YACHTING PARTNERS INTERNATIONAL EDITIONS AUTUMN 2008
There have been many cases where a one-sided contract that perhaps seemed very
clever at the time of signing has eventually bankrupted the shipyard and left the
poorly advised Owner with the poor choice of either being left with an unfinished
yacht or buying out the shipyard from the Recievers.
Alex explains that, like Sale and Purchase contracts, New-Build contracts should
be tough but fair. "Both sides should clearly understand what they are getting into,"
he says, "and what their obligations are. A New-Build contract is a commitment to
a long-term relationship. We have just signed one for a very large sailing yacht that
will be delivered in 2014 - six years from now. Hopefully those contract negotiations
(not with Jay but another excellent lawyer) will be the basis for a good working
relationship throughout the years to come."
Alex and Jay, however, have worked together on several contracts for new builds and
sales of existing yachts and in most cases they have felt confident that their long-term
relationship and deep level of expertise has clearly added value to many of the deals
they have mutually completed. For new builds, Jay added that the process can be
simplified by using a well-versed yacht lawyer, not just a maritime lawyer, to draft a
clear and specific contract based on experience and knowledge of the yard they are
dealing with.
If this happens, coupled with a realistic payment programme and some intelligence on
the yard itself, things should go well. The problem is that there are many advisors and
intermediaries who seem to suggest that any yard can build a good yacht, providing
the right project manager and sub-contractor are appointed. This ill-advised owner
may then be making decisions based on a salesman's pitch, and with such a limited
number of build slots available in the primary shipyards, this is happening more and
more. This leaves the unwitting owner being led down the garden path to a shipyard
that will demonstrate on screen that they have the capability, with wonderful virtual
3-D images, but the reality is that they have only built trawlers and small coasters.
The end result of this scenario has left owners with more than they bargained for; in
fact as mentioned before, there have been too many owners ending up as accidental
investors in these unproven shipyards.
The other key problem in the onerous world of ownership that was raised during
our light lunch overlooking London's financial district was the role of advisors and
professionals in the scheme of ownership structures and the owner's tax affairs.
Jay and Franc both echoed the sentiment that there are still several cases where
owners are sold a tax structure without substance. Buying a yacht and commercially
registering it without understanding the full picture, apart from the fact that the
"expert" said he/she should, is not only criminal, but it creates a whole wave of
issues that can cause havoc. There is no standard solution, but each individual
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