Analysis & Insights
So You've Just Bought Your Yacht…Now What?
23 Aug 2013
So you've just bought your yacht. The contracts are signed, the survey has been completed, funds have been transferred, the yacht has been registered, the naming ceremony is over and the crew, all on board, have been kitted out in their new uniforms. The hard work is over, and you are ready to sail away, or are you?
Although the registration process will have addressed most of the initial requirements in relation to certification, there are a number of on-going requirements with which the owner of a Cayman Islands flagged yacht must continue to comply. Many of these requirements are set out in the Merchant Shipping Law (2011 Revision) (the "Law") and, in some cases, failure to comply with the requirements could lead to significant fines being imposed on the owner, the operator and-or the master of the vessel. In this article, we will examine a few of the key on-going requirements which any prudent yacht owner should bear in mind.
Payment of Fees
After the initial registration fees have been paid, the owner will need to pay an annual tonnage fee to the Cayman Islands Shipping Registry ("CISR") in respect of the gross tonnage ("GT") of the yacht, as noted below:
|GT of yacht||Annual Tonnage Fee|
There are also additional fees payable to CISR with regard to periodic surveys, registration of any changes to a yacht and assessment and processing of certification renewals.
If the yacht is owned through a Cayman Islands entity, in addition to the fees payable to CISR, there will also be annual return fees payable to the Registrar of Companies in the Cayman Islands, and where a corporate services provider is used to administer the entity, annual registered office fees will be charged by that corporate service provider.
Maintain a Representative Person
Where the majority interest in a Cayman Islands flagged yacht is owned by a person or company not resident in the Cayman Islands, the owner must appoint a representative on island to act as the 'representative person'. The identity of the representative person must be notified to the Registrar of Shipping. Any change in the identity of the representative person will also need to be notified to the Registrar of Shipping as soon as practicable, otherwise the owner may be liable for a fine of up to CI$3,000.
Maintenance of Insurance
Section 54 of the Law requires that all Cayman Islands vessels (and all other vessels whilst in Cayman Islands waters) must carry insurance that provides adequate cover against the risk of loss or damage to third parties and against wreck removal expenses. It is an offence not to carry adequate insurance and, where the owner of a Cayman Islands flagged yacht fails to do so, they will be guilty of an offence and liable to pay a fine of up to CI$20,000.
If the yacht is over 1000GT, the Law requires that adequate protection and indemnity ("P&I") cover (or equivalent financial security) is entered by the owner to cover the owner's liability in respect of pollution damage arising from a bunker spill. This is in accordance with the requirements of Article 7 of the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001.
Failure to carry adequate insurance or to produce a certificate of insurance may lead to a fine of up to CI$50,000 being imposed upon the owner, under the Law.
Where the yacht will be operating in areas other than in the Cayman Islands, the owner should also have regard to any local insurance requirements. For example, for yachts over 300GT entering European Union ports, the owner is required to have additional cover relating to third party liability (e.g. P&I cover), and copies of the certificates will need to be available on board the yacht in order to satisfy any port state control inspection that adequate cover is in place.
The Law includes a number of provisions which are intended to protect the rights of crew members and ensure that they are adequately provided for and looked after.
Every member of the crew of a Cayman Islands flagged yacht should be party to a crew agreement, in a form approved by CISR, signed by the crew member and on behalf of the owner setting out the terms of their employment. Each crew agreement must be carried on the yacht to which it relates whenever that vessel goes to sea. Failure to do so is an offence which may lead to a fine of up to CI$20,000 being levied against the master or the person employing the crew and/or - if the yacht is in Cayman Islands waters - the detention of the yacht.
Anyone employing crew in respect of a Cayman Islands flagged yacht is required to pay wages to the crew member and the balance of any wages outstanding must be paid within seven days of discharge of that crew member. The employer is also liable to pay an equivalent of the daily rate agreed in the crew agreement to each crew member for each day that payment of any wages due to that crew member is delayed.
Where a crew member requires medical, dental or optical treatment during a voyage which cannot reasonably be postponed, the employer is then liable to meet the expenses of any such treatment. Where a crew member is discharged from a yacht in a port which is not their home port, the owner is required to make adequate provisions for that crew member's safe return to their home port.
