Registration of yachts and commercial vessels

Of the 42 ship registries in the world, 12 are in the Caribbean region … including the largest

All ships and marine vessels plying the world’s oceans and seas must be registered. The country in which they are registered, the so-called Flag State, is responsible under maritime law for ensuring that the owners and operators of the vessel meet established standards for safety at sea and the welfare of its crew. Where that vessel is registered in and being operated under the laws of its home country it will invariably fly the national flag and adhere to the laws and practices of the home state. In this regard there is a direct relationship, regarded as a ‘genuine link’ between the vessel and the country in which it is registered.

There are situations and circumstances in which a vessel is operated, usually by lease agreement, by a lessee in another port in a different part of the world. Such circumstances may arise if the entity seeking to lease the vessel plans to operate that ship or yacht for an extended period, a 5-year lease, for example. In such circumstances, either of the two parties, lessor or lessee, may find it inconvenient or risky for the leased vessel to fly the flag of the home state while operating in a different part of the world. In this regard, a yacht owned by European or Asian interests, for example, could be conveniently listed in the ship registry of another country in another part of the world.

There are more than 40 countries in the world with such ship registries, 12 of which are in the Caribbean region.

Mike Jarrett (MJ) spoke with Jermaine Reid (JR), Attorney-at-Law, about ship registries in the Caribbean following his visit to Curaçao in March 2024 where he discussed this and related matters with representatives of the maritime sector in Willemstad.

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MJ: There are a number of flag states in the Caribbean. What is the situation regarding registering vessels in the Caribbean … yachts, cruise ships, cargo vessels, ferries, harbour department vessels? What are your observations with respect to registering these vessels in the Caribbean?

JR: Registration, whether it be yachts, commercial vessels, or any other sea-going vessel, there is a requirement that registration must be done, no matter what. Registration is a process by which a nationality is given to the vessel. That vessel gets its nationality from what we describe as a ‘genuine link’. So, regardless of the type of vessel, it gets its nationality from some form of a ‘genuine link’ to a state. This ‘genuine link’ can be formed by an owner registering the vessel of in his/her home state.

An owner, having done research and comparisons, may want to register the vessel in another country in order to obtain benefits, incentives or advantages that may not be obtainable in his or her home state. This is a likely scenario because not all ship registries offer the same benefits or advantages. There are different types of registries … five in all … referred to as: Open, Closed, Hybrid, Bare Boat and Secondary. And they all have different requirements; and they allow different benefits or options that may be regarded as attractive depending on what the particular owner is looking for.

For example, if an owner has a yacht that is to be rented out on a charter basis to interests in another country, that owner may prefer a Bare Boat registry. That registry allows that owner to ‘flag out’ the vessel, meaning, the vessel can be registered in another country. That yacht can then be moved from the home port and registered elsewhere, temporarily, for commercial activities once it has met all the standards of the International Maritime Organization (IMO). So, at the end of the period that the yacht is registered and operating in another state … it could be months … it is returned to the owners and ‘flagged in’. This is one of the advantages of operating a Bare Boat registry.

MJ: But what are the disadvantages?

JR: Well, the lack of control of what takes place on the vessel while it is operating in another jurisdiction. Owners may not be able to control certain things that are happening with the vessel while it is flagged out and being operated elsewhere, in a different country, under different circumstances.

Although maritime law is international, there are domestic laws which are different from one country to the next. So, while flagged out, vessel owners may find that there are certain activities or perhaps cultural practices that are happening on the vessel or circumstances in which the vessel is engaged that, although not illegal, do not meet their approval. This reality is something vessel owners must take into account if there are going to adopt the ‘Bare Boat’ strategy.

If this is a concern, the vessel owner should perhaps consider another approach such as a Closed registry. Some countries do not allow persons who are outside of their citizenship to flag in or register a boat in that country. So, a Closed registry may stipulate that only persons of a particular nationality can register a vessel in that country. In other words, if you are not of that nationality, you may not be allowed to register your vessel there. The UK used to be like that; used to be very closed that you have actually had to be third generation born Brit to register a vessel. They have relaxed that requirement now although there are some countries that have upheld that approach.

