The All Important Small Print

The larger the asset the longer the small print is the way it goes. So owners of super, mega and giga yachts deal with lorry loads of spiel. Except of course they don’t. It’s their legal experts who are either responsible for writing up these large loads of tiny texts or they are rifling through it with needle point precision Words: Claire Griffiths

ONBOARD talks to the experts about their work as legal gatekeepers to UHNW society.

Jane Hayes is Associate Director of Ogier Global, Jersey. She manages fiduciary structures for ultra-high-net- worth clients (UHNW), with a special focus on the provision of services related to the management of superyachts and their ownership structures.

She begins by explaining the benefits of corporate yacht ownership: “Superyachts are often an owner’s passion which they want to enjoy and share with family and friends,” begins Hayes. “There are many benefits to placing these luxury assets in a corporate structure: Firstly, limited liability and asset protection; the liability of the beneficial owner is limited to the value of the assets in the structure and insulates the beneficial owner’s other assets from creditors. Another reason is confidentiality; offshore entities are best placed to maintain the anonymity of the beneficial owner from public knowledge.”


Hayes continues by explaining that when a yacht is owned by a corporate vehicle corporate governance and adherence to regulations is vital. She says, “Obtaining tax and legal advice at the outset is the most important aspect, selecting an experienced legal adviser and corporate service provider who will ensure that the business is operated in accordance with that advice and building a team of experts to support the day-to-day management of the yacht itself. The corporate service provider should have a network of specialist marine advisers and can assist the client with selecting the right support for the day-to-day running of the yacht, for example an independent fleet manager for smaller yachts, a professional yacht management company for larger yachts, charter broker, and fiscal agent. The CSP will work closely with the yacht captain to ensure the yacht is run in accordance with the owner’s wishes. Each individual situation is different but by putting together the right team of advisers the owner will be best placed to avoid legal issues and problems in the future.”

The benefits of yacht ownership are clear. But what are the most common legal issues relating to yacht charter and ownership?

Alicia Vázquez Prendes is a European lawyer with Upwind Legal. Issues to consider with yacht charters include; setting up a structure for commercial yachts, the private use of commercial yachts and representation in charter disputes. In terms of yacht ownership Vázquez Prendes lists the following for key consideration; negotiating contracts with shipyards or sellers/ buyers, registration of yachts and setup of ownership structures, crew contracts and negotiations, insurance cover and claims handling, damage claim settlement, representation in arbitration.

Jane Hayes points out that while clients may think that once the corporate structure is established there is no further engagement needed from legal or tax advisers until such time as the yacht is sold. However, the legal and tax landscapes are dynamic with frequent changes and this can result in problems arising during the period of ownership. She explains, “At Ogier Global we keep in regular contact with the legal and tax advisers to ensure there are no changes that will adversely affect the beneficial owner.” According to her, some of the most common legal problems that arise in relation to yacht ownership and charter are: contractual and insurance disputes relating to the purchase and sale of an existing yacht, new builds and refits. “A captain may play a fundamental role in the construction, purchase and sale, and refit of a yacht, but he should be supported by an experienced legal team and corporate owner throughout to ensure the beneficial owner is getting what they want. When purchasing a yacht, sea trials will not always identify defects, some may only be discovered after delivery and warranties should be carefully drafted,” explains Hayes.

It is also important to keep up-to-date with international regulations and ensure full compliance on an ongoing basis. Don’t forget changes to the tax landscape, in particular the EU’s VAT regulations on charter yachts that are frequently revised and owners do not always adapt accordingly, often resulting in fines and legal challenges.

Crew welfare and compliance with MLC 2006, ensuring crew contracts are in line with MLC 2006 must also be considered. Not doing so risks serious reputational damage and financial liability. Then there is the issue of cybersecurity: “Robust security measures are required,” Hayes advises.

Chartering throws up other issues: a legally binding agreement being the first criteria. Says Hayes, “When chartering in the Med it is common to use the MYBA standard charter agreement and for any specific requirements or changes to the standard form special conditions can be added and addendums prepared for any subsequent changes. All parties must clearly understand what the charter will deliver and the process for resolving disputes. The insurance policy should also be reviewed by the charterer.’