The Cayman Islands is a signatory to the main international conventions relating to vessel safety, such as the Safety of Life at Sea Convention ("SOLAS") and the International Regulations for Avoiding Collisions at Sea (the "COLREGS"). As well as complying with the requirements of SOLAS, the COLREGS and other international convention, the Law places a number of other safety requirements upon the owners and masters of Cayman Islands flagged vessels. These include:
(a) Keeping the vessel in a seaworthy condition;
(b) Submitting to regular surveys and maintaining the valid and up-to-date certification (e.g. radio licence, survey certificates etc.) as necessary;
(c) Maintaining minimum safe manning levels. The level of crew required will depend on the size of the vessel, the type of voyage on which it is engaged and the distance it will be from a safe harbour. However, it is an offence for a Cayman Islands flagged vessel to sail without sufficient crew. It is worth noting that for larger yachts (over 1000GT), the crew will need to include an experienced cook who carries a valid certificate of competency;
(d) Keeping to maximum passenger numbers. Again, the number of passengers who can be carried safely will depend on the size and type of vessel and the type of voyage on which it is engaged; and
(e) Rendering assistance to other ships in distress or persons lost at sea.
There are also restrictions on the number of passengers which a yacht may carry, and this will depend on the size of yacht, the type of operation in which it is engaged and the certification which is held in respect of the yacht. The maximum total number of persons which may be carried on any Cayman Islands flagged yacht (including crew) is 99, and the number of passengers may not exceed 36. Some of the safety requirements which the Law imposes on a Cayman Islands flagged yacht are more unusual. For example, where ice is reported on or near the course of a Cayman Islands flagged yacht, the master must either alter his course to keep clear of the area of danger or alter his speed accordingly. Any master who fails to do so is guilty of an offence and will be liable to a fine of up to CI$5,000.
Reporting and Record Keeping
The owner (or operator) of a Cayman Islands flagged yacht is obliged to maintain a number of records on board. These include:
(a) An official log book recording details of the day to day operation of the yacht. This should also include details of all life boat and fire drills and equipment inspections;
(b) A deck log book recording particulars relating to the deck watch;
(c) An engine room log book recording particulars relating to the engine room watch; and
(d) A crew list.
Entries in these records should be in English, unless all persons making entries in the books have a common language other than English, in which case entries can be made in that common language. If that is the case, the Director of CISR may then require the log book to be translated into English.
There are also a number of reporting requirements which the owner of a Cayman Islands flagged yacht must meet. Under section 159 of the Law, the owner or master of a Cayman Islands flagged yacht is required to report any accident resulting in: (i) loss of life or serious injury to any person; or (ii) any material damage to a vessel which may affect its seaworthiness or efficiency within 24 hours following the incident. The incident report must include details of:
(a) the name of the yacht, the port of registry, the official number and the location of the yacht;
(b) the circumstances in which the incident occurred; and
(c) the probable cause of the incident.
The owner, managing owner and/or representative person in respect of a Cayman Islands flagged yacht also has an obligation to ensure that where the incident has not already been notified to CISR, it is reported to CISR as soon as possible. Failure to report an incident gives rise to a liability to a fine of up to CI$4,000.
CISR is a first class international shipping registry with an excellent reputation for safety. Although some of the on-going requirements and standards imposed by the Law may seem burdensome on the owner and/or the master of a Cayman Islands flagged yacht, they reflect the fact that the Cayman Islands are a signatory to the majority of international conventions relating to shipping and ship safety and are no more onerous than the standards imposed by other flag states.
By ensuring that their yacht meets the requirements under the Law, the owner of a Cayman Islands flagged yacht will avoid issues such as delays and detentions arising from port state control inspections when entering ports in other jurisdictions. This, coupled with the fact that CISR is an approachable, owner focused registry with significant experience dealing with yachts is key in ensuring that the Cayman Islands continues to be the flag of choice for a significant number of yacht owners around the world.
1 for each additional GT over 1000GT
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