered owner of the yacht. So if the registered owner is a body corporate, the Beneficial Ownership of the body corporate is not restricted by nationality.”
CONVENIENTLY OFFSHORE?
When selecting a flag state owners often choose the option of least initial impact such as open flags with technical flag duties delegated to commercial organisations. Initial flag costs may be low but overall costs are usually comparable with the UK MCA. For example, says Marshall, “A Flag state can offer so much more as a partner to an owner and captain to ensure the best possible cruising experience.”
A flag state with the lowest fees or the least intrusive regulatory regime is fine when things are running smoothly, but when problems arise you will find out the value of a good flag state. And with Port State Control visits aboard on the increase and detentions more frequent, you’ll want a flag state that can guide you through these issues. “In the Isle of Man,” says Mitchell, “our survey team has developed a unique scheme aimed at helping a commercial yacht navigate Port State Control (PSC). Each commercial yacht
gets an appointment with an experienced surveyor who will help identify areas that PSC may take an interest in and ensure records and paperwork are up to date.”
The attraction of open flags or offshore registries is sometimes seen as low tax implications, low transparency of ownership, low regulatory burden. The offshore Cayman Islands holds approximately 15% of the world’s yacht fleet over 30m on its Ship Register, for varying reasons the most popular of which includes tax savings. The Commonwealth of Dominica also offers an international open register that it operates along the lines of an exclusive club: It claims to be one of the fastest growing registries in the world. A similar set up can be found at the Cook Islands open register which operates via a network of Deputy Registrars around the world.
Cook Islands requires that all ships comply with all of the relevant international maritime conventions but do not impose any additional requirements beyond IMO Conventions and IACS Unified Interpretations. Matheson explains, “Registration of a vessel upon the Cook Islands Ships Registry is governed by the Ship Registration Act 2007; The Act requires that a vessel be owned by or on a demise charter to a ‘qualified person’.”
“There are three ways in which an owner can become a Qualified Person; International Company Incorporation, Foreign Company Registration or as an Island Trust. Each route has its benefits for specific owners and nationalities, so one definitely needs to take professional advice and find the correct solution for the yacht’s registration.”
But MCA LYS sees no benefits in open registers. Says Marshall,”The UK Flag is more interested in attracting owners looking for a tailored, personal service at a competitive cost.” And at the IOM Mitchell explains that the registry tries to limit any restrictions and can welcome clients from around the world. “As a member of the Red Ensign Group of British flags we operate a robust but pragmatic legal framework to ensure ships and yachts registered in the Isle of Man meet high standards of safety and quality. The International Transport Workers Federation (ITF) maintains a list of Flags of Convenience (FOCs) which are traditionally offshore registries; you will not find the Isle of Man on that list. Onshore registries or national registries traditionally have restrictions on ownership which include citizenship, domicile, corporate structures etc.” The final and real ‘benefit’ echoed by all the registries we have spoken to, is above all to provide a service. All the registries are moving more in the digital certification systems to make survey and general certification simpler, but overall, as Matheson agrees, “It doesn’t matter if the flag is an open or a closed registry, what matters is the quality of service it offers and if it can keep the vessel moving without interruption.”
So check that the registries have representation across the globe or at least in the main yachting hubs and that they have technical offices and personnel that are qualified. But perhaps you should even ask the captain next door for his experiences with a specific flag.
REPORT FORM
The Paris MoU had to scale back efforts like everyone else over the past 18 months resulting in decreasing numbers of inspections, refusal of access orders, detentions and deficiencies. In 2020 there were 7 bans and over the past 3 years 55 ships have been banned.
The detention percentage fell slightly to 2.81% (from 2.96% in 2019). The number of detainable deficiencies decreased to 1,942 (from 2,964 in 2019). The number of inspections carried out was 13,148. Clearly a substantial decrease to 2019: 17,913.
The Paris MoU applies largely to the world of commercial vessels, a far cry away from the superyacht industry. And flag states’ performances across the world fluctuate a little in the right direction with 39 countries on the White List, 22 on the Grey List and 9 on the Black List.
Despite sitting comfortably at 13 (UK MCA) and 18 (IoM) in the middle of the White List the UK and Isle of Man registers are not complacent. The MCA is particularly proud of the direct personal contact it offers its clients and its current goals are ‘to digitise every process that can be digitised’ and simplify the fee arrangement. Marshall adds, “We are also fully committed to the decarbonisation of the maritime industry and have taken a leading role in this process internationally, supporting innovation through regulatory flexibility. We are modernising crew training and certification to ensure the crew of tomorrow are properly prepared for the new challenges they will face.”
The IoM has similar goals to satisfy its clients. “We know that yachting is the ultimate fast paced environment and clients can’t be sitting around waiting for a flag state to take a decision. So we undertake that we’ll be quick to react and we’ll work with our clients to find a pragmatic solution to their regulatory issues,” explains Mitchell. The Register also recently launched the first ever flag state sponsored crew welfare app called ‘Crew Matters’ which allows access features such as live exercise classes and mental health support.
BEYOND THE HORIZON
Changes on the horizon include the recent introduction of the Ballast Water Management convention and the D-2 dates are coming due at the present time; this is the date by which yachts with ballast tanks must have a Ballast Water Treatment system fitted. The date is aligned with the renewal date of the yacht’s IOPP certificate.
Cyber risk is another feature of the future and IMO requires any yachts that have Safety Management Systems to address potential cyber risks. Mitchell adds, “For yachts which are not required to have a Safety Management System, it is still a good idea to consider these risks!”
With climate change, cyber threats and an ever more digitised world, cruising on a yacht is not necessarily always plain sailing, but the support of a robust, respected ship registry will help keep you steering a good and compliant course through the choppy waters of life on the open seas.
“Fair Winds and Following Seas.”