Dealing with any charter disputes should be dealt with as soon after the charter has completed as possible. Disputes due to the yacht not meeting the expectations of the charterer and consequently debts for non-paid APA are common, or damage to the high quality interiors resulting in an insurance claim. Fires resulting from the incorrect storage of electric ‘toys’ with lithium ion batteries are also becoming more frequent and storage in accordance with the terms of the insurance policy must be followed. “Ogier Global’s experienced marine team will ensure the beneficial owner is alerted to any upcoming industry changes,” says Hayes, “and when necessary provide solutions to ensure continued compliance.”

Tom Kelly is a Partner at Preston Turnbull, litigators in the superyacht market, acting across disputes involving yacht charters, sales and broker disputes.


Kelly acts on all aspects of marine and international trade litigation and international arbitration, covering dry shipping and ship/yacht building in particular. He regularly acts for many of the largest shipbuilding companies around the world, from South Korean shipyards to European superyacht builders.

Problems relating to charters are often to do with the expectations of the charterer and expenses. He says, “We’ve recently seen a dispute where a charterer objected to/tried to refuse to pay expense requests because they had not factored in the expense of fuel and food during the charter on top of the charter fee itself. There can also be issues arising out of the use of the yacht during a charter, in terms of maintenance and condition but also on restrictions due to bad weather, which charterers often won’t understand.”

When it comes to ownership, the Memorandum of Agreement (MOA) process is very much a Buyer’s risk process and that can lead to problems, especially where parties impose deadlines on getting the deal done, or are pushed into closing before they are ready. Says Kelly, “We’ve had several disputes recently over brokers/surveyors failing to highlight the true condition of a yacht, or failing to agree post-sale terms clearly.

The single biggest cost for an owner (after buying the yacht) is then likely to be any refit, and that’s to require much more attention to the refit contract than is often given – with the owner naturally focussing on the timing and cost of the work, as well as the specification and design of what is to be done. Security in the form of bank or owner guarantees is also becoming a lot more of a focus for those projects.”

“Unusual cases and considerations abound but,” says Fabrice Henrici at Upwind, “since we are specialised on yachts in every area of law, we are used to getting questions and cases that some might label as unusual. However, that gives us the possibility and experience to react flexibly to each and every request, which makes no request unusual for us!”

Hayes is more forthcoming, offering welcome advice even if it is not particularly unusual per se: She urges owners to ensure they employ a captain with whom they have a great rapport and can trust to represent them and the company. She explains, “Although the yacht may be used for commercial charter when the owner is not on board, which provides income to offset the operational expenses, the design and layout is per the owner’s specific requirements relating to his family and how they use the yacht, even down to considering the family dog(s) and their ability to move around the yacht safely without getting trapped in sliding doors or falling overboard. The dog is often the most pampered client on board and captain and crew will know they must take good care of the family pet(s).”

Hayes also flags up the need to draft non disclosure agreements for particularly high profile charter guests to be signed by crew and all parties associated with the management of the yacht. “These may have very specific terms and Ogier Legal will assist in this regard.”

“There are actually fairly few ‘usual’ considerations in superyacht disputes, where the demands of owners and the situations that can arise are hugely varied and almost always based on unique yachts and projects,” says Kelly. He adds, “They often get expensive too – for example claims for unique paint coatings in which tiny flaws can lead to claims for €18 million.

“The owner teams in newbuild projects can be of varying professionalism too, meaning that an owner is always going to be better off with a really good, experienced owner’s representative who knows the build process, rather than just about yachts. I’ve seen plenty of owners’ teams effectively ask the impossible or refuse to countenance that redesigning the yacht 6 months in to a build will cause a delay!”


What about ridiculous situations? Surely our experts have had to tread lightly through a few? Alicia Vázquez Prendes at Upwind has an answer: “As lawyers familiarised with the yachting industry the filter for classifying a situation as ridiculous changes depending on the perspective.