A ‘closed registry’ ensures that ship owner remains confident that whoever is using their vessel is doing so in accordance with the laws and regulations of the home state. Flagging in and flagging out is not allowed in a Closed registry. These are just two of the five different types of registries that a vessel owner can use, whether you are a yacht, private or commercial vessel owner.

MJ: For purpose of this discussion, if there is a yacht in a Bare Boat registry in the Caribbean, and the owners have a client that wants to operate the vessel in the Mediterranean for the Summer months, what flag does it fly on leaving the Caribbean?

JR: The Port State Control Office will do their inspection of the vessel before it is flagged out. They will have to inspect it to make sure that it meets certain criteria, because when our vessel is going to be flagged in in somebody else’s country, they are not going to flag it into their country if they find any form of defects or deficiencies. So, you know, we have the IMO sulphur cap and all of those things. If this vessel is emitting too much sulphur fumes, or whatever, the authorities in the destination country may opt not to admit it to their registry. So, all of these things have to be done prior to the vessel arriving in the destination country. Flagging out would likely occur here in the Caribbean but equally the destination country that the vessel will be operating from will be exercising their own diligence as part of their flagging in process.

CLASSIFIED BY SIZE

One thing I think we should clarify for our readers is, in discussing yachts, we should understand that they are classified differently according to size. So, we have yachts, large yachts, super yachts and mega yachts.

A yacht measures between 10 metres, up to 24 metres, stem to stern. These are the smallest and many of us in the Caribbean are familiar with these. We may even have been invited to a party on board one of these boats. Then you have large yachts measuring 24 up to 40 metres. Super yachts are up to 60 metres, stem to stern and mega yachts exceed 60 metres in length.

We also need to understand that the definition of a passenger ship is a vessel that is over 500 gross tonnage and carry more than 12 passengers on an international voyage. And, no matter their size, passenger ships must comply with all the relevant IMO standards, no matter their size. And, if they are carrying more than 100 passengers, thereby entering the realm of a cruise ship … there must be a medical practitioner on board … that is, a doctor or a paramedic. However, yachts, regardless of their size, all fall below the definition of a passenger ship.

It must be noted that yacht operations are guided by a code of safety that is also laid down by the IMO. However, they are not as rigidly regulated as passenger ships carrying more than 12 passengers.

MJ: Several Caribbean countries have ship registries. Is there any obligation, benefit or advantage for the Region for vessel owners to have yachts, passenger ships and cruise ships that are home-based in Caribbean to have these vessels listed in the ship registry of the Caribbean state from which they are operating?

JR: There is no obligation to have vessel listed. However, there are advantages relative having an available labour force with wages that are competitive in comparison to other parts of the world. And so, a ship or yacht owner seeking to register a vessel in a state other than his/her home country, in choosing a Caribbean flag state, may find a significant economic advantage in using Caribbean labour and expertise.

MJ: And what types of vessels are in the main being listed in Caribbean ship registries?

JR: In this moment I can’t say exactly what is the primary business of Caribbean ship registries. But I can tell you that many yachts are flying Caribbean flags. I know the Jamaican ship registry is doing quite well with registering yachts and mega yachts.

MJ: Of course, countries will have other types of vessels servicing their ports. Not many Caribbean countries have passenger ferries … for various reasons … but there are vessels owned and operated by state agencies such as the local harbours department; the police … for example. These are listed in the local registry I presume.

JR: Yes, those vessels would be readily registered in their local ship registry. Those vessels are most likely owned by the government and operated by the government and so there is what is termed a ‘genuine link’ which allows the country to determine and apply the conditions under which such vessels will operate.

Vessels owned and operated by local entities, such as port authorities and fishing vessels operated by citizens, have a clear and genuine link with the country and therefore there is little difficulty in establishing the conditionalities under which they will operate. And, in like manner, they would be required uphold the relevant safety standards and everything else as required under domestic and international laws. You wouldn’t want to find yourself, if someone is injured or killed, to be in breach of either domestic law or international law. In this regard, a ‘closed registry’ facilitates the establishment of local operational norms, management and manning according to laws and procedures stipulated by the IMO.

MJ: Thank you Jermaine. []