As an example, the Know Your Client requirements to incorporate companies in certain jurisdictions some years ago were no more than a simple questionnaire and a copy of the client’s identity document. Nowadays this is considered ridiculous.”

Kelly at Preston-Turnbull remembers an owner flying all the lawyers, Tribunal and experts out to the south of France to ‘inspect’ pinholes in the paint coating. “That felt quite over the top,” he says.

“As was one yard moving floating cranes and pontoons to block in a yacht (unlawfully) during a dispute, with the crew having to conduct a stealth exercise of deflating fenders and walking the yacht along the quay by hand to escape!”

Legal puzzles that need some serious application to resolve must be a welcome blitz of spritz to a lawyer’s day-to-day duty?

Says Fabrice Henrici: “In the last years we are coming across the always more common use of electric driven engines on boats. Dealing with these new technologies and their legal impacts is a challenge for the industry, including not only lawyers but also insurers and technical experts.”

Upwind colleague, Alicia Vázquez Prendes adds: “Clients are being more and more conscious about their private data and the importance of keeping their personal details saved. Even when the anti-money laundering and ‘Know Your Client’ requirements are always more demanding in terms of private documentation and information from the clients, we are keen to make sure that all information disclosed to third parties in the course of a transaction is only in fulfilment of legal requirements and respects clients’ private sphere.”

Hayes cites the arrest of a yacht and dealing with the relevant authorities and courts in resolving the situation are always challenging but rewarding if successful in gaining the release of the yacht.

Tom Kelly, partner with Preston Turnbull chooses yacht build contracts as a particularly interesting and challenging sphere; “Especially in yacht build contracts, there is a lot of interrelation between the owner, the yard and the subcontractors which is always interesting to resolve – especially where contracts follow different jurisdictions, so the different legal systems have to be resolved together.

The best and most rewarding results though are where we are able to actually resolve the issue, and not see things escalate and to not rely on a court or Tribunal. I’ve been in plenty of meetings during a newbuild or refit project where we are able to get both sides to talk and agree to a compromise, and where the yacht has been delivered despite threats by the buyer to cancel the project.”

Since the beginning of the year Henrici has noticed more and more cyber attacks and fraudulent behaviour of third parties intervening with client emails: “That was challenging for us at first. However, we were able to build up an expertise on these questions and are happy to assist any yacht owner who is a victim of such criminals.”

For Hayes, dealing with crew disputes and situations where a crew member may make allegations against another crew member are the most difficult to deal with as you are dealing with highly emotive situations. She adds, “Harassment and bullying on board yachts can have serious consequences for the physical and emotional health of seafarers, and compromise teamwork.


A yacht is often the crew members’ home for a substantial part of the year, and they have to remain in their workplace even during rest periods when at sea. Developing policies and procedures to eliminate harassment and bullying is essential. Where appropriate, and taking into account national legal systems, company policies on harassment and bullying should be incorporated into collective bargaining agreements.”

“Any build project where trust and communication has broken down between the owner team and shipyard gets very difficult because everything becomes a battle,” says Kelly.

“Often it’s about ego as much as anything and as lawyers sometimes you need to try to get everyone to step back and look at solutions to a problem rather than wanting to be ‘right’.”

Kelly believes future challenges are likely to rear up in the form of responsibility for developing regulations and technology: “Both are moving quite fast at present, and so especially when building a yacht, there may well come times where an owner wants the latest technology or where rules change and there needs to be a clear process for allocating that risk during the project.”

As a final word Hayes points out that there is no one solution to ownership structures as there are many variables for each client situation. It is often changes to tax regimes that will determine a new ownership structure offering, such as the use of Jersey Limited Partnerships which have recently been approved by HMRC.

Kelly adds, “We are seeing a lot more requests for advice on contracts (especially newbuild contracts) and insurance policies now at the beginning of the process. Having litigated a large number of those contracts, we can provide much more focussed advice based on risk and what terms really matter (and how they would be read in a dispute